UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

BANCORPSOUTH, INC.

(Name of Registrant as Specified In Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Mississippi Plaza

201 South Spring Street

Tupelo, Mississippi 38804

 

March 23, 2007

 

TO THE SHAREHOLDERS OF BANCORPSOUTH, INC.

 

On Wednesday, April 25, 2007, at 9:30 a.m. (Central Time), the annual meeting of shareholders of BancorpSouth, Inc. will be held at the BancorpSouth Arena, 375 East Main Street, Tupelo, Mississippi 38804. You are cordially invited to attend and participate in the meeting.

 

Please read our enclosed Annual Report to Shareholders and the attached Proxy Statement. They contain important information about BancorpSouth and the matters to be addressed at the annual meeting.

 

Whether you plan to attend the meeting or not, I urge you to vote your proxy as soon as possible to assure your representation at the meeting. For your convenience, you can vote your proxy in one of the following ways:

 

 

Instructions regarding each method of voting are contained in the Proxy Statement and on the enclosed proxy card. If you attend the annual meeting and desire to vote your shares personally rather than by proxy, you may withdraw your proxy at any time before it is exercised.

 

I look forward to seeing you at this year’s annual meeting.

 

Sincerely,

 

 

AUBREY B. PATTERSON

Chairman of the Board

and Chief Executive Officer

 

Enclosures:

1. Proxy Card and Business Reply Envelope

2. Householding Notice, if applicable

3. Annual Report to Shareholders

 

 

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR PROXY BY INTERNET, TOUCH-TONE TELEPHONE OR BY COMPLETING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD PROMPTLY.

 

One Mississippi Plaza

201 South Spring Street

Tupelo, Mississippi 38804

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To Be Held April 25, 2007

 

TO THE SHAREHOLDERS OF BANCORPSOUTH, INC.

 

The annual meeting of shareholders of BancorpSouth, Inc. will be held on Wednesday, April 25, 2007, at 9:30 a.m. (Central Time) at the BancorpSouth Arena, 375 East Main Street, Tupelo, Mississippi 38804 for the following purposes:

 

(1) To elect four directors;

 

(2) To ratify the Audit Committee’s selection of the accounting firm of KPMG LLP as independent auditors of BancorpSouth, Inc. and its subsidiaries for the year ending December 31, 2007;

 

(3) To approve a proposed amendment to our Restated Articles of Incorporation; and

 

(4) To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof.

 

The Board of Directors has fixed the close of business on March 5, 2007 as the record date for determining shareholders entitled to notice of and to vote at the meeting.

 

By order of the Board of Directors,

 

 

AUBREY B. PATTERSON

Chairman of the Board

and Chief Executive Officer

 

March 23, 2007

 

 

IMPORTANT:

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, TO ASSURE THE PRESENCE OF A QUORUM, PLEASE VOTE YOUR PROXY BY INTERNET, TOUCH-TONE TELEPHONE OR BY COMPLETING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD PROMPTLY. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.

 

 

 

TABLE OF CONTENTS

 

One Mississippi Plaza
201 South Spring Street
Tupelo, Mississippi 38804

 

PROXY STATEMENT

 

This Proxy Statement is furnished in connection with the solicitation of proxies by our Board of Directors, to be voted at our annual meeting of shareholders to be held at the BancorpSouth Arena, 375 East Main Street, Tupelo, Mississippi 38804 on April 25, 2007, at 9:30 a.m. (Central Time), for the purposes set forth in the accompanying notice, and at any adjournments or postponements thereof. This Proxy Statement and the accompanying form of proxy card are first being sent to shareholders on or about March 23, 2007.

 

If your proxy is properly given and not revoked, it will be voted in accordance with the instructions, if any, given by you, and if no instructions are given, it will be voted (i) “FOR” the election as directors of the nominees listed in this Proxy Statement, (ii) “FOR” ratification of the Audit Committee’s selection of the accounting firm of KPMG LLP as independent auditors for us and our subsidiaries for the year ending December 31, 2007, (iii) “FOR” the proposed amendment to our Restated Articles of Incorporation, and (iv) in accordance with the recommendations of our Board of Directors on any other proposal that may properly come before the annual meeting.

 

Shareholders are encouraged to vote their proxies by Internet, touch-tone telephone or completing, signing, dating and returning the enclosed proxy card, but not by more than one method. If you vote by more than one method, only the last vote that is submitted will be counted and each previous vote will be disregarded. Shareholders who vote by proxy using any method before the annual meeting have the right to revoke the proxy at any time before it is exercised by submitting a written request to us or by voting another proxy at a later date. The grant of a proxy will not affect the right of any shareholder to attend the meeting and vote in person. For a general description of how votes will be counted, please refer to the section below entitled “GENERAL INFORMATION — Counting of Votes.”

 

Pursuant to the Mississippi Business Corporation Act and our governing documents, a proxy to vote submitted by Internet or touch-tone telephone has the same validity as one submitted by mail. To submit your proxy to vote by Internet, you need to access the website www.investorvote.com, enter the 6-digit control number found on the enclosed proxy card and follow the instructions on the website. To submit your proxy to vote by touch-tone telephone, call 1-800-652-8683, enter the 6-digit control number on the enclosed proxy card and follow the instructions. You may submit your proxy to vote by Internet or telephone at anytime until 10:59 p.m. (Central Time) on April 24, 2007 and either method should not require more than a few minutes to complete. To submit your proxy to vote by mail, please complete, sign, date and return the enclosed proxy card in the enclosed business reply envelope.

 

If your shares are held in “street name” through a broker, bank or other holder of record, you will receive instructions from the registered holder that you must follow in order for your shares to be voted for you by that record holder. Each method of voting listed above is offered to shareholders who own their shares through a broker, bank or other holder of record. If you provide specific voting instructions, your shares will be voted as you have instructed and as the proxy holders may determine within their discretion with respect to any other matters that may properly come before the annual meeting.

 

The close of business on March 5, 2007 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at this year’s annual meeting. As of such date, we had 500,000,000 authorized shares of common stock, $2.50 par value, of which 82,238,612 shares were outstanding. Each share of our common stock is entitled to one vote. The common stock is our only outstanding voting stock. Holders of a majority of the outstanding shares of our common stock must be present, in person or by proxy, to constitute a quorum for the transaction of business.

 

Our Restated Articles of Incorporation provide that the Board of Directors shall be divided into three classes of as nearly equal size as possible. Directors are elected by a plurality of the votes cast by the holders of shares of common stock represented at a meeting at which a quorum is present. The holders of our common stock do not have cumulative voting rights with respect to the election of directors. Consequently, each shareholder may cast one vote per share for each nominee.

 

Unless a proxy specifies otherwise, the persons named in the proxy shall vote the shares covered by the proxy for the nominees listed below. Should any nominee become unavailable for election, shares covered by a proxy will be voted for a substitute nominee selected by the current Board of Directors.

 

 

The Board of Directors has nominated the four individuals named below under the caption “Class III Nominees” for election as directors to serve until the annual meeting of shareholders in 2010 or until their earlier retirement in accordance with our retirement policy for directors. Our retirement policy for directors provides that a director may not stand for re-election to the Board after reaching his 70^th birthday, unless the Board determines that BancorpSouth would significantly benefit from such director serving another term because of his advice, expertise and influence.

 

At the end of a director’s term, the Board may, in its discretion, re-nominate that director for another term. If the Board does not re-nominate a former director for another term after his 70^th birthday or such person is not re-elected by our shareholders, the person would then serve as a Director Emeritus for a one-year term, and be eligible for re-election as a Director Emeritus by the Board annually. A Director Emeritus does not have the authority of a director and does not meet with the Board, but is given this title in honor of past service.

 

Each nominee has consented to be a candidate and to serve as a director if elected.

 

The following table shows the names, ages, principal occupations and other directorships of the nominees designated by the Board of Directors to become directors and the year in which each nominee was first elected to the Board of Directors:

 

Class III Nominees — Term Expiring in 2010

 

 

Each person named below will continue to serve as a director until the annual meeting of shareholders in the year indicated for the expiration of his term. Shareholders are not voting on the election of the Class II and Class I directors listed below. The following tables show the names, ages, principal occupations and other directorships of each continuing director, and the year in which each was first elected to the Board of Directors:

 

Class II Directors — Term Expiring in 2008

 

 

Class I Directors — Term Expiring in 2009

 

 

 

 

Each of the nominees and continuing directors has had the principal occupation indicated for more than five years unless otherwise indicated. Messrs. Murphy and Nolan are first cousins.

 

Assuming the presence of a quorum, directors will be elected by a plurality of the votes cast by the holders of shares of common stock represented at the annual meeting and entitled to vote. However, pursuant to our Amended and Restated Bylaws, amended as of January 24, 2007, any nominee who receives a greater number of “withheld” votes than “for” votes shall promptly tender his resignation. The Nominating Committee will make a recommendation to the Board of Directors with respect to such offer(s) of resignation and the Board will act on such recommendation within 90 days after the shareholder vote. Any director who tenders his resignation shall not participate in the Nominating Committee recommendation or Board action regarding the resignation.

 

The Board of Directors recommends that shareholders vote
“FOR” each of the Class III nominees.

 

The Audit Committee of the Board of Directors selected the accounting firm of KPMG LLP as independent auditors of BancorpSouth and its subsidiaries for the year ending December 31, 2007 and seeks ratification of the selection by our shareholders. This firm has served as our independent auditors since 1973.

 

In addition to rendering audit services for the year ended December 31, 2006, KPMG LLP performed various other services for us and our subsidiaries. The aggregate fees billed for the services rendered to us by KPMG LLP for the years ended December 31, 2006 and December 31, 2005 were as follows:

 

 

 

 

 

All audit and non-audit services performed by KPMG LLP must be pre-approved by the Audit Committee. The Audit Committee specifically reviews and pre-approves each audit and non-audit service provided by KPMG LLP prior to its engagement to perform such services. The Audit Committee has not adopted any other pre-approval policies or procedures.

 

Shareholder ratification of the Audit Committee’s selection of KPMG LLP as our independent auditors for the year ending December 31, 2007 is not required by our Amended and Restated Bylaws or otherwise. Nonetheless, the Board of Directors has elected to submit the selection of KPMG LLP to our shareholders for ratification. If a quorum is present, approval of this proposal requires the affirmative vote of a majority of the shares of our common stock represented at the meeting and entitled to vote at the annual meeting. If the selection of KPMG LLP as our independent auditors for the year ending December 31, 2007 is not ratified, the matter will be referred to the Audit Committee for further review.

 

Representatives of KPMG LLP will be at the annual meeting, will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions.

 

The Board of Directors recommends that shareholders vote “FOR”
ratification of the selection of KPMG LLP as our independent auditors for 2007.

 

On January 24, 2007, the Board of Directors unanimously adopted a bylaw provision that requires any of our directors who receives a greater number of “withheld” votes than “for” votes in an uncontested election to resign. As a result, a vacancy could arise on the Board if any director fails to receive more “for” votes than “withheld” votes in an election at an annual meeting. Currently, Article 6(a) of our Restated Articles of Incorporation provides that a vacancy “shall be filled by vote of the shareholders and the term of any such director shall be for the balance of the term of the retiring director’s class.” Therefore, any vacancy resulting from a director failing to receive enough “for” votes could not be filled unless a special meeting of shareholders was called to fill the vacancy or until the election at the next annual meeting. To avoid the expense of calling a special meeting of shareholders or waiting until the next annual meeting, the Board of Directors unanimously adopted, subject to shareholder approval, the proposed amendment to our Restated Articles of Incorporation to permit the directors to fill a vacancy on the Board.

 

The proposed amendment to our Restated Articles of Incorporation states that if a vacancy occurs on the Board of Directors for any reason, the Board may fill the vacancy or the Board may instead elect to not fill the vacancy or have the vacancy filled by a vote of the shareholders at a regular or special meeting. The amendment also corrects an error in a statutory reference in Article 9(a) of the Restated Articles of Incorporation. The complete text of the amendment is attached as Appendix A to this Proxy Statement and this summary is qualified in its entirety by reference to Appendix A, which is incorporated herein by reference in its entirety.

 

Based on this amendment, if a vacancy arises because a director fails to receive more “for” votes than “withheld” votes in an uncontested election, the Board could (i) appoint a director to fill the vacancy, (ii) leave the position vacant until the election of directors at the next annual meeting or (iii) call a special meeting for shareholders to vote on another nominee to fill the vacancy. The amendment creates greater flexibility in filling a vacancy than our Restated Articles of Incorporation currently permit. Pursuant to Section 79-4-8.05(d) of the Mississippi Code Annotated, the term of the director that is elected or appointed to fill the vacancy would expire at the next annual meeting of shareholders at which directors are elected.

 

Pursuant to Section 79-4-8.10(a)(2) of the Mississippi Code Annotated, unless the articles of incorporation provide otherwise, either the Board of Directors or the shareholders may fill a vacancy arising on the Board. Management believes that the amendment is closer to the default provision under Mississippi law than our current Restated Articles of Incorporation because the amendment authorizes the Board to determine whether either the Board or the shareholders may fill a vacancy whereas under our current Restated Articles of Incorporation, only the shareholders may fill a vacancy. However, unlike the default statutory provision, the amendment would not permit the shareholders to fill a vacancy unless the Board first authorizes and prompts such action.

 

Although the proposed amendment to the Restated Articles of Incorporation could, under certain circumstances, have an anti-takeover effect, it is not being proposed in response to any effort to obtain control of BancorpSouth. If the amendment is approved and, for example, the shareholders were to cast more “withheld” votes than “for” votes for the director nominees as part of a plan to appoint new directors and/or change the control of BancorpSouth, the remaining directors could appoint their own candidates to fill the resultant vacancies, preventing shareholder nominees from being elected to the Board, whereas under the terms of our current Restated Articles of Incorporation, the shareholders could fill such vacancies with their nominees.

 

Other than the proposed amendment, the Board of Directors does not currently contemplate recommending the adoption of any other amendments to our Restated Articles of Incorporation that could be construed to affect the ability of third parties to take over or change the control of BancorpSouth. Our Restated Articles of Incorporation currently contain other provisions that have an anti-takeover effect, such as provisions creating a classified board of directors and requiring a supermajority vote of shareholders for the approval of certain mergers.

 

Assuming the presence of a quorum, the affirmative vote of the majority of the shares of our common stock represented at the annual meeting and entitled to vote is required to approve the proposed amendment to our Restated Articles of Incorporation.

 

If the proposed amendment to our Restated Articles of Incorporation is approved, we intend to file the amendment shortly after the annual meeting. The amendment to our Restated Articles of Incorporation will be effective immediately upon acceptance of the filing by the Mississippi Secretary of State.

 

The Board of Directors recommends that shareholders vote “FOR”
approval of the proposed amendment to our Restated Articles of Incorporation.

 

During 2006, our Board of Directors held seven meetings. Each director attended at least 75% of the total of all meetings of the Board of Directors and all committees on which such director served, except Mr. Nolan, who attended 71% of the total of all meetings of the Board of Directors and all committees on which he served (but attended 100% of all meetings of the Board of Directors). BancorpSouth encourages its Board members to attend the annual meeting of shareholders. In 2006, all of our directors attended the annual meeting of shareholders.

 

The Board of Directors has established four standing committees — the Executive Committee, the Audit Committee, the Executive Compensation and Stock Incentive Committee and the Nominating Committee. A copy of the charter of each of these committees, except for the Executive Committee, is available on our website at www.bancorpsouthonline.com on our Investor Relations webpage under the caption “Corporate Governance.”

 

The following table shows the current membership of each committee of the Board of Directors:

 

 

Executive Committee.  The Executive Committee acts on behalf of the Board of Directors on all matters concerning the management and conduct of our business and affairs, except those matters enumerated in the Executive Committee Charter and those matters reserved to the Board of Directors under state law. Generally, the Executive Committee meets monthly. The Executive Committee held eight meetings during 2006.

 

Audit Committee.  The Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)58(A) of the Securities Exchange Act of 1934 that is responsible for, among other things:

 

 

This committee’s performance is evaluated annually. The Board of Directors has determined that each member of the Audit Committee is independent under the listing standards of the New York Stock Exchange. Our Board of Directors has also determined that each of Messrs. Kirk and Murphy is an “audit committee financial expert” as defined in regulations adopted by the Securities and Exchange Commission. The Audit Committee held 13 meetings during 2006.

 

Executive Compensation and Stock Incentive Committee.  The Charter of the Executive Compensation and Stock Incentive Committee was amended and restated as of March 21, 2007. Pursuant to this amended and restated charter, the Executive Compensation and Stock Incentive Committee reviews corporate goals and objectives relevant to the compensation of our Named Executive Officers (as identified in the section below entitled “EXECUTIVE COMPENSATION — Summary Compensation Table”), evaluates the performance of our Named Executive Officers and determines the salary, benefits and other compensation of our Named Executive Officers. After consultation with management, this committee makes recommendations to the Board of Directors with respect to the salaries, benefits and other compensation of our executive officers other than the Named Executive Officers. Pursuant to the amended and restated charter, the committee reviews and approves at least annually the compensation paid to non-employee directors and reviews and recommends to the Board for approval in advance all “related person” transactions between us and any of our “related persons.” The committee, or a subcommittee thereof, also administers our 1995 Non-Qualified Stock Option Plan for Non-Employee Directors, as amended and restated, Home Office Incentive Plan, 1994 Stock Incentive Plan, as amended and restated, 1998 Stock Option Plan and Executive Performance Incentive Plan.

 

This committee has the sole authority to retain, at BancorpSouth’s expense, any compensation consultant to assist in the evaluation of executive officer compensation and to approve such consultant’s fees and other retention terms. In addition, the committee also has authority to obtain advice and assistance from internal or external legal, accounting or other advisors as it deems necessary to carry out its duties, at BancorpSouth’s expense, without prior approval of the Board of Directors or management.

 

The activities of this committee must be conducted in accordance with the policies and principles set forth in our Corporate Governance Principles and this committee’s performance is evaluated annually. On occasion, the Chief Executive Officer attends Executive Compensation and Stock Incentive Committee meetings. The Chief Executive Officer provides information to the Executive Compensation and Stock Incentive Committee concerning the executive officers, discusses performance measures relating to executive officer compensation and makes recommendations to the Executive Compensation and Stock Incentive Committee concerning the compensation of the executive officers. The Board of Directors has determined that each committee member is independent under the listing standards of the New York Stock Exchange. This committee held three meetings during 2006.

 

In 2006, the Executive Compensation and Stock Incentive Committee engaged the compensation consulting firm of Watson Wyatt Worldwide to review our compensation programs and provide advice with respect to the aggregate level of our executive compensation as well as the mix of elements used to compensate our executive officers. In addition to its engagement as a consultant to the Executive Compensation and Stock Incentive Committee, Watson Wyatt provided substantial advisory and actuarial services with respect to our pension plans and other employee benefit plans and compensation programs.

 

In performing its services, Watson Wyatt interacted collaboratively with the Executive Compensation and Stock Incentive Committee and senior management. In the past, Watson Wyatt has also provided services that resulted in the addition of equity-based incentives that have been added to our compensation programs to ensure appropriate focus on long-term performance and objectives.

 

Nominating Committee.  The Nominating Committee identifies and recommends to the Board nominees for election to the Board consistent with criteria approved by the Board, and recommends to the Board of Directors nominees for election to the Board and for appointment to its committees. This committee also developed and recommended to the Board of Directors our Corporate Governance Principles. In addition, this committee oversees the evaluation of the Board and management. This committee’s performance is evaluated annually. The Board of Directors has determined that each committee member is independent under the listing standards of the New York Stock Exchange. The Nominating Committee held five meetings during 2006.

 

In order to promote open discussion among the non-management directors, we schedule regular executive sessions in which those directors meet without management participation. Unless a majority of the Board of Directors designates a presiding director, the Chairman of the Nominating Committee, currently Mr. Franklin, presides at these meetings. In addition, an executive session of independent (as defined in the listing standards of the New York Stock Exchange), non-management directors is held at least twice each year.

 

You may send communications to the Board of Directors, the presiding director of the non-management directors, the non-management directors as a group or any individual director by writing to the Board of Directors or an individual director in care of the Corporate Secretary at One Mississippi Plaza, 201 South Spring Street, Tupelo, Mississippi 38804. The Corporate Secretary will directly forward written communications addressed to the entire Board of Directors to the Chairman of the Nominating Committee, written communications addressed to the non-management directors to the non-management directors and all other written communications to the individual director(s) to whom they are addressed.

 

In addition to the committee charters described above, our Corporate Governance Principles and our Code of Business Conduct and Ethics are available on our website at www.bancorpsouthonline.com on our Investor Relations webpage under the caption “Corporate Governance.” These materials, including the committee charters described above, are also available in print to any shareholder upon request. Such requests should be sent to the following address:

BancorpSouth, Inc.

One Mississippi Plaza

201 South Spring Street

Tupelo, Mississippi 38804

Attention: Corporate Secretary

 

The Board of Directors reviews the independence of all directors and affirmatively makes a determination as to the independence of each director on an annual basis. No director will qualify as independent unless the Board of Directors affirmatively determines that the director has no material relationship with BancorpSouth (either directly or as a partner, shareholder or officer of an organization that has a relationship with BancorpSouth). In each case, the Board of Directors broadly considers all relevant facts and circumstances when making independence determinations. To assist the Board of Directors in determining whether a director is independent, the Board of Directors has adopted Director Independence Standards, which are attached as Appendix B to this Proxy Statement and are also available on our website at www.bancorpsouthonline.com on our Investor Relations webpage under the caption “Corporate Governance.” The Board of Directors has determined that each of Messrs. Franklin, Holliman, Kirk, Lashlee, Mitchell, Murphy, Nolan, Partee and Staub, a majority of our Board members, meets these standards as well as the current listing standards of the New York Stock Exchange for independence.

 

The Nominating Committee and our Chief Executive Officer actively seek individuals qualified to become members of our Board of Directors for recommendation to our Board of Directors and shareholders. The Nominating Committee considers nominees proposed by our shareholders to serve on our Board of Directors that are properly submitted in accordance with our Amended and Restated Bylaws. In recommending candidates and evaluating shareholder nominees for our Board of Directors, the Nominating Committee considers each candidate’s qualification regarding independence, as well as diversity of age, ownership, influence and skills such as understanding of financial services industry issues, all in the context of an assessment of the perceived needs of BancorpSouth at that point in time. A copy of our director qualifications is set forth in our Corporate Governance

Principles, which are available on our website at www.bancorpsouthonline.com on our Investor Relations webpage under the caption “Corporate Governance.” The Nominating Committee meets at least annually with our Chief Executive Officer to discuss the qualifications of potential new members of our Board of Directors. After consulting with our Chief Executive Officer, the Nominating Committee recommends the director nominees to the Board of Directors for their approval. We have not paid any third-party fee to assist the Nominating Committee in the director nomination process to date.

 

The table below sets forth certain information, as of January 31, 2007, with respect to the beneficial ownership of common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each director and nominee, (iii) each of our Named Executive Officers identified in the section below entitled “EXECUTIVE COMPENSATION — Summary Compensation Table” and (iv) all of our directors and executive officers as a group. The statute governing Mississippi state banks and our Amended and Restated Bylaws require our directors to hold $200 in par value (i.e., 80 shares) of our common stock. The number of shares of common stock owned by each director reflected in the table includes such shares. We relied on information supplied by our directors, executive officers and beneficial owners for purposes of this table.

 

 

 

 

 

 

 

 

The Executive Compensation and Stock Incentive Committee of the Board of Directors administers our executive compensation program. The Executive Compensation Committee is composed entirely of directors who are independent under the listing standards of the New York Stock Exchange and our Director Independence Standards. These Director Independence Standards and the Charter of the Executive Compensation and Stock Incentive Committee are available on our website at www.bancorpsouthonline.com on our Investor Relations webpage under the caption “Corporate Governance.” The Charter is reviewed annually by the Executive Compensation and Stock Incentive Committee and was most recently revised in March 2007.

 

In performing its duties, among other things the Executive Compensation and Stock Incentive Committee:

 

 

 

 

 

 

 

 

 

 

 

Decisions by the Executive Compensation and Stock Incentive Committee with respect to the compensation of our executive officers, including the Named Executive Officers, are reviewed by the full Board of Directors (excluding directors who are also our employees).

 

Our principal measures of success in achieving our business objectives are an increasing dividend, growth in average deposits and other funding sources, return on average equity, earnings per share growth, our asset quality and our overall market competitive position, as measured against our own internal standards and as compared to a peer group of comparably sized bank holding companies. The variable, performance-based elements of our executive compensation program are designed to reward our executive officers based on our overall performance in achieving defined performance goals relative to these measures.

 

Through our executive compensation program we seek to provide:

 

 

 

 

 

 

Our executive compensation program consists of the following primary elements:

 

 

 

 

 

 

The Executive Compensation and Stock Incentive Committee uses the variable compensation elements of our executive compensation program (i.e., annual incentive compensation and long-term incentive compensation) as incentives that are based on our performance. While increases to annual base salaries also take individual and BancorpSouth performance into consideration, they are not predicated solely on performance achievements and are not subject to the same degree of variability as the performance-based incentives. The variable elements of compensation align with shareholder interests by focusing executives’ attention on key measures of performance that we believe either drive shareholder return or directly reflect our stock price performance.

 

The allocation of compensation across each of the elements of our executive compensation program is based on the following considerations:

 

 

 

 

 

To date, we have not implemented policies or procedures with respect to adjustment or recovery of awards or payments in the event of restatements of our earnings or similar events.

 

The statute governing Mississippi state banks and our Amended and Restated Bylaws require our directors to own common stock of BancorpSouth in an aggregate amount of at least $200 par value (i.e., 80 shares). We do not, however, have any other requirements for minimum stock ownership for our officers or directors. Our Insider Trading Policy prohibits directors, officers and other employees from hedging the economic risk of ownership of any BancorpSouth common stock they own.

 

The Executive Compensation and Stock Incentive Committee generally meets two times a year and more often if necessary. Prior to each regular meeting, the Corporate Secretary sends material to each Executive Compensation and Stock Incentive Committee member, including minutes of the previous meeting, an agenda, recommendations for the upcoming meeting and other materials relevant to the agenda items. All materials are reviewed by the Chief Executive Officer before being sent to committee members. On occasion, the Chief Executive Officer attends Executive Compensation and Stock Incentive Committee meetings. The Chief Executive Officer provides information to the Executive Compensation and Stock Incentive Committee concerning the executive officers, discusses performance measures relating to executive officer compensation and makes recommendations to the Executive Compensation and Stock Incentive Committee concerning the compensation of the executive officers. The Executive Compensation and Stock Incentive Committee holds an executive session consisting only of committee members at almost every meeting. The Chief Executive Officer does not engage in discussions with the Executive Compensation and Stock Incentive Committee regarding his own compensation, except to respond to questions posed by committee members outside of the executive session deliberations.

 

The Executive Compensation and Stock Incentive Committee uses competitive marketplace information developed by Watson Wyatt and Company, its independent executive compensation consultant, with respect to compensation of the senior executives. The Executive Compensation and Stock Incentive Committee uses such information in both its deliberations regarding the Chief Executive Officer’s compensation and its review and decision process with respect to the recommendations presented by the Chief Executive Officer. In the compensation deliberations for 2006 salary levels and incentive compensation opportunities, the competitive market data reflected:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historically, neither the Executive Compensation and Stock Incentive Committee nor management have utilized comprehensive executive compensation spreadsheets (“tally sheets”) that set forth our total compensation obligations to the Named Executive Officers under various scenarios. Management began utilizing such spreadsheets in 2006, however, to track total compensation packages for the Named Executive Officers.

 

The Executive Compensation and Stock Incentive Committee reviews and approves, in advance, employment, severance or similar arrangements or payments to be made to any executive officer. The Executive Compensation and Stock Incentive Committee receives reports from management pertaining to compensation for all other officers. The Executive Compensation and Stock Incentive Committee annually reviews all of the perquisites paid to the Named Executive Officers as discussed below in the section entitled “Components of Compensation — Perquisites.”

 

The Executive Compensation and Stock Incentive Committee allocates compensation to individuals both as to specific components (for example, base salary and incentive compensation) and as a whole. Each of the components of compensation is discussed in more detail below. While considering each component of compensation, the Executive Compensation and Stock Incentive Committee is relatively more focused on the individual components that make up an individual officer’s total compensation rather than the total compensation itself.

 

Annual Base Salary.  The Executive Compensation and Stock Incentive Committee views cash compensation as one element of overall compensation, but not necessarily as the principal instrument to provide incentive to our executive officers. We believe that base salary ranges should reflect the competitive employment market and the relative internal responsibilities of each executive’s position, with an executive’s salary within a salary range being based upon his or her individual performance. In connection with the annual budget process, the Executive Compensation and Stock Incentive Committee considers salaries for executive officers within the context of the competitive market data described above under the caption “Compensation Process.” In its review of market data for setting 2006 salary levels, the Executive Compensation and Stock Incentive Committee found that, while there were some variances of our executives’ salaries from salaries for comparable positions at comparable bank holding companies (which particular deviations were deemed appropriate), the salaries of our executives on the whole reasonably approximated the salaries at comparable bank holding companies. Increases in base salary are based upon the following considerations:

 

 

 

 

 

 

In January 2007, the Executive Compensation and Stock Incentive Committee determined the base salary for its executive officers for 2007 based on the above methodology. Each Named Executive Officer’s base salary was adjusted effective as of January 1, 2007.

 

Annual Incentive Compensation.  Our annual incentive compensation program furthers our objectives to provide compensation that differentiates pay on the basis of performance, provide compensation commensurate with our performance achievements and protect shareholder interests by requiring achievement of successful results as a condition to earning above-average compensation. We believe that annual incentive compensation should reflect the competitive employment market and the relative internal responsibilities of each executive’s position. In connection with the annual budget process, the Executive Compensation and Stock Incentive Committee considers

annual bonuses for similarly-situated executive officers of similarly-sized bank holding companies within the context of the competitive market data described above under the caption “Compensation Process.”

 

We believe that our annual incentive compensation program should provide meaningful compensation opportunities in relation to our achievement of key annual performance goals. In providing such opportunities, we believe that participants in the program are motivated to achieve the established goals and are rewarded at levels that reflect their achievements.

 

We provide incentive compensation opportunities to Named Executive Officers under two programs — the BancorpSouth, Inc. Executive Performance Incentive Plan, as amended, and the BancorpSouth, Inc. Home Office Incentive Plan. The Executive Performance Incentive Plan provides for the payment of cash incentive bonuses, as well as equity-based awards, to participants based upon the achievement of performance goals established by a subcommittee of the Executive Compensation and Stock Incentive Committee that administers the Executive Performance Incentive Plan. This plan is intended to increase shareholder value and our success by encouraging outstanding performance by our Named Executive Officers. All payments made under the Executive Performance Incentive Plan are intended to be “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Executive Performance Incentive Plan provides eligible executive officers with incentive awards based on the achievement of goals relating to our performance. The amount of the cash bonus may vary among participants from year to year. During 2006, the Chief Executive Officer and Chief Operating Officer were eligible to participate in the Executive Performance Incentive Plan.

 

The subcommittee of the Executive Compensation and Stock Incentive Committee that administers the Executive Performance Incentive Plan may establish performance goals based on any of the following business criteria:

 

 

 

 

 

 

 

 

 

 

 

 

The subcommittee may take into account several factors when establishing the performance goals each year. The performance goals established by the subcommittee, however, must be objectively determinable and based on levels of achievement of the business criteria contained in the Executive Performance Incentive Plan. No later than 90 days after the beginning of each fiscal year, the subcommittee will specify in writing (i) the type of award (i.e., cash or equity) and target amount payable to each participant, (ii) the maximum amount payable to each participant, (iii) the performance goals upon which each participant’s award is conditioned and (iv) the formula to determine the amount payable or shares that become vested based on the achievement of the specified goals. The amount of awards may vary among participants and from year to year, but the maximum cash bonus payable to any participant under the Executive Performance Incentive Plan in a year is $4 million.

 

No later than 90 days after the end of each year, or other period of performance specified in an award, the subcommittee must certify in writing for each participant whether the performance goals and any other material conditions have been met. If these goals and conditions have been met, the subcommittee may authorize payment of

the amount of cash earned under an award. The subcommittee has discretion to reduce or eliminate, but not increase, an amount that is payable to a participant under the Executive Performance Incentive Plan. Any incentive cash bonuses will be paid in cash as soon as practicable following the end of the fiscal year.

 

In 2006, the subcommittee established the following performance goals for growth in average deposits and other funding sources and return on average equity in connection with the Executive Performance Incentive Plan:

 

 

Based on actual performance, and as certified by the subcommittee in its role as administrator of the Executive Performance Incentive Plan, each of the Named Executive Officer’s 2006 bonus represented 120% of his respective target award and no award was reduced or eliminated by the subcommittee. The threshold amount of each respective award was equal to 33% of the target award and the maximum amount of each respective award was equal to 200% of the target award, as reflected in the table under the section entitled “EXECUTIVE COMPENSATION — Grants of Plan Based Awards.”

 

We also provide incentive compensation opportunities to Named Executive Officers and other participants under the Home Office Incentive Plan. The Home Office Incentive Plan uses the same performance measures and goals as the Executive Performance Incentive Plan referenced above, but allows the Executive Compensation and Stock Incentive Committee to use its discretion to either increase or decrease resultant awards.

 

Long-Term Incentive Compensation.  Long-term incentive compensation is another important part of our executive compensation program and provides equity-based awards to ensure optimal alignment with our shareholders’ interests. Under the relevant plans that have been approved by our shareholders in recent years — the 1994 Stock Incentive Plan and the Executive Performance Incentive Plan — we have the ability to make grants of non-qualified stock options, incentive stock options, performance shares, restricted stock and restricted stock units. We believe that long-term incentive compensation should reflect the competitive employment market and the relative internal responsibilities of each executive’s position. The Executive Compensation and Stock Incentive Committee considers long-term incentive compensation for executive officers at comparable bank holding companies within the context of the competitive market data described above under the caption “Compensation Process.” In general, the Executive Compensation and Stock Incentive Committee attempts to set the long-term incentive compensation for Messrs. Patterson and Kelley at a level that is near the 50th percentile for the comparable executive officers and attempts to set the long-term incentive compensation for our other executives at a competitive level that is generally below the 50^th percentile.

 

The Executive Compensation and Stock Incentive Committee has the ability to use different incentive vehicles for long-term incentive compensation for achieving our compensation objectives. For example, the Executive Compensation and Stock Incentive Committee may grant:

 

 

 

 

Historically, we have used stock option grants to provide performance-based long-term incentive compensation where the value to the recipient is dependent upon appreciation in our stock price. We have also made limited use of restricted stock grants to both the Chief Executive Officer and Chief Operating Officer to encourage their continued service with BancorpSouth while maintaining a strong focus on performance.

 

The 2005 amendments to the 1994 Stock Incentive Plan and the Executive Performance Incentive Plan, which primarily added the ability to grant awards of performance shares and restricted stock units contingent upon certain performance targets for BancorpSouth, constituted the initial step in a new incentive compensation strategy that moved us from predominantly relying on stock price appreciation to using a broader range of performance objectives that are important to our business. The 2006 amendments to the Executive Performance Incentive Plan, which expanded the performance criteria that can be used as the basis for earning awards in a manner that is compliant with Section 162(m) of the Internal Revenue Code, was the next step toward implementing the new incentive compensation strategy. With these enabling amendments approved by our shareholders, our intent is to implement changes to our long-term incentive compensation strategy beginning in 2007 by reducing the role of stock options and introducing the opportunity to earn performance shares. Nearly all of our previous equity-based awards provided rewards based solely on the increase in the market value of our common stock. Placing sole reliance on market value can, we believe, reward short-term or mid-term performance under some circumstances, but cannot adequately support our objectives of encouraging long-term performance.

 

For 2006, long-term incentive compensation for the Named Executive Officers was solely in the form of stock option grants. Such awards were limited to executives who are responsible for long-term investment, operating or policy decisions and to executives who are instrumental in implementing these decisions. In determining the total number of options to be granted, the Executive Compensation and Stock Incentive Committee considered the available number of shares under the 1994 Stock Incentive Plan, but had no fixed formula for determining the total number of options to be granted. In selecting the award recipients and determining the level of stock option grants made in 2006, management and the Executive Compensation and Stock Incentive Committee utilized market competitive data as described above under the caption “Compensation Process.” In addition, management (with respect to all executives except the Chief Executive Officer and Chief Operating Officer) and the Executive Compensation and Stock Incentive Committee (with respect to the Chief Executive Officer and Chief Operating Officer, and in its review of management’s recommendations for other recipients), considered the (i) present scope of responsibility of the executive, (ii) degree to which the units influenced by that executive contribute to our profits, (iii) degree to which asset quality and other risk decisions are influenced by that executive’s direction, (iv) the number of awards currently held by the executive, and (v) long-term management potential of the executive. In 2006, no single factor was weighed more heavily than any other factor in determining the level of stock option grants.

 

Historically, we have granted stock options on November 1^st of each year. In the future, we plan to make any grants of performance shares during January of each fiscal year and the performance goals upon which the awards are conditioned will generally be based on our performance during the year of grant.

 

Our 2006 stock option grants were made on November 1, 2006, with a strike price of $24.78 (which was the closing price of our common stock on that date). The stock options granted in 2006 have an overall term of seven years and will become exercisable in three equal annual installments, beginning one year after the date of grant.

 

Executive Benefits.  We provide our executive officers with executive benefits in amounts that we believe are reasonable, competitive and consistent with our management compensation program. We believe that such benefits help us to attract and retain executive officers of the caliber we believe necessary to remain competitive. We offer group life insurance, disability insurance, medical, dental and vision insurance to all our employees. We also maintain a Retirement Plan, which is discussed in detail under the section entitled “EXECUTIVE COMPENSATION — Pension Benefits — Retirement Plan.” In addition, we maintain bank-owned life insurance for certain executive officers.

 

Perquisites.  We provide our executive officers with perquisites in amounts that we believe help us attract and retain highly-qualified leaders. For certain executives, including the Named Executive Officers, we provide a company automobile and pay for country club dues and the cost of an annual physical examination.

 

In addition, BancorpSouth owns and operates corporate aircraft to facilitate the business travel of its executive officers consistent with the best use of their time. Although the Named Executive Officers are not generally entitled to use aircraft for personal travel, Messrs. Patterson and Kelley are permitted to use aircraft for personal travel if approved by the Board of Directors.

 

Section 162(m) of the Internal Revenue Code generally limits the corporate tax deduction for compensation in excess of $1 million that is paid to our Named Executive Officers. Qualifying performance-based compensation, however, is fully deductible without regard to the general Section 162(m) limits if certain requirements are met. Section 162(m) also permits full deductibility for certain pension contributions and other payments. The Executive Compensation and Stock Incentive Committee has carefully considered the impact of Section 162(m) and its limits on deductibility, and intends that certain of our compensation plans qualify for an exception to the limitations of Section 162(m) so that we may fully deduct compensation paid under these plans. The Executive Performance Incentive Plan is considered “performance based” for this purpose, as are certain awards under the 1994 Stock Incentive Plan.

 

We have certain other executive compensation arrangements that may cause a portion of that compensation to exceed the Section 162(m) limitation and, therefore, prevent us from deducting that excess portion for 2006 and subsequent years. These arrangements include the Stock Bonus Agreement with Mr. Patterson. In adopting these executive compensation arrangements, the Executive Compensation and Stock Incentive Committee determined that the benefits of these arrangements to us and our shareholders outweighed the inability to deduct a portion of the compensation for federal income tax purposes.

 

We have no written employment agreements with any of the Named Executive Officers.

 

We have entered into a Change in Control Agreement with each of the Named Executive Officers that provides certain benefits in the event that we experience a change in control and we terminate the executive’s employment “without cause” (generally because of the executive’s conviction for certain crimes, the executive’s commission of certain acts of dishonesty or the executive’s intentional neglect of or material inattention to his duties), or the executive resigns “for cause” (generally because of a material adverse alteration in the executive’s position, a reduction in the executive’s compensation or a material breach by BancorpSouth of its employment policies), within 24 months after the change in control. In general, the amount of benefits payable under the agreements is 300% of the amount of annual base compensation and the highest annual bonus that the executive would otherwise be entitled to receive in the year that the change in control occurs with respect to Messrs. Patterson and Kelley, 200% of such annual base compensation and annual bonus with respect to Messrs. Sappington and Cowsert, and 100% of such annual base compensation and annual bonus with respect to Mr. Allen. The agreements include a “double trigger” (i.e., requiring both a change in control and termination of the executive’s employment for the executive to receive payment) so that the Named Executive Officers will only receive additional benefits if a change in control also has an adverse economic impact on them individually and also protects a surviving entity if it desires to maintain the services of an executive. For more information about the Change in Control Agreements with the Named Executive Officers, see the section entitled “EXECUTIVE COMPENSATION — Potential Payments Upon Termination or Change-in-Control.”

 

Under our Stock Bonus Agreement with Mr. Patterson, dated January 20, 1998, as amended, if we experience a change in control, Mr. Patterson can terminate his agreement and receive all shares of restricted common stock remaining in escrow under the agreement. We will make additional payments to Mr. Patterson to the extent he becomes subject to an excise tax under Section 4999 of the Internal Revenue Code as a result of the payments under his Stock Bonus Agreement.

 

All unexercisable options granted under our stock option plans, including options granted to the Named Executive Officers, become exercisable immediately if we undergo a change in control. Under the Executive Performance Incentive Plan, if we experience a change in control, the Executive Compensation and Stock Incentive Committee will pay the maximum amount payable under the incentive bonus to all participants in the Executive Performance Incentive Plan. This bonus will be paid as soon as practicable following the change in control.

 

We maintain certain compensatory arrangements as part of our retirement program that are intended to provide payments to the Named Executive Officers upon their resignation or retirement. These include the 401(k) Plan, a traditional defined benefit retirement plan (the “Retirement Plan”), a traditional defined restoration plan (the “Restoration Plan”) and a deferred compensation arrangement (the “Deferred Compensation Plan”). The purpose of this retirement program is to provide competitive retirement benefits that enable us to attract and retain talented leaders who will exert considerable influence on our direction and success.

 

All Named Executive Officers are eligible to participate in the 401(k) Plan, pursuant to which each participant over age 50 could contribute up to a maximum of $20,000 for 2006 ($15,000 maximum limit for BancorpSouth employees plus $5,000 maximum “catch-up” payment for employees over the age of 50). BancorpSouth provides a matching contribution for the first five percent (5%) of base salary contributed in the plan, up to a maximum of $11,000 per year.

 

We maintain the Retirement Plan, a tax-qualified, non-contributory, defined benefit retirement plan, for our employees and those of our subsidiaries who have reached the age of 21 and have completed one year of service. Benefits under the Retirement Plan are based primarily on final average compensation and length of service. For 2006, the maximum annual benefit allowable under the Internal Revenue Code with respect to the Retirement Plan was $175,000 and the maximum amount of allowable considered annual compensation was $220,000.

 

We also have adopted the Restoration Plan, a non-qualified, non-contributory, unfunded defined benefit pension plan for certain officers and executives. Benefits under the Restoration Plan are based primarily on final average compensation and length of service but include only the amount of compensation and annual benefit accruals that exceed the maximum limits under the Internal Revenue Code and, therefore, are not included in the Restoration Plan.

 

We also maintain the Deferred Compensation Plan, a non-qualified, non-contributory, unfunded defined benefit pension arrangement, for selected key employees that is in the form of a deferred compensation agreement. Benefits under the Deferred Compensation Plan are based primarily on average final compensation and supplement the amounts payable under the Retirement Plan and the Restoration Plan.

 

In 2005, we reevaluated our retirement program and made changes to the Retirement Plan, the Restoration Plan and the 401(k) Plan for all employees hired on or after January 1, 2006. These employees will not receive any benefit from the Retirement Plan or the Restoration Plan, but they will receive an automatic contribution to a defined contribution plan equal to 2% of their respective salaries. This additional 2% contribution will not be dependent on employee deferrals to the 401(k) Plan. This strategy lowers the volatility of our retirement plan costs, shifts ownership and responsibility to our employees and enables us to direct our compensation towards non-retirement programs that are more individualized and pay-for-performance.

 

Each of the Named Executive Officers is eligible for early retirement pursuant to the Retirement Plan and the Restoration Plan. Upon early retirement, each Named Executive Officers is also eligible to receive payments under the Deferred Compensation Plan and the Executive Performance Incentive Plan or the Home Office Incentive Plan, as applicable. The amounts each Named Executive Officer would have received if he had retired on December 31, 2006 is provided in the section entitled “EXECUTIVE COMPENSATION — Potential Payments Upon Termination or Change-in-Control.”

 

Director Compensation

 

We established our Deferred Directors’ Fee Unfunded Plan to provide an opportunity for our directors to receive their annual directorship fees in the form of our common stock. Fifty percent of directorship fees are automatically paid in the form of our common stock. Under this plan, directors may elect to receive any portion of the remainder of their directorship fees in the form of our common stock.

 

The following table sets forth certain information concerning compensation paid or accrued by us and our subsidiaries for the last year with respect to our Named Executive Officers — the Chief Executive Officer, the Chief Financial Officer and our three other most highly compensated executive officers whose total compensation for 2006 exceeded $100,000:

 

 

 

 

 

 

 

 

 

 

 

 

 

The Executive Compensation and Stock Incentive Committee allocates compensation to individuals both as to specific components (for example, base salary and incentive compensation) and as a whole. While considering each component of compensation, the Executive Compensation and Stock Incentive Committee is relatively more focused on the individual components that make up an individual officer’s total compensation rather than the total compensation itself.

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings.  The change in each executive’s pension value in the Summary Compensation Table is the change in BancorpSouth’s obligation to provide pension benefits (at a future retirement date) from the beginning of the fiscal year to the end of the fiscal year. The obligation is the value today of a benefit that will be paid at the officer’s normal retirement date (age 65), based on the benefit formula and his or her current pay and service.

 

Change in pension values may be a result of various sources such as:

 

 

 

 

 

The pension benefits and assumptions used to calculate these values are described in more detail in the section below entitled “EXECUTIVE COMPENSATION — Pension Benefits.”

 

The following table sets forth certain information regarding plan-based awards granted to the Named Executive Officers during 2006:

 

 

 

 

The subcommittee of the Executive Compensation and Stock Incentive Committee that administers the Executive Performance Incentive Plan may establish performance goals based on any of the following business criteria:

 

 

 

 

 

 

 

 

 

 

 

 

The subcommittee may take into account several factors when establishing the performance goals each year. The performance goals established by the subcommittee, however, must be objectively determinable and based on levels of achievement of the business criteria contained in the Executive Performance Incentive Plan. The subcommittee has discretion to reduce or eliminate, but not increase, an amount that is payable to a participant under the Executive Performance Incentive Plan.

 

The following table provides certain information with respect to the Named Executive Officers regarding outstanding equity awards as of December 31, 2006 that represent potential amounts that may be realized in the future: