1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 14, 1995 --------------------- BancorpSouth, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Mississippi 0-10826 64-0659571 --------------- ---------------- ---------------- (State or Other (Commission File (I.R.S. Employer Jurisdiction of Number) Identification Incorporation) Number) One Mississippi Plaza Tupelo, Mississippi 38801 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (601) 680-2000 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------ (Former name or former address, if changed since last report) ================================================================================ 2 ITEM 5. OTHER EVENTS. As of June 16, 1995, the Registrant and Wes-Tenn Bancorp, Inc., a Tennessee corporation ("Wes-Tenn"), entered into an Agreement and Plan of Merger providing for the merger of Wes-Tenn with and into the Registrant, with the Registrant being the surviving corporation (the "Wes-Tenn Merger"). Simultaneously with the Wes-Tenn Merger, Tennessee Community Bank, a Tennessee banking corporation and wholly-owned subsidiary of Wes-Tenn, will be merged with and into Volunteer Bank, a Tennessee banking corporation and wholly-owned subsidiary of the Registrant ("Volunteer"), with Volunteer being the surviving bank. Each holder of Wes-Tenn common stock will be entitled to receive 0.6296 of a share of the Registrant's common stock (subject to appropriate adjustment in the event of certain occurrences) in exchange for each outstanding share of Wes-Tenn common stock. The closing of the Wes-Tenn Merger is subject to certain conditions, including the approval of the shareholders of Wes-Tenn and the receipt of applicable regulatory approvals or consents, including those of the Federal Deposit Insurance Corporation and the Tennessee Department of Financial Institutions. The parties anticipate closing the Wes-Tenn Merger on or about October 31, 1995. As of May 9, 1995, the Registrant entered into a purchase and assumption agreement with Shelby Bank, a Tennessee banking corporation, whereby Volunteer is to acquire substantially all of the assets, and assume certain liabilities, of Shelby Bank in exchange for an aggregate of up to 78,516 shares of the Registrant's common stock (the "Shelby Purchase"). Shelby Bank operates a general commercial banking business at a single office located in Bartlett, Shelby County, Tennessee and at April 13, 1995 had assets of approximately $24 million. The closing of the Shelby Purchase is subject to certain conditions, including the approval of shareholders of Shelby Bank and the receipt of applicable approvals and consents, including those of the Federal Deposit Insurance Corporation and the Tennessee Department of Financial Institutions. Historical and pro forma financial information - ---------------------------------------------- Filed herewith under Item 7 is certain historical and pro forma financial information required by Regulation S-X for probable acquisitions by the Registrant. Comparative per share data - -------------------------- The following table presents selected comparative unaudited per share data (i) of each of the Registrant and Fist Federal Bank for Savings ("First Federal"), a federally-chartered savings bank with which the Registrant has entered into an agreement and plan of merger (the "First Federal Merger Agreement") providing for the merger of First Federal with and into on a historical basis, (ii) for the Registrant and First Federal on a pro forma basis, (iii) the Registrant, First Federal and other pending acquisitions on a pro forma basis, (iv) First Federal on a pro forma equivalent basis, and (v) First Federal and other pending acquisitions on a pro forma equivalent basis. The other pending acquisitions are the Wes-Tenn Merger and the Shelby Purchase. Book Value Per Share: December 31, 1994 March 31, 1995 ----------------- -------------- The Registrant historical(1) $25.71 $26.33 First Federal historical 17.70 17.92 The Registrant and First Federal pro forma (2) 25.71 26.01 The Registrant, First Federal and other pending acquisitions pro forma(3) 25.00 25.49 First Federal pro forma equivalent(4) 17.95 18.15 First Federal and other pending acquisitions pro forma equivalent(5) 17.45 17.79 Three Months Ended Net Income Per Share: Year Ended December 31 March 31 ---------------------------------- ------------------ 1992 1993 1994 1995 ---- ---- ---- ---- The Registrant historical(1)(7) $2.40 $3.34 $3.11 $0.80 First Federal historical(6) N/A N/A 1.43 0.22 The Registrant and First Federal pro forma(2)(6) N/A N/A 3.10 0.79 The Registrant, First Federal and other pending acquisitions pro form(3)(6) N/A N/A 2.97 0.75 First Federal pro forma equivalent(4)(6) N/A N/A 2.16 0.55 First Federal and other pending acquisitions pro forma equivalent(5)(6) N/A N/A 2.07 0.52 Three Months Ended Cash Dividends Per Share: Year Ended December 31 March 31 ---------------------------------- ------------------ 1992 1993 1994 1995 ---- ---- ---- ---- The Registrant historical(1)(7) $1.02 $1.03 $1.11 $0.30 First Federal historical(6) N/A N/A 0.25 - The Registrant and First Federal pro forma(2)(6) N/A 1.03 1.11 0.30 The Registrant, First Federal and other pending acquisitions pro form(3)(6) N/A N/A 1.11 0.30 First Federal pro forma equivalent(4)(6) N/A N/A 0.77 0.21 First Federal and other pending acquisitions pro forma equivalent(5)(6) N/A N/A 0.77 0.21 - --------------------------- (1) Presented as if the merger between the Registrant and LF Bancorp, Inc.; which was effective March 31, 1995, had been effective throughout the periods presents. (2) Presented as if the mergers between the Registrant and First Federal had been efffective throughout the periods presented. (3) Presented as if the mergers between the Registrant, First Federal and other pending acquisitions had been effective throughout the periods presents. (4) Calculated by multiplying the Registrant value by the quotient calculated by dividing the number of shares of the Registrant's common stock issuable under the Merger Agreement by the number of shares of First Federal common stock outstanding as of the end of the period. (5) Calculated by multiplying the Registrant and other pending acquisitions pro forma value by the quotient calculated by diving the number of shares of the Registrant's common stock issuable under the First Federal Merger Agreement by the number of shares of First Federal common stock outstanding as of the end of the period. (6) Not applicable for periods prior to First Federal's conversion from mutual to stock ownership on October 31, 1993. (7) Does not include the effect of LF Bancorp's net income per share prior to its conversion from mutual to stock ownership on December 30, 1992. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements The following historical financial statements of Wes-Tenn are included herewith: - Wes-Tenn Bancorp, Inc. Consolidated Balance Sheets at March 31, 1995 and Decenber 31, 1994 (unaudited) - Wes-Tenn Bancorp, Inc. Consolidated Statements of Income for the three months ended March 31, 1995 and 1994 (unaudited) - Wes-Tenn Bancorp, Inc. Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and 1994 (unaudited) - Wes-Tenn Bancorp, Inc. Notes to Consolidated Financial Statements - Independent Auditors' Report - Wes-Tenn Bancorp, Inc. Consolidated Balance Sheets at December 31, 1994 and 1993 - Wes-Tenn Bancorp, Inc. Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992. - Wes-Tenn Bancorp, Inc. Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992 - Wes-Tenn Bancorp, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 2 3 - Wes-Tenn Bancorp, Inc. Notes to Consolidated Financial Statements (b) Pro forma financial information The following pro forma financial statements are included herewith in connection with the Wes-Tenn Merger and the Shelby Purchase: - Pro Forma Condensed Consolidated Balance Sheet at March 31, 1995 (unaudited) - Pro Forma Condensed Consolidated Statements of Income for the three months ended March 31, 1995 and 1994 (unaudited) - Pro Forma Condensed Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992 (unaudited) (c) Exhibits 23.1 Consent of KPMG Peat Marwick LLP 3 4 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS 4 5 WES-TENN BANCORP, INC. CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) MARCH 31, DECEMBER 31, 1995 1994 ---------- ------------ ASSETS Cash and due from banks $ 7,261 $ 7,965 Interest bearing deposits with banks 3,981 4,318 Federal funds sold 0 3,275 Securities, available for sale 41,266 41,861 Securities, held to maturity 49,190 46,189 Stock in Federal Home Loan Bank 1,621 1,595 -------- -------- Total securities 92,077 89,645 -------- -------- Loans, net of unearned interest 186,813 176,926 Less: Allowance for losses (2,616) (2,588) -------- -------- Loans, net 184,197 174,338 -------- -------- Bank premises and equipment, net 4,196 4,108 Other real estate 171 321 Accrued interest receivable 2,905 2,434 Other assets 1,273 1,264 -------- -------- Total assets $296,061 $287,668 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Demand deposits $ 60,360 $ 73,804 Savings deposits 32,105 33,610 Time deposits 150,049 130,692 -------- -------- Total deposits 242,514 238,106 -------- -------- Federal funds purchased 3,225 0 Federal Home Loan Bank advances 19,095 19,388 Other borrowed money 1,808 2,327 Accrued interest payable 1,397 1,225 Other liabilities 1,673 1,490 -------- -------- Total liabilities 269,712 262,536 -------- -------- Stockholders' equity: Capital stock, $1 par value. Authorized 1,000,000 shares; issued and outstanding 601,108 and 591,673 shares in 1995 and 1994, respectively 601 592 Additional paid in capital 11,748 11,532 Retained earnings 16,326 15,727 Net unrealized gains (losses) on available-for-sale securities (419) (825) Treasury stock, at cost (45,994 and 45,758 for 1995 and 1994, respectively) (1,907) (1,894) -------- -------- Total stockholders' equity 26,349 25,132 -------- -------- Total liabilities and stockholders' equity $296,061 $287,668 ======== ======== See accompanying Notes to Consolidated Financial Statements. 5 6 WES-TENN BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME 3 MONTHS 3 MONTHS (in thousands, except for per share amounts) ENDED ENDED (unaudited) 03/31/95 03/31/94 -------------------------- INTEREST INCOME: Loans, including fees $4,221 $3,855 Deposits with banks 53 64 Federal funds sold 14 26 Interest on investments: Taxable 1,079 846 Exempt from federal taxes 340 345 ------ ------ TOTAL INTEREST INCOME 5,707 5,136 ------ ------ INTEREST EXPENSE: Deposits: Demand 343 261 Time, $100,000 and over 316 225 Other time and savings 1,884 1,474 Federal funds purchased 8 0 Federal Home Loan Bank advances 291 147 Other borrowed funds 41 28 ------ ------ TOTAL INTEREST EXPENSE 2,883 2,135 ------ ------ NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 2,824 3,001 Provision for credit losses 118 48 ------ ------ NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,706 2,953 ------ ------ NON-INTEREST INCOME: Service charges on deposits 301 144 Other charges, commissions, and fees 124 115 Security gains (losses), net 0 0 Other operating income 172 133 ------ ------ TOTAL NON-INTEREST INCOME 597 392 ------ ------ NON-INTEREST EXPENSES: Salaries and benefits 1,137 1,069 Occupancy expense, including furniture and fixtures 306 252 Other non-interest expense 732 664 ------ ------ TOTAL NON-INTEREST EXPENSE 2,175 1,985 ------ ------ INCOME BEFORE INCOME TAXES $1,128 $1,360 Applicable income taxes 322 374 ------ ------ NET INCOME $ 806 $ 986 ====== ====== Earnings per share: $ 1.45 $ 1.80 ====== ====== PRO-FORMA INCOME STATEMENT AMOUNTS: (SEE FOOTNOTES) Total interest income $6,429 5,839 ====== ====== Total interest expense $3,286 2,443 ====== ====== Net interest income $3,143 3,396 ====== ====== Net income $ 892 1,158 ====== ====== Earnings per share $ 1.41 1.84 ====== ====== See accompanying Notes to Consolidated Financial Statements. 6 7 WES-TENN BANCORP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (in thousands) (unaudited) 1995 1994 ------------------------ NET CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 806 $ 986 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of intangible assets 5 5 Depreciation and amortization of premises and equipment 127 86 Net amortization (accretion) of securities (30) (32) Accretion of loan fees and discounts (30) (14) Provision for possible credit losses 118 48 (Gains) losses from disposal of other real estate, including provisions (13) 0 Stock dividends from Federal Home Loan Bank (26) (9) (Increase) decrease in interest receivable (471) (51) Increase (decrease) in interest payable 172 (42) (Gains) losses on sale of securities 0 0 Other, net (87) (6) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 571 971 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in interest bearing deposits with banks 337 1,084 Net (increase) decrease in federal funds sold 3,275 5,100 Purchase of securities (3,641) (9,061) Maturities and calls of securities 1,373 4,228 Proceeds from sales of securities 0 0 Principal payments on mortgage backed securities 554 2,403 Purchases of Federal Home Loan Bank stock 0 (191) Net (increase) decrease in loans (9,947) 467 Capital expenditures for premises and equipment (215) (280) Proceeds from sales of other real estate 163 20 ------- ------- NET CASH USED IN INVESTING ACTIVITIES (8,101) 3,770 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 4,408 (4,567) Proceeds from other borrowed money 0 1,000 Increase in federal funds purchased 3,225 0 Principal payments on FHLB advances and other borrowed money (812) (832) Cash dividends paid (207) (164) Exercise of stock warrants 231 0 Purchase of outstanding stock warrants (6) 0 Purchase of treasury stock (13) 0 ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 6,826 (4,563) ------- ------- NET INCREASE IN CASH AND DUE FROM BANKS (704) 178 CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 7,965 10,056 ------- ------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 7,261 $10,234 ======= ======= See accompanying Notes to Consolidated Financial Statements. 7 8 WES-TENN BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles and prevailing practices within the banking industry. Wes-Tenn Bancorp, Inc. (the "Company") is a one bank holding company for Tennessee Community Bank (the "Bank"), and is engaged in the business of banking and bank related activities. The Bank has two wholly-owned subsidiaries; TC Finance, a consumer finance company, and West Tennessee Life Insurance Company, a credit life insurance company. The Bank is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory agencies. The accompanying financial statements for all periods presented include the accounts and transactions of the Company, the Bank, and the Bank's wholly owned subsidiaries. All significant inter-company transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three month period ended March 31, 1995, are not necessarily indicative of the results to be expected for the full year. 2. The computation of net income per share is based upon the weighted average number of shares outstanding of 554,035 for the three months ended March 31, 1995, and 547,778 for the three months ended March 31, 1994. 3. On January 1, 1995, the Company adopted Statements of Financial Accounting Standards statements 114, "Accounting by Creditors for Impairment of a Loan" and 118, " Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure". These statements required that impaired loans that are within the scope of the statement be measured on the present value of expected future cash flows, discounted at the loan's effective interest rate or at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The adoption of these statements did not have a material impact on the financial condition or results of operations of the Company. 4. Effective April 3, 1995, the Company acquired 100% of the outstanding stock of West Tennessee Financial Corporation ("WTFC"), a bank holding company owning 100% of Community Bank of West Tennessee ("Community Bank"), and WTFC and Community Bank were simultaneously merged into the Company and the Bank, respectively. The actual purchase price was approximately $4.4 million in a combination of cash and stock and the acquisition is being accounted for as a purchase for financial reporting purposes. WTFC had total assets of approximately $38 million, stockholders' equity of approximately $3 million and net income for the three months ended March 31, 1995 of approximately $86 thousand, on a historical cost basis. WTFC income amounts have been included in the pro-forma information presented on the consolidated statements of income. 5. The following table summarizes the loan loss experience for the periods indicated: Three months ended March 31, 1995 -------------- (dollars in thousands) Allowance for credit losses, beginning of period .............. 2,588 Provision for credit losses ........ 188 Charge-offs ........................ (155) Recoveries ......................... 65 ----- 2,616 ===== 6. Certain prior period amounts have been reclassified to conform to current period presentation. 8 9 INDEPENDENT AUDITORS' REPORT The Board of Directors Wes-Tenn Bancorp, Inc.: We have audited the accompanying consolidated balance sheets of Wes-Tenn Bancorp, Inc. and subsidiary as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wes-Tenn Bancorp, Inc. and subsidiary at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in note 1 to the financial statements, the Company changed its methods of accounting for income taxes and investments in debt and equity securities in 1993 to adopt the provisions of Financial Accounting Standards Board's Statements of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. KPMG Peat Marwick LLP Memphis, Tennessee February 15, 1995 9 10 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 ASSETS 1994 1993 ---- ---- (in thousands) Cash and demand balances with banks (note 3) $ 7,965 10,056 Interest bearing deposits with banks 4,318 6,829 Securities available-for-sale, at fair values (amortized cost of $43,188 in 1994 and $60,845 in 1993) (notes 4 and 9) 41,861 62,530 Securities held-to-maturity (fair value of $44,643 in 1994 and $20,634 in 1993) (notes 4 and 9) 46,189 20,395 Federal funds sold 3,275 6,400 Stock in Federal Home Loan Bank, at cost (note 8) 1,595 778 Loans (notes 5, 8 and 9) 180,971 172,375 Less: Unearned income 4,045 4,158 Allowance for credit losses (note 6) 2,588 2,730 ---------- ------- NET LOANS 174,338 165,487 ---------- ------- Premises and equipment, net (note 7) 4,108 3,364 Other real estate 321 157 Accrued interest receivable 2,434 2,473 Other assets (note 12) 1,264 762 ---------- ------- TOTAL ASSETS $ 287,668 279,231 ========== ======= LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS (NOTE 9): Demand: Non-interest bearing $ 22,463 22,355 Interest bearing 51,341 36,297 Savings: Other savings 33,610 33,736 Time, $100,000 and over 20,945 21,902 Other time 109,747 125,537 ---------- ------- TOTAL DEPOSITS 238,106 239,827 ---------- ------- Federal Home Loan Bank advances (note 8) 19,388 9,370 Other borrowed money (note 8) 2,327 2,204 Accrued interest payable 1,225 979 Other liabilities (note 12) 1,490 2,175 ---------- ------- TOTAL LIABILITIES 262,536 254,555 ---------- ------- STOCKHOLDERS' EQUITY (NOTE 13): Capital stock, $1 par value. Authorized 1,000,000 shares; issued and outstanding 591,673 and 542,416 shares in 1994 and 1993, respectively 592 542 Surplus 11,532 10,859 Undivided profits 15,727 13,279 Net unrealized (loss) gain on available for sale securities (825) 1,046 --------- ------- 27,026 25,726 Treasury stock - at cost, 45,758 and 30,413 shares, respectively 1,894 1,050 ---------- ------- TOTAL STOCKHOLDERS' EQUITY 25,132 24,676 Commitments and contingencies (note 14) ---------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 287,668 279,231 ========== ======= See accompanying notes to consolidated financial statements. 10 11 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 1994 1993 1992 ---- ---- ---- (in thousands, except per share amounts) INTEREST INCOME: Loans, including fees $15,883 17,205 17,005 Deposits with banks 209 419 727 Federal funds sold 113 166 173 Interest on investments: Taxable 3,364 3,183 2,815 Exempt from federal taxes 1,355 1,383 1,195 ------- ------ ------ TOTAL INTEREST INCOME 20,924 22,356 21,915 INTEREST EXPENSE: Deposits: Demand 1,586 1,411 1,446 Time, $100,000 and over 944 1,017 1,169 Other time and savings 5,747 6,789 8,159 Other borrowed funds 143 126 165 Federal Home Loan Bank advances 734 447 148 ------- ------ ------ TOTAL INTEREST EXPENSE 9,154 9,790 11,087 ------- ------ ------ NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 11,770 12,566 10,828 Provision for credit losses (note 6) 285 1,063 1,008 ------- ------ ------ NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 11,485 11,503 9,820 NON-INTEREST INCOME: Service charges on deposit accounts 727 711 647 Other service charges, commissions and fees 504 504 664 Securities (losses) gains, net (note 4) (163) 144 176 Other 563 582 503 ------- ------ ------ TOTAL NON-INTEREST INCOME 1,631 1,941 1,990 NON-INTEREST EXPENSE: Salaries 3,429 3,173 2,758 Employee benefits (note 11) 877 691 634 Occupancy expense, net of rental income (note 7) 545 539 482 Furniture and equipment expense 659 610 573 Federal insurance premiums 597 571 542 Other 2,433 2,715 2,221 ------- ------ ------ TOTAL NON-INTEREST EXPENSE 8,540 8,299 7,210 ------- ------ ------ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4,576 5,145 4,600 Income taxes (note 12) 1,354 1,683 2,027 ------- ------ ------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 3,222 3,462 2,573 Cumulative effect, at January 1, 1993 of change in accounting for income taxes (note 12) - 50 - ------- ------ ------ NET INCOME $ 3,222 3,512 2,573 ======= ====== ====== Earnings per share (note 13) $ 5.77 6.53 5.18 ======= ====== ====== See accompanying notes to consolidated financial statements. 11 12 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 COMMON PAID-IN UNDIVIDED UNREALIZED TREASURY STOCK SURPLUS PROFITS GAIN (LOSS) STOCK TOTAL ----- ------- ------- ----------- ----- ----- (in thousands) Balances, January 1, 1992 480 9,890 8,280 - (1,792) 16,858 Cash dividends declared ($1.04 per share) - - (499) - - (499) Stock issuance (note 2) 35 359 - - 1,792 2,186 Conversion of warrants (note 13) 3 59 - - - 62 Net change in unrealized losses on marketable equity securities - - 53 - - 53 Purchase of treasury stock - - - - (43) (43) Net income - - 2,573 - - 2,573 ---- ------ ------ ------- ------ ------ Balances, December 31, 1992 518 10,308 10,407 - (43) 21,190 Cash dividends declared ($1.26 per share) - - (640) - - (640) Conversion of warrants (note 13) 24 576 - - - 600 Purchase of treasury stock - - - - (1,007) (1,007) Purchase of stock warrants - (25) - - - (25) Impact at December 31, 1993, of change in accounting for securities, net of taxes of $640 (notes 1 and 4) - - - 1,046 - 1,046 Net income - - 3,512 - - 3,512 ---- ------ ------ ------- ------ ------ Balances, December 31, 1993 542 10,859 13,279 1,046 (1,050) 24,676 Cash dividends declared ($1.48 per share) - - (774) - - (774) Conversion of warrants (note 13) 50 1,157 - - - 1,207 Purchase of treasury stock - - - - (844) (844) Purchase of stock warrants - (484) - - - (484) Change in market valuation of securities available-for-sale net of taxes of $(1,141) (note 4) - - - (1,871) - (1,871) Net income - - 3,222 - - 3,222 ---- ------ ------ ------- ------ ------ Balances, December 31, 1994 $592 11,532 15,727 (825) (1,894) 25,132 ==== ====== ====== ====== ====== ====== See accompanying notes to consolidated financial statements. 12 13 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 1994 1993 1992 ---- ---- ---- (in thousands) NET CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,222 3,512 2,573 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of intangible assets 20 25 33 Depreciation and amortization of premises and equipment 445 408 314 Net (accretion) amortization of investment securities and mortgage-backed securities (30) 120 (402) Accretion of loan fees and discounts (122) (163) (142) Provision for possible credit losses 285 1,063 1,008 Provision for possible real estate losses 36 - 3 Decrease (increase) in trading securities, net - 2,019 (2,019) Stock dividends from Federal Home Loan Bank (62) (35) (20) Decrease in interest receivable 39 161 167 Increase (decrease) in interest payable 246 (51) (383) Losses (gain) on sale of investment securities 163 (43) (88) Other, net (104) 325 798 --------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,138 7,341 1,842 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of real estate owned 190 677 798 Net decrease in federal funds sold 3,125 3,475 325 Purchase of securities held-to-maturity (28,265) (50,286) (37,577) Purchases of securities available-for-sale (5,936) - - Maturities of securities held-to-maturity 2,268 22,765 8,121 Maturities of securities available-for-sale 5,533 - - Proceeds from sales of securities available-for-sale 13,072 - - Proceeds from sales of securities - 8,461 12,123 Principal payments on mortgage-backed securities, held-to-maturity 432 5,225 1,265 Principal payments of mortgage-backed securities, available-for-sale 4,625 - - Net increase in loans (9,365) (4,598) (9,101) Capital expenditures for premises and equipment (1,189) (280) (183) Purchase of stock in FHLB (755) - - Proceeds from sale of premises and equipment - - 11 --------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES $ (16,265) (14,561) (24,218) --------- -------- -------- (Continued) 13 14 WES-TENN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS 1994 1993 1992 ---- ---- ---- (in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in deposits $ (1,721) (1,367) 17,363 Proceeds from other borrowed money 1,325 1,525 580 Principal payments on other borrowed money (1,202) (1,609) (1,503) Cash dividends paid (774) (640) (499) Purchase of treasury stock (844) (1,007) (43) Purchase of stock warrants (484) (25) - Proceeds from FHLB advances 16,000 6,500 1,500 Principal repayment on FHLB advances (5,982) (244) (218) Net proceeds from warrant conversion 1,207 600 2,248 --------- ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 7,525 3,733 19,428 --------- ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (4,602) (3,487) (2,948) Cash and due from banks at the beginning of the period 16,885 20,372 23,320 --------- ------- ------- Cash and due from banks at the end of the period $ 12,283 16,885 20,372 ========= ======= ======= SUPPLEMENTAL DISCLOSURES: Interest paid $ 8,908 9,841 11,470 Income taxes paid 1,251 1,776 1,459 Increase in other real estate due to foreclosures of loans 351 200 417 Net change in unrealized losses on marketable equity securities - - 53 Net change in market valuation of securities available-for-sale, net of deferred taxes of $(1,141) and $640 in 1994 and 1993, respectively (1,871) 1,046 - ========= ======= ======= See accompanying notes to consolidated financial statements. 14 15 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994, 1993 AND 1992 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of Wes-Tenn Bancorp, Inc. and subsidiary (the Company) are prepared in conformity with generally accepted accounting principles and prevailing practices within the banking industry. Management of the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and income and expenses for the periods reported. The Company, a one-bank holding company, is engaged in the business of banking and bank-related activities. The bank subsidiaries are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory agencies. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements. (See note 2.) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Wes-Tenn Bancorp, Inc. and its wholly-owned subsidiary: Tennessee Community Bank (the Bank) and its wholly-owned subsidiaries, Wes-Tenn Mortgage Finance, Inc., TC Finance, Inc. and West Tennessee Life Insurance Company. All significant intercompany accounts and transactions are eliminated in consolidation. SECURITIES At December 31, 1993, the Company adopted SFAS 115, which addresses the accounting and reporting for investments in equity securities with a readily determinable market value and for all investments in debt securities. Under SFAS 115, the Company must classify these securities as either (1) securities held-to-maturity, (2) trading securities or (3) securities available for sale. If management has the positive intent and the Company has ability to hold securities to maturity, they are classified as held-to-maturity and are recorded (Continued) 15 16 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS at cost adjusted for amortization of premiums and accretion of discounts. Securities bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings. Securities not classified as either held-to-maturity or trading securities are classified as securities available-for-sale and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported net of tax as a separate component of stockholders' equity until realized. Amortization of premiums and accretion of discounts are recorded using the interest method. Gains or losses from the sale of securities are recorded in non-interest income using the specific identification method. Prior to the adoption of Statement 115, the Company classified its marketable equity securities at the lower of cost or market, with a valuation allowance for unrealized losses established as a charge against stockholders' equity. Securities purchased with the intention of recognizing short-term profits were placed in a trading account and carried at market value. All other securities were carried at historical cost, adjusted for the (Continued) 16 17 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS amortization of premiums and accretion of discounts. When the Company's intent was to sell a security prior to maturity, it was deemed held for sale and carried at the lower of cost or market. There were no such securities identified at December 31, 1992. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation. Provisions for depreciation are computed using the straight-line method for buildings and accelerated methods for furniture and equipment over the estimated useful life of the assets. Costs of major additions and improvements are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses is maintained at a level considered adequate by management to absorb potential losses in the loan portfolio. The provision for credit losses is based on management's evaluation of the loan portfolio. Factors considered in management's evaluation are current and anticipated future economic conditions, previous loan loss experience, industry concentrations, and the overall quality of the loan portfolio. While management uses available information to recognize losses, future additions to the allowance 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 allowances for losses. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. INCOME RECOGNITION ON LOANS Loans are reported at the principal amount outstanding, net of unearned income and the allowance for credit losses. Unearned income on installment loans is amortized using methods which approximate the interest method. Management does not accrue interest on loans when it is determined that the borrower is unable 17 18 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to meet his contractual obligation or where interest or principal is 90 days or more past due, unless the loan is adequately secured and in process of collection. A loan may be designated as partially accruing when the rate of interest has been reduced because the borrower has experienced financial difficulties. Interest income on such loans is recognized at the reduced interest rate. Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a yield adjustment to the related loans, generally over the contractual life of the loans. RETIREMENT PLANS The Company has a discretionary profit-sharing plan covering substantially all employees with more than one year of service. (Continued) 18 19 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INCOME TAXES In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted Statement 109 and the cumulative effect of that change in the method of accounting for income taxes in the 1993 consolidated statement of income was a benefit of $50,000. Pursuant to the deferred method under APB Opinion 11, which was applied in 1992 and prior years, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates. OTHER REAL ESTATE Other real estate is carried at the lower of the recorded investment in the property or its fair value less estimated selling costs. Any loss at foreclosure is charged to the allowance for credit losses. Provisions for operating expenses of such properties and gains and losses on their disposition are included in non-interest expense. (Continued) 19 20 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EARNINGS PER SHARE The computations of earnings per share in each year is based on the weighted average number of shares outstanding during the year adjusted for dilutive stock warrants. (See note 13.) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuation in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. (See note 14.) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and demand balances with banks and interest bearing deposits with banks. (Continued) 20 21 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RECENT PRONOUNCEMENTS In May 1993, FASB also issued SFAS 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures. This statement amends SFAS 5, Accounting for Contingencies, and SFAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings, and prescribes the recognition criterion for loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled-debt restructurings (a "restructured loan"). This statement is effective for financial statements issued for fiscal years beginning after December 15, 1994. The Company's adoption of this statement is not expected to have a material impact on its financial position or results of operation. During 1994, the Company adopted SFAS No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. This statement amends SFAS statements No. 105, Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk, and No. 107, Disclosure about Fair Value of Financial Instruments. This statement requires specific disclosures on derivatives for financial instruments. RECLASSIFICATIONS Certain 1993 and 1992 amounts have been reclassified to conform to 1994 financial statement presentation. (2) BUSINESS COMBINATION - CONVERSION AND MERGER On September 27, 1991, the Company and Tri-County Federal Savings Bank (Tri-County) reached a definitive Restated Agreement and Plan of Reorganization providing for the Company's acquisition of Tri-County simultaneously with Tri-County's conversion from a federal mutual savings bank to a federal stock savings bank. Tri-County received regulatory approval and the merger-conversion was accomplished in February 1992 by the offering of 104,868 shares of the Company's common stock and common stock purchase warrants in exchange for 100% of Tri-County's newly-converted stock. The net proceeds from the issuance and sale of the Company's common stock and common stock purchase warrants, which approximated $2,200,000, was infused as additional capital of Tri-County. The transaction was accounted for as a pooling of interests. Conversion costs of approximately $100,000 were capitalized by Tri-County and will be amortized over a five-year period. All other costs of the (Continued) 21 22 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS offering in the amount of $388,140 were deducted from the proceeds of the shares sold in the conversion. At the time of the conversion, in accordance with regulatory requirements, Tri-County established a liquidation account for the benefit of eligible depositors who continued to maintain their accounts at Tri-County after the conversion in the amount of $3,928,273. The liquidation account will be reduced annually to the extent that eligible depositors have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder's interest in the liquidation account. In the event of a complete liquidation, each eligible depositor will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for each account then held. The liquidation account balance is not available for payment of dividends. At December 31, 1994, the liquidation balance had been reduced to a balance of $224,992. Prior to the merger, Tri-County's fiscal year end was September 30. Accordingly, its results are included as of that date for fiscal year 1992. In conjunction with Tri-County's merger with Tennessee Community Bank in 1993, the results of operations for the former Tri-County for the period October 1, 1992 to December 31, 1992 are included with the result of operations for the period ended December 31, 1993. (Continued) 22 23 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (3) REQUIRED CASH BALANCES Aggregate average daily reserves of $2,078,000 were maintained at December 31, 1994 to satisfy federal regulatory requirements. (4) SECURITIES The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale and held-to-maturity securities by major security type at December 31 were as follows: 1994 -------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- (in thousands) Available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $17,058 8 1,245 15,821 Obligations of state and political subdivisions 14,833 264 22 15,075 Other securities 362 14 - 376 Mortgage-backed securities 10,935 7 353 10,589 ------- ----- ----- ------ Totals $43,188 293 1,620 41,861 ======= ===== ===== ====== Held-to-maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies 29,854 117 927 29,044 Obligations of state and political subdivisions 10,431 7 361 10,077 Mortgage-backed securities 5,904 - 382 5,522 ------- ----- ----- ------ Totals $46,189 124 1,670 44,643 ======= ===== ===== ====== (Continued) 23 24 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1993 -------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- (in thousands) Available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $25,669 402 73 25,998 Obligations of state and political subdivisions 16,971 1,109 - 18,080 Other securities 264 46 2 308 Mortgage-backed securities 17,941 217 14 18,144 ------- ----- -- ------ Totals $60,845 1,774 89 62,530 ======= ===== == ====== Held-to-maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies 9,764 59 24 9,799 Obligations of state and political subdivisions 7,251 163 22 7,392 Mortgage-backed securities 3,380 83 20 3,443 ------- ----- -- ------ Totals $20,395 305 66 20,634 ======= ===== == ====== (Continued) 24 25 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Maturities of securities classified as available-for-sale and held-to-maturity were as follows at December 31, 1994 (expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties): ESTIMATED AMORTIZED FAIR COST VALUE ---- ----- (in thousands) Available-for-sale: Due in one year or less $ 9,422 9,156 Due after one year through five years 19,613 18,909 Due after five years through ten years 2,884 2,867 Due after ten years 334 340 ------- ------ 32,253 31,272 Mortgage-backed securities 10,935 10,589 ------- ------ $43,188 41,861 ======= ====== Held-to-maturity: Due in one year or less 6,468 6,371 Due after one year through five years 13,829 13,078 Due after five years through ten years 19,988 19,672 ------- ------ 40,285 39,121 Mortgage-backed securities 5,904 5,522 ------- ------ $46,189 44,643 ======= ====== Proceeds from sales of securities available-for-sale during 1994 were approximately $13,072,000. Gross gains of approximately $51,000 and gross losses of approximately $214,000 were realized on those sales. Proceeds from sales of securities during 1993 and 1992 were approximately $8,461,000 and $12,123,000, respectively. Gross gains of approximately $125,000 and $176,000 and gross losses of approximately $82,000 and $88,000 were recognized on those sales during 1993 and 1992, respectively. (Continued) 25 26 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Gross gains of $101,000 and $88,000 were realized during 1993 and 1992, respectively, from sales of trading securities. Securities, including mortgage-backed securities, with a book value of approximately $8,810,000 and $15,582,000 at December 31, 1994 and 1993, respectively, were pledged to secure public deposits and pledged for other purposes as required by law. Investments in general obligations of the State of Tennessee as of December 31, 1994, had a book value of approximately $14,674,000 and a market value of approximately $14,890,000. (Continued) 26 27 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (5) LOANS Loans outstanding at December 31 by major lending classification were as follows: 1994 1993 ---- ---- (in thousands) Commercial and industrial loans $ 6,089 8,139 Real estate: Construction and land development 4,791 3,274 Secured by farmland and improvements 6,108 5,465 Secured by residential properties 100,199 91,674 Other real estate loans 16,962 13,078 Loans to individuals for household, family and other personal expenditures 37,677 40,838 Agricultural loans 4,683 5,514 All other loans 417 235 -------- ------- TOTAL LOANS, NET OF UNEARNED INCOME 176,926 168,217 Allowance for credit losses (2,588) (2,730) -------- ------- NET LOANS $174,338 165,487 ======== ======= The above table reflects loans net of unearned income. The amount of unearned discount remaining is approximately $4,045,000 and $4,158,000 at December 31, 1994 and 1993, respectively. Nonaccrual and restructured loans totaled approximately $220,000 and $375,000 at December 31, 1994 and 1993, respectively. The effect on income before income taxes had interest been earned at the contractual rates on these loans as compared to the actual amount earned was immaterial for 1994 and 1993. There were no commitments to lend additional funds to borrowers whose loans are classified as nonaccrual or restructured. (6) ALLOWANCE FOR CREDIT LOSSES A summary of changes in the allowance for credit losses for the years ended December 31 is as follows: (Continued) 27 28 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1994 1993 1992 ---- ---- ---- (in thousands) Balance at beginning of year $2,730 2,362 1,892 Provision charged to operating expenses 285 1,063 1,008 Deductions: Loans charged-off (697) (877) (858) Recoveries 270 182 320 ------ ----- ----- Net charge-offs (427) (695) (538) ------ ----- ----- Balance at end of year $2,588 2,730 2,362 ====== ===== ===== (Continued) 28 29 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) PREMISES AND EQUIPMENT Premises and equipment and accumulated depreciation thereon at December 31 are as follows: ESTIMATED USEFUL LIVES - YEARS 1994 1993 ------------- ---- ---- (in thousands) Land $ 456 381 Buildings 10-40 3,732 3,732 Furniture and equipment 3-7 2,683 1,814 ------ ----- TOTAL 6,871 5,927 Accumulated depreciation 2,763 2,563 ------ ----- PREMISES AND EQUIPMENT, NET $4,108 3,364 ====== ===== Depreciation expense on premises and equipment for the years ended December 31, 1994, 1993 and 1992 was approximately $445,000, $408,000 and $314,000, respectively. (8) FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWED MONEY Borrowings consisted of the following at December 31: 1994 1993 ---- ---- (in thousands) Advances from Federal Home Loan Bank of Cincinnati with stated rates from 5.65% to 8.95% maturing from February 1, 2006 to November 1, 2013 $19,388 9,370 ======= ===== Open line of credit with a commercial bank, with an interest rate of 8.5%. Total available credit of $2,800,000. Interest due quarterly, principal annual through April 2003 1,330 830 Series 1 collateralized mortgage obligation bonds of Wes-Tenn Mortgage Finance, Inc.; secured by mortgage-backed securities with carrying values of $1,030,000 and $1,363,000 at December 31, 1994 and 1993, respectively. Interest is payable quarterly at a variable rate with a maximum rate of 12%. The average rate paid was 5.7% and 4.2% for 1994 and 1993, respectively. The bonds mature July 25, 2017 889 1,201 Other 108 173 ------- ----- TOTAL OTHER BORROWED MONEY $2,327 2,204 ======= ===== FHLB advances are secured by the stock of the FHLB and certain real estate loans of the Company totaling approximately $29,082,000 at December 31, 1994. (Continued) 29 30 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (9) FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments (SFAS No. 107) requires that the Company disclose estimated fair values for its financial instruments. See note 14 for a discussion of the Company's off-balance sheet financial instruments whose fair values are estimated to be equal to their carrying value. The fair value of most investments and mortgage-backed securities is estimated based on market prices or dealer quotes. See "Note 4: Securities" for market values. The following table presents fair value information for financial instruments shown in the Company's balance sheet for which no market exists. The fair values for these financial instruments were calculated by discounting expected cash flows using the information presented. Because no market exists for these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold. 1994 ----------------------------------------------------------------- ESTIMATED CALCULATED CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE AMOUNT YIELD MATURITY RATE (*) AMOUNT ------ ----- -------- -------- ------ (in thousands) Commercial and industrial loans $ 6,089 10.03% 27 months 9.50% $ 6,099 Real estate: Construction and land development 4,791 8.42 3 months 9.50 4,740 Secured by farmland and improvements 6,108 9.09 8 months 9.50 6,076 Secured by residential properties 100,199 8.33 110 months 9.50 98,858 Other real estate loans 16,962 8.78 7 months 9.50 16,792 Loans to individuals for household, family and other personal expenditures 37,677 10.55 29 months 9.88 40,232 Agricultural loans 4,683 9.47 11 months 9.50 4,680 All other loans 417 8.20 20 months 9.50 306 Time deposits 130,692 4.95 8 months 5.52 130,275 Federal Home Loan Bank Advances 19,388 6.19 36 months 6.60 18,185 Other borrowed money 2,327 7.30 59 months 7.30 2,327 (Continued) 30 31 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1993 ----------------------------------------------------------------- ESTIMATED CALCULATED CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE AMOUNT YIELD MATURITY RATE (*) AMOUNT ------ ----- -------- -------- ------ (in thousands) Commercial and industrial loans $ 8,139 8.97% 7 months 8.21% $ 8,175 Real estate: Construction and land development 3,274 8.92 3 months 8.00 3,283 Secured by farmland and improvements 5,465 8.82 8 months 8.08 5,482 Secured by residential properties 91,674 8.35 32 months 7.44 92,598 Other real estate loans 13,078 8.36 4 months 8.00 13,140 Loans to individuals for household, family and other personal expenditures 40,838 11.40 20 months 10.40 41,654 Agricultural loans 5,514 8.88 8 months 8.14 5,527 All other loans 235 8.00 20 months 7.50 238 Time deposits 147,439 4.23 4 months 3.65 147,691 Federal Home Loan Bank Advances 9,370 6.30 59 months 5.45 10,832 Other borrowed money 2,204 6.00 68 months 6.00 2,204 *Management has made estimates of fair value discount rates that it believes to be reasonable. However, because there is no market for these financial instruments, management has no basis to determine whether the rates shown would be indicated in an actual sale. The reader is encouraged to use different discount rates to calculate fair values for the Company's financial instruments if such rates are believed to be more appropriate. (Continued) 31 32 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SFAS No. 107 specifies that fair values should be calculated based on the value of one unit, without regard to any premium or discount that may result from concentrations of ownership of a financial instrument. In addition, SFAS No. 107 does not permit the Company to disclose an estimated fair value for its demand and savings deposits. Such deposits amount to a total of approximately $107,414,000 and $92,388,000 at December 31, 1994 and 1993, respectively, and annually provide funding to the Company at a cost significantly below the cost of borrowing funds in the market. Management believes that the Company's demand and savings deposits as continuing sources of less costly funding provide a significant additional value to the Company that is not reflected above. (Continued) 32 33 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Because no market exists for a significant portion of the Company's financial instruments and because of the inherent imprecision of estimating fair value discount rates for financial instruments for which no market exists and because of the disclosure restrictions imposed by SFAS No. 107, management does not believe that the above information reflects the amounts that would be received if the Company's assets and liabilities were sold. (10) RELATED PARTY TRANSACTIONS From time to time, the Company provides credit to directors and executive officers of the Company and their affiliates. In management's opinion, such transactions are made on substantially the same terms as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectibility or present other unfavorable features. Such loans were approximately $628,000 and $569,000 at December 31, 1994 and 1993, respectively. During 1994, new loans of approximately $104,000 were made, and repayments of approximately $45,000 were received. (11) EMPLOYEE BENEFIT PLANS The Company maintains a non-contributory discretionary profit-sharing plan (the Plan) covering substantially all full-time employees who have completed at least one year of service and have attained the age of 21. Contributions to the Plan which are made at the discretion of the board of directors totaled approximately $210,000 and $195,000 for the years ended December 31, 1994 and 1993, respectively. (12) INCOME TAXES Income tax expense for the years ended December 31 consists of: 1994 1993 1992 ---- ---- ---- (in thousands) Current: Federal $1,140 1,523 1,232 State 290 345 320 ------ ----- ----- Total current 1,430 1,868 1,552 Deferred federal and state (76) (185) 475 ----- ---- ----- Total income tax expense $1,354 1,683 2,027 ====== ===== ===== (Continued) 33 34 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income tax expense for the years ended December 31, 1994, 1993 and 1992 differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as a result of the following: 1994 1993 1992 ---- ---- ---- (in thousands) Computed "expected" tax expense $1,556 1,749 1,564 Increase (reduction) in income taxes resulting from: Tax exempt income (403) (397) (348) State income taxes, net of federal income tax benefit 183 206 260 Statutory bad debt recapture - - 504 Other, net 18 125 47 ------ ----- ----- $1,354 1,683 2,027 ====== ===== ===== For the year ended December 31, 1992, deferred income tax expense resulted from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those timing differences consisted of $504,000 of statutory bad debt recapture and $(29,000) of various other differences. (Continued) 34 35 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1994 and 1993, are presented below (in thousands): 1994 1993 ---- ---- (in thousands) Deferred tax assets: Loans, principally due to allowance for possible loan losses and interest income recognition $ 88 43 Deferred compensation, principally due to accrual for financial reporting purposes 138 149 Unrealized loss on available for sale securities 501 - Other 81 54 ---- ---- Total gross deferred tax assets 808 246 Valuation allowance ( -) ( -) ---- ---- Net deferred tax assets 808 246 ---- ---- Deferred tax liabilities: Investments, principally due to dividends deferred for tax purposes (51) (28) Premises and equipment, principally due to differences in depreciation (131) (140) Unrealized gains on available for sale securities - (640) Other (53) (82) ---- ---- Total deferred tax liabilities (235) (890) ---- ---- Net deferred tax asset (liability) $573 (644) ==== ==== (13) STOCKHOLDERS' EQUITY AND PER SHARE DATA Dividends paid by the Company are provided primarily from dividends received from the subsidiary. Banking regulations limit the amount of dividends that may be paid without prior approval of the agencies which regulate the Bank. The computation of earnings per share in each year was based on the weighted average number of common shares outstanding. Stock warrants which were dilutive, were included as share equivalents using the treasury stock methods. The number of shares used in (Continued) 35 36 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS computing earnings per share was 558,144 and 537,754 and 497,017 in 1994, 1993 and 1992, respectively. Fully diluted earnings per share was not materially different from primary earnings per share for any years presented. The Company had outstanding at December 31, 1994, warrants to purchase approximately 9,600 shares of its common stock. The warrants were issued in 1992 in connection with the Tri-County merger (note 2). Each warrant is exercisable at $24.50 per share, and may be exercised during the periods of May 1 through July 31 of 1992 and 1993 and May 1, 1994 through February 3, 1995. In 1994 and 1993, respectively, 49,257 and 24,508 warrants were exercised and converted to shares of common stock. All outstanding warrants at December 31,1994 were exercised before February 3, 1994. (Continued) 36 37 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In January 1993, the Company filed a tender offering to purchase from existing shareholders up to 60,000 shares of its outstanding common stock for $34.00 per share, and up to 30,000 outstanding warrants for $8.00 per warrant. The offer expired on February 15, 1993 and resulted in the Company repurchasing 21,193 shares of common stock and 3,090 warrants at a total cost of approximately $745,000. The Company purchased an additional 7,440 shares in September 1993. During the fourth quarter of 1994, the Company purchased 15,345 shares of stock at $55 per share and those shares are reflected as treasury shares at December 31, 1994. During the fourth quarter of 1994, the Company also repurchased 15,873 warrants at $30.50 per warrant. (14) COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company has various outstanding commitments to extend credit and standby letters of credit which are not disclosed in the accompanying consolidated financial statements. At December 31, 1994 and 1993, the Company had outstanding approximately $259,700 and $266,700, respectively, in standby letters of credit and commitments to extend approximately $9,986,000 and $6,711,000, respectively, under outstanding lines of credit. In the opinion of management, no significant credit losses will result from these commitments. (15) SUBSEQUENT EVENT - PENDING ACQUISITION On August 30, 1994, a definitive merger agreement was executed between the Company and West Tennessee Financial Corporation (WTFC), a bank holding company. WTFC owns all of the outstanding shares of capital stock of Community Bank of West Tennessee (Community Bank), formerly First Federal Savings and Loan Association, a state chartered commercial bank with its principal office located in Selmer, Tennessee and two additional branches in Hardin County. Pursuant to the merger agreement, WTFC is to be merged with and into the Company, with the Company being the surviving corporation. The shareholders of WTFC common stock, $.01 (Continued) 37 38 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS par value per share, are to receive $51 in cash or .9273 shares of the Company's common stock in exchange for each share of WTFC common stock. As soon as reasonably practical after the merger of WTFC into the Company, Community Bank will be merged into the Bank, with the Bank continuing as the surviving bank. The Company intends to account for the mergers under the purchase method of accounting. At December 31, 1994, WTFC had total assets of $36.2 million. The mergers are subject to the approval of WTFC's shareholders. Management expects this transaction to be consummated on April 3, 1995. (Continued) 38 39 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (16) CONDENSED PARENT COMPANY FINANCIAL INFORMATION Condensed financial information of Wes-Tenn Bancorp, Inc. (parent only) is as follows: CONDENSED BALANCE SHEETS DECEMBER 31 1994 1993 ------- ------ (in thousands) Assets: Cash and demand balances with banks $ 370 32 Investment in subsidiary 26,141 25,519 Other - 3 ------- ------ TOTAL ASSETS $26,511 25,554 ======= ====== Liabilities: Other borrowed money 1,330 830 Other liabilities 49 48 ------- ------ TOTAL LIABILITIES 1,379 878 ------- ------ Stockholders' equity 25,132 24,676 ------- ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,511 25,554 ======= ====== (Continued) 39 40 WES-TENN BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31 1994 1993 1992 ---- ---- ---- (in thousands) Income: Dividends received from subsidiary $ 860 929 699 Other income - - 180 ------ ----- ----- 860 929 879 Expenses 96 156 139 ------ ----- ----- INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 764 773 740 Equity in undistributed earnings of subsidiary 2,458 2,739 1,833 ------ ----- ----- NET INCOME $3,222 3,512 2,573 ====== ===== ===== CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31 1994 1993 1992 ---- ---- ---- (in thousands) Net cash flows from operating activities: Net income $ 3,222 3,512 2,573 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Earnings from subsidiary (3,318) (3,668) (2,532) Dividends received from subsidiary 860 929 699 Other, net (31) 5 229 ------- ------- ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 733 778 969 ------- ------- ------ Cash flows from financing activities: Principal payments on other borrowed money (825) (1,220) (1,060) Proceeds from other borrowed money 1,325 1,525 580 Cash dividends paid (774) (640) (499) Conversion of stock warrants 1,207 600 62 Purchase of treasury stock (844) (1,007) (43) Purchase of stock warrants (484) (25) - ------- ------ ------ NET CASH USED IN FINANCING ACTIVITIES (395) (767) (960) ------- ------ ------ NET INCREASE IN CASH AND DEMAND BALANCES WITH BANKS 338 11 9 Cash and demand balances with banks at the beginning of the year 32 21 12 ------- ------- ------ Cash and demand balances with banks at the end of the year $ 370 32 21 ======= ======= ====== 40 41 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 income for the three months ended March 31, 1995 and 1994 and for the years ended December 31, 1994, 1993 and 1992 for (i) the Registrant (adjusted to include the financial results of LF Bancorp, Inc., which was merged with and into the Registrant on March 31, 1995 and accounted for as a pooling of interests); (ii) the Registrant and First Federal, and (iii) the Registrant, First Federal and other pending acquisitions. The other pending acquisitions are (i) the proposed purchase of substantially all of the assets and assumption of certain liabilities of Shelby Bank; and (ii) the proposed 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 Registrant, First Federal and Wes-Tenn. Pro forma results are not necessarily indicative of future operating results. 41 42 Pro Forma Condensed Consolidated Balance Sheet March 31, 1995 (Unaudited) Historical ------------------------------------------- Other Pending BancorpSouth First Federal Acquisitions(6) Adjustments Pro Forma ------------ ------------- ------------- ----------- --------- ASSETS (In thousands) Cash and due from banks $ 130,745 $ 1,356 $ 15,122 $ 147,223 Held-to maturity securities 499,473 9,288 50,811 559,572 Loans and leases, net 1,834,268 13,880 196,344 2,044,492 Available-for-sale securities 137,738 - 46,353 184,091 Mortgages held for sale 11,180 - - 11,180 Premises and equipment, net 69,524 226 5,371 250 (2) 75,371 Other assets 108,604 287 4,745 1,434 (3) 115,070 ---------- ------- -------- ------ ---------- Total assets $2,791,532 $25,037 $318,746 $1,684 $3,136,999 ========== ======= ======== ====== ========== LIABILITIES Deposits Non-interest bearing $ 319,785 - 64,739 $ 384,524 Interest bearing 2,126,065 22,012 199,159 2,347,236 ---------- ------- -------- ---------- Total deposits 2,445,850 22,012 263,898 2,731,760 Short-term borrowings 31,864 - 3,225 35,089 Long-term debt 47,037 - 19,095 66,132 Other liabilities 36,016 203 4,927 41,146 ---------- ------- -------- ---------- Total liabilites 2,560,767 22,215 291,145 2,874,127 ---------- ------- -------- ---------- STOCKHOLDERS' EQUITY Common stock 22,045 157 3,474 118 (1) (2,677)(4) 3,184 (5) 26,301 Capital surplus 73,782 1,239 14,566 (118)(1) (78)(4) (3,184)(5) 86,207 Unrealized gain (loss) on available-for-sale securities 125 - (605) 186 (4) (294) Retained earnings 135,847 1,426 12,073 4,253 (4) 153,599 Less cost of treasury stock (1,034) - (1,907) (2,941) ---------- ------- -------- ------ ---------- Total stockholders' equity 230,765 2,822 27,601 1,684 262,872 ---------- ------- -------- ------ ---------- Total liabilities and stockholders' equity $2,791,532 $25,037 $318,746 $1,684 $3,136,999 ========== ======= ======== ====== ========== - ---------------------------- (1) Reclassification of capital accounts to reflect the exchange of First Federal Common Stock for BancorpSouth Common Stock. (2) Estimated write-up of premises and equipment acquired from The Shelby Bank. (3) Cost in excess of fair value of net assets acquired from The Shelby Bank. (4) Adjustments to capital accounts to reflect the transaction with The Shelby Bank. (5) Reclassification of capital accounts to reflect the exchange of Wes-Tenn Bancorp Common Stock for BancorpSouth Common Stock. (6) Does not include West Tennessee Financial Corporation ("WTFC"), a bank holding company with total assets of approximately $38 million. WTFC was merged into Wes-Tenn Bancorp effective April 3, 1995 and the transaction was accounted for as a purchase for financial reporting purposes. 42 43 Pro Forma Condensed Consolidated Statements of Income (Unaudited) For the three months ended March 31, -------------------------------------------------------------------------------------------- 1994 1995 --------------------------------------------- --------------------------------------------- BancorpSouth, BancorpSouth, First Federal First Federal BancorpSouth & Other Pending BancorpSouth & Other Pending Historical & First Federal Acquisitions Historical & First Federal Acquisitions BancorpSouth Pro Forma Pro Forma (1) BancorpSouth Pro Forma Pro Forma (1) ------------ --------------- --------------- ------------ --------------- -------------- (In thousands except per share amounts) Interest revenue $42,490 $42,874 $48,331 $52,510 $52,932 $59,041 Interest expense 17,046 17,229 19,491 22,513 22,725 25,810 ------- ------- ------- ------- ------- ------- Net interest revenue 25,444 25,645 28,840 29,997 30,207 33,231 Provision for credit losses 1,064 1,067 1,120 1,176 1,180 1,299 ------- ------- ------- ------- ------- ------- Net interest revenue, after provision for credit losses 24,380 24,578 27,720 28,821 29,027 31,932 Other revenue 4,884 4,943 5,399 7,062 7,094 7,740 Other expense 21,860 22,023 24,334 25,457 25,648 28,138 ------- ------- ------- ------- ------- ------- Income before income tax and accounting change 7,404 7,498 8,785 10,426 10,473 11,534 Applicable income taxes 2,015 2,051 2,422 3,385 3,397 3,716 ------- ------- ------- ------- ------- ------- Net income $ 5,389 $ 5,447 $ 6,363 $ 7,041 $ 7,076 $ 7,818 ======= ======= ======= ======= ======= ======= Earnings per share Primary $ 0.62 $ 0.62 $ 0.62 $ 0.80 $ 0.79 $ 0.75 ======= ======= ======= ======= ======= ======= Fully diluted $ 0.62 $ 0.62 $ 0.62 $ 0.80 $ 0.79 $ 0.75 ======= ======= ======= ======= ======= ======= Average shares Primary 8,733 8,843 10,297 8,801 8,911 10,427 Fully diluted 8,733 8,843 10,297 8,803 8,914 10,430 - ---------------------------- (1) Does not include West Tennessee Financial Corporation ("WTFC"), a bank holding company with total assets of approximately $38 million. WTFC was merged into Wes-Tenn Bancorp effective April 3, 1995 and the transaction was accounted for as a purchase for financial reporting purposes. 43 44 Pro Forma Condensed Consolidated Statements of Income (Unaudited) For the years ended December 31, ------------------------------------------------------------------------------------------------- 1992 1993 --------------------------------------------- ----------------------------------------------- BancorpSouth, BancorpSouth, First Federal First Federal BancorpSouth & Other Pending BancorpSouth & Other Pending Historical & First Federal Acquisitions Historical & First Federal Acquisitions BancorpSouth Pro Forma Pro Forma (2) BancorpSouth Pro Forma Pro Forma (2) ------------ --------------- --------------- ------------ --------------- --------------- (In thousands except per share amounts) Interest revenue $180,285 $182,079 $205,189 $171,035 $172,606 $196,162 Interest expense 79,996 81,056 92,913 68,112 68,925 79,318 -------- -------- -------- -------- -------- -------- Net interest revenue 100,289 101,023 112,276 102,923 103,681 116,844 Provision for credit losses 11,818 11,836 12,924 7,886 7,969 9,047 -------- -------- -------- -------- -------- -------- Net interest revenue, after provision for credit losses 88,471 89,187 99,352 95,037 95,712 107,797 Other revenue 21,105 21,321 23,593 24,027 24,321 26,514 Other expense 82,394 82,949 91,322 84,837 85,457 94,858 -------- -------- -------- -------- -------- -------- Income before income tax and accounting change 27,182 27,559 31,623 34,227 34,576 39,453 Applicable income taxes 6,954 7,101 9,126 8,402 8,533 10,213 -------- -------- -------- -------- -------- -------- Income before accounting change 20,228 20,458 22,497 25,825 26,043 29,240 Accounting change, net of tax - - - 3,380 3,380 3,380 Extraordinary item (284) (284) (284) - - - -------- -------- -------- -------- -------- -------- Net income $ 19,944 $ 20,174 $ 22,213 $ 29,205 $ 29,423 $ 32,620 ======== ======== ======== ======== ======== ======== Earnings per share(1) Primary: Income before accounting change $ 2.43 N/A N/A $ 2.99 N/A N/A Accounting change, net of taxes - - 0.39 - - Extraordinary item (0.03) - - - - - -------- -------- -------- -------- -------- -------- Net income $ 2.40 N/A N/A $ 3.38 N/A N/A ======== ======== ======== ======== ======== ======== Fully diluted: Income before accounting change $ 2.32 N/A N/A $ 2.95 N/A N/A Accounting change, net of taxes - - 0.39 - - Extraordinary item (0.03) - - - - - -------- -------- -------- -------- -------- -------- Net income $ 2.29 N/A N/A $ 3.34 N/A N/A ======== ======== ======== ======== ======== ======== Average shares(1) Primary 8,335 N/A N/A 8,651 N/A N/A Fully diluted 8,731 N/A N/A 8,747 N/A N/A 1994 ----------------------------------------------- BancorpSouth, First Federal BancorpSouth & Other Pending Historical & First Federal Acquisitions BancorpSouth Pro Forma Pro Forma (2) ------------ --------------- --------------- Interest revenue $185,256 $186,868 $209,178 Interest expense 75,102 75,875 85,610 -------- -------- -------- Net interest revenue 110,154 110,993 123,568 Provision for credit losses 5,652 5,662 6,004 -------- -------- -------- Net interest revenue, after provision for credit losses 104,502 105,331 117,564 Other revenue 24,347 24,562 26,387 Other expense 91,671 92,366 101,878 -------- -------- -------- Income before income tax and accounting change 37,178 37,527 42,073 Applicable income taxes 10,876 10,984 12,335 -------- -------- -------- Income before accounting change 26,302 26,543 29,738 Accounting change, net of tax 962 962 962 Extraordinary item - - - -------- -------- -------- Net income $ 27,264 $ 27,505 $ 30,700 ======== ======== ======== Earnings per share Primary: Income before accounting change (1) $ 3.01 $ 3.00 $ 2.88 Accounting change, net of taxes 0.11 0.11 0.09 Extraordinary item - - - -------- -------- -------- Net income $3.12 $3.11 $2.97 ======== ======== ======== Fully diluted: Income before accounting change (1) $ 3.00 $ 2.99 $ 2.88 Accounting change, net of taxes 0.11 0.11 0.09 Extraordinary item - - - -------- -------- -------- Net income $ 3.11 $ 3.10 $ 2.97 ======== ======== ======== Average shares Primary 8,750 8,859 10,313 Fully diluted 8,757 8,867 10,321 (1) N/A - Not applicable for periods prior to First Federal's conversion from mutual to stock ownership on October 1, 1993. (2) Does not include West Tennessee Financial Corporation ("WTFC"), a bank holding company with total assets of approximately $38 million. WTFC was merged into Wes-Tenn Bancorp effective April 3, 1995 and the transaction was accounted for as a purchase for financial reporting purposes. 44 45 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BANCORPSOUTH, INC. By: /s/ Cathy M. Robertson -------------------------------- Cathy M. Robertson First Vice President and Corporate Secretary Date: July 13, 1995 45 46 EXHIBIT INDEX EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBITS NUMBER - ------ ----------------------- ------ 23.1 Consent of KPMG Peat Marwick LLP 46