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.  )

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BANCORPSOUTH, INC.

(Name of Registrant as Specified In Its Charter)

 

N/A

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

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One Mississippi Plaza
201 South Spring Street
Tupelo, Mississippi 38804

March 21, 2008

TO THE SHAREHOLDERS OF

  BANCORPSOUTH, INC.

     On Wednesday, April 23, 2008, at 9:30 a.m. (Central Time), the annual meeting of shareholders of BancorpSouth, Inc. will be held at the BancorpSouth Conference Center, 387 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:

	•		Use the Internet at the web address shown on your proxy card;
	•		Use the telephone number shown on your proxy card; or
	•		Complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided.

     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. Annual Report to Shareholders

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR PROXY BY INTERNET,
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 23, 2008

TO THE SHAREHOLDERS OF

  BANCORPSOUTH, INC.

     The annual meeting of shareholders of BancorpSouth, Inc. will be held on Wednesday, April 23, 2008, at 9:30 a.m. (Central Time) at the BancorpSouth Conference Center, 387 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 the independent registered public accounting firm of BancorpSouth, Inc. and its subsidiaries for the year ending December 31, 2008;
	(3)		To approve the Amendment to the BancorpSouth, Inc. 1995 Non-Qualified Stock Option Plan for Non-Employee Directors; 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 3, 2008 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 21, 2008

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, 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

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING			1
PROPOSAL 1: ELECTION OF DIRECTORS			2
Introduction			2
Nominees			2
Continuing Directors			2
Required Vote			3
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			4
PROPOSAL 3: AMENDMENT TO OUR 1995 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS			5
Introduction			5
Explanation of Changes			5
General Description of Directors Option Plan			5
New Plan Benefits			6
Federal Income Tax Consequences			6
Required Vote			6
EQUITY COMPENSATION PLAN INFORMATION			7
CORPORATE GOVERNANCE			8
Director Attendance at Board, Committee and Annual Meetings			8
Committees of the Board of Directors			8
Executive Sessions			10
Communications with the Board of Directors			10
Governance Information			10
Director Independence			10
Director Qualification Standards			11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			12
COMPENSATION DISCUSSION AND ANALYSIS			14
Overview			14
Compensation Policy			14
Compensation Process			16
Components of Compensation			18
Internal Revenue Code Section 162(m)			23
Employment Contracts and Change in Control Arrangements			24
Retirement Benefits			24
Director Compensation			25
EXECUTIVE COMPENSATION			26
Summary Compensation Table for 2006 and 2007			26
Grants of Plan-Based Awards for 2007			28
Outstanding Equity Awards at 2007 Fiscal Year-End			28
Option Exercises and Stock Vested for 2007			30
Pension Benefits for 2007			30
Nonqualified Deferred Compensation for 2007			33
Potential Payments Upon Termination or Change-in-Control			34
Compensation Committee Interlocks and Insider Participation			39
DIRECTOR COMPENSATION			40
AUDIT COMMITTEE REPORT			42
EXECUTIVE COMPENSATION AND STOCK INCENTIVE COMMITTEE REPORT			43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			44
GENERAL INFORMATION			45

Counting of Votes			45
Section 16(a) Beneficial Ownership Reporting Compliance			45
Shareholder Nominations and Proposals			45
Householding of Proxy Materials and Annual Reports			46
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting			47
Miscellaneous			47

PROXY STATEMENT

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

     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 Conference Center, 387 East Main Street, Tupelo, Mississippi 38804 on April 23, 2008, 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 21, 2008.

     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 our independent registered public accounting firm for the year ending December 31, 2008, (iii) “FOR” approval of the Amendment to the BancorpSouth, Inc. 1995 Non-Qualified Stock Option Plan for Non-Employee Directors, 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, 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 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.proxyvotenow.com/bxs, enter the 9-digit control number found on the enclosed proxy card and follow the instructions on the website. To submit your proxy to vote by telephone, call 1-866-257-2279, enter the 9-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 2:00 a.m. (Central Time) on April 23, 2008 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 3, 2008 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 82,375,948 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 at the annual meeting.

PROPOSAL 1: ELECTION OF DIRECTORS

Introduction

     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.

Nominees

     The Board of Directors has nominated the four individuals named below under the caption “Class II Nominees” for election as directors to serve until the annual meeting of shareholders in 2011 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 we would significantly benefit from such director serving another term because of his advice, expertise and influence. Pursuant to this policy, the Board has determined that we would significantly benefit from having each of W. G. Holliman, Jr. and Turner O. Lashlee serve another term.

     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 II Nominees – Term Expiring in 2011

								Director
Name		Age				Principal Occupation/Other Directorships		Since
W. G. Holliman, Jr.			70			Chairman of the Board and Former Chief Executive Officer (1996-2008), Furniture Brands International, Inc., St. Louis, Missouri and Tupelo, Mississippi (furniture manufacturer)			1994
James V. Kelley			58			Chief Operating Officer and President of BancorpSouth, Inc. and BancorpSouth Bank; Director, Murphy Oil Corporation, El Dorado, Arkansas (integrated oil company)			2000
Turner O. Lashlee			71			Chairman of the Board, Lashlee-Rich, Inc., Humboldt, Tennessee (general construction)			1992
Alan W. Perry			60			Attorney at Law, Forman, Perry, Watkins, Krutz & Tardy LLP, Jackson, Mississippi			1994

Continuing Directors

     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 I and Class III 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 I Directors – Term Expiring in 2009

								Director
Name		Age				Principal Occupation/Other Directorships		Since
Hassell H. Franklin			72			Chief Executive Officer, Franklin Corp., Houston, Mississippi (furniture manufacturer)			1974
Robert C. Nolan			66			Chairman of the Board, Deltic Timber Corporation, El Dorado, Arkansas (timber production); Managing Partner, Munoco Company, El Dorado, Arkansas (oil and gas exploration and production)			2000
W. Cal Partee, Jr.			63			Partner, Partee Flooring Mill, Oil and Timber Investments, Magnolia, Arkansas (oil and lumber production)			2000
Travis E. Staub*			75			Retired, Fulton, Mississippi; Construction/engineering consultant, Fulton, Mississippi (2003-2004)			1975

Class III Directors – Term Expiring in 2010

								Director
Name		Age				Principal Occupation/Other Directorships		Since
Larry G. Kirk			61			Retired, Tupelo, Mississippi; Former Chairman of the Board and Chief Executive Officer (1996-2005), Hancock Fabrics, Inc., Tupelo, Mississippi (fabric retailer and wholesaler)			2002
Guy W. Mitchell, III			64			President and Attorney at Law, Mitchell, McNutt and Sams, P.A., Tupelo, Mississippi			2003
R. Madison Murphy			50			Director, Murphy Oil Corporation, El Dorado, Arkansas (integrated oil company); Director, Deltic Timber Corporation, El Dorado, Arkansas (timber production); Managing Member, Murphy Family Management, LLC, El Dorado, Arkansas (investments)			2000
Aubrey B. Patterson			65			Chairman of the Board and Chief Executive Officer of BancorpSouth, Inc. and BancorpSouth Bank; Director, Furniture Brands International, Inc., St. Louis, Missouri and Tupelo, Mississippi (furniture manufacturer)			1983

     Each of the nominees and continuing directors has had the principal occupation indicated for more than five years unless otherwise indicated.

Required Vote

     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, as amended in 2007, any nominee for director who receives a greater number of “withheld” votes than “for” votes shall promptly following certification of the shareholder vote tender his resignation. The Nominating Committee will consider the resignation offer(s) and make a recommendation to the Board of Directors whether to accept such offer(s) and the Board will act on such recommendation within 90 days after certification of the shareholder vote. Any director who tenders his resignation shall not participate in the Nominating Committee recommendation or Board action regarding whether to accept the resignation offer.

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

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     The Audit Committee of the Board of Directors selected the accounting firm of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2008 and seeks ratification of the selection by our shareholders. This firm has served as our independent registered public accounting firm since 1973.

     In addition to rendering audit services for the year ended December 31, 2007, 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, 2007 and December 31, 2006 were as follows:

		2007				2006
Audit Fees(1)		$	777,500			$	781,000
Audit-Related Fees(2)			47,000				68,000
Tax Fees			––				––
All Other Fees			––				––
Total		$	824,500			$	849,000

     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 registered public accounting firm for the year ending December 31, 2008 is not required by our Amended and Restated Bylaws, as amended, 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 annual meeting and entitled to vote. If the selection of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2008 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 registered public accounting firm for 2008.

PROPOSAL 3: AMENDMENT TO OUR 1995 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

Introduction

     Our Board of Directors has adopted an Amendment (the “Amendment”) to the BancorpSouth, Inc. 1995 Non-Qualified Stock Option Plan for Non-Employee Directors (the “Directors Option Plan”). The descriptions and explanations in this proposal are qualified in their entirety by reference to the full text of the Amendment, which is attached hereto as Appendix A. If the Amendment is approved by the shareholders at the annual meeting, it will become effective without further action in accordance with its terms and conditions. The Directors Option Plan is administered by the Nominating Committee.

     Currently under the Directors Option Plan, 564,000 shares of common stock have been reserved for issuance under awards, of which 475,964 shares are either subject to outstanding awards or have been issued. The Directors Option Plan provides for automatic annual grants to non-employee directors of stock options that are not qualified as incentive stock options under the Internal Revenue Code.

Explanation of Changes

     The purpose of the Amendment is to (i) provide for awards of non-qualified stock options, restricted stock and restricted stock units, (ii) eliminate the automatic grant of stock options and provide discretion to the Nominating Committee to determine the awards made under the plan, (iii) limit the number of shares of our common stock that may be issued as awards each year, and (iv) increase the number of shares of our common stock that are available for award under the plan by 400,000 shares to a total of 964,000 shares. A grant of restricted stock is an award of our common stock that is subject to forfeiture until the conditions for vesting stated in the award are satisfied, and the recipient immediately becomes a shareholder of the company. A restricted stock unit provides the recipient the right to receive our common stock upon the achievement of conditions stated in the award. The recipient is not a shareholder until such conditions are satisfied.

General Description of Directors Option Plan

     The purpose of the Directors Option Plan is to maintain our ability to attract and retain the services of experienced and highly qualified non-employee directors and to enhance long-term shareholder value by more closely aligning the interests of non-employee directors with those of the shareholders. Currently, the Directors Option Plan only provides to each director who is not employed by us a non-qualified stock option grant to purchase 3,600 shares of our common stock. If the Amendment is approved by the shareholders at the annual meeting, this feature will be eliminated. Instead, our Nominating Committee will have the discretion to grant each non-employee director non-qualified options to purchase our common stock (not to exceed 10,000 shares), restricted shares of our common stock (not to exceed 5,000 shares) and/or restricted stock units representing the right to receive shares of our common stock (not to exceed 5,000 shares). Subject to the limits noted above, if the Amendment is approved, the types of awards granted and number of shares underlying each award will be determined in the sole discretion of the Nominating Committee. As of March 21, 2008, ten of our directors were eligible to participate in the Directors Option Plan; however, after Mr. Staub’s retirement immediately following the 2008 annual meeting of shareholders, nine of our directors will be able to participate.

     Non-qualified stock options become fully vested upon the annual meeting of shareholders following the date of grant, provided the individual remains a director until that time. The exercise price of all non-qualified stock options granted under this plan is the fair market value of common stock on the grant date. Each non-qualified stock option will expire ten years after the grant date, unless canceled sooner as a result of termination of service (but not normal retirement) or death. The Directors Option Plan will continue indefinitely until terminated by the Board of Directors.

     Once a non-qualified stock option has become exercisable, the individual may purchase shares of our common stock by paying the exercise price in cash, shares of common stock or in other consideration acceptable to the Board of Directors. No additional payment is required for awards of restricted stock and restricted stock units. Subject to limitations on “golden parachute” payments described in Sections 280G and 4999 of the Internal Revenue Code, awards become fully vested upon the occurrence of a merger or certain other corporate events in which we experience a change of control.

     As of January 31, 2008, non-qualified stock options to exercise 475,964 shares of common stock have been granted under the Directors Option Plan, of which 160,364 options have been exercised. Based upon the closing sale price of our common stock on March 14, 2008, the aggregate market value of the 315,600 shares of common stock underlying outstanding non-qualified stock options granted pursuant to the Directors Option Plan was approximately $7,227,240.

New Plan Benefits

     Because awards under the Directors Option Plan will be granted at the discretion of the Nominating Committee, it is not possible to determine the amount of awards that will be granted if the Amendment is approved or the amount of awards that would have been received by non-employee directors in 2007 if the Amendment had been in effect. The Nominating Committee has not approved any awards under the Directors Option Plan that are conditioned upon shareholder approval of the Amendment.

Federal Income Tax Consequences

     The tax consequences to us and our directors will vary with the type of award. Generally, a director will not recognize income and we are not entitled to take a deduction upon the grant of non-qualified stock options, restricted stock or restricted stock units under the Directors Option Plan.

     Upon exercise of a non-qualified stock option, the director recognizes ordinary income in an amount equal to the difference between the fair market value of the common stock and the exercise price paid. The director is also subject to capital gains treatment on the gain realized pursuant to a subsequent sale of the common stock acquired upon exercise of a non-qualified stock option. For this purpose, the director’s basis in the common stock is its fair market value at the time the non-qualified stock option is exercised. We are not entitled to a tax deduction upon the grant of a non-qualified stock option under the Directors Option Plan. We are generally entitled to take a deduction for the ordinary income that is recognized by a director upon exercise of a non-qualified stock option in the same amount and at the time of such recognition.

     With respect to awards of restricted stock and restricted stock units, directors will recognize ordinary income based on the market value of common stock at the time it becomes vested or earned under an award. However, directors can make an election under Section 83(b) of the Internal Revenue Code to be taxed at the time that restricted stock is granted. This election is not available for restricted stock units. In either case, the director is also subject to capital gains treatment on the subsequent sale of the common stock acquired through an award of restricted stock or restricted stock units. For this purpose, the director’s basis in the common stock is its fair market value at the time the common stock subject to the award becomes vested. If an election under Section 83(b) is made, the director’s basis in the common stock is determined at the time the restricted stock was transferred. We will receive a deduction for the amount constituting ordinary income to the director for restricted stock and restricted stock units.

Required Vote

     Assuming the presence of a quorum, approval of the Amendment requires the affirmative vote of the majority of the shares represented at the annual meeting and entitled to vote.

The Board of Directors recommends that shareholders vote “FOR”
approval of the proposed Amendment to our
1995 Non-Qualified Stock Option Plan for Non-Employee Directors.

EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information as of December 31, 2007 with respect to compensation plans (including individual compensation arrangements) under which shares of our common stock are authorized for issuance:

Number of Securities

Number of Securities

to be Issued upon

Weighted-Average

Remaining Available for

Exercise of

Exercise Price of

Future Issuance under

Outstanding Options,

Outstanding Options,

Equity Compensation

Plan Category

Warrants and Rights

Warrants and Rights

Plans(1)

Equity Compensation Plans Approved by Shareholders (2)

3,019,319

$

21.14

2,155,415

Equity Compensation Plans Not Approved by Shareholders (3)

87,322

14.78

438,459

Total

3,106,641

$

20.96

2,593,874

CORPORATE GOVERNANCE

Director Attendance at Board, Committee and Annual Meetings

     During 2007, our Board of Directors held eight 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. We encourage our Board members to attend the annual meeting of shareholders. In 2007, all of our directors attended the annual meeting of shareholders in person, except that, because of inclement weather, Messrs. Murphy, Nolan and Partee were only able to listen to the annual meeting via webcast.

Committees of the Board of Directors

     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

Compensation and

Executive

Stock Incentive

Nominating

Director

Committee

Audit Committee

Committee

Committee

Hassell H. Franklin

X

X

Chair

W. G. Holliman, Jr.

X

X

James V. Kelley

X

Larry G. Kirk

Chair

Turner O. Lashlee

X

X

X

Guy W. Mitchell, III

R. Madison Murphy

X

Robert C. Nolan

X

X

X

W. Cal Partee, Jr.

X

Aubrey B. Patterson

Chair

Alan W. Perry

Travis E. Staub*

X

Chair

X

     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 charter of the Executive Committee and those matters reserved to the Board of Directors under state law. Generally, the Executive Committee meets monthly. The Executive Committee held seven meetings during 2007.

     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:

	•		Monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements and our financial reporting process and systems of internal controls;
	•		Monitoring the work of the Audit/Loan Review Committee of BancorpSouth Bank;
	•		Evaluating the independence and qualifications of our independent registered public accounting firm;

	•		Evaluating the performance of our independent registered public accounting firm and our internal auditing department;
	•		Providing an avenue of communication among our independent registered public accounting firm, management, our internal audit department, our subsidiaries and our Board of Directors; and
	•		Selecting, engaging, overseeing, evaluating and determining the compensation of our independent registered public accounting firm.

     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 thirteen meetings during 2007.

     Executive Compensation and Stock Incentive Committee. Pursuant to the charter of the Executive Compensation and Stock Incentive Committee, 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. The committee, or a subcommittee thereof, also administers our 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 our 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 our 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 five meetings during 2007.

     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 maintains and periodically reviews our Corporate Governance Principles, oversees the annual evaluation of the Board and management and reviews and recommends to the Board for approval in advance all “related person” transactions between us and any of our “related persons.” Pursuant to its charter, the committee also reviews and approves at least every two years the compensation paid to non-employee directors and, in accordance with such authority, administers our 1995 Non-Qualified Stock Option Plan for Non-Employee Directors, as amended and restated, and Director Stock Plan, as amended and restated. 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 four meetings during 2007.

Executive Sessions

     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.

Communications with the Board of Directors

     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.

Governance Information

     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

Director Independence

     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.

     During 2007, the Board of Directors discussed the following relationships and transactions in making its independence determinations with respect to each director identified as independent and determined that none of these relationships or transactions precluded any such directors from being independent:

	•		Messrs. Nolan and Murphy are first cousins;
	•		Mr. Staub’s daughter is employed by BancorpSouth Bank as First Vice President, Student Loan Manager, which is not an executive position;
	•		Lashlee-Rich, Inc., a private company for which Mr. Lashlee serves as Chairman, from time to time performs construction work on some of BancorpSouth Bank’s branches; however, the Board of

Directors determined that the amount that we paid to Lashlee-Rich in 2007 ($44,500) was not material remuneration affecting Mr. Lashlee’s independent judgment; and

•

Furniture Brands International, Inc., a public company the stock of which is listed on the New York Stock Exchange and for which Mr. Holliman is Chairman and served as Chief Executive Officer during 2007, leased office space at BancorpSouth Bank’s main office building in Tupelo, Mississippi and paid rent to us; however, the Board of Directors determined that the amount paid to us by Furniture Brands in 2007 ($16,080) was not material remuneration affecting Mr. Holliman’s independent judgment.

     Forman, Perry, Watkins, Krutz & Tardy, LLP, a law firm of which Mr. Perry is a partner, provides legal services for us and in 2007 we paid this law firm less than $120,000. Because Mr. Perry’s law firm regularly provides legal services for us, the Board of Directors has determined that Mr. Perry does not meet the current listing standards of the New York Stock Exchange for independence.

     Mr. Lashlee meets the independence standards for the New York Stock Exchange but does not meet the independence standards under Section 162(m) of the Internal Revenue Code. In serving on the Executive Compensation and Stock Incentive Committee, Mr. Lashlee does not participate in the determination of performance-based awards qualifying as such under Section 162(m).

Director Qualification Standards

     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, as amended. 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.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The table below sets forth certain information, as of January 31, 2008, 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, as amended, 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 below includes such shares. We relied on information supplied by our directors, executive officers and beneficial owners for purposes of this table.

		Amount and Nature of				Percent of
Name and Address of Beneficial Owner*		Beneficial Ownership(1)				Class
BancorpSouth, Inc. Amended and Restated Salary Deferral – Profit Sharing Employee Stock Ownership Plan			6,486,246				7.88	%
Barclays Global Investors, NA(2)			5,645,486				6.86	%
L. Nash Allen, Jr.			177,311					**
Larry D. Bateman			82,421					**
W. Gregg Cowsert			127,352					**
Hassell H. Franklin			1,056,766				1.28	%
W. G. Holliman, Jr.			694,270	(3)				**
James V. Kelley			331,359					**
Larry G. Kirk			29,371					**
Turner O. Lashlee			96,357					**
Guy W. Mitchell, III			37,481					**
R. Madison Murphy			427,794	(4)				**
Robert C. Nolan			606,954	(5)				**
W. Cal Partee, Jr.			309,503	(6)				**
Aubrey B. Patterson			1,024,613				1.24	%
Alan W. Perry			77,345					**
Michael L. Sappington(7)			40,052					**
Travis E. Staub			89,678	(8)				**
All directors and executive officers as a group (19 persons)			5,418,798				6.58	%

		Common Stock Underlying Options
Name		Exercisable within 60 Days
L. Nash Allen, Jr.			92,600
Larry D. Bateman			59,600
W. Gregg Cowsert			93,866
Hassell H. Franklin			30,000
W. G. Holliman, Jr.			30,000
James V. Kelley			200,000
Larry G. Kirk			18,000
Turner O. Lashlee			30,000
Guy W. Mitchell, III			14,400
R. Madison Murphy			21,600
Robert C. Nolan			21,600
W. Cal Partee, Jr.			21,600
Aubrey B. Patterson			595,666
Alan W. Perry			30,000
Michael L. Sappington			—
Travis E. Staub			30,000

		These shares are deemed to be outstanding for the purposes of computing the “percentage of class” for that individual, but are not deemed outstanding for the purposes of computing the percentage of any other person.
		Information in the table for individuals also includes shares held in our Amended and Restated Salary Deferral – Profit Sharing Employee Stock Ownership Plan, also referred to as the 401(k) Plan, and in individual retirement accounts for which the shareholder can direct the vote. Except as indicated in the footnotes to this table, each person listed has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by him pursuant to applicable law.
(2)		Based on information contained in a Schedule 13G, filed on February 5, 2008, with the SEC. The amount shown includes shares beneficially owned by affiliates of Barclays Global Investors, NA.
(3)		Includes 137,408 shares owned by Mr. Holliman’s wife, of which Mr. Holliman disclaims beneficial ownership.
(4)		Includes 10,940 shares held in trusts of which Mr. Murphy is the trustee for the benefit of his minor children, of which Mr. Murphy disclaims beneficial ownership, 48,288 shares held in trusts of which Mr. Murphy is co-trustee for the benefit of others, 9,735 shares owned by Mr. Murphy’s wife, of which Mr. Murphy disclaims beneficial ownership, and 248,861 shares held by a limited partnership that is controlled by a limited liability company of which Mr. Murphy is a member of which Mr. Murphy disclaims beneficial interest as to 228,110 shares.
(5)		Includes 12,879 shares held in trusts of which Mr. Nolan is the co-trustee for the benefit of his grandchildren, of which Mr. Nolan disclaims beneficial ownership, 391,971 shares held in a trust of which Mr. Nolan is the co-trustee for the benefit of his nieces, nephews, children and the lineal descendants of four co-trustees, of which Mr. Nolan disclaims beneficial ownership, and 4,227 shares owned by Mr. Nolan’s wife, of which Mr. Nolan disclaims beneficial ownership.
(6)		Includes 330 shares owned by Mr. Partee’s wife, of which Mr. Partee disclaims beneficial ownership, and 5,208 shares held by Mr. Partee’s wife as custodian for the benefit of Mr. Partee’s children, of which Mr. Partee disclaims beneficial ownership.
(7)		Mr. Sappington retired effective as of December 21, 2007.
(8)		Includes 14,318 shares owned by Mr. Staub’s wife, of which Mr. Staub disclaims beneficial ownership.

COMPENSATION DISCUSSION AND ANALYSIS

Overview

     The Executive Compensation and Stock Incentive Committee of the Board of Directors administers our executive compensation program. The Executive Compensation and Stock Incentive Committee is composed entirely of directors who are independent under the listing standards of the New York Stock Exchange and our Director Independence Standards. The 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 April 2007.

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

	•		Annually reviews and approves corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluates the Chief Executive Officer’s performance in light of those goals and objectives and determines and approves the Chief Executive Officer’s compensation level based on this evaluation;
	•		In determining the long-term incentive component of the Chief Executive Officer’s compensation, considers our performance and relative shareholder return, the value of similar incentive awards to chief executive officers at comparable companies, the awards given to the Chief Executive Officer in past years and such other factors as it may deem relevant;
	•		For the (i) Chief Executive Officer, Chief Financial Officer and the three most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer, determines and approves, and (ii) other executive officers, annually reviews and recommends to the Board:

	–		The annual base salary level(s);
	–		Annual bonus(es);
	–		Changes or amendments to incentive-compensation plans and equity-based plans;
	–		Employment agreements, severance arrangements and change in control agreements/ provisions, in each case as, when and if appropriate; and
	–		Any special or supplemental benefits plans or programs;

	•		At least annually and more often as circumstances dictate, reports its actions to the Board; and
	•		Annually reviews and re-assesses the adequacy of the Executive Compensation and Stock Incentive Committee’s charter and recommends any proposed changes to the Board for approval.

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

Compensation Policy

     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:

	•		Base salaries at levels that will attract and retain qualified executive officers;
	•		Compensation that differentiates pay on the basis of performance;
	•		Incentive compensation opportunities that will motivate executive officers to achieve both our short-term and long-term business objectives and that will provide compensation commensurate with our performance achievements;
	•		Total compensation that is competitive with that of comparable bank holding companies within the context of our performance; and
	•		Protection of shareholder interests by requiring achievement of successful results as a condition to earning above-average compensation.

     Our executive compensation program consists of the following primary elements:

	•		Annual base salary is intended to provide a foundation element of compensation that is relatively secure and that reflects the skills and experience that an executive brings to us; we seek to pay base salaries that are competitive with those paid to executive officers in comparable positions at comparable bank holding companies;
	•		Annual incentive compensation is a variable non-equity element that is based on the achievement of defined goals for a given fiscal year that are tied to our overall performance and, in some situations, performance of a specific business unit;
	•		Long-term incentive compensation is a variable equity element that provides an emphasis on longer-term performance goals, stock price performance, ongoing improvement and continuity of performance;
	•		Employee benefits are intended to provide reasonable levels of security with respect to retirement, medical, death and disability protection and paid time off; and
	•		Certain perquisites are used to supplement the other elements of compensation, facilitating the attraction and retention of executive officers of the caliber we believe necessary to remain competitive.

     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 our overall 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:

	•		The need to provide a level of basic compensation (base salary and employee benefits) necessary to enable us to attract and retain high-quality executives, regardless of external business conditions;
	•		The goal of providing a substantial amount of compensation opportunities through performance-based, variable-compensation vehicles;
	•		The goal of reflecting reasonable practices of comparable bank holding companies within the context of our performance achievements; and
	•		The desire to align our executives’ and our shareholders’ best interests through the use of equity-based compensation vehicles.

     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, as amended, require our directors to own shares of our common stock 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 shares of our common stock they own.

Compensation Process

     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 materials to each committee member, including minutes of the previous meeting, an agenda, recommendations for the upcoming meeting and other materials relevant to the agenda items. On occasion, the Chief Executive Officer attends committee meetings to provide information to the committee concerning the performance of executive officers, discusses performance measures relating to executive officer compensation and makes recommendations to the 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.

     Prior to 2006, neither the Executive Compensation and Stock Incentive Committee nor management formally compiled a summary of all executive compensation components (“tally sheets”). Management began compiling tally sheets in 2006 to assimilate all components of compensation that are paid to the Named Executive Officers. This information is provided to the Executive Compensation and Stock Incentive Committee for use in its deliberations.

     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 committee receives reports from management pertaining to compensation for all other officers and annually reviews all of the perquisites paid to the Named Executive Officers as discussed below in the section entitled “Components of Compensation – Perquisites.”

     In 2007, we engaged Watson Wyatt Worldwide, Inc. to provide multiple services, including substantive consultation services with respect to general compensation, health, welfare and retirement benefits. In addition, Watson Wyatt is the actuary for our pension plan. Since 2001, the Executive Compensation and Stock Incentive Committee has separately engaged Watson Wyatt to review our executive compensation programs, advise the committee with respect to the aggregate level of compensation of our executive officers and advise the committee on the mix of elements used to compensate our executive officers. The Watson Wyatt consultants who are involved in this function are engaged separately and work independently from those Watson Wyatt consultants who are engaged for health, welfare and retirement consulting.

     In performing its services in 2007, Watson Wyatt interacted collaboratively with the Executive Compensation and Stock Incentive Committee and senior management. Watson Wyatt’s analyses and reports were provided contemporaneously to both the chairman of the committee and to management to facilitate review and discussion. The Executive Compensation and Stock Incentive Committee instructed Watson Wyatt to prepare an analysis of the market competitiveness of base salary, annual bonus opportunity and long-term incentive opportunity for our senior management. In response, Watson Wyatt conducted an in-depth market analysis and, based on this analysis, made additional recommendations regarding Mr. Patterson’s position as Chairman and Chief Executive Officer and Mr. Kelley’s position as President and Chief Operating Officer that were based on a combination of:

•

An analysis of definitive proxy statements (by “pay rank” and “position match”) covering our peer group, which examined base salary, annual bonus, total cash compensation, long-term incentive opportunity and total direct compensation (salary plus bonus and long-term incentive opportunity); and

•

An analysis using key bank industry surveys (primarily provided by Watson Wyatt and Mercer LLC) comprised of similarly-sized banking organizations.

     Watson Wyatt provided the chairman of the Executive Compensation and Stock Incentive Committee with a detailed report that summarized the market data and provided the committee with observations as to our relative competitiveness in comparison to both our peer group and the overall relevant bank industry marketplace based on Watson Wyatt’s interpretation and synthesis of the various components of market data.

     In addition, the Executive Compensation and Stock Incentive Committee relied on Watson Wyatt for the following:

	•		In collaboration with legal counsel and accounting professionals, assistance with regulatory compliance (e.g., compliance with Section 162(m) of the Internal Revenue Code and FAS 123R);
	•		Development of long-term incentive compensation strategy;
	•		Development and update of our peer group in light of industry consolidations; and
	•		Research of issues and presentation of alternatives on topics of interest to the committee.

     The Executive Compensation and Stock Incentive Committee determined specific awards for 2007 through a qualitative analysis beginning from a base of objective market information. First, Watson Wyatt provided a memorandum to the chairman of the committee that included a detailed market analysis and observations of market competitiveness of the Chief Executive Officer’s and Chief Operating Officer’s base salary, target bonus opportunity and long-term incentive opportunity. The committee then reviewed this objective market information as a check to ensure that the current compensation and potential increases were within an acceptable competitive range. In addition, the committee analyzed factors such as our past and expected future performance, past and expected future individual performance, career objectives, retention considerations, the current business environment and anticipated changes, and our near-term and long-term business strategies. In other words, the committee combined objective and financial information with subjective and qualitative considerations. The committee made adjustments to base compensation, target annual bonus award opportunities and the quantity and form of long-term incentive award opportunities with a view to providing incentives that would encourage the performance that is necessary to achieve our business objectives.

     In reviewing the peer group analysis, the Executive Compensation and Stock Incentive Committee did not set executive compensation in accordance with a specific benchmark nor use a peer group subset in its analysis. The committee did, however, review proxy disclosures and compensation survey data. The peer group selected by the committee was comprised of both “primary comparators” and a “reference comparator.” The primary comparators were organizations that were within a range of approximately one-half to two times our asset size and the reference comparator was an organization of regional interest that was outside of that range. The primary and reference comparators were as follows:

	•		Primary comparators: Alabama National Bancorporation; BOK Financial Corporation; The Colonial Bancgroup, Inc.; Commerce Bankshares; Cullen/Frost Bankers, Inc.; FirstMerit Corporation; Fulton Financial Corporation; Hancock Holding Company; Mercantile Bankshares Corporation; Sky Financial Group; The South Financial Group, Inc.; Trustmark Corporation; Valley National Bancorp; and Whitney Holding Corporation.
	•		Reference comparator: Compass Bancshares, Inc.

     The proxy review analysis included the following:

	•		The pay levels and practices of the peer group of bank holding companies selected by the committee;
	•		The Chief Executive Officer’s and the Chief Operating Officer’s positions from both a “pay rank” perspective (e.g., highest paid and second-highest paid) and a “position match” perspective (e.g., Chairman and Chief Executive Officer, President and Chief Operating Officer);

	•		Base salary, annual bonus (both target opportunity and bonus actually paid), total cash compensation (salary plus bonus), long-term incentive opportunity and total direct compensation (salary plus bonus and long-term incentive opportunity); and
	•		Both descriptive statistics (e.g., 25th, 50th and 75th percentiles) for the primary comparators and our percentile ranking versus the peer group primary comparators for each pay element. Similar data was compiled for the reference comparator, but was not incorporated into the descriptive statistics or the percentile rankings.

     In its review of compensation survey data, the Executive Compensation and Stock Incentive Committee used nationally recognized bank industry surveys (primarily surveys provided by Watson Wyatt and Mercer LLC) reflecting similarly-sized banking organizations. Watson Wyatt provided the committee with comparisons using both a straight-line regression analysis, which related compensation to the asset size of the banking organization, and an “asset group” analysis, which examined pay data for the banking organizations falling within set asset-size groupings. This review included the following:

	•		An examination for the Chairman and Chief Executive Officer and the President and Chief Operating Officer positions, as well as other selected senior management positions;
	•		An examination of base salary, annual incentive opportunity and long-term incentive opportunity; and
	•		A calculation of descriptive statistics reflecting the 25th, 50th and 75th percentiles of the participant data.

     The Executive Compensation and Stock Incentive Committee believes that the overall compensation for our Chief Executive Officer and Chief Operating Officer is competitive with our peer group and is commensurate with the responsibilities assigned to their respective positions. Compensation for our other executive officers is comparatively less than the compensation for similarly situated officers in the peer group. Otherwise, our compensation policies are consistently applied for all of our officers. The difference between the award opportunities granted to Mr. Patterson as compared to Mr. Kelley, and to Messrs. Patterson and Kelley as compared to our other executive officers, is a reflection of differences in the level and scope of responsibility of their respective positions, and the market’s pattern of providing progressive award opportunities at higher levels.

Components of Compensation

     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 2007 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:

	•		Our salary budget for the applicable fiscal year, which includes the salary of all of our employees;
	•		Assessment of the competitiveness of the executive’s salary as compared to competitive market data (with primary emphasis on setting base salary at the median salary for the comparable position at

comparable bank holding companies unless a different compensation level is warranted by individual performance);

	•		The executive’s performance in carrying out his or her specific job responsibilities and attaining specific objectives that may have been established for the year;
	•		Our overall performance as a whole for the prior fiscal year; and
	•		Assessment of the appropriateness of the executive’s salary when compared to peers and on an internal equity basis.

     In 2007, the Executive Compensation and Stock Incentive Committee set base salary in reference to a combination of individual performance and our overall performance. The committee endeavored to understand competitive pay and compensation opportunities for similarly situated executive officers of comparable bank holding companies and to provide reasonably competitive compensation within the context of our achievements. The committee determined the amounts of base salary increases for our executive officers after consideration of:

	•		The executive officer’s pattern of achievement with respect to the budget and business plan performance in his/her area(s) of responsibility and overall managerial effectiveness with respect to planning, personnel development, communications, regulatory compliance and similar matters;
	•		Competitive pay levels for similarly situated executives in comparable bank holding companies;
	•		The current level of the executive officer’s base salary in relation to market competitive salary levels;
	•		Marketplace trends in salary increases (both geographical and by industry); and
	•		Consideration of our overall performance and aggregate cost affordability, retention risks, fairness in view of our overall salary increases and the executive officer’s potential for future contributions to the organization.

     In January 2008, the Executive Compensation and Stock Incentive Committee determined the base salary for its executive officers for 2008 based on the above methodology. Each Named Executive Officer’s base salary was adjusted effective as of January 1, 2008.

     Annual Incentive Compensation. Annual non-equity “bonuses” are provided through our annual incentive compensation program. This 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 and should provide meaningful compensation opportunities in relation to our achievement of key annual performance goals. We believe that such compensation opportunities will motivate participants in the program to achieve our established goals. 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 provide annual incentive compensation opportunities to Named Executive Officers under two programs – the Executive Performance Incentive Plan and the Home Office Incentive Plan. The Executive Performance Incentive Plan provides for the payment of cash incentive bonuses, as well as equity-based awards 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 who are eligible to participate. During 2007, the Chief Executive Officer and Chief Operating Officer were eligible to participate in the Executive Performance Incentive Plan. 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. The amount of the cash bonus may vary among participants from year to year.

     The subcommittee that administers the Executive Performance Incentive Plan consists of members of the Executive Compensation and Stock Incentive Committee who are qualified under all applicable independence standards (including Section 162(m) of the Internal Revenue Code and SEC Rule 16b-3). The subcommittee may establish performance goals for awards granted under the plan based on any of the following business criteria:

	•		Return on average equity or average assets;
	•		Deposits and other funding sources;
	•		Revenue, including interest income and/or non-interest income, and/or return on revenue;
	•		Cash flow (operating, free, cash flow return on equity, cash flow return on investment);
	•		Earnings, before or after taxes, interest, depreciation and/or amortization;
	•		Earnings per share;
	•		Net interest margin;
	•		Improvement in credit quality measures, including non-performing asset ratio, net charge-off ratio or reserve coverage of non-performing loans vs. peers;
	•		Efficiency ratio;
	•		Loan growth; and
	•		Total shareholder return.

     The subcommittee may take into account several factors when establishing performance goals but such goals must be objectively determinable and based on levels of achievement of the business criteria described above. No later than 90 days after the beginning of each fiscal year or any other performance period, 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.

     Following the applicable performance period, 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 earned under an award. The subcommittee has discretion to reduce or eliminate, but not increase, an amount that is payable under the Executive Performance Incentive Plan. Incentive cash bonuses are paid as soon as practicable following the end of the fiscal year.

     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 consider objective factors and to use its discretion to either increase or decrease resultant awards.

     The Home Office Incentive Plan and the Executive Performance Incentive Plan are similar but separate programs. Employees are eligible for either one program or the other, but not both. The Home Office Incentive Plan covers approximately 64 key management employees who are selected by our Board of Directors and does not impact the awards generated under the Executive Performance Incentive Plan. For 2007, participation in the Executive Performance Incentive Plan was limited to the two executive officers whose compensation is subject to the deduction limitations of Section 162(m) of the Internal Revenue Code. Awards granted under the Home Office Incentive Plan and the Executive Performance Incentive Plan during 2007 had the following characteristics:

	•		Awards were based on growth in average deposits and other funding sources, and return on average equity. These metrics were selected because of their relationship to shareholder value. Performance goals using these metrics were established and were applied consistently to all participants of both plans.
	•		The award opportunities were established on the basis of (i) each participant’s role and level in the organization, his or her potential to make significant contributions to our success and market competitive levels for similarly situated positions in comparable banking organizations, (ii) the nature of the executive officer’s position and scope of responsibilities so that performance goals were tailored to either our overall performance or business unit performance, depending on the scope of the executive officer’s responsibilities, and (iii) our business environment and positioning in comparison to key competitors, as well as our near-term business plan and longer-term business strategy, which were the basis for establishing performance goals.
	•		The relationship between performance goals and amount of award earned was set forth in a matrix which specified the target award opportunity for performance criteria.
	•		The actual performance achieved was compared to the goals established for the year, and the award earned was determined for each participant. For participants of the Executive Performance Incentive Plan, the Executive Compensation and Stock Incentive Committee certified the achievement of performance goals in writing, as is required.
	•		No discretion was applied to award payouts for 2007 performance under either plan.

     Awards under the Executive Performance Incentive Plan and Home Office Incentive Plan were given in 2007 to provide a cash bonus opportunity that was a percentage of each Named Executive Officer’s base salary as follows:

						Award Opportunity as a Percentage of Salary*
Executive Officer		Annual Incentive Plan Participation				Threshold				Target				Outstanding
Aubrey B. Patterson		Executive Performance Incentive Plan					33	%			100	%			200	%
L. Nash Allen, Jr.		Home Office Incentive Plan					15	%			45	%			90	%
James V. Kelley		Executive Performance Incentive Plan					25	%			75	%			150	%
W. Gregg Cowsert		Home Office Incentive Plan					17	%			50	%			100	%
Larry D. Bateman		Home Office Incentive Plan					17	%			50	%			100	%
Michael L. Sappington		Home Office Incentive Plan					17	%			50	%			100	%

     Awards were targeted to each executive’s role and scope of responsibility in the organization. For some individuals, performance goals were based entirely on overall company performance. For others, a portion of performance was also measured by goals that were tied to the area of the individual’s responsibility. For our Named Executive Officers, 2007 performance measures were blended as follows:

		Performance Criteria
						System-wide Community Bank
Executive Officer		Overall BancorpSouth Performance				Performance				Net Chargeoffs
Aubrey B. Patterson			100	%			0	%			0	%
L. Nash Allen, Jr.			100	%			0	%			0	%
James V. Kelley			100	%			0	%			0	%
W. Gregg Cowsert			75	%			0	%			25	%
Larry D. Bateman			100	%			0	%			0	%
Michael L. Sappington			75	%			25	%			0	%

     For 2007, the Executive Compensation and Stock Incentive Committee established the performance goals set forth below for the Named Executive Officers with respect to the performance criteria. The targeted amounts for each performance criteria were incorporated into our fiscal budget.

Performance Goal		Threshold Amount				Target Amount				Maximum Amount
Growth in Average Deposits		$	10,371,000,000			$	11,523,000,000			$	12,675,000,000
Return on Average Equity			10.82	%			12.73	%			14.64	%
Net Chargeoffs		0.1925% of Loans				0.175% of Loans				0.1575% of Loans

     With respect to system-wide community bank performance, the performance goal was based on the community bank financial budget for net income, loan growth, deposit growth and non-interest income. The portion of the target bonus that was based on this performance criterion was to be earned if 100% of the budgeted amount was achieved for each of these items. The maximum bonus was to be earned if 105% of budget was achieved. The threshold requirement was 95% of budget.

     Based on our actual performance in 2007, the cash incentive bonus payment represented 90% of the respective target awards. 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 for 2007.” The Executive Compensation and Stock Incentive Committee set similar performance targets for 2008.

     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 50^th 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:

	•		Stock options to focus on stock price appreciation;
	•		Restricted stock and restricted stock units as an incentive for continued service or to emphasize both our overall performance and executive retention; and
	•		Performance shares as an incentive to optimize our overall performance.

     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 us while maintaining a strong focus on performance. In 2005 and 2006, we amended our long-term incentive plans and obtained shareholder approval to enable us to provide awards that include performance criteria other than increase in market value. In 2006, we began implementing changes to our long-term incentive compensation strategy by reducing the role of stock options. Then, in early 2007, we introduced the opportunity to earn performance shares. Our anticipated pattern of equity grants will be to continue making stock option grants late in the year (just before the beginning of the new fiscal year) and to grant performance share award opportunities early in the year (as soon as knowledge of prior year results can be incorporated into the goal-setting process).

     Performance shares are equity awards denominated in shares of our common stock. The number of shares earned is based on the achievement of goals that reflect our overall financial and operating performance as determined by the Executive Compensation and Stock Incentive Committee. In addition, the value of earned performance shares is determined by the market value of our common stock. The award cycle is three years in length and is comprised of a two-year performance period followed by a one-year retention period. The “performance period” is set at two years to reflect a realistic horizon for goal setting in the current environment of the financial services industry and the

“retention period” is set at one year to enhance the retentive power of the performance share awards (three years overall) and to ensure that the impact of stock price performance reflects a longer-term period. The performance share element of the long-term incentive plans is configured so that a new three-year award cycle will begin every year.

     In 2007, equity-based awards were limited to executive officers who were responsible for long-term investment, operating or policy decisions and to executive officers who were instrumental in implementing those decisions. In determining the total number of performance shares to be granted, the Executive Compensation and Stock Incentive Committee considered the number of available shares under our 1994 Stock Incentive Plan but had no fixed formula for determining the total number of shares to be granted. In selecting the award recipients and determining the level of equity grants made in 2007, the committee utilized a combination of (i) market competitive data, (ii) the present scope of responsibility of the executive officer, (iii) the degree to which the business units influenced by the executive officer contributed to our profits, (iii) the degree to which asset quality and other risk decisions were influenced by the executive officer’s direction, (iv) the number of awards currently held by the executive officer, and (v) the long-term management potential of the executive officer. No single factor was weighed more heavily than any other factor in determining the amount of equity grants. Equity-based awards for 2007 were as follows:

•

60% of the long-term incentive award opportunity was granted as performance shares with an award cycle that encompasses 2007, 2008 and 2009 with the following performance and retention periods:

	–		The “performance period” for this award cycle is 2007-2008, with performance measured versus goals set in terms of our cumulative earnings per share and two-year average of deposits and other funding sources; and
	–		The “retention period” for this award cycle is 2009, with performance shares earned over the 2007-2008 “performance period” being paid out in early 2010 only to participants who continued their service through the end of the “retention period.”

•

The remaining 40% of the long-term incentive award opportunity was granted as stock options with the following terms:

	–		Stock options were granted that vest ratably on the basis of continued employment over the three-year period following the date of grant;
	–		Stock options were granted at the closing price of our common stock on the date of grant; and
	–		The maximum term of the stock option grant was seven years.

     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 for 2007 – Retirement Plan.” In addition, we maintain bank-owned life insurance that can be used for funding supplemental benefits to 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, we own and operate corporate aircraft to facilitate the business travel of our 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.

Internal Revenue Code Section 162(m)

     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, may prevent us from deducting that excess portion. 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.

Employment Contracts and Change in Control Arrangements

     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” (i.e., conviction of certain crimes, commission of certain acts of dishonesty or intentional neglect of or material inattention to duties) or the executive resigns “for cause” (i.e., a material adverse alteration in the executive’s position, a reduction in compensation or a material breach by us of our 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. Cowsert and Bateman, and 100% of such annual base compensation and annual bonus with respect to Mr. Allen. In addition, prior to Mr. Sappington’s retirement as of December 21, 2007, the amount of benefits payable under his agreement was 200% of his annual base compensation and annual bonus. 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 impact on them 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.”

     All equity incentives granted under our stock incentive plans, including those granted to the Named Executive Officers, become vested and/or exercisable immediately if we undergo a change in control. Under the Executive Performance Incentive Plan, if we experience a change in control, all participants will receive the maximum amount payable under the incentive bonus. This bonus will be paid as soon as practicable following the change in control.

Retirement Benefits

     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 referred to as our Retirement Plan, a traditional supplemental defined benefit plan referred to as our Restoration Plan, a supplemental defined benefit plan referred to as our Supplemental Executive Retirement Plan, and a contributory deferred compensation arrangement referred to as our 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 could contribute up to a maximum of $20,500 for 2007 ($15,500 limit for all employees plus $5,000 maximum “catch-up” for employees over the age of 50). We provide a matching contribution for the first five percent of base salary contributed in the plan, up to a maximum of $11,250 per year.

     We maintain the Retirement Plan, a tax-qualified, non-contributory, defined benefit retirement plan, for certain of 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 2007, the maximum annual benefit allowable under the Internal Revenue Code with respect to the Retirement Plan was $180,000 and the maximum amount of allowable annual compensation considered was $225,000.

     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 length of service and final average compensation but only to the extent that compensation and annual benefit accruals exceed the limits under the Internal Revenue Code and, therefore, are not included in the Retirement Plan.

     We also maintain the Supplemental Executive Retirement Plan, a non-qualified, non-contributory, unfunded defined benefit pension arrangement, for selected key employees in the form of a deferred compensation agreement. Benefits under the Supplemental Executive Retirement Plan are based primarily on average final compensation. This arrangement supplements the benefits under the Retirement Plan and the Restoration Plan.

     We also maintain the Deferred Compensation Plan to allow certain members of senior management to defer a portion of their cash compensation. Amounts that are deferred are credited with a market interest rate and are paid out upon retirement or termination of employment.

     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 do not receive any benefit from the Retirement Plan or the Restoration Plan, but will receive an automatic contribution to the 401(k) Plan equal to 2% of their respective salaries. This additional 2% contribution is not 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 normal or early retirement pursuant to the 401(k) Plan, the Retirement Plan, the Restoration Plan, the Supplemental Executive Retirement Plan and the Deferred Compensation Plan. The amounts each Named Executive Officer would have received if he had retired on December 31, 2007 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.

EXECUTIVE COMPENSATION

Summary Compensation Table for 2006 and 2007

     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, our three other most highly compensated executive officers who were serving as executive officers at December 31, 2007 and whose total compensation for 2007 exceeded $100,000, and one additional executive officer who would have been considered one of the three most highly compensation executive officers but for the fact that he had retired prior to December 31, 2007:

																										Change in
																										Pension Value
																										and Nonqualified
																						Non-Equity				Deferred
Name and Principal														Stock				Option				Incentive Plan				Compensation				All Other
Position		Year(1)				Salary(2)				Bonus				Awards				Awards(3)				Compensation(4)				Earnings(5)				Compensation (6)				Total
Aubrey B. Patterson			2007			$	717,586			$	—			$	—			$	162,281			$	645,827			$	832,485			$	27,420			$	2,385,599
Chairman and Chief			2006				686,685				—				—				22,790				824,022				863,946				36,203				2,433,646
Executive Officer
L. Nash Allen, Jr.			2007				216,827				—				—				10,181				87,815				139,133				22,782				476,738
Treasurer and Chief			2006				209,495				—				—				1,478				113,128				154,674				22,596				501,371
Financial Officer
James V. Kelley			2007				473,101				—				—				74,819				319,343				107,588				34,247				1,009,098
President and Chief			2006				452,728				—				—				10,164				407,455				118,885				23,368				1,012,600
Operating Officer
W. Gregg Cowsert			2007				305,638				—				—				11,883				179,563				117,232				17,058				631,374
Executive Vice			2006				293,318				—				—				1,723				205,323				165,570				15,553				681,487
President
Larry D. Bateman			2007				283,959				—				—				10,181				127,782				124,150				21,009				567,081
Executive Vice President
Michael L. Sappington (7)			2007				350,333				—				—				7,408				164,220				176,779				19,699				718,439
Executive Vice President			2006				336,859				—				—				1,478				213,568				160,172				20,298				732,375

		Deferred
Name		Compensation
Aubrey B. Patterson		$	16,500
L. Nash Allen, Jr.			10,000
James V. Kelley			––
W. Gregg Cowsert			––
Larry D. Bateman			––
Michael L. Sappington			50,000

(6)		Details of the amounts reported as All Other Compensation for 2007 are as follows:

						Company												Corporate
		401(k)				Airplane				Company				Country Club				Physical
Name		Contribution				Use*				Automobile				Dues				Exam
Aubrey B. Patterson		$	11,250			$	—			$	6,714			$	7,182			$	2,274
L. Nash Allen, Jr.			11,250				—				7,301				3,531				700
James V. Kelley			11,250				6,305				9,012				6,680				1,000
W. Gregg Cowsert			11,250				—				1,777				3,531				500
Larry D. Bateman			11,250				—				5,728				3,531				500
Michael L. Sappington			11,250				—				6,303				1,646				500

     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 our 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 of a benefit as of December 31, 2007 that will be paid at the officer’s normal retirement date (age 65), based on the benefit formula and the executive’s current pay and service. In the case of Mr. Patterson, the Summary Compensation Table shows the value of his postponed retirement benefit because he is presently older than his normal retirement age.

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

	•		Service accruals: As the executive earns an additional year of service, the present value of the liability increases because the officer has earned one year more service than he had at the prior measurement date.
	•		Compensation increases/decreases since prior year: As the executive’s compensation increases, the present value of the liability increases because the officer’s final average monthly compensation has increased since the prior measurement date. If the executive’s compensation decreases, however, the final average monthly compensation will not decrease in connection with the Retirement Plan or Restoration Plan because the definition of final average monthly compensation in those plans is based on the highest average of all years of earnings, and there would be no change to the present value of the liability. The only plan that is affected if there is a decrease in compensation is the Supplemental Executive Retirement Plan, because the final average monthly compensation in the Supplemental Executive Retirement Plan is based on the last 36 months of compensation, which would cause the present value of the liability to decrease.
	•		Aging: The change in pension amounts shown in the Summary Compensation Table attributable to the retirement plans are present values of retirement benefits that will be paid in the future. As the executive approaches retirement, the present value of the liability increases because the executive is one year closer to retirement than he was at the prior measurement date.
	•		Changes in assumptions since prior year: The change in benefit shown in the Summary Compensation Table is the present value of the increase in pension benefits during the applicable year. In order to

calculate the value today of benefits that will be paid in the future, a discount rate and mortality table is used. The discount rate used to calculate the present value of benefits increased since the prior year, which caused a decrease in the present value of the benefit as of December 31, 2007. The mortality table used to calculate the present value of benefits remained the same since the prior year, which caused no change to the present value of the benefit as of December 31, 2007.

The pension benefits and assumptions used to calculate these values are described in more detail in the section below entitled “EXECUTIVE COMPENSATION — Pension Benefits for 2007.”

Grants of Plan-Based Awards for 2007

     The following table sets forth certain information regarding plan-based awards granted to the Named Executive Officers during 2007:

																														All
																														Other
																														Stock				All Other								Grant
																														Awards:				Option								Date Fair
																														Number				Awards:				Exercise				Value of
																														of				Number of				or Base				Stock
						Estimated Future Payouts Under Non-												Estimated Future Payouts Under												Shares				Securities				Price of				and
						Equity Incentive Plan Awards(1)												Equity Incentive Plan Awards(2)												of Stock				Underlying				Option				Option
Name		Grant Date				Threshold				Target				Maximum				Threshold				Target				Maximum				or Units				Options				Awards				Awards(3)
Aubrey B. Patterson			11/01/07			$	236,803			$	717,586			$	1,435,172				—				—				—				—				93,200			$	22.97			$	461,526
			01/23/07				—				—				—				10,850				21,700				43,400				—				—				—				542,500
L. Nash Allen, Jr.			11/01/07				32,199				97,572				195,144				—				—				—				—				4,800				22.97				23,770
			01/23/07				—				—				—				720				1,440				2,880				—				—				—				36,000
James V. Kelley			11/01/07				117,093				354,826				709,652				—				—				—				—				50,500				22.97				250,076
			01/23/07				—				—				—				5,350				10,700				21,400				—				—				—				267,500
W. Gregg Cowsert			11/01/07				50,430				152,819				305,638				—				—				—				—				5,600				22.97				27,731
			01/23/07				—				—				—				840				1,680				3,360				—				—				—				42,000
Larry D. Bateman			11/01/07				46,853				141,980				283,960				—				—				—				—				4,800				22.97				23,770
			01/23/07				—				—				—				720				1,440				2,880				—				—				—				36,000
Michael L. Sappington			11/01/07				57,805				175,167				350,334				—				—				—				—				—				—				—

Outstanding Equity Awards at 2007 Fiscal Year-End

     The following table provides certain information with respect to the Named Executive Officers regarding outstanding equity awards as of December 31, 2007 that represent potential amounts that may be realized in the future:

																						Stock Awards
																																		Equity
																																		Incentive
																																		Plan
																														Equity				Awards:
		Option Awards																												Incentive				Market or
										Equity																				Plan				Payout
										Incentive																				Awards:				Value of
										Plan Awards:												Number				Market				Number of				Unearned
										Number of												of Shares				Value of				Unearned				Shares,
										Securities												or Units				Shares or				Shares,				Units or
		Number of Securities								Underlying												of Stock				Units of				Units or				Other Rights
		Underlying Unexercised								Unexercised				Option				Option				That				Stock Held				Other Rights				That Have
		Options(1)								Unearned				Exercise				Expiration				Have Not				that Have				That Have				Not
Name		(Exercisable)				(Unexercisable)				Options				Price				Date				Vested				Not Vested				Not Vested				Vested(2)
Aubrey B. Patterson			56,000				—				—			$	19.88				10/31/2008				—				—				—			$	—
			60,000				—				—				17.31				10/31/2009				—				—				—				—
			75,000				—				—				13.06				10/31/2010				—				—				—				—
			75,000				—				—				15.50				10/31/2011				—				—				—				—
			75,000				—				—				19.18				10/31/2012				—				—				—				—
			75,000				—				—				23.51				10/31/2013				—				—				—				—
			75,000				—				—				24.03				10/31/2014				—				—				—				—
			80,000				—				—				23.19				11/30/2015				—				—				—				—
			24,666				49,334	(3)			—				24.78				10/31/2013				—				—				—				—
			—				93,200	(4)			—				22.97				10/31/2014				—				—				—				—
			—				—				—				—				—				—				—				21,700	(5)			512,337	(5)
L. Nash Allen, Jr.			10,000				—				—				19.88				10/31/2008				—				—				—				—
			10,000				—				—				17.31				10/31/2009				—				—				—				—
			12,000				—				—				13.06				10/31/2010				—				—				—				—
			12,000				—				—				15.50				10/31/2011				—				—				—				—
			12,000				—				—				19.18				10/31/2012				—				—				—				—
			12,000				—				—				23.51				10/31/2013				—				—				—				—
			11,000				—				—				24.03				10/31/2014				—				—				—				—
			12,000				—				—				23.19				11/30/2015				—				—				—				—
			1,600				3,200	(3)			—				24.78				10/31/2013				—				—				—				—
			—				4,800	(4)			—				22.97				10/31/2014				—				—				—				—
			—				—				—				—				—				—				—				1,440	(5)			33,998	(5)
James V. Kelley			30,000				—				—				13.06				10/31/2010				—				—				—				—
			30,000				—				—				15.50				10/31/2011				—				—				—				—
			30,000				—				—				19.18				10/31/2012				—				—				—				—
			32,000				—				—				23.51				10/31/2013				—				—				—				—
			32,000				—				—				24.03				10/31/2014				—				—				—				—
			35,000				—				—				23.19				11/30/2015				—				—				—				—
			11,000				22,000	(3)			—				24.78				10/31/2013				—				—				—				—
			—				50,500	(4)			—				22.97				10/31/2014				—				—				—				—
			—				—				—				—				—				—				—				10,700	(5)			252,627	(5)
W. Gregg Cowsert			10,000				—				—				19.88				10/31/2008				—				—				—				—
			14,000				—				—				17.31				10/31/2009				—				—				—				—
			15,000				—				—				15.50				10/31/2011				—				—				—				—
			12,000				—				—				19.18				10/31/2012				—				—				—				—
			13,000				—				—				23.51				10/31/2013				—				—				—				—
			14,000				—				—				24.03				10/31/2014				—				—				—				—
			14,000				—				—				23.19				11/30/2015				—				—				—				—
			1,866				3,734	(3)			—				24.78				10/31/2013				—				—				—				—
			—				5,600	(4)			—				22.97				10/31/2014				—				—				—				—
			—				—				—				—				—				—				—				1,680	(5)			39,665	(5)
Larry D. Bateman			8,000				—				—				19.88				10/31/2008				—				—				—				—
			3,000				—				—				13.06				10/31/2010				—				—				—				—
			8,000				—				—				15.50				10/31/2011				—				—				—				—
			7,000				—				—				19.18				10/31/2012				—				—				—				—
			10,000				—				—				23.51				10/31/2013				—				—				—				—
			10,000				—				—				24.03				10/31/2014				—				—				—				—
			12,000				—				—				23.19				11/30/2015				—				—				—				—
			1,600				3,200	(3)			—				24.78				10/31/2013				—				—				—				—
			—				4,800	(4)			—				22.97				10/31/2014				—				—				—				—
			—				—				—				—				—				—				—				1,440	(5)			33,998	(5)
Michael L. Sappington(6)			—				—				—				—				—				—				—				—				—