BANCORPSOUTH INC, POS AM, 1995-07-27

BANCORPSOUTH INC
POS AM, 1995-07-27
STATE COMMERCIAL BANKS

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<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1995
REGISTRATION NO. 33-91338
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-----------------------

POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

-----------------------

BANCORPSOUTH, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
MISSISSIPPI 64-0659571 6798
(State of other jurisdiction of (I.R.S. Employer (Primary Standard Industrial incorporation
organization) Identification Number) or Classification Code Number)
</TABLE>

ONE MISSISSIPPI PLAZA
TUPELO, MISSISSIPPI 38801
(601) 680-2000
(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Offices)

-----------------------

AUBREY BURNS PATTERSON
BANCORPSOUTH, INC.
ONE MISSISSIPPI PLAZA
TUPELO, MISSISSIPPI 38801
(601) 680-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

-----------------------

Copies of communications to:

THEODORE W. LENZ, ESQ.
WALLER LANSDEN DORTCH & DAVIS
2100 NASHVILLE CITY CENTER
511 UNION STREET
NASHVILLE, TENNESSEE 37219-1760
(615) 244-6380

-----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Post-Effective Amendment to the
Registration Statement and appropriate stockholder action.

If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
================================================================================
<PAGE> 2

BANCORPSOUTH, INC.
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)

<TABLE>
<CAPTION>
Items of Form S-4 Prospectus or Prospectus Supplement Caption or Location
----------------- -------------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION

1. Forepart of Registration State-
ment and Outside Front Cover
Page of Prospectus . . . . . . . . . Facing Page of Registration Statement; Outside Front Cover Page of
Prospectus, Outside Front Cover of Prospectus Supplement
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . Inside Front Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information . . . . . . . . . . . . "Summary"; "Selected Financial Data"; "The Merger"; "The Purchase and
Assumption Agreement"; "Comparison of Rights of Stockholders"
4. Terms of the Transaction . . . . . . . "Summary"; "The Merger"
5. Pro Forma Financial Information . . . "Selected Financial Data"
6. Material Contracts with the
Company Being Acquired . . . . . . . "The Purchase Agreement"
7. Additional Information Required
for Reoffering by Persons
and Parties Deemed to be
Underwriters . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts
and Counsel . . . . . . . . . . . . Not Applicable
9. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities . . . . . Not Applicable

B. INFORMATION ABOUT THE REGISTRANT

10. Information with Respect to
S-3 Registrants . . . . . . . . . . "Incorporation of Certain Information by Reference"; "Summary"
11. Incorporation of Certain
Information by Reference . . . . . . "Incorporation of Certain Information by Reference"
12. Information with Respect to
S-2 or S-3 Registrants . . . . . . . Not Applicable
13. Incorporation of Certain
Information by Reference . . . . . . Not Applicable
14. Information with Respect to
Registrants Other than S-3
or S-2 Registrants . . . . . . . . . Not Applicable

</TABLE>
<PAGE> 3

<TABLE>
<S> <C> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED

15. Information with Respect to
S-3 Companies . . . . . . . . . . . Not Applicable
16. Information with Respect to
S-2 or S-3 Companies . . . . . . . . Not Applicable
17. Information with Respect to
Companies Other than S-3
or S-2 Companies . . . . . . . . . . "Summary"; "Selected Financial Data"; "Shelby Bank"; "Shelby Bank
Management's Discussion and Analysis of Financial Condition and
Results of Operations"; Financial Statements of Shelby Bank

D. VOTING AND MANAGEMENT INFORMATION

18. Information if Proxies, Consents
or Authorizations are to be
Solicited . . . . . . . . . . . . . "Summary"; "The Special Meeting"; "The Merger"; "Incorporation of
Certain Information by Reference"; "Description of Shelby Bank
Capital Stock"
19. Information if Proxies, Consents
or Authorizations are not to
be Solicited in an Exchange
Offer . . . . . . . . . . . . . . . Not Applicable

</TABLE>
<PAGE> 4

SHELBY BANK

-----------------------

6675 Stage Road
Bartlett, Tennessee 38134

-----------------------

______________, 1995
Dear Stockholder:

You are cordially invited to attend a special meeting of the stockholders
of Shelby Bank to be held in the board room at the offices of Shelby Bank at
6675 Stage Road, Bartlett, Tennessee on ______, 1995 at 9:00 a.m. Central Time.
At this special meeting, you will be asked to consider and vote upon a Purchase
and Assumption Agreement, dated as of May 9, 1995, pursuant to which Volunteer
Bank, a Tennessee banking corporation, is to acquire substantially all of the
assets, and assume certain liabilities, of Shelby Bank in exchange for shares
of common stock of BancorpSouth, Inc., a Mississippi corporation and the parent
holding company of Volunteer Bank, as described in the Purchase and Assumption
Agreement and in the enclosed Joint Prospectus Supplement and Proxy Statement.
You will also be asked to consider and vote upon a plan of reorganization
providing for the dissolution and liquidation of Shelby Bank, as discussed in
the enclosed Joint Prospectus Supplement and Proxy Statement and attached as
Annex B thereto.

Further information concerning the special meeting and the proposed
purchase and assumption transaction and plan of reorganization is set forth in
the enclosed Notice of Special Meeting and Joint Prospectus Supplement and
Proxy Statement. Shelby Bank's management and legal counsel will attend the
special meeting to answer questions and to explain the proposed purchase and
assumption transaction and the plan of reorganization in detail.

Your vote on these matters is of great importance. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock of
Shelby Bank entitled to vote, among other conditions, is required for the
approval of the proposed purchase and assumption transaction. The affirmative
vote of the holders of two-thirds of the outstanding shares of Common Stock of
Shelby Bank is required for approval of the plan of reorganization. Even if
you plan to attend the special meeting, we ask that you execute and promptly
return your completed proxy in the enclosed postage-paid envelope so that your
vote can be recorded at the meeting. If you attend the meeting, you may
withdraw your proxy and vote your shares personally.

The Board of Directors of Shelby Bank has considered and approved the
proposed purchase and assumption by Volunteer Bank and the plan of
reorganization, and recommends that stockholders vote FOR approval of both of
these proposals.

Very truly yours,

James L. Reid
Chairman of the Board

<PAGE> 5

SHELBY BANK

_______________________

6675 Stage Road
Bartlett, Tennessee 38134

_______________________

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD _______, 1995

_______________________

A special meeting of the stockholders of Shelby Bank is to be held in
the board room at the offices of Shelby Bank, 6675 Stage Road, Bartlett,
Tennessee on _________, 1995 at 9:00 a.m. Central Time, for the following
purposes:

(1) To consider and vote upon a Purchase and Assumption Agreement,
dated as of May 9, 1995, which provides for the purchase of
substantially all of the assets, and assumption of certain
liabilities, of Shelby Bank by Volunteer Bank, a Tennessee
banking corporation, in exchange for shares of common stock of
BancorpSouth, Inc., a Mississippi corporation and the parent
holding company of Volunteer Bank;

(2) To consider and vote upon a plan of reorganization providing for
the dissolution and liquidation of Shelby Bank; and

(3) To transact such other business as may properly come before the
special meeting or any adjournment of the special meeting.

Only stockholders of record of Shelby Bank at the close of business on
______, 1995 are entitled to notice of and to vote at the special meeting. In
the event that there are insufficient shares represented to approve the
proposed purchase and assumption transaction and the plan of reorganization at
the special meeting, this meeting may be adjourned to permit further
solicitation.

Stockholders of Shelby Bank are entitled to assert dissenters' rights
with respect to the proposed purchase and assumption transaction, pursuant to
Sections 45-2-1309 and 48-23-101 et seq. of the Tennessee Code Annotated, a
copy of which is included as Annex A to the enclosed Joint Prospectus
Supplement and Proxy Statement. Any stockholder desiring to dissent from the
proposed purchase and assumption transaction and receive the fair value of that
stockholder's shares must, prior to the vote at the special meeting, deliver
written notice to the Secretary of Shelby Bank at the address set forth above
of such stockholder's intent to demand payment for the stockholder's shares if
the proposed purchase and assumption transaction is effectuated, and must not
vote his or her shares in favor of the purchase and assumption transaction.
For a detailed discussion of the procedures required to exercise these rights,
see "The Special Meeting-Dissenters' Rights" and Annex A in the enclosed Joint
Prospectus Supplement and Proxy Statement.

Even if you plan to attend the special meeting, we ask that you execute
and promptly return your completed proxy in the enclosed postage-paid envelope
so that your vote can be recorded at the meeting. If you attend the meeting,
you may withdraw your proxy and vote your shares personally.

By Order of the Board of Directors,

Billy F. Campbell
Secretary

Bartlett, Tennessee
_____, 1995
<PAGE> 6

JOINT PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 9, 1995)
AND PROXY STATEMENT
78,516 SHARES

BANCORPSOUTH, INC.

COMMON STOCK

_______________________

This Joint Supplement and Proxy Statement ("Supplement/Proxy Statement")
relates to the issuance of an aggregate of up to 78,516 shares of Common Stock,
$2.50 par value per share (the "BancorpSouth Common Stock"), of BancorpSouth,
Inc. (the "Company"), a Mississippi corporation, a bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
and a savings and loan holding company registered under the Savings and Loan
Holding Company Act, as amended (the "SLHCA"), in connection with a Purchase
and Assumption Agreement, dated as of May 9, 1995 (the "Purchase Agreement"),
among the Company, Volunteer Bank, a Tennessee banking corporation and a
wholly-owned subsidiary of the Company ("Volunteer"), and Shelby Bank, a
Tennessee banking corporation ("Shelby Bank"). Pursuant to the Purchase
Agreement, Volunteer is to acquire substantially all of the assets, and assume
certain liabilities, of Shelby Bank (the "Purchase and Assumption") in exchange
for an aggregate of up to 78,516 shares of BancorpSouth Common Stock, to be
issued to holders of outstanding shares of Common Stock of Shelby Bank, $1 par
value per share (the "Shelby Bank Common Stock"), in accordance with such
holders' respective ownership interests in the outstanding shares of Shelby
Bank Common Stock. This Supplement/Proxy Statement also relates to a plan of
reorganization providing for the dissolution and liquidation of Shelby Bank
after consummation of the Purchase and Assumption (the "Plan of
Reorganization"), a copy of which plan is attached hereto as Annex B.

This Supplement/Proxy Statement also serves as the proxy statement of
Shelby Bank with respect to a special meeting of the stockholders of Shelby
Bank to be held on ________, 1995, or any adjournment thereof, to consider and
vote upon the transactions described in the Purchase Agreement and the Plan of
Reorganization (the "Special Meeting").

THIS SUPPLEMENT/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THESE
DOCUMENTS, INCLUDING THE PURCHASE AGREEMENT, IS AVAILABLE UPON REQUEST FROM
CATHY M. ROBERTSON, CORPORATE SECRETARY, BANCORPSOUTH, INC., ONE MISSISSIPPI
PLAZA, TUPELO, MISSISSIPPI 38801, (601) 680-2000. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST SHOULD BE
MADE BY _________, 1995.

_______________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROSPECTUS
SUPPLEMENT AND PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

_______________________

SHARES OF BANCORPSOUTH COMMON STOCK TO BE ISSUED PURSUANT TO THE
PURCHASE AGREEMENT ARE NOT A SAVINGS OR DEPOSIT ACCOUNT AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

_______________________

THE DATE OF THIS JOINT PROSPECTUS SUPPLEMENT AND PROXY STATEMENT IS ______, 1995
<PAGE> 7

TABLE OF CONTENTS

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Page
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<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13

THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Matters to Be Considered at the Special Meeting . . . . . . . . . . . . . . . . . . . S-19
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Shares Entitled to Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Voting and Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-20
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-20

THE PURCHASE AND ASSUMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Background of the Purchase and Assumption . . . . . . . . . . . . . . . . . . . . . . S-22
Reasons for the Purchase and Assumption; Recommendation of the Board of Directors . . S-22
Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
Interests of Certain Persons in the Purchase and Assumption . . . . . . . . . . . . . S-24
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . S-25
Resale Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-26
Comparison of Rights of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . S-26

THE PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
The Purchase and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Assets to be Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Liabilities to be Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
Issuance of BancorpSouth Common Stock . . . . . . . . . . . . . . . . . . . . . . . . S-28
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
Conduct of Business Pending the Purchase and Assumption . . . . . . . . . . . . . . . S-29
Conditions to Consummation of the Purchase and Assumption . . . . . . . . . . . . . . S-29
Employment of Shelby Bank Employees . . . . . . . . . . . . . . . . . . . . . . . . . S-30
Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
Amendment of the Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . S-31
Termination of the Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . S-31

PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32

SHELBY BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
</TABLE>

S-2
<PAGE> 8

<TABLE>
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SHELBY BANK MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . S-39

DESCRIPTION OF SHELBY BANK CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . S-42
Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42
Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42

COMPARISON OF RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Indemnification of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Right to Call Special Meetings of the Stockholders . . . . . . . . . . . . . . . . . S-44

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-45

Index to Shelby Bank Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

Annex A -- Provisions Relating to Dissenters' Rights . . . . . . . . . . . . . . . . . . . . A-1
Annex B -- Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

---------------------------

No person has been authorized to give any information or to make any
representations other than those contained in this Supplement/Proxy Statement
in connection with the offering made hereby, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company. This Supplement/Proxy Statement does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the shares of BancorpSouth Common Stock offered hereby or an offer to sell or a
solicitation of an offer to buy such shares to any person, or the solicitation
of a proxy from any person, in any jurisdiction in which such offer,
solicitation of an offer or proxy solicitation is unlawful. The delivery of
this Supplement/Proxy Statement at any time does not imply that the information
herein is correct as of any time subsequent to its date.

S-3
<PAGE> 9

SUMMARY

The following summary of certain information contained elsewhere in this
Supplement/Proxy Statement does not purport to be complete and is qualified in
its entirety by the more detailed information appearing elsewhere or
incorporated by reference herein. Unless the context otherwise requires, all
references to the "Company" include BancorpSouth, Inc. and its wholly-owned
subsidiaries.

PARTIES TO THE PURCHASE AND ASSUMPTION

BANCORPSOUTH, INC.; VOLUNTEER BANK

The Company was incorporated in February 1982 in the State of
Mississippi, and is a bank holding company registered under the BHCA and a
savings and loan holding company registered under the SLHCA. The Company owns
all of the outstanding capital stock of Bank of Mississippi, a Mississippi
banking corporation with its principal office located in Tupelo, Mississippi
and 84 branch offices located across the State of Mississippi; Volunteer, a
Tennessee banking corporation with its principal office located in Jackson,
Tennessee and 14 branch offices located in west Tennessee; and Laurel Federal
Savings and Loan Association, a federally chartered savings and loan
association with its principal office located in Laurel, Mississippi and seven
branch offices located in west Mississippi. The principal executive offices of
the Company are located at One Mississippi Plaza, Tupelo, Mississippi 38801,
and its telephone number is (601) 680-2000.

Effective as of July 31, 1995, First Federal Bank for Savings ("First
Federal"), a federally chartered savings bank located in Starkville,
Mississippi, merged with and into Bank of Mississippi in exchange for shares of
BancorpSouth Common Stock. First Federal was chartered in 1934 as a federal
savings and loan association converted to a mutual savings bank in 1988 and
converted to a stock savings bank in October 1993. First Federal operated from
a single office located in Starkville, Mississippi and, at March 31, 1995, had
total assets of approximately $25 million and total deposits of approximately
$22 million. The Company accounted for the merger with First Federal as a
pooling of interests for financial reporting and accounting purposes.

Effective as of June 16, 1995, the Company and Volunteer entered into an
agreement and plan of merger with Wes-Tenn Bancorp, Inc. ("Wes-Tenn"), a
Tennessee corporation and the parent holding company of Tennessee Community
Bank ("TCB"), a Tennessee banking corporation, whereby Wes-Tenn is to merge
with and into the Company and TCB is to merge with and into Volunteer, in
exchange for shares of BancorpSouth Common Stock. Tennessee Community Bank
operates a general commercial banking business through 11 offices located
throughout west Tennessee and, at March 31, 1995, had total assets of
approximately $296 million and total deposits of approximately $242.5 million.
These proposed mergers are subject to, among other things, approval by the
Federal Deposit Insurance Corporation (the "FDIC"), the Tennessee Department of
Financial Institutions (the "TDFI") and the stockholders of Wes-Tenn. The
Company intends to account for the mergers as a pooling of interests for
financial reporting and accounting purposes. The Company's Current Report on
Form 8-K, filed with the Commission on July 14, 1995, contains certain pro
forma financial information reflecting the impact of the proposed mergers with
Wes-Tenn and TCB upon the consolidated financial statements of the Company.

S-4
<PAGE> 10

SHELBY BANK

Shelby Bank is a Tennessee banking corporation which commenced
operations in January 1988. Shelby Bank operates a single bank location in
Bartlett, Shelby County, Tennessee. The principal executive offices of Shelby
Bank are located at 6675 Stage Road, Bartlett, Tennessee 38134, and its
telephone number is (901) 382-2265.

Shortly after beginning operations in 1988, Shelby Bank experienced
operating difficulties due to the general poor credit quality of its loans.
The deterioration of Shelby Bank's capital position due to Shelby Bank's
operating losses and increases in nonperforming loans led to increased
regulatory oversight from the FDIC and the TDFI. The Board of Directors of
Shelby Bank took a number of actions to address this situation, including
changes in senior management and, to counter the decrease in its capital
position, in 1992, the issuance and sale of approximately $1.875 million
of Shelby Bank Common Stock (including the conversion of loans from
directors of Shelby Bank in the aggregate amount of $550,000 into shares of
Shelby Bank Common Stock).

Notwithstanding these actions by Shelby Bank, since May 1992, Shelby
Bank has been operating under an FDIC cease and desist order to which the TDFI
is also a party. Under the order, Shelby Bank is required to cease engaging in
hazardous lending and lax collection practices, operating with inadequate
capital and a large volume of poor quality loans, and operating in a manner as
to produce operating losses or in violation of various federal and state
banking regulations. In addition, the order requires Shelby Bank to maintain
qualified management, implement and maintain a management policy and plan for
increasing earnings, increase its capital and maintain adequate loan loss
reserves, establish a loan committee and an internal periodic loan review
program and restrict extensions of credit to borrowers with previously
uncollected or doubtful loans from Shelby Bank. Shelby Bank is to provide the
FDIC with periodic progress reports regarding Shelby Bank's compliance with the
order. The terms of the cease and desist order will remain in effect until the
order is cancelled by the FDIC. In the event that Shelby Bank fails to
continue to comply with the provisions of the cease and desist order, the FDIC
could take over the operations of Shelby Bank or place it into receivership, or
the TDFI could revoke Shelby Bank's charter.

While operating under the cease and desist order, Shelby Bank was
required by the FDIC to raise additional capital or risk additional action
being taken by the FDIC and the TDFI. Accordingly, in April 1993, Shelby Bank
issued and sold approximately $900,000 of Shelby Bank Common Stock, primarily
to members of the Board of Directors of Shelby Bank and made changes in its
senior management. Donald E. Russell, the President and Chief Executive
Officer of Shelby Bank, and other members of the current senior management of
Shelby Bank, began working with Shelby Bank in April 1993 or after such date.

Shelby Bank is subject to continuing review by the FDIC and the TDFI and
has continued to receive comments from both agencies regarding violations of
various federal and state banking provisions. Management of Shelby Bank
believes that all deficiencies have currently been corrected, except with
respect to the existence of an outstanding loan which, although made in
compliance with applicable regulations, exceeds the amount of Shelby Bank's
current lending limits.

In the event that the Purchase and Assumption is not approved, the Board
of Directors of Shelby Bank intend to continue to operate Shelby Bank as an
independent institution and to seek additional capital for Shelby Bank. Shelby
Bank would continue to be subject to the FDIC cease and desist order until such
time, if any, as the FDIC and the TDFI determine to cancel the order. There is
no assurance, however, that the FDIC or the TDFI would permit Shelby Bank to
continue to operate.

S-5
<PAGE> 11

THE PURCHASE AND ASSUMPTION

If the Purchase Agreement is approved by the stockholders of Shelby
Bank, certain other conditions are satisfied and the stockholders of Shelby
Bank approve the Plan of Reorganization: (i) Volunteer will acquire
substantially all of the assets, and assume certain liabilities, of Shelby Bank
in exchange for up to 78,516 shares of BancorpSouth Common Stock to be issued
to holders of the Shelby Bank Common Stock pursuant to the Purchase Agreement
and (ii) Shelby Bank will dissolve and liquidate.

The Purchase Agreement contains various representations and warranties
by the Company and Shelby Bank, and the obligations of such parties are subject
to certain conditions. See "The Purchase Agreement."

ASSETS TO BE PURCHASED

The Purchase Agreement provides for the purchase by Volunteer of all of
the assets of Shelby Bank, including its bank location, outstanding loans, cash
and investments, except Shelby Bank's charter and up to $50,000 in cash, which
will be placed in an account with Volunteer for use following the Purchase and
Assumption solely to pay Shelby Bank's expenses related to its liquidation and
dissolution, unknown or contingent claims and contractual liabilities not
assumed by Volunteer. Donald E. Russell, the President of Shelby Bank, and
James L. Reid, the Chairman of the Board of Directors of Shelby Bank, will be
the only persons authorized to draw against this account. Any funds remaining
in such account following completion of the liquidation of Shelby Bank will
become the property of Volunteer. The risk of loss with respect to the assets
of Shelby Bank proposed to be acquired by Volunteer, and the risks and
obligations with respect to the security of persons and property on Shelby
Bank's bank location premises, will remain with Shelby Bank until consummation
of the Purchase and Assumption.

LIABILITIES TO BE ASSUMED

The Purchase Agreement provides for the assumption by Volunteer of all
of Shelby Bank's deposit liabilities, all other recorded liabilities on the
Shelby Bank general ledger as of February 28, 1995, additional liabilities
recorded on the general ledger of Shelby Bank between February 28, 1995 and the
consummation of the Purchase and Assumption (provided such liabilities are of a
type consistent with liabilities recorded on the general ledger on February 28,
1995), certain contractual liabilities, potential liability in connection with
certain pending litigation and trade payables for landscaping, maintenance,
janitorial and similar services in an aggregate amount of up to $1,000.
Volunteer and the Company will not be responsible for any other obligations or
liabilities of Shelby Bank.

ISSUANCE OF BANCORPSOUTH COMMON STOCK

Upon effectiveness of the Purchase and Assumption, the stockholders of
Shelby Bank, other than dissenting stockholders, will be entitled to receive up
to an aggregate of 78,516 shares of BancorpSouth Common Stock in accordance
with such holders' respective ownership interest in the outstanding shares of
Shelby Bank Common Stock and cash in lieu of the issuance of fractional shares
of BancorpSouth Common Stock (the "Purchase Consideration"). Assuming that
5,287,552 shares of Shelby Bank Common Stock are outstanding upon consummation
of the Purchase and Assumption (including 500,000 shares subject to outstanding
options to purchase), holders of each share of Shelby Bank Common Stock, other
than dissenting stockholders, would be entitled to receive approximately 0.0148
shares of BancorpSouth Common Stock (the "Exchange Ratio"). In no event will
the Company be obligated to provide aggregate cash consideration, for
fractional shares or otherwise, in an amount greater than 1% of the aggregate
Purchase Consideration or otherwise to the extent such payment would not be in
accordance with Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code"). The amount of the Purchase Consideration was

S-6
<PAGE> 12

determined through arm's-length negotiations between the Company and Shelby
Bank. See "The Purchase and Assumption -- Background of the Purchase and
Assumption".

PLAN OF REORGANIZATION

In connection with the Purchase and Assumption, the Board of Directors
of Shelby Bank has adopted the Plan of Reorganization. The Plan of
Reorganization is intended to meet the requirements of Section 368(a)(1)(C) of
the Code and is to be approved by the stockholders of Shelby Bank. Pursuant to
the Plan of Reorganization, Shelby Bank will dissolve and liquidate following
the Purchase and Assumption. The remaining net assets of Shelby Bank, if any,
which are not conveyed to Volunteer will be distributed to the stockholders of
Shelby Bank. A copy of the Plan of Reorganization is attached hereto as Annex
B. See "Plan of Reorganization."

SPECIAL MEETING OF STOCKHOLDERS OF SHELBY BANK

The Special Meeting will be held on __________, 1995 at 9:00 a.m.
Central Time in the board room at the offices of Shelby Bank at 6675 Stage
Road, Bartlett, Tennessee. The purpose of the Special Meeting is to consider
and vote upon the Purchase Agreement, the Plan of Reorganization and any other
matters that may be properly brought before the stockholders of Shelby Bank at
the Special Meeting. Only holders of record of shares of Shelby Bank Common
Stock at the close of business on __________, 1995 will be entitled to receive
notice of and to vote at the Special Meeting.

VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS

Consummation of the Purchase and Assumption will require the affirmative
vote of the holders of a majority of the outstanding shares of Shelby Bank
Common Stock. Approval of the Plan of Reorganization will require the
affirmative vote of the holders of two-thirds of the outstanding shares of
Shelby Bank Common Stock. Each share of Shelby Bank Common Stock is entitled
to one vote. At _____________, 1995, Shelby Bank's directors, executive
officers and affiliates beneficially owned 3,030,367 shares of Shelby Bank
Common Stock, or approximately 63% of the then outstanding shares of Shelby
Bank Common Stock. The directors and executive officers of Shelby Bank have
indicated that they intend to vote their shares of Shelby Bank Common Stock for
approval and adoption of the Purchase Agreement and the Plan of Reorganization.
Accordingly, approval of the Purchase and Assumption is virtually assured. See
"Special Meeting -- Vote Required."

THE SHELBY BANK BOARD OF DIRECTORS HAS APPROVED THE PURCHASE AGREEMENT
AND THE PLAN OF REORGANIZATION AS BEING IN THE BEST INTERESTS OF THE SHELBY
BANK STOCKHOLDERS AND RECOMMENDS THAT THE SHELBY BANK STOCKHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE PURCHASE AGREEMENT AND THE PLAN OF REORGANIZATION.

The vote of the holders of BancorpSouth Common Stock is not required to
approve the Purchase and Assumption.

BACKGROUND OF AND REASONS FOR THE PURCHASE AND ASSUMPTION

S-7
<PAGE> 13

possible business combination with Volunteer. On February 28, 1995, Mr. Weeks
met with the Shelby Bank Board of Directors and presented terms of a proposed
merger between Volunteer and Shelby Bank. In February 1995, representatives of
the Company and Volunteer began a due diligence review of the records and
operations of Shelby Bank. Due to the Company's and Volunteer's concerns
regarding the assumption of potential but unknown liabilities through a merger
transaction, Mr. Weeks proposed a revised transaction wherein Volunteer would
acquire Shelby Bank's assets and assume its known liabilities but would not be
responsible for any other liabilities. On April 11, 1995, following continued
negotiation regarding the proposed purchase and assumption, a letter of intent
with respect to the proposed purchase and assumption was entered into among the
Company, Volunteer and Shelby Bank. On May 9, 1995, the Shelby Bank Board of
Directors approved the terms of the Purchase Agreement, which was executed on
behalf of each of the parties as of such date. Although the Shelby Bank Board
of Directors considered retaining an independent third party to issue a
fairness opinion with respect to the consideration to be conveyed in the
Purchase and Assumption, the directors determined not to obtain such a fairness
opinion as the Shelby Bank Board of Directors considered relevant statistical
and financial information relating to a number of transactions in the
southeastern United States involving banks of less than $100 million in assets
in assessing the adequacy and fairness of the financial terms of the proposed
transaction, among other factors that the Shelby Bank Board of Directors
considered to be relevant. Accordingly, the Shelby Bank Board of Directors
concluded that a fairness opinion would add little additional value.

The Shelby Bank Board of Directors concluded, in light of the
current operations of Shelby Bank and its financial condition, including its
capital position, and the alternatives reasonably available to it, that it
would be in the best interests of Shelby Bank, its stockholders, depositors and
customers for Shelby Bank to combine with Volunteer in the proposed Purchase
and Assumption. The Board of Directors of Shelby Bank also concluded, after
considering information presented regarding other bank acquisitions in relation
to the proposed consideration to be received by the stockholders of Shelby Bank
in the Purchase and Assumption, the book value of Shelby Bank Common Stock and
Shelby Bank's recent earnings, that this proposed consideration was fair to the
stockholders of Shelby Bank.

STOCKHOLDERS' RIGHTS OF APPRAISAL

Stockholders of Shelby Bank are entitled to dissent from the Purchase
and Assumption and, if the Purchase and Assumption is consummated, to receive
cash from the Company equal to the fair value of their shares of Shelby Bank
Common Stock. Any stockholder of Shelby Bank who elects to dissent from the
Purchase and Assumption and demand payment of the fair value of their shares of
Shelby Bank Common Stock must strictly comply with the applicable provisions
set forth in Sections 45-2-1309 and 48-23-101 et seq. of the Tennessee Code
Annotated, a copy of which is attached hereto as Annex A. If a stockholder of
Shelby Bank elects to exercise the stockholder's right to dissent from the
Purchase and Assumption and demand payment of the fair value of such
stockholder's shares of Shelby Bank Common Stock, the stockholder must satisfy
both of the following conditions, as well as the other applicable procedural
requirements: (i) the stockholder must deliver to Shelby Bank prior to the vote
at the Special Meeting a written notice of the stockholder's intent to demand
payment for his or her shares, and (ii) the stockholder may not vote his or her
shares in favor of the Purchase and Assumption. Written notice with respect to
dissenters' rights should be submitted to Billy F. Campbell, Secretary, Shelby
Bank, 6675 Stage Road, Bartlett, Tennessee 38134. See "The Special Meeting --
Dissenters' Rights" and Annex A hereto.

Holders of BancorpSouth Common Stock are not entitled to dissenters'
rights with respect to the Purchase and Assumption.

S-8
<PAGE> 14

CONDITIONS; REGULATORY APPROVALS

Consummation of the Purchase and Assumption is subject to certain
conditions, including the approval of Shelby Bank stockholders and the receipt
of applicable regulatory approvals or consents, including those of the FDIC and
the TDFI. Volunteer filed applications with the FDIC and the TDFI with respect
to the Purchase and Assumption on May 23, 1995 and anticipates a response to
each application prior to August 15, 1995. See "The Purchase and Assumption --
Regulatory Approvals" and "The Purchase Agreement -- Conditions to Consummation
of the Purchase and Assumption."

INTERESTS OF CERTAIN PERSONS IN THE PURCHASE AND ASSUMPTION

At _______________, 1995, the directors and executive officers of
Shelby Bank beneficially owned an aggregate of 3,030,367 shares of the then
outstanding Shelby Bank Common Stock. Based upon an Exchange Ratio of 0.0148
and assuming such shares and an additional 500,000 shares of Shelby Bank Common
Stock which Donald E. Russell, the President and Chief Executive Officer of
Shelby Bank, holds options to purchase, are owned upon effectiveness of the
Purchase and Assumption, such officers and directors would receive an aggregate
of approximately 52,249 shares of BancorpSouth Common Stock upon consummation
of the Purchase and Assumption. In connection with the Purchase and
Assumption, Mr. Russell will enter into a confidentiality and non-competition
agreement with Volunteer, which agreement will provide, in part, that, for a
period of two years from the consummation of the Purchase and Assumption, Mr.
Russell will not compete with Volunteer or solicit its customers, and Mr.
Russell will receive certain severance payments in the event that his
employment with Volunteer is terminated without cause and following a change in
control of Volunteer or the Company prior to two years following the Purchase
and Assumption. In addition, Volunteer has entered into a purchase agreement
to acquire all of the assets of First Mortgage Express, Inc., a Tennessee
corporation ("First Mortgage"), for $50,000 in cash. The capital stock of
First Mortgage, which engages in a mortgage origination business, is held by
directors of Shelby Bank other than Mr. Russell. See "The Purchase and
Assumption -- Interests of Certain Persons in the Purchase and Assumption,"
"The Purchase Agreement -- Employment of Shelby Bank Employees" and
"Description of Shelby Bank Capital Stock -- Beneficial Ownership."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Purchase and Assumption is intended to constitute a tax-free
reorganization under Section 368(a)(1)(C) of the Code. If the Purchase and
Assumption was determined not to qualify as a "reorganization" under Section
368(a) of the Code, the Purchase and Assumption would be treated as a taxable
sale of assets by Shelby Bank followed by the liquidation of Shelby Bank. A
stockholder of Shelby Bank who receives cash in lieu of a fractional share of
BancorpSouth Common Stock in the Purchase and Assumption will recognize gain
(or loss) as if the fractional share had been received and then redeemed for
the cash. The amount of gain or loss will equal the difference between the
amount of cash and the stockholder's basis in the fractional share interest.
In such event, any gain or loss recognized will be capital gain (or loss) if
the shares of Shelby Bank Common Stock are held by such stockholder as a
capital asset at the Effective Time. The receipt of cash for shares of Shelby
Bank Common Stock as a result of the exercise of dissenters' rights will be
taxable as a redemption of those shares for the cash. Stockholders of Shelby
Bank are urged to consult their own tax advisors as to specific tax
consequences of the Purchase and Assumption. See "The Purchase and Assumption
- -- Certain Federal Income Tax Consequences."

S-9
<PAGE> 15

ACCOUNTING TREATMENT

The Company intends to account for the Purchase and Assumption using the
purchase method for accounting purposes. See "The Purchase and Assumption --
Accounting Treatment."

RESALE RESTRICTIONS

Shares of BancorpSouth Common Stock received by the stockholders of
Shelby Bank in the Purchase and Assumption will be freely transferable, except
that shares of BancorpSouth Common Stock received by persons who are deemed to
be "affiliates" (as that term is defined under the Securities Act of 1933, as
amended (the "Securities Act")) of Shelby Bank at the time of the Special
Meeting may be re-sold by them only in certain permitted circumstances. This
Supplement/Proxy Statement is not intended to be used in connection with the
resale of BancorpSouth Common Stock by such affiliates, if any. See "The
Purchase and Assumption -- Resale Restrictions."

S-10
<PAGE> 16

COMPARATIVE MARKET DATA

The BancorpSouth Common Stock has been traded on The Nasdaq Stock Market
National Market ("Nasdaq") under the symbol "BOMS" since October 14, 1985. At
_________________, 1995, there were approximately ____________ stockholders of
record of the BancorpSouth Common Stock.

At May 8, 1995, there were approximately 176 stockholders of record of
the Shelby Bank Common Stock. There is no established public trading market
for shares of Shelby Bank Common Stock.

At April 11, 1995, the date immediately preceding the public announcement
of the proposed Purchase and Assumption, the closing price per share as
reported on Nasdaq for the BancorpSouth Common Stock was $36.50. At
____________, 1995, the closing price per share of BancorpSouth Common Stock
was $____________.

The table below sets forth, for the periods indicated, the range of
closing sales prices as reported on Nasdaq for the BancorpSouth Common Stock.
<TABLE>
<CAPTION>
BANCORPSOUTH
COMMON STOCK(1)
------------

HIGH LOW
---- ---
1995
----
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . $36.50 $32.25
Second Quarter . . . . . . . . . . . . . . . $40.00 $36.00
Third Quarter (through August __, 1995) . . . $_____ $_____

1994
----

First Quarter . . . . . . . . . . . . . . . . $33.00 $29.00
Second Quarter . . . . . . . . . . . . . . . 33.25 29.00
Third Quarter . . . . . . . . . . . . . . . 36.25 34.00
Fourth Quarter . . . . . . . . . . . . . . . 34.75 31.00

1993
----

First Quarter . . . . . . . . . . . . . . . . $31.96 $29.57
Second Quarter . . . . . . . . . . . . . . . 35.00 31.09
Third Quarter . . . . . . . . . . . . . . . 34.78 31.63
Fourth Quarter . . . . . . . . . . . . . . . 36.96 31.00

1992
----

First Quarter . . . . . . . . . . . . . . . . $27.17 $23.26
Second Quarter . . . . . . . . . . . . . . . 27.83 25.65
Third Quarter . . . . . . . . . . . . . . . 27.83 23.91
Fourth Quarter . . . . . . . . . . . . . . . 31.09 26.09
</TABLE>
- ------------------------
(1) All share prices for BancorpSouth Common Stock have been adjusted to give
effect to a 15% stock dividend paid on December 1, 1993 to all
shareholders of record on November 15, 1993.

S-11
<PAGE> 17

COMPARATIVE PER SHARE DATA

The following table presents selected comparative unaudited per share
data (i) of each of the Company and Shelby Bank on a historical basis, (ii)
for the Company and Shelby Bank on a pro forma basis, (iii) the Company,
Shelby Bank and other pending acquisitions on a pro forma basis, (iv)
Shelby Bank on a pro forma equivalent basis, and (v) Shelby Bank and other
pending acquisitions on a pro forma equivalent basis.

<TABLE>
<CAPTION>
BOOK VALUE PER SHARE:
December 31, 1994 March 31, 1995
----------------- --------------
<S> <C> <C>
The Company historical (1) $25.71 $26.33
Shelby Bank historical 0.25 0.26
The Company and Shelby Bank pro forma (2) 25.82 26.43
The Company, Shelby Bank and other pending
acquisitions pro forma (3) 24.67 25.31
Shelby Bank pro forma equivalent (4) 0.38 0.39
Shelby Bank and other pending acquisitions
pro forma equivalent (5) 0.37 0.37
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended
NET INCOME PER SHARE: Year Ended December 31 March 31
-------------------------- --------
1992 1993 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
The Company historical (1)(6) $2.40 $3.34 $3.11 $0.80
Shelby Bank historical (0.09) (0.03) 0.01 0.01
The Company and Shelby Bank pro forma (2) 2.21 3.28 3.08 0.79
The Company, Shelby Bank and other pending
acquisitions pro forma (3) 2.15 3.14 2.94 0.75
Shelby Bank pro forma equivalent (4) 0.03 0.05 0.05 0.01
Shelby Bank and other pending acquisitions
pro forma equivalent (5) 0.03 0.05 0.04 0.01
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended
CASH DIVIDENDS PER SHARE: Year Ended December 31 March 31
-------------------------- --------
1992 1993 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
The Company historical (1) $1.02 $1.08 $1.11 $0.30
Shelby Bank historical - - - -
The Company and Shelby Bank pro forma (2) 1.02 1.08 1.11 0.30
The Company, Shelby Bank and other pending
acquisitions pro forma (3) 1.02 1.08 1.11 0.30
Shelby Bank pro forma equivalent (4) 0.02 0.02 0.02 -
Shelby Bank and other pending acquisitions
pro forma equivalent (5) 0.02 0.02 0.02 -
</TABLE>

- ------------------------------

(1) Presented as if the merger of LF Bancorp, Inc. ("LF Bancorp") with and
into the Company as of March 31, 1995 (the "LF Bancorp Merger") had
been effective throughout the periods presented.
(2) Presented as if the transation between the Company and Shelby Bank had
been effective throughout the periods presented.
(3) Presented as if the transaction between the Company, Shelby Bank and
other pending acquisitions had been effective thoroughout the periods
presents.
(4) Calculated by multiplying the Company and Shelby Bank pro forma value
by the quotient calculated by dividing the number of shares of
BancorpSouth common stock issuable under the Agreement by the number
of shares of Shelby Bank common stock outstanding as of the end of the
period, adjusted for the issuance of 500,000 shares of Shelby Bank
Common Stock under option.
(5) Calculated by multiplying the Company, Shelby Bank and other pending
acquisitions pro forma value by the quotient calculated by dividing
the number of shares of BancorpSouth common stock issuable under the
Agreement by the number of shares of Shelby Bank common stock
outstanding as of the end of the period, adjusted for the issuance of
500,000 shares of Shelby Bank Common Stock under option.
(6) Does not include the effect of LF Bancorp's net income per share prior
to LF Bancorp's conversion from mutual to stock ownership on December
30, 1992.

S-12
<PAGE> 18

SELECTED FINANCIAL DATA

The following tables set forth for the Company and Shelby Bank certain
historical consolidated financial information, and for the Company, certain
unaudited pro forma condensed consolidated financial information. The financial
information set forth below is derived from, and should be read in conjunction
with, the respective consolidated financial statements, and the notes thereto,
of the Company which have been incorporated herein by reference, and of Shelby
Bank appearing elsewhere in this Prospectus/Proxy Statement and the unaudited
pro forma condensed consolidated financial statements and the notes thereto,
appearing elsewhere in this Prospectus/Proxy Statement. The unaudited
historical financial data for the three month periods ended March 31, 1994 and
1995 have been derived from the unaudited financial statements of the Company
which have been restated for the LF Bancorp Merger, which was accounted for as
a pooling-of-interests. The historical financial statements of the Company
for the years ended December 31, 1990, 1991, 1992, 1993 and 1994 have not been
restated for the LF Bancorp Merger, as such merger was not significant. In the
opinion of management of the Company and Shelby Bank, all adjustments necessary
for a fair presentation of the consolidated financial statements have been
included.

BancorpSouth, Inc.
Selected Historical Consolidated Financial Data
(Dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
Three Months Ended
For the Years Ended December 31, March 31
------------------------------------------------------------ -----------------------
1990 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Summary:
Interest revenue $ 178,703 $ 178,448 $ 164,139 $ 157,250 $ 173,208 $ 42,490 $ 52,510
Intertest expense 104,673 93,730 71,200 61,952 69,332 17,046 22,513
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest revenue 74,030 84,718 92,939 95,298 103,876 25,444 29,997
Provision for credit losses 5,965 8,436 11,483 7,754 5,652 1,064 1,176
Other revenue 17,540 19,427 19,981 23,781 23,421 4,884 7,062
Other expense 63,783 71,988 77,472 80,742 85,799 21,860 25,457
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax
and accounting change 21,822 23,721 23,965 30,583 35,846 7,404 10,426
Applicable income taxes 4,429 5,283 5,400 7,200 10,400 2,015 3,385
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before accounting change 17,393 18,438 18,565 23,383 25,446 5,389 7,041
Accounting change, net of tax - - - 3,200 - - -
Net income $ 17,393 $ 18,438 $ 18,565 $ 26,583 $ 25,446 $ 5,389 $ 7,041
========== ========== ========== ========== ========== ========== ==========

Per Share Data:
Primary
Income before accounting change $ 2.33 $ 2.47 $ 2.47 $ 2.99 $ 3.21 $ 0.62 $ 0.80
Accounting change, net of taxes - - - 0.41 - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2.33 $ 2.47 $ 2.47 $ 3.40 $ 3.21 $ 0.62 $ 0.80
========== ========== ========== ========== ========== ========== ==========
Fully diluted
Income before accounting change $ 2.26 $ 2.40 $ 2.40 $ 2.97 $ 3.21 $ 0.62 $ 0.80
Accounting change, net of taxes - - - 0.40 - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2.26 $ 2.40 $ 2.40 $ 3.37 $ 3.21 $ 0.62 $ 0.80
========== ========== ========== ========== ========== ========== ==========

Cash dividends $ 0.86 $ 0.94 $ 1.02 $ 1.08 $ 1.11 $ 0.27 $ 0.30
Book value $ 18.32 $ 19.95 $ 21.55 $ 23.95 $ 25.94 $ 24.27 $ 26.33

Balance Sheet Data (period end):
Total assets $1,870,693 $2,001,210 $2,137,004 $2,306,709 $2,518,398 $2,584,688 $2,791,532
Loans, net of unearned income 1,187,001 1,266,340 1,332,283 1,507,593 1,733,730 1,650,153 1,863,048
Allowance for credit losses 17,676 18,825 21,205 24,019 27,529 25,360 28,780
Securities 451,763 466,716 469,842 485,746 566,256 578,972 637,211
Deposits 1,621,039 1,752,967 1,876,093 2,031,477 2,171,748 2,259,770 2,445,850
Long-term debt:
Parent 33,996 33,309 32,541 24,508 24,508 24,508 24,508
Subsidiaries - - - - 23,520 22,223 22,529
Total stockholders' equity 135,288 148,570 161,668 188,600 205,329 211,499 230,765

Balance Sheet Data (averages):
Total assets $1,830,881 $1,939,678 $2,052,408 $2,197,330 $2,418,415 $2,504,011 $2,723,628
Total stockholders' equity 128,547 141,607 155,327 177,304 195,884 208,317 227,696
Average shares outstanding 7,349,488 7,414,576 7,474,192 7,775,139 7,888,662 8,713,325 8,760,239

Selected Ratios (annualized):
Return on average assets 0.95% 0.95% 0.90% 1.21% 1.05% 0.86% 1.03%
Return on average stockholders' equity 13.53% 13.02% 11.95% 15.06% 12.99% 10.35% 12.37%
Net interest margin 4.69% 4.99% 5.19% 4.95% 4.86% N/A 5.08%
Net charge-offs to average loans 0.43% 0.63% 0.70% 0.35% 0.13% N/A 0.12%
Tier 1 capital to risk-weighted assets 10.14% 9.99% 9.90% 11.00% 10.63% N/A 11.51%
Total capital to risk-weighted assets 13.94% 13.42% 13.10% 13.70% 12.89% N/A 13.71%
Leverage ratio 7.29% 7.57% 7.50% 8.30% 8.00% N/A 8.20%
</TABLE>

- ----------------------------
N/A - Information not available

S-13
<PAGE> 19

Shelby Bank
Selected Historical Financial Data
(Dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
For the Three
For the Years Ended Months Ended
December 31, March 31,
----------------------------- ------------------
1992 1993 1994 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
Interest revenue $ 1,191 $ 1,200 $ 1,386 $ 320 $ 402
Intertest expense 770 603 581 127 202
------- ------- ------- ------- -------
Net interest revenue 421 597 805 193 200
Provision for credit losses 84 15 57 5 1
Other revenue 289 252 193 64 49
Other expense 1,059 998 867 222 211
------- ------- ------- ------- -------
Income before income tax (433) (164) 74 30 37
Applicable income taxes - - - - -
------- ------- ------- ------- -------
Net income (loss) $ (433) $ (164) $ 74 $ 30 $ 37
======= ======= ======= ======= =======

PER SHARE DATA:
Net income $ (0.09) $ (0.03) $ 0.01 $ 0.01 $ 0.01
Cash dividends - - - - -
Book value $ 0.12 $ 0.28 $ 0.25 $ 0.28 $ 0.26

BALANCE SHEET DATA (PERIOD END):
Total assets $19,061 $19,205 $21,389 $18,879 $22,685
Loans, net of unearned income 9,366 11,949 12,177 13,396 12,419
Allowance for credit losses 965 396 246 381 273
Securities 6,449 4,322 4,094 3,201 5,087
Deposits 18,399 17,806 20,134 16,480 21,384
Total equity 591 1,326 1,214 1,339 1,251
</TABLE>

S-14
<PAGE> 20

Pro Forma Condensed Consolidated Financial Information

The following tables contain unaudited consolidated pro forma condensed
financial information showing a balance sheet at March 31, 1995 and statements
of earnings for the three months ended March 31, 1994 and 1995, and for the
years ended December 31, 1992, 1993 and 1994, for (i) the Company; (ii) the
Company and Shelby Bank ("Shelby"); and (iii) the Company, Shelby and other
pending acquisitions. The other pending acquisitions are (i) the merger with
First Federal; and (ii) the merger with Wes-Tenn. The unaudited pro forma
financial information reflects each acquisition using either the pooling of
interests or purchase method of accounting in accordance with the accounting
requirements applicable to each respective transaction. The unaudited pro
forma financial information should be read in conjunction with the historical
consolidated financial statements and notes thereto of the Company, Shelby,
First Federal and Wes-Tenn. The historical financial statements of the Company
for the 1992, 1993 and 1994 fiscal years and the three months ended March 31,
1995 include financial information of LF Bancorp which was accounted for as a
pooling of interests. Pro forma results are not necessarily indicative
of future operating results.

S-15
<PAGE> 21

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
For the three years ended December 31,
---------------------------------------------------------------------------------------
1992 1993
-------------------------------------------- ------------------------------------------
The Company, The Company,
Shelby Bank Shelby Bank
The Company & Other Pending The Company & Other Pending
The Company & Shelby Bank Acquisitions The Company & Shelby Bank Acquisitions
Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
------------ ------------- --------------- ------------ ------------- ---------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue $180,285 $181,476 $207,836 $171,035 $172,235 $198,753
Interest expense 79,996 80,766 94,267 68,112 68,715 80,580
-------- -------- -------- -------- -------- --------
Net interest revenue 100,289 100,710 113,569 102,923 103,520 118,173
Provision for credit losses 11,818 11,902 12,968 7,886 7,901 9,097
-------- -------- -------- -------- -------- --------
Net interest revenue, after
provision for credit losses 88,471 88,808 100,601 95,037 95,619 109,076
Other revenue 21,105 21,394 23,856 24,027 24,279 26,911
Other expense 82,394 83,557 92,227 84,837 85,939 95,906
-------- -------- -------- -------- -------- --------
Income before income tax
and accounting change 27,182 26,645 32,230 34,227 33,959 40,081
Applicable income taxes 6,954 6,951 9,339 8,402 8,399 10,386
-------- -------- -------- -------- -------- --------
Income before accounting
change 20,228 19,694 22,891 25,825 25,560 29,695
Accounting change, net of tax - - - 3,380 3,380 3,380
Extraordinary item (284) (284) (284) - - -
-------- -------- -------- -------- -------- --------

Net income $ 19,944 $ 19,410 $ 22,607 $ 29,205 $ 28,940 $ 33,075
======== ======== ======== ======== ======== ========

Earnings per share
Primary:
Income before
accounting change $ 2.43 $ 2.34 $ 2.26 $ 2.99 $ 2.93 $ 2.85
Accounting change,
net of taxes - - - 0.39 0.39 0.32
Extraordinary item (0.03) (0.03) (0.03) - - -
-------- -------- -------- -------- -------- --------
Net income $ 2.40 $ 2.31 $ 2.23 $ 3.38 $ 3.32 $ 3.17
======== ======== ======== ======== ======== ========

Fully diluted:
Income before
accounting change $ 2.32 $ 2.24 $ 2.18 $ 2.95 $ 2.90 $ 2.82
Accounting change,
net of taxes - - - 0.39 0.38 0.32
Extraordinary item (0.03) (0.03) (0.03) - - -
-------- -------- -------- -------- -------- --------
Net income $ 2.29 $ 2.21 $ 2.15 $ 3.34 $ 3.28 $ 3.14
======== ======== ======== ======== ======== ========

Average shares
Primary 8,335 8,414 10,110 8,651 8,730 10,426
Fully diluted 8,731 8,810 10,506 8,747 8,826 10,522

<CAPTION>
For the three years ended December 31,
--------------------------------------------
1994
--------------------------------------------
The Company,
Shelby Bank
The Company & Other Pending
The Company & Shelby Bank Acquisitions
Historical Pro Forma Pro Forma
------------ ------------- ---------------
(In thousands except per share amounts)
<S> <C> <C> <C>
Interest revenue $185,256 $186,642 $211,884
Interest expense 75,102 75,683 86,983
-------- -------- --------
Net interest revenue 110,154 110,959 124,901
Provision for credit losses 5,652 5,709 6,004
-------- -------- --------
Net interest revenue, after
provision for credit losses 104,502 105,250 118,897
Other revenue 24,347 24,540 26,552
Other expense 91,671 92,642 102,931
-------- -------- --------
Income before income tax
and accounting change 37,178 37,148 42,518
Applicable income taxes 10,876 10,873 12,466
-------- -------- --------
Income before accounting
change 26,302 26,275 30,052
Accounting change, net of tax 962 962 962
Extraordinary item - - -
-------- -------- --------

Net income $ 27,264 $ 27,237 $ 31,014
======== ======== ========

Earnings per share
Primary:
Income before
accounting change $ 3.01 $ 2.98 $ 2.86
Accounting change,
net of taxes 0.11 0.11 0.09
Extraordinary item - - -
-------- -------- --------
Net income $ 3.12 $ 3.09 $ 2.95
======== ======== ========

Fully diluted:
Income before
accounting change $ 3.00 $ 2.97 $ 2.85
Accounting change,
net of taxes 0.11 0.11 0.09
Extraordinary item - - -
-------- -------- --------
Net income $ 3.11 $ 3.08 $ 2.94
======== ======== ========

Average shares
Primary 8,750 8,828 10,524
Fully diluted 8,757 8,836 10,532
</TABLE>

S-16
<PAGE> 22

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
For the three months ended March 31,
-----------------------------------------------------------------------------------------------------
1994 1995
------------------------------------------------ ------------------------------------------------
The Company, The Company,
Shelby Bank Shelby Bank
The Company & Other Pending The Company & Other Pending
The Company & Shelby Bank Acquisitions The Company & Shelby Bank Acquisitions
Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
------------ ------------- --------------- ------------ ------------- ---------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue $42,490 $42,811 $49,034 $52,510 $52,912 $59,735
Interest expense 17,046 17,173 19,799 22,513 22,715 26,213
------- ------- ------- ------- ------- -------
Net interest revenue 25,444 25,638 29,235 29,997 30,197 33,522
Provision for credit losses 1,064 1,069 1,120 1,176 1,177 1,299
------- ------- ------- ------- ------- -------
Net interest revenue, after
provision for credit losses 24,380 24,569 28,115 28,821 29,020 32,223
Other revenue 4,884 4,948 5,501 7,062 7,111 7,807
Other expense 21,860 22,108 24,506 25,457 25,694 28,327
------- ------- ------- ------- ------- -------
Income before income tax
and accounting change 7,404 7,409 9,110 10,426 10,437 11,703
Applicable income taxes 2,015 2,014 2,499 3,385 3,384 3,774
------- ------- ------- ------- ------- -------

Net income $ 5,389 $ 5,395 $ 6,611 $ 7,041 $ 7,053 $ 7,929
======= ======= ======= ======= ======= =======

Earnings per share
Primary $ 0.62 $ 0.61 $ 0.63 $ 0.80 $ 0.79 $ 0.75
======= ======= ======= ======= ======= =======
Fully diluted $ 0.62 $ 0.61 $ 0.63 $ 0.80 $ 0.79 $ 0.75
======= ======= ======= ======= ======= =======

Average shares
Primary 8,733 8,812 10,508 8,801 8,880 10,576
Fully diluted 8,733 8,812 10,508 8,803 8,882 10,579
</TABLE>

S-17
<PAGE> 23

Pro Forma Condensed Consolidated Balance Sheet
March 31, 1995
(Unaudited)

<TABLE>
<CAPTION>
Historical
------------------------------------------
Other Pending
The Company Shelby Bank Acquisitions Adjustments Pro Forma
------------ ----------- ------------ ----------- ---------
ASSETS (In thousands)
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 130,745 $ 3,880 $ 15,417 $ 150,042
Held-to maturity securities 499,473 - 61,631 561,104
Loans and leases, net 1,834,268 12,147 223,451 2,069,866
Available-for-sale securities 137,738 5,087 47,745 190,570
Mortgages held for sale 11,180 - - 11,180
Premises and equipment, net 69,524 1,175 5,359 250 (1) 76,308
Other assets 108,604 396 6,239 1,434 (2) 116,673
---------- ------- -------- ------- ----------
Total assets $2,791,532 $22,685 $359,842 $ 1,684 $3,175,743
========== ======= ======== ======= ==========

LIABILITIES
Deposits
Non-interest bearing $ 319,785 $ 4,379 $ 21,931 $ 346,095
Interest bearing 2,126,065 17,005 277,041 2,420,111
---------- ------- -------- ----------
Total deposits 2,445,850 21,384 298,972 2,766,206
Short-term borrowings 31,864 - 3,225 35,089
Long-term debt 47,037 - 20,903 67,940
Other liabilities 36,016 49 3,737 39,802
---------- ------- -------- ----------
Total liabilites 2,560,767 21,433 326,837 2,909,037
---------- ------- -------- ----------

STOCKHOLDERS' EQUITY
Common stock 22,045 2,873 787 118 (4)
(2,677) (3)
3,335 (5) 26,481
Capital surplus 73,782 2,818 14,885 (118) (4)
(78) (3)
(3,335) (5) 87,954
Unrealized gain (loss) on
available-for-sale securities 125 (186) (419) 186 (3) (294)
Retained earnings 135,847 (4,253) 17,752 4,253 (3) 153,599
Less cost of treasury stock (1,034) - - (1,034)
---------- ------- -------- ------- ----------
Total stockholders' equity 230,765 1,252 33,005 1,684 266,706
---------- ------- -------- ------- ----------
Total liabilities and stockholders' equity $2,791,532 $22,685 $359,842 $ 1,684 $3,175,743
========== ======= ======== ======= ==========
</TABLE>

- ----------------------------

(1) Estimated write-up of premises and equipment acquired from Shelby
Bank.
(2) Cost in excess of fair value of net assets acquired from Shelby
Bank.
(3) Adjustments to capital accounts to reflect the transaction with
Shelby Bank.
(4) Reclassification of capital accounts to reflect the exchange of First
Federal's Common Stock for BancorpSouth Common Stock.
(5) Reclassification of capital accounts to reflect the exchange of
Wes-Tenn's Common Stock for BancorpSouth Common Stock.

S-18
<PAGE> 24

THE SPECIAL MEETING

MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING

The Special Meeting will be held on _________, 1995 at 9:00 a.m. Central
Time in the board room at the offices of Shelby Bank at 6675 Stage Road,
Bartlett, Tennessee. The purpose of the Special Meeting is to consider and vote
upon the Purchase Agreement, the Plan of Reorganization and any other matters
that may be properly brought before the stockholders of Shelby Bank at the
Special Meeting. In the event that there are insufficient shares represented
to approve the Purchase and Assumption or the Plan of Reorganization at the
Special Meeting, the Special Meeting may be adjourned to permit further
solicitation.

VOTE REQUIRED

Consummation of the Purchase and Assumption will require the affirmative
vote of the holders of a majority of the outstanding shares of Shelby Bank
Common Stock. Approval of the Plan of Reorganization will require the
affirmation vote of the holders of two-thirds of the outstanding shares of
Shelby Bank Common Stock. Each share of Shelby Bank Common Stock is entitled
to one vote. At __________, 1995, Shelby Bank's directors, executive officers
and affiliates beneficially owned 3,030,367 shares of Shelby Bank Common Stock,
or approximately 63% of the then outstanding shares of Shelby Bank Common
Stock. The directors and executive officers of Shelby Bank have indicated that
they intend to vote their shares of Shelby Bank Common Stock for approval and
adoption of the Purchase Agreement and the Plan of Reorganization.
Accordingly, approval of the Purchase and Assumption is virtually assured.

The vote of the holders of BancorpSouth Common Stock is not required to
approve the Purchase and Assumption.

SHARES ENTITLED TO VOTE; QUORUM

Only holders of record of shares of Shelby Bank Common Stock at the close
of business on ____________, 1995 will be entitled to receive notice of and to
vote at the Special Meeting. At ____________, 1995, there were 4,787,552
shares of Shelby Bank Common Stock outstanding. A majority of the outstanding
shares of Shelby Bank Common Stock entitled to vote must be represented in
person or by proxy at the Special Meeting in order for a quorum to be present
at the Special Meeting for the purpose of voting on the Purchase Agreement and
the Plan of Reorganization. Any stockholder present in person or by proxy at
the Special Meeting, but who abstains from voting, shall be counted for
purposes of determining whether a quorum exists.

VOTING AND REVOCABILITY OF PROXIES

Shares of Shelby Bank Common Stock represented by properly executed
proxies received at or prior to the Special Meeting will be voted at the
Special Meeting in the manner specified by the holders of such shares.
Properly executed proxies which do not contain voting instructions will be
voted FOR approval and

S-19
<PAGE> 25

adoption of the Purchase Agreement and the Plan of Reorganization. With
respect to the matters considered at the Special Meeting, an abstention has the
same effect as a vote against the proposal.

The grant of a proxy does not preclude a stockholder of Shelby Bank from
voting in person or otherwise revoking a proxy. Attendance at the Special
Meeting will not in and of itself constitute revocation of a proxy. A
stockholder of Shelby Bank may revoke a proxy at any time prior to its exercise
by delivering to Billy F. Campbell, Secretary, Shelby Bank, 6675 Stage Road,
Bartlett, Tennessee 38134, a duly executed revocation or a proxy bearing a
later date, or by voting in person at the Special Meeting.

SOLICITATION OF PROXIES

Shelby Bank will bear the cost of the solicitation of proxies from its
stockholders, except that the Company will bear the cost of printing and
mailing the Prospectus (including this Supplement/Proxy Statement). In
addition to solicitation by mail, the directors, officers and employees of
Shelby Bank may solicit proxies from stockholders of Shelby Bank by telephone,
facsimile or in person. Such persons will not be additionally compensated, but
will be reimbursed for reasonable out-of-pocket expenses incurred in connection
with such solicitation. Arrangements may also be made with brokerage firms,
nominees, fiduciaries and other custodians for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons,
and Shelby Bank will reimburse such persons for their reasonable out-of-pocket
expenses in connection therewith. STOCKHOLDERS SHOULD NOT SEND STOCK
CERTIFICATES WITH THEIR PROXY.

DISSENTERS' RIGHTS

If a stockholder of Shelby Bank elects to exercise the stockholder's
right to dissent from the Purchase and Assumption and demand payment of the
fair value of such stockholder's shares of Shelby Bank Common Stock, the
stockholder must satisfy both of the following conditions, as well as the other
applicable procedural requirements: (i) the stockholder must deliver to Shelby
Bank prior to the vote at the Special Meeting a written notice of the
stockholder's intent to demand payment for his or her shares, and (ii) the
stockholder may not vote his or her shares in favor of the Purchase and
Assumption. Written notice with respect to dissenters' rights should be
submitted to Billy F. Campbell, Secretary, Shelby Bank, 6675 Stage Road,
Bartlett, Tennessee 38134. As discussed in "The Special Meeting -- Voting and
Revocability of Proxies," executed proxies that are returned without specific
instructions will be voted FOR the approval and adoption of the Purchase
Agreement; accordingly, a stockholder wishing to dissent from the Purchase and
Assumption should be certain to complete such stockholder's proxy
appropriately.

Within ten days after approval of the Purchase Agreement by the
stockholders of Shelby Bank, Shelby Bank will provide written notice to each
dissenting stockholder of where and by when demand for

S-20
<PAGE> 26

payment must be sent, and where and when certificates representing shares of
Shelby Bank Common Stock must be deposited. In addition, Shelby Bank will
provide a form for demanding payment. A dissenting stockholder must, in order
to be entitled to appraisal rights, demand payment for his or her shares of
Shelby Bank Common Stock, certify whether beneficial ownership of shares was
acquired before April 11, 1995, the date of the first announcement to the news
media of the principal terms of the Purchase Agreement, and deposit the
certificates representing the shares in accordance with Shelby Bank's notice to
the stockholder. A dissenting stockholder may not withdraw his or her demand
for appraisal and accept the terms offered in the Purchase and Assumption
unless Shelby Bank consents to such withdrawal.

Upon the later of the consummation of the Purchase and Assumption or
receipt of a demand for payment, the Company will pay to each dissenting
stockholder who has complied with the requirements discussed above the
Company's estimate of the fair value of such stockholder's shares of Shelby
Bank Common Stock, plus accrued interest. Such payment will be accompanied by
a copy of Shelby Bank's financial statements at and for the year ended December
31, 1994 and Shelby Bank's latest available interim financial statements, a
statement of the Company's estimate of the fair value of the stockholder's
shares, an explanation of how interest was calculated and a statement of such
stockholder's right to reject the Company's offer and demand the fair value of
his or her shares. If the Company and a dissenting stockholder do not agree
upon the fair value of such stockholder's shares, the Company must commence a
judicial proceeding within two months of receiving the stockholder's payment
demand and petition the court to determine the fair market value of the shares
and accrued interest.

S-21
<PAGE> 27

THE PURCHASE AND ASSUMPTION

GENERAL

The Purchase Agreement provides for the purchase of substantially all of
the assets, and assumption of certain liabilities, of Shelby Bank by Volunteer
in exchange for the issuance of up to 78,516 shares of BancorpSouth Common
Stock to the holders of shares of Shelby Bank Common Stock. The Board of
Directors of Shelby Bank has adopted the Plan of Reorganization, which will
provide for the dissolution of Shelby Bank after consummation of the Purchase
and Assumption. The Purchase and Assumption transaction is intended to qualify
as a tax-free reorganization for federal income tax purposes. The discussion
in this Supplement/Proxy Statement regarding the Purchase and Assumption and
the description of the principal terms of the Purchase Agreement are subject to
and qualified in their entirety by reference to the Purchase Agreement, which
has been filed as an exhibit hereto with the Commission.

BACKGROUND OF THE PURCHASE AND ASSUMPTION

In January 1995, Michael W. Weeks began serving as the Chairman and
Chief Executive Officer of Volunteer. In late January 1995, Mr. Weeks
contacted Donald E. Russell, the President of Shelby Bank, with whom Mr. Weeks
was acquainted, and inquired whether Shelby Bank was interested in discussing a
possible business combination with Volunteer. Discussions regarding such a
transaction continued between Mr. Weeks and Mr. Russell during January and
February 1995. On February 28, 1995, Mr. Weeks met with the Shelby Bank Board
of Directors and presented terms of a proposed merger between Volunteer and
Shelby Bank. Negotiation of the proposed transaction continued between Mr.
Weeks and Mr. Russell. In February 1995, representatives of the Company and
Volunteer began a due diligence review of the records and operations of Shelby
Bank. Due to the Company's and Volunteer's concerns regarding the assumption
of potential but unknown liabilities through a merger transaction, Mr. Weeks
proposed a revised transaction wherein Volunteer would acquire Shelby Bank's
assets and assume its known liabilities but would not be responsible for any
other liabilities. On March 17, 1995, the Shelby Bank Board of Directors met
to discuss the proposed purchase and assumption. On April 11, 1995, following
continued negotiation regarding the proposed purchase and assumption, a letter
of intent with respect to the proposed purchase and assumption was entered into
among the Company, Volunteer and Shelby Bank. On May 9, 1995, the Shelby Bank
Board of Directors approved the terms of the Purchase Agreement, which was
executed on behalf of each of the parties as of such date. Although the Shelby
Bank Board of Directors considered retaining an independent third party to
issue a fairness opinion with respect to the consideration to be conveyed in
the Purchase and Assumption, the directors determined not to obtain such a
fairness opinion as the Shelby Bank Board of Directors considered relevant
statistical and financial information relating to a number of transactions in
the southeastern United States involving banks of less than $100 million in
assets in assessing the adequacy and fairness of the financial terms of the
proposed transaction, among other factors that the Shelby Bank Board of
Directors considered to be relevant. Accordingly, the Shelby Bank Board of
Directors concluded that a fairness opinion would add little additional value.

REASONS FOR THE PURCHASE AND ASSUMPTION; RECOMMENDATION OF THE BOARD OF
DIRECTORS

Volunteer's operating strategy is to expand its market area and to be
perceived as a community bank. Management of the Company and Volunteer
perceive Shelby Bank as being well positioned in its market as a "community
bank" and that the suburban Shelby County, Tennessee markets, including
Bartlett, Cordova, and Collierville, Tennessee, represent ideal markets in
which Volunteer can be successful in perpetuating its strategy. Although
Shelby Bank has historically had an unprofitable operation, management of the
Company and Volunteer believe that given adequate capitalization, Shelby Bank
could operate

S-22
<PAGE> 28

successfully. Management of the Company and Volunteer believe that the
combination of Volunteer and Shelby Bank will allow the Company to be
successful in the Shelby County, Tennessee marketplace. Management of
Volunteer also believes that, under the leadership of Mr. Russell, the
performance of Shelby Bank has improved. Accordingly, management of Volunteer
believes that entering into an employment arrangement with Mr. Russell will
strengthen the Company's entire Tennessee banking activities.

In reaching its determination to enter into the Purchase Agreement, the
Shelby Bank Board of Directors considered the terms of the Company's proposal,
the current operations of Shelby Bank, its prospects, its continuing regulatory
situation, the alternative of remaining an independent institution, the
potential of alternative acquirors, the financial condition of Shelby Bank, the
nature of consideration proposed by the Company, the multiple of the then
market price per share of BancorpSouth Common Stock to Shelby Bank's 1994
earnings and book value, and the price to earnings and book value multiples in
acquisitions since January 1, 1993 of banks in the southeastern United States
with total assets of less than $100 million. In addition, management of Shelby
Bank discussed the proposed purchase and assumption informally with staff of
the TDFI. The Shelby Bank Board of Directors concluded, in light of the
current operations of Shelby Bank and its financial condition, including its
capital position, and the alternatives reasonably available to it, that it
would be in the best interests of Shelby Bank, its stockholders, depositors and
customers for Shelby Bank to combine with Volunteer in the proposed Purchase
and Assumption. The Board of Directors of Shelby Bank also concluded, after
considering information presented regarding other bank acquisitions in relation
to the proposed consideration to be received by the stockholders of Shelby Bank
in the Purchase and Assumption, the book value of Shelby Bank Common Stock and
Shelby Bank's recent earnings, that this proposed consideration was fair to the
stockholders of Shelby Bank.

In approving the Purchase and Assumption, the Board of Directors of
Shelby Bank considered a number of factors, both from a short-term and
long-term perspective, including but not limited to: (i) the fact that Shelby
has been operating under a cease and desist order with the FDIC since May 1992,
which has subjected Shelby Bank to frequent examination and review by the FDIC
and the TDFI; (ii) Shelby Bank has been operating in a weak capital position;
(iii) the competitive constraints facing Shelby Bank, including those arising
from its capital position and the regulatory constraints under which it is
operating; (iv) the necessity for Shelby Bank to grow significantly beyond what
its current capital position would permit in order to bring its occupancy and
other overhead expense in line with its peer group; (v) the risks associated
with continuing to operate as an independent institution, including the
difficulty of raising additional capital in the existing financial climate in
light of Shelby's history of operations, the competitive environment in its
market and operational risks associated with maintaining and upgrading
facilities and equipment; (vi) the inability of Shelby Bank to offer its
stockholders any return on equity in the foreseeable future due to its
operating history and capital position; (vii) the benefits to depositors and
customers of Shelby Bank and to other persons in Shelby Bank's market that will
flow from the enhanced capital position of the bank and the increased level of
services to be offered by the bank as a result of the transaction; and (viii)
the fairness to the stockholders of Shelby Bank, from a financial point of
view, of the proposed transaction price when compared to transaction prices for
other recent bank mergers in the southeastern United States. In view of the
variety of factors considered in connection with its evaluation of the Purchase
and Assumption, the Board of Directors of Shelby Bank did not find it
practicable to, and did not quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.

S-23
<PAGE> 29

THE BOARD OF DIRECTORS OF SHELBY BANK RECOMMENDS THAT
STOCKHOLDERS OF SHELBY BANK VOTE TO APPROVE AND ADOPT THE
PURCHASE AGREEMENT AND THE PLAN OF REORGANIZATION.

REGULATORY APPROVAL

Consummation of the Purchase and Assumption is conditioned on, among
other things, the receipt of approvals by governmental authorities required in
connection with the Purchase and Assumption, including approvals by the FDIC
and the TDFI.

As a state non-member bank, Volunteer must file an application for
approval of the Purchase and Assumption pursuant to Sections 5(d) and 18(c) of
the Federal Deposit Insurance Act. The FDIC may disapprove the application if
it finds that the Purchase and Assumption tends to create or result in a
monopoly, substantially lessens competition or would be in restraint of trade.
Volunteer filed its application with the FDIC on May 23, 1995 and anticipates a
response from the FDIC regarding approval or disapproval of the application
prior to August 15, 1995. Following approval of the application by the FDIC,
the Department of Justice would have an additional 15 calendar days to submit
any adverse comments with regard to Purchase and Assumption relating to
competitive factors.

INTERESTS OF CERTAIN PERSONS IN THE PURCHASE AND ASSUMPTION

At __________, 1995, the directors and executive officers of Shelby
Bank beneficially owned an aggregate of 3,030,367 shares of the then
outstanding Shelby Bank Common Stock. Based upon an Exchange Ratio of 0.0148
and assuming such shares and an additional 500,000 shares of Shelby Bank Common
Stock which Donald E. Russell, the President and Chief Executive Officer of
Shelby Bank, holds options to purchase, are owned at the Effective Time, such
directors and officers would receive an aggregate of approximately 52,249
shares of BancorpSouth Common Stock upon consummation of the Purchase and
Assumption. See "Description of Shelby Bank Capital Stock -- Beneficial
Ownership."

In connection with the Purchase and Assumption, Mr. Russell will enter
into a confidentiality and non-competition agreement with Volunteer, which
agreement will provide, in part, that, for a period of two years from the
consummation of the Purchase and Assumption, Mr. Russell will not compete with
Volunteer or solicit its customers, and Mr. Russell will receive certain
severance payments in the event that his employment with Volunteer is
terminated without cause and following a change in control of Volunteer or the
Company prior to two years following the Purchase and Assumption. In all other
respects, Mr. Russell will be an at-will employee on the same basis as all
other employees of Shelby Bank.

In addition, Volunteer has entered into a purchase agreement to acquire
all of the assets of First Mortgage for $50,000 in cash. The capital stock of
First Mortgage, which engages in a mortgage origination business, is held by
directors of Shelby Bank other than Mr. Russell. See "The Purchase Agreement
- -- Employment of Shelby Bank Employees" and "Description of Shelby Bank Capital
Stock -- Beneficial Ownership."

ACCOUNTING TREATMENT

The Company intends to account for the Purchase and Assumption using the
purchase method of accounting. Under this method of accounting, the Company
will record the assets and liabilities of Shelby Bank after the Purchase and
Assumption at their respective fair values, and will record the amount by which
the Purchase Consideration exceeds such amounts as goodwill, which will be
amortized over a period of 15 years.

S-24
<PAGE> 30

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax
consequences of the Purchase and Assumption. This summary relates only to
shares of Shelby Bank Common Stock held as a capital asset within the meaning
of Section 1221 of the Code by persons who are citizens or residents of the
United States. This summary does not discuss the tax consequences to
categories of holders entitled to special treatment under the Code (including,
without limitation, foreign persons, tax-exempt organizations, insurance
companies, financial institutions and dealers in stocks and securities). No
rulings will be sought from the Internal Revenue Service with respect to the
federal income tax consequences of the Purchase and Assumption. Stockholders
of Shelby Bank are urged to consult their own tax advisors as to specific tax
consequences of the Purchase and Assumption.

The Purchase and Assumption is intended to constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code.
Assuming the transaction qualifies as a reorganization under Section
368(a)(1)(C) of the Code, (i) no gain or loss will be recognized by Shelby Bank
or the Company as a result of the Purchase and Assumption; (ii) the basis of
the assets of Shelby Bank in the hands of the Company will be the same as the
basis of such assets in the hands of Shelby Bank immediately prior to the
transaction; (iii) the holding period of the assets of Shelby Bank acquired by
the Company will include the period during which the assets were held by Shelby
Bank; (iv) no gain or loss will be recognized by the Shelby Bank stockholders
upon the receipt of BancorpSouth Common Stock; (v) the basis of the
BancorpSouth Common Stock (including any fractional share interest) received by
a stockholder of Shelby Bank in connection with the transaction will be the
same as the basis of the shares of Shelby Bank Common Stock (including any
fractional share interest) held by such stockholder; (vi) the holding period of
the BancorpSouth Common Stock received by a stockholder of Shelby Bank in
connection with the Purchase and Assumption will include the holding period of
the shares of Shelby Bank Common Stock held by such stockholder, provided that
the shares of Shelby Bank Common Stock are held as a capital asset; and (vii)
cash received in lieu of a fractional share of BancorpSouth Common Stock will
be treated as having been received as a distribution in full payment in
exchange for a fractional share interest in BancorpSouth Common Stock.

If the Purchase and Assumption was determined not to qualify as a
"reorganization" under Section 368(a) of the Code, the Purchase and Assumption
would be treated as a taxable sale of assets by Shelby Bank followed by the
liquidation of Shelby Bank.

A stockholder of Shelby Bank who receives cash in lieu of a fractional
share of BancorpSouth Common Stock in the Purchase and Assumption will
recognize gain (or loss) as if the fractional share had been received and then
redeemed for the cash. The amount of gain or loss will equal the difference
between the amount of cash and the stockholder's basis in the fractional share
interest. In such event, any gain or loss recognized will be capital gain (or
loss) if the shares of Shelby Bank Common Stock are held by such stockholder as
a capital asset.

The receipt of cash for shares of Shelby Bank Common Stock as a result of
the exercise of dissenters' rights will be taxable as a redemption of those
shares for the cash. Any stockholder considering the exercise of dissenters'
rights should consult the stockholder's tax advisor regarding the tax
consequences of exercising dissenters' rights.

The Company has not obtained, and does not intend to obtain, an opinion
of counsel or a private letter ruling as to federal income tax consequences of
the Purchase and Assumption.

S-25
<PAGE> 31

THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS ANY STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE PURCHASE AND ASSUMPTION. THE DISCUSSION IS BASED ON
CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY
REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS.
ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGES COULD AFFECT
THE CONTINUING VALIDITY OF THIS DISCUSSION. EACH STOCKHOLDER OF SHELBY BANK
SHOULD CONSULT THE STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC
TAX CONSEQUENCES OF THE PURCHASE AND ASSUMPTION TO SUCH STOCKHOLDER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.

RESALE RESTRICTIONS

All shares of BancorpSouth Common Stock received by stockholders of
Shelby Bank in the Purchase and Assumption will be freely transferable, except
that shares of BancorpSouth Common Stock received by persons who are deemed to
be "affiliates" (as such term is defined under the Securities Act) of Shelby
Bank prior to the Purchase and Assumption may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of Shelby Bank generally include individuals
or entities that control, are controlled by, or are under common control with,
such party and may include certain officers and directors of Shelby Bank as
well as principal stockholders of Shelby Bank. Rule 145 permits affiliates to
sell up to 1% of the outstanding BancorpSouth Common Stock in each three month
period commencing with the public announcement of the results of 30 days of
combined operations of the Company and Shelby Bank. It is expected that no
affiliates of Shelby Bank will own as much as 1% of the outstanding shares of
BancorpSouth Common Stock following the Purchase and Assumption. Accordingly,
such affiliates should be able to sell their BancorpSouth Common Stock
following the public announcement of 30 days of combined operations.

COMPARISON OF RIGHTS OF STOCKHOLDERS

At the Effective Time, stockholders of Shelby Bank will become
stockholders of the Company (except for stockholders of Shelby Bank who
exercise dissenters' rights). The Company is a Mississippi corporation which
is governed by provisions of the Mississippi Business Corporation Act, the
Company's Restated Articles of Incorporation and its Bylaws. Shelby Bank is a
Tennessee banking corporation which is governed by regulations of the FDIC, the
TDFI and Shelby Bank's Charter and Bylaws. The stockholders of Shelby Bank
will continue to hold their shares of Shelby Bank Common Stock until Shelby
Bank is dissolved pursuant to the Plan of Reorganization. See "Comparison of
Rights of Stockholders."

S-26
<PAGE> 32

THE PURCHASE AGREEMENT

The following is a brief summary of certain provisions of the Purchase
Agreement. This summary is qualified in its entirety by reference to the full
text of the Purchase Agreement which was filed as an exhibit to this Post-
Effective Amendment to the Registration Statement and which is incorporated
herein by reference.

THE PURCHASE AND ASSUMPTION

Subject to the terms and conditions of the Purchase Agreement, at the
Effective Time, Volunteer will acquire substantially all of the assets, and
assume certain liabilities, of Shelby Bank in exchange for up to 78,516 shares
of BancorpSouth Common Stock. The Purchase and Assumption is intended to
qualify as a tax-free reorganization for federal income tax purposes.

The closing of the Purchase and Assumption (the "Closing") is to take
place at a time and place mutually agreeable to the parties on the last day of
the month during which all approvals of all relevant governmental regulatory
authorities have been granted and become final (the "Closing Date"), and all
statutory waiting periods have expired or been terminated, and the Closing is
to be effective as of 12:01 a.m. (Memphis Time) on the following day (the
"Effective Time").

At the Effective Time, holders of each share of Shelby Bank Common Stock,
other than dissenting stockholders, will be entitled to receive the Purchase
Consideration, consisting of approximately 0.0148 shares of BancorpSouth Common
Stock, in accordance with the Exchange Ratio, and cash in lieu of the issuance
of fractional shares of BancorpSouth Common Stock. No adjustment will be made
to the amount of Purchase Consideration in the event of a change in the market
price of shares of BancorpSouth Common Stock prior to the Effective Time. The
amount of the Purchase Consideration was determined through arm's-length
negotiations between the Company and Shelby Bank. See "The Purchase and
Assumption -- Background of the Purchase and Assumption."

ASSETS TO BE PURCHASED

The Purchase Agreement provides for the purchase by Volunteer of
substantially all of the assets of Shelby Bank, including its bank location,
outstanding loans, cash and investments, except Shelby Bank's charter and up to
$50,000 in cash, which will be placed in an account with Volunteer for use
following the Purchase and Assumption solely to pay Shelby Bank's expenses
related to its liquidation and dissolution, unknown or contingent claims and
contractual liabilities not assumed by Volunteer. Donald E. Russell, the
President of Shelby Bank and James L. Reid, the Chairman of the Board of
Directors of Shelby Bank, will be the only persons authorized to draw against
this account. Any funds remaining in such account following completion of the
liquidation of Shelby Bank will become the property of Volunteer. The risk of
loss with respect to the assets of Shelby Bank proposed to be acquired by
Volunteer, and the risks and obligations with respect to the security of
persons and property on Shelby Bank's bank location premises, will remain with
Shelby Bank until consummation of the Purchase and Assumption.

LIABILITIES TO BE ASSUMED

S-27
<PAGE> 33

landscaping, maintenance, janitorial and similar services in an aggregate
amount of up to $1,000. Volunteer and the Company will not be responsible for
any other obligations or liabilities of Shelby Bank.

PLAN OF REORGANIZATION

In connection with the Purchase and Assumption, the Board of Directors of
Shelby Bank has adopted the Plan of Reorganization. The Plan of Reorganization
is intended to meet the requirements of Section 368(a)(1)(C) of the Code and is
to be approved by the stockholders of Shelby Bank. Pursuant to the Plan of
Reorganization, Shelby Bank will dissolve and liquidate following the Purchase
and Assumption. The remaining net assets of Shelby Bank, if any, which are not
conveyed to Volunteer, will be distributed to the stockholders of Shelby Bank.
A copy of the Plan of Reorganization is attached hereto as Annex B. See "Plan
of Reorganization."

ISSUANCE OF BANCORPSOUTH COMMON STOCK

On or prior to the Closing Date, the Company will direct Trust Company
Bank, Atlanta, Georgia (the "Exchange Agent") to issue certificates
representing shares of BancorpSouth Common Stock to be issued in the Purchase
and Assumption. The Company will also deposit with the Exchange Agent the cash
required to make cash payments in lieu of fractional shares.

From and after the Effective Time, each holder of a certificate which
immediately prior to the Effective Time represented outstanding shares of
Shelby Bank Common Stock ("Shelby Bank Certificate"), other than shares with
respect to which dissenters' rights are exercised, will be entitled to receive
a certificate or certificates representing the aggregate number of whole shares
of BancorpSouth Common Stock computed by multiplying the Exchange Ratio by the
number of such holder's shares of Shelby Bank Common Stock and cash in lieu of
any fractional shares. As soon as practicable after the Effective Time, the
Exchange Agent will mail to each holder of record of a Shelby Bank Certificate
a notice and transmittal form advising such holder of the effectiveness of the
Purchase and Assumption and the procedure to be used in receiving shares of
BancorpSouth Common Stock.

No fractional shares of BancorpSouth Common Stock will be issued and no
BancorpSouth Common Stock dividend, stock split or interest shall relate to any
fractional security, and such fractional interests shall not entitle the owner
thereof to vote or to any other rights of a security holder. In lieu of any
such fractional shares, each holder of shares of Shelby Bank Common Stock who
would otherwise be entitled to receive a fractional share of BancorpSouth
Common Stock will be entitled to receive from the Exchange Agent a cash payment
in lieu of such fractional share equal to such fraction multiplied by $34.50,
which will not be adjusted in the event of a change in the market price per
share of BancorpSouth Common Stock. In no event will the Company be obligated
to provide aggregate cash consideration, for fractional shares or otherwise, in
an amount greater than 1% of the aggregate Purchase Consideration or otherwise
to the extent such payment would not be in accordance with Section 368 of the
Code.

REPRESENTATIONS AND WARRANTIES

The Purchase Agreement contains certain representations and warranties by
Shelby Bank to the Company, including those relating to: (i) Shelby Bank's
capital structure; (ii) title to its assets; (iii) investigations, litigation
or claims with respect to its assets and liabilities; (iv) its lease
agreements; (v) its outstanding loans; (vi) insurance of its deposit accounts;
(vii) compliance with environmental laws; (viii) its financial statements; (ix)
its undisclosed liabilities or obligations; (x) filing of its tax returns and
payment of taxes; (xi) its material contracts or agreements, and any defaults
thereunder; (xii) its casualty and liability

S-28
<PAGE> 34

insurance; (xiii) compliance of its operations with applicable laws and
regulations; (xiv) its directors, officers and employees; (xv) interests of its
directors or officers in property used in its operations; and (xvi) since
February 28, 1995, the incurrence of material liability, except in the ordinary
course of business, material adverse changes in its equity, reserves,
prospects, business, operations, assets, liabilities or financial condition,
payment or satisfaction of liabilities or claims, encumbrance of its assets,
write-downs of its assets or write-offs of notes or accounts receivable,
cancellation of any debts, sale of any of its assets, increases in the
compensation of its officers and employees, capital expenditures, payment of
dividends, changes in its methods of accounting and transactions with its
directors and officers.

The Purchase Agreement contains certain representations and warranties by
each of the Company and Shelby Bank, including those relating to: (i) their
respective due organization, power and standing; (ii) the authorization,
execution, delivery and enforceability of the Purchase Agreement; (iii) the
absence of conflicts with their respective governing documents or any law,
contract, right, lease, pledge, lien, security interest, instrument, indenture,
mortgage, charge, encumbrance, agreement, order, writ, injunction, decree or
judgment to which they are subject; (iv) the absence of broker or finder fees
in connection with the Purchase and Assumption; (v) this Supplement/Proxy
Statement; and (vi) the accuracy of information furnished by each party to
another party in connection with the Purchase Agreement or the Purchase and
Assumption.

CONDUCT OF BUSINESS PENDING THE PURCHASE AND ASSUMPTION

Shelby Bank has agreed, among other things, prior to the consummation of
the Purchase and Assumption, to conduct its operations according to its
ordinary and usual manner, to use its best efforts to promote the successful
operations of Shelby Bank, to avoid acts that would adversely affect its assets
or liabilities, to maintain its assets in customary repair and condition, to
maintain its books and records in the ordinary and usual manner, and to not
take any action that would cause its representations and warranties in the
Purchase Agreement to be untrue. Shelby Bank agreed that it will not (i) grant
any increases in salary or benefits to any officer, employee or director except
in the ordinary course of business in connection with regularly scheduled
salary reviews; (ii) sell, pledge or otherwise dispose of any of its assets
having a value in excess of $5,000, other than investment securities and
federal funds in the ordinary course of business; (iii) declare, set aside or
pay any dividend; or (iv) redeem any of its capital stock. Shelby Bank has
also agreed that it will cause the exercise of outstanding options held by
Donald E. Russell to purchase 500,000 shares of Shelby Bank Common Stock at an
exercise price of $0.32 per share.

The Company and Shelby Bank have each agreed to proceed in good faith,
and to cooperate in good faith with the other, in seeking to satisfy the
conditions set forth in the Purchase Agreement, and to use its best efforts to
ensure that the Purchase and Assumption qualifies as a reorganization under
Section 368 of the Code.

CONDITIONS TO CONSUMMATION OF THE PURCHASE AND ASSUMPTION

The respective obligations of the Company, Volunteer and Shelby Bank
under the Purchase Agreement are subject to satisfaction of the following
conditions on or prior to the Closing Date, unless waived: (i) receipt of
approvals from all appropriate state and federal governmental authorities
required in connection with the Purchase and Assumption; (ii) no action, suit
or proceeding shall have been instituted or threatened against a party which
seeks to restrain or prohibit, or to obtain damages in respect of, or which is
related to or arises out of the Purchase Agreement or the transactions
contemplated thereby, and which in the opinion of an adverse party makes it
inadvisable to consummate the Purchase Agreement; (iii) the Purchase Agreement
shall have been adopted and approved by a majority vote of the stockholders of
Shelby Bank; (iv) the respective Boards of Directors of each party shall have
approved the Purchase Agreement;

S-29
<PAGE> 35

(v) the representations and warranties of each party shall have been true and
correct when made and, in addition, shall be true and correct on and as of the
Closing Date, with the same force and effect as though made on and as of the
Closing Date; and (vi) each party shall have performed in all material respects
all obligations and agreements and complied with all covenants contained in the
Purchase Agreement to be performed and complied with by such party on or prior
to the Closing Date.

The obligations of Shelby Bank under the Purchase Agreement are subject
to satisfaction of the following additional conditions on or prior to the
Closing Date, unless waived: (i) there shall not have occurred any material
adverse change in the assets, business, operations, employees, revenue, income,
prospects, condition (financial or otherwise), liabilities, net worth or
results of operations of the Company which has resulted in, or could reasonably
be expected to result in, a decrease in the Company's stockholders' equity of
10% or more; (ii) the Company shall have delivered to Shelby Bank an opinion of
counsel, dated as of the Closing Date; and (iii) the Registration Statement
shall have been declared effective by the Commission and no order suspending
the sale of BancorpSouth Common Stock in any jurisdiction shall have been
issued.

The obligations of the Company and Volunteer under the Purchase Agreement
are subject to the satisfaction of the following additional conditions on or
prior to the Closing Date, unless waived: (i) the bank location and personal
property of Shelby Bank shall not have been adversely affected in any material
way by, or sustained any material loss, whether or not insured, as a result of,
any fire, flood, accident, explosion, strike, labor disturbance, riot, act of
God or the public enemies, or other calamity or casualty; (ii) the Registration
Statement shall have been declared effective by the Commission, no order
suspending the sale of BancorpSouth Common Stock in any jurisdiction shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be, to the Company's knowledge, contemplated; (iii) there shall not have
occurred any material adverse change in the assets, business, operations,
employees, revenue, income, prospects, condition (financial or otherwise),
liabilities, net worth, or results of operations of Shelby Bank which has
resulted in, or could reasonably be expected to result in, a decrease in Shelby
Bank's stockholders' equity of 10% or more (with certain specified exceptions);
(iv) Shelby Bank shall have delivered to the Company an opinion of counsel,
dated as of the Closing Date; (v) no proceeding shall have instituted or
threatened which could result in the condemnation or other taking of a material
portion of Shelby Bank's bank location or which could materially restrict or
impair its continued use; (vi) Volunteer shall have received a special warranty
deed conveying to Volunteer good and marketable fee simple title to Shelby
Bank's bank location premises, subject to no adverse claims or encumbrances
claiming or attaching by or through Shelby Bank; (vii) Volunteer shall have
received an owner's policy of title insurance, insuring its interest in Shelby
Bank's bank location premises and subject to no exceptions and qualifications
that are unacceptable to Volunteer; (viii) Mr. Russell shall have entered into
a non-competition agreement with Volunteer; and (ix) options to acquire a
total of 500,000 shares of Shelby Bank Common Stock shall have exercised and
Shelby Bank shall have received the exercise price of $0.32 per share in cash.

EMPLOYMENT OF SHELBY BANK EMPLOYEES

Volunteer has agreed to offer continued employment to all employees of
Shelby Bank who are employed on the date of the Purchase and Assumption and who
deliver a release of liability to Shelby Bank. The Company has no obligation,
however, to continue such employment after the Purchase and Assumption. All
employment agreements between Shelby Bank and any of its current employees are
to be terminated at the Effective Time.

Volunteer will enter into a confidentiality and non-competition
agreement with Mr. Russell. This agreement is to provide that Mr. Russell will
not, during the term of his employment with Volunteer

S-30
<PAGE> 36

and thereafter until two years following the consummation of the Purchase and
Assumption: (i) compete with Volunteer; (ii) operate, develop, be employed by
or a consultant with, or own (other than ownership of less than 5% of the
equity securities of a publicly traded bank) any business that owns, manages or
operates a financial institution located within 50 miles of Shelby Bank's bank
location; or (iii) solicit any of Volunteer's customers, clients, suppliers or
employees. Mr. Russell would be permitted to own, operate or be employed by a
business confined solely to originating or servicing residential mortgage
loans. In addition, the agreement is to provide that Mr. Russell will not use
or disclose any confidential information of Volunteer during or after Mr.
Russell's employment with Volunteer, other than as required to perform his
duties as an employee of Volunteer. In the event that Mr. Russell's employment
with Volunteer is terminated both without cause and following a change in
control of Volunteer or the Company, as defined in the agreement, prior to two
years following consummation of the Purchase and Assumption, Mr. Russell would
be entitled to severance pay equal to the lesser of (i) the gross salary, less
legal deductions, that would have otherwise been paid to Mr. Russell had his
employment with Volunteer been continued for such two year period, or (ii) Mr.
Russell's then current annual gross salary, less legal deductions. In all
other respects, Mr. Russell will be an at-will employee on the same basis as
all other employees of Shelby Bank.

EMPLOYEE BENEFITS

Volunteer has agreed to provide Shelby Bank employees who become
employees of Volunteer with the same employee benefits, including medical
insurance, vacation pay and sick leave, as are extended to Volunteer's other
non-executive new hires. No uninsured waiting periods or pre-existing
condition limitations are to be imposed with respect to medical insurance
coverage.

AMENDMENT OF THE PURCHASE AGREEMENT

The Purchase Agreement may be amended and any condition therein waived by
a written agreement between the parties, except that regulatory approval of the
Purchase and Assumption may not be waived.

TERMINATION OF THE PURCHASE AGREEMENT

The Purchase Agreement may be terminated at or prior to the Closing: (i)
by mutual written consent of the Company and Shelby Bank, or (ii) by either
party, in writing, if any opposing party breaches a representation or warranty
in any material respect or breaches any covenant, undertaking or obligation
contained in the Purchase Agreement and such breach has not been cured by the
earlier of 30 days after the giving of notice to the breaching party of such
breach or the Closing Date. The Purchase Agreement may be terminated at any
time by either party, in writing, after any relevant regulatory authority has
denied an application of the Company for approval of the transactions
contemplated in the Purchase Agreement and the time period for all appeals or
requests for reconciliation with respect to such application have run. The
Purchase Agreement may be terminated, at the Closing, by any party, in writing,
if the conditions to such party's obligation to close under the Purchase
Agreement have not been met by the opposing party or waived in writing by the
terminating party. The Purchase Agreement shall terminate automatically and
without action on the part of any party unless the Purchase and Assumption is
consummated on or before November 1, 1995, unless mutually extended by the
respective boards of directors of the Company and Shelby Bank; provided that,
if the Purchase and Assumption cannot be consummated on or before November 1,
1995 because of delays in obtaining approvals or consents from relevant
regulatory authorities, such deadline will be extended to a date to be mutually
agreed to by the parties to the Purchase Agreement (but not beyond May 1,
1996).

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<PAGE> 37

PLAN OF REORGANIZATION

The Board of Directors of Shelby Bank has adopted the Plan of
Reorganization which provides that, upon the effectiveness of the Purchase and
Assumption, Shelby Bank shall voluntarily dissolve pursuant to the provisions
of the Tennessee Banking Law. The Plan of Reorganization provides that, after
giving effect to the consummation of the Purchase and Assumption, (a) the only
outstanding capital stock shall be the 5,287,552 shares of Shelby Bank Common
Stock; (b) pursuant to the provisions of the Purchase Agreement and in
accordance with Section 368(a)(1)(C) of the Code, BancorpSouth Common Stock
will be distributed directly to the holders of Shelby Bank Common Stock in
consideration of the assets and assumption of liabilities of Shelby Bank; and
(c) the sole assets of Shelby Bank shall be the $50,000 expense fund which will
be used to pay all remaining known liabilities of Shelby Bank in connection
with the dissolution. The Plan of Reorganization provides for the approval by
the Tennessee Commissioner of Financial Institutions (the "Tennessee
Commissioner") of the voluntary dissolution of Shelby Bank, in accordance with
the Tennessee Banking Act, and that Shelby Bank will send a notice of
liquidation by mail to each depositor, creditor, person interested in funds
held as a fiduciary, lessee of a safe deposit box or bailor of property, to the
extent that there are any such persons immediately following the effectiveness
of the Purchase and Assumption. It is not anticipated that there will be any
such persons. Further, since Shelby Bank will not have any premises after the
effectiveness of the Purchase and Assumption, Shelby Bank will post the notice
of liquidation required by law in a manner prescribed by the Tennessee
Commissioner. If there are any assets of Shelby Bank remaining after discharge
of all its obligations and after making provision with the Tennessee
Commissioner with respect to any disputed claims as required by law, the
remaining assets, if any, will be distributed to the stockholders of Shelby
Bank in accordance with their respective interests. It is not anticipated that
there will be any remaining assets available for distribution.

The Plan of Reorganization also provides that immediately after the
effectiveness of the Purchase and Assumption and in any event, within 365 days,
Shelby Bank will deliver to the Tennessee Commissioner (a) its charter, for
cancellation by the Tennessee Commissioner as required by applicable law and
(b) Articles of Dissolution, which will include an Order of Dissolution for
entry by the Tennessee Commissioner. After entry by the Tennessee Commissioner
of the Order of Dissolution, Shelby Bank will file the Articles of Dissolution
and Order of Dissolution with the Tennessee Secretary of State. The Plan of
Reorganization provides that Shelby Bank may terminate or abandon it at any
time prior to the closing of the transactions under the Purchase Agreement, but
that it may not be terminated or abandoned after the consummation of the
Purchase and Assumption.

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<PAGE> 38

SHELBY BANK

GENERAL

Shelby Bank is a Tennessee banking corporation which was chartered on
August 19, 1987, and commenced operations in January 1988. Shelby Bank is not a
member of the Federal Reserve System, but it is an FDIC insured bank. Shelby
owns its only office which is located at 6675 Stage Road, Bartlett, Shelby
County, Tennessee.

Shelby Bank engages in a general commercial banking business in Shelby
County, Tennessee, by providing banking services to individual, small to medium
size commercial and governmental customers. These services include checking
accounts, money market checking accounts, money market savings accounts,
certificates of deposit, individual retirement accounts, letters of credit,
collection services, cashier's checks, traveler's checks, wire transfers,
personal loans, automobile loans, home improvement loans, commercial loans,
construction loans, drive-in banking, banking by mail and night depository
facilities. Although Shelby has made some home mortgage loans, it generally
has originated residential mortgage loans for other lenders.

Shelby Bank obtains a majority of its deposits and makes a majority of
its loans to customers who live and/or work in Bartlett, Tennessee and the
north Shelby County, Tennessee area communities. Within these areas are a large
concentration of residential as well as multi-use commercial, governmental and
retail developments. Memphis is the largest city in Shelby County, Tennessee.
Bartlett is one of the leading growth areas of Tennessee with its population
having increased from 17,170 to 26,989 between 1980 and 1990 according to the
United States Census Bureau.

Shelby Bank considers its competitors to be other commercial banks,
savings and loans associations and credit unions with locations within the
Shelby County, Tennessee areas. Many of these competitors are able to offer
customers larger loans than Shelby Bank can (due to the limitations on the size
of loans it can make based upon its capital), and a wider range of services.

REGULATION

Shelby Bank is subject to applicable provisions of Tennessee law, insofar
as they do not conflict with or are not preempted by federal law, including
laws relating to usury, various consumer and commercial loans and the operation
of branch banks.

In recent years, significant federal legislation designed to encourage
competition among financial institutions and restructure the financial services
industry, among other things, has been enacted, including the Depository
Institutions Deregulation and Monetary Control Act of 1980, the Garn-St.
Germain Depository Institutions Act of 1982, the Competitive Equality Banking
Act of 1987, the Financial Institutions Reform Recovery and Enforcement Act of
1989 and the Omnibus Crime Control Act of 1990. Various bills which could
affect the operations of commercial banks and other financial institutions are
introduced periodically in Congress and the state legislature. The likelihood
of passage of such legislation, its final form, the manner of implementation or
its impact on Shelby Bank cannot be foreseen; however, efforts in Congress and
with regulatory agencies are underway that may make operating insured
depository institutions more burdensome and more costly.

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<PAGE> 39

In addition to the foregoing factors, the business of Shelby Bank is
affected by the monetary and fiscal policies adopted by the United States
government and federally ruled regulatory bodies, including the Board of
Governors of the Federal Reserve System, which, among other actions, may raise
or lower the current reserve requirements respecting deposits and change the
discount rate on member banks borrowing. These policies influence to a
significant extent the overall growth of bank loans, investments and deposits
and the interest rates charged on loans and paid on deposits. The nature of
future monetary and fiscal policies and the effect of such policies on the
business and earnings of Shelby Bank cannot be predicted.

FDIC CEASE AND DESIST ORDER

Shortly after beginning operations in 1988, Shelby Bank experienced
operating difficulties due to the general poor credit quality of its loans.
The deterioration of Shelby Bank's capital position due to Shelby Bank's
operating losses and increases in nonperforming loans led to increased
regulatory oversight from the FDIC and the TDFI. The Board of Directors of
Shelby Bank took a number of actions to address this situation, including
changes in senior management and, to counter the decrease in its capital
position, in 1992, the issuance and sale of approximately $1.875 million of
Shelby Bank Common Stock (including the conversion of loans from directors
of Shelby Bank in the aggregate amount of $550,000 into shares of Shelby Bank
Common Stock).

Notwithstanding these actions by Shelby Bank, since May 1992, Shelby Bank
has been operating under an FDIC cease and desist order to which the TDFI is
also a party. Under the order, Shelby Bank is required to cease engaging in
hazardous lending and lax collection practices, operating with inadequate
capital and a large volume of poor quality loans, and operating in a manner as
to produce operating losses or in violation of various federal and state
banking regulations. In addition, the order requires Shelby Bank to maintain
qualified management, implement and maintain a management policy and plan for
increasing earnings, increase its capital and maintain adequate loan loss
reserves, establish a loan committee and an internal periodic loan review
program and restrict extensions of credit to borrowers with previously
uncollected or doubtful loans from Shelby Bank. Shelby Bank is to provide the
FDIC with periodic progress reports regarding Shelby Bank's compliance with the
order. The terms of the cease and desist order will remain in effect until the
order is cancelled by the FDIC. In the event that Shelby Bank fails to
continue to comply with the provisions of the cease and desist order, the FDIC
could take over the operations of Shelby Bank or place it into receivership, or
the TDFI could revoke Shelby Bank's charter.

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<PAGE> 40

CERTAIN ADDITIONAL FINANCIAL AND STATISTICAL DATA

The following information presents certain financial and statistical
disclosures with respect to the condition and operations of Shelby Bank for and
during its last two fiscal years.

Loan Portfolio

The following table sets forth loans outstanding, according to type of
loan, at the indicated dates:
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1994
----------- -----------
(in thousands)
<S> <C> <C>
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . . $ 4,477 $ 4,032
Real estate - construction . . . . . . . . . . . . . . . 2,488 2,503
Real estate - mortgage . . . . . . . . . . . . . . . . . 1,750 1,857
Installment loans to individuals . . . . . . . . . . . . 2,044 2,064
Lease financing . . . . . . . . . . . . . . . . . . . . . 1,238 1,774
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $ 11,997 $ 12,230
======== ========
</TABLE>

There were no agricultural loans included in the commercial, financial
and agricultural loans at December 31, 1994. Commercial and industrial loans
are loans generally advanced for business purposes to fund long term capital
and short term working capital needs. These loans may be collateralized by
cash, marketable securities, accounts receivable, inventory, equipment and
other business assets, or may be unsecured. Agricultural loans are generally
for farming purposes and may be collateralized by farm land, equipment or
crops. Credit standards applied to these loans, as well as all other loans,
primarily include repayment ability based on cashflow capacity, as well as
certain equity and loan to value requirements.

The following table sets forth loans (excluding real estate-mortgage,
installment loans to individuals and lease financing) outstanding as of
December 31, 1994, which, based on remaining scheduled repayments of principal,
are due in the periods indicated. Also, the total amounts of all these leases
which are due after one year are classified according to their sensitivity to
changes in interest rates.

<TABLE>
<CAPTION>
Maturing
---------------------
After One
Within But Within After Five
One Year Five Years Years Total
----------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Commercial financial and
agricultural . . . . . . . . . . . . . . $ 2,879 $ 745 $ 408 $ 4,032
Real estate-construction . . . . . . . . . 2,503 --- --- 2,503
---------- ---------- ------ --------
Total . . . . . . . . . . . . . . . $ 5,382 $ 745 $ 408 $ 6,535
========== ========== ====== ========

Loans maturing after one year with:
Fixed interest rates . . . . . . . . 408
Variable interest rates . . . . . . 745
--------
Total . . . . . . . . . . . . $ 1,153
========
</TABLE>

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<PAGE> 41

Non-Accrual, Past Due and Restructured Loans

The following table summarizes information concerning non-accrual and
past due loans:

<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1994
------------ ----------
(in thousands)
<S> <C> <C>
Non-accruing loans . . . . . . . . . . . . . . . . . . . $ 281 $ 40
Restructured loans . . . . . . . . . . . . . . . . . . . -- --
Interest income which would have been recorded
under original terms:
Non-accrual loans . . . . . . . . . . . . . . . . 25 3
Restructured loans . . . . . . . . . . . . . . . . -- --
Interest income recorded during the period:
Non-accrual loans . . . . . . . . . . . . . . . . -- --
Restructured loans . . . . . . . . . . . . . . . . -- --
Accruing loans past due 90 days or more . . . . . . . 5 23
</TABLE>

There were no restructured loans at the end of either period and there
was no interest recorded on restructured loans or that would have been recorded
under the original terms of the loans. There were no other loans which were
"troubled debt restructurings" as defined in the Statement of Financial
Accounting Statements No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructurings."

The accrual of interest income is discontinued when, in the opinion of
management, the collectibility of such interest is doubtful. When interest
accruals are discontinued, interest credited to income in the current year is
reversed, and interest accrued in the prior year is charged to the allowance
for possible loan losses. Management may elect to continue the accrual of
interest when the estimated net realizable value of collateral is sufficient to
cover the principal balance and accrued interest.

Potential Problem Loans

Shelby Bank had $395,795 at December 31, 1993 and $824,969 at December
31, 1994 in loans subject to special management attention because the borrowers
were experiencing financial difficulties which caused management to have
serious doubts about the ability of those borrowers to comply with the present
loan repayment terms and which may result in the inclusion of those loans in
the preceding table. These loans are subject to constant management attention
with their classification and potential loss, if any, reviewed on a monthly
basis. Management believes that any loss from these loans, as well as those set
forth in the above table of non-accrual, past due and restructured loans, will
not have a material impact on Shelby Bank's future operating results, liquidity
or capital position.

Loan Concentrations

At December 31, 1994, Shelby Bank did not have any loan concentrations
to borrowers which are engaged in the same industry or similar industries that
exceeded 10% of the total amount of loans outstanding.

S-36
<PAGE> 42

Other Interest-Earning Assets

At December 31, 1994; Shelby Bank did not have any interest-earning
assets, other than loans, that would require disclosure as non-accrual, past
due, restructured loans or potential problem loans if such assets were loans.

Summary of Loan Loss Experience

The following table summarizes changes in the allowance for possible
loan losses arising from loans charged off and recoveries on loans previously
charged off by loan category and additions to the allowance which have been
charged to operating expense:

<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of period . . . . . . . . . . . . . $ 535 $ 396
Loans charged off:
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . . 247 276
Real estate - construction . . . . . . . . . . . . . . . -- --
Real estate - mortgage . . . . . . . . . . . . . . . . . -- --
Installment loans to individuals . . . . . . . . . . . . 36 7
-------- --------
Total loans charged off . . . . . . . . . . . . . 283 283

Recoveries of loans previously charged off:
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . 120 52
Real estate - construction . . . . . . . . . . . . -- --
Real estate - mortgage . . . . . . . . . . . . . . -- --
Installment loans to individuals . . . . . . . . . 9 24

Total recoveries . . . . . . . . . . . . . 129 76
-------- --------
Net loans charged off . . . . . . . . . . . . . . . . . . (154) (207)
Additions charged to operations . . . . . . . . . . . . . 15 57
-------- --------
Balance at end of periods . . . . . . . . . . . . . . . . $ 396 $ 246
======== ========
Ratio of net charge-offs during period to average
loans outstanding . . . . . . . . . . . . . . . . . 1.61% 1.70%
======== ========
</TABLE>

Management of Shelby Bank reviews Shelby Bank's loan portfolio to
identify potential credit difficulties on a monthly basis, and determines
whether allowances for possible loan losses are adequate for loans considered
to be in potential difficulty. In the event that management of Shelby Bank
increases allowances for possible loan losses, a corresponding charge is made
to operating expenses. In addition, all recoveries on loans previously charged
off are credited back to allowances for possible loan losses and are not
credited to operating earnings.

Allowance for Possible Loan Losses

The allowance for possible loan losses is maintained at a level, deemed
adequate by management of Shelby Bank, to absorb potential losses in the loan
portfolio. Management's determination of the adequacy

S-37
<PAGE> 43

of the allowance is based on an evaluation of the loan portfolio, past loan
loss experience, current domestic economic conditions, loan volume, growth and
composition of the portfolio and any other factors management deems relevant.
The allowance may be further increased by provisions for loan losses charged
against current operating income.

The allowance for loan losses represents management's best estimate of
the future losses which may be sustained when existing loans become due, based
on several factors including Shelby Bank's historical loan loss experience, a
comparison with Shelby Bank's peer group, and an evaluation of the
collectibility of loans outstanding using results of Shelby Bank's quarterly
loan review. The provision for loan losses represents the amount charged
against earnings during the accounting period to bring the allowance for loan
losses up to an adequate level.

The allowance for possible loan losses has been allocated according to
the amount which might reasonably be necessary for losses incurred within the
following categories of loans at December 31 for the years indicated:
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1994
------------ -----------
(in thousands)
<S> <C> <C>
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . . $ 120 $ 125
Real estate :
Construction . . . . . . . . . . . . . . . . . . . 142 87
Mortgage . . . . . . . . . . . . . . . . . . . . . -- --
Installment loans to
individuals . . . . . . . . . . . . . . . . . . . . . 44 34
--------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $ 306 $ 246
========= ========
</TABLE>

S-38
<PAGE> 44

SHELBY BANK MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides certain information concerning Shelby
Bank's financial condition and results of operations. For a more complete
understanding of the following discussion, reference should be made to the
financial statements of Shelby Bank and related notes thereto presented
elsewhere in this Supplement/Proxy Statement. The financial statements of
Shelby Bank as of and for the year ended December 31, 1994 have been audited.
All other financial statements of Shelby Bank included in this Supplement/Proxy
Statement are unaudited.

FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The Banking Industry. In the banking industry, net income is largely
dependent upon net interest income, which is the spread between (i) income
received on the loan portfolio and other investments, and (ii) the cost of
money, consisting primarily of interest paid on deposit accounts. Accordingly,
net interest income is affected by the average yield on interest-earning
assets, the average rate paid on interest-bearing liabilities and the average
outstanding balance of interest-earning assets and interest-bearing
liabilities.

Two key measures of profitability in the banking industry are return on
equity ("ROE") and return on assets ("ROA"). ROE is the ratio of income earned
to average stockholders' equity, and ROA measures how effectively a corporation
uses its assets to produce earnings.

Liquidity is the ability of a financial institution to maintain
sufficient cash to support loan growth, deposits, withdrawals, and other
financial obligations, even during times of stress in financial markets.
Liquidity is achieved through the continual maturing of interest-earning
assets, as well as by investing in short term marketable securities. Liquidity
is also available through deposit growth, borrowing capacity, and repayments of
principal on loans and securities. High levels of liquidity are normally
obtained at a net interest cost because yields are typically reduced as the
proportion of short term, liquid earning assets are increased. In addition,
higher interest expenses are normally incurred in connection with the extension
of deposit maturities. The trade-off of the level of desired liquidity versus
its cost is evaluated in determining the appropriate amount of liquidity at any
one time.

The allowance for loan losses is established through a provision for loan
losses charged to expenses. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans that may become uncollectible. The adequacy of the allowance for loan
losses is determined on an ongoing basis by the historical loan loss experience
of Shelby Bank, loan delinquency trends and the economic conditions within the
relevant market area. Also, allocations are made to the allowance based on
specifically identified potential loss situations. These potential loss
situations are identified by management.

Shelby Bank's policy is to place loans in excess of 90 days past due on
nonaccrual status, unless there is sufficient evidence to indicate probable
collection in the near future. At the discretion of management, loans less
than 90 past due may be placed on nonaccrual status.

Three Months Ended March 31, 1995 Compared to Three Months Ended March
31, 1994. Net income for the three months ended March 31, 1995, was $37,232,
as compared to $30,862 for the three months ended March 31, 1994, for an
increase of 20.6%. This increase was attributable to an increase in net
interest income. ROE was 10.5% at March 31, 1995, as compared to 9.08% at March
31, 1994. ROA rose to 0.69% on March 31, 1995, from 0.67% on March 31, 1994.

S-39
<PAGE> 45

Interest income increased by $82,126 during the three-month period ending
March 31, 1995, as compared to the three-month period ending March 31, 1994,
and interest expense increased by $75,800 over the same period, for an
improvement in the net interest income (after provision for loan losses) of
$10,326. Non-interest income decreased by approximately $14,396 and operating
expense decreased by approximately $10,440 during the three-month period ended
March 31, 1995, as compared to the same period during 1994.

The provision made for loan losses was $1,000 during the three-month
period ended March 31, 1995, as compared to $5,000 for the same period during
1994. This decrease was a result of a decrease of $900,000 in the loan
portfolio and a determination that the provision for loan losses was adequate.

At March 31,1995, total assets were $22,684,629, an increase of
approximately 20.2% from $18,879,052 in total assets at March 31, 1994. The
increase in total assets was primarily due to an increase in Federal funds of
$2.9 million and an increase in investment securities of $1.9 million. Total
deposits increased to $21,384,137 at March 31, 1995, as compared to $16,479,644
at March 31, 1994, due to a marketing campaign to increase deposits. The ratio
of total loans to total deposits was 58.07% at March 31, 1995, compared to
81.29% at March 31, 1994.

The loan loss reserve at March 31, 1995 was $272,652 or 2.19% of total
loans, compared to $380,941 or 2.84% of total loans at March 31, 1994. As of
March 31, 1995 and 1994, there was approximately $75,000 and $264,000
respectively, in nonaccrual loans, and approximately $1,000 and $327,000
respectively, in accruing loans more than 90 days past due.

Total stockholders' equity at March 31, 1995 was $1,437,127 compared to
$1,364,380 at March 31, 1994. This increase in total stockholders' equity was
attributable to earnings and does not take into account unrealized losses on
securities available for sale. The capital to assets ratio on March 31, 1995
was 6.34%.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993.
Net income for 1994 was $74,110 as compared to a net loss of $163,821 for 1993.
Net interest income (after provision for loan losses) increased to $747,937 in
1994, as compared to $582,238 in 1993.

Income from interest and loan fees for 1994 was $1,385,520 as compared to
$1,199,948 in 1993. The increase is primarily due to an increase of
approximately $300,000 in the loan portfolio and an increase in the prime rate
during 1994.

Interest expense for 1994 was $580,583 as compared to $602,710 in 1993.
The shift from time deposits to demand deposits was primarily due to a $1.0
million increase in non-interest bearing checking accounts as well as a
reduction in the level of certificates of deposit over $100,000.

Non-interest (operating) expense was $866,915 in 1994, a decrease from
$997,736 in 1993. The decrease is primarily due to a reduction in legal and
other expenses paid during 1993 in connection with the Cease and Desist Order
issued in May 1992. See "Shelby Bank -- FDIC Cease and Desist Order."

The provision made for loan losses was $57,000 during 1994, as compared
to a $15,000 provision during 1993. The increase in the provision in 1994 was
primarily due to a loan loss in the amount of $150,000 that was taken in
December 1994.

Total assets increased 11.4%, to $21,389,418 at December 31, 1994, from
$19,205,025 at December 31, 1993, and total deposits increased 13.08%, from
$17,805,947 to $20,134,186 at December 31, 1993 and 1994, respectively. The
ratio of total loans to total deposits was 60.48% at December 31, 1994,
compared to 67.14% at December 31, 1993.

S-40
<PAGE> 46

The loan loss reserve at December 31, 1994 was $246,150 or 2.01% of total
loans, compared to $396,270 or 3.32% of total loans at December 31, 1993. The
decrease in the loan loss reserves was due primarily to a loss of $150,000
taken in December 1994 and a determination that the reserve level was adequate.
As of December 31,1994, and 1993, there was approximately $40,000 and $281,000
respectively, in nonaccrual loans and $ 23,000 and $5,000, respectively, in
accruing loans contractually past due 90 days or more as to principal or
interest payments.

Total stockholders' equity at December 31, 1994 was $1,399,900, an
increase of $74,106, or 5.59%, since December 31, 1993. This amount does not
include unrealized losses on securities available for sale of $186,000. The
capital to assets ratio on December 31, 1994 was 6.5%.

Year Ended December 31, 1993 Compared to Year Ended December 31, 1992.
Shelby Bank experienced a net loss of $163,821 during 1993 as compared to a net
loss of $432,944 for 1992. Net interest income (after provision for loan losses)
during 1993 increased 73%, or $245,520, over 1992, primarily due to a decrease
in interest expenses associated with time deposits.

Total assets at December 31, 1993 were $19,205,025, representing a slight
increase over $19,060,838 at December 31, 1992. The loan loss reserve at
December 31, 1993 was $396,270 or 3.32% of total loans, compared to $535,000 or
5.71% of total loans at December 31, 1992. The decrease in the loan loss
reserve was attributable to a reduction in classified loans to $986,000 at
December 31, 1993 compared to $3,135,000 at December 31, 1992. During 1993,
total charge offs were $283,347 compared to recoveries for the same period of
$129,616. Management of Shelby Bank considered that the level of the reserves
to total loans was adequate at December 31, 1993.

Total stockholders equity at December 31, 1993 was $1,325,794 as compared
to $590,841 at December 31, 1992.

IMPACT OF INFLATION AND CHANGES IN PRICES

The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and results of operations in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation. Because virtually all of
the assets of Shelby Bank are monetary in nature, interest rates have a more
significant impact on its performance than the general level of inflation.
Interest does not necessarily move in conjunction with or in proportion to
inflation rates.

LIQUIDITY AND CAPITAL RESOURCES

Since the commencement of Shelby Bank's operations in 1988, it has
experienced an inadequate capital position, due in part to operating losses and
non-performing loans. This inadequacy has, among other things, resulted in
substantial regulatory oversight of the operations of Shelby Bank and the
issuance of a cease and desist order by the FDIC. See "Shelby Bank -- FDIC
Cease and Desist Order." To address its inadequate capital position and the
concerns of the FDIC and the TDFI, Shelby Bank issued and sold $1.875 million
of shares of Shelby Bank Common Stock in 1992 and an additional $900,000 of
shares of Shelby Bank Common Stock in 1993. Management of Shelby Bank believes
that in order for Shelby Bank to continue to operate as an independent
institution, additional capital will be required. There is no assurance that
such capital could be obtained.

S-41
<PAGE> 47

DESCRIPTION OF SHELBY BANK CAPITAL STOCK

VOTING SECURITIES

Stockholders of record of Shelby Bank Common Stock as of the close of
business on _______ __, 1995 are entitled to one vote for each share of Shelby
Bank Common Stock then held at the Special Meeting. As of ______, 1995, Shelby
Bank had 4,787,552 shares of Shelby Bank Common Stock issued and outstanding,
which is the only outstanding class of Shelby Bank's capital stock.

The presence in person or by proxy of at least a majority of the
outstanding shares of Shelby Bank Common Stock entitled to vote is necessary to
constitute a quorum at the Special Meeting. In the event that there are not
sufficient votes present for a quorum, or to ratify any proposal at the time of
the Special Meeting, the Special Meeting may be adjourned in order to permit
the further solicitation of proxies.

For a description of the rights and privileges of holders of Shelby Bank
Common Stock and a comparison of those rights with those of the BancorpSouth
Common Stock, see "Comparison of Rights of Stockholders."

BENEFICIAL OWNERSHIP

The following table sets forth, at _______, 1995, certain information as
to those persons who were beneficial owners of more than 5% of the outstanding
shares of Shelby Bank Common Stock and the beneficial ownership of each
director and executive officer of Shelby Bank and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING SHARES
SHELBY BANK OF SHELBY BANK
COMMON STOCK COMMON STOCK
DIRECTORS AND EXECUTIVE OFFICERS: BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)(3)
--------------------- ------------------------
<S> <C> <C>
Robert E. Brawner . . . . . . . . . . . . . . 175,000(2) 3.31%
Billy F. Campbell . . . . . . . . . . . . . . 360,960(2) 6.83
Sammy Joe Garner . . . . . . . . . . . . . . 612,600(2) 11.59
James O. Miller . . . . . . . . . . . . . . . 596,355(2) 11.28
Harry E. Mongue . . . . . . . . . . . . . . . 299,268(2) 5.66
James L. Reid . . . . . . . . . . . . . . . . 1,212,500(2) 22.93
Asher Roberts . . . . . . . . . . . . . . . . 198,284(2) 3.75
Donald E. Russell . . . . . . . . . . . . . . 600,000(2)(3) 11.35
Clair Vander Schaaf . . . . . . . . . . . . . 275,000(2) 5.20
C. Alan Hall . . . . . . . . . . . . . . . . 400 *
All directors and executive
officers as a group (ten persons) . . . . . . 3,530,367(2)(3) 66.77
OTHER 5% STOCKHOLDERS:
John Hyneman . . . . . . . . . . . . . . . . 468,750 8.87
Kevin Hyneman(4). . . . . . . . . . . . . . . 312,500 5.91
- ---------------------
</TABLE>
* Less than 1%
(1) A person or entity is considered to beneficially own shares of Shelby
Bank Common Stock if he or she directly or indirectly has or shares (1)
voting power,which includes the power to vote or to direct the voting of
the shares; or (2) investment power, which includes the power to dispose
or direct the disposition of the shares. Unless otherwise indicated,
includes all shares held directly the named individuals as well as by
spouses, minor children in trust and other indirect ownership, over which
shares the named individual effectively exercises sole voting and
investment power with respect to the indicated shares.
(2) Number of shares and percentages includes 100,000 shares owned by Shelby
Bancshares, Inc., which has identical directors as Shelby Bank.
Therefore, each of the directors of Shelby Bank has shared voting power
with respect to these shares.
(3) Includes 500,000 shares of Shelby Bank Common Stock which Mr. Russell
holds option to purchase, which options are currently exercisable.
(4) Shares are held by Kevin Hyneman as trustee for Hyneman Homes,
Inc.--Profit Sharing Plan. Kevin Hyneman controls Hyneman Homes, Inc.

S-42
<PAGE> 48

COMPARISON OF RIGHTS OF STOCKHOLDERS

The following is a comparison of the rights a stockholder of Shelby Bank
now possesses under Shelby Bank's governing documents and would possess as a
stockholder of the Company with respect to the various factors set forth below:

VOTING RIGHTS

Company - Each outstanding share of BancorpSouth Common Stock entitles
the holder thereof to one vote on each matter with respect to which
stockholders are entitled to vote.

Shelby Bank - Each outstanding shares of Shelby Bank Common Stock
entitles the holder thereof to one vote on each matter submitted to a vote at a
meeting of the stockholders of Shelby Bank.

CHANGE OF CONTROL

Company - The Board of Directors of the Company is divided into three
classes so that only one-third of the directors will be subject to reelection
at each annual meeting of the stockholders of the Company. The affirmative vote
of the holders of not less than 80% of the outstanding shares of voting stock
of the Company is required in the event that the Board of Directors of the
Company does not recommend to the stockholders of the Company a vote in favor
of a merger or consolidation of the Company with, or a sale or lease of all or
substantially all of the assets of the Company to, any person or entity. In
addition, the affirmative vote of the holders of not less than 80% of the
outstanding shares of voting stock of the Company, as well as at least 67% of
the outstanding shares of voting stock of the Company not held by a person
owning or controlling 20% or more of the Company's voting stock ("Controlling
Person"), shall be required for the approval of a merger, consolidation, or
sale or lease of all or substantially all of the Company's assets with or to a
Controlling Person, except in certain instances. The Company has implemented a
shareholders rights plan under which a common stock purchase right attaches to
and trades with each share of BancorpSouth Common Stock. Upon the occurrence
of certain events, including the acquisition of or tender for 20% or more of
the outstanding shares of BancorpSouth Common Stock by any person, then the
holders of each such purchase right (except those held by the acquiring
person,) will be entitled to purchase a share of BancorpSouth Common Stock at
50% of the then current market price.

Shelby Bank - The charter and bylaws of Shelby Bank do not contain any
similar impediments to a change of control.

BOARD OF DIRECTORS

Company - The business and affairs of the Company are to be managed by the
Company's Board of Directors. The Company's Board of Directors is to consist of
nine to 24 members, as determined from time to time by the Company's Board of
Directors, and at ____________, 1995 consisted of 12 members. The members of
the Company's Board of Directors are divided into three classes, with the
classes elected for staggered three-year terms.

Shelby Bank - The property, affairs and business of Shelby Bank are to
be managed by its Board of Directors. Directors of Shelby Bank are elected for
one year terms. The number of members of the Board of Directors of Shelby Bank
is determined by the vote of its stockholders at its annual meeting of
stockholders, and at _________, 1995 consisted of nine members.

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<PAGE> 49

REMOVAL OF DIRECTORS

Company - A director of the Company may be removed for cause by the
affirmative vote of a majority of the entire Board of Directors of the Company,
and may be removed by the stockholders of the Company only for cause.

Shelby Bank - A director of Shelby Bank may be removed without cause by
the majority vote of the stockholders of Shelby Bank.

INDEMNIFICATION OF MANAGEMENT

Company - Directors of the Company are not personally liable to the
Company or its stockholders for monetary damages for the amount of a financial
benefit received by a director to which he is not entitled, an intentional
infraction of harm on the Company or its stockholders, a violation of Section
79-4-8.33 of the Mississippi Business Corporation Act, or an intentional
violation of criminal law. If the law of Mississippi is amended to limit or
expand the liability of directors, the liability of directors will be limited
or expanded according to such amended provisions. The Company is to indemnify,
and upon request shall advance expenses to any officer or director who was, or
is a party to, or is threatened to be made a party to, any threatened, pending
or completed action, suit or proceeding because such person is or was a
director or officer of the Company.

Shelby Bank - Directors, officers and employees of Shelby Bank are to be
indemnified by Shelby Bank against judgments resulting from, and expenses
reasonably incurred in connection with, any action to which such a person may
be made a party by reason of being a director, officer or employee of Shelby
Bank, except as to matters with respect to which such person shall be finally
adjudged to be liable for his or her negligence or misconduct, and except that
in the event of a settlement of such an action, only in connection with the
matters covered by the settlement as to which Shelby Bank is advised by counsel
that the person to be indemnified was not liable for such negligence or
misconduct.

PERMITTED ACTIVITIES

Company - The Company's Restated Articles of Incorporation provide that
the Company may engage in any business activity or exercise any power permitted
by law.

Shelby Bank - Shelby Bank's Charter provides that Shelby Bank was
organized to conduct a general banking business, with all powers granted to
banking corporations under the laws of the State of Tennessee, including trust
powers, and with all other corporate powers not specifically prohibited to such
banking corporations.

RIGHT TO CALL SPECIAL MEETINGS OF THE STOCKHOLDERS

Company - Special meetings of the stockholders of the Company may be
called by the chief executive officer or secretary of the Company, or by the
holders of not less than a majority of the shares entitled to vote at such
meeting.

Shelby Bank - Special meetings of the stockholders of Shelby Bank may be
called by the president, a majority of its directors, or by the holders of not
less than 10% of the outstanding shares of Shelby Bank Common Stock.

S-44
<PAGE> 50

LEGAL MATTERS

The validity of the shares of BancorpSouth Common Stock to be issued to
the stockholders of Shelby Bank in the Purchase and Assumption and certain
federal income tax consequences in connection with the Purchase and Assumption
will be passed upon by Waller Lansden Dortch & Davis, Nashville, Tennessee,
special counsel to the Company. Certain matters concerning the Purchase and
Assumption will be passed upon on behalf of the Company by Riley, Ford,
Caldwell & Cork, P.A., Tupelo, Mississippi. Frank A. Riley, a shareholder of
such firm, is a director of the Company. Certain legal matters concerning the
Purchase and Assumption will be passed upon on behalf of Shelby Bank by
Sherrard & Roe, P.L.C., Nashville, Tennessee.

EXPERTS

The Consolidated Financial Statements of the Company, as of December 31,
1994 and 1993, and for each of the years in the three-year period ended
December 31, 1994, have been incorporated by reference in this Supplement/Proxy
Statement and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in accounting
and auditing.

The report of KPMG Peat Marwick LLP refers to the Company adopting the
provisions of Financial Accounting Standards Board's Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" in 1993 and
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" in 1994.

The financial statements of Shelby Bank as of December 31, 1994 and for
the year ended December 31, 1994, included in this Supplement/Proxy Statement,
are included in reliance upon the report of Fouts & Morgan, Certified Public
Accountants, P.C., independent certified public accountants, upon the authority
of such firm as experts in accounting and auditing.

S-45
<PAGE> 51
INDEX TO SHELBY BANK
FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Accountants' Compilation Report . . . . . . . . . . . . . . . . . . . . . . . F-2

Shelby Bank Statement of Financial Condition at
December 31, 1993 and 1992 (unaudited). . . . . . . . . . . . . . . . . . . F-3

Shelby Bank Statement of Income for the Year Ended
December 31, 1993 and 1992 (unaudited). . . . . . . . . . . . . . . . . . . F-4

Shelby Bank Statement of Cash Flows for the Year
Ended December 31, 1993 and 1992 (unaudited). . . . . . . . . . . . . . . . F-5

Accountants' Compilation Report. . . . . . . . . . . . . . . . . . . . . . . . F-6

Shelby Bank Statement of Financial Condition at
March 31, 1995 and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . F-7

Shelby Bank Statement of Income for the Three
Months Ended March 31, 1995 and 1994 (unaudited). . . . . . . . . . . . . . F-8

Shelby Bank Statement of Cash Flows for the
Three Months Ended March 31, 1995 and 1994 (unaudited). . . . . . . . . . . F-9

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Shelby Bank Statement of Financial Condition at December 31, 1994. . . . . . . F-13

Shelby Bank Statement of Income for the Year Ended December
31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

Shelby Bank Statement of Changes in Stockholders' Equity for
the Year Ended December 31, 1994. . . . . . . . . . . . . . . . . . . . . . F-15

Shelby Bank Statement of Cash Flows for the Year Ended December
31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16

Shelby Bank Notes to Financial Statements. . . . . . . . . . . . . . . . . . . F-17
</TABLE>

F-1
<PAGE> 52
Board of Directors
The Shelby Bank
Bartlett, Tennessee

We have compiled the accompanying statement of financial condition of The
Shelby Bank as of December 31, 1993 and 1992, and the related statements of
income and cash flows for the years then ended, in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.

Management has elected to omit the statement of changes in stockholders' equity
and substantially all of the disclosures required by generally accepted
accounting principles. If the omitted disclosures were included in the
financial statements, they might influence the user's conclusions about the
Bank's financial position, results of operations, and cash flows. Accordingly,
these financial statements are not designed for those who are not informed
about such matters.

FOUTS & MORGAN
Certified Public Accountants

Memphis, Tennessee
July 5, 1995

F-2
<PAGE> 53
THE SHELBY BANK

STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1992
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
December 31, December 31,
1992 1993
-------------------- -------------------
<S> <C> <C>
Cash and due from banks $ 1,161,595 $ 755,973
Federal funds sold 800,000 800,000
-------------------- -------------------
Cash and cash equivalents 1,961,595 1,555,973
Interest bearing deposits in banks 73,250 73,250
Investment securities, at cost 6,448,577 4,322,101
Loans 9,365,555 11,948,700
Less: Reserve for loan losses (535,000) (396,270)
-------------------- -------------------
Net loans 8,830,555 11,552,430
Accrued interest receivable 125,184 104,774
Bank premises and equipment 1,472,866 1,557,587
Less: Accumulated depreciation (195,272) (319,493)
-------------------- -------------------
Net bank premises and equipment 1,277,594 1,238,094
Deferred income taxes 1,624,868
Less: Deferred income tax valuation allowance 0 (1,624,868)
-------------------- -------------------
Net deferred income taxes 0 0
Other real estate 173,052 270,637
Other assets 170,831 87,766
-------------------- -------------------

Total Assets $ 19,060,638 $ 19,205,025
==================== ===================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Liabilities
- -----------
Deposits
Demand $ 2,070,698 $ 5,965,886
Savings and NOW accounts 3,495,396 1,271,393
Time deposits under $100,000 8,916,395 6,660,966
Time deposits over $100,000 3,916,807 3,907,702
-------------------- -------------------
Total deposits 18,399,296 17,805,947
Accrued interest payable on deposits 63,278 63,093
Accrued taxes and other liabilities 2,223 10,191
-------------------- -------------------
Total liabilities 18,469,797 17,879,231

Stockholders' Equity
- --------------------
Common stock - $1 par value, 10,000,000 shares
authorized, 4,787,552 shares issued and outstanding $ 1,973,702 2,872,531
Capital surplus 2,816,141 2,817,743
Retained earnings (deficit) (4,199,002) (4,364,480)
-------------------- -------------------
Total stockholders' equity 590,841 1,325,794
-------------------- -------------------

Total Liabilities and Stockholders' Equity $ 19,060,638 $ 19,205,025
==================== ===================
</TABLE>

See accountants' compilation report.

F-3
<PAGE> 54
THE SHELBY BANK

STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993 AND 1992
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, December 31,
1992 1993
-------------------- -------------------
<S> <C> <C>
Interest Income
- ---------------
Interest and fees on loans $ 723,312 $ 897,927
Interest on investment securities:
U.S. Treasury Securities 38,423 43,836
Obligations of other U.S. Government agencies
and corporations 402,882 198,610
-------------------- -------------------
441,305 242,446
Interest on federal funds sold 26,312 56,279
Interest on deposits in banks 0 3,296
-------------------- -------------------
Total interest income 1,190,929 1,199,948

Interest Expense
- ----------------
Interest on demand deposits 83,941 82,441
Interest on savings and NOW accounts 27,758 33,221
Interest on deposits under $100,000 480,971 309,796
Interest on deposits over $100,000 177,665 177,252
-------------------- -------------------
Total interest expense 770,335 602,710
-------------------- -------------------

Net interest income 420,594 597,238
Provision for loan losses 83,876 15,000
-------------------- -------------------

Net interest income after provision for loan losses 336,718 582,238

Other Income
- ------------
Service charges on deposit accounts 160,707 125,342
Gain on sale of investment securities 133,446 15,548
Loss on sale of other real estate (20,737) (14,876)
Other operating income 16,183 125,663
-------------------- -------------------
Total other income 289,599 251,677

Operating Expenses
- ------------------
Advertising and promotion 27,422 21,385
Collection and repossession expenses 8,794 4,928
Data processing 55,107 49,552
Depreciation 68,093 71,354
Employee benefits and payroll taxes 55,115 44,521
Insurance, bonds and FDIC assessments 65,166 85,736
Office expenses and postage 57,645 70,708
Other operating expenses 54,236 75,513
Other real estate expense 44,221 26,226
Professional services and fees 194,411 135,046
Property tax expense 15,600 18,000
Repairs and maintenance 33,280 35,556
Salaries and directors fees 327,225 308,152
Telephone and utilities 35,326 28,908
Travel, courier and entertainment expenses 17,620 22,151
-------------------- -------------------
Total operating expenses 1,059,261 997,736
-------------------- -------------------

Net Income $ (432,944) $ (163,821)
==================== ===================
</TABLE>

See accountants' compilation report.

F-4
<PAGE> 55
THE SHELBY BANK

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993 AND 1992
(UNAUDITED)

<TABLE>
<CAPTION>
December 31, December 31,
1992 1993
-------------------- -------------------
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net income (loss) $ (432,944) $ (163,821)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 68,093 71,354
Provision for loan losses 83,876 15,000
Write-down of other real estate 9,419 18,000
Accretion of discounts and amortization of premiums
on investment securities 12,393 15,121
(Gain) loss on sale of securities (133,446) (15,548)
(Gain) loss on sale of other real estate 20,737 14,876
(Increase) decrease in accrued interest receivable 75,146 20,410
(Increase) decrease in other assets (19,883) 54,119
Increase (decrease) in accrued interest payable on deposits (69,850) (5,185)
Increase (decrease) in accrued taxes and other liabilities (954) 7,968
-------------------- -------------------
Total adjustments 45,531 196,115
-------------------- -------------------
Net cash provided (used) by operating activities (387,413) 32,294

Cash Flows from Investing Activities
- ------------------------------------
Proceeds from sale and call of securities 7,787,067 5,722,153
Proceeds from the sale of other real estate 377,272 201,005
Purchase of fixed assets (9,894) (2,908)
Purchase of securities (8,778,546) (3,595,250)
Loans made to customers, net of collections (1,829,313) (3,068,342)
-------------------- -------------------
Net cash provided (used) by investing activities (2,453,414) (743,342)
-------------------- -------------------

Cash Flows from Financing Activities
- ------------------------------------
Net increase (decrease) in demand deposits, savings,
and NOW accounts 164,944 (585,901)
Proceeds from issuance of stock 1,242,498 900,432
Net increase (decrease) in time deposits 1,816,807 (9,105)
-------------------- -------------------
Net cash provided (used) by financing activities 3,224,249 305,426
-------------------- -------------------

Net increase (decrease) in cash and cash equivalents 383,422 (405,622)

Cash and cash equivalents at beginning of period 1,578,173 1,961,595
-------------------- -------------------

Cash and cash equivalents at end of period $ 1,961,595 $ 1,555,973
==================== ===================
</TABLE>

See accountants' compilation report.

F-5
<PAGE> 56

Board of Directors
The Shelby Bank
Bartlett, Tennessee

We have compiled the accompanying statement of financial condition of The
Shelby Bank as of March 31, 1995 and 1994, and the related statements of income
and cash flows for the three months then ended, in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.

FOUTS & MORGAN
Certified Public Accountants

Memphis, Tennessee
July 5, 1995

F-6
<PAGE> 57
THE SHELBY BANK

STATEMENT OF FINANCIAL CONDITION
MARCH 31, 1995 AND 1994
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
March 31, March 31,
1994 1995
-------------------- -------------------
<S> <C> <C>
Cash and due from banks $ 960,708 $ 907,183
Federal funds sold 0 2,900,000
-------------------- -------------------
Cash and cash equivalents 960,708 3,807,183
Interest bearing deposits in banks 73,250 73,250
Investment securities:
Securities available-for-sale, at fair value 3,200,545 5,086,770
Loans 13,396,310 12,419,281
Less: Reserve for loan losses (380,941) (272,652)
-------------------- -------------------
Net loans 13,015,369 12,146,629
Accrued interest receivable 111,428 133,774
Bank premises and equipment 1,476,269 1,476,900
Less: Accumulated depreciation (268,390) (302,272)
-------------------- -------------------
Net bank premises and equipment 1,207,879 1,174,628
Deferred income taxes 1,534,174 1,534,174
Less: Deferred income tax valuation allowance (1,534,174) (1,534,174)
-------------------- -------------------
Net deferred income taxes 0 0
Other real estate 213,347 186,438
Other assets 96,526 75,957
-------------------- -------------------

Total Assets $ 18,879,052 $ 22,684,629
==================== ===================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Liabilities
- -----------
Deposits
Demand $ 5,249,742 $ 4,378,517
Savings and NOW accounts 1,465,006 8,489,076
Time deposits under $100,000 5,864,138 5,856,463
Time deposits over $100,000 3,900,758 2,660,081
-------------------- -------------------
Total deposits 16,479,644 21,384,137
Federal funds purchased 1,000,000 0
Accrued interest payable on deposits 48,162 49,457
Accrued taxes and other liabilities 12,489 (236)
-------------------- -------------------
Total liabilities 17,540,295 21,433,358

Stockholders' Equity
- --------------------
Common stock - $1 par value, 10,000,000 shares
authorized, 4,787,552 shares issued and outstanding $ 2,872,531 2,872,531
Capital surplus 2,817,743 2,817,743
Retained earnings (deficit) (4,325,894) (4,253,147)
Unrealized loss on securities available-for-sale (25,623) (185,856)
-------------------- -------------------
Total stockholders' equity 1,338,757 1,251,271
-------------------- -------------------

Total Liabilities and Stockholders' Equity $ 18,879,052 $ 22,684,629
==================== ===================
</TABLE>

See accountants' compilation report.

F-7
<PAGE> 58
THE SHELBY BANK

STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, March 31,
1994 1995
-------------------- -------------------
<S> <C> <C>
Interest Income
- ---------------
Interest and fees on loans $ 274,993 $ 303,591
Interest on investment securities:
U.S. Treasury Securities 10,459 15,735
Obligations of other U.S. Government agencies
and corporations 32,725 45,186
-------------------- --------------
43,184 60,921
Interest on federal funds sold 1,345 37,136
Interest on deposits in banks 813 813
-------------------- -------------------
Total interest income 320,335 402,461

Interest Expense
- ----------------
Interest on demand deposits 19,331 88,903
Interest on savings and NOW accounts 9,842 9,392
Interest on deposits under $100,000 61,563 66,792
Interest on deposits over $100,000 35,899 37,348
-------------------- -------------------
Total interest expense 126,635 202,435
-------------------- -------------------

Net interest income 193,700 200,026
Provision for loan losses 5,000 1,000
-------------------- -------------------

Net interest income after provision for loan losses 188,700 199,026

Other Income
- ------------
Service charges on deposit accounts 29,135 42,925
Loss on sale of investment securities (1,310) 0
Gain on sale of fixed assets 26,246 0
Other operating income 9,736 6,486
-------------------- -------------------
Total other income 63,807 49,411

Operating Expenses
- ------------------
Advertising and promotion 1,679 4,085
Automobile lease 0 1,558
Collection and repossession expenses 991 0
Data processing 13,834 18,159
Depreciation 14,546 13,023
Employee benefits and payroll taxes 6,927 7,737
Insurance, bonds and FDIC assessments 16,984 21,199
Office expenses and postage 17,811 17,223
Other operating expenses 666 321
Other real estate expense 4,081 254
Professional services and fees 28,917 7,215
Property tax expense 4,500 4,500
Repairs and maintenance 8,470 9,373
Salaries and directors fees 91,412 93,068
Telephone and utilities 6,984 7,266
Travel, courier and entertainment expenses 3,843 6,224
-------------------- -------------------
Total operating expenses 221,645 211,205
-------------------- -------------------

Net Income $ 30,862 $ 37,232
==================== ===================
</TABLE>

See accountants' compilation report.

F-8
<PAGE> 59
THE SHELBY BANK

STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
March 31, March 31,
1994 1995
-------------------- -------------------
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net income $ 30,862 $ 37,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 14,456 13,023
Provision for loan losses 5,000 1,000
Accretion of discounts and amortization of premiums
on investment securities (2,877) (7,747)
(Gain) loss on sale of securities 1,310 0
(Gain) loss on sale of fixed assets (26,246) 0
Reserve for contingencies 7,728 0
(Increase) decrease in accrued interest receivable (6,654) (9,935)
(Increase) decrease in other assets (8,760) 9,981
Increase (decrease) in accrued interest payable on deposits (14,931) 9,346
Increase (decrease) in accrued taxes and other liabilities 2,298 (1,313)
-------------------- -------------------
Total adjustments (28,676) 14,355
-------------------- -------------------
Net cash provided (used) by operating activities 2,186 51,587

Cash Flows from Investing Activities
- ------------------------------------
Proceeds from sale of fixed assets 42,500 0
Proceeds from sale and call of securities 1,097,500 0
Proceeds from the sale of other real estate 168,297 0
Purchase of fixed assets (495) 0
Purchase of securities 0 (985,167)
Loans made to customers, net of collections (1,467,943) (216,803)
Purchase of other real estate (111,007) 0
-------------------- -------------------
Net cash provided (used) by investing activities (271,148) (1,201,970)
-------------------- -------------------

Cash Flows from Financing Activities
- ------------------------------------
Net increase (decrease) in demand deposits, savings,
and NOW accounts (522,531) 1,750,566
Purchase of federal funds 1,000,000 0
Net increase (decrease) in time deposits (803,772) (500,620)
-------------------- -------------------
Net cash provided (used) by financing activities (326,303) 1,249,946
-------------------- -------------------

Net increase (decrease) in cash and cash equivalents (595,265) 99,563

Cash and cash equivalents at beginning of period 1,555,973 3,707,620
-------------------- -------------------

Cash and cash equivalents at end of period $ 960,708 $ 3,807,183
==================== ===================
</TABLE>

See accountants' compilation report.

F-9
<PAGE> 60

THE SHELBY BANK

BARTLETT, TENNESSEE

FINANCIAL STATEMENTS

DECEMBER 31, 1994

F-10
<PAGE> 61

THE SHELBY BANK

CONTENTS
DECEMBER 31, 1994

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report 1

Statement of Financial Condition 2

Statement of Income 3

Statement of Changes in Stockholders' Equity 4

Statement of Cash Flows 5

Notes to Financial Statements 6 - 12

</TABLE>

F-11
<PAGE> 62

Board of Directors
The Shelby Bank
Bartlett, Tennessee

Independent Auditors' Report

We have audited the accompanying statement of financial condition of The Shelby
Bank as of December 31, 1994, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Shelby Bank as of December
31, 1994, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.

FOUTS & MORGAN
Certified Public Accountants

Memphis, Tennessee
January 31, 1995 (except for Note O, as to
which the date is June 16, 1995)

F-12
<PAGE> 63

THE SHELBY BANK

STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1994

<TABLE>
<S> <C> <C>
ASSETS
------

Cash and due from banks $ 1,007,620
Federal funds sold 2,700,000
------------------
Cash and cash equivalents 3,707,620
Interest bearing deposits in banks 73,250
Investment securities:
Securities available-for-sale, at fair value 4,093,856
Loans $ 12,176,976
Less: Reserve for loan losses (246,150)
-------------------
Net loans 11,930,826
Accrued interest receivable 123,839
Bank premises and equipment 1,474,887
Less: Accumulated depreciation (289,249) 1,185,638
-------------------
Deferred income taxes 1,534,174
Less: Deferred income tax valuation allowance (1,534,174) 0
-------------------
Other real estate 187,174
Other assets 87,215
------------------

Total Assets $ 21,389,418
==================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Liabilities
- -----------
Deposits
Demand $ 5,746,840
Savings and NOW accounts 5,370,182
Time deposits under $100,000 5,655,791
Time deposits over $100,000 3,361,373
------------------
Total deposits 20,134,186
Accrued interest payable on deposits 40,111
Accrued taxes and other liabilities 1,077
------------------
Total liabilities 20,175,374

Stockholders' Equity
- --------------------
Common stock - $1 par value, 10,000,000 shares
authorized, 4,787,552 shares issued and outstanding $ 2,872,531
Capital surplus 2,817,743
Retained earnings (deficit) (4,290,374)
Unrealized loss on securities available-for-sale (185,856)
-------------------
Total stockholders' equity 1,214,044
------------------

Total Liabilities and Stockholders' Equity $ 21,389,418
==================
</TABLE>

See accompanying notes.

F-13
<PAGE> 64

THE SHELBY BANK

STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<S> <C> <C>
Interest Income
- ---------------
Interest and fees on loans $ 1,175,941
Interest on investment securities:
U.S. Treasury Securities $ 46,989
Obligations of other U.S. Government agencies
and corporations 127,318 174,307
-------------------
Interest on federal funds sold 32,256
Interest on deposits in banks 3,016
------------------
Total interest income 1,385,520

Interest Expense
- ----------------
Interest on demand deposits $ 111,373
Interest on savings and NOW accounts 43,392
Interest on deposits under $100,000 251,652
Interest on deposits over $100,000 174,166
-------------------
Total interest expense 580,583
------------------

Net interest income 804,937
Provision for loan losses 57,000
------------------

Net interest income after provision for loan losses 747,937

Other Income
- ------------
Service charges on deposit accounts 147,491
Loss on sale of investment securities (1,310)
Gain on sale of fixed assets 26,603
Other operating income 20,304 193,088
-------------------

Operating Expenses
- ------------------
Advertising and promotion 13,644
Automobile lease 1,473
Collection and repossession expenses 2,115
Data processing 60,440
Depreciation 51,050
Employee benefits and payroll taxes 60,428
Insurance, bonds and FDIC assessments 81,090
Office expenses and postage 78,696
Other operating expenses 17,350
Other real estate expense 6,723
Professional services and fees 63,079
Property tax expense 13,351
Repairs and maintenance 38,901
Salaries and directors fees 332,585
Telephone and utilities 28,797
Travel, courier and entertainment expenses 17,193
-------------------
Total operating expenses 866,915
------------------

Net Income $ 74,110
==================

Net Income per Share $ 0.0149
==================
</TABLE>

See accompanying notes.

F-14
<PAGE> 65

THE SHELBY BANK

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>

Shares of
Common
Stock Common Capital
Issued Stock Surplus
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance - January 1, 1994 4,787,552 $ 2,872,531 $ 2,817,743

Net income for the year ended
December 31, 1994

Change in unrealized loss on
securities available-for-sale
--------------- ---------------- ----------------

Balance - December 31, 1994 4,787,552 $ 2,872,531 $ 2,817,743
=============== ================ ================

Unrealized
Loss on
Retained Securities
Earnings Available
(Deficit) For Sale Total
--------------- ---------------- ---------------
<S> <C> <C> <C>
Balance - January 1, 1994 $ (4,364,484) $ 0 $ 1,325,790

Net income for the year ended
December 31, 1994 74,110 74,110

Change in unrealized loss on
securities available-for-sale (185,856) (185,856)
--------------- ---------------- ---------------

Balance - December 31, 1994 $ (4,290,374) $ (185,856) $ 1,214,044
=============== ================ ===============
</TABLE>

See accompanying notes.

F-15
<PAGE> 66

THE SHELBY BANK

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net income $ 74,110
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation $ 51,050
Provision for loan losses 57,000
Accretion of discounts and amortization of premiums
on investment securities (11,765)
Loss on sale of securities 1,310
Gain on sale of fixed assets (26,603)
Increase in accrued interest receivable (19,065)
Decrease in other assets 551
Decrease in accrued interest payable on deposits (22,982)
Decrease in accrued taxes and other liabilities (9,118)
-------------
Total adjustments 20,378
--------------
Net cash provided by operating activities 94,488

Cash Flows from Investing Activities
- ------------------------------------
Proceeds from sale of fixed assets 47,950
Proceeds from sale and call of securities 1,097,500
Proceeds from the sale of other real estate 301,534
Purchase of fixed assets (17,051)
Purchase of securities (1,044,656)
Loans made to customers, net of collections (463,681)
Purchase of other real estate (192,676)
-------------
Net cash used by investing activities (271,080)

Cash Flows from Financing Activities
- ------------------------------------
Net increase in demand deposits, savings, and NOW accounts 3,879,743
Net decrease in time deposits (1,551,504)
-------------
Net cash provided by financing activities 2,328,239
--------------

Net increase in cash and cash equivalents 2,151,647

Cash and cash equivalents at beginning of year 1,555,973
--------------

Cash and cash equivalents at end of year $ 3,707,620
==============
</TABLE>

See accompanying notes.

F-16
<PAGE> 67

THE SHELBY BANK

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

Note A - Summary of Significant Accounting Policies

Basis of Presentation - The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles and
with general practices of the banking industry. Prior to May 5, 1992,
the Bank was owned 100% by Shelby Bancshares, Inc. and was included in
the consolidated financial statements thereof. As of May 5, 1992, Shelby
Bancshares, Inc.'s holdings were diluted to approximately 5%.
Accordingly, Shelby Bank's financial statements have been presented
separately and do not reflect the accounts and transactions of Shelby
Bancshares, Inc.

Cash and Cash Equivalents - For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and
federal funds sold. Generally, federal funds sold are for one-day
periods.

Investment Securities - Debt securities that management has the ability
and intent to hold to maturity are classified as held- to-maturity and
carried at cost, adjusted for amortization of premium and accretion of
discounts using methods approximating the interest method. Other
marketable securities are classified as available-for-sale and are
carried at fair value. Unrealized gains and losses on securities
available-for-sale are recognized as direct increases or decreases in
stockholders' equity. Cost of securities sold is recognized using the
specific identification method.

Loans - Loans are stated at the principal amount outstanding, net of
unearned discount and the allowance for loan losses. Unearned discount
represents the unamortized amount of finance charges, principally related
to installment loans, and is recognized as income using the interest
method. Interest on other loans is recognized as income by using the
simple interest method on daily balances of the principal amount
outstanding.

Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Accrual of interest is discontinued on
loans past due 90 days or more, or sooner, if management believes, after
considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that collection of principal
or interest is doubtful. The decision to place a loan on nonaccrual
status is based on an evaluation of the borrower's financial condition,
collateral liquidation value, economic and business conditions and other
factors that affect the borrower's ability to pay. When a loan is placed
on nonaccrual status, the accrued but unpaid interest is charged off
against current period income. Thereafter, interest on nonaccrual loans
is recognized only as received if future collection of principal is
probable. If the collectability of outstanding principal is doubtful,
interest received is applied as a reduction of principal. A loan may be
restored to an accrual status when principal and interest are no longer
past due or it otherwise becomes both well secured and in the process of
collection and collectability is reasonably assured.

Fees on loans and costs incurred in origination of loans are recognized
at the time the loan is recorded. Because loan fees are not significant
and the majority of loans have maturities of one year or less, the
results of operations are not materially different than the results which
would be obtained by accounting for loan fees and costs in accordance
with generally accepted accounting principles as set forth in Statement
of Financial Accounting Standards No. 91.

Reserve for Loan Losses - The reserve for loan losses is established
through a provision for loan losses charged to expense. Loans are
charged against the reserve for loan losses when management believes that
the collectability of principal is unlikely. Recoveries of amounts
previously charged off are credited to the reserve.

F-17
<PAGE> 68

NOTES CONTINUED

Note A - Summary of Significant Accounting Policies (Continued)

The reserve for loan losses is maintained at a level that management
considers adequate to absorb possible losses on outstanding loans that
may become uncollectible. Factors considered in management's evaluation
of the adequacy of the reserve are current and anticipated economic
conditions, changes in the nature, volume and composition of the loan
portfolio, industry or other concentrations of credit, review of specific
problem loans, the level of classified and nonperforming loans, the
results of regulatory examination, the fair value of underlying
collateral and overall quality of the loan portfolio.

The level of the reserve and the amount of the provision involve
uncertainties and matters of judgment and therefore cannot be determined
with precision. Material estimates that are particularly susceptible to
significant change in the near term are a necessary part of the valuation
process. Future additions to the reserve may be necessary based on
changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the adequacy of the Bank's reserve for loan losses. Such agencies
may require the Bank to recognize additions to the reserve based on their
judgments about information available to them at the time of their
examination.

Premises and Equipment - Premises and equipment are stated at cost less
accumulated depreciation. Provisions for deprecation are computed
principally on the straight-line method and are charged to noninterest
expense over the estimated useful lives of the assets. Maintenance
agreements are amortized to expense over the period of time covered by
the agreement. Costs of major additions, replacements or improvements
are capitalized while expenditures for maintenance and repairs are
charged to expense as incurred.

Other Real Estate Acquired Through Foreclosure - Other real estate
acquired through foreclosure is carried at the lower of cost or fair
value. Cost includes loan principal, accrued but unpaid interest not
previously charged off and expenditures for subsequent improvements.
Fair value is the amount the Bank could reasonably expect to receive in a
current sale of the subject property to a willing buyer in other than a
forced or liquidation sale. The excess of cost over fair value at the
time of foreclosure is charged to the reserve for loan losses.
Subsequent declines in fair value are recognized as a valuation allowance
and charged to noninterest expense.

Income Taxes - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the basis of fixed assets, other real estate, and the reserve for
loan losses for financial and income tax reporting. Additional
differences result from the use of the accrual method of accounting for
financial reporting and the cash basis of accounting for income tax
reporting. The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that
are available to offset future taxable income and tax credits that are
available to offset future federal income taxes.

Note B - Cash and Due from Banks

Banks are required by Federal regulation to maintain average reserve
balances which are based on the types and amounts of its deposit
liabilities. However, the Bank's total amount of deposit liabilities
upon which required reserves are calculated was within certain exemption
levels provided in the applicable Federal regulations. Accordingly, the
Bank was not required to maintain specified average reserve balances at
December 31, 1994.

F-18
<PAGE> 69
NOTES CONTINUED

Note B - Cash and Due from Banks (Continued)

At December 31, 1994, the Bank had concentrations of credit risk with
financial institutions in the form of correspondent bank accounts and
federal funds sold. The bank had amounts due from the institutions
totalling $3,707,620 at December 31, 1994 as follows:

<TABLE>
<S> <C>
Due from banks $ 1,007,620
Federal funds sold 2,700,000
-------------
$ 3,707,620
=============
</TABLE>

If the financial institutions failed to completely perform under the
terms of the financial instruments, the exposure for credit loss would be
the amount of the financial instruments less amounts covered by
regulatory insurance.

Correspondent bank balances are maintained for check clearing and other
services.

Note C - Investment Securities

Carrying amounts and approximate market values of investment securities
available-for-sale at December 31, 1994 are summarized as follows:

<TABLE>
<CAPTION>
Gross Gross Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
U.S. Treasury
securities $ 1,156,639 $ 0 $ 30,498 $ 1,126,141
Obligations of
other U.S.
Government
agencies and
corporations 3,123,073 0 155,358 2,967,715
------------------- ------------------ ------------------- ------------------
$ 4,279,712 $ 0 $ 185,856 $ 4,093,856
=================== ================== =================== ==================
</TABLE>

The maturities of investment securities available-for-sale at December
31, 1994 were as follows:

<TABLE>
<CAPTION>
Carrying Market
Amount Value
------------------- ------------------
<S> <C> <C>
Due in one year or less $ 545,743 $ 540,520
Due from one to five years 3,532,583 3,357,836
Due from five to ten years 201,386 195,500
------------------- ------------------
$ 4,279,712 $ 4,093,856
=================== ==================
</TABLE>

Proceeds from sales of investment securities prior to maturity, call or
prepayment, gross realized gains and gross realized losses from such
sales for the period ended December 31, 1994 are as follows:

<TABLE>
<S> <C>
Proceeds from calls $ 100,000
==================
Proceeds from sales $ 997,500
==================
Gross realized gains $ 0
==================
Gross realized losses $ (1,310)
==================
Net realized losses $ (1,310)
==================
</TABLE>

Investment securities with a carrying amount of approximately $2,235,539
and a market value of $2,111,677 at December 31, 1994 were pledged to
secure public deposits and for other purposes as required or permitted
by law.
F-19
<PAGE> 70
NOTES CONTINUED

Note D - Loans

Major classification of loans at December 31, 1994 are as follows:

<TABLE>
<S> <C>
Commercial and industrial loans $ 1,837,800
Loans to individuals 3,118,800
Construction loans 1,927,199
Real estate loans 3,570,814
Leases 1,774,969
Overdrafts 740
------------------
Total loans 12,230,322
Unearned discount (36,299)
Deferred loan loss (17,047)
------------------
12,176,976
Reserve for loan losses (246,150)
------------------
Net Loans $ 11,930,826
==================
</TABLE>

At December 31, 1994, nonaccrual loans totalled $40,000. Interest
income received on nonaccrual loans and included in net income is not
significant for the period ended December 31, 1994. There were no
commitments to lend additional funds to borrowers whose loans are
classified as nonaccrual.

Related party loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated borrowers and do not involve more
than normal risk of collectability or present other unfavorable
features. There were no related party loans at December 31, 1994 that
were restructured or charged off. Direct and indirect loans to
executive officers and directors of the Bank, and their related
interests for the period ended December 31, 1994 were as follows:
<TABLE>
<S> <C>
Balance at beginning of year $ 509,659
New loans during the year 869,915
Repayments during the year (819,380)
------------------
Balance at end of year $ 560,194
==================
</TABLE>

Note E - Reserve for Loan Losses

Changes in the reserve for loan losses for the period ended December 31,
1994 were as follows:

<TABLE>
<S> <C>
Balance at beginning of year $ 396,270

Provision for loan losses 57,000
Recoveries on loans previously charged off 77,004
------------------
530,274
Loans charged off (284,124)
------------------
Balance at end of year $ 246,150
==================
</TABLE>

Note F - Premises and Equipment

Major classification of these assets at December 31, 1994 are as follows:

<TABLE>
<S> <C>
Land $ 404,188
Building and improvements 934,376
Furniture, fixtures and equipment 136,323
------------------
Total cost 1,474,887
Less: Accumulated depreciation (289,249)
------------------
$ 1,185,638
==================
</TABLE>

Depreciation expense on premises and equipment was $51,050 for the
period ending December 31, 1994.

F-20
<PAGE> 71

NOTES CONTINUED

Note G - Income Taxes

The Bank experienced a current loss for tax purposes. In addition, the
Bank has substantial loss carryforwards available to offset future
taxable income. Accordingly, no current provision for income taxes has
been provided for in the financial statements.

Total loss carryforwards of $4,504,949 and $4,860,979 are available to
the Bank to offset future federal and state taxable income,
respectively. If not used, the carryforwards will expire as follows:

<TABLE>
<CAPTION>
Loss Carryforward
Year Ended -----------------
December 31, 1994 Federal State
----------------- ------------------- ------------------
<S> <C> <C>
2005 $ 1,981,343 $ 2,334,048
2006 1,433,037 1,432,610
2007 481,589 482,846
2008 301,067 301,703
2009 307,913 309,772
------------------- ------------------
$ 4,504,949 $ 4,860,979
=================== ==================
</TABLE>

Deferred tax assets and liabilities at December 31, 1994 consists of the
following:

<TABLE>
<CAPTION>
Federal State Total
------------------ ------------------- ------------------
<S> <C> <C> <C>
Deferred tax assets $ 1,501,232 $ 267,708 $ 1,768,940
Deferred tax liabilities (212,045) (22,721) (234,766)
Deferred tax valuation allowance (1,289,187) (244,987) (1,534,174)
------------------ ------------------- ------------------
Net Deferred Tax Assets $ 0 $ 0 $ 0
================== =================== ==================
</TABLE>

A deferred tax valuation allowance has been provided to offset the net
deferred tax assets because management believes there is not more than a
50% chance that the benefit will be realized. The need for an allowance
will be evaluated annually and changes to the valuation allowance will
be recognized in the period of change.

The effect of deferred income taxes in current year earnings is as
follows:

<TABLE>
<CAPTION>
Federal State Total
------------------ ------------------- ------------------
<S> <C> <C> <C>
Deferred income tax expense $ 76,947 $ 14,439 $ 91,386
Deferred income tax benefit (589) (104) (693)
Change in deferred tax valuation
allowance (76,358) (14,335) (90,693)
------------------ ------------------- ------------------
Amount Included in Current Year Earnings $ 0 $ 0 $ 0
================== =================== ==================
</TABLE>

Note H - Supplemental Disclosure of Cash Flow Information

<TABLE>
<S> <C>
Income taxes paid $ 0
==================
Interest paid on deposits $ 603,564
==================
Amounts transferred from loans to other real estate $ 0
==================
</TABLE>

Note I - Financial Instruments with Off-Balance-Sheet Risk

The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financial needs of its
customers. These financial instruments represent commitments to extend
credit, including home equity credit lines. These instruments involve,
to varying degrees, elements of credit risk, interest rate risk and
liquidity risk, in excess of the amount recognized in the balance sheet.
The contract amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by one
of the other parties to the financial instruments for commitments to
extend credit is represented by the contractual amount of those
instruments. The bank uses the same credit policies and procedures in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.

F-21
<PAGE> 72

NOTES CONTINUED

Note I - Financial Instruments with Off-Balance-Sheet Risk (Continued)

Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of the
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation of the customer.
Collateral held, if any, varies, but may include certificates of
deposit, accounts receivable, inventory, property and equipment, real
estate and income-producing properties.

In the normal course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying financial statements. The principal commitments of the
bank are as follows:

<TABLE>
<S> <C>
Home equity loans $ 24,000
==================
Real estate loans $ 664,000
==================
Lines of credit $ 66,000
==================
Other unused loans $ 419,000
==================
</TABLE>

At December 31, 1994, there were no outstanding letters of credit.

The Bank has funds on deposit with a financial institution in excess of
federally insured limits.

Concentration of Credit Risk - The Bank primarily grants commercial,
residential and consumer loans to customers within its defined market
area, Northeast Shelby County, Tennessee. Although the Bank reviews the
diversification of the loan portfolio on a regular basis to avoid
concentrations of credit risk, the overall quality of the loan portfolio
is, to some extent, affected by the health of the local economy taken as
a whole.

Note J - Regulatory Requirements

The Bank operates pursuant to various federal and state banking
regulations. At December 31, 1994, the Bank was operating under an
agreement and understanding with the State of Tennessee Department of
Financial Institutions effective in 1990. In 1991, the Federal Deposit
Insurance Corporation, the Bank's primary federal regulatory agency,
issued an order to cease and desist certain unsafe and unsound banking
practices.

The Bank has taken corrective steps to comply with the above orders and
agreements.

The Bank is required by state and federal banking regulations to
maintain certain levels of capital.

Banking laws and regulations limit the payment of dividends by the Bank
without prior regulatory approval. In addition, the Bank must meet
minimum capital levels prior to the payment of dividends.

Note K - Stock Options

The Bank, pursuant to an agreement with its president, has granted to
such officer options to purchase 500,000 shares of the common stock of
the Bank at an exercise price of $.32 per share at any time prior to
expiration on May 1, 1996. On May 1, 1996, if these options have not
been exercised, this agreement will be extended for an additional three
years at the current book value at that time. Accordingly, at December
31, 1994, approximately 500,000 shares of authorized, but previously
unissued common stock of the Bank is reserved under these options.

F-22
<PAGE> 73

NOTES CONTINUED

Note L - Operating Leases

The Bank is party to an operating lease which expires December 15, 1997.
Lease expense included in current period expenses is $20,337.

Future minimum lease payments under the terms of the lease are:

Note M - Net Income Per Share

Net income per share for 1994 is computed on the basis of the weighted
average shares of common stock outstanding plus common stock equivalents
arising from the effect of officer stock options, using the treasury
stock method. The following is a reconciliation of the weighted average
number of shares of common stock actually outstanding with the number of
shares used in the computation of net income per share. Total shares
outstanding were the same for primary and fully diluted income per share
computations.

<TABLE>
<S> <C>
Weighted number of shares actually outstanding 4,787,552
Common stock equivalent (stock options) 201,665
------------------
Total shares 4,989,217
==================
</TABLE>

Note N - Change in Accounting Principle

In 1994, the Bank adopted Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities.

Note O - Plan of Sale

On May 9, 1995, Shelby Bank executed a definitive Purchase and
Assumption Agreement with Volunteer Bank of Jackson, Tennesse and its
parent, BancorpSouth, Inc. This agreement provides that Volunteer Bank
will buy substantially all of the assets and assume all the deposit
liabilities and certain other liabilities of Shelby Bank in exchange for
an aggregate of 78,516 shares of common stock of BancorpSouth.
Consummation of the transaction is subject to regulatory approval,
approval by the shareholders of Shelby Bank and certain other matters.

F-23
<PAGE> 74
ANNEX A

TENNESSEE CODE ANNOTATED Section Section 45-2-1309 AND 48-23-101 ET. SEQ.

45-2-1309. DISSENTING STOCKHOLDERS. -- The owners of shares of
a state bank shall have dissenters rights as provided by chapter 23 of
the Tennessee Business Corporation Act (Section Section 48-23-101, et
seq.) with respect to any plan of merger, merger agreement, plan of
conversion, plan of share exchange or any other corporate action
described in Section 48-23-102. [Acts 1969, ch. 36, Section
1(3.409); 1973, ch. 294, Section 6; T.C.A., Section 45-609; Acts
1981, ch. 330, Section 2; 1983, ch. 441, Section 2; 1994, ch. 551,
Section 15.]

48-23-101. DEFINITIONS. -- (1) "Beneficial shareholder" means
the person who is a beneficial owner of shares held by a nominee as
the record shareholder;
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 48-23-102 and who exercises that
right when and in the manner required by Section Section 48-
23-201--48-23-209;
(4) "Fair value", with respect to a dissenter's shares, means
the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the
corporate action that gave rise to the shareholder's right to dissent
until the date of payment, at the average auction rate paid on United
States treasury bills with a maturity of six (6) months (or the
closest maturity thereto) as of the auction date for such treasury
bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the beneficial owner
of shares to the extent of the rights granted by a nominee certificate
on file with a corporation; and
(7) "Shareholder" means the record shareholder or the
beneficial shareholder. [Acts 1986, ch. 887, Section 13.01.]

48-23-102. RIGHT TO DISSENT. -- (a) A shareholder is entitled to
dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation
is a party:
(A) If shareholder approval is required for the merger
by Section 48-21-103 or the charter and the shareholder is
entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged
with its parent under Section 48-21-104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than
in the usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or a sale
for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;

A-1
<PAGE> 75

(4) An amendment of the charter that materially and adversely
affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the
shares;
(B) Creates, alters, or abolishes a right in respect
of redemption, including a provision respecting a sinking fund
for the redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or other
securities with similar voting rights; or
(E) Reduces the number of shares owned by the
shareholder to a fraction of a share, if the fractional share
is to be acquired for cash under Section 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote
to the extent the charter, bylaws, or a resolution of the Board of
Directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for
his shares under this chapter may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no
shareholder may dissent as to any shares of a security which, as of
the date of the effectuation of the transaction which would otherwise
give rise to dissenters' rights, is listed on an exchange registered
under Section 6 of the Securities Exchange Act of 1934, as amended,
or is a "national market system security," as defined in rules
promulgated pursuant to the Securities Exchange Act of 1934, as
amended. [Acts 1986, ch. 887, Section 13.02.]

48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (a) A
record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one (1) person and notifies the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to
which he dissents and his other shares were registered in the names of
different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as
to shares of any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of the same class of
which he is the beneficial shareholder or over which he has power to
direct the vote. [Acts 1986, ch. 887, Section 13.03.]

48-23-201. NOTICE OF DISSENTERS' RIGHTS. -- (a) If proposed
corporate action creating dissenters' rights under Section 48-23-102
is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter and be accompanied by a copy of
this chapter.
(b) If corporate action creating dissenters' rights under
Section 48-23-102 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in Section 48-23-203.
(c) A corporation's failure to give notice pursuant to this
section will not invalidate the corporate action. [Acts 1986, ch. 887,
Section 13.20.]

A-2
<PAGE> 76

48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT. -- (a) If
proposed corporate action creating dissenters' rights under Section
48-23-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
No such written notice of intent to demand payment is required of any
shareholder to whom the corporation failed to provide the notice
required by Section 48-23-201.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his shares under this
chapter. [Acts 1986, ch. 887, Section 13.21.]

48-23-203. DISSENTERS' NOTICE. -- (a) If proposed corporate
action creating dissenters' rights under Section 48-23-102 is
authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the
requirements of Section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10)
days after the corporate action was authorized by the shareholders or
effectuated, whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Supply a form for demanding payment that includes the date
of the first announcement to news media or to shareholders of the
principal terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he acquired
beneficial ownership of the shares before that date;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than one (1) nor more than
two (2) months after the date the subsection (a) notice is delivered;
and
(5) Be accompanied by a copy of this chapter if the
corporation has not previously sent a copy of this chapter to the
shareholder pursuant to Section 48-23-201. [Acts 1986, ch. 887,
Section 13.22.]

48-23-204. DUTY TO DEMAND PAYMENT. -- (a) A shareholder sent a
dissenters' notice described in Section 48-23-203 must demand
payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters'
notice pursuant to Section 48-23-203(b)(3), and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a
shareholder until these rights are cancelled or modified by the
effectuation of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for his shares under
this chapter.
(d) A demand for payment filed by a shareholder may not be
withdrawn unless the corporation with which it was filed, or the
surviving corporation, consents thereto. [Acts 1986, ch. 887, Section
13.23.]

48-23-205. SHARE RESTRICTIONS. - (a) The corporation may
restrict the transfer of uncertificated shares from the date the
demand for their payment is received until the proposed corporate
action is effectuated or the restrictions released under Section
48-23-207.

A-3
<PAGE> 77

(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until
these rights are cancelled or modified by the effectuation of the
proposed corporate action. [Acts 1986, ch. 887, Section 13.24.]

48-23-206. PAYMENT. -- (a) Except as provided in Section
48-23-208, as soon as the proposed corporate action is effectuated, or
upon receipt of a payment demand, whichever is later, the corporation
shall pay each dissenter who complied with Section 48-23-204 the
amount the corporation estimates to be the fair value of his shares,
plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under Section 48-23-209; and
(5) A copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to
Section 48-23-201 or Section 48-23-203. [Acts 1986, ch. 887, Section
13.25.]

48-23-207. FAILURE TO TAKE ACTION. -- (a) If the corporation
does not effectuate the proposed action that gave rise to the
dissenters' rights within two (2) months after the date set for
demanding payment and depositing share certify, the corporation shall
return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation effectuates the proposed
action, it must send a new dissenters' notice under Section 48-
23-203 and repeat the payment demand procedure. [Acts 1986, ch. 887,
Section 13.26.]

48-23-208. AFTER-ACQUIRED SHARES. -- (a) A corporation may elect
to withhold payment required by Section 48-23-206 from a dissenter
unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the principal terms of the
proposed corporate action.
(b) To the extent the corporation elects to withhold payment
under subsection (a), after effectuating the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation shall
send with its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under Section
48-23-209. [Acts 1986, ch. 887, Section 13.27.]

48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. -- (a) A dissenter may notify the corporation in writing of his
own estimate of the fair value of his shares and amount of interest
due, and demand payment of his estimate (less any payment under
Section 48-23-206), or reject the corporation's offer under Section
48-23-208 and demand payment of the fair value of his shares and
interest due, if:
(1) The dissenter believes that the amount paid under Section
48-23-206 or offered under Section 48-23-208 is less than the fair
value of his shares or that the interest due is incorrectly
calculated;
(2) The corporation fails to make payment under Section
48-23-206 within two (2) months after the date set for demanding
payment; or

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(3) The corporation, having failed to effectuate the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within two (2)
months after the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this
section unless he notifies the corporation of his demand in writing
under subsection (a) within one (1) month after the corporation made
or offered payment for his shares. [Acts 1986, ch. 887, Section
13.28.]

48-23-301. COURT ACTION. -- (a) If a demand for payment under
Section 48-23-209 remains unsettled, the corporation shall commence a
proceeding within two (2) months after receiving the payment demand
and petition the court to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding
within the two-month period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court
of record having equity jurisdiction in the county where the
corporation's principal office (or, if none in this state, its
registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled, parties to
the proceeding as in an action against their shares and all parties
must be served with a copy of the petition. Nonresidents may be served
by registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may
appoint one (1) or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment
to it. The dissenters are entitled to the same discovery rights as
parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled
to judgment:
(1) For the amount, if any, by which the court finds the fair
value of his shares, plus accrued interest, exceeds the amount paid
by the corporation; or
(2) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to withhold
payment under Section 48-23-208. [Acts 1986, ch. 887, Section
13.30.]

48-23-302. COURT COSTS AND COUNSEL FEES. -- (a) The court in an
appraisal proceeding commenced under Section 48-23-301 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 48-23-209.
(b) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds
equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of Section Section 48-23-201 -- 48-23-
209; or
(2) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this chapter.

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(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel
reasonable fees to be paid out of the amounts awarded to the
dissenters who were benefited. [Acts 1986, ch. 887, Section 13.31.]

A-6
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ANNEX B

PLAN OF REORGANIZATION

SHELBY BANK

PLAN OF REORGANIZATION

1. Shelby Bank, a state banking corporation organized under the
laws of the State of Tennessee ("Shelby Bank"), has entered into a Purchase and
Assumption Agreement dated as of May 9, 1995, as amended from time to time (the
"P&A Agreement"), with Volunteer Bank, a state banking corporation organized
under the laws of the State of Tennessee ("Volunteer") and BancorpSouth, Inc.,
a Mississippi corporation and registered bank holding company of which
Volunteer is a wholly owned subsidiary ("BancorpSouth"), pursuant to which
Volunteer will acquire substantially all of the assets, and assume certain
liabilities of Shelby Bank, including all of Shelby Bank's deposit liabilities,
in exchange for up to 78,516 shares of common stock, par value $2.50 per share,
of BancorpSouth (the "BancorpSouth Common Stock") to be issued to the holders
of outstanding common stock, par value $1.00 per share, of Shelby Bank (the
"Shelby Bank Common Stock"). The transfer of assets and assumption of
liabilities in consideration of shares of BancorpSouth Common Stock are
collectively referred to herein as the "Transaction". The parties to the P&A
Agreement intend that the Transaction qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, Shelby Bank adopts this Plan of
Reorganization (the "Plan") for the purpose of proceeding with the voluntary
liquidation and dissolution of Shelby Bank promptly following the effective
time of the Transaction (the "Effective Time").

2. In furtherance of the foregoing, the officers of Shelby Bank
shall proceed with the voluntary dissolution of Shelby Bank under the laws of
the State of Tennessee after (a) adoption of the Plan by the Board of
Directors of Shelby Bank, (b) approval of the Plan by the affirmative vote of
the holders of two-thirds of the outstanding Shelby Bank Common Stock, and (c)
approval by the Commissioner of Financial Institutions of the State of
Tennessee (the "Commissioner") pursuant to Sections 45-2-1501 et seq. of the
Tennessee Banking Act, as amended (the "Act").

3. As of the date hereof, there are 4,787,552 shares of Shelby
Bank Common Stock issued and outstanding. As of the Effective Time, there will
be 5,287,552 shares of Shelby Bank Common Stock outstanding. No other capital
stock of Shelby Bank will be outstanding.

4. Pursuant to the provisions of Section 4.06 of the P&A
Agreement, subsequent to the Effective Time and in consideration of the
transfer of assets and assumption of liabilities of Shelby Bank, the
BancorpSouth Common Stock issued in connection with the Transaction will be
distributed by BancorpSouth directly to the holders of Shelby Bank Common
Stock.

5. Subsequent to the Effective Time, the sole assets of Shelby
Bank shall be an amount not to exceed $50,000 (the "Expense Fund"), which will
be held in an account with Volunteer pursuant to Section 4.04 of the P&A
Agreement. This account will be used solely for the purpose of paying (a)
contractual liabilities of Shelby Bank not assumed by Volunteer, (b) claims
that are unknown or contingent which may be asserted against Shelby Bank
subsequent to the closing of the Transaction (the "Closing"), and (c)
liquidation or dissolution expenses of Shelby Bank. James L. Reid, the
Chairman of the Board of Directors of Shelby Bank, and Donald E. Russell, the
President and Chief Executive Officer of Shelby Bank, (or such other persons as
Shelby Bank may designate in writing at the Closing) shall be the only

B-1
<PAGE> 81

persons authorized to draw upon this account. At the conclusion of the
dissolution and liquidation of Shelby Bank, any balance in the Expense Fund
shall be the property of, and be transferred to, Volunteer as provided in
Section 4.04 of the P&A Agreement.

6. Immediately following the Effective Time, Shelby Bank shall
forthwith cease to do business and shall proceed to pay its creditors and to
wind up its affairs as provided herein and in compliance with T.C.A. Sections
45-2-1501, et seq.

7. Promptly after the Closing and within 30 days following
receipt of approval of the Plan by the Commissioner (or such later period as
the Commissioner shall approve), Shelby Bank will send a notice of liquidation
by mail to each depositor, creditor, person interested in funds held as a
fiduciary, lessee of a safe deposit box or bailor of property, to the extent
there are any such persons immediately following the Effective Time. As Shelby
Bank will not have any premises subsequent to the Effective Time, Shelby Bank
will post and publish such notice in the manner as the Commissioner shall
require. The notice shall demand that property held by Shelby Bank as bailee
or in a safe deposit box be withdrawn by the person entitled thereto and that
claims of depositors and creditors, if the amount claimed differs from that
stated in the notice to be due, be filed with Shelby Bank before a specified
date not earlier than 60 days thereafter in accordance with the procedure
described in the notice.

8. After the Effective Time, Shelby Bank shall hold no fiduciary
positions.

9. After the Transaction and after discharge of all the
obligations of Shelby Bank, and after provision has been made with the
Commissioner with respect to any disputed claims pursuant to Section
45-2-1501(b)(6) of the Act, there will not be any assets remaining for
distribution to the stockholders of Shelby Bank.

10. The officers and directors of Shelby Bank are authorized and
directed to execute and file all documents and notices which are necessary or
advisable to carry out the purposes and intentions of this Plan and any and all
information required on Treasury Department forms, together with income tax
returns and the information required by applicable regulations and the Code.
The officers and directors of Shelby Bank are authorized and directed to do any
and all other things in its name and behalf which they deem necessary or
advisable to carry out the purposes and intentions of this Plan. The officers,
directors and stockholders shall be held harmless by Shelby Bank for any action
under this Plan taken in good faith, and any expense or liability so incurred
by them shall be that of Shelby Bank.

11. Immediately after the Effective Time and completion of the
foregoing liquidation, and in any event no later than 365 days after the date
of the Effective Time, Shelby Bank shall deliver to the Commissioner (a) its
Charter, for cancellation by the Commissioner, and (b) Articles of Dissolution
containing an Order of Dissolution for entry by the Commissioner.

12. Upon entry by the Commissioner of the Order of Dissolution,
Shelby Bank shall cause the Articles of Dissolution and the Order of
Dissolution to be filed with the Tennessee Secretary of State.

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<PAGE> 82

13. Shelby Bank may terminate or abandon this Plan at any time
prior to the Closing. This Plan may not be terminated or abandoned after the
Closing.

Shelby Bank

By: /s/ DONALD E. RUSSELL
---------------------
Donald E. Russell
President

Dated: July 25, 1995

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<PAGE> 83

PROSPECTUS

2,175,000 SHARES

BANCORPSOUTH, INC.

COMMON STOCK

--------------------

BancorpSouth, Inc. (the "Company"), a Mississippi corporation, a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), and a savings and loan holding company registered under
the Savings and Loan Holding Company Act, as amended ("SLHCA"), may from time
to time offer shares of common stock, par value $2.50 per share (the
"BancorpSouth Common Stock"), in an aggregate amount of up to 2,175,000 shares,
on terms to be determined at the time of such offering. The BancorpSouth
Common Stock may be offered in such amounts, at such prices and on such terms
to be set forth in a supplement to this Prospectus (a "Supplement").

The BancorpSouth Common Stock is to be offered directly by the Company
in connection with the acquisition of, or business combination with, certain
banking or savings institutions. The specific terms under which the
BancorpSouth Common Stock is being offered in connection with the delivery of
this Prospectus will be set forth in the applicable Supplement and will include
the specific number of shares of BancorpSouth Common Stock and the issuance
price per share. BancorpSouth Common Stock may not be sold through this
Prospectus without delivery of the applicable Supplement.

--------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

--------------------

THE DATE OF THIS PROSPECTUS IS JUNE 9, 1995
<PAGE> 84

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

DESCRIPTION OF BANCORPSOUTH COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Certain Anti-takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
BancorpSouth Common Stock Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

--------------------

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offering made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the shares of
BancorpSouth Common Stock offered hereby or an offer to sell or a solicitation
of an offer to buy such shares to any person, or the solicitation of a proxy
from any person, in any jurisdiction in which such offer, solicitation of an
offer or proxy solicitation is unlawful. The delivery of this Prospectus at
any time does not imply that the information herein is correct as of any time
subsequent to its date.

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<PAGE> 85

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-4, including
amendments thereto, if any, with respect to the BancorpSouth Common Stock (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission"). This Prospectus and any accompanying Supplement do not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or as
previously filed with the Commission and incorporated herein by reference. For
further information with respect to the Company and the BancorpSouth Common
Stock, reference is made to such Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part
thereof may be obtained from the Commission upon payment of certain fees
prescribed by the Commission.

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, as well as the following Commission Regional
Offices: New York Regional Office, 7 World Trade Center, 13th Floor, New York,
New York 10048; and Chicago Regional Office, 500 West Madison Street, 14th
Floor, Chicago, Illinois 60601-2511. Copies can be obtained by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the period ending
December 31, 1994, and Quarterly Report on Form 10-Q for the period ending
March 31, 1995, are incorporated herein by reference.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall
be deemed to be incorporated by reference into this Prospectus. Any statement
contained herein, or in a document incorporated or deemed to be incorporated by
reference herein, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THESE DOCUMENTS IS AVAILABLE
UPON REQUEST FROM CATHY M. ROBERTSON, CORPORATE SECRETARY, BANCORPSOUTH, INC.,
ONE MISSISSIPPI PLAZA, TUPELO, MISSISSIPPI 38801, (601) 681-2000.

3
<PAGE> 86

THE COMPANY

The Company is a Mississippi corporation, a bank holding company and a
savings and loan holding company, with commercial banking operations in
Mississippi and Tennessee, and savings and loan operations in Mississippi. The
principal executive offices of the Company are located at One Mississippi
Plaza, Tupelo, Mississippi 38801, and its telephone number is (601) 680-2000.

SUPERVISION AND REGULATION

The Company is a bank holding company registered under the BHCA and is
subject to supervision by the Board of Governors of the Federal Reserve System
(the "Federal Reserve") and the Federal Reserve Bank of St. Louis. The Company
is also a savings and loan holding company registered under the SLHCA, and is
subject to supervision by the Office of Thrift Supervision ("OTS") and the
periodic reporting requirements of the OTS. Bank of Mississippi ("BOM") and
Volunteer Bank ("Volunteer"), which are subsidiaries of the Company, are
Mississippi and Tennessee state banks, respectively, and are subject to
regulation by the banking regulatory agency in their respective state. The
deposits of each of the Company's subsidiaries are insured by the Federal
Deposit Insurance Corporation ("FDIC") and therefore each is subject to
examination by the FDIC.

Federal Reserve. The Company is required to file periodic reports and
such additional information as the Federal Reserve may require pursuant to the
BHCA. The Federal Reserve may also examine the Company and its subsidiaries.

The BHCA requires Federal Reserve approval before the Company may acquire
substantially all the assets of any bank if by the acquisition the Company
would own or control more than 5% of the voting shares of the bank, or for a
merger or consolidation with another bank holding company. The Company may,
however, engage in or acquire an interest in a company that engages in
activities which the Federal Reserve has determined by regulation or order to
be so closely related to banking or managing or controlling banks as to be
properly incident thereto.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") amended provisions of the BHCA to specifically authorize the Federal
Reserve to approve an application by a bank holding company to acquire control
of a savings association. FIRREA also authorized a bank holding company that
controls a savings association to merge or consolidate the assets and
liabilities of the savings association with, or transfer assets and liabilities
to, any subsidiary bank which is a member of the Bank Insurance Fund ("BIF")
with the approval of the appropriate federal banking agency and the Federal
Reserve Board. The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") further amended the BHCA to permit federal savings associations
to acquire or be acquired by any insured depository institution. As a result
of these provisions, there have been a number of acquisitions of savings
associations by bank holding companies and other financial institutions in
recent years.

The Federal Reserve has adopted a risk-based capital adequacy assessment
system for bank holding companies. Assets are weighted by a risk factor and a
ratio is calculated by dividing qualifying capital by the risk-weighted assets.
Tier I capital generally includes common stock and retained earnings. Total
capital is comprised of Tier I capital and Tier II capital, which includes
certain allowances for loan losses, certain subordinated debt and perpetual
preferred stock.

4
<PAGE> 87

The Company is a legal entity which is separate and distinct from its
subsidiaries. Federal law restricts extensions of credit by its subsidiaries
to the Company or its affiliates. Dividends to stockholders of the Company may
be paid only from dividends paid to the Company by its subsidiaries.

CRA. The Community Reinvestment Act of 1977 ("CRA") and its implementing
regulations are intended to encourage regulated financial institutions to meet
the credit needs of their local community or communities, including low and
moderate income neighborhoods, consistent with the safe and sound operation of
such financial institutions. The regulations provide that the appropriate
regulatory authority will assess CRA reports in connection with applications
for establishment of domestic branches, acquisition of banks or mergers
involving bank holding companies.

FDIC. Deposits in each of the Company's subsidiaries are insured by the
FDIC and, pursuant to provisions of the Federal Deposit Insurance Act ("FDIA"),
any FDIC-insured subsidiary of the Company can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC in connection
with the default of a commonly controlled FDIC-insured subsidiary or any
assistance by the FDIC to any commonly controlled FDIC-insured subsidiary in
danger of default.

FDICIA. FDICIA implemented a number of provisions applicable to insured
banks and bank holding companies. Federal bank regulatory agencies are
required to establish standards for safety and soundness of banks and bank
holding companies relating to internal controls and audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth
and compensation. FDICIA also requires bank holding companies to guarantee
compliance with any capital restoration plans entered into by a subsidiary bank
and the FDIC. The activities of insured state banks, including non-subsidiary
equity investment, is generally limited under the FDICIA to those permitted for
national banks. FDICIA also requires regulations by federal banking agencies
establishing minimum loan to value ratios for all real estate mortgage and
construction loans. The FDICIA also requires regulations to limit risks posed
by an insured bank's "exposure" to another bank. Exposure includes extension
of credit, purchases of securities issued by the other bank or acceptance of
securities issued by the other bank as collateral for an extension of credit.
Regulations pursuant to FDICIA limit such exposure.

Interstate Banking. In September 1994, the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("IBBEA") was enacted. Beginning
September 29, 1995, IBBEA permits adequately capitalized and managed bank
holding companies to acquire control of banks in states other than their home
states, subject to federal regulatory approval, without regard to whether such
a transaction is prohibited by the laws of any state. IBBEA permits states to
continue to require that an acquired bank have been in existence for a certain
minimum time period, which may not exceed five years. A bank holding company
may not, following an interstate acquisition, control more than 10% of the
nation's total amount of bank deposits or 30% of bank deposits in the relevant
state (unless the state enacts legislation to raise the 30% limit). States
retain the ability to adopt legislation to effectively lower the 30% limit.
Beginning June 1, 1997, federal banking regulators may approve merger
transactions involving banks located in different states, without regard to
laws of any state prohibiting such transactions; except that, mergers may not
be approved with respect to banks located in states that, prior to June 1,
1997, enacted legislation prohibiting mergers by banks located in such state
with out-of-state institutions. Federal banking regulators may permit an
out-of-state bank to open new branches in another state if such state has
enacted legislation permitting interstate branching. Affiliated institutions
are authorized to accept deposits for existing accounts, renew time deposits,
and close and service loans for affiliated institutions without being deemed an
impermissible branch of the affiliate.

5
<PAGE> 88

OTS. The Company is a unitary savings and loan holding company subject
to regulatory oversight by the OTS. As such, the Company is required to
register and file periodic reports with the OTS and is subject to regulation
and examination by the OTS. As a federally-chartered savings association,
Laurel Federal Savings and Loan Association ("Laurel Federal"), a subsidiary of
the Company, is subject to extensive regulation by the OTS. Laurel Federal
must file reports with the OTS concerning its activities and financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with or acquisitions of other savings
institutions. The regulatory structure gives the OTS extensive discretion in
connection with its supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.

State Banking Regulation. BOM is subject to supervision, regulation and
examination by the Mississippi Department of Banking and Consumer Finance.
Volunteer is subject to supervision, regulation and examination by the
Tennessee Department of Financial Institutions. State regulations in
Mississippi and Tennessee relate to such matters as loans, mortgages,
consolidations, required reserves, allowable investments, issuance of
securities, payment of dividends, establishment of branches, filing of periodic
reports and other matters affecting the business of BOM and Volunteer.

6
<PAGE> 89

DESCRIPTION OF BANCORPSOUTH COMMON STOCK

The Company has authorized 500 million shares of BancorpSouth Common
Stock, $2.50 par value.

DIVIDEND RIGHTS

Holders of outstanding shares of BancorpSouth Common Stock are entitled
to receive such dividends, if any, as may be declared by the Board of Directors
of the Company, in its discretion, out of funds legally available therefor.

VOTING RIGHTS
Holders of BancorpSouth Common Stock are entitled to one vote per share
on all matters to be voted on by the stockholders of the Company, including the
election of directors, and do not have cumulative voting rights. Under the
Mississippi Business Corporation Act, an affirmative vote of the majority of
the stockholders present at a meeting is sufficient in order to take most
stockholder actions. Certain extraordinary actions require greater percentages
of affirmative stockholder votes, including an increase, without a
recommendation by the Board of Directors of such increase, in the maximum
number of members of the Board of Directors of the Company or an amendment or
repeal of the anti-takeover provision described below.

LIQUIDATION RIGHTS

In the event of the liquidation of the Company, the holders of
BancorpSouth Common Stock are entitled to receive pro rata any assets
distributed to stockholders with respect to their shares, after payment of all
debts and payments to holders of preferred stock of the Company, if any.

PREEMPTIVE RIGHTS

Holders of BancorpSouth Common Stock have no right to subscribe to
additional shares of capital stock that may be issued by the Company.

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Restated Articles of Incorporation, as amended, generally
require the affirmative vote of the holders of 80% of the outstanding shares of
BancorpSouth Common Stock to approve (i) a merger or consolidation of the
Company with, or (ii) a sale, exchange or lease of all or substantially all of
the assets (as defined in the Restated Articles of Incorporation) of the
Company to any person or entity, unless such transaction is approved by the
Board of Directors of the Company.

The Restated Articles of Incorporation of the Company also require the
affirmative vote of the holders of 80% of the outstanding shares of the
BancorpSouth Common Stock, and the affirmative vote of the holders of 67% of
the shares of BancorpSouth Common Stock held by stockholders other than a
Controlling Party (as defined below), for the approval or authorization of any
merger, consolidation, sale, exchange or lease of all or substantially all of
the assets of the Company if such transaction involves any stockholders "owning
or controlling" 20% or more of the BancorpSouth Common Stock outstanding at the
time of the proposed transaction (a "Controlling Party"). The terms "owning or
controlling" are not defined in the Company's Restated Articles of
Incorporation. Management of the Company assumes that such terms would be
interpreted in accordance with the meaning of the term "beneficial ownership"
under the Exchange Act; however, if is uncertain how such terms would be
construed under the laws of the State of Mississippi or whether such terms
would encompass the possession of a revocable proxy to direct the vote of
shares of BancorpSouth Common Stock. However, these voting requirements are
not applicable in transactions in which: (a) the cash or fair market value of
the property, securities or other consideration to be received (which includes
BancorpSouth Common Stock retained by the Company's

7
<PAGE> 90

existing stockholders in a transaction in which the Company is the surviving
entity) per share by holders of BancorpSouth Common Stock in such transaction
is not less than the highest per share price (with appropriate adjustments for
recapitalizations, stock splits, stock dividends and distributions) paid by the
Controlling Party in the acquisition of any of its holdings of the BancorpSouth
Common Stock in the three years preceding the announcement of the proposed
transaction, or (b) the transaction is approved by a majority of the Board of
Directors of the Company.

Neither of these provisions of the Restated Articles of Incorporation may
be repealed or amended except by the affirmative vote of 80% of the total
voting power of the Company.

BANCORPSOUTH COMMON STOCK PURCHASE RIGHTS
Following stockholder approval of a Shareholder Rights Plan in April
1991, the Company issued one common stock purchase right (a "Right") for each
issued and outstanding share of BancorpSouth Common Stock. Each Right attaches
to and trades with each share of BancorpSouth Common Stock; provided, however,
that the Rights will separate from the BancorpSouth Common Stock and be
distributed upon the occurrence of certain events, including the acquisition of
or tender for 20% or more of the outstanding shares of BancorpSouth Common
Stock by any person (an "Acquiring Person") or if the Board of Directors of the
Company determines that a person beneficially owning 10% or more of the
outstanding shares of BancorpSouth Common Stock has become an "Adverse Person,"
as defined in the Shareholder Rights Plan.
In the event that a person becomes an Acquiring Person or is declared an
Adverse Person by the Board of Directors of the Company, then each Right will
entitle the holder thereof to purchase one share of BancorpSouth Common Stock
at 50% of the then current market price, subject to adjustments as described in
the Shareholder Rights Plan. At any time after the aforementioned events, the
Board of Directors of the Company may exchange each Right for one share of
BancorpSouth Common Stock, subject to adjustment as described in the
Shareholder Rights Plan. If an Acquiring Person effects certain transactions
with the Company, including a merger, share exchange, or transfer of over 50%
of the Company's assets or earning power, then each Right shall entitle the
holder thereof to purchase a share of common stock of the Acquiring Person at
50% of the then current market price for such common stock. Shares of
BancorpSouth Common Stock owned by an Acquiring Person or Adverse Person will
not be entitled to exercise the Rights as set forth above.

The Rights are redeemable at $.01 per Right at any time prior to the
close of business on the tenth day after the public announcement that a person
has become an Acquiring Person or been declared an Adverse Person by the Board
of Directors of the Company. The Rights are not exercisable until the
expiration of the applicable ten day period, and the Rights will expire at the
close of business on April 24, 2001, unless earlier redeemed. The Board of
Directors of the Company is entitled to interpret the provisions of the
Shareholder Rights Plan, which may be amended in certain respects by the Board
of Directors of the Company at any time.

8
<PAGE> 91

LEGAL MATTERS

The validity of the shares of BancorpSouth Common Stock to be offered
hereunder will be passed upon by Waller Lansden Dortch & Davis, Nashville,
Tennessee, special counsel to the Company. Certain matters concerning this
offering will be passed upon on behalf of the Company by Riley, Ford, Caldwell
& Cork, P.A., Tupelo, Mississippi. Frank A. Riley, a shareholder of such
firm, is a director of the Company.

EXPERTS

The Consolidated Financial Statements of the Company, as of December 31,
1994 and 1993, and for each of the years in the three-year period ended
December 31, 1994, have been incorporated by reference in this Prospectus and
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of such firm as experts in accounting and
auditing.

9
<PAGE> 92

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

A. Restated Articles of Incorporation and Bylaws.

The Company's Restated Articles of Incorporation provide that it will
indemnify, and upon request advance expenses to, any person (or his estate) who
was or is a party to any legal proceeding because he is or was a director,
officer or employee of the Company, or is or was serving at the request of the
Company as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, or other entity, against any liability incurred in
that proceeding (A) to the full extent permitted by the Mississippi Business
Corporation Act (the "Mississippi Corporation Act"), and (B) despite the fact
that such person did not meet the standard of conduct specified in the
Mississippi Corporation Act or would be disqualified for indemnification under
that Act, if a determination is made that (i) the person seeking indemnity is
fairly and reasonably entitled to indemnification in view of all of the
relevant circumstances, and (ii) his acts or omissions did not constitute gross
negligence or willful misconduct. A request for reimbursement or advancement
of expenses prior to final disposition of the proceeding must be accompanied by
an undertaking to repay the advances if it is ultimately determined that he did
not meet the requisite standard of conduct but it need not be accompanied by an
affirmation that the person seeking indemnity believed he has met the standard
of conduct.

The Company's Bylaws provide that it will indemnify officers and
directors who are a party to any legal proceeding because he is or was an
officer or director of the Company against any expenses or awards in connection
therewith if he acted in good faith and in a manner he reasonably believed to
be in the best interest of the Company and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Company also will indemnify officers and directors who are a party to any
derivative suit with respect to the Company because that person is or was an
officer or director of the Company, against expenses incurred in connection
with that action unless he is found to have acted without good faith and
without that degree of care, diligence and skill which ordinarily prudent men
would exercise in similar circumstances and in like positions, unless, despite
such finding of liability, the court determines that he is entitled to
indemnity. The Bylaws also provide that the Company may (i) advance to the
officer or director the expenses incurred in defending a proceeding upon
receipt of an undertaking that he will repay amounts advanced unless it
ultimately is determined that he is entitled to be indemnified, and (ii)
purchase and maintain insurance on behalf of an officer or director against any
liability arising out of his acting as such.

B. Mississippi Corporation Act.

In addition to the foregoing provisions of the Company's Restated
Articles of Incorporation and Bylaws, directors, officers, employees and agents
of the Company and its subsidiaries may be indemnified by the Company pursuant
to Sections 79-4-8.50 through 79-4-8.58 of the Mississippi Corporation Act.

C. Insurance.

The Company maintains and pays premiums on an insurance policy on
behalf of its officers and directors against liability asserted against or
incurred by such persons in or arising from their capacity as such.

II-1
<PAGE> 93

D. Securities and Exchange Commission Policy On Indemnification.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C> <C>
2.1 -- Purchase and Assumption Agreement, dated as of May 9, 1995, between the Registrant, Volunteer Bank and Shelby
Bank, as amended
3.1 -- Restated Articles of Incorporation of the Registrant(1)
3.2 -- Amendment to Articles of Incorporation of Registrant, as filed on May 4, 1994(1)
3.3 -- Bylaws of the Registrant, as amended(2)
5.1 -- Opinion of Waller Lansden Dortch & Davis
11.1 -- Statement re computation of earnings per share(3)
21.1 -- List of subsidiaries of the Registrant(3)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Fouts & Morgan, Certified Public Accountants, P.C.
23.3 -- Consent of Waller Lansden Dortch & Davis (included in opinion filed as Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-5)

-------------------
</TABLE>
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4, filed on January 5, 1995.
(2) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1985.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.

ITEM 22. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.

II-2
<PAGE> 94

(2) For the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.

The registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.

The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.

II-3
<PAGE> 95

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Tupelo, State of Mississippi, on June 28, 1995.

BANCORPSOUTH, INC.

By: /s/ Aubrey Burns Patterson
-------------------------------------
Aubrey Burns Patterson
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Aubrey Burns Patterson and L. Nash Allen, Jr.,
and each of them, his true and lawful attorney-in-fact, as agent and with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacity, to sign any or all amendments to this
Post-Effective Amendment to the Registration Statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agents in full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
and to all intents and purposes as they might or be in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Aubrey Burns Patterson Chairman of the Board, Chief June 28, 1995
- ------------------------------- Executive Officer, Director
Aubrey Burns Patterson (principal executive officer)

/s/ L. Nash Allen, Jr. Treasurer and Chief Financial June 28, 1995
- ------------------------------- Officer (principal financial and
L. Nash Allen, Jr. accounting officer)

/s/ S. H. Davis Director June 28, 1995
- -------------------------------
S. H. Davis

/s/ Hassell H. Franklin Director June 28, 1995
- -------------------------------
Hassell H. Franklin
</TABLE>

II-4
<PAGE> 96

<TABLE>
<S> <C> <C>
/s/ W. G. Holliman, Jr. Director June 28, 1995
- --------------------------------
W. G. Holliman, Jr.

/s/ A. Douglas Jumper Director June 28, 1995
- --------------------------------
A. Douglas Jumper

/s/ Turner O. Lashlee Director June 28, 1995
- --------------------------------
Turner O. Lashlee

/s/ Alan W. Perry Director June 28, 1995
- --------------------------------
Alan W. Perry

/s/ Frank A. Riley Director June 28, 1995
- --------------------------------
Frank A. Riley

/s/ Travis E. Staub Director June 28, 1995
- --------------------------------
Travis E. Staub

/s/ Dr. Andrew R. Townes Director June 28, 1995
- --------------------------------
Dr. Andrew R. Townes

/s/ Lowery A. Woodall Director June 28, 1995
- --------------------------------
Lowery A. Woodall

Director June 28, 1995
- --------------------------------
J. Louis Griffin, Jr.
</TABLE>

II-5

<PAGE> 1

Exhibit 2.1

PURCHASE AND ASSUMPTION AGREEMENT

BETWEEN

SHELBY BANK
AS SELLER

AND

VOLUNTEER BANK
AS PURCHASER

AND

BANCORPSOUTH, INC.
<PAGE> 2

INDEX TO

PURCHASE AND ASSUMPTION AGREEMENT

<TABLE>
<S> <C>
ARTICLE I Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Assets Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Transfer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.03 Subsequent Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.04 Excluded Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.05 Assets Free and Clear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.06 Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.07 Stipulations Regarding Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE III Assumption of Liabilities and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.01 Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.02 Conditions of Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.03 Subsequent Purchaser Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.04 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.05 Security of Persons and Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IV Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.01 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.02 Access and Confidential Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.03 Dissolution and Liquidation of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.04 Expenses of Dissolution and Liquidation of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.05 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.06 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.07 Mail Received After Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE V Closing and Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.01 Purchase and Assumption; Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.02 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.03 Closing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE VI Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.01 Corporate Organization; Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.02 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.03 Title to Property; Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.04 No Violations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.05 No Adverse Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.06 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.07 Status of Loans; Public Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.08 Deposit Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.09 Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 No Undisclosed Liabilities, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
6.14 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Agreements in Full Force and Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.17 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.18 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.19 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.20 Insider Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.21 Proxy Statement and S-4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.22 True Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE VII Representations and Warranties of
Purchaser and BancorpSouth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.01 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.03 No Violations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.04 True Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.05 Proxy Statement and S-4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.06 Securities Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE VIII Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.01 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.02 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.03 Proxy Preparation and Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.04 Conduct of Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.05 Diligence and Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.06 Preservation of Tax Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.07 Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE IX Covenants of Purchaser and BancorpSouth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.01 Diligence and Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.02 Purchaser's Contact with Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.03 S-4 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.04 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.05 Issuance of BancorpSouth Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.06 Preservation of Tax Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE X Conditions Precedent to the Obligations
of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.01 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.02 Obligations Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.03 Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.04 No Adverse Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.05 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.07 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.08 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.09 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.10 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.11 Seller Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE XI Conditions Precedent to the Obligations
of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.01 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

<PAGE> 4

<TABLE>
<S> <C>
11.02 Obligations Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.03 Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.04 No Adverse Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.05 Opinion of Purchaser's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.07 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE XII Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.01 Methods of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.02 Procedure Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.03 Automatic Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE XIII Indemnifications; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.01 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.02 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.03 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE XIV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.01 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.02 Modifications and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.03 No Broker or Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.04 Survival of Representations and Warranties;
Survival of Letter of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.05 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.07 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.08 Plain Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.09 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.13 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>

<PAGE> 5

PURCHASE AND ASSUMPTION AGREEMENT

This Purchase and Assumption Agreement (the "Agreement") made
and entered into as of May 9, 1995, among Shelby Bank ("Seller"), a state
banking corporation organized under the laws of the State of Tennessee, and
Volunteer Bank ("Purchaser"), a state banking corporation organized under the
laws of the State of Tennessee, and BancorpSouth, Inc., a Mississippi
corporation and registered bank holding company, of which Purchaser is a wholly
owned subsidiary ("BancorpSouth").

W I T N E S S E T H:

WHEREAS, Seller wishes to sell substantially all of its
assets, including its banking location at 6775 Stage Road, Bartlett, Tennessee
(the "Office");

WHEREAS, Purchaser wishes to purchase such assets and assume
certain liabilities on the terms and conditions set forth herein; and

WHEREAS, Seller and Purchaser intend that the purchase and
assumption transaction contemplated hereby (the "Transaction") shall qualify as
a reorganization under Section 368(a)(1)(C) of the Code (as defined below).

NOW, THEREFORE, in consideration of the premises and the
mutual agreements, covenants, and provisions herein contained, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

ARTICLE I

Defined Terms

1.01 The following defined terms used in this Agreement have
the meanings specified below:

"Applicable Environmental Laws" shall mean the federal, state,
regional, county, parish, municipal, and local environmental laws, regulations,
ordinances, rules and policies relating to the use, handling, treatment,
storage, transportation, disposal, emissions, discharges or releases of
Hazardous Substances, or otherwise relating to protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), as the same may be amended or modified until the
date of closing, including, without limitation, the following statutes:
Federal Resources Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901, et seq.; Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq.; Federal Clean Air Act,
42

<PAGE> 6

U.S.C. Section 7401, et seq.; Federal Water Pollution Control Act, Federal
Clean Water Act of 1977, 33 U.S.C. Section 1251, et seq.; Federal Insecticide,
Fungicide, and Rodenticide Act, Federal Pesticide Act of 1978, 7 U.S.C. Section
136, et seq.; Federal Hazardous Materials Transportation Act, 48 U.S.C. Section
1801, et seq.; Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, et
seq.; Federal Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.

"Assignment and Assumption Agreement" shall mean the General
Assignment, Assumption, and Undertaking as attached hereto as Exhibit A.

"BancorpSouth Common Stock" shall mean the common stock, par
value $2.50 per share, of BancorpSouth.

"Bill of Sale" shall mean the Indenture, Bill of Sale, and
Assignment of Assets, Properties and Business of Shelby Bank, as attached
hereto as Exhibit B.

"Closing" means the closing of the purchase of the assets and
assumption of certain liabilities of the Seller by the Purchaser and of the
other transactions contemplated hereunder, which shall take place as provided
in Section 5.02 hereof and subject to the conditions set forth in Articles X
and XI below.

"Code" shall mean the Internal Revenue Code of 1986, as
amended.

"Environmental Condition" shall be mean any Release, or the
generation, manufacture, refining, transportation, treatment, storage,
handling, disposal, transfer, production or processing of a Hazardous Substance
in violation of any Applicable Environmental Law.

"Environmental Notice" shall refer to any summons, citation,
order, proceeding, judgment, letter or other written communication from the
Tennessee Department of Environment and Conservation, any other federal, state
or local agency or authority, or any other entity, group, or individual,
concerning any intentional or unintentional act or omission that is alleged to
have resulted in an Environmental Condition or relating in any way to the
Applicable Environmental Laws or Hazardous Substances.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

"Exchange Agent" shall mean the bank or trust company,
designated by BancorpSouth with which BancorpSouth shall deposit, for the
benefit of eligible shareholders of Seller, certificates representing shares of
BancorpSouth Common Stock constituting the

2
<PAGE> 7

Purchase Consideration for exchange in accordance with the provisions of
Section 4.06 of this Agreement.

"Fair Market Value" shall mean $34.50, with no adjustment
being made if the actual value of BancorpSouth Common Stock is higher or lower
on the date of determination.

"FDIC" shall mean the Federal Deposit Insurance Corporation.

"Hazardous Substances" shall mean any toxic or hazardous
waste, pollutants or substances, including, without limitations, asbestos,
PCBs, petroleum products and byproducts, substances defined or listed as
"hazardous substances", "hazardous waste", "toxic substances", or "toxic
pollutant", in or pursuant to the applicable Environmental Laws.

"Letter of Intent" shall mean that certain letter agreement,
dated March 31, 1995, addressed to Seller from Purchaser.

"Mailing Date" shall mean the date subsequent to the effective
date of the S-4 Registration Statement (and any post-effective amendment
thereto) when the Proxy Statement shall first be mailed to Seller's
shareholders.

"Power of Attorney" shall mean the power of attorney delivered
by Seller to Purchaser as part of the Bill of Sale.

"Release" shall mean the presence of, or releasing, placing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leeching, disposing or dumping of, any Hazardous
Substances, whether intentional or unintentional.

"S-4 Registration Statement" shall mean the Registration
Statement on Form S-4 and any amendments thereto filed by BancorpSouth with the
SEC under the Securities Act for the purpose of registering a number of shares
of BancorpSouth Common Stock to be exchanged in accordance with the provisions
of Section 4.06 of this Agreement.

"SEC" shall mean the United States Securities and Exchange
Commission.

"Securities Act" shall mean the Securities Act of 1933, as
amended.

"Seller Common Stock" shall mean the common stock, par value
$0.60 per share, of Seller.

3
<PAGE> 8

"Seller Real Property" shall mean (i) the Office, and (ii) all
other real property owned by Seller.

1.02 The following defined terms used in this Agreement have
the meanings specified in the Sections hereof identified below:

<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Effective Time 5.02
Nonassignable Contract 2.04
Plan of Reorganization 4.03
Proxy Statement 8.03
Purchase Consideration 5.01
Seller Options 6.01
Seller Shareholders' Meeting 8.01
Transaction Preamble
</TABLE>

ARTICLE II

Transfer of Assets

2.01 Assets Transferred. Except as otherwise provided in Section 2.04,
at the Effective Time, Purchaser will purchase, accept and receive, and Seller
will sell, transfer, assign and deliver, all of the assets of Seller of every
kind and nature whatsoever, real, personal or mixed, movable or immovable,
tangible or intangible, including without limitation:

(i) all loans, mortgages and other credits outstanding, together with
all accrued but unpaid interest thereon as of the Effective Time;

(ii) all of the real property or leasehold or other interests in real
property held by the Seller, together with all buildings, improvements
and fixtures located thereon, and all other real property owned by
Seller;

(iii) all furnishings, equipment and other tangible personal property
of Seller, including those located at the Office;

(iv) all of the policies, rights, collateral, books, records and other
assets of Seller;

(v) all cash, securities, investments, and other financial assets;

(vi) all patents, trademarks, service marks, copyrights, assumed
names, corporate names, and other intellectual property and all
applications therefor, including without

4
<PAGE> 9

limitation, the right to use the name "Shelby Bank" and any logo or
symbol thereof;

(vii) any deposits given to Seller after the Effective Time and all
payments made to Seller on account of any asset acquired by Purchaser;

(viii) all of Seller's right, title, and interest in and to any
pledge, deposit, refund, or other credits; and

(ix) all of Seller's right, title, and interest in and to any state or
federal tax refunds, credits, deductions, net operating losses, and
similar items.

2.02 Transfer Documents. The sale, transfer, assignment and delivery
of the assets to be purchased pursuant to Section 2.01 shall be effected by the
Bill of Sale, the Power of Attorney, and such other deeds, bills of sale,
endorsements, assignments and other instruments of transfer and conveyance
reasonably satisfactory in form and substance to counsel for Purchaser. At the
Closing, Seller will take steps necessary to put Purchaser in possession and
operating control of such assets and deliver to Purchaser such of the assets as
shall be capable of physical delivery. At the Closing, Seller shall also (i) if
requested by Purchaser, assign and deliver any and all assignable insurance
policies, whether fire, life, fidelity or otherwise, previously taken out by
Seller for its own protection so that Purchaser, after the Effective Time, may
be protected to the full extent of such policies; (ii) assign and deliver to
Purchaser all leases of real or personal property described at Schedule 6.06
hereto, each of which Purchaser agrees to take over and perform; (iii) assign
and deliver to Purchaser all leases and agreements with respect to safe deposit
boxes at the Office as are then in effect, each of which Purchaser agrees to
take over and perform; (iv) assign and deliver to Purchaser all collateral
security for any indebtedness owing to Seller and acquired by Purchaser; and (v)
deliver all of Seller's books, records, and accounts relating to all assets and
liabilities of Seller being acquired by Purchaser, including without limitation
all records, microfilm, books, papers, collateral, signature cards, orders,
contracts, withdrawal orders, records of accounts, and agreements of Seller
relating to the assets being purchased by Purchaser and the liabilities being
assumed by Purchaser hereunder.

2.03 Subsequent Cooperation. Seller agrees that it will, at the
Closing and at any time and from time to time after the Closing, upon request of
Purchaser, do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged, and delivered, all such further acts, deeds, assignments,
transfers, conveyances, and assurances as may be required for the better
assigning, transferring, granting, conveying, assuring and confirming to
Purchaser, or for aiding and assisting in collecting

5
<PAGE> 10

and reducing to possession, any or all of the assets to be sold, transferred,
assigned, and delivered to Purchaser pursuant to Section 2.01 and for ensuring
the performance of any or all obligations of Seller hereunder.

2.04 Excluded Items. (a) Anything herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
claim, contract, license, lease, commitment, sales order or purchase order or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or in any way affect the rights of Purchaser
or Seller thereunder (any such contract, a "Nonassignable Contract"); provided,
however, that with respect to each Nonassignable Contract, Seller and Purchaser
shall cooperate to obtain prior to Closing, at Seller's expense, a consent
reasonably satisfactory in form and substance to Purchaser under which the
opposing party on the Nonassignable Contract agrees to allow Purchaser to assume
Seller's rights and obligations under the Nonassignable Contract; and provided
further, that if such consent is not obtained, Seller will enter into such
alternative arrangements desired by Purchaser to provide to Purchaser the
benefits under any Nonassignable Contract, at the cost of Seller and for the
benefit of Purchaser.

(b) Anything herein to the contrary notwithstanding, the assets set
forth on Schedule 2.04 shall be excluded from the assets purchased by Purchaser
under this Agreement.

2.05 Assets Free and Clear. The assets to be sold, transferred,
assigned and delivered to Purchaser pursuant to Section 2.01 hereof will be sold
free and clear of all liens, liabilities, charges and encumbrances, except for
such liens, liabilities, charges and encumbrances for real estate taxes for the
current tax year not yet due and payable (which shall be the responsibility of
Purchaser), and easements and rights of way of record which do not materially
interfere with the use of any Seller Real Property.

2.06 Valuation of Assets. Purchaser and Seller hereby agree that
they will cooperate to establish the respective values of the assets purchased
in the Transaction prior to the Closing.

2.07 Stipulations Regarding Tax Matters. BancorpSouth, Purchaser
and Seller hereby stipulate as follows:

(i) The fair market value of the BancorpSouth Common Stock received by
each Seller shareholder will be approximately equal to the fair market
value of the Seller Common Stock surrendered in the exchange.

6
<PAGE> 11

(ii) There is no plan or intention by the shareholders of Seller who
own one percent or more of the Seller Common Stock, and to the best of
the knowledge of management of Seller, there is no plan or intention
on the part of the remaining shareholders of Seller to sell, exchange,
or otherwise dispose of a number of shares of BancorpSouth Common
Stock received in the transaction that would reduce the Seller's
shareholders' ownership of BancorpSouth Common Stock to a number of
shares having a value, as of the date of the transaction, of less than
50% of the value of all of the formerly outstanding stock of Seller as
of the same date. For purposes of this representation, shares of
Seller Common Stock exchanged for cash or other property surrendered
by dissenters, or exchanged for cash in lieu of fractional shares of
BancorpSouth Common Stock will be treated as outstanding Seller Common
Stock on the date of the transaction. Moreover, shares of Seller
Common Stock and shares of BancorpSouth Common Stock held by Seller
shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the transaction will be considered in making this
representation.

(iii) Purchaser will acquire at least 90% of the fair market value of
the net assets and at least 70% of the fair market value of the gross
assets held by Seller immediately prior to the transaction. For
purposes of this representations, amounts paid by Seller to
dissenters, amounts used by Seller to pay its reorganization expenses,
amounts paid by Seller to shareholders who receive cash or other
property, and all redemptions and distributions (except for regular,
normal dividends) made by Seller immediately preceding the transfer
will be included as assets of Seller held immediately prior to the
transaction.

(iv) Neither BancorpSouth nor Purchaser has a plan or intention to
reacquire any of its stock issued in the transaction.

(v) Purchaser has no plan or intention to sell or otherwise dispose
of any of the assets of Seller acquired in the transaction, except for
dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.

(vi) Seller will distribute the BancorpSouth Common Stock and other
property it receives in the transaction, and its other properties (if
any), in pursuance of the Plan of Reorganization.

7
<PAGE> 12

(vii) The liabilities of Seller assumed by Purchaser and the
liabilities to which the transferred assets of Seller are subject were
incurred by Seller in the ordinary course of its business.

(viii) Following the transaction, Purchaser will continue the
historic business of Seller or use a significant portion of Seller's
historic business assets in a business.

(ix) Purchaser, Seller, and the shareholders of Seller will pay their
respective expenses, if any, incurred in connection with the
transaction.

(x) There is no intercorporate indebtedness existing between Seller
and either BancorpSouth or Purchaser that was issued, acquired, or
will be settled at a discount.

(xi) No two parties to the transaction are investment companies as
defined in Section 368(a)(F)(iii) of the Code.

(xii) Neither BancorpSouth nor Purchaser owns, directly or
indirectly, nor has it owned during the past five years, directly or
indirectly, any stock of Seller.

(xiii) The fair market value of the assets of Seller transferred to
Purchaser will equal or exceed the sum of the liabilities assumed by
Purchaser, plus the amount of liabilities, if any, to which the
transferred asset are subject.

(xiv) Seller is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the
Code.

(xv) The payment of cash in lieu of fractional shares of BancorpSouth
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to Purchaser and BancorpSouth of issuing fractional
shares and does not represent separately bargained for consideration.
The total cash consideration that will be paid to the shareholders of
Seller instead of issuing fractional shares of BancorpSouth Common
Stock will not exceed one percent of the total consideration that will
be issued in the Transaction to the shareholders of Seller in exchange
for their shares of Seller Common Stock. The fractional share
interests of each Seller shareholder will be aggregated, and no Seller
shareholder will receive cash in an amount equal to or greater than
the value of one full share of BancorpSouth Common Stock.

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ARTICLE III

Assumption of Liabilities and Risks

3.01 Liabilities Assumed. At the Effective Time, Purchaser hereby
agrees to assume from Seller only the liabilities set forth on Schedule 3.01
hereof. No other assumption of liabilities shall be implied, and Purchaser
shall not be responsible for any other obligations or liabilities of Seller.
The assumption of liabilities will be evidenced by the Assignment and Assumption
Agreement.

3.02 Conditions of Assumption. The liabilities being assumed by
Purchaser pursuant to Section 3.01 shall be assigned by Seller in accordance
with the terms and conditions of the contracts and the laws, rules, and
regulations applicable thereto.

3.03 Subsequent Purchaser Payments. With respect to depository
liabilities assumed by the Purchaser, Purchaser agrees to pay in accordance with
law and customary banking practices all properly drawn and presented checks,
drafts and withdrawal orders presented to Purchaser by mail, over the counter or
through the check clearing system of the banking industry, by depositors of the
assumed accounts, whether drawn on the checks, withdrawal or draft forms
provided by the Seller or by the Purchaser, and in all other respects to
discharge, in the usual course of the banking business, the duties and
obligations of the Seller with respect to the balances due and owing to the
depositors whose accounts are assumed by Purchaser.

3.04 Risk of Loss. Risk of loss with respect to the assets of the
Seller shall remain with Seller until the Effective Time, at which time such
risk of loss shall transfer to Purchaser with respect to the assets purchased by
Purchaser.

3.05 Security of Persons and Property. Prior to the Effective Time,
Seller shall be responsible for the risks and obligations, if any, relating to
the security of persons and property at the Office premises. From and after the
Effective Time, Purchaser shall be responsible for the risks and obligations, if
any, relating to the security of persons and property at the Office premises.

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<PAGE> 14

ARTICLE IV

Related Matters

4.01 Employees. (a) Purchaser agrees that all employees of Seller
who are currently employed at the Office and who deliver the release described
in Section 4.01(c) will be offered at-will employment with Purchaser at the
Office following the Effective Time. Employees of Seller who become employees
of Purchaser shall be offered employment at their respective salaries set forth
on Schedule 6.19. Continuing employees will receive the same employee benefits,
including medical insurance, vacation pay, and sick leave, as are currently
extended to Purchaser's other non-executive new hires (provided, however, that
no uninsured waiting periods or pre-existing condition limitations shall be
imposed with respect to medical insurance coverage).

(b) Seller shall provide Purchaser at such reasonable times as
Purchaser may deem necessary such records and information regarding the service
of Seller's employees hired by Purchaser as Purchaser may need to process such
employees for its employment and benefits program records. Purchaser and
Seller agree to assist each other by providing the employee information needed
to open and close employees' files on those employees of Seller hired by
Purchaser.

(c) All employment contracts or agreements with any of the current
employees of Seller will be terminated at the Effective Time, and each employee
of Seller shall deliver to the Seller a release in the form attached as Exhibit
D hereto.

(d) Except to the extent set forth on Schedule 3.01, Purchaser shall
not be responsible for any salary, wages, bonuses, vacation, severance or sick
pay or other benefits earned by or accrued for any employee of Seller pursuant
to an agreement or policy of Seller, it being understood that employment of
such employees by Purchaser terminates any such arrangements and that such
employees become employees of Purchaser only on the terms and conditions
expressly provided by Purchaser.

4.02 Access and Confidential Treatment. From the date of this
Agreement, Seller shall afford the representatives of Purchaser (including its
attorneys and accountants) reasonable access, during normal business hours, to
all assets, properties, books, records, agreements, and commitments of Seller,
and Seller shall furnish all such information concerning its affairs as
Purchaser may reasonably request; provided that Purchaser will hold in
confidence, and will use its reasonable efforts to cause its representatives to
hold in confidence, all documents and information concerning Seller in
compliance with Tennessee Code

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<PAGE> 15

Annotated Section 45-10-101 et seq. No such investigation by Purchaser or its
representatives shall affect or be deemed to modify this Agreement or the
representations and warranties of the Seller, and each of Seller's
representations and warranties shall survive such investigation. Nothing in
this Section shall be deemed to require the Seller to breach any obligation of
confidentiality.

4.03 Dissolution and Liquidation of Seller. Prior to the
Closing, the Seller will adopt a plan of reorganization, meeting the
requirements of Section 368(a)(1)(C) of the Code and approved by the Purchaser
(the "Plan of Reorganization") pursuant to which Seller will take all steps
necessary or appropriate so that the following will occur as soon as
practicable after the Closing (and in any event within one year after Seller
Shareholders' Meeting): (i) the dissolution of the Seller pursuant to title 45,
Chapter 2, Part 15 of the Tennessee Code Annotated, and (ii) the reorganization
of the Seller in the manner provided in Section 2.07 and 4.06 hereof and in
accordance with the requirements of Section 368 of the Code. Notwithstanding
the foregoing, Seller may sell or otherwise convey its banking charter in the
course of its liquidation as long as such charter is restricted to use no
closer than fifty (50) miles from any banking location of Purchaser as set
forth on Schedule 4.03 hereto, and such sale does not cause the transaction
contemplated hereby to fail to qualify as a reorganization under Section 368 of
the Code. In the event such charter is not sold by the first anniversary of
the Seller Shareholders' Meeting, such charter shall be surrendered to the
appropriate governmental authority for cancellation. At the conclusion of the
reorganization pursuant to the Plan of Reorganization, any assets of Seller
that have not been conveyed to Purchaser hereunder shall be distributed to
Seller's shareholders in accordance with their respective interests and
applicable law, including Section 368 of the Code.

4.04 Expenses of Dissolution and Liquidation of the Seller.
To provide for the payment of all post-closing expenses of the Seller
(including claims of creditors not assumed by Purchaser hereunder), on or prior
to the Closing, the Seller will establish a special account in an amount not to
exceed $50,000 with Purchaser. The persons authorized to draw upon this
account shall be James L. Reid and Donald E. Russell (or such other person(s)
as Seller may designate at Closing). Withdrawals shall be made only for the
purpose of paying (a) contractual liabilities not assumed by Purchaser, (b)
claims that are unknown or contingent and which may be asserted against Seller
after Closing, and (c) liquidation or dissolution expenses in amounts
previously approved in writing by a representative of Purchaser designated for
that purpose. The Purchaser shall have no responsibility for paying any such
expenses. At the conclusion of the liquidation, any amounts

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<PAGE> 16

remaining in such account shall be the property of, and be transferred to,
Purchaser.

4.05 Change of Name. The Seller will amend its charter on
the date of Closing so as to change its name to "Liquidating Bank (Shelby)" and
will file, with all appropriate governmental authorities any documents
necessary to reflect such change in its corporate name.

4.06 Exchange of Certificates; Cancellation of Certificates.
(a) After the Effective Time, holders of certificates theretofore evidencing
outstanding shares of Seller Common Stock, upon surrender of such certificates
to the Exchange Agent, shall be entitled to receive certificates representing
the number of whole shares of BancorpSouth Common Stock which such holder shall
be entitled to obtain according to such Seller's ratable interest in the
Purchase Consideration, and cash payments in lieu of fractional shares, if any,
as provided in Section 4.06(d) hereof. As soon as practicable after the
Effective Time, the Exchange Agent will send to each Seller shareholder of
record as of the Closing date a notice and transmittal form advising such
shareholder of the effectiveness of the Transaction and the procedure for
surrender to the Exchange Agent (which may appoint forwarding agents) of
outstanding certificates formerly evidencing Seller Common Stock in exchange
for new certificates for BancorpSouth Common Stock. The certificate or
certificates so surrendered shall be duly endorsed if the Exchange Agent so
requires. Upon surrender, each certificate evidencing Seller Common Stock
shall be canceled.

(b) Until surrendered as provided in clause (a) above, each
outstanding certificate of Seller Common Stock will be deemed for all corporate
purposes to evidence ownership of the number of whole shares of BancorpSouth
Common Stock for which such shares would have been exchanged if surrendered in
accordance with clause (a) above. Until such certificates are so surrendered,
no dividend payable to holders of record of BancorpSouth Common Stock shall be
paid to any holder of such outstanding certificates. However, upon surrender
of such outstanding certificates by such holder, there shall be paid to such
holder, without interest, the amount of: (i) any cash dividends, which had a
record date occurring on or subsequent to the Effective Time, theretofore paid
with respect to such whole shares of BancorpSouth Common Stock; and (ii) any
cash payable to such holder in lieu of fractional shares pursuant to this
Agreement. At the close of business on the last business day immediately
preceding the Closing the stock transfer books of Seller shall be closed, and
no transfer of shares of Seller Common Stock shall thereafter be made.

(c) If any new certificate for BancorpSouth Common Stock or
any check representing cash is to be issued in a name other than

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<PAGE> 17

that in which a certificate surrendered in exchange therefor is registered, it
shall be a condition of the issuance thereof that the certificate surrendered
in exchange shall be properly endorsed and otherwise in proper form for
transfer. The person requesting any such transfer shall affix any requisite
stock transfer tax stamps to the certificate surrendered, or pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance
of a new certificate for shares of BancorpSouth Common Stock in any name other
than that of the registered holder of the certificate surrendered, or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.

(d) Notwithstanding any term or provision hereof, no
fractional shares of BancorpSouth Common Stock, and no certificate or scrip
therefor or other evidence of ownership thereof, will be issued in exchange for
any shares of Seller Common Stock and no fractional shares may be assigned; no
dividend or distribution with respect to BancorpSouth Common Stock shall be
payable on or with respect to any fractional share interest; and no such
fractional share interest shall entitle the owner thereof to vote or to any
other rights of a shareholder of BancorpSouth. In lieu of such fractional
share interest, any holder of Seller Common Stock who would otherwise be
entitled to receive, as a result of the Transaction, a fractional share of
BancorpSouth Common Stock will, upon surrender of his certificate or
certificates representing Seller Common Stock outstanding immediately prior to
the Effective Time, be paid the cash value of such fractional share interest,
which shall be equal to the product of the fractional interest being cashed out
multiplied by the Fair Market Value per share. For the purposes of determining
any such fractional share interests, all shares of Seller Common Stock owned by
each Seller shareholder shall be combined (regardless of whether ownership is
registered in separate lots) so as to calculate the maximum number of whole
shares of BancorpSouth Common Stock issuable to such shareholder. In no event
shall BancorpSouth be obligated to provide aggregate cash compensation for
fractional shares or otherwise, in an amount greater than one percent (1%) of
the total Purchase Consideration, or otherwise to the extent that such payment
would not be in accordance with Section 368 of the Code or Section 2.07 hereof.

4.07 Mail Received After Effective Time. Following the
Effective Time, Purchaser may receive and open all mail delivered to the Office
and addressed to the Seller or any director, officer, or employee of Seller and
deal with the contents thereof in its discretion to the extent that such mail
and the contents thereof relate to the business, assets or properties of the
Seller sold to Purchaser and any of the obligations or liabilities assumed by
Purchaser pursuant to this Agreement. Purchaser agrees to deliver or cause to
be delivered to Seller all other mail.

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<PAGE> 18

ARTICLE V

Closing and Settlement

5.01 Purchase and Assumption; Price. Subject to the
satisfaction of the conditions set forth in Articles X and XI, Seller agrees to
sell and transfer, and Purchase agrees to purchase and assume, the assets and
liabilities described in Articles II and III respectively. As consideration
for the purchase of assets, in addition to the assumption of liabilities set
forth in Article III, Purchaser shall transfer or cause to be transferred to
Seller up to 78,516 shares of BancorpSouth Common Stock, subject to downward
adjustment to reflect the payment of cash in lieu of fractional shares in
accordance with Article IV hereof (such shares and cash payments being the
"Purchase Consideration"). The Purchase Consideration shall not be subject to
adjustment for any event occurring after the date hereof, including without
limitation, any decrease in the value of BancorpSouth Common Stock.

5.02 Time and Place. The Closing under this Agreement shall
take place on the last day of the month in which all approvals by all
governmental regulatory agencies have been granted and become final and all
statutory waiting periods have expired or been terminated. The Closing shall
be effective as of 12:01 a.m. Memphis time on the day following the Closing
(the "Effective Time"). The Closing shall be held at a time and place mutually
agreeable to the parties.

5.03 Closing Expenses. Purchaser and Seller each will
pay all of their respective expenses in this transaction relating to legal,
accounting and other services. All expenses relating to notification of
depositors of the transactions contemplated hereby and the printing and
exchange of customer checks will be paid by Purchaser. Purchaser shall pay all
printing expenses relating to the S-4 Registration Statement. Purchaser will
pay all recording fees and taxes relating to the conveyance of real property
conveyed to Purchaser pursuant to this transaction and of all recording or
filing fees incurred in connection with the recording or filing of instruments
which Purchaser determines are reasonably necessary to perfect, or maintain the
perfection of, its interest in any collateral securing indebtedness which
Purchaser acquires pursuant to the transactions contemplated hereby. Purchaser
will pay the cost of title insurance relating to such real property if any such
insurance is obtained. Purchaser and Seller will each bear their own fees
charged by state and federal regulatory agencies with respect to the review for
approval of the transactions contemplated hereby.

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<PAGE> 19

ARTICLE VI

Representations and Warranties of Seller

Seller represents and warrants to Purchaser as follows:

6.01 Corporate Organization; Capitalization. Seller is a
state banking corporation duly organized, validly existing and in good standing
under the laws of the State of Tennessee. Seller has no subsidiaries. As of
the date of this Agreement, the authorized capital stock of the Seller consists
of 10,000,000 shares of Seller Common Stock, of which 4,787,552 shares are
issued and outstanding. All issued and outstanding shares of Seller Common
Stock are validly issued, fully paid and nonassessable. As of the date of this
Agreement, there are also outstanding options to purchase 500,000 shares of
Seller Common Stock at an exercise price of $0.32 per share (the "Seller
Options"). Except as set forth above, there are no outstanding (i) securities
convertible into or exchangeable for Seller Common Stock; (ii) options,
warrants or other rights to purchase or subscribe to Seller Common Stock or any
other capital stock of the Seller or securities convertible into or
exchangeable for capital stock of the Seller; or (iii) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance
of any capital stock of the Seller, any such convertible or exchangeable
securities or any such options, warrants or rights.

6.02 Corporate Authority. Seller has full corporate
right, power, capacity, and authority to enter into and to perform this
Agreement and the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement and the transactions contemplated by
this Agreement by Seller have been duly and validly authorized by all requisite
corporate action, subject to shareholder approval described in Section 8.01,
and, subject to such shareholder approval and regulatory approval described in
Schedule 6.04, this Agreement is binding and enforceable against Seller in
accordance with its terms.

6.03 Title to Property; Condition of Property. Except as
set forth in Part I of Schedule 6.03 hereto and except for property deposited
in safe deposit boxes leased to customers by Seller, Seller owns (i) all of the
Seller Real Property; (ii) all buildings, improvements and fixtures located
thereon; and (iii) all furnishings, equipment and other personal property
located at the Office or used in the ordinary course of Seller's business.
Legal descriptions of all Seller Real Property are set forth on Part II of
Schedule 6.03. Seller has and at Closing will have, good and marketable title
in fee simple to, and at Closing will own outright, subject to no mortgage,
pledge, lien, security interest, leases, charge, encumbrances or conditional
sale or other title retention agreement (except for real estate taxes not yet
due and

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<PAGE> 20

payable and, with respect to the Seller Real Property, easements and rights of
way disclosed in Part III of Schedule 6.03 and other easements and rights of
way which in each case do not materially interfere with the use of the Seller
Real Estate) all of the assets to be purchased by the Purchaser pursuant to
Section 2.01 hereof. Seller does not have any interest in any real estate
other than (x) the Seller Real Property, and (y) interests as trustee, secured
party, lienholder or a similar capacity.

6.04 No Violations or Consents. Subject to the
conditions set forth in Article XI below, the execution, delivery and
performance of this Agreement and the transactions contemplated by this
Agreement: (i) do not and will not violate any provisions of law to which
Seller is subject and do not and will not conflict with or result in the
violation or breach of any condition or provision of, or constitute a default
under, the charter or bylaws of Seller, or any contract, right, lease, pledge,
lien, security interest, instrument, indenture, mortgage, charge, encumbrance,
agreement, order, writ, injunction, decree, or judgment which is binding on
Seller or to which Seller is a party, or to which any of the property or assets
to be purchased hereby is subject; and (ii) will not result in the creation of
any lien, charge, pledge, security interest or other encumbrance upon any of
the assets to be sold to Purchaser pursuant to this Agreement. Except as shown
on Schedule 6.04, no consent, license, approval or authorization of, or
designation, declaration or filing with any governmental authority or other
person or entity is required on the part of the Seller in connection with the
execution, delivery, or performance of this Agreement or the consummation of
the transactions contemplated by this Agreement.

6.05 No Adverse Litigation. Except as set forth on Part
I of Schedule 6.05, there is no investigation, action, arbitration, suit,
proceeding, or claim pending or threatened against Seller with respect to the
assets being purchased hereunder or the liabilities being assumed hereunder,
before or by any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, nor to the knowledge of Seller
does there exist any basis or grounds for any such investigation, action,
arbitration, suit, proceeding or claim. The Seller shall notify Purchaser
promptly of any examination or investigation initiated prior to the Closing
date by any state or federal governmental or regulatory authority, and shall
consult with Purchaser regarding the same to the extent permitted by law.
Except as set forth on Part II of Schedule 6.05, Seller has not received any
notification from any agency or department of federal, state or local
government (i) asserting a violation of any statute or regulation applicable to
the conduct of its business, or (ii) restricting, limiting or threatening to
restrain, or in any other way limit, its operations.

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<PAGE> 21

6.06 Leases. Attached hereto as Schedule 6.06 is a list of
all lease agreements to which Seller is a party. Such schedule does not
include a list of agreements pursuant to which Seller leases, as lessor, safe
deposit boxes located at the Office.

6.07 Status of Loans; Public Filings. Part I of Schedule
6.07 contains (i) a correct and complete list of all loans owned by Seller and
(ii) identifies all loans which, as of the date hereof, are more than ninety
(90) days past due. With respect to each loan being purchased by the
Purchaser, the loan is a valid loan with respect to Seller, and to the
knowledge of Seller, with respect to the borrower thereof; its principal
balance shown on the Seller's books and records is true and correct as to the
last date shown thereon; it was made for good, valuable and adequate
consideration in the ordinary course of business of Seller and, to the best of
Seller's knowledge, except as disclosed on Part II of Schedule 6.07, in
compliance in all material respects with Regulation Z and other applicable
federal and state laws; it is evidenced by notes or other evidences of
indebtedness, which to the best of Seller's knowledge, are true, genuine and
what they purport to be; Seller believes that it represents valid and existing
indebtedness of the maker, borrower or guarantor thereof; Seller believes that
all purported signatures on and executions of any document in connection with
such loan are genuine; to the best of Seller's knowledge, all loan
documentation has been signed or executed by all necessary parties; and Seller
has custody of all documents, or microfilm records (if any) thereof, related to
such loan. Except as described on Part III of Schedule 6.07, no mortgage, deed
of trust, pledge agreement, security interest, or other lien in any way
securing Seller's loans has lapsed or has been terminated. Part IV of Schedule
6.07 identifies all loans secured by a lien or security interest as to which a
UCC-1 financing statement, a deed of trust, or other publicly filed instrument
is of record, and includes an accurate listing of the filing and recording
information with respect to such instrument(s).

6.08 Deposit Insurance. The deposit accounts of Seller
are insured by the FDIC to the maximum extent permitted by the Federal Deposit
Insurance Act, and Seller has paid all premiums and filed all reports required
by the FDIC or by the Federal Deposit Insurance Act with respect to its
deposits.

6.09 Environmental Law. Seller represents and warrants
to Purchaser that (i) to Seller's knowledge, all Seller Real Estate is in
compliance in all material respects with all Applicable Environmental Laws,
(ii) Seller has not received any Environmental Notice with respect to any
Seller Real Property, any other real estate in which Seller has an interest, or
any Environmental Condition, (iii) Seller has not generated, treated, stored,
handled or disposed of Hazardous Substances, except in strict compliance

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<PAGE> 22

with all Applicable Environmental Laws, and has not caused or permitted to
exist, and has no knowledge of the existence of, an Environmental Condition on
any Seller Real Property or any adjacent property.

6.10 Financial Statements. The Seller has heretofore
delivered to Purchaser an unaudited balance sheet of the Seller as of February
28, 1995 and as of December 31, 1994, and statements of income for each of the
periods then ended.

6.11 No Undisclosed Liabilities, Etc. The Seller has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) required to be reflected in the financial statements delivered
pursuant to Section 6.10 which were not fully reflected or reserved against in
such financial statements, except for liabilities and obligations incurred in
the ordinary course of business and consistent with past practice since the
date thereof; and the reserves reflected in such financial statements (if any)
are adequate, appropriate and reasonable and comply with all applicable
regulatory and accounting requirements.

6.12 Absence of Certain Changes. Except as and to the extent
set forth in Schedule 6.12, since February 28, 1995, the Seller has not:

(i) Suffered any material adverse change in its
equity, financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business,
operations or prospects;

(ii) Incurred any liabilities or obligations
(absolute, accrued, contingent or otherwise) except deposits
received in the ordinary course of business and other
non-material items incurred in the ordinary course of business
and consistent with past practice, none of which non-material
items exceeds $5000.00 (counting obligations or liabilities
arising from one transaction or a series of similar
transactions, and all periodic installments or payments under
any lease or other agreement providing for periodic
installments or payments, as a single obligation or liability
but not including deposits), or increased, or experienced any
change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves;

(iii) Paid, discharged or satisfied any claim,
liabilities or obligations (absolute, accrued, contingent or
otherwise) other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past
practice of liabilities and obligations reflected or reserved
against in the

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<PAGE> 23

financial statements delivered pursuant to Section 6.10 or
incurred in the ordinary course of business and consistent
with past practice since the date of such financial
statements;

(iv) Permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be
subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, except for
liens for current taxes not yet due;

(v) Written down the value of any assets or
written off as uncollectible any notes or accounts receivable,
or established or increased any reserve, except for
chargeoffs, write-downs, and write-offs in the ordinary course
of business and consistent with past practice;

(vi) Cancelled any debts or waived any claims or
rights of substantial value;

(vii) Sold, transferred, or otherwise disposed of
any of its properties or assets (real, personal or mixed,
tangible or intangible), except in the ordinary course of
business and consistent with past practice;

(viii) Disposed of any rights to the use of any
patent, trademark, trade name or copyright;

(ix) Granted any general increase in the
compensation of officers or employees (including any such
increase pursuant to any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation
payable or to become payable to any officer or employee, and
no such increase is customary on a periodic basis or required
by agreement or understanding;

(x) Made any single capital expenditure or
commitment in excess of $5000 for additions to property,
plant, equipment or intangible capital assets or made
aggregate capital expenditures and commitments in excess of
$25,000 for additions to property, plant, equipment or
intangible capital assets;

(xi) Declared, paid or set aside for payment any
dividend or other distribution in respect of its capital stock
or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities;

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<PAGE> 24

(xii) Made any change in any method of accounting or
accounting practice;

(xiii) Paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or entered into
any agreement or arrangement with, any of its officers or
directors or any affiliate or associate of any of its officers
or directors except for directors' fees, and compensation to
officers at rates not exceeding the rates of compensation paid
during the year ended 1994; or

(xiv) Agreed, whether in writing or otherwise, to
take any action described in this Section.

6.13 Taxes. The Seller has duly filed all tax reports and
returns required to be filed by it and has duly paid all taxes and other
charges due or claimed to be due from it by federal, state or local taxing
authorities (including, without limitation, those due in respect of the
properties, income, franchises, licenses, sales or payrolls of any of them);
the reserves for taxes reflected in the Seller's financial statements are
adequate; and there are no tax liens upon any property or assets of the Seller
except liens for current taxes not yet due. Copies of all tax returns for the
Seller in respect of all years not barred by the statute of limitations have
heretofore been made available by the Seller to Purchaser. The Seller has not
filed any consent to the application of Section 341(f)(2) of the Code. Except
as disclosed on Schedule 6.13, no tax returns of the Seller have been examined
or audited by the Internal Revenue Service or other governmental taxing
authority, and no extension of time with respect to the filing of any return is
currently in effect. To the knowledge of Seller, no state of facts exists or
has existed which would constitute grounds for the assessment of any tax
liability with respect to the periods for which the applicable statute of
limitations has not passed. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return for
any period.

6.14 Contracts and Commitments. Except as set forth in
Schedule 6.14:

(i) Seller has no agreements, contracts,
commitments or restrictions which are material to its
business, operations or prospects which are not being assumed
by Purchaser hereunder, including employment agreements that
are to be terminated pursuant to Section 4.01(c); and

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<PAGE> 25

(ii) The Seller is not in default, nor is there
any basis for any valid claim of default, under any contract
made or obligation owed by it.

6.15 Agreements in Full Force and Effect. All contracts,
agreements, plans, leases, policies and licenses referred to in the Schedules
hereto are valid and in full force and effect, and true copies thereof have
been heretofore been made available to Purchaser.

6.16 Insurance. Schedule 6.16 contains an accurate and
complete description of all material policies of fire, liability, workers'
compensation and other forms of insurance owned or held by the Seller. All
such policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of the Closing have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy.

6.17 Benefit Plans. Except as set forth on Schedule 6.17,
the Seller has no bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option or any other fringe benefit plan,
arrangement or practice, whether formal or informal. Except as set forth on
Schedule 6.17, the Seller has no commitment, whether formal or informal and
whether legally binding or not, to create any additional such plan or
arrangement.

6.18 Compliance with Law. Except as described on Schedule
6.18, to the best of Seller's knowledge, the operations of the Seller have been
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of all national governmental authorities,
and of all states, municipalities and other political subdivisions and agencies
thereof, having jurisdiction over the Seller. Except as described on Schedule
6.18, the Seller has not received any notification of any asserted present or
past failure by the Seller to comply with such laws, rules or regulations.

6.19 Personnel. Schedule 6.19 sets forth a true and complete
list of:

(a) the names and current salaries of all directors and
elected and appointed officers of the Seller and the number of shares of the
Seller Common Stock owned beneficially or of record, or both, by each such
person;

(b) the wage rates for non-salaried and non-executive
salaried employees of the Seller.

6.20 Insider Interests. No officer or director of Seller has
any material interest in any property, real or personal,

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tangible or intangible, including without limitation, real property, trademarks
or trade names, used in or pertaining to the business of the Seller.

6.21 Proxy Statement and S-4 Registration Statement. When
the S-4 Registration Statement or any post-effective amendment thereto shall
become effective, and on the Mailing Date, and at all times subsequent to such
effective date or Mailing Date up to the date of the Seller Shareholders'
Meeting, the information with respect to Seller set forth in the S-4
Registration Statement and in the Proxy Statement and in all amendments and
supplements thereto: (i) will comply in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder; and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

6.22 True Statements. Neither this Agreement nor any
certificate, document or other information furnished or to be furnished to
Purchaser by or on behalf of Seller pursuant to or in connection with this
Agreement or the transactions contemplated hereunder, contains or will contain
any misstatement of a material fact, or omits or will omit to state a material
fact necessary in order to make the representations and warranties and other
statements herein or therein contained not misleading under the circumstances
in which made.

ARTICLE VII

Representations and Warranties of Purchaser and BancorpSouth

Purchaser and BancorpSouth represent and warrant to Seller as
follows:

7.01 Corporate Organization. Purchaser is a state banking
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. BancorpSouth is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Mississippi and a bank holding company under the Bank Holding Company Act of
1956.

7.02 Corporate Authority. Each of BancorpSouth and Purchaser
has full corporate right, power, capacity, and authority to enter into and to
perform its obligations in this Agreement and the transactions contemplated by
this Agreement. The execution, delivery, and performance of this Agreement by
each of BancorpSouth and Purchaser have been duly and validly authorized by all
requisite corporate action and this Agreement is binding and

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enforceable against BancorpSouth and the Purchaser in accordance with its
terms.

7.03 No Violations or Consents. Subject to the conditions
set forth in Article X below, the execution, delivery, and performance of this
Agreement and the transactions contemplated by this Agreement do not and will
not violate any provisions of law to which Purchaser or BancorpSouth is subject
and do not and will not conflict with or result in the violation or breach of
any condition or provision of, or constitute a default under, any contract,
right, lease, pledge, lien, security interest, instrument, indenture, mortgage,
charge, encumbrance, agreement, order, writ, injunction, decree or judgment to
which Purchaser or BancorpSouth is a party which is binding on Purchaser or
BancorpSouth or to which any of the property or assets of Purchaser or
BancorpSouth is subject. Except as set forth on Schedule 7.03, no consent,
license, approval or authorization of or designation, declaration, or filing
with any governmental authority or other person or entity is required on the
part of Purchaser or BancorpSouth in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement.

7.04 True Statements. Neither this Agreement nor any
certificate, document, or other information furnished or to be furnished to
Seller by or on behalf of Purchaser or BancorpSouth pursuant to or in
connection with this Agreement or the transactions contemplated hereunder
contains or will contain any misstatement of a material fact, or omits or will
omit to state a material fact necessary in order to make the representations
and warranties and other statements herein or therein contained not misleading
under the circumstances in which made.

7.05 Proxy Statement and S-4 Registration Statement. When
the S-4 Registration Statement or any post-effective amendment thereto shall
become effective, on the Mailing Date, and at all times subsequent to such
effective date or Mailing Date, the information with respect to BancorpSouth
and Purchaser set forth in the S-4 Registration Statement and in the Proxy
Statement and in all amendments and supplements thereto: (a) will comply in all
material respects with the provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder; and (b) will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.

7.06 Securities Reports. BancorpSouth has filed all reports,
registrations, and statements, together with any amendments required under the
Exchange Act, all of which as of their respective dates were in full compliance
with the rules and

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<PAGE> 28

regulations of the SEC. The financial statements and schedules included in
such forms and reports, together with the notes thereto, present fairly, in all
material respects, the consolidated financial position of BancorpSouth as of
their respective dates and the consolidated results of operations and changes
in financial position for the periods indicated therein, all in accordance with
generally accepted accounting principles, consistently applied throughout the
periods involved.

ARTICLE VIII

Covenants of Seller

8.01 Shareholders' Meeting. Seller shall call a meeting of
its shareholders in accordance with the applicable provisions of law and its
charter and bylaws for the purpose of considering and voting on this Agreement
and the transactions contemplated hereby (the "Seller Shareholders' Meeting").
The Seller Shareholders' Meeting shall be held as soon as practicable, but in
no event later than 30 days after the S-4 Registration Statement is declared
effective. The board of directors of Seller, consistent with its fiduciary
duties and to the extent permitted by law, shall use its best efforts to
solicit the requisite vote for approval of the Agreement and any related
actions by the shareholders of Seller and shall recommend to such shareholders
that they approve the Agreement and any related actions.

8.02 Information. Seller shall furnish to Purchaser and
BancorpSouth all information concerning Seller reasonably required for
inclusion in the S-4 Registration Statement, the Proxy Statement, or any
application made by Purchaser or BancorpSouth to any regulatory authority.

8.03 Proxy Preparation and Distribution. Seller shall cause
to be distributed to each holder of record of Seller Common Stock (determined
on the record date), as soon as practicable after the execution of this
Agreement, a proxy statement (the "Proxy Statement"), a notice of meeting, and
a form of proxy to be used in connection with the Seller Shareholders' Meeting,
each to be prepared by Purchaser and BancorpSouth with the assistance of Seller
and to be included in the S-4 Registration Statement. The Proxy Statement
shall be mailed by Seller at least 20 business days prior to the date of the
Seller Shareholders' Meeting. The Proxy Statement shall contain a
recommendation of the board of directors of Seller, subject to their fiduciary
duties, that the Agreement and the transactions contemplated thereby be
approved.

8.04 Conduct of Business Pending Closing. Seller agrees that
from the date of this Agreement to the date of Closing it will:

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<PAGE> 29

(i) use its best efforts to promote the
successful operations of its business and avoid any act that
would materially adversely affect the value of the assets
being purchased by Purchaser hereunder or increase the
liabilities being assumed by Purchaser;

(ii) operate its business only in the ordinary and
usual manner and use all reasonable efforts to preserve intact
its present relations with those having business dealings with
Seller;

(iii) at its expense, maintain all of the property
of Seller in customary repair, order and condition, reasonable
wear and tear excepted;

(iv) maintain its books of account and records
concerning Seller in the ordinary and usual manner, consistent
with prior years;

(v) not take any action which would cause any
representation or warranty to be untrue as if made at the date
of Closing;

(vi) not grant any increases in salary or benefits to
any officer, employee or director except for salary increases
granted in the ordinary course of business in connection with
regularly scheduled salary reviews;

(vii) not declare or pay any dividend or redeem or
retire any shares of Seller Common Stock, or any warrant or
other option to acquire any Seller Common Stock; and

(viii) not sell, transfer, pledge, encumber, assign,
or otherwise dispose of any assets of Seller having a value in
excess of five thousand dollars ($5000.00) other than
purchases and sales of investment securities and federal funds
in the ordinary course of business.

8.05 Diligence and Good Faith. Seller will diligently:

(i) Proceed in good faith in seeking the
satisfaction of all conditions set forth in Article XI below;
and

(ii) Cooperate in good faith with Purchaser in its
seeking the satisfaction of all conditions set forth in
Article X below.

8.06 Preservation of Tax Benefits. Seller shall use its best
efforts to ensure that the transaction contemplated hereby qualifies as a
reorganization under Section 368 of the Code, and

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<PAGE> 30

that the tax benefits attributable to operating losses of the Seller will be
available for the benefit of Purchaser.

8.07 Exercise of Options. Seller shall cause the exercise of
the Seller Options at the exercise price of $0.32 per share.

ARTICLE IX

Covenants of Purchaser and BancorpSouth

9.01 Diligence and Good Faith. Purchaser will diligently:

(i) Proceed in good faith in seeking the
satisfaction of all conditions set forth in Article X below;
and

(ii) Cooperate in good faith with Seller
in its seeking the satisfaction of all conditions set forth in
Article XI below.

9.02 Purchaser's Contact with Customers. Prior to Closing,
Purchaser at its expense may notify the customers of the Seller of the pending
transfer of his, her or its deposit account or safe deposit box. Purchaser
agrees that the form of any notices, letters or other material which Purchaser
wishes to send or give to customers of Seller prior to Closing must be reviewed
and approved by Seller in advance, however, such approval shall not be
unreasonably withheld. Purchaser agrees to use its best efforts to work with
deposit customers of Seller in securing new checks, deposit slips and other
items with the routing and code numbers of Purchaser for use after the Closing
date.

9.03 S-4 Registration Statement and Proxy Statement.
BancorpSouth and Purchaser shall prepare or cause to be prepared, as soon as
practicable after the date of this Agreement, a draft of the S-4 Registration
Statement and the Proxy Statement, to share such draft with Seller so that
Seller can suggest revisions, to cooperate with Seller in finalizing such S-4
Registration Statement (and any amendments thereto), and to use their
respective best efforts to cause the S-4 Registration Statement to become
effective as soon as practicable.

9.04 Access. BancorpSouth shall afford to Seller and to its
accountants, counsel, and other representatives, during normal business hours
and for reasonable periods throughout the period prior to the Closing, the
opportunity to review public filings made by BancorpSouth or Purchaser and to
discuss such reports and other matters relating to the assets, operations,
business, employees,

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revenue, income, condition (financial or otherwise), liabilities, net worth, or
results of operations of BancorpSouth or Purchaser with appropriate officers
and employees of BancorpSouth or Purchaser.

9.05 Issuance of BancorpSouth Common Stock. BancorpSouth
shall take all necessary and appropriate action to ensure that the shares of
BancorpSouth Common Stock issued to Seller as Purchase Consideration are duly
authorized, fully paid and nonassessable, and have been issued in compliance
with all applicable federal and state securities laws relating to the issuance
of such securities under such circumstances.

9.06 Preservation of Tax Benefits. Purchaser shall use its
best efforts to ensure that the transaction contemplated hereby qualifies as a
reorganization under Section 368 of the Code.

ARTICLE X

Conditions Precedent to the Obligations of Purchaser

The obligation of Purchaser to close under this Agreement
shall be subject to the following conditions (all or any of which may be
waived, in whole or part, by the Purchaser):

10.01 Representations and Warranties True. The
representations and warranties made by Seller in this Agreement shall have been
true and correct when made, and shall be true and correct in all material
respects on and as of the date of Closing with the same force and effect as
though such representations and warranties had been made on and as of such
date.

10.02 Obligations Performed. Seller shall have complied
with, performed or satisfied all covenants, obligations and conditions required
by this Agreement to be complied with, performed or satisfied by it on or
before the date of Closing.

10.03 Certificate of Compliance. The President of Seller
shall have executed and delivered to Purchaser a certificate in substantially
the form and substance as the one attached hereto as Exhibit F, dated as of the
date of Closing.

10.04 No Adverse Litigation. No action, suit or proceeding
shall have been instituted or threatened (i) against Seller, by or before any
court or governmental agency, or (ii) against BancorpSouth or Purchaser by any
governmental agency, which in either case seeks to restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, and
which in the opinion of Purchaser or BancorpSouth makes it inadvisable to
proceed to Closing under this Agreement.

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<PAGE> 32

10.05 Opinion of Seller's Counsel. Purchaser shall have
received an opinion of counsel for Seller, in substantially the same form and
substance as the opinion attached hereto as Exhibit G, dated the date of
Closing.

10.06 Approvals. Each of Purchaser and BancorpSouth shall
have obtained the approval of its board of directors in accordance with its
charter and bylaws and in accordance with all applicable law, and shall have
provided Seller with a certificate evidencing such approval. Purchaser and
BancorpSouth shall have obtained from all necessary governmental and regulatory
authorities all necessary consents to, and authorizations and approvals of,
this Agreement and the consummation of the transactions contemplated hereby,
including those set forth on Schedule 7.03. The S-4 Registration Statement
shall have been declared effective. No order suspending the sale of the shares
of BancorpSouth Common Stock in any jurisdiction shall have been issued, and no
proceedings for that purpose shall have been instituted or shall be, to
BancorpSouth's knowledge, contemplated.

10.07 Casualty. The Office and the personal property of
Seller shall not have been adversely affected in any material way by, or
sustained any material loss, whether or not insured, as a result of, any fire,
flood, accident, explosion, strike, labor disturbance, riot, act of God or the
public enemy or other calamity or casualty.

10.08 Condemnation. No proceeding shall have been instituted
or threatened which could result in the condemnation or other taking of a
material portion of the Office or which could materially restrict or impair the
continued use of the Office.

10.09 No Material Adverse Change. There shall not have
occurred any adverse change in the assets, business, operations, employees,
revenue, income, condition (financial or otherwise), liabilities, net worth,
prospects or results of operations of Seller which has resulted in, or could
reasonably be expected to result in, a decrease of ten percent or more of the
stockholders' equity of Seller; provided, however, that neither (i) the
withdrawal of deposits by customers following the notification provided for in
Section 9.02 nor (ii) expenses to be borne by Seller pursuant to Section 5.03,
shall be considered for purposes of the foregoing determination.

10.10 Noncompetition Agreement. Donald E. Russell shall have
entered into a noncompetition agreement with Purchaser, substantially in the
form attached as Exhibit H hereto.

10.11 Seller Options. All Seller options shall have been
exercised, and Seller shall have received the exercise price of $0.32 per share
in cash.

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10.12 Special Warranty Deed; Title Insurance. Purchaser
shall have received a special warranty deed conveying good and marketable fee
simple title to the Office premises to Purchaser subject to no adverse claims
or encumbrances claiming or attaching by or through Seller. Purchaser shall
have received an owner's policy of title insurance, insuring its interest in
the Office premises and subject to no exceptions and qualifications that are
unacceptable to Purchaser.

ARTICLE XI

Conditions Precedent to the Obligations of Seller

The obligation of Seller to close under this Agreement shall
be subject to the following conditions (all or any of which may be waived, in
whole or in part, by Seller):

11.01 Representations and Warranties True. The
representations and warranties made by Purchaser and BancorpSouth in this
Agreement shall be true and correct when made and shall be true and correct in
all material respects on and as of the date of Closing with the same force and
effect as though such representations and warranties had been made on and as of
such date.

11.02 Obligations Performed. Each of BancorpSouth and the
Purchaser shall have complied with, performed or satisfied all covenants,
obligations and conditions required by this Agreement to be complied with,
performed or satisfied by it on or before the date of Closing.

11.03 Certificates of Compliance. The Chief Executive
Officers of Purchaser and BancorpSouth shall each have executed and delivered
to Seller a certificate in substantially the form and substance as those
attached hereto as Exhibits I-1 and I-2 respectively, dated as of the date of
Closing.

11.04 No Adverse Litigation. No action, suit or proceeding
shall have been instituted or threatened (i) against BancorpSouth or Purchaser,
by or before any court or governmental agency, or (ii) against Seller by any
governmental agency, which in either case seeks to restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, and
which in the opinion of Seller makes it inadvisable to proceed to Closing under
this Agreement.

11.05 Opinion of Purchaser's Counsel. Seller shall have
received opinions of counsel for Purchaser and BancorpSouth, dated the date of
Closing, in substantially the same form and substance as the opinions attached
hereto as Exhibits J-1 and J-2.

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<PAGE> 34

11.06 Approvals. Seller shall have obtained the approval of
its board of directors and shareholders in accordance with its charter and
bylaws and in accordance with all applicable law. Seller shall have obtained
from all the necessary state and regulatory authorities all necessary consents
to, and authorizations and approvals of, this Agreement and the consummation of
the transactions contemplated hereby including the regulatory approvals set
forth on Schedule 6.04 hereof. The S-4 Registration Statement shall have been
declared effective. No order suspending the sale of the shares of BancorpSouth
Common Stock in any jurisdiction shall have been issued, and no proceedings for
that purpose shall have been instituted.

11.07 No Material Adverse Change. There shall not have
occurred any adverse change in the assets, business, operations, employees,
revenue, income, condition (financial or otherwise), liabilities, net worth,
prospects or results of operations of BancorpSouth which has resulted in, or
could reasonably be expected to result in, a decrease of ten percent or more of
the stockholder's equity of BancorpSouth.

ARTICLE XII

Termination

12.01 Methods of Termination. This Agreement may be
terminated in any of the following ways:

(a) At or prior to the Closing, by the mutual
consent in writing of Purchaser and Seller;

(b) At the Closing, by Purchaser in writing, if
the conditions set forth in Article X of this Agreement shall
not have been met by the Seller or waived in writing by
Purchaser and BancorpSouth;

(c) At the Closing, by Seller in writing, if the
conditions set forth in Article XI of this Agreement shall not
have been met by Purchaser and/or BancorpSouth or waived in
writing by Seller;

(d) At any time at or prior to the Closing, by
Purchaser or Seller in writing if any opposing party hereto
shall have been in breach of any representation or warranty in
any material respect (as if such representation and warranty
had been made on and as of the date hereof and on the date of
the notice of such breach referred to below), or in breach of
any covenant, undertaking, or obligation contained herein and
such breach has not been cured by the earlier of thirty (30)

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<PAGE> 35

days after the giving of such notice to the breaching party of
such breach or the date of Closing; and

(e) By either party in writing at any time after
any of the regulatory authorities has denied any application
of Purchaser for approval of the transactions contemplated
herein and the time period for all appeals or requests for
reconciliation thereof have run.

12.02 Procedure Upon Termination. In the event of
termination pursuant to Section 12.01 hereof, written notice thereof shall
forthwith be given to the other party, and this Agreement shall terminate upon
receipt of such notice immediately unless an extension is consented to by the
party having the right to terminate. If this Agreement is terminated as
provided herein:

(i) each party will return all documents, work
papers and other materials of the other party relating
to this transaction, whether obtained before or after
the execution hereof, to the party furnishing the same;
and

(ii) All information received by either party
hereto with respect to the business of the other party (other
than information which is a matter of public knowledge or
which has heretofore been or is hereafter published in any
publication for public distribution or filed as public
information with any governmental authority) shall not at any
time be used for any business purpose by such party or
disclosed by such party to third persons.

12.03 Automatic Termination. Unless mutually extended by the
respective Boards of Directors (or any duly authorized Committee of such
Boards) of Purchaser and Seller, and any provision of this Agreement to the
contrary notwithstanding, this Agreement shall terminate, and the purchase,
sale, and assumption contemplated hereby shall be abandoned, automatically and
without action on the part of either party, and, except as set forth in Section
12.02 or as otherwise provided in this Agreement, without liability of either
party to the other party, unless the purchase, sale and assumption contemplated
hereby is consummated on or before November 1, 1995; provided, that if this
transaction cannot be closed on or before November 1, 1995, because of delays
in obtaining approvals or consents from the relevant regulatory authorities,
this deadline shall be extended to such date as the parties hereto may mutually
agree but not beyond May 1, 1996.

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ARTICLE XIII

Indemnifications; Remedies

13.01 Indemnification by Seller. Seller agrees to indemnify
and hold harmless BancorpSouth and Purchaser and their affiliates and their
perspective officers, directors, agents, servants and employees from and
against any and all claims, actions, demands, enforcement proceedings, causes
of action, damages, liabilities, expenses (including reasonable attorney's
fees), costs and fines which may be incurred, suffered, sustained, or paid
arising out of or related to any of the foregoing:

(i) any inaccuracy in any of the representations and
warranties of Seller made in this Agreement or in any
certificate delivered pursuant to this Agreement;

(ii) all claims, proceedings, investigations,
litigation, suits, demands or arbitrations, whether instituted
prior to, on or after the Effective Time, relating to
incidents at, or relating to, events allegedly occurring prior
to the Effective Time (including, without limitation, all tort
claims or claims for alleged violations of applicable
regulations for acts or omissions which allegedly occurred
prior to the Effective Time);

(iii) any breach or nonfulfillment by Seller of its
covenants or agreements set forth in this Agreement;

(iv) except to the extent such items are expressly
assumed by Purchaser hereunder, all of Seller's federal, state
and local taxes (and interest and penalties thereon, if any),
including, without limitation, income taxes, depreciation or
investment tax credit recapture, franchise taxes, sale or use
tax, or FICA, on the assets being purchased by Purchaser or
the liabilities being assumed by Purchaser and arising prior
to the Effective Time or arising from the sale of such assets
or the assumption of such liabilities;

(v) except for such liabilities, indebtedness and
obligation specifically assumed by Purchaser pursuant to this
Agreement, all liabilities, debts, obligations and the like,
of any kind whatsoever, incurred by Seller which may be
asserted against any indemnitee;

(vi) except as otherwise expressly provided in this
Agreement, all expenses, taxes, commissions, charges

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<PAGE> 37

and costs of Seller incident to or arising out of the sale of
the assets; and

(vii) all claims, proceedings, investigations,
litigation, suits, demands or arbitrations, whether instituted
prior to, on or after the Effective Time, relating to any
alleged violation of any Applicable Environmental Laws or to
any Environmental Condition at any Seller Real Property
occurring or existing on or prior to the Effective Time.

13.02 Indemnification by Purchaser. Purchaser agrees to
indemnify and hold harmless Seller and its affiliates and their officers,
directors, agents, servants and employees from and against any and all claims,
actions, demands, enforcement proceedings, causes of action, damages,
liabilities, expenses (including reasonable attorney's fees), costs and fines
which may be incurred, suffered, sustained, or paid arising out of or related
to any of the following:

(i) any inaccuracy in any of the representations
and warranties of Purchaser or BancorpSouth made in this
Agreement or in any certificate delivered pursuant to this
Agreement;

(ii) all claims, proceedings, investigations,
litigation, suits, demands or arbitrations instituted after
the Effective Time relating to incidents at, or relating to,
events allegedly occurring after the Effective Time with
respect to the assets purchased or liabilities assumed by
Purchaser (including , without limitation, all tort claims or
claims for alleged violations of applicable regulations for
acts or omissions which allegedly occurred after the Effective
Time);

(iii) any breach or nonfulfillment by Purchaser of
its covenants or agreements set forth in this Agreement;

(iv) all of Purchaser's federal, state and local
taxes (and interest and penalties thereon, if any), including,
without limitation, income taxes, depreciation or investment
tax credit recapture, franchise taxes, sale or use tax, or
FICA, on the assets being purchased by Purchaser or the
liabilities being assumed by Purchaser and arising after the
Effective Time;

(v) any liability related to a default after the
Effective Time by Purchaser in performance of any lease or
contract assigned to and assumed by Purchaser at the Effective
Time; and

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<PAGE> 38

(vi) except as otherwise expressly provided in this
Agreement, all expenses, taxes, commissions, charges and costs
of Purchaser incident to or arising out of the sale of the
assets.

13.03 Remedies. Notwithstanding the provisions of Sections
13.01 and 13.02, in the event of a breach of this Agreement by a party, the
non-breaching party shall be entitled to seek all legal and equitable remedies
to which such party may be entitled, including specific performance of the
provisions hereof.

ARTICLE XIV

Miscellaneous

14.01 Entire Agreement. This Agreement, including any
exhibits hereto, represents the entire agreement of the parties relating to the
subject matter hereof.

14.02 Modifications and Waivers. This Agreement may not be
modified nor may any condition be waived except by an instrument in writing
duly executed by the party or parties waiving such condition, except that
regulatory approval cannot be waived.

14.03 No Broker or Finder. Purchaser and Seller each
represents and warrants to the other that no broker or finder fees are due or
will become due as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby.

14.04 Survival of Representations and Warranties; Survival of
Letter of Agreement. The representations and warranties set out in this
Agreement shall survive the Closing of the transactions contemplated hereby for
the period of one year from the date of the Closing; provided, that liability
for any untrue or misleading representation shall not exceed $250,000 in the
aggregate. The provisions of the Letter of Agreement, dated March 31, 1995,
between Purchaser and Seller shall survive the execution and delivery of this
Agreement but shall expire upon the Closing.

14.05 Binding Effect. All terms of this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.

14.06 Counterparts. This Agreement is being executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.

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14.07 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by overnight courier of recognized national standing or
mailed by certified mail, return receipt requested, with postage prepaid, to
the other party at its respective address reflected on Exhibit K attached
hereto, and shall be effective when delivered.

14.08 Plain Meaning. Each party hereto, together with its
respective legal counsel, has reviewed this Agreement and negotiated the terms
hereof, and agrees that each provision hereof is to be given its plain meaning.
Each party agrees that if any issue arises as to the meaning or construction of
any word, phrase or provision hereof, that no party shall be entitled to the
benefit of the principles of the construction and interpretation of contracts
or written instruments which provide that any ambiguity is to be construed in
favor of the party who did not draft the disputed word, phrase or provision.

14.09 Time of the Essence. The parties hereto acknowledge
that time is of the essence with respect to the performance of the Agreement.

14.10 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Tennessee applicable to agreements
made and to be performed in Tennessee, without giving effect to principles of
conflicts of law other than those relating to the validity of contractual
choice of law provisions.

14.11 Headings. The headings contained in this Agreement are
for references purposes only and shall not affect the meaning or interpretation
hereof. The use of the singular in this Agreement shall be deemed to include
the plural (and vice versa), wherever appropriate.

14.12 Severability. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement shall remain in effect.

14.13 Public Announcements. The parties hereto agree that
all public announcements relating to this Agreement or to the transactions
contemplated hereby, including announcements to employees, will be made only as
may be agreed upon in advance in writing by the parties hereto.

35
<PAGE> 40

IN WITNESS WHEREOF, Seller, Purchaser and BancorpSouth have
caused this Agreement to be executed by their duly authorized officers as of
the day and year first above written.

ATTEST: SELLER:

/s/ Billy F. Campbell SHELBY BANK
- ----------------------------

By: /s/ Donald E. Russell
-----------------------
Its: President

ATTEST: PURCHASER:

/s/ Sharon A. Cooley VOLUNTEER BANK
- --------------------------

By: /s/
-------------------------
Its: Chairman & C.E.O.

BANCORPSOUTH, INC.
ATTEST:

/s/ Sharon A. Cooley
- ---------------------------
By: /s/
-------------------------
Its: Exec. Vice President

36
<PAGE> 41

AMENDMENT NO. 1 TO
PURCHASE AND ASSUMPTION AGREEMENT

This Amendment No. 1 (the "Amendment") to Purchase and
Assumption Agreement (the "Agreement") made and entered into as of July ___,
1995, among Shelby Bank ("Seller"), a state banking corporation organized under
the laws of the State of Tennessee, Volunteer Bank ("Purchaser"), a state
banking corporation organized under the laws of the State of Tennessee, and
BancorpSouth, Inc., a Mississippi corporation and registered bank holding
company, of which Purchaser is a wholly owned subsidiary ("BancorpSouth").

W I T N E S S E T H:

WHEREAS, Seller and Purchaser are parties to the Agreement and
desire to amend it as set forth herein.

Section 1. Definitions. Unless otherwise defined herein,
capitalized terms used in this Amendment shall have the meanings assigned to
such terms in the Agreement.

Section 2. Amendment of Agreement. (a) Section 1.01 of the
Agreement is hereby amended by deleting the term "Exchange Agent" and its
accompanying definition.

(b) Section 4.06 of the Agreement is hereby restated as
follows:

4.06 Issuance of BancorpSouth Common Stock. (a) At
the Effective Time, holders of certificates evidencing
outstanding shares of Seller Common Stock (each an "Eligible
Seller Shareholder") shall be entitled to receive certificates
representing the number of whole shares of BancorpSouth Common
Stock which such Eligible Seller Shareholder shall be entitled
to obtain according to such Eligible Seller Shareholder's
ratable interest in the Purchase Consideration, and cash
payments in lieu of fractional shares, if any, as provided in
Section 4.06(b) hereof. Shelby Bank share certificates shall be
retained by each Eligible Seller Shareholder, subject to the
Plan of Reorganization.

(b) Notwithstanding any term or provision hereof, no
fractional shares of BancorpSouth Common Stock, and no

<PAGE> 42

certificate or scrip therefor or other evidence of ownership
thereof, will be issued and no fractional shares may be
assigned; no dividend or distribution with respect to
BancorpSouth Common Stock shall be payable on or with respect
to any fractional share interest; and no such fractional share
interest shall entitle the owner thereof to vote or to any
other rights of a shareholder of BancorpSouth. In lieu of
such fractional share interest, any Eligible Seller
Shareholder who would otherwise be entitled to receive as a
result of the Transaction a fractional share of BancorpSouth
Common Stock will be paid the cash value of such fractional
share interest, which shall be equal to the product of the
fractional interest being cashed out multiplied by the Fair
Market Value per share. For the purposes of determining any
such fractional share interests, all shares of Seller Common
Stock owned by each Eligible Seller Shareholder shall be
combined (regardless of whether ownership is registered in
separate lots) so as to calculate the maximum number of whole
shares of BancorpSouth Common Stock issuable to such Eligible
Seller Shareholder. In no event shall BancorpSouth be
obligated to provide aggregate cash compensation for
fractional shares or otherwise, in an amount greater than one
percent (1%) of the total Purchase Consideration, or otherwise
to the extent that such payment would not be in accordance
with Section 368 of the Code or Section 2.07 hereof.

Section 3. Reference to and Effect on Agreement. On and
after the date hereof each reference in the Agreement to "this Agreement,"
"hereunder," "hereof," "herein," or words of like import, and each reference to
the Agreement in the other documents, shall mean and be a reference to the
Agreement as amended hereby. Except as specifically amended above or by
instruments executed concurrently with this Amendment, the Agreement and any
related documents shall remain in full force and effect and are hereby ratified
and confirmed.

Section 4. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.

Section 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.

<PAGE> 43

Section 6. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.

IN WITNESS WHEREOF, Seller, Purchaser and BancorpSouth have
caused this Agreement to be executed by their duly authorized officers as of
the day and year first above written.

ATTEST: SELLER:

SHELBY BANK

By:
- --------------------- -------------------------------
Its:

ATTEST: PURCHASER:

VOLUNTEER BANK

By:
- ---------------------- --------------------------------
Its:

ATTEST: BANCORPSOUTH, INC.

By:
- ---------------------- --------------------------------
Its:

<PAGE> 1

Exhibit 5.1

WALLER LANSDEN DORTCH & DAVIS

NASHVILLE CITY CENTER
511 UNION STREET, SUITE 2100
NASHVILLE, TENNESSEE 37219-1760
(615) 244-6380

FACSIMILES 809 SOUTH MAIN STREET
(615) 244-6804 P. O. BOX 1035
(615) 244-5686 COLUMBIA, TN 38402-1035
(615) 388-6031

July 26, 1995

Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D.C. 20549

Re: BancorpSouth, Inc.
Post-Effective Amendment to
Registration Statement on Form S-4

Ladies and Gentlemen:

We are acting as counsel to BancorpSouth, Inc., a Mississippi
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 (the "Act") of an aggregate of 78,516 shares of the
Company's Common Stock, $2.50 par value per share (the "Shares"), pursuant to a
Post-Effective Amendment to a Registration Statement on Form S-4 (the
"Registration Statement"). We have examined and relied upon such records,
documents and other instruments as in our judgment are necessary and
appropriate in order to express the opinion hereinafter set forth, and have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.

Based upon the foregoing, we are of the opinion that the Shares, when
issued and delivered in the manner and on the terms described in the
Registration Statement (after the Registration Statement is declared
effective), will be duly authorized, validly issued, fully paid and
non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the reference to us under the
caption "Legal Matters" in the prospectus included in the Registration
Statement.

Very truly yours,

Waller Lansden Dortch & Davis

<PAGE> 1
EXHIBIT 23.1

ACCOUNTANTS' CONSENT
--------------------

The Board of Directors
BancorpSouth, Inc.:

We consent to incorporation by reference in the registration statement on
Post-Effective Amendment No. 1 to Form S-4 of BancorpSouth, Inc. of our report
dated January 27, 1995 on the consolidated balance sheets of BancorpSouth, Inc.
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1994, which report appears in the
Annual Report of BancorpSouth, Inc. for the year ended December 31, 1994 and to
the reference to our firm under the heading "Experts" in the Prospectus.

Our report refers to a change in accounting for income taxes to adopt the
provisions of the Financial Accounting Standards Board's SFAS 109 in 1993 and a
change in accounting for securities to adopt the provisions of SFAS 115 in 1994.

KPMG Peat Marwick LLP

Memphis, Tennessee
July 24, 1995

<PAGE> 1
Exhibit 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Shelby Bank
6675 Stage Road
Bartlett, Tennessee 38134

Re: BancorpSouth, Inc. Post-Effective Amendment No. 1 to Form S-4 (the
"Registration Statement")

Gentlemen:

We have issued our independent auditors' report, dated January 31, 1995
(except for Note O, as to which the date is June 16,1995), regarding Shelby
Bank. We hereby consent to the use of such report in the Registration
Statement and to all references to our firm included in or made a part of the
Registration Statement.

Fouts & Morgan
Certified Public Accountants

Memphis, Tennessee
July 26, 1995