<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549

                                   FORM 10-K


                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


   For the fiscal year ended DECEMBER 31, 1996 Commission file number 0-4518


                             DEPOSIT GUARANTY CORP.
                             ----------------------
             (Exact name of registrant as specified in its charter)


              MISSISSIPPI                                  64-0472169
              -----------                                  ----------
   (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                   Identification No.)

  210 EAST CAPITOL STREET, JACKSON, MS                       39201
  ------------------------------------                       -----
(Address of principal executive offices)                  (Zip Code)


       Registrant's telephone number, including area code (601) 354-8564
                                                          --------------

        Securities registered pursuant to Section 12(b) of the Act: NONE
                                                                    ----

          Securities registered pursuant to Section 12(g) of the Act:

                           COMMON STOCK, NO PAR VALUE
                           --------------------------

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No
                                             ---    ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. [X]

Aggregate market value of voting stock held by nonaffiliates of the Registrant
as of March 3, 1997: $1,083,820,988.

Common stock, no par value, outstanding as of March 3, 1997: 40,778,218 shares

Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on April 15, 1997, are incorporated in Parts III and IV
of this report.

================================================================================
<PAGE>   2



                             CROSS REFERENCE INDEX




<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>
PART I    Item 1   Business                                                4-7
                   Statistical data required by Exchange
                   Act Guide 3 and Securities Act Guide
                   3 included in Management's Discussion
                   and Analysis                                           9-28
          Item 2   Properties                                                7
          Item 3   Legal Proceedings                                         8
          Item 4   There has been no submission of matters to a
                   vote of shareholders during the quarter ended
                   December 31, 1996.

PART II   Item 5   Market for Registrant's Common Equity
                   and Related Stockholder Matters                       24,28
          Item 6   Selected Financial Data                                   9
          Item 7   Management's Discussion and Analysis
                   of Financial Condition and Results
                   of Operation                                           9-28
          Item 8   Financial Statements and
                   Supplementary Data:
                   Consolidated Statements of Condition -
                   December 31, 1996 and 1995                               29
                   Consolidated Statements of Earnings -
                   Years Ended December 31, 1996,
                   1995, and 1994                                           30
                   Consolidated Statements of Changes in
                   Stockholders' Equity - Years
                   Ended December 31, 1996, 1995,
                   and 1994                                                 31
                   Consolidated Statements of Cash Flows -
                   Years Ended December 31, 1996,
                   1995, and 1994                                           32
                   Notes to Consolidated Financial Statements            33-46
                   Independent Auditors' Report                             47

          Item 9   There has been no disagreement with
                   accountants on accounting and financial
                   matters.
</TABLE>
<PAGE>   3
                             CROSS REFERENCE INDEX



<TABLE>
<S>                                                                      <C>
PART III  Item 10  Directors and Executive Officers of the
                   Registrant                                            6,7,*
          Item 11  Executive Compensation                                   *
          Item 12  Security Ownership of Certain Beneficial
                   Owners and Management                                    *
          Item 13  Certain Relationships and Related
                   Transactions                                             *

PART IV   Item 14  Exhibits, Financial Statement Schedules,
                   and Reports on Form 8-K
                   (a)(1)   Financial Statements (See Item 8
                            for reference)
                       (2)  Financial Statement Schedules normally
                            required on Form 10-K are omitted since
                            they are not applicable.
                       (3)  Exhibit index is on page 51 of this
                            Form 10-K and exhibits are filed
                            herewith.
                   (b) No reports on Form 8-K were filed
                            during the last quarter of the period
                            covered by this report.
                   (c) The response to this portion of Item 14
                            is submitted as a separate section of
                            this report.
                   (d) Not applicable
</TABLE>

*    Information called for by Part III (Items 10 through 13) is incorporated
     by reference to the Registrant's Proxy Statement for the 1997 Annual
     Meeting of Shareholders filed with the Securities and Exchange Commission.
<PAGE>   4
BUSINESS

General

         Deposit Guaranty Corp. (the "Company") is a Mississippi business
corporation organized in 1968 as a bank holding company registered under the
Bank Holding Company Act of 1956, as amended and is headquartered in Jackson,
Mississippi. During 1996, the Company conducted its business through its
banking subsidiaries, the largest of which are the 98%-owned Deposit Guaranty
National Bank ("Deposit Guaranty") with $4.5 billion in assets and the
100%-owned Commercial National Bank (Commercial) with $1.2 billion in assets,
two other banking subsidiaries and its various bank-related subsidiaries.
Through its subsidiaries, which includes 205 banking offices, the Company
serves customers primarily in Mississippi, Louisiana, and Arkansas, offering
complete banking, mortgage banking, discount brokerage and trust services. The
Company also provides mortgage banking services in Texas, Nebraska and Oklahoma
through two of its subsidiaries.

         On June 29, 1996, the Company purchased Bank of Gonzales Holding
Company, a $126 million asset bank holding company located in Gonzales,
Louisiana in a transaction accounted for as a purchase business combination.
The results of operations of this acquired company, which are not material, are
included in the 1996 financial statements from the date of acquisition.

         On June 29, 1996, the Company purchased McAfee Mortgage and Investment
Company, located in Lubbock, Texas, in a transaction accounted for as a
purchase business combination. McAfee Mortgage and Investment Company has
fifteen offices located throughout Texas and originated approximately $240
million in mortgage loans in 1995. The results of operations of this acquired
company which are not material, are included in the 1996 financial statements
from the date of acquisition

         On November 1, 1996, the Company purchased Tuscaloosa Bancshares,
Inc., a bank holding company with approximately $41 million in total assets
located in Denham Springs, Louisiana in a transaction accounted for as a
purchase business combination. The results of operations of this acquired
company, which are not material, are included in the 1996 financial statements
beginning July 1, 1996.

         On December 26, 1996, a definitive agreement was reached to acquire
First Capital Bancorp., Inc., a bank holding company located in Monroe,
Louisiana with approximately $186 million in total assets. The transaction,
which will be accounted for as a pooling of interests, is subject to the
approval of the stockholders of First Capital Bancorp., Inc. and regulatory
authorities and is expected to be consummated during the first quarter of 1997.

         On January 3, 1997, the acquisition of Jefferson Guaranty Bancorp, a
one bank holding company, located in Metairie, Louisiana, with approximately
$300 million in total assets was consummated. The Company paid a combination of
1,759,688 shares its common stock and $10 million in cash for all of the
outstanding common stock of Jefferson Guaranty Bancorp. The transaction was
accounted for as a purchase business combination.

         On February 20, 1997, a definitive agreement was reached to acquire
NBC Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana with approximately $70 million in total assets. The transaction,
which will be accounted for as a purchase business combination, is subject to
the approval of the stockholders of NBC Financial Corporation and regulatory
authorities and is expected to be consummated during the second quarter of
1997.

         During the first quarter of 1997, the Board of Directors of the
Company approved a plan to merge Deposit Guaranty National Bank into Deposit
Guaranty Interim National Bank, a newly formed subsidiary. Each outstanding
share of Deposit Guaranty National Bank common stock will be exchanged for
9.667 shares of Company common stock. The Company owns all of the shares of
Deposit Guaranty Interim National Bank and 97.9% of the shares of Deposit
Guaranty National Bank. The Company's Board of Directors has also authorized
the purchase of all or part of the Company's common shares to be exchanged as
part of the acquisition. The acquisition is expected to be consummated during
the second quarter of 1997.

        During the first quarter of 1997, the Board of Directors of the Company
approved the use of an accelerated share repurchase program with a third party
as a means of accomplishing previously approved and future share repurchases in
connection with specific purchase business combinations.
<PAGE>   5

SUPERVISION AND REGULATION

         As a bank holding company, the Company's activities and those of its
banking and nonbanking subsidiaries are limited to the business of banking and
activities closely related or incidental to banking. The Company may not
directly or indirectly acquire the ownership or control of more than 5% of any
class of voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board.

         The Company's subsidiary banks are subject to supervision and
examination by the Office of the Comptroller of the Currency ("OCC"). All of
the Company's subsidiary banks are insured by, and therefore subject to the
regulations of, the Federal Deposit Insurance Corporation ("FDIC"), and are
also subject to requirements and restrictions under federal law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Other federal and state laws and
regulations also affect the operations of the Company's subsidiaries.

         The Company's subsidiary banks are subject to restrictions under
federal law applicable to certain transactions between each of them and the
Company and its nonbanking subsidiaries, including loans, other extensions of
credit, investments or asset purchases. Such transactions between any
subsidiary bank and the Company or any nonbanking subsidiary are limited in
amount to 10% of such subsidiary bank's capital and surplus. The total of such
transactions between any subsidiary bank and the Company and certain of its
affiliates, with certain exceptions, is limited to an aggregate of 20% of such
subsidiary bank's capital and surplus. Furthermore, loans and extensions of
credit from a subsidiary bank to the Company or its nonbank affiliates are
required to be secured in specified amounts by specified types of collateral.
At December 31, 1996, the banks could lend the Company a maximum of
approximately $33.0 million in aggregate.

         As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act ("FIRREA") on August 9, 1989, a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with (i) the
default of a commonly controlled FDIC-insured depository institution or (ii)
any assistance provided by the FDIC to a commonly controlled depository
institution in danger of default if the FDIC notifies the depository
institution within two years of incurring such loss. Under Federal Reserve
policy, the Company is expected to act as a source of financial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary.

         The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") provides criteria for categorizing the capital strength of FDIC
insured depository institutions. FDICIA substantially revises the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other federal banking statutes. The
Company's insured depository institutions have been categorized as "well
capitalized" under the guidelines of FDICIA.

         The Company's subsidiary banks are subject to FDIC deposit insurance
assessments. These insured depository institutions qualified for the lowest
assessment allowed by FDICIA. Beginning in 1997, the FDIC will assess
the banks only for the purpose of retiring debt of the Financing Corporation
(FICO). This assessment will be charged at an annual rate of $.013 of Bank
Insurance Fund deposits.

<PAGE>   6

         During 1996, the Company and its subsidiaries were engaged in the
general banking business and activities closely related to banking or to
managing or controlling banks, as authorized by the laws of the United States
and regulations pursuant thereto. The Company's banking subsidiaries comprise
more than 99% of the related combined revenue, profits and assets of all
industry segments of the Company.

COMPETITION

         The Company is a leader in the majority of its markets. Deposit
Guaranty, located throughout Mississippi, is the second largest bank in
Mississippi. Commercial is the sixth largest bank in Louisiana.

         There are numerous other banks and financial institutions which
compete with the Company and its subsidiaries in making loans, accepting
deposits, providing credit, and performing other banking services. The Company
also competes with other providers of financial services, such as investment
companies, brokerage firms, finance companies and insurance companies, which
are involved in marketing various types of loans, investments and other
services. For information regarding industry segments see "Management's
Discussion and Analysis."


PERSONNEL

         On December 31, 1996, the Company and its subsidiaries had
approximately 3,193 full-time equivalent employees.


EXECUTIVE OFFICERS OF THE REGISTRANT

         The chart provided below contains certain information concerning the
executive officers of the Company and its principal subsidiaries.

<TABLE>
<CAPTION>
                                 Position(s) And Office(s)
                                   Held With the Company             Assumed
            Name           Age       And Subsidiaries           Present Office(s)
            ----           ---       ----------------           -----------------
<S>                         <C>  <C>                            <C>
E. B. Robinson, Jr.         55   Chairman of the Board and      January 1, 1984
                                 Chief Executive Officer
                                 of the Company and Deposit
                                 Guaranty

Howard L. McMillan, Jr.     58   President and Chief            January 1, 1984
                                 Operating Officer of the
                                 Company and Deposit
                                 Guaranty

Thomas M. Hontzas           52   Executive Vice President       May 18, 1982
                                 of the Company and
                                 Deposit Guaranty
</TABLE>

(Continued)


<PAGE>   7
<TABLE>
<CAPTION>
                                 Position(s) And Office(s)
                                   Held With the Company             Assumed
            Name           Age       And Subsidiaries           Present Office(s)
            ----           ---       ----------------           -----------------
<S>                         <C>  <C>                            <C>
W. Parks Johnson            54   Executive Vice President       February 16, 1994
                                 of the Company and
                                 Deposit Guaranty

James S. Lenoir             54   Executive Vice President       February 15, 1983
                                 and Chief Credit Officer
                                 of the Company and Deposit
                                 Guaranty

Arlen L. McDonald           48   Executive Vice President       March 16, 1976
                                 and Chief Financial
                                 Officer of the Company
                                 and Deposit Guaranty

W. Stanley Pratt            51   Executive Vice President       September 30, 1996
                                 of the Company and
                                 Deposit Guaranty

Steven C. Walker            47   Executive Vice President       September 30,1996
                                 of the Company and
                                 Deposit Guaranty

Stephen E. Barker           40   Controller and Principal       February 16, 1993
                                 Accounting Officer of the
                                 Company and Deposit Guaranty

J. Clifford Harrison        43   General Counsel and            January 1, 1996
                                 Secretary of the Company
                                 and Deposit Guaranty
</TABLE>

     All executive officers have held executive or senior management positions
with the Company or its principal subsidiaries for more than five years.


ITEM 2. PROPERTIES

     The Company has its principal office in Deposit Guaranty Plaza ("Plaza"),
210 East Capitol Street, Jackson, Mississippi, a twenty-two story office tower.
The Company owns the Plaza in addition to the building ("Building") at 200 East
Capitol Street, Jackson, Mississippi, adjacent to the Plaza. The building,
completed in its present form in 1958, was renovated during 1975. Both the
Plaza and the Building are occupied by the Company, Deposit Guaranty, and
various tenants. Deposit Guaranty Mortgage Company is also located in the
Building.


<PAGE>   8

     The Company also owns the Commercial Center, located in downtown
Shreveport, Louisiana, at 333 Texas Street. The complex is occupied by
Commercial and various tenants. Commercial Center is comprised of a twenty-four
story office tower which was placed in service in 1986, a fifteen story office
building constructed in 1940, and an adjoining parking garage which was
completed in 1986.

     Deposit Guaranty owns 121 of its 139 full-service branch banking
facilities. The remaining branch banking facilities as well as its mortgage
branch facilities are occupied under leases expiring from 1997 through 2024.
The Company also holds fee title to 5 tracts of land held as locations for
additional banking facilities in the future.

     The Company's management considers all of its buildings and leased
premises to be in good condition. None of the properties described above are
subject to any significant encumbrances.


ITEM 3.  LEGAL PROCEEDINGS

     The Company's subsidiary, Deposit Guaranty National Bank (DGNB), is a
defendant in a case in which the plaintiffs are some of the beneficiaries of a
trust for which DGNB is the trustee. In an amended complaint, the plaintiffs
claim that DGNB was negligent in its dealings with the trust property, breached
its trust duties by allegedly abusing its discretion and negligently handling
trust assets, engaged in self dealing, and was grossly negligent in its handling
of the trusts. The case seeks actual damages for waste of trust assets and loss
of income and punitive damages, both in an unspecified amount to be proven at
trial, and attorney fees and court costs. While the ultimate outcome of the
lawsuit cannot be predicted with certainty, management denies all liability and
believes that the ultimate resolution of this matter will not have a material
effect on the Company's consolidated financial statements.

     In addition, the Company is subject to numerous other pending and
threatened legal actions arising in the normal course of business and
management believes that the ultimate resolution of these matters will not have
a material effect on the Company's consolidated financial statements.
<PAGE>   9
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             Deposit Guaranty Corp.


<TABLE>
<CAPTION>
TABLE 1 - SELECTED FINANCIAL DATA
(In Thousands Except Share Data)                                        Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------
                                              1996            1995            1994             1993             1992
------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>              <C>              <C>
Statements of earnings
Interest income                           $    432,222    $    402,704    $    307,272     $    299,327     $    322,114
Interest expense                               182,688         173,432         125,881          124,687          155,459

Net interest income                            249,534         229,272         181,391          174,640          166,655
Provision for possible loan losses               5,340           2,160          (4,750)         (16,000)          10,378
------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
   possible loan losses                        244,194         227,112         186,141          190,640          156,277
Other operating income                         117,245          91,989          93,499           74,781           67,977
Other operating expenses                       237,208         211,452         180,047          171,567          164,470
------------------------------------------------------------------------------------------------------------------------
Income before income taxes                     124,231         107,649          99,593           93,854           59,784
Income tax expense                              40,621          35,029          32,463           27,302           14,270
------------------------------------------------------------------------------------------------------------------------
Net income                                $     83,610    $     72,620    $     67,130     $     66,552     $     45,514
========================================================================================================================
Net income per share
   Primary                                $       2.16    $       1.89    $       1.90     $       1.89     $       1.34
   Fully diluted                                  2.16            1.89            1.90             1.89             1.30
Cash dividends per share                          .715            .605            .530             .465             .400
Weighted average shares outstanding
   Primary                                  38,760,192      38,431,162      35,336,124       35,299,704       34,067,328
   Fully diluted                            38,760,192      38,431,162      35,336,124       35,299,704       34,930,564

Statement of condition - averages
Total assets                              $  6,026,548    $  5,571,697    $  4,940,977     $  4,826,726     $  4,777,596
Earning assets                               5,395,343       4,961,261       4,413,938        4,333,740        4,275,345
Securities available for sale                1,293,830         186,194         712,184        1,308,634             --
Investment securities                          130,255       1,365,070         718,891          396,011        1,616,658
Loans, net of unearned income                3,774,490       3,273,408       2,581,724        2,293,416        2,261,034
Deposits                                     4,750,894       4,438,797       3,997,038        3,867,669        3,876,927
Long-term debt                                  67,888            --              --               --              6,320
Total stockholders' equity                     551,754         498,023         429,967          367,592          315,833

Selected ratios
Return on average assets                          1.39%           1.30%           1.36%            1.38%             .95%
Return on average equity                         15.15           14.58           15.61            18.10            14.41
Net interest margin - tax equivalent              4.77            4.75            4.24             4.18             4.12
Efficiency ratio                                 63.35           64.62           64.22            67.23            67.68
Loans to deposits                                79.45           73.75           64.59            59.30            58.32
Allowance for possible loan losses to
   loans, net of unearned income                  1.56            1.64            1.95             2.56             3.30
Net charge-offs (recoveries) to average
   loans, net of unearned income                   .10             .12             .10             (.14)            1.02
Dividend payout                                  33.10           32.01           27.89            24.67            29.96
Average equity to average assets                  9.15            8.94            8.70             7.62             6.61
Leverage ratio                                    8.23            7.87            8.43             8.13             6.80
Tier I risk-based                                11.42           11.05           12.49            13.28            12.00
Total risk-based                                 12.67           12.30           13.75            14.54            13.27
</TABLE>

All share data reflects a 2 for 1 stock split declared in 1996.

The dividend payout ratio is calculated using historical Deposit Guaranty
Corp. dividends per share.

FINANCIAL REVIEW

   This section of the Annual Report reviews the results of operations and
assesses the financial condition of Deposit Guaranty Corp. (the Company). This
discussion should be read in conjunction with the consolidated financial
statements included in this Annual Report.

   Net income for 1996 achieved record levels both in total and on a per-share
basis. The Company's reported net income of $83.6 million for 1996 was 15%
greater than that reported for 1995. On a per share basis, earnings increased
14% over the same period to $2.16. Several factors contributed to the favorable
results including increases in earning assets and fee income.


<PAGE>   10



TABLE 2 - SUMMARY OF QUARTERLY RESULTS
(In Thousands Except Share Data)

   The summary of quarterly results of operations is presented in the following
table.

<TABLE>
<CAPTION>

                                                                 Quarter Ended
------------------------------------------------------------------------------------------------
                                                   Dec. 31     Sept. 30     June 30     March 31
------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>         <C>         <C>
1996
Interest income                                   $ 111,877    $ 110,751   $ 104,723   $ 104,871
Net interest income                                  65,637       64,745      59,988      59,164
Provision for possible loan losses                    1,335        1,335       1,335       1,335
Gains (losses) on securities available for sale         (67)           6         487        (414)
Income before income taxes                           29,134       33,492      30,515      31,090
Net income                                           19,485       22,200      20,436      21,489
Net income per share                                    .50          .57         .53         .56

1995
Interest income                                   $ 107,669    $ 104,007   $  98,786   $  92,242
Net interest income                                  61,352       58,453      55,717      53,750
Provision for possible loan losses                      120        1,040       1,000        --
Gains (losses) on securities available for sale         831           69          24          (5)
Income before income taxes                           25,121       30,761      25,398      26,369
Net income                                           16,563       20,711      17,374      17,972
Net income per share                                    .42          .55         .45         .47
</TABLE>

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

Return on average assets and return on average equity rose 9 basis points to
1.39% and 57 basis points to 15.15%, respectively, from 1995 to 1996.

   The volume of earning assets continued to rise throughout 1996 due to both
acquisitions and growth in deposits in existing markets. Earning asset growth
was concentrated in loans as strong demand continued throughout 1996. Although
only slightly higher than 1995, the net interest margin remains strong and,
combined with a 9% increase in average earning assets, produced a steady
increase in net interest income.

   At the end of 1996, total assets were $6.4 billion which represents an
increase of 6%, or $357 million, from December 31, 1995. Average total assets
for 1996 increased 8%, or $455 million, from 1995.

   Capital ratios remain well above the minimum regulatory guidelines. The
leverage ratio at December 31, 1996, was 8.23% compared to 7.87% for 1995. Tier
I capital and total risk-based capital ratios at year-end 1996 were 11.42% and
12.67%, respectively. The capital ratios of each of the Company's banking
subsidiaries categorize them as "well capitalized" according to the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).

   In the fourth quarter, plans were announced to consolidate the four banking
subsidiaries under one charter pursuant to the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 (Riegle-Neal), which becomes effective on
June 1, 1997. Prior to Riegle-Neal, bank holding companies with multi-state
operations were required to operate under a separate banking charter in each
state. Included in results of operations for 1996 is an after-tax charge of
$2.4 million for costs associated with the Company's consolidation plans which
are expected to be completed by the end of the third quarter of 1997. The
benefits of consolidation include streamlining management and consolidation of
back-office operations.

   Identification of the changes in the significant components of earnings from
quarter-to-quarter aids in understanding the results of operations. Loan growth
throughout 1996, increasing yields in the securities portfolio, and an increase
in interest-earning assets due to acquisitions contributed to the increase in
net interest income in the third and fourth quarters. In the first quarter,
$1.8 million in after-tax gains were realized from the disposition of assets
related to expired lease financing transactions. In the fourth quarter, the
Company recorded an after-tax charge of $2.4 million for the estimated cost of
the planned consolidation of its subsidiary banks.

<PAGE>   11

TABLE 3 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
(Dollars in Thousands)

   The following table shows the major categories of interest-earning assets
and interest-bearing liabilities with their corresponding average balances,
related interest income or expense and the resulting yield or rate for 1996,
1995 and 1994.

<TABLE>
<CAPTION>
                                              1996                             1995                             1994
-------------------------------------------------------------------------------------------------------------------------------
                                            Interest  Average                Interest  Average                Interest  Average
                                 Average     Income/   Yield/     Average     Income/   Yield/     Average     Income/   Yield/
Assets                           Balance     Expense    Rate      Balance     Expense    Rate      Balance     Expense    Rate
-------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>    <C>          <C>          <C>    <C>          <C>          <C>
Interest-earning assets:
Loans, net of unearned
  income                       $3,774,490   $329,426     8.73%  $3,273,408   $289,659     8.85%  $2,581,724   $206,280     7.99%
Investment securities:
  Taxable                         130,250     10,467     8.04    1,256,785     87,896     6.99      609,604     41,511     6.81
  Exempt from Federal
   income tax                           5          2    10.75      108,285     11,664    10.77      109,287     11,876    10.87
Securities available
  for sale:
  Taxable                       1,115,168     72,576     6.51      169,316     10,095     5.96      710,738     36,353     5.11
  Exempt from Federal
   income tax                     178,662     16,602     9.29       16,878      1,415     8.38        1,446        118     8.16
Trading account
  securities                        6,394        511     7.99        5,758        445     7.73        4,714        322     6.83
Federal funds sold and
  securities purchased
  under agreements
  to resell                       184,757      9,989     5.41      107,529      6,317     5.87      269,432     11,111     4.12
Interest-bearing
  bank balances                     5,617        325     5.79       23,302      1,153     4.95      126,993      5,184     4.08
-------------------------------------------------------------------------------------------------------------------------------
Total interest-earning
  assets                        5,395,343    439,898     8.15    4,961,261    408,644     8.24    4,413,938    312,755     7.09
Noninterest-earning assets:
Cash and due from banks           302,696                          327,200                          298,143
Bank premises and
  equipment                       147,076                          142,750                          128,862
Other assets                      235,543                          194,437                          144,857
Allowance for possible
  loan losses                     (60,001)                         (59,126)                         (61,178)
Unrealized gain on securities
  available for sale                5,891                            5,175                           16,355
-------------------------------------------------------------------------------------------------------------------------------
Total assets                   $6,026,548                       $5,571,697                       $4,940,977
===============================================================================================================================
</TABLE>

For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding. Interest income and average yield on
tax-exempt assets have been calculated on a fully tax equivalent basis using a
tax rate of 35% for all years.

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

     During 1995, loan growth throughout each quarter combined with a general
increase in interest-earning assets contributed to the increase in net interest
income. The Company recorded a provision for possible loan losses of $1 million
for both the second and third quarters primarily as a result of loan growth. In
the third quarter, a $2.7 million refund of insurance premiums was recorded as
a result of the FDIC lowering the premium rate on insured deposits. In the
fourth quarter, a charge of $3.5 million was recorded for the estimated cost of
a proposed settlement of a class action suit concerning collateral protection
insurance. The suit was settled with no additional expense incurred in 1996.

     Much of the growth during the past three years comes from strategic
acquisitions in new markets and acquisitions designed to enhance the Company's
presence in existing markets. The



<PAGE>   12

TABLE 3 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES (continued)
(Dollars in Thousands)

<TABLE>
<CAPTION>

                                              1996                             1995                              1994
------------------------------------------------------------------------------------------------------------------------------------
                                            Interest     Average              Interest   Average               Interest     Average
                                Average     Income/      Yield/   Average     Income/    Yield/     Average    Income/      Yield/
Liabilities                     Balance     Expense       Rate    Balance     Expense    Rate       Balance    Expense       Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>             <C>    <C>          <C>         <C>      <C>          <C>         <C>
Interest-bearing liabilities:
Savings and interest-bearing
  transaction deposits         $1,843,150  $   47,809      2.59%  $1,710,218   $ 47,807    2.80     $1,592,776  $ 37,369     2.35%
Time deposits                   1,915,637     103,566      5.41    1,773,437     95,833    5.40      1,528,590    71,947     4.71
Federal funds purchased,
  securities sold under
  agreements to repurchase
  and other short-term
  borrowings                      545,735      27,222      4.99      555,193     29,792    5.37        452,610    16,565     3.66
Long-term debt                     67,888       4,091      6.03          --         --      --             --        --       --
------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
  liabilities                   4,372,410     182,688      4.18    4,038,848    173,432    4.29      3,573,976   125,881     3.52
Noninterest-bearing
  liabilities:
Deposits                          992,107                            955,142                           875,672
Other liabilities                 110,277                             79,684                            61,362
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities               5,474,794                          5,073,674                         4,511,010
Stockholders' equity              551,754                            498,023                           429,967
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
  stockholders' equity         $6,026,548                         $5,571,697                        $4,940,977
====================================================================================================================================
Net interest income/
  margin - tax
  equivalent                      257,210                  4.77%                235,212    4.75%                 186,874     4.24%
------------------------------------------------------------------------------------------------------------------------------------
Tax equivalent adjustment:
  Loans                             2,361                                         1,917                            1,846
  Investment securities                 1                                         3,484                            3,559
  Securities available for sale     5,219                                           448                               14
  Other                                95                                            91                               64
------------------------------------------------------------------------------------------------------------------------------------
Total tax equivalent
  adjustment                        7,676                                         5,940                            5,483
------------------------------------------------------------------------------------------------------------------------------------
Net interest income            $  249,534                                      $229,272                         $181,391
====================================================================================================================================
</TABLE>

following table briefly outlines each of the mergers completed during the past
three years:

<TABLE>
<CAPTION>

     Financial                             Total Assets  Merger      Accounting
    Institution                      State  (Millions)    Date        Treatment
--------------------------------------------------------------------------------
<S>                                    <C>     <C>       <C>            <C>
First Columbus
  Financial Corporation                MS      $209      May 1994       Purchase

LBO Bancorp, Inc.                      LA        96      Jan. 1995      Purchase

Citizens National
  Bancshares                           LA       193      May 1995       Pooling

First Merchants
  Financial Corp.                      AR       280      Aug. 1995      Purchase

Bank of Gonzales
  Holding Company                      LA       126      June 1996      Purchase

Tuscaloosa
  Bancshares, Inc.                     LA        41      Nov. 1996      Purchase
</TABLE>

     In addition to the above mergers, the Company purchased the Coahoma
County, Mississippi operations of a local Mississippi bank in March 1995,
adding $82 million in assets.

     On August 8, 1995, the purchase of First Mortgage Corp., located in Omaha,
Nebraska, was completed. This acquisition was accounted for as a purchase
business combination. First Mortgage Corp. had a $1.1 billion mortgage
servicing portfolio and six production offices in Nebraska and Oklahoma.

     On June 29, 1996, the Company purchased McAfee Mortgage and Investment
Company, located in Lubbock, Texas, in a transaction accounted for as a
purchase business combination. McAfee Mortgage and Investment Company has 15
offices located throughout Texas and originated approximately $240 million in
mortgage loans in 1995.


<PAGE>   13

TABLE 4 - TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
(In Thousands)

     The following table sets forth, for the periods indicated, a summary of
the changes in interest income and expense resulting from changes in volume and
changes in rates.

<TABLE>
<CAPTION>
                                                        1996 Compared To 1995            1995 Compared To 1994
                                                      Increase (Decrease) Due To       Increase (Decrease) Due To
--------------------------------------------------------------------------------------------------------------------------
                                                      Volume      Rate        Net      Volume       Rate        Net
--------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>        <C>         <C>         <C>         <C>
Interest income on:
Loans                                               $ 44,340    $(4,573)   $ 39,767    $ 55,266    $ 28,113    $ 83,379
Investment securities:
   Taxable                                           (78,787)     1,358     (77,429)     44,070       2,315      46,385
   Exempt from Federal income tax                    (11,663)         1     (11,662)       (109)       (103)       (212)
Securities available for sale:
   Taxable                                            56,394      6,087      62,481     (27,693)      1,435     (26,258)
   Exempt from Federal income tax                     13,546      1,641      15,187       1,260          37       1,297
Trading account securities                                50         16          66          71          52         123
Federal funds sold and securities purchased
   under agreements to resell                          4,537       (865)      3,672      (6,677)      1,883      (4,794)
Interest-bearing bank balances                          (875)        47        (828)     (4,233)        202      (4,031)
--------------------------------------------------------------------------------------------------------------------------
      Total                                           27,542      3,712      31,254      61,955      33,934      95,889
--------------------------------------------------------------------------------------------------------------------------
Interest expense on:
Savings and interest-bearing transaction deposits      3,716     (3,714)          2       2,755       7,683      10,438
Time deposits                                          7,684         49       7,733      11,524      12,362      23,886
Federal funds purchased, securities sold
   under agreements to repurchase, and other
   short-term borrowings                                (508)    (2,062)     (2,570)      3,754       9,473      13,227
Long-term debt                                         4,091       --         4,091        --          --          --
--------------------------------------------------------------------------------------------------------------------------
      Total                                           14,983     (5,727)      9,256      18,033      29,518      47,551
--------------------------------------------------------------------------------------------------------------------------
Changes in net interest income - tax equivalent     $ 12,559    $ 9,439    $ 21,998    $ 43,922    $  4,416    $ 48,338
==========================================================================================================================
</TABLE>

The increase (decrease) due to changes in average balances reflected in
the above table was calculated by applying the preceding year's rate to the
current year's change in the average balance. The increase (decrease) due to
changes in average rates was calculated by applying the current year's change
in the average rates to the current year's average balance. Using this method
of calculating increases (decreases), any increase or decrease due to both
changes in average balances and rates is reflected in the changes attributable
to average rate changes.

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

     A brief description of merger agreements which have been entered into by
the Company but were not completed at December 31, 1996, follows:

     On January 3, 1997, the acquisition of Jefferson Guaranty Bancorp, a
one-bank holding company, located in Metairie, Louisiana, with approximately
$300 million in total assets was consummated. The Company paid a combination of
1.8 million shares of its common stock and $10 million in cash for all of the
outstanding common stock of Jefferson Guaranty. The transaction was accounted
for as a purchase business combination.

     On December 26, 1996, a definitive agreement was reached to acquire First
Capital Bancorp, Inc., a bank holding company located in Monroe, Louisiana,
with approximately $186 million in total assets. The transaction, which will be
accounted for as a pooling of interests, is subject to the approval of the
stockholders of First Capital Bancorp, Inc. and regulatory authorities and is
expected to be consummated during the first quarter of 1997.

     On February 20, 1997, a definitive agreement was reached to acquire NBC
Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana, with approximately $70 million in total assets. The transaction,
which will be accounted for as a purchase business combination, is subject to
the approval of the stockholders of NBC Financial Corporation and regulatory
authorities and is expected to be consummated during the second quarter of
1997.

NET INTEREST INCOME

     Net interest income is the largest component of net income and represents
the income earned on interest-earning assets less the cost of interest-bearing
liabilities. This major source of income represents the earnings from the
primary business of gathering funds from deposit and other sources and
investing those funds in loans and securities. The long-term objective is to
manage those assets and liabilities to provide the largest possible amount of
income, while balancing interest-rate, credit, liquidity and capital risks.


<PAGE>   14

TABLE 5 - INTEREST SENSITIVITY
(In Thousands)

     The following table reflects the interest sensitivity of the Company over
various periods as of December 31, 1996, based on contractual maturities as of
that date.

<TABLE>
<CAPTION>

                                              0-3            4-12             1-5            Over 5
                                             Months          Months          Years            Years        Total
-------------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>             <C>            <C>
Assets
Interest-earning assets:
Loans, net of unearned income             $   808,872     $   955,791     $ 1,651,083     $   564,131    $3,979,877
Investment securities                             300            --             2,169         142,618       145,087
Securities available for sale                   2,863           5,088         621,202         832,885     1,462,038
Trading account securities                      2,505            --              --              --           2,505
Federal funds sold and securities
   purchased under agreements to resell        47,640            --              --              --          47,640
Interest-bearing bank balances                  1,732            --              --              --           1,732
-------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                 863,912         960,879       2,274,454       1,539,634     5,638,879
Noninterest-earning assets                       --              --              --           744,018       744,018
-------------------------------------------------------------------------------------------------------------------
   Total assets                           $   863,912     $   960,879     $ 2,274,454     $ 2,283,652    $6,382,897
===================================================================================================================
Liabilities and stockholders' equity
Interest-bearing liabilities:
Savings deposits                          $ 1,905,636     $      --       $      --       $      --      $1,905,636
Time deposits                                 529,823         862,800         555,634          10,942     1,959,199
Short-term borrowings                         543,029            --              --              --         543,029
Long-term debt                                   --              --              --            99,405        99,405
-------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities       2,978,488         862,800         555,634         110,347     4,507,269
Noninterest-bearing deposits                  302,770          81,963         319,286         456,895     1,160,914
Other liabilities                                --              --              --           133,448       133,448
Stockholders' equity                             --              --              --           581,266       581,266
-------------------------------------------------------------------------------------------------------------------
   Total liabilities and
      stockholders' equity                $ 3,281,258     $   944,763     $   874,920     $ 1,281,956    $6,382,897
===================================================================================================================
Interest rate contracts                   $   477,041     $  (101,015)    $  (306,847)    $   (69,179)
Interest sensitive gap                     (1,940,305)        (84,899)      1,092,687         932,517
Cumulative interest sensitive gap          (1,940,305)     (2,025,204)       (932,517)           --
Cumulative interest sensitive gap
   as a percent of total assets                (30.40)%        (31.73)%        (14.61)%          --
</TABLE>

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

     Net interest income is presented in this discussion on a tax-equivalent
basis, so that the income from assets exempt from federal income taxes is
adjusted based on a statutory marginal federal income tax rate of 35%. The tax
equivalent net interest margin (margin) provides an indication of the
efficiency of the earnings from balance-sheet activities and is calculated by
dividing the tax-equivalent net interest income by the average balance of
interest-earning assets. The margin is affected by changes in the spread
between interest-earning asset yields and interest-bearing liability costs
(interest spread) and by the percentage of interest-earning assets funded by
interest-bearing liabilities (liability funding).

     Tax equivalent net interest income increased $22 million, or 9%, primarily
due to a 9% increase in the level of interest-earning assets, funded by a 7%
increase in deposit balances. Continued strong loan demand improved the earning
asset mix and further contributed to the favorable results in net interest
income as average loans increased as a percentage of average earning assets to
70% in 1996 from 66% in 1995. As a result of the improving asset mix, the
margin increased 2 basis points from 1995 to 4.77% in 1996.

     Interest rates on both earning assets and interest-bearing liabilities
declined reflecting the lower average market rate environment in 1996. Loan
yields fell 12 basis points from 1995 and the securities portfolio yield
declined 16 basis points to 7.00%. The improvement in asset mix partially
offset these decreases resulting in only a 9 basis point decline in the yield
on average earning assets from 1995 to 1996. The decline in

<PAGE>   15
TABLE 6 - RISK MANAGEMENT DERIVATIVE POSITION
(Dollars in Thousands)

     The following table identifies the year end open positions for the
Company's risk management interest rate contracts at December 31, 1996.

<TABLE>
<CAPTION>

                                                      Pay Rate          Receive Rate
                                      Fair        -----------------------------------   Underlying
Maturity                 Notional     Value       Rate         Index    Rate    Index   Asset/Liability
--------------------------------------------------------------------------------------------------------
<C>                      <C>        <C>           <C>           <C>     <C>     <C>     <C>
Interest rate swaps
Pay fixed:
2007                     $ 22,622   $  (182)      6.65%         Fixed   5.56%   Libor   Mortgage loans

Receive fixed:
2006                      100,000     1,789       5.56          Libor   6.94    Fixed   Long-term debt

Interest rate caps
1997                      100,000         7       6.88           --      --      --     Time deposits

Interest rate floors
1998                       50,000        21       5.00           --      --      --     Commercial loans
2000                       65,000     1,054       6.00           --      --      --     Commercial loans
2001                      185,000     1,739       5.25           --      --      --     Commercial loans
</TABLE>
--------------------------------------------------------------------------------


average yield on earning assets, however, was offset by an 11 basis point
drop in rates paid on interest-bearing liabilities. While the rate on time
deposits increased slightly in 1996, rates on savings and interest-bearing
transaction accounts dropped 21 basis points from 1995. The interest spread,
the difference between the yield on interest-earning assets and the rate on
interest-bearing liabilities, increased slightly from 3.95% in 1995 to 3.97% in
1996.

     A drop in the proportionate level of nonearning assets contributed
favorably to the 1996 margin as these funds were invested in earning assets. In
1996, the Company reduced the proportionate level of nonearning assets to 10.5%
of average total assets from 11.0% in 1995, adding approximately 3 basis points
to the 1996 net interest margin. The reduction in the relative level of
nonearning assets is primarily related to a reduction in reserve requirements
on certain deposits.

     The mix of interest-bearing liabilities during 1996 remained substantially
the same as 1995 with the exception of the issuance of $100 million in
long-term debt in April of 1996.

     The increase in net interest income in 1995 from 1994 reflects an increase
in loan volumes of 27%. Both yields on earning assets and rates paid on
interest-bearing liabilities increased significantly between 1994 and 1995;
however, the increase in rates on funding sources did not keep pace with the
increase in earning asset yields. During this period, the net interest margin
increased from 4.24% in 1994 to 4.75% in 1995.

INTEREST RATE SENSITIVITY

     Net interest income is managed through the Asset/Liability Management
(ALM) process. A board committee establishes ALM policy guidelines that limit
the potential variation in net interest income and the economic value of equity
due to market interest rate swings. The Asset/Liability Committee, comprised of
executive management, sets the day-to-day operating guidelines and approves
strategies affecting net interest income and coordinates activities within
board policy limits.

   Simulation of the effects of interest rate changes on net income is a
broader measure of interest rate risk profile than the static interest
sensitive gap position and is therefore the primary tool used by the Company. A
computer simulation model is used to simulate the effect of complex
interactions of customer choices, product promotions, and potential market
interest rate scenarios.

   Board policy limits the amount of interest rate risk the Company can take by
establishing variation limits to net interest income and economic value of
equity based on simulations with specific assumptions. The Company supplements
these with a number of other simulations which measure key sensitivities to
several specific rate scenarios as well as potential competitive issues related
to loan and deposit volume levels and pricing.

     Board policy limits the negative variation of net interest income and
economic value of equity to 10% and 20%, respectively. To provide a consistent
comparative analysis, specific guidelines for each measurement are followed. A
baseline forecast of net interest income and economic value of equity is
established assuming a stable interest rate environment. For net interest
income variation, simulations are run trending interest rates up and down 200
basis points over the next 12 months from the baseline forecast. At December
31, 1996, this analysis indicated a negative variation of approximately 2% with
a 10% policy limitation for an increase in rates.


<PAGE>   16


TABLE 7 - RISK MANAGEMENT DERIVATIVE POSITION
(In Thousands)

   The following table shows the interest rate swap activity (notional amounts)
for 1996.

<TABLE>
<CAPTION>

                                                                                                                   1996
                                                                                                                 Interest
                              December 31,                                                 December 31,           Income
Maturity                          1995              Purchased             Matured              1996             (Expense)
--------------------------------------------------------------------------------------------------------------------------
<C>                            <C>                  <C>                 <C>                  <C>                 <C>
Pay fixed
1996                           $  90,000            $     --            $  90,000            $     --            $   (73)
2007                              23,910                  --                1,288              22,622               (255)
--------------------------------------------------------------------------------------------------------------------------
Total                            113,910                  --               91,288              22,622               (328)
--------------------------------------------------------------------------------------------------------------------------
Receive fixed
1996                              40,000                  --               40,000                  --               (148)
2006                                  --             100,000                   --             100,000                867
--------------------------------------------------------------------------------------------------------------------------
Total                             40,000             100,000               40,000             100,000                719
--------------------------------------------------------------------------------------------------------------------------
Total swaps                    $ 153,910            $100,000            $ 131,288            $122,622            $   391
==========================================================================================================================
</TABLE>

     For variation in economic value of equity, simulations are run assuming
interest rates move up and down immediately by 200 basis points, remain at
those levels, and no management action occurs. This rate shock, while unlikely
in management's opinion, provides insight into some components of interest rate
risk for the Company. At December 31, 1996, this measure indicated
approximately 12% negative variation in the economic value of equity with an
increase in external market interest rates compared to a policy limit of 20%.

     Given the various methods used to measure and manage interest rate risk,
the Company believes its interest rate risk profile is in appropriate balance
with its profit objectives.

DERIVATIVE ACTIVITIES

RISK MANAGEMENT DERIVATIVES

     Derivative instruments were used in 1996 and 1995 primarily as a means of
protecting the economic value of equity and income. The specific types of
derivatives used were interest rate swaps, forward contracts, interest rate
caps and floors and other option contracts.

     Interest rate swaps were the primary instruments used to manage interest
rate risk. These are contractual agreements between counterparties to exchange
interest streams based on notional principal amounts over a set period of time.
The notional amount does not represent an amount at risk, but is used as a
basis for determining the actual cash flows related to the interest rate
contracts. As of December 31, 1996, the notional value of interest rate swap
contracts totaled $122.6 million compared to $153.9 million at December 31,
1995. This amount is composed of agreements where the Company receives fixed
rates on notional amounts totaling $100 million with a rate of 6.94% and
agreements where the Company pays fixed rates on notional amounts totaling
$22.6 million with an average rate of 6.65%. As of December 31, 1996 and 1995,
there would be no cost to replace these contracts if the counterparty defaults.
All interest rate swap counterparties are at least AA-rated by Standard and
Poors or have collateral arrangements with the Company. A stress test is used
to determine the effect of market movements on the value of the interest rate
swaps. The stress test estimates the value of the instrument assuming a
parallel 300 basis point shift in rates.

     Interest rate caps were purchased during 1994 to limit the future funding
rates on floating rate deposit accounts resulting from forecasted rising
interest rates. These interest rate caps were based on the three month LIBOR
rate and assigned to certificates of deposit with maturities of three months or
less. As of December 31, 1996 and 1995, the notional value of interest rate cap
contracts totaled $100 million. The interest rate caps have one year maturities
and a fair value of $7 thousand at December 31, 1996.

     Interest rate floors were purchased during 1995 and 1996 to limit any loss
resulting from falling interest rates. These interest rate floors were based on
the three month LIBOR rate and assigned to floating rate commercial loans. As
of December 31, 1996, the Company had outstanding interest rate floor contracts
with a total notional value of $300 million compared to $115 million
outstanding at December 31, 1995. The interest rate floors have two to five
year maturities and a fair value of $2.8 million at December 31, 1996.

     Forward commitments are contracts for the delayed delivery of securities,
foreign currencies or money market instruments in which the seller agrees to
make delivery of a specified instrument at a specified future date and a
specified price or yield. Credit risk may arise from the possibility that
counterparties may not have the ability to fulfill their commitments. Market
risk arises from the movements in interest rates and security values. The
majority of the forward commitments represent agreements to sell mortgage
loans. As of December 31, 1996, the contract amounts for forward commitments
totaled $131 million compared to $144 million at December 31, 1995, and $37
million at December 31, 1994.

<PAGE>   17


TABLE 8 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
(In Thousands)

   The carrying amounts of securities available for sale and investment
securities are presented as of the dates indicated.

<TABLE>
<CAPTION>

                                                                                              December 31,
--------------------------------------------------------------------------------------------------------------------------
                                                                                    1996           1995          1994
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>            <C>           <C>
Securities available for sale
U.S. Treasury and other U.S. Government agencies                                 $  711,515     $  868,626    $       --
Obligations of states and political subdivisions                                    180,833        144,487         1,872
Mortgage-backed securities                                                          568,261        183,777         6,759
Other securities                                                                      1,429          2,501            --
--------------------------------------------------------------------------------------------------------------------------
   Total securities available for sale                                            1,462,038      1,199,391         8,631
--------------------------------------------------------------------------------------------------------------------------

Investment securities
U.S. Treasury and other U.S. Government agencies                                      9,379          9,369       933,828
Obligations of states and political subdivisions                                        105             --       104,890
Mortgage-backed securities                                                           60,581         80,481       252,869
Other securities                                                                     75,022         49,183        38,584
--------------------------------------------------------------------------------------------------------------------------
   Total investment securities                                                      145,087        139,033     1,330,171
--------------------------------------------------------------------------------------------------------------------------
      Total securities available for sale and investment securities              $1,607,125     $1,338,424    $1,338,802
==========================================================================================================================
</TABLE>

TRADING DERIVATIVES

     A Eurodollar futures and options trading account is used in order to
maintain an active presence in the Eurodollar futures and options markets.
Position limits were established for the account in order to provide for a
tightly controlled trading environment. At December 31, 1996, the trading
account had no open contracts compared to contracts with a notional value of
$300 million and a net loss of $28 thousand at December 31, 1995. Eurodollar
trading activity during 1996 was minimal.

DERIVATIVE CONTROLS

     Various controls are utilized to manage the risks associated with
derivative instruments. These controls include specific internal policies,
tracking systems, and legal contracts in conjunction with management oversight,
internal and external audits, and regulatory compliance examinations. These
reviews are performed on a continuous basis.

     Management and board oversight is achieved through strict internal policy
and operating guidelines which include specific approvals for each transaction.
Specific operating limits have been established for common derivative
transactions. Additionally, certain transactions require approval from the
executive committee. An on-site compliance officer reports directly to the
Board of Directors.

     An automated derivatives management system is used to generate position,
pricing, and risk management reports. This system generates reports used to
maintain accurate and timely information on all derivative positions.

     Derivatives credit risk is minimal. Each counterparty is either AA-rated
or higher by Standard and Poors or has executed a bilateral collateral
agreement with the Company. Collateral agreements are designed to protect
against possible default by the counterparties. Active counterparties are
required to post collateral on any net positive market value above $100
thousand on an ongoing basis. As of December 31, 1996, counterparty collateral
with a fair value of $6.3 million was being held.

SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES

     The securities portfolio is the second largest component of
interest-earning assets at $1.6 billion on December 31, 1996, compared to $1.3
billion at year-end 1995 and 1994. The securities portfolio includes securities
classified as available for sale and for investment purposes. These two
segments of the securities portfolio are managed to optimize their long-term
total return.

     Securities available for sale are subject to sale prior to their
contractual maturities allowing the Company the ability to respond to changes
in the interest rate environment. This portfolio can also be a secondary
liquidity source and provide a balance to interest rate and credit risks in
other categories of the balance sheet. Securities available for sale are
accounted for at fair value with unrealized gains or losses excluded from
earnings and reported as a separate component of stockholders' equity, net of
deferred income taxes. The investment securities portfolio consists of debt
securities which the Company has the positive intent and ability to hold to
maturity and is carried at amortized cost.

     Securities available for sale increased $263 million to $1.5 billion at
December 31, 1996, compared to December 31, 1995. Investment securities at
December 31, 1996, were $145 million, an increase of $6 million compared to
year-end 1995. During the fourth quarter of 1995, the Company reevaluated the
securities classifications as allowed by the FASB's supplemental guidance to
SFAS No. 115. As a result, investment securities with a carrying value of $1.1
billion and a fair value of $1.2 billion, or approximately 89% of its
investment securities were reclassified to securities available for sale. The
reclassification provided

<PAGE>   18

TABLE 9 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE
          AND INVESTMENT SECURITIES
(Dollars in Thousands)

     The following table shows the maturities and weighted average yields of
the Company's securities available for sale and investment securities at
December 31, 1996.

<TABLE>
<CAPTION>

                                                        Maturing
                      ----------------------------------------------------------------------------
                                             After One Year    After Five Years                          Mortgage-
                            Within                But                But                After             Backed
                           One Year         Within Five Years   Within Ten Years      Ten Years          Securities      Carrying
------------------------------------------------------------------------------------------------------------------------------------
                      Amount      Yield     Amount      Yield   Amount    Yield    Amount     Yield   Amount     Yield     Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>          <C>      <C>         <C>     <C>        <C>      <C>         <C>     <C>        <C>    <C>
Securities
available for sale
U.S. Treasury
   and other U.S.
   Government
   agencies           $   503      6.25%    $516,206    6.39%   $194,806    6.44%   $    --       --%   $     --    --%   $  711,515
 Obligations of
   states and
   political
   subdivisions         8,268      9.96       24,494     9.1      35,493   10.58     112,578    9.08          --    --       180,833
Mortgage-backed
   securities              --        --           --      --          --      --          --      --     568,261  7.06       568,261
Other securities           --        --           --      --          --      --       1,429    7.50          --    --         1,429
------------------------------------------------------------------------------------------------------------------------------------
Total securities
   available
   for sale             8,771      9.75      540,700    6.51     230,299    7.08     114,097    9.06     568,261  7.06     1,462,038
------------------------------------------------------------------------------------------------------------------------------------
Investment
securities
U.S. Treasury
   and other U.S.
   Government
   agencies               379      5.27        9,000    5.64          --      --          --      --          --    --         9,379
Obligations of
   states and
   political
   subdivisions            50      8.45           55    8.46          --      --          --      --          --    --           105
Mortgage-backed
   securities              --        --           --      --          --      --          --      --      60,581  9.96        60,581
Other securities        2,230      6.85        8,524    6.03      44,827    4.29      19,441    6.44          --    --        75,022
------------------------------------------------------------------------------------------------------------------------------------
Total investment
   securities           2,659      6.65       17,579    5.84      44,827    4.29      19,441    6.44      60,581  9.96       145,087
------------------------------------------------------------------------------------------------------------------------------------
Total securities
   available for
   sale and
   investment
   securities         $11,430      9.03%    $558,279    6.49%   $275,126    6.62%   $133,448    8.68%   $628,842  7.34%   $1,607,125
====================================================================================================================================
</TABLE>

greater flexibility to take advantage of significant changes or
anticipated changes in interest rates and to manage liquidity.

     Securities, excluding mortgage-backed securities, maturing within five
years or less at December 31, 1996, represented 35% of total securities
compared to 61% at December 31, 1995, and 71% at December 31, 1994.
Mortgage-backed securities at year-end 1996 increased to 39% of total
securities compared to 20% at December 31, 1995, and 19% at year-end 1994.
Securities exempt from Federal income taxes represented 11% of year-end total
securities in 1996 and 1995 compared to 8% in 1994.

     Average securities decreased $127 million, or 8%, in 1996 from 1995's
average balance compared to an increase of $120 million in 1995 from 1994's
average balance. As a percent of average interest-earning assets, average
securities continued to decline to 26% in 1996 compared to 31% in 1995 and 32%
in 1994. This decrease in the relative level of securities was a result of
increased loan demand.



<PAGE>   19

TABLE 10 - LOAN PORTFOLIO
(In Thousands)

     Loans outstanding at the indicated dates are shown in the following table
classified by type of loan.

<TABLE>
<CAPTION>
                                                                December 31,
-------------------------------------------------------------------------------------------------------
                                            1996         1995         1994         1993        1992
-------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>         <C>         <C>         <C>
Commercial, financial and agricultural   $1,104,648   $1,010,174   $  927,551   $  712,522   $  757,582
Real estate - construction                  170,711      122,765       92,411       70,506       81,320
Real estate - mortgage                    1,800,031    1,615,166    1,152,068    1,051,752      929,966
Consumer                                    904,487      831,197      687,368      583,805      496,615
-------------------------------------------------------------------------------------------------------
                                         $3,979,877   $3,579,302   $2,859,398   $2,418,585   $2,265,483
=======================================================================================================
</TABLE>


TABLE 11 - REAL ESTATE LOANS
(Dollars in Thousands)

     The following table shows the composition of real estate loans outstanding
at December 31, 1996.

<TABLE>
<CAPTION>

                                             Percent of       Percent of
                                               Balance     Real Estate Loans   Total Loans
--------------------------------------------------------------------------------------------
<S>                                          <C>                  <C>              <C>
Commercial real estate
   Construction and land development         $  170,711           8.7%             4.3%
   Multifamily                                   77,332           3.9              1.9
   Nonfarm residential                          695,386          35.3             17.5
--------------------------------------------------------------------------------------------
                                                943,429          47.9             23.7
--------------------------------------------------------------------------------------------
Residential and farmland
   Residential                                  936,845          47.5             23.5
   Farmland                                      90,468           4.6              2.3
--------------------------------------------------------------------------------------------
                                              1,027,313          52.1             25.8
--------------------------------------------------------------------------------------------
                                             $1,970,742         100.0%            49.5%
============================================================================================
</TABLE>

LOANS

     The loan portfolio is the largest component of earning assets and is also
the highest yielding. Quality growth in the loan portfolio over the past three
years has been a key driver in the Company's overall financial performance. The
trend of steady growth in loans continued throughout 1996, however, at a slower
pace than in 1995. Loans totaled $4.0 billion at December 31, 1996, an increase
of 11%, or $401 million, from the balance at December 31, 1995. During 1995,
the portfolio grew approximately 25% from the balances reported for 1994.
During 1996, acquisitions accounted for only 23% of the loan growth while
approximately 51% of the 1995 loan growth was the result of acquisitions of
other financial institutions. Internal loan growth for 1996 and 1995 was 8% and
12%, respectively.

     The portfolio mix at December 31, 1996, consisted of 49% real estate
loans, 28% commercial, financial and agricultural loans and 23% consumer loans,
which is substantially unchanged from the portfolio mix at December 31, 1995.
Diversification of the loan portfolio is a means of reducing the risks
associated with fluctuations in economic conditions. At December 31, 1996,
there were no concentrations of 10% or more of total loans in any single
industry. The geographical concentrations of the loan portfolio are 63% located
in Mississippi, 21% in Louisiana, and 6% in Arkansas.

     Loans secured by real estate are the largest category of loans at $2.0
billion at year-end 1996. The largest sub-section of the real estate portion of
the loan portfolio is loans secured by one-to-four family residential
properties. Loans to businesses for intermediate and longer term financing of
land and buildings represent the second largest component within the real
estate portfolio. The mix of the real estate portfolio is substantially
unchanged from that reported in prior years with the exception of a slight
increase in the proportion of loans secured by one-to-four family residential
properties.

     One-to-four family residential property loans are underwritten to take
into consideration family incomes available to service debt, credit histories
and the values of the properties being financed. While this group is considered
low risk, it can be adversely impacted by economic patterns.

     Loans to businesses for the financing of land and buildings are
underwritten taking into consideration the quantity and quality of the
business' cash flow, its future prospects and the property's value. Sufficient
margin in the financed property is required should liquidation of the property
become necessary to repay the loan.



<PAGE>   20

TABLE 12 - LOAN MATURITIES AND INTEREST RATE SENSITIVITY
(In Thousands)

     The following table shows the amounts of loans, excluding consumer and
real estate mortgage loans, in certain categories outstanding as of December
31, 1996 which, based on remaining scheduled repayments of principal, are due
in the periods indicated. Also, the amounts due after one year are classified
according to their sensitivity to changes in interest rates.

<TABLE>
<CAPTION>

                                                                Maturing
                                            -----------------------------------------------------
                                                               After One But
                                            Within One Year   Within Five Years  After Five Years       Total
--------------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>               <C>               <C>
Commercial, financial and agricultural        $  629,447        $  377,545        $   97,656        $1,104,648
Real estate - construction                       103,919            66,793              --             170,712
--------------------------------------------------------------------------------------------------------------
                                              $  733,366        $  444,338        $   97,656        $1,275,360
==============================================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                Interest Sensitivity
                                           ---------------------------
                                           Fixed Rate    Variable Rate       Total
------------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>
Due after one, but within five years        $304,630        $139,708        $444,338
Due after five years                          68,078          29,578          97,656
------------------------------------------------------------------------------------
                                            $372,708        $169,286        $541,994
====================================================================================
</TABLE>


     Construction and land development loans are made in familiar markets to
developers and builders who have a proven record of success. These loans are
underwritten through the use of feasibility studies, sensitivity analysis of
absorption rates and financial analysis of the developers. Sources of repayment
may be pre-committed permanent loans, sales of developed properties or an
interim or mini-permanent loan commitment. These types of loans are monitored
by on-site inspections and architects' reports. They are considered more risky
than other real estate loans due to their ultimate repayment being sensitive to
interest rate changes, general economic conditions and the availability of
long-term financing.

     Commercial, financial and agricultural loans increased to $1.1 billion at
December 31, 1996, from $1.0 billion and $928 million at year-end 1995 and
1994, respectively. The commercial, financial and agricultural loan portfolio
is a diverse group of loans to small, medium and large businesses in a variety
of different industries. The purposes of these loans vary from supporting
seasonal working capital needs to the term financing of equipment. These loans
are underwritten by a thorough evaluation of the prospective borrowers'
management, financial condition and the business' ability to generate
sufficient cash flow to repay the debt in an orderly manner. While some of the
short-term loans may be made on an unsecured basis, most are secured by assets
having an adequate equity margin. Additionally, most loans to closely held
corporations are guaranteed by their owners.

     Various Federal and State loan guarantee programs are used to provide
credit enhancements for loans to small businesses. The use of these programs
enables financing to be provided in amounts and on terms which might not be
otherwise available to the small business. All guaranteed loans are subject to
the same underwriting criteria as other types of loans as guarantee programs
are considered a secondary source of repayment.

     The commercial loan portfolio is sufficiently diverse to minimize the
impact of a decline in a single industry. It is geographically concentrated in
Mississippi, Louisiana, and Arkansas so it is exposed to the risk of a general
downturn in the economies of the markets in which the Company operates within
those states.

     Consumer loans increased $73 million, or 9%, from December 31, 1995, which
represents a substantial slowdown from the rate of growth experienced over the
past three years. The decline in the growth rate of the consumer loan portfolio
reflects a national trend of slowing consumer demand.

     The consumer loan portfolio is composed of installment loans, home equity
loans, unsecured revolving credit products, and other similar types of credit
facilities. Consumer credits are underwritten using a computer-based multiple
discriminant analysis which is commonly called credit scoring. This analysis
considers factors such as income, debt levels and credit history. This system
provides uniformity in the decision-making process and better quality control
during the process.

     Consumer loans are concentrated in Mississippi, Louisiana, and Arkansas
and would be adversely impacted by an economic recession or other conditions
which would affect consumer incomes.

     Additionally, the needs of low to moderate income borrowers is an area of
continued focus and efforts are ongoing to expand the credit facilities
tailored to their special needs. An extensive branch network brings loan
officers in close contact with small business customers and consumers. The
expanded use of government credit enhancement programs has improved the ability
to meet the needs of small businesses and differentiate the Company from
competitors. Consumer credit products will continue to be aggressively marketed
and new ones developed utilizing the high level of technology available;
however, the Company will continue to maintain a close watch on both local and
national delinquency trends.


<PAGE>   21

TABLE 13 - AVERAGE DEPOSITS
(In Thousands)

     The daily average amounts of deposits for the periods indicated are
summarized in the following table.

<TABLE>
<CAPTION>

                                                                    Year Ended December 31,
-------------------------------------------------------------------------------------------------------
                                                            1996              1995              1994
-------------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>               <C>
Demand deposits                                          $  953,872        $  919,215        $  840,515
Savings and interest-bearing transaction deposits         1,843,150         1,710,218         1,592,777
Time deposits                                             1,953,872         1,809,364         1,563,746
-------------------------------------------------------------------------------------------------------
Total                                                    $4,750,894        $4,438,797        $3,997,038
=======================================================================================================
</TABLE>


TABLE 14 - TIME DEPOSITS OF $100 THOUSAND OR MORE,
MATURITY DISTRIBUTION (In Thousands)

     Maturities of time certificates of deposit of $100 thousand or more
outstanding at December 31, 1996, are summarized in the following table.

<TABLE>
<S>                                  <C>
Time remaining until maturity
3 months or less                     $161,913
Over 3 through 6 months                81,311
Over 6 through 12 months               66,147
Over 12 months                         86,276
---------------------------------------------
Total                                $395,647
=============================================
</TABLE>

DEPOSITS

     The primary funding source for loans and investments is deposit
liabilities. The mix and repricing alternatives can significantly affect the
cost of this source of funds and therefore impact the margin. Strategies used
to manage deposit liabilities are designed to be flexible so that changes can
be made in consideration of interest rate movements and liquidity issues. Local
retail and commercial customers provide the majority of deposits.

     Average deposits increased $312 million to $4.8 billion in 1996 compared
to $4.4 billion in 1995, and $4.0 billion in 1994. Approximately 20% of the
increase in average deposits for 1996 was a result of acquisitions.

     Average time deposits increased $144 million, or 8%, from the $1.8 billion
reported in 1995. Average savings deposits and average demand deposits
increased $133 million and $35 million, respectively, in 1996 compared to 1995.
Both average savings deposits and average demand deposits remained at 38% and
20% of average total deposits for 1996 compared to 1995. In spite of the past
two years' merger activity, the deposit mix has remained substantially
unchanged with the exception of a slight shift toward more time deposits.

LIQUIDITY

     Liquidity for a financial institution can be expressed in terms of
maintaining sufficient funds available to meet both expected and unanticipated
obligations in a cost effective manner. Adequate liquidity allows the Company
to meet the demands of both the borrower and the depositor on a timely basis,
as well as pursue other business opportunities as they arise. Thus, liquidity
is maintained through the Company's ability to convert assets into cash, manage
the maturities of liabilities and generate funds on a short-term basis either
through the national Federal funds market, backup lines of credit, or through
the national CD market.

     Short-term investments totaling $50 million at December 31, 1996, provide
one source of the Company's liquidity. Cash flows from repayments and
maturities from the securities and loan portfolios provide an additional source
of liquidity. At December 31, 1996, $1.8 billion, or 44% of total loans, have
contractual maturities of one year or less. Additional liquidity can be
achieved through the sale of securities classified as available for sale.

     The Company relies largely on core deposits to fund loan demand and
long-term investments. Core deposits, defined as total deposits less time
deposits of $100 thousand or more, have increased, ending the year at $4.6
billion which compares to $4.4 billion at the end of 1995. Additional funding
is provided from an established Federal funds market within Mississippi,
Louisiana and other contiguous states. Although the Company prefers to meet
liquidity requirements through internally generated funding sources and through
the matching of maturities of assets and liabilities, it also maintains funding
relationships with numerous other financial institutions.

     The consolidated statements of cash flows can be used to review cash flows
from operating, investing and financing activities. Cash and cash equivalents
increased $41 million during 1996 to $385 million at December 31, 1996. Net
cash provided by operating activities of $89 million for 1996 represents a
substantial increase from $232 thousand reported for 1995. Cash flows from
operating activities includes net income, adjusted for various noncash charges
to income, as well as changes in certain balance sheet items. The increase in
net cash provided by operating activities from 1995 to 1996 was primarily due
to a large


<PAGE>   22

TABLE 15 - SHORT-TERM BORROWINGS
(Dollars in Thousands)

     The following table presents a summary of the Company's short-term
borrowings at December 31 for each of the last three years by category and the
corresponding interest rates.

<TABLE>
<CAPTION>

                                                                    Daily        Average          Maximum
                                                 December 31       Average       Interest        Month-End
                                                   Balance         Balance         Rate           Balance
-----------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>              <C>           <C>
1996
Federal funds purchased and securities sold
   under agreements to repurchase                  $532,537        $529,398         4.9%          $627,785
Other short-term borrowings                          10,492          16,337         5.7             44,997
----------------------------------------------------------------------------------------
Total short-term borrowings                        $543,029        $545,735         5.0%
========================================================================================

1995
Federal funds purchased and securities sold
   under agreements to repurchase                  $566,862        $539,384         5.4%          $650,296
Other short-term borrowings                          32,620          15,809         3.8             33,568
----------------------------------------------------------------------------------------
Total short-term borrowings                        $599,482        $555,193         5.4%
========================================================================================

1994
Federal funds purchased and securities sold
   under agreements to repurchase                  $559,779        $424,091         3.6%          $559,779
Other short-term borrowings                           5,010          28,519         4.3             54,123
----------------------------------------------------------------------------------------
Total short-term borrowings                        $564,789        $452,610         3.7%
========================================================================================
</TABLE>

use of cash to fund mortgage loans held for sale during 1995. The decrease
in net cash provided by operating activities from 1994 to 1995 was primarily
due to the increase in mortgage loans held for sale in 1995.

     Investing activities, primarily loans and securities, used cash of $119
million in 1996. This use of cash was mostly to finance an increase in loan and
securities volumes and was partially offset by cash provided by decreases in
short-term investments. In 1995, investing activities used cash of $152
million. This use of cash was largely a result of increased loan demand and
increases in short-term investments. These uses of cash were partially offset
by cash provided by decreases in securities and interest-bearing bank balances.

     Financing activities are the primary funding source of investing
activities. Financing activities include the gathering of deposits and use of
purchased funds as well as issuance and repurchase of the Company's stock.
Financing activities provided $72 million and $169 million in cash in 1996 and
1995, respectively, primarily due to increases in deposits. During 1996, debt
securities were issued which netted cash proceeds of $99 million. Proceeds from
the debt issuance were used to repay certain short-term borrowings and
repurchase the Company's common shares in connection with certain acquisitions.

     The parent company requires liquidity to pay dividends to its shareholders
and to meet operating expenses. Dividends and interest on borrowings paid by
the parent company are primarily funded from dividends received from its
banking subsidiaries. The dividends paid by the banking subsidiaries are
subject to certain regulations controlling national banks that restrict the
amount of dividends that may be distributed. The subsidiary banks have
available for payment of dividends in 1997, without prior regulatory approval,
$110.3 million plus their net profits for 1997. The operating expenses of the
parent company are primarily incurred in providing management and other
services for the subsidiaries and are reimbursed monthly to provide the cash
flow necessary for these operations. From time to time the parent company uses
short-term lines of credit and issues long-term debt to meet acquisition and
expansion needs. During 1995, a $300 million registration statement was filed
with the Securities and Exchange Commission allowing the Company the ability to
acquire funds through the issuance of various instruments in the market place.
At December 31, 1996, $100 million in such instruments was outstanding. These
funds were used to reduce its short-term borrowings and to fund acquisitions.
The remainder of these proceeds will be used to fund further acquisitions.

<PAGE>   23

TABLE 16 - ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars in Thousands)

   The following table summarizes the activity in the allowance for possible
loan losses over the past five years.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
-------------------------------------------------------------------------------------------------------------------------
                                                     1996           1995           1994            1993            1992
-------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>             <C>             <C>
Allowance for possible loan losses -
   beginning balance                            $    58,719    $    55,873    $    62,032     $    74,856     $    87,493
   Charge-offs:
      Commercial, financial and agricultural          1,278          1,591          7,851           2,881          22,348
      Real estate - construction                        119            177            132              40              80
      Real estate - mortgage                          2,786          1,723          1,691           1,846           3,772
      Consumer                                       10,126          8,833          5,234           5,375           7,708
-------------------------------------------------------------------------------------------------------------------------
         Total charge-offs                           14,309         12,324         14,908          10,142          33,908
-------------------------------------------------------------------------------------------------------------------------
   Recoveries:
      Commercial, financial and agricultural          3,232          2,217          5,163           5,164           2,037
      Real estate - construction                         71            272            621           1,398             803
      Real estate - mortgage                          2,459          1,403          2,393           2,077           2,723
      Consumer                                        4,631          4,466          4,098           4,679           5,330
-------------------------------------------------------------------------------------------------------------------------
         Total recoveries                            10,393          8,358         12,275          13,318          10,893
-------------------------------------------------------------------------------------------------------------------------
   Net charge-offs (recoveries)                       3,916          3,966          2,633          (3,176)         23,015
   Provision for possible loan losses                 5,340          2,160         (4,750)        (16,000)         10,378
   Additions due to acquisitions                      2,062          4,652          1,224            --              --
-------------------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses -
  ending balance                                $    62,205    $    58,719    $    55,873     $    62,032     $    74,856
=========================================================================================================================
Total loans outstanding:
   End of year                                  $ 3,979,877    $ 3,579,302    $ 2,859,398     $ 2,418,585     $ 2,265,483
   Average                                        3,774,490      3,273,408      2,581,724       2,293,416       2,261,034
=========================================================================================================================
Ratios:
Allowance for possible loan losses to end of
   year total loans                                    1.56%          1.64%          1.95%           2.56%           3.30%
Allowance for possible loan losses to net
  charge-offs                                         1,588          1,480          2,122              NM             325
Allowance for possible loan losses to
  nonperforming loans                                   364            262            219             204             189
Net charge-offs (recoveries) to average
  total loans                                           .10            .12            .10            (.14)           1.02
Recoveries to prior year charge-offs                  84.33          56.06         121.03           39.28           35.21
</TABLE>

NM - Not Meaningful

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

CREDIT RISK MANAGEMENT

     Asset quality is managed by utilizing a credit process that has as its
basis the separation of the credit administration function from the line
lending function. This process includes a system of loan committees to review
and approve loans, a system of credit quality review committees that monitors
the progress of action plans on loans requiring special attention and an
independent loan review function which reports to the Directors' Loan Review
Committee. Additionally, the Credit Administration Division works to ensure
that the credit process is carried out in accordance with credit policies. This
process assists in the early identification of problem or potential problem
credits and assists in determining the adequacy of the allowance for possible
loan losses.

PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES

     In conjunction with the credit process, the allowance for possible loan
losses (allowance) is maintained at a level that is considered sufficient to
absorb potential losses in the loan portfolio. The allowance is adjusted by the
provision for possible loan losses (provision) and is increased by recoveries
of previously charged-off loans and decreased by loan charge-offs. The
provision is the adjustment to expense necessary to maintain the allowance at
an adequate level. Various factors are taken into consideration in determining
the amount of the provision and the adequacy of the allowance. These factors
include: 1) management's analysis of current and future economic conditions and
their anticipated impact on specific borrowers; 2) the current level of
classified and criticized assets and the associated risk factors with each; 3)
past due and nonperforming assets; 4) the current level of the allowance in
relation to total loans and to historical and current loss levels; and 5)
growth and composition of the loan portfolio.

<PAGE>   24

TABLE 17 - ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars in Thousands)

     The following table presents, for analysis purposes only, the allocation
of the allowance by loan categories with respect to individual credits,
historical losses, foreseeable economic conditions and other factors pertaining
to specific industries.


<TABLE>
<CAPTION>
                                                           December 31,
-----------------------------------------------------------------------------------------------------------
                                     1996                       1995                       1994
-----------------------------------------------------------------------------------------------------------
                             Percent      Loan Loss     Percent       Loan Loss     Percent     Loan Loss
                             Of Loans     Allowance     Of Loans      Allowance     Of Loans    Allowance
                            Outstanding   Allocation   Outstanding    Allocation   Outstanding  Allocationn
-----------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>           <C>           <C>           <C>           <C>
Commercial, financial
   and agricultural             27.8%       $18,124        28.2%        $13,824        32.4%        $13,851
Real estate - construction       4.3          2,050         3.5           2,146         3.2           1,475
Real estate - mortgage          45.2         12,090        45.1          12,741        40.3          10,372
Consumer                        22.7         15,265        23.2          13,928        24.1          10,940
Unallocated                       --         14,676          --          16,080          --          19,235
-----------------------------------------------------------------------------------------------------------
                               100.0%       $62,205       100.0%        $58,719       100.0%        $55,873
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                  December 31,
---------------------------------------------------------------------------------
                                        1993                      1992
---------------------------------------------------------------------------------
                               Percent     Loan Loss       Percent     Loan Loss
                               Of Loans    Allowance       Of Loans    Allowance
                              Outstanding  Allocation     Outstanding  Allocation
---------------------------------------------------------------------------------
<S>                              <C>          <C>            <C>          <C>
Commercial, financial
   and agricultural               29.5%       $15,683         33.4%       $16,306
Real estate - construction         2.9          2,330          3.6          3,127
Real estate - mortgage            43.5          9,285         41.1         12,596
Consumer                          24.1         10,087         21.9          7,915
Unallocated                         --         24,647           --         34,912
---------------------------------------------------------------------------------
                                 100.0%       $62,032        100.0%       $74,856
=================================================================================
</TABLE>

     As a result of management's assessment of the adequacy of the allowance
including the growth in loans in 1996, a $5.3 million provision for possible
loan losses was recorded, compared to a $2.2 million provision in 1995. During
1994, a negative provision of $4.8 million was recorded. Additions to the
allowance of $2.1 million, $4.7 million, and $1.2 million resulted from
acquisitions in 1996, 1995 and 1994, respectively.

     Net charge-offs remain low at .10% of average loans in 1996 compared to
 .12% and .10% of average loans in 1995 and 1994, respectively. Net charge-offs
were $4.0 million for both 1996 and 1995 compared to $2.6 million in 1994.

     The allowance at year-end 1996, was $62.2 million, or 1.56% of total
loans, compared to $58.7 million, or 1.64% of total loans, at December 31,
1995, and $55.9 million, or 1.95% of total loans, at December 31, 1994. While
future losses are difficult to predict, management believes that the current
level of the allowance is adequate to cover possible losses in the loan
portfolio based on the Company's allowance methodology.

NONPERFORMING ASSETS

     Nonperforming assets consist of loans on which interest is no longer
accrued (nonaccrual), certain restructured loans where the interest rate or
other terms have been materially changed due to the financial condition of the
borrowers (restructured), and other real estate. A loan is placed on nonaccrual
when management believes there is reasonable uncertainty about the full
collection of both principal and interest, or when the loan is contractually
past due ninety days or more, not well secured and not in process of
collection. The policy regarding nonperforming loans is to take appropriate,
timely and aggressive action when necessary to reach a timely resolution.

     Nonperforming assets decreased $6.8 million to $22.1 million at year-end
1996 compared to year-end 1995. The decrease was primarily attributable to cash
collections, property sales and restoration of loans to performing status,
while a portion was also due to charge-offs. The year-end 1996 total is
comprised of $17.1 million of nonaccrual and restructured loans and $5.0
million of other real estate. The Company had restructured loans of $694
thousand at year-end 1996 versus none at the end of 1995 and 1994.

     An additional $414 thousand of outstanding loans were not considered
nonperforming at December 31, 1996, but the borrowers, in management's
assessment, are experiencing financial difficulties severe enough that serious
doubt exists as to the borrowers' continued ability to comply with the present
terms of these loans.

CAPITAL AND DIVIDENDS

     Dividends paid are substantially provided by dividends from the banking
subsidiaries. The approval of the Comptroller of the Currency (OCC) is required
if the total of all dividends declared by a national bank in any calendar year
exceeds the total of its net profits for that year combined with its retained
net profits of the preceding two years. In 1997, the banking subsidiaries have
available for payment of dividends to the Company, without approval of the
Comptroller of the Currency, $110.3 million plus their net profits for 1997.

     The two sources of capital are internally generated capital and the
capital markets. Primary reliance historically has been on internally generated
capital. Net income for 1996, 1995 and 1994 added $83.6 million, $72.6 million
and $67.1 million, respectively, to capital. Capital was further increased by
$5.8 million and $1.6 million in 1996 and 1995, respectively, with the issuance
of common stock as a result of the exercise of


<PAGE>   25

TABLE 18 - NONPERFORMING ASSETS
(Dollars in Thousands)

     The amounts of the Company's nonperforming assets at the indicated dates
are shown in the following table.

<TABLE>
<CAPTION>
                                                                                 December 31,
--------------------------------------------------------------------------------------------------------------------
                                                          1996         1995         1994         1993         1992
--------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Nonaccrual loans                                         $16,385      $22,452      $25,556      $30,425      $39,456
Restructured loans                                           694           --           --           54          249
--------------------------------------------------------------------------------------------------------------------
Nonperforming loans                                       17,079       22,452       25,556       30,479       39,705
Other real estate                                          5,044        6,485        6,689       13,256       17,349
--------------------------------------------------------------------------------------------------------------------
Nonperforming assets                                     $22,123      $28,937      $32,245      $43,735      $57,054
====================================================================================================================
Accruing loans past due 90 days or more                  $ 9,711      $ 4,767      $ 3,055      $ 2,935      $ 3,670
====================================================================================================================
Ratios:
Nonperforming assets to loans plus other real estate         .56%         .81%        1.12%        1.80%        2.50%
Nonperforming assets to total assets                         .35          .48          .63          .89         1.14
</TABLE>


Interest income of approximately $412 thousand on nonaccrual and restructured
loans at December 31, 1996, would have been recorded in 1996 if such loans had
been in compliance with their original terms. Interest income actually recorded
on such loans in 1996 was $916 thousand.

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

executive stock options. Capital was decreased by dividends of $28.0
million, $23.1 million and $18.7 million declared in 1996, 1995 and 1994,
respectively. Capital was also decreased by $1.7 million and increased by $27.3
million as a result of the Company's acquisitions, net of repurchases of its
common stock during 1996 and 1995, respectively. As a result of the
implementation of a repurchase program related to certain acquisitions
accounted for using the purchase accounting method, the Company purchased 1.7
million shares and 2.6 million shares of its common stock during 1996 and 1995,
respectively. These shares were for the purpose of offsetting the 5.1 million
shares issued in the acquisitions of LBO Bancorp, Inc., First Merchants
Financial Corporation, Bank of Gonzales Holding Company, and Tuscaloosa
Bancshares, Inc. over the past two years. The Company currently has the
authorization to purchase up to 1.8 million shares under a repurchase plan for
the purpose of offsetting the shares issued in the acquisition of Jefferson
Guaranty Bancorp.

     Capital includes the unrealized gain on securities available for sale, net
of deferred taxes, of $1.6 million at December 31, 1996, compared to $19.1
million at December 31, 1995. Average stockholders' equity to average assets
for 1996 was 9.15% compared to 8.94% in 1995 and 8.70% in 1994.

     Under the risk-based capital guidelines, the minimum ratio of total
capital to risk-weighted assets (total capital) is 8%. At least half of the
total capital is to be comprised of tier I capital. Under these guidelines, the
Company's tier I capital and total capital ratios were 11.42% and 12.67%,
respectively, at December 31, 1996, compared to 11.05% and 12.30%,
respectively, at December 31, 1995, and 12.49% and 13.75%, respectively, at
December 31, 1994.

     The Company's strategy related to risk-based capital is to maintain
capital levels which will be sufficient to qualify the banking subsidiaries as
"well capitalized." Maintaining capital ratios at the "well capitalized" level
avoids certain restrictions which, for example, could impact the banking
subsidiaries' FDIC assessments, trust services and asset/liability management.

     At December 31, 1996, the tier I and total capital ratios for each of the
banking subsidiaries were well above the minimum 6% and 10% levels required to
be categorized as a "well capitalized" insured depository institution.

     The Federal Reserve Board and the OCC have established minimum leverage
ratios for bank holding companies and national banks, respectively, requiring
such banking organizations to maintain tier I capital of at least 4% of the
quarterly average assets (net of the allowance for possible loan losses) less
goodwill and other nonqualifying intangible assets. FDICIA also established a
minimum leverage ratio requirement of 5% for "well capitalized" institutions.
The leverage ratios for December 31, 1996, 1995 and 1994, were 8.23%, 7.87% and
8.43%, respectively. The Company's banking subsidiaries have maintained
leverage ratios well above the minimum required by the banks' regulators.

     Capital adequacy is continuously monitored to ensure that appropriate
levels of capital are maintained to meet both current operating needs and
anticipated future requirements. The capital guidelines play a crucial role in
a banking organization's plans for business, asset allocations, acquisitions,
and expansion.

<PAGE>   26

OTHER OPERATING INCOME

     Growth in noninterest related sources of income is one of the Company's
key long-term strategies. The strategy is to develop new sources of noninterest
related income and to reprice services and products to manage their
profitability. Other operating income includes fees for trust services, deposit
service charges, mortgage loan servicing fees, income from broker/dealer
services and many other corporate and retail products.

     During 1996, other operating income was $117.2 million compared to $92.0
million in 1995, an increase of $25.2 million. Other operating income for 1996
included gains of $2.7 million from the disposition of assets covered by lease
financing transactions and additional income of $6.3 million resulting from the
adoption of a new accounting pronouncement. Excluding these items, other
operating income increased $16.2 million, or 18%, from 1995 to 1996.
Approximately $7.1 million of the increase in other operating income for 1996
was due to acquisitions. The remaining increase was due to a 14% increase in
core fee revenues.

     Service charges on deposit accounts has historically represented one of
the primary sources of other operating income. Revenues in this area increased
approximately $3.5 million to $35.6 million in 1996 compared to 1995.
Approximately $1.6 million of this increase was a result of acquisitions. The
remaining increase was primarily the result of continued growth in business
volumes. Fees for trust services totaled $16.4 million in 1996, reflecting an
11% increase from 1995. Approximately one-half of the increase relates to
acquisitions, while the remainder was the result of new trust business and an
increase in the value of assets under management.

     Other service charges, commissions and fees increased $17.4 million, or
44%, from $39.2 million in 1995 to $56.6 million in 1996. Approximately $4.9
million of this increase was a result of fee income generated by acquired
companies. The adoption of SFAS No. 122 resulted in an increase in mortgage
loan origination income of $6.3 million for 1996 as compared to 1995. The
written covered call option program earned $1.8 million due to premiums
received on expired written option contracts. The remainder of the increase
resulted from increased income from broker/dealer services, mortgage loan
servicing and customer utilization of other retail services.

     Other income increased $3.7 million, or 74%, to $8.6 million in 1996 as
compared to 1995. This increase resulted primarily from gains of $2.7 million
from the disposition of assets related to lease financing transactions.

     During 1995, other operating income decreased $1.5 million to $92.0
million compared to $93.5 million in 1994. Other operating income for 1995
included gains on sales of securities of $919 thousand compared to $13.6
million for 1994. Excluding these gains, other operating income increased $11.2
million, or 14%, from 1994 to 1995. Approximately $6.2 million of this increase
was due to acquisitions with the balance of the increase due to increases in
core fee revenue sources. Revenue from service charges on deposits increased
$4.5 million primarily as a result of a continued increase in business volumes.
Fees for trust services increased 5% to $14.8 million in 1995 compared to 1994
as a result of new business. Other service charges, commissions and fees
increased $6.5 million, or 20%, to $39.2 million in 1995. Approximately $2.6
million of this increase was the result of fee income generated from acquired
companies. The remaining increase resulted from increased income from core
business services.

OTHER OPERATING EXPENSE

     Enhancing operational efficiency without sacrificing quality of service to
customers continues to be a priority. A key measure used in the banking
industry to assess the level of noninterest expense is the efficiency ratio,
which is defined as noninterest expense divided by the sum of tax-equivalent
net interest income plus noninterest income. The efficiency ratio measures the
level of expense required to generate one dollar of revenue. Improvement in the
efficiency ratio is measured by a reduction in the percentage reported. The
efficiency ratios for 1996, 1995 and 1994 were 63.35%, 64.62% and 64.22%,
respectively. The Company's near-term efficiency goal is 60%. In order to
achieve this goal, revenues must continue to increase, primarily through loan
growth and increased fee income, while controlling expense growth to a minimal
level. The Company's plans to consolidate its four independently chartered bank
subsidiaries under one charter is expected to improve efficiency going forward
by streamlining management and consolidating back-office operations. The
consolidation plan, which will be implemented in 1997, resulted in a charge to
1996 other operating expense of $3.8 million.

     Other operating expense increased $25.8 million, or 12%, to $237.2 million
in 1996 compared to 1995. Other operating expense for 1995 included the accrual
of $3.5 million for the estimated cost of a proposed settlement of a class
action suit concerning collateral protection insurance which was settled in
1996 without additional expense. Approximately $20.2 million of the increase in
1996 can be attributed to acquisitions. Excluding acquisitions and nonrecurring
charges in both years, expenses grew at a 3% rate in 1996 versus 1995.

     Salaries and employee benefits, which account for 55% of other operating
expense, increased $18.1 million in 1996 compared to 1995. Salaries and
employee benefits for the current year include a charge of $2.2 million for
personnel severance costs related to the consolidation plan. Excluding the
effects of acquisitions and the severance accrual, salaries and employee
benefits increased $6.4 million, or 6%, in 1996.

     Combined net occupancy and equipment expense increased $3.7 million over
1995, of which approximately $1.7 million was due to acquisitions. The
remaining increase was due to the cost of increased automation to more
effectively and efficiently deliver products and services to customers.


<PAGE>   27

     Service fees increased $3.5 million, or 28%, in 1996 compared to 1995
largely as a result of acquisitions, which accounted for $2.2 million, or 63%,
of this increase. The remaining increase in service fees resulted from
increased professional and consulting fees in a continuing effort to enhance
products and their delivery to the customer, and to provide efficiencies within
the organization. This investment is expected to be recovered through increased
operational efficiencies and enhanced revenue in future periods.

     The FDIC assessment decreased $4.8 million from 1995 to 1996. This
decrease was the result of the FDIC reducing the premium rate on insured
deposits. The rate for the Company's banking subsidiaries, which all qualify
for the most favorable insurance rates, was virtually eliminated for 1996.

     Other expense increased $2.9 million, to $37.4 million in 1996 compared to
$34.5 million in 1995 as a result of costs related to acquisitions, including
$2.9 million due to amortization of goodwill, core deposit intangibles and
mortgage servicing rights. Included in 1995 other expense is the $3.5 million
litigation accrual.

   Other operating expense increased $31.4 million, or 17%, in 1995 compared to
1994. Approximately $15.0 million of the increase in 1995 is attributable to
acquisitions. Salaries and employee benefits, which account for 53% of other
operating expense, increased $13.2 million, or 13%, in 1995 compared to 1994,
or $5.3 million, or 6%, excluding the affect of acquisitions. Combined net
occupancy and equipment expense increased $4.4 million, or 17%, over 1994 of
which approximately $2.3 million relates to acquisitions and the remainder was
due to the cost of increased automation. The FDIC assessment decreased $3.9
million, or 44%, from 1994 to 1995 as a result of the FDIC lowering the premium
rate on insured deposits. Other expense increased $14.2 million, to $34.5
million in 1995, of which $5.9 million, or 42% of the increase, is related to
acquisitions and $3.5 million relates to the litigation accrual. Additionally,
net other real estate expenses increased $1.1 million due to a decrease in
gains on the sales of properties and purchased mortgage servicing rights
amortization increased by $1 million.

INCOME TAXES

     Income tax expense was $40.6 million in 1996, compared to $35.0 million in
1995 and $32.5 million in 1994. The increase in tax expense between 1996 and
1995 was primarily the result of increased pre-tax earnings. The effective tax
rate was 33% for 1996, 1995 and 1994. These effective tax rates are lower than
the statutory income tax rate primarily due to tax exempt interest income
received on certain loans and debt securities.


OUTLOOK

     The Company's growth closely follows the economies of the tri-state area
of Mississippi, Louisiana and Arkansas with the most significant influence
coming from Mississippi where 70% of the Company's assets are located.
Mississippi's economy remains strong along with the other southern states.
Consumer spending and commercial loan demand have been steady, providing the
Company with three straight years of solid loan growth.

     Much of the growth in the Mississippi and Louisiana economies has been
driven by advances in the gaming industry. Hotel/lodging and other industries
that benefit from the increase in tourism drawn by gaming have also seen growth
in 1996. Construction spending continues to be strong and is expected to remain
so well into 1997.

     As a result of the favorable economic outlook, loan volumes are expected
to continue to grow but at a more moderate level in 1997 as compared to 1996.
Most of the recent growth in the loan portfolio has come from consumers and
small middle market businesses, a trend that is expected to continue. Deposits
began to grow during 1996 after several years of being stable. This trend is
expected to continue at a slow to moderate pace in 1997.

     The net interest margin has remained strong for the past two years and is
expected to remain so in 1997. Loan demand continues to exceed the growth in
deposits, contributing favorably to the net interest margin, although loan and
deposit spreads are expected to narrow somewhat in 1997.

     Loan quality continued to improve throughout 1996 and is expected to
remain stable through 1997. Loan quality indicators are well within
management's acceptable ranges and are consistent with the current state of the
banking industry as a whole.

     The emphasis on fee income in 1996 resulted in substantial growth in this
revenue source. Further growth in fee income is expected in 1997 as the Company
continues to explore nontraditional ways to provide services to an expanding
customer base as well as ways to enhance the wide range of existing banking
services offered. Expense control continues to be an area of intense focus as
the Company moves toward a one-charter organization. Consolidation of the
back-office is critical to improving operating efficiency with such changes
being transparent to the customer.

<PAGE>   28

BUSINESS

     The Company is a multi-bank holding company headquartered in Jackson,
Mississippi. The Company and its subsidiaries engage in the general banking
business and activities closely related to banking, as authorized by the
banking laws of the United States and the regulations issued pursuant thereto.
Complete banking and trust services are offered to the commercial, industrial
and agricultural areas which it serves through its four banking subsidiaries,
Deposit Guaranty National Bank, Commercial National Bank, Deposit Guaranty
National Bank of Louisiana, and Merchants National Bank.

     Deposit Guaranty National Bank, a 98%-owned banking subsidiary, is located
throughout Mississippi with 109 branches.

     Commercial National Bank is headquartered in Shreveport, Louisiana, and
has 16 branches in the Shreveport/Bossier and West Monroe/Monroe markets.
Deposit Guaranty National Bank of Louisiana is headquartered in Hammond,
Louisiana, with 23 branches in the Hammond, Gonzales and Denham Springs
markets. Merchants National Bank is located in Fort Smith, Arkansas, with six
branches.

     Deposit Guaranty's mortgage business includes McAfee Mortgage and
Investment Company, headquartered in Lubbock, Texas, with branches located
throughout Texas; Deposit Guaranty Mortgage Company, a Mississippi business
corporation with branches throughout Mississippi and Louisiana; and First
Mortgage Corporation headquartered in Omaha, Nebraska, with branches in
Nebraska, Oklahoma, Arkansas and Iowa. The mortgage companies act as mortgage
bankers, engaging in mortgage lending, brokerage and servicing.

     The Company provides investment advice and brokerage services through its
subsidiaries, Deposit Guaranty Investments, Inc., CNB Investments, Inc.,
Merchants Investment Company, Inc., and ParkSouth Corporation.

     The Company provides credit insurance related to extensions of credit by
the Company through G & W Life Insurance Company, a wholly-owned subsidiary.

DIVIDEND AND MARKET INFORMATION

     Effective December 5, 1996, the Company's common stock began trading on
the New York Stock Exchange under the symbol "DEP." Prior to that date, the
Company's common stock traded in the over-the-counter market under the Nasdaq
symbol "DEPS" and was quoted on Nasdaq's National Market System. The following
table sets forth the range of the high and low prices of the common stock, as
reported by the New York Stock Exchange and Nasdaq, respectively, and the
dividends declared per share for the periods indicated.

<TABLE>
<CAPTION>

                                             Prices
                          Dividends     -------------------
                          Per Share     High         Low
-----------------------------------------------------------
<S>                    <C>          <C>         <C>
1996
First Quarter          $    .165    $  23.75    $   21.50
Second Quarter              .175       24.13        22.00
Third Quarter               .175       24.50        22.00
Fourth Quarter              .200       31.00        24.00

1995
First Quarter          $    .140    $  17.00    $   14.75
Second Quarter              .150       19.50        16.75
Third Quarter               .150       21.13        19.25
Fourth Quarter              .165       25.75        20.88
</TABLE>

     This table reflects a 2 for 1 stock split which was effective December 2,
1996.

     It is the Company's present intention to continue the payment of cash
dividends on the common stock on a quarterly basis, dependent on expected
future normalized earnings, the financial condition of the Company, the
assessment of future capital needs and such other factors as deemed relevant.
As a bank holding company, the Company's ability to pay dividends is to a great
extent dependent upon dividend payments it receives from its subsidiaries. Such
subsidiary dividend payments are subject to the limitations described in the
notes to the consolidated financial statements. On March 3, 1997, there were
6,862 stockholders of record of the Company's common stock.

<PAGE>   29

                     CONSOLIDATED STATEMENTS OF CONDITION
                             Deposit Guaranty Corp.
<TABLE>
<CAPTION>

 (In Thousands Except Share Data)                                 December 31,
---------------------------------------------------------------------------------------
                                                               1996            1995
---------------------------------------------------------------------------------------
<S>                                                       <C>              <C>
Assets
Cash and due from banks                                   $   385,009      $   343,706
Interest-bearing bank balances                                  1,732               --
Federal funds sold and securities
   purchased under agreements to resell                        47,640          441,015
Trading account securities                                      2,505            3,381
Securities available for sale                               1,462,038        1,199,391
Investment securities (fair value: 1996 -
  $152,412; 1995 - $141,649)                                  145,087          139,033
Loans                                                       3,979,877        3,579,302
   Less: Allowance for possible loan losses                   (62,205)         (58,719)
---------------------------------------------------------------------------------------
      Net loans                                             3,917,672        3,520,583
---------------------------------------------------------------------------------------
Bank premises and equipment                                   148,327          144,340
Other assets                                                  272,887          234,750
---------------------------------------------------------------------------------------
   Total assets                                           $ 6,382,897      $ 6,026,199
=======================================================================================

Liabilities
Deposits:
   Noninterest-bearing                                    $ 1,160,914      $ 1,094,627
   Interest-bearing                                         3,864,835        3,686,032
---------------------------------------------------------------------------------------
      Total deposits                                        5,025,749        4,780,659
Federal funds purchased, securities
   sold under agreements to repurchase
   and other short-term borrowings                            543,029          599,482
Long-term debt                                                 99,405               --
Other liabilities                                             133,448          107,005
---------------------------------------------------------------------------------------
   Total liabilities                                        5,801,631        5,487,146
---------------------------------------------------------------------------------------

Stockholders' equity
Cumulative preferred stock, no par value,
   authorized: 25,000,000 shares of class A
   voting; and 25,000,000 shares of class B
   non-voting; issued and outstanding: none                        --               --
Common stock, no par value, authorized
   100,000,000 shares; issued and outstanding:
   1996 - 39,185,394 shares; 1995 - 38,759,286 shares          21,491           21,257
Surplus                                                       174,995          171,073
Retained earnings                                             383,211          327,633
Unrealized gain on securities available
   for sale, net of deferred income taxes                       1,569           19,090
---------------------------------------------------------------------------------------
   Total stockholders' equity                                 581,266          539,053
---------------------------------------------------------------------------------------
   Total liabilities and stockholders' equity             $ 6,382,897      $ 6,026,199
=======================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>   30

                      CONSOLIDATED STATEMENTS OF EARNINGS
                              Deposit Guaranty Corp.
<TABLE>
<CAPTION>

(In Thousands Except Share Data)                               Year Ended December 31,
--------------------------------------------------------------------------------------------------
                                                        1996            1995             1994
--------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
Interest income
Interest and fees on loans                           $   327,065     $   287,742     $    204,434
Interest on investment securities:
   Taxable                                                10,467          87,896           41,511
   Exempt from Federal income tax                              1           8,180            8,317
Interest on securities available for sale:
   Taxable                                                72,576          10,095           36,353
   Exempt from Federal income tax                         11,383             967              104
Interest on trading account securities                       416             354              258
Interest on Federal funds sold and securities
   purchased under agreements to resell                    9,989           6,317           11,111
Interest on bank balances                                    325           1,153            5,184
--------------------------------------------------------------------------------------------------
   Total interest income                                 432,222         402,704          307,272
--------------------------------------------------------------------------------------------------

Interest expense
Interest on deposits                                     151,375         143,640          109,316
Interest on Federal funds purchased, securities
   sold under agreements to repurchase and other
   short-term borrowings                                  27,222          29,792           16,565
Interest on long-term debt                                 4,091              --               --
--------------------------------------------------------------------------------------------------
   Total interest expense                                182,688         173,432          125,881
--------------------------------------------------------------------------------------------------

Net interest income                                      249,534         229,272          181,391
Provision for possible loan losses                         5,340           2,160           (4,750)
--------------------------------------------------------------------------------------------------
Net interest income after provision for
   possible loan losses                                  244,194         227,112          186,141
--------------------------------------------------------------------------------------------------

Other operating income
Service charges on deposit accounts                       35,584          32,084           27,572
Fees for trust services                                   16,413          14,793           14,111
Gains on securities available for sale                        12             919           13,621
Other service charges, commissions and fees               56,624          39,250           32,701
Other                                                      8,612           4,943            5,494
--------------------------------------------------------------------------------------------------
   Total other operating income                          117,245          91,989           93,499
--------------------------------------------------------------------------------------------------

Other operating expense
Salaries and employee benefits                           129,660         111,556           98,366
Net occupancy                                             16,073          13,838           12,269
Equipment                                                 17,618          16,196           13,419
Service fees                                              16,237          12,735           11,217
Communication                                             10,607           9,100            7,736
FDIC assessment                                               94           4,906            8,776
Advertising and public relations                           9,484           8,668            7,985
Other                                                     37,435          34,453           20,279
--------------------------------------------------------------------------------------------------
   Total other operating expense                         237,208         211,452          180,047
--------------------------------------------------------------------------------------------------

Income before income taxes                               124,231         107,649           99,593
Income tax expense                                        40,621          35,029           32,463
--------------------------------------------------------------------------------------------------
Net income                                           $    83,610     $    72,620     $     67,130
==================================================================================================
Net income per share                                 $      2.16     $      1.89     $       1.90
Weighted average shares outstanding                   38,760,192      38,431,162       35,336,124
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>   31

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             Deposit Guaranty Corp.
<TABLE>
<CAPTION>

                                                                                             Unrealized
                                                                                              Gain on
                                                                                             Securities
                                                    Common                     Retained       Available     Treasury
(In Thousands Except Share Data)                    Stock        Surplus       Earnings       For Sale       Stock
--------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>            <C>           <C>
Balance, December 31, 1993                        $ 19,383      $ 155,399      $ 221,106      $     --      $    --
Net income for 1994                                     --             --         67,130            --           --
Cash dividends declared ($.530 per share)               --             --        (18,728)           --           --
Purchase and retirement of 76,000 shares
   of common stock                                     (42)        (1,055)            --            --           --
Purchase of 140,000 shares of common stock
   by subsidiary                                        --             --             --            --       (2,019)
Issuance of 36,400 shares of common stock
   under executive stock option plan                    20            262             --            --           --
Tax benefit from exercise of stock options              --            120             --            --           --
Cumulative effect of a change in accounting
   principle, net of deferred income taxes
   of $18,807                                           --             --             --        31,583           --
Net change in unrealized gain on securities
   available for sale, net of deferred income
   taxes of $17,628                                     --             --             --       (29,610)          --
--------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994                          19,361        154,726        269,508         1,973       (2,019)
Net income for 1995                                     --             --         72,620            --           --
Cash dividends declared ($.605 per share)               --             --        (23,075)           --           --
Issuance of 6,114,582 shares of common stock
   in acquisitions                                   3,348         64,094          8,580            --           --
Purchase of 2,645,800 shares and retirement
   of 2,785,800 shares of common stock              (1,526)       (49,253)            --            --        2,019
Issuance of 134,400 shares of common stock
   under executive stock option plan                    74          1,027             --            --           --
Tax benefit from exercise of stock options              --            479             --            --           --
Net change in unrealized gain on securities
   available for sale, net of deferred income
   taxes of $10,447                                     --             --             --        17,117           --
--------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995                          21,257        171,073        327,633        19,090           --
Net income for 1996                                     --             --         83,610            --           --
Cash dividends declared ($.715 per share)               --             --        (28,000)           --           --
Issuance of 1,687,888 shares of common stock
   in acquisitions                                     926         36,523            (32)           --           --
Purchase and retirement of 1,629,900 shares
   of common stock                                    (894)       (38,206)            --            --           --
Issuance of 368,120 shares of common stock
   under executive stock option plan                   202          3,643             --            --           --
Tax benefit from exercise of stock options              --          1,962             --            --           --
Net change in unrealized gain on securities
   available for sale, net of deferred income
   taxes of $10,656                                     --             --             --       (17,521)          --
--------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996                        $ 21,491      $ 174,995      $ 383,211      $  1,569      $    --
====================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>   32

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             Deposit Guaranty Corp.
<TABLE>
<CAPTION>
(In Thousands)                                                                   Year Ended December 31,
-------------------------------------------------------------------------------------------------------------------
                                                                             1996           1995             1994
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>            <C>
Cash flows from operating activities
Net income                                                              $    83,610      $  72,620      $    67,130
Adjustments to reconcile net income to net cash provided
  by operating activities:
   Provision for possible loan losses                                         5,340          2,160           (4,750)
   Provision for possible losses on other real estate                           165            154            1,078
   Provision for depreciation and amortization                               31,176         25,998           18,405
   Provision for deferred income taxes                                        1,979         (3,259)             898
   Amortization (accretion) of premium (discount) on investment
     securities, net                                                            563        (23,339)         (13,390)
   Accretion of discount on securities available for sale, net               (3,477)          (666)          (3,776)
   Deferred loan fees and costs                                              (2,677)        (2,716)          (3,238)
   Decrease in other liabilities                                             (7,034)        (3,306)          (7,152)
   (Increase) decrease in other assets                                       (9,378)       (11,940)          25,252
   Net cash received from (paid for) loans held for resale                  (19,796)       (49,934)          26,652
   Gains on securities available for sale                                       (12)          (919)         (13,621)
   Other, net                                                                 8,228         (4,621)          (6,625)
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                              88,687            232           86,863
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Net (increase) decrease in interest-bearing bank balances                    (1,732)       135,298          (65,298)
Proceeds from sales of securities available for sale                      1,391,991        423,530        1,656,020
Proceeds from maturities and principal repayments of
  investment securities                                                      44,012        816,065          277,324
Proceeds from maturities and principal repayments of securities
  available for sale                                                        545,643        174,371          724,466
Purchases of investment securities                                          (52,104)      (643,049)      (1,130,578)
Purchases of securities available for sale                               (2,154,049)      (492,674)      (1,063,787)
Net (increase) decrease in Federal funds sold and securities
   purchased under agreements to resell                                     399,129       (209,410)         (15,454)
Net increase in loans                                                      (284,040)      (348,698)        (369,938)
Proceeds from sales of other real estate                                      4,591          3,578            8,952
Purchases of bank premises and equipment                                    (18,263)       (18,551)         (17,337)
Proceeds from sales of bank premises and equipment                              742            586            2,758
Payment for purchase of common stock of
   acquired companies and other acquisition costs                            (3,593)       (19,739)         (50,465)
Cash and due from banks of acquired companies                                 8,304         26,646           14,073
-------------------------------------------------------------------------------------------------------------------
      Net cash used by investing activities                                (119,369)      (152,047)         (29,264)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase (decrease) in deposits                                         101,217        238,759          (48,713)
Net increase (decrease) in Federal funds purchased, securities sold
   under agreements to repurchase, and other short-term borrowings          (66,851)        31,963           45,023
Repayment of line of credit to fund loans held for resale                        --        (32,955)              --
Proceeds from the exercise of common stock options                            3,845          1,101              282
Proceeds from the issuance of long-term debt                                 99,381             --               --
Purchases of common stock                                                   (39,100)       (48,760)          (3,116)
Cash dividends paid                                                         (26,507)       (21,355)         (18,201)
-------------------------------------------------------------------------------------------------------------------
      Net cash provided (used) by financing activities                       71,985        168,753          (24,725)
-------------------------------------------------------------------------------------------------------------------
      Increase in cash and due from banks                                    41,303         16,938           32,874
      Cash and due from banks at beginning of year                          343,706        326,768          293,894
-------------------------------------------------------------------------------------------------------------------
      Cash and due from banks at year end                               $   385,009      $ 343,706      $   326,768
===================================================================================================================
</TABLE>

INCOME TAXES:

   The Company made income tax payments of $38.6 million, $35.5 million and
$28.6 million during the years ended December 31, 1996, 1995 and 1994,
respectively.

INTEREST:

   The Company paid $183.3 million, $168.7 million and $126.2 million in
interest on deposits and other borrowings during the years ended December 31,
1996, 1995 and 1994, respectively.


See accompanying notes to consolidated financial statements.

<PAGE>   33

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             Deposit Guaranty Corp.

NOTE 1 - BUSINESS, BASIS OF FINANCIAL STATEMENT PRESENTATION, ACCOUNTING
         POLICIES AND RECENT PRONOUNCEMENTS

BUSINESS

     The Company and its subsidiaries are engaged in the general banking
business and activities closely related to banking and provide these services
primarily to customers in Mississippi, Louisiana and Arkansas through its
banking subsidiaries. The Company is subject to the regulations of certain
federal agencies and undergoes periodic examinations by those regulatory
authorities.

BASIS OF FINANCIAL STATEMENT PRESENTATION

     The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, the Company is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the dates of
the statements of condition and the reported amounts of revenues and expenses
for the years then ended. Actual results could differ significantly from those
estimates.

     Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for possible loan
losses and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the determination
of the allowance for possible loan losses and real estate owned, the Company
obtains independent appraisals for significant properties.

ACCOUNTING POLICIES

CONSOLIDATION

     The consolidated financial statements of the Company include Deposit
Guaranty National Bank (DGNB), a 98%-owned subsidiary, Deposit Guaranty
Arkansas Corp., G & W Life Insurance Co., and Deposit Guaranty Louisiana Corp.
(DGLC, formerly Commercial National Corporation), wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.

CASH EQUIVALENTS

     The Company considers only cash and amounts due from banks to be cash
equivalents.

     TRADING ACCOUNT SECURITIES

   Trading account securities are reported at fair value. Realized and
unrealized gains or losses on trading account securities are reflected in other
operating income.

SECURITIES AVAILABLE FOR SALE

     Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under this statement, securities
available for sale prior to maturity are reported at fair value with unrealized
gains and losses excluded from earnings and reported as a separate component of
stockholders' equity, net of related deferred income taxes. Premiums are
amortized and discounts are accreted using the interest method. The
amortization of premiums and accretion of discounts on mortgage-backed
securities is periodically adjusted to reflect the actual prepayment experience
of the underlying mortgage loans. Gains or losses on sales of these securities,
computed based on the carrying value of the specific securities sold, are
classified as gains on securities available for sale in other operating income.

INVESTMENT SECURITIES

     Investment securities are securities which the Company has the positive
intent and ability to hold to maturity. Investment securities are stated at
cost, adjusted for amortization of premiums and accretion of discounts using
the interest method. The amortization of premiums and discounts on
mortgage-backed securities is periodically adjusted to reflect the actual
prepayment experience of the underlying mortgage loans. Gains and losses on
sales of investment securities are computed based on the adjusted cost of the
specific securities sold.

DERIVATIVE FINANCIAL INSTRUMENTS

     TRADING INSTRUMENTS: Derivative financial instruments held for trading are
recorded at fair value. These instruments are used by the Company to generate
additional noninterest income. Realized and unrealized gains and losses on
trading positions are recognized in noninterest income during the period in
which the gain or loss occurs. Interest revenue and expense arising from
trading instruments are included in other operating income.

     RISK MANAGEMENT INSTRUMENTS: As part of its asset/liability management
activities, the Company may enter into interest rate futures, forwards, swaps
and option contracts. These derivative financial instruments are categorized as
risk management instruments and are carried at fair value unless the instrument
qualifies for hedge accounting treatment. Fair value adjustments on risk
management instruments carried at fair value are reflected in operating income.
Gains and losses realized on futures and forward contracts qualifying as hedges
are deferred and amortized over the terms of the related assets or liabilities
and are included as adjustments to interest income or interest expense.
Settlements on interest rate swaps and option contracts are recognized over the
lives of the agreements as adjustments to interest income or interest expense.

     Interest rate contracts used in connection with securities available for
sale are carried at fair value with gains and losses, net of applicable
deferred income taxes, reported in a separate component of stockholders'
equity, consistent with the reporting of unrealized gains and losses on such
securities.

     Premiums paid for interest rate caps and floors qualifying for hedge
accounting are deferred and classified with the assets and liabilities hedged
and are amortized to interest income or expense over the life of the
instrument.

<PAGE>   34

INTEREST AND FEES ON LOANS

   Interest on loans is recognized based on the interest method. The
recognition of interest is suspended on commercial loans when principal or
interest is past due ninety days or more and collateral is inadequate to cover
principal and interest or when, in the opinion of management, full collection
is unlikely. Interest on such loans is subsequently recognized only in the
period in which payments are received and, in certain situations, such payments
are applied to reduce principal when loans are unsecured or collateral values
are deficient. A nonaccrual loan is returned to accrual status provided all
principal and interest amounts are reasonably assured of repayment within a
reasonable period and the borrower has demonstrated sustained payment
performance. Nonrefundable loan fees and direct origination costs are deferred
and amortized over the life of the loan as an adjustment of the yield.
Commitment fees are deferred and recognized as noninterest income over the
commitment period.

ALLOWANCE FOR POSSIBLE LOAN LOSSES

   The allowance for possible loan losses is maintained at a level considered
adequate to provide for reasonably foreseeable potential losses on loans. The
allowance is based on management's evaluation of the loan portfolio considering
economic conditions, volume and composition of the loan portfolio, past
experience and other relevant factors.

   Effective January 1, 1995, the Company adopted the provisions of SFAS No.
114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 requires
a creditor to measure impaired and restructured loans at the present value of
expected future cash flows, discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. The difference
between the impaired loan's carrying value and the fair value is recognized as
a valuation adjustment. The Company also adopted the provisions of SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" on January 1, 1995. SFAS No. 118 amends SFAS No. 114 by allowing
creditors to use existing methods for recognizing interest income on impaired
loans and by requiring additional disclosures. These statements did not have a
material impact on the consolidated financial statements.

OTHER REAL ESTATE OWNED

  Other real estate owned includes assets that have been acquired in
satisfaction of debt. Other real estate owned is reported in other assets and
is recorded at the lower of cost or estimated fair value less estimated costs
to sell. Any valuation adjustments required prior to foreclosure are charged to
the allowance for possible loan losses. Subsequent to acquisition, losses on
the periodic revaluation of the property are charged to current period earnings
as other operating expense. Costs of operating and maintaining the properties,
net of related income and gains (losses) on their disposition, are charged to
other operating expense as incurred.

   Expenditures to complete or improve properties are capitalized if the
expenditures are expected to be recovered upon the ultimate sale of the
property.

BANK PREMISES AND EQUIPMENT

   Bank premises and equipment are stated at cost. Depreciation and
amortization are computed principally using the straight-line method over the
estimated useful lives of the assets. Any gain or loss resulting from
disposition is included in other operating income. Expenditures for maintenance
and repairs are charged to other operating expense and renewals and betterments
are capitalized.

   Effective January 1, 1996, the Company adopted the provisions of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use is based on the fair value of the asset. This
statement requires that the majority of long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The adoption of SFAS No. 121 did not
have a material impact on the consolidated financial statements.

INTANGIBLE ASSETS

   Goodwill, representing the excess of the cost of acquisitions over the fair
value of the net assets acquired, is amortized using the straight-line method
over periods not exceeding 15 years. Core deposit intangibles represent the net
present value of the future economic benefits related to the use of deposits
assumed and are amortized on a straight-line basis generally over ten years.

   The Company reviews its intangible assets for possible impairment when there
is a significant event that may detrimentally impact the underlying basis of
the asset.

   Mortgage servicing rights represent the right to receive future servicing
income. Mortgage servicing rights are amortized over the period of, and in
proportion to, estimated net servicing income. At least annually, the Company
evaluates the carrying amount of its servicing rights by analyzing the
discounted cash flows of such assets under current market conditions.

   Effective January 1, 1996, the Company adopted the provisions of SFAS No.
122, "Accounting for Mortgage Servicing Rights, an Amendment to SFAS No. 65."
SFAS No. 122 provides guidance for recognition of mortgage servicing rights as
an asset when originated or purchased mortgage loans are sold or securitized
with servicing rights retained. This statement also requires that any
impairment of mortgage servicing rights be measured as the difference between
the carrying amount of the servicing rights and their current fair values. SFAS
No. 122 is applied prospectively; therefore, the Company's financial

<PAGE>   35

statements for years prior to 1996 do not reflect the adoption of this
pronouncement. The effect of this change for the year ended December 31, 1996,
was to increase net income by approximately $3.3 million, net of income taxes.

POSTRETIREMENT BENEFITS

   The Company accounts for postretirement and postemployment health care and
life insurance benefits using the full accrual method which recognizes the cost
of providing the benefits over the active service period of the employee.

   Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 established standards for
accounting and reporting the cost of benefits provided by an employer to its
former or inactive employees after employment but before retirement. SFAS No.
112 requires an employer to recognize an obligation for such benefits if
certain conditions are met. This statement did not have a material impact on
the consolidated financial statements.

INCOME TAXES

   Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which the
deferred tax assets or liabilities are expected to be settled or realized.

NET INCOME PER SHARE

   Net income per share is based on the weighted average number of shares
outstanding during each year.

RECLASSIFICATIONS

   Certain prior amounts have been reclassified to conform with the 1996
presentation.

RECENT PRONOUNCEMENTS

   In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This statement establishes accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. SFAS No. 125 requires that an entity recognize
the financial and servicing assets it controls and the liabilities it has
incurred, derecognize financial assets when control has been surrendered, and
derecognize liabilities when extinguished. Consistent standards are provided by
this statement for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. This statement, as amended by SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125," is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996,
and is effective after December 31, 1997, for repurchase agreements,
dollar-roll agreements, securities lending, and similar transactions. The
adoption of this statement will not have a material impact on the consolidated
financial statements.

NOTE 2 - CASH AND DUE FROM BANKS

   The Company is required to maintain average reserve balances with the
Federal Reserve Bank based on a percentage of deposits.
The average amount of those reserves for the year ended December 31, 1996, was
approximately $18 million.

NOTE 3 - ACQUISITIONS

   Bank mergers and acquisitions completed by the Company during the three
years ended December 31, 1996, along with the related accounting treatment, are
as follows (dollars in millions):

<TABLE>
<CAPTION>


                                                   Common      Cash   Accounting
                     State     Date    Assets   Shares Issued  Paid    Treatment
---------------------------------------------------------------------------------
<S>                   <C>      <C>      <C>      <C>            <C>     <C>
First Columbus
 Financial                      May
 Corporation          MS       1994     $209             --     $50     Purchase

LBO Bancorp,                   Jan.
 Inc                  LA       1995       96      1,360,842      --     Purchase

Citizens
 National                       May
 Bancshares, Inc.     LA       1995      193      2,765,688      --     Pooling

First Merchants
 Financial                     Aug.
 Corporation          AR       1995      280      1,988,052       4     Purchase

Bank of
 Gonzales
 Holding                       June
 Company              LA       1996      126      1,267,346      --     Purchase

Tuscaloosa                     Nov.
 Bancshares, Inc.     LA       1996       41        450,542      --     Purchase
</TABLE>

   For those acquisitions accounted for as a purchase business combination, the
results of operations have been included in the financial statements from the
date of acquisition.

   In addition to the mergers included in the table above, the Company acquired
a branch operation and two mortgage companies. On March 10, 1995, the Company
purchased the Coahoma County, Mississippi, operations of a local Mississippi
bank. This acquisition added assets of approximately $82 million.

   On August 8, 1995, the acquisition of First Mortgage Corp. located in Omaha,
Nebraska, was completed for $15.8 million in a purchase business combination.
At the acquisition date, First Mortgage Corp. had a $1.1 billion mortgage
servicing portfolio and six production offices in Nebraska and Oklahoma.

   On June 29, 1996, the Company purchased for $3.6 million, McAfee Mortgage
and Investment Company, located in Lubbock, Texas, in a transaction accounted
for as a purchase business combination. McAfee Mortgage and Investment Company
has 15 offices located throughout Texas and originated approximately $240
million in mortgage loans in 1995.
<PAGE>   36

   On January 3, 1997, the Company completed its acquisition of Jefferson
Guaranty Bancorp, a one-bank holding company, located in Metairie, Louisiana,
with approximately $300 million in total assets. The Company paid a combination
of 1,759,688 shares of its common stock and $10 million in cash for all of the
outstanding common stock and common stock equivalents of Jefferson Guaranty
Bancorp. The transaction was accounted for as a purchase business combination.
The Company has been authorized by its Board to purchase in the open market all
or part of the Company's common shares exchanged in the acquisition.

   On December 26, 1996, the Company entered into a definitive agreement to
acquire First Capital Bancorp, Inc., a bank holding company located in Monroe,
Louisiana, with approximately $186 million in total assets. Under the terms of
the agreement, the Company's common stock will be exchanged for all of First
Capital Bancorp's outstanding common shares. The exchange rate will be based on
the average market price of the Company's common stock on the ten consecutive
trading days ending on the tenth business day prior to the effective date of
the acquisition. If the average market price remains above $25.50, the Company
will issue 1,568,626 shares. If the average market price is less than $25.50,
the number of shares issued will increase up to a maximum of 1,702,126. The
transaction, which will be accounted for as a pooling of interests business
combination, is subject to the approval of the stockholders of First Capital
Bancorp, Inc. and regulatory authorities and is expected to be consummated
during the first quarter of 1997.

   On February 20, 1997, a definitive agreement was reached to acquire NBC
Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana, with approximately $70 million in total assets. Under the terms of
the agreement, 422,581 shares of the Company's common stock will be exchanged
for all of the outstanding common shares of NBC Financial Corporation. The
transaction, which will be accounted for as a purchase business combination, is
subject to the approval of the stockholders of NBC Financial Corporation and
regulatory authorities and is expected to be consummated during the second
quarter of 1997.

NOTE 4 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES

   On November 27, 1995, the Company transferred investment securities with a
carrying amount of $1.1 billion and a fair value of $1.2 billion to securities
available for sale, as provided for under the FASB's Special Report, "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities."

   The amortized cost and estimated fair value of securities available for sale
and investment securities follow (in thousands):

<TABLE>
<CAPTION>

                                        December 31,
-----------------------------------------------------------------------------
Securities                          Gross          Gross        Estimated
available            Amortized    Unrealized     Unrealized        Fair
for sale               Cost         Gains          Losses          Value
-----------------------------------------------------------------------------
<S>                  <C>            <C>           <C>              <C>
1996
U.S. Treasury
  and other U.S.
  Government
  agencies           $  715,808     $  2,994      $    (7,287)     $  711,515
Obligations of
  states and
  political
  subdivisions          175,977        6,092           (1,236)        180,833
Mortgage-backed
  securities            567,235        3,008           (1,982)        568,261
Other securities          1,424            5               --           1,429
-----------------------------------------------------------------------------
                     $1,460,444     $ 12,099      $   (10,505)     $1,462,038
=============================================================================

1995
U.S. Treasury
  and other U.S.
  Government
  agencies           $  849,984     $ 19,117      $      (475)     $  868,626
Obligations of
  states and
  political
  subdivisions          136,297        8,304             (114)        144,487
Mortgage-backed
  securities            180,848        3,209             (280)        183,777
Other securities          2,477           27               (3)          2,501
-----------------------------------------------------------------------------
                     $1,169,606     $ 30,657      $      (872)     $1,199,391
=============================================================================
</TABLE>

<TABLE>
<CAPTION>
                                     December 31,
-----------------------------------------------------------------------
                                 Gross          Gross        Estimated
Investment          Amortized   Unrealized    Unrealized        Fair
securities            Cost        Gains        Losses          Value
-----------------------------------------------------------------------
<S>                  <C>          <C>          <C>            <C>
1996
U.S. Treasury
  and other U.S.
  Government
  agencies           $  9,379     $    --      $    (110)     $  9,269
Obligations of
  states and
  political
  subdivisions            105          --             --           105
Mortgage-backed
  securities           60,581       5,047             --        65,628
Other securities       75,022       2,423            (35)       77,410
-----------------------------------------------------------------------
                     $145,087     $ 7,470      $    (145)     $152,412
=======================================================================
</TABLE>


<PAGE>   37

<TABLE>
<CAPTION>
                                     December 31,
-----------------------------------------------------------------------
                                 Gross          Gross        Estimated
Investment          Amortized   Unrealized    Unrealized        Fair
securities            Cost        Gains        Losses          Value
-----------------------------------------------------------------------
<S>                  <C>          <C>          <C>            <C>
1995
U.S. Treasury
  and other U.S.
  Government
  agencies           $  9,369     $     9      $      --      $  9,378
Mortgage-backed
  securities           80,481       2,898           (829)       82,550
Other securities       49,183         549            (11)       49,721
-----------------------------------------------------------------------
                     $139,033     $ 3,456      $    (840)     $141,649
=======================================================================
</TABLE>

   The amortized cost and estimated fair value of securities available for sale
and investment securities at December 31, 1996, by contractual maturity, are
shown below (in thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                            December 31, 1996
--------------------------------------------------------------------
                                                          Estimated
Securities available                       Amortized        Fair
for sale                                      Cost          Value
--------------------------------------------------------------------
<S>                                        <C>            <C>
Due in one year or less                    $    8,403     $    8,771
Due after one year through five years         541,657        540,700
Due after five years through ten years        231,974        230,299
Due after ten years                           111,175        114,007

                                              893,209        893,777
Mortgage-backed securities                    567,235        568,261
--------------------------------------------------------------------
                                           $1,460,444     $1,462,038
====================================================================

Investment securities
Due in one year or less                    $    2,659     $    2,729
Due after one year through five years          17,579         17,465
Due after five years through ten years         44,827         47,093
Due after ten years                            19,441         19,497

                                               84,506         86,784
Mortgage-backed securities                     60,581         65,628
--------------------------------------------------------------------
                                           $  145,087     $  152,412
====================================================================
</TABLE>

   Gross gains of $10.8 million, $1.2 million, and $30.8 million and gross
losses of $10.8 million, $338 thousand, and $17.2 million were realized on
sales of securities available for sale in 1996, 1995, and 1994, respectively.
Included in gross gains for 1996 and 1995 were $107 thousand and $829 thousand,
respectively, related to premiums received for exercised written option
contracts on securities available for sale. Included in gross gains and gross
losses for 1994 was $10.5 million and $6.2 million, respectively, related to
the termination of interest rate swap agreements and sales of securities
associated with such agreements.

   Securities available for sale and investment securities with a carrying
amount of $1,019.9 million (fair value $1,023.1 million) at December 31, 1996,
and $772.2 million (fair value $793.1 million) at December 31, 1995, were
pledged to secure public and trust deposits, for repurchase agreements, and for
other purposes.

NOTE 5 - LOANS

   The Company makes commercial, financial, agribusiness, real estate and
consumer loans to customers. Although the Company has a diversified loan
portfolio, a substantial portion of its loan portfolio is concentrated in the
states of Mississippi, Louisiana and Arkansas. Loans held for sale at December
31, 1996 and 1995, were $295.1 million and $237.1 million, respectively. The
Company services mortgage loans, and at December 31, 1996, 1995 and 1994, the
loan servicing portfolio approximated $3.8 billion, $3.5 billion and $2.0
billion, respectively. The composition of the loan portfolio follows (in
thousands):

<TABLE>
<CAPTION>
                                                 December 31,
--------------------------------------------------------------------
                                              1996           1995
--------------------------------------------------------------------
<S>                                        <C>            <C>
Commercial, financial and agricultural     $1,104,648     $1,010,174
Real estate - construction                    170,711        122,765
Real estate - mortgage                      1,800,031      1,615,166
Consumer                                      904,487        831,197
--------------------------------------------------------------------
Total loans                                $3,979,877     $3,597,302
====================================================================
</TABLE>

   In the ordinary course of business, the Company makes loans to its directors
and principal officers of its subsidiaries, as well as other related parties.
In the opinion of management, such loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other parties. A summary of changes in such
loans during 1996 follows (in thousands):

<TABLE>
<S>                                            <C>
Balance at January 1                           $  73,770
Additions                                        220,510
Reductions (including participations sold)      (231,041)
--------------------------------------------------------
Balance at December 31                         $  63,239
========================================================
</TABLE>

   Transactions in the allowance for possible loan losses follow (in
thousands):

<TABLE>
<CAPTION>
                                    1996          1995          1994
----------------------------------------------------------------------
<S>                               <C>           <C>           <C>
Balance at January 1              $ 58,719      $ 55,873      $ 62,032
Additions due to acquisitions        2,062         4,652         1,224
Loans charged-off                  (14,309)      (12,324)      (14,908)
Recoveries on loans
   previously charged-off           10,393         8,358        12,275
----------------------------------------------------------------------
Net charge-offs                     (3,916)       (3,966)       (2,633)
----------------------------------------------------------------------
Provision for possible
   loan losses                       5,340         2,160        (4,750)
----------------------------------------------------------------------
Balance at December 31            $ 62,205      $ 58,719      $ 55,873
======================================================================
</TABLE>

<PAGE>   38
   The Company's total recorded investment in impaired loans as of December 31,
1996 and 1995, was $11.7 million and $18.7 million, respectively. Included in
the balance of impaired loans at December 31, 1996 and 1995, is $4.0 million
and $5.3 million which have related allowances of $782 thousand and $2.4
million, respectively, for estimated credit losses determined in accordance
with the provisions of SFAS No. 114. The remaining $7.7 million and $13.4
million of the balance of impaired loans at December 31, 1996 and 1995,
respectively, do not require an allowance under the provisions of SFAS No. 114
since the estimated future cash flows or the collateral value was considered
sufficient to cover any future deficiencies in loan payments. However, a
general allowance for possible loan losses is available to absorb any losses on
these loans. The average recorded investment in impaired loans for the years
ended December 31, 1996 and 1995, was $14.5 million and $22.2 million,
respectively. All impaired loans are on nonaccrual status and are subject to
the nonaccrual method for interest income recognition. There was no interest
income recognized in 1996 and 1995 on loans identified as impaired.

   Loans on nonaccrual status amounted to approximately $16.4 million at
December 31, 1996, and $22.5 million at December 31, 1995. The effect on
interest income of nonaccrual loans was not material in 1996, 1995 or 1994.
Restructured loans were not significant in 1996 and there were no restructured
loans in 1995 or 1994.

   Other real estate owned amounted to approximately $5.0 million at December
31, 1996, and $6.5 million at December 31, 1995. Transactions in the allowance
for possible losses on other real estate follow (in thousands):

<TABLE>
<CAPTION>

                                       1996         1995         1994
---------------------------------------------------------------------
<S>                <C>              <C>          <C>          <C>
Balance at January 1                $ 1,730      $ 2,024      $ 1,205
Additions due to acquisitions           197           --           --
Provision charged to expense            165          154        1,078
Losses charged to the allowance        (856)        (448)        (259)
---------------------------------------------------------------------
Balance at December 31              $ 1,236      $ 1,730      $ 2,024
=====================================================================
</TABLE>

NOTE 6 - BANK PREMISES AND EQUIPMENT

   A summary of bank premises and equipment follows (in thousands):

<TABLE>
<CAPTION>
                                          December 31,
-------------------------------------------------------------
                                       1996           1995
-------------------------------------------------------------
<S>                                  <C>            <C>
Land                                 $  27,485      $  24,885
Buildings and leasehold
   improvements                        177,087        164,383
Furniture and equipment                107,465        109,905
-------------------------------------------------------------
                                       312,037        299,173
Less: Accumulated depreciation
   and amortization                   (163,710)      (154,833)
-------------------------------------------------------------
Bank premises and equipment, net     $ 148,327      $ 144,340
=============================================================
</TABLE>

NOTE 7 - DEPOSITS

   The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000, was approximately $395.6 million and $390.0
million at December 31, 1996 and 1995, respectively.

NOTE 8 - BORROWED FUNDS

   In April 1996, the Company issued $100 million in 7.25% Senior Notes due in
2006. These notes are not callable prior to maturity and no sinking fund is
required. Interest on the notes is paid semi-annually. The notes qualify as
"Tier II Capital" under Federal Reserve Guidelines.

   The Company maintains a $50 million line of credit at a commercial bank. The
line of credit, which is for general corporate purposes, bears interest at an
adjustable rate based on LIBOR and expires in May 1997. There is no commitment
fee or compensating balance arrangement relating to this line of credit and
there was no balance outstanding at December 31, 1996. Included in other
short-term borrowings at December 31, 1995, was $27.6 million outstanding under
the line of credit.

   Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days from the transaction date. Other
borrowed funds consist of term federal funds purchased and treasury tax and
loan deposits and generally are repaid within one to 120 days from the
transaction date.

   Information concerning securities sold under agreements to repurchase is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                            1996          1995
----------------------------------------------------------------
<S>                                       <C>           <C>
Average balance during the year           $280,876      $309,002
Maximum month-end balance
   during the year                         346,215       374,828
Average interest rate during the year         4.65%         5.00%
</TABLE>

   Securities underlying the repurchase agreements remain under the Company's
control.

NOTE 9 - LEASES

   Operating leases (primarily for branch bank space) expire at various dates.
Most of these leases may be renewed beyond their present expiration dates.
Future minimum payments under noncancelable operating leases with initial or
remaining terms of one year or more at December 31, 1996, follow (in
thousands):

<TABLE>
                  <S>                              <C>
                  1997                             $ 2,207
                  1998                               1,786
                  1999                               1,211
                  2000                                 801
                  2001                                 614
                  Thereafter                         3,762
                  ----------------------------------------
                  Total minimum lease payments     $10,381
                  ========================================
</TABLE>


<PAGE>   39

   At December 31, 1996, the Company leases office space to others with
expirations at various dates through 2005. These leases have an average term of
approximately three years and require total minimum rentals of approximately
$18.2 million. Most of these subleases may be renewed beyond their present
expiration dates.

   Rental expense of $7.1 million in 1996, $5.8 million in 1995, and $4.5
million in 1994 included amounts for short-term cancelable leases and minimum
rentals under operating leases.

NOTE 10 - INCOME TAXES

   Total income tax expense was allocated as follows (in thousands):

<TABLE>
<CAPTION>
                                          1996          1995          1994
----------------------------------------------------------------------------
<S>                                     <C>           <C>           <C>
Income before income taxes              $ 40,621      $ 35,029      $ 32,463
Other noncurrent intangible assets,
   for recognition of acquired
   tax benefits that previously
   were included in the valuation
   allowance                                  --        (2,949)         (550)
Other noncurrent intangible assets,
   for recognition of acquired
   tax benefits relating to a
   prior purchase business
   combination                                --          (181)           --
Stockholders' equity, for
   compensation expense for
   tax purposes in excess of
   amount recognized for
   financial reporting
   purposes                               (1,962)         (479)         (120)
Stockholders' equity, for
   unrealized gains on securities
   available for sale for financial
   reporting purposes, including
   impact of adopting
   SFAS No. 115                          (10,656)       10,447         1,179
----------------------------------------------------------------------------
                                        $ 28,003      $ 41,867      $ 32,972
============================================================================
</TABLE>

   The current and deferred components of income tax expense follow (in
thousands):

<TABLE>
<CAPTION>
                1996         1995          1994
-------------------------------------------------
<S>            <C>         <C>           <C>
Current
   Federal     $36,900     $ 36,020      $ 29,368
   State         1,742        2,268         2,197
Deferred
   Federal       1,835       (2,673)        1,079
   State           144         (586)         (181)
-------------------------------------------------
               $40,621     $ 35,029      $ 32,463
=================================================
</TABLE>

   The differences between the income tax expense shown on the consolidated
statements of earnings and the amounts computed by applying the federal income
tax rate of 35% to income before income taxes follow (in thousands):

<TABLE>
<CAPTION>
                                1996       1995      1994
-----------------------------------------------------------
<S>                           <C>        <C>        <C>
Amount computed at
   statutory tax rates        $ 43,481   $37,677    $34,858
Increases (decreases):
Cash surrender value
   of life insurance            (1,461)   (1,834)    (1,061)
Tax exempt interest
   income                       (4,840)   (3,951)    (4,001)
Amortization of
   intangible assets             1,406       926        283
State income taxes, net          1,226     1,093      1,311
Other, net                         809     1,118      1,073
-----------------------------------------------------------
                              $ 40,621   $35,029    $32,463
===========================================================
</TABLE>

   The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset follow (in thousands):

<TABLE>
<CAPTION>
                                            December 31,
-----------------------------------------------------------
                                           1996      1995
-----------------------------------------------------------
<S>                                      <C>        <C>
Deferred tax assets
Allowance for possible loan losses       $23,815    $22,289
Other real estate owned                      700        986
Deferred compensation                     11,503      9,377
Investment tax credit carryforwards        2,398      2,965
Other                                      5,718      7,286
-----------------------------------------------------------
   Total gross deferred tax asset         44,134     42,903
-----------------------------------------------------------
Deferred tax liabilities
Bank premises and equipment                4,505      4,076
Pension plan                               4,931      4,777
Leveraged leases                             225        665
Core deposit intangibles                   8,472      8,090
Mortgage servicing rights                  7,989      3,659
Unrealized gain on securities available
   for sale                                  970     11,626
State income taxes                           514        366
Other                                      1,060      1,550
-----------------------------------------------------------
   Total gross deferred tax liability     28,666     34,809
-----------------------------------------------------------
   Net deferred tax asset                $15,468    $ 8,094
===========================================================
</TABLE>

   There was no valuation allowance for the gross deferred tax asset as of
December 31, 1996 and 1995. The valuation allowance for the gross deferred tax
asset as of December 31, 1994, was $3.0 million. The net change in the total
valuation allowance for the year ended December 31, 1995, was a decrease of
$3.0 million. This decrease was due to management's belief that it is now more
likely than not that DGLC will be able to utilize the entire portion of the
investment tax credit carryforwards. The net change in the total valuation
allowance for the


<PAGE>   40

year ended December 31, 1994, was a decrease of $567 thousand. This decrease
was due to the utilization of net operating loss carryforwards.

   At December 31, 1996, the Company had investment tax credit carryforwards
for federal income tax purposes of approximately $2.4 million which are
available to reduce DGLC's future federal income taxes, if any, through 2001.

   The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical
taxable income and anticipated future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible differences.

   Total income taxes resulting from securities transactions included a
provision of $41 thousand, $322 thousand, and $4.8 million in 1996, 1995 and
1994, respectively.

NOTE 11 - EMPLOYEE BENEFIT PLANS

   The Company has the following employee benefit plans:

-- A defined benefit pension plan based upon age, length of employment and
   hours of service covering substantially all employees;

-- A retirement savings plan covering substantially all employees;

-- Deferred compensation and stock plans covering certain key executives,
   directors, and advisory directors;

-- Stock plan covering certain key executives; and

-- Employee stock purchase plan available to all full-time employees who have
   attained legal majority and have one year of continuous service.

   Employee benefit expense (income) related to these plans follows (in
thousands):

<TABLE>
<CAPTION>
                                   1996      1995     1994
-----------------------------------------------------------
<S>                               <C>       <C>      <C>
Pension plan                      $  (436)  $  (17)  $ (750)
Retirement savings plan             2,902    2,693    2,395
Deferred compensation plan          3,695    3,253    2,848
Other plans                           793      393      595
-----------------------------------------------------------
                                  $ 6,954   $6,322   $5,088
===========================================================
</TABLE>

   Benefits under the defined benefit pension plan are based on years of
service and the employee's compensation during the last five years of
employment. The Company's funding policy is to contribute an amount which will
satisfy the minimum funding requirements of ERISA and will not exceed the
maximum tax-deductible amount allowed by the IRS. The annual contribution is
determined by an enrolled actuary and incorporates benefits earned to date and
in the future.

   The following table sets forth the plan's funded status and amount
recognized in the Company's consolidated statements of condition (in
thousands):

<TABLE>
<CAPTION>
                                           December 31,
----------------------------------------------------------------------------
                                                      1996           1995
----------------------------------------------------------------------------
<S>                                                 <C>            <C>
Actuarial present value of benefit obligations:
      Accumulated benefit
         obligation, including
         vested benefits of $88,855
         in 1996 and $81,443 in 1995                $  90,622      $  83,051
----------------------------------------------------------------------------

      Projected benefit obligation
         for service rendered to date               $ 104,546      $  95,705
Plan assets at fair value, primarily
   corporate securities                               134,853        121,537
----------------------------------------------------------------------------

Plan assets in excess of projected
   benefit obligation                                  30,307         25,832
Unrecognized net gain from
   past experience difference
   from that assumed                                  (16,818)       (10,452)
Prior service cost not yet
   recognized in net
   periodic pension cost                                1,807             28
Unrecognized net asset, net of
   amortization over a fifteen-
   year period                                         (2,192)        (2,740)
----------------------------------------------------------------------------
Prepaid pension cost                                $  13,104      $  12,668
============================================================================
</TABLE>

   Net pension benefit included the following components (in thousands):

<TABLE>
<CAPTION>
                                    1996         1995         1994
--------------------------------------------------------------------
<S>                               <C>           <C>          <C>
Service cost - benefits
   earned during the year         $  3,656      $ 2,781      $ 2,791
Interest cost on projected
   benefit obligation                6,954        6,318        5,841
Actual return on plan assets       (10,734)      (8,571)      (8,878)
Net amortization and deferral         (312)        (545)        (504)
--------------------------------------------------------------------
Net periodic pension benefit      $   (436)     $   (17)     $  (750)
====================================================================
</TABLE>

   The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligations was 7.25% in 1996 and 1995. The rate
of increase in future compensation was 5.0% in 1996 and 1995. The expected
long-term rate of return on plan assets was 9.0% in 1996 and 1995.

   Under the retirement savings plan, the Company automatically contributes an
amount equal to 2% of each participant's base salary to the plan. A
participant, in addition, may elect to contribute up to 10% of base salary to
the plan. The Company contributes an additional amount to the plan equal
<PAGE>   41

to 50% of the participant's contribution up to 5% of base salary. Effective
January 1, 1997, employees can contribute up to 15% of base salary.

   Participants of the deferred compensation plan can defer a portion of their
compensation for payment after retirement or termination of employment. Life
insurance contracts have been purchased which may be used to fund payments
under the plan.

   The incentive stock plan includes the granting of incentive stock options,
nonqualified stock options, stock appreciation rights, and restricted stock
awards. Stock options are granted at a price equal to the market value of the
stock at the date of grant and are exercisable for a period not to exceed ten
years from the date of grant. The maximum number of shares subject to the plan
is 1.91 million. In calculating net income per share, the dilutive effect of
the options outstanding was not material.

   The Company accounts for the incentive stock plan under APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost for
the plan been determined consistent with SFAS No. 123, the Company's net income
and net income per share would have been reduced to the following pro forma
amounts:

<TABLE>
<CAPTION>
                                         1996        1995
-----------------------------------------------------------
<S>                                     <C>         <C>
Net income:
   As reported                          $83,610     $71,620
   Pro forma                             82,482      71,364
Net income per share:
   As reported                          $  2.16     $  1.89
   Pro forma                               2.13        1.86
</TABLE>

   Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: risk-free
investment rate of 6.34% and 6.28%, expected dividend yield of 2.55%, expected
life of seven years, and expected volatility of 21.58% and 19.99%.

   The following table summarizes the Company's option activity (in thousands):

<TABLE>
<CAPTION>
                                      1996     1995    1994
-----------------------------------------------------------
<S>                                    <C>      <C>     <C>
Options outstanding at
   beginning of year                   886      848     754
Options issued and assumed             160      180     130
Options exercised and expired         (368)    (142)    (36)
-----------------------------------------------------------
Options outstanding and
   exercisable at end of year          678      886     848
===========================================================
</TABLE>

   All options are nonqualified stock options. The exercise prices of the
options are $23.63, $17.75, and $13.88 per share for options issued in 1996,
1995 and 1994, respectively. The weighted average exercise price of all options
outstanding at December 31, 1996, is $15.28.

   Participants in the employee stock purchase plan may contribute up to 5% of
their base salary. The Company's contribution to each participant's account is
25% of the participant's contribution. Common stock of the Company is purchased
for the plan in the open market.

   The Company also provides certain health care and life insurance benefits
for retired employees. For those employees who have retired and active
employees eligible to retire, as of January 1, 1993, the Company shares in the
cost of these benefits. Employees eligible to retire are those age 55 with ten
years of service. The Company pays 50% of the cost of these benefits for the
retiree and covered spouse until the retiree becomes Medicare eligible (age
65). After the retiree attains age 65, the retiree pays the full cost of these
benefits. Active employees not eligible to retire before January 1, 1993, pay
the full cost of coverage for these benefits at retirement. The plan is
unfunded.

   The following table sets forth the amount recognized in the Company's
consolidated statements of condition (in thousands):

<TABLE>
<CAPTION>
                                                    December 31,
-------------------------------------------------------------------
                                                  1996       1995
-------------------------------------------------------------------
<S>                                               <C>        <C>
Accumulated postretirement benefit
   obligation:
      Retired participants                        $1,235     $1,117
      Fully eligible active plan participants        342        676
      Other active plan participants                 209        270
-------------------------------------------------------------------
                                                   1,786      2,063
Unrecognized net gain from
   past experience different from that
   assumed and from changes in
   actuarial assumptions                             409        215
-------------------------------------------------------------------
Accrued postretirement benefit cost               $2,195     $2,278
===================================================================
</TABLE>

   Net periodic postretirement benefit cost included the following components
(in thousands):

<TABLE>
<CAPTION>
                                         1996       1995      1994
------------------------------------------------------------------
<S>                                     <C>        <C>        <C>
Service cost - benefits earned
   during the period                    $  27      $  20      $ 22
Interest costs on projected benefit
   obligation                             112        136       150
Net amortization and deferral             (52)       (29)       --
------------------------------------------------------------------
Net periodic postretirement
   benefit cost                         $  87      $ 127      $172
==================================================================
</TABLE>



<PAGE>   42

   The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% in 1996 and 1995. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 10.6%
in 1996 and 11.4% in 1995, graded down to 9.8% in 1997 and graded down each
year to an ultimate rate of 5% in 2008. If the health care cost trend rate
assumptions were increased by 1%, the accumulated postretirement benefit
obligation as of December 31, 1996, would be increased by 1%. The effect of
this change on the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1996 would be an increase of 1%.

NOTE 12 - EQUITY RESTRICTIONS

   The banking subsidiaries of the Company are subject to certain regulations
controlling national banks that restrict the amount of dividends that may be
distributed and the amount of loans that may be made by the banks to the
parent.

   Dividends paid by the Company are substantially provided from dividends
received from the banking subsidiaries. The approval of the Comptroller of the
Currency is required if the total of all dividends declared by a national bank
in any calendar year exceeds the total of its net profits, as defined, for that
year combined with its retained net profits of the preceding two years. The
subsidiary banks have available for payment of dividends in 1997, without
regulatory approval, $110.3 million plus their net profits for 1997.

NOTE 13 - REGULATORY MATTERS

   The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
and material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.

   Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of Total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as defined). The minimum
required ratios of Total and Tier I capital to risk-weighted assets and Tier I
capital to average assets are 8.0%, 4.0% and 4.0%, respectively. Management
believes, as of December 31, 1996, that the Company meets all capital adequacy
requirements to which it is subject.

   As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Company's subsidiary banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company's subsidiary banks must maintain
minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios of
10.0%, 6.0% and 5.0%, respectively. There are no conditions or events since
that notification that management believes have changed the institution's
category.

   The Company's and its significant banking subsidiaries' actual capital
amounts and ratios are presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                             December 31,
---------------------------------------------------------------------
                                       1996                1995
---------------------------------------------------------------------
                                  Amount    Rate     Amount    Rate
---------------------------------------------------------------------
<S>                              <C>        <C>     <C>        <C>
Total Capital
  (to Risk Weighted Assets):
  Consolidated                   $554,254   12.67%  $508,855   12.30%
  Deposit Guaranty
   National Bank                  430,478   13.32    382,106   12.19
  Commercial
   National Bank                  109,072   12.79    112,178   15.52

Tier I Capital
  (to Risk Weighted Assets):
  Consolidated                    499,489   11.42    457,069   11.05
  Deposit Guaranty
   National Bank                  390,267   12.07    343,430   10.96
  Commercial
   National Bank                   98,345   11.54    103,050   14.25

Tier I Capital
  (to Average Assets):
  Consolidated                    499,489    8.23    457,069    7.87
  Deposit Guaranty
   National Bank                  390,267    8.96    343,430    8.00
  Commercial
   National Bank                   98,345    9.05    103,050    9.10
</TABLE>

NOTE 14 - OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES

   The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit, standby and
commercial letters of credit, securities lent, futures and forward contracts,
interest rate contracts and options. Those instruments involve, to varying
degrees, elements of credit and/or interest rate risk in excess of the amounts
recognized in the consolidated financial statements. The contract or notional
amounts of those instruments reflect the extent of involvement the Company has
in particular classes of financial instruments.


<PAGE>   43

   The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contractual
notional amount of those instruments. The Company uses the same credit policies
in making commitments and conditional obligations as it does for on-balance
sheet instruments. For futures, forward contracts, interest rate contracts, and
options, the contract or notional amounts do not represent exposure to credit
loss. Credit risk for those instruments is controlled by limits and monitoring
procedures.

COMMITMENTS

   At December 31, 1996, the financial instruments whose contract amounts
represent credit risk and those whose notional or contract amounts exceed the
amount of on-balance sheet credit risk are listed in the following table (in
thousands):

<TABLE>
<CAPTION>
                                             Contract
                                              Amount
------------------------------------------------------
<S>                                         <C>
Financial instruments whose contract
 amounts represent credit risk:
Commitments to extend credit                $1,367,050
Standby letters of credit                       99,825
Commercial letters of credit                     4,354
Financial instruments whose notional or
   contract amounts exceed the amount
   of credit risk:
Commitments to purchase securities              40,155
Commitments to sell securities                   7,685
</TABLE>

   Commitments to extend credit are agreements to lend money with fixed
expiration dates or other termination clauses. The Company periodically
reassesses the customers' creditworthiness through ongoing credit reviews.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Collateral is obtained based on the Company's assessment of the
customer's creditworthiness.

   Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
and collateralization policy involved in issuing standby letters of credit is
essentially the same as that involved in extending loans to customers.

   The Company issues commercial letters of credit which are short-term
commitments used to finance commercial contracts for the shipment of goods.
Under these instruments, the Company substitutes its own creditworthiness for
that of the customer by committing to pay a third party under certain
contractual conditions. These instruments are collateralized by the goods being
shipped.

   Commitments to purchase and sell securities, futures and forward contracts
are contracts for delayed delivery of securities, foreign currencies or money
market instruments in which the seller agrees to make delivery of a specified
instrument at a specified future date, at a specified price or yield. Risks
arise from the possible inability of counterparties to meet the terms of their
contracts and from movements in interest rates and securities values.

DERIVATIVES

   The Company maintains an active trading account in Eurodollar futures and
options in order to maintain a presence in those markets. Trading activities
are confined to relatively small dollar limits on exchange-traded instruments.
Trading activities in those instruments resulted in a net loss of $25 thousand
for 1996. There were no notional amounts outstanding at December 31, 1996.

   Trading instruments are recorded at fair value, with realized and unrealized
gains and losses recognized in other operating income. Exposure to market risk
is managed in accordance with risk limits set by senior management. All
positions are netted for risk-management purposes. Credit risk is minimized by
using only exchange-traded futures and options, utilizing a position netting
strategy, and requiring that all positions be fully collateralized.

   Risk management derivative instruments are used to manage the Company's
exposure to interest rate and market risk. The notional or contract amounts on
these instruments normally exceed the amount of credit risk to the Company. The
1996 year-end positions of the Company in these instruments are summarized in
the following table (in thousands):

<TABLE>
<CAPTION>
                                               Contract or
                                             Notional Amount
------------------------------------------------------------
<S>                                            <C>
Interest rate swap agreements                  $ 122,622
Interest rate caps                               100,000
Interest rate floors                             300,000
Forward contracts                                130,500
</TABLE>

   Interest rate swap agreements are entered into by the Company primarily to
manage interest rate exposure. These are contractual agreements between
counterparties to exchange interest streams based on notional principal amounts
over a set period of time. Interest rate swap agreements normally involve the
exchange of fixed and floating rate interest payment obligations without the
exchange of the underlying principal amounts. The notional or principal amount
does not represent an amount at risk, but is used only as a basis for
determining the actual cash flows related to the interest rate contracts.
Market risk, due to potential fluctuations in interest rates, is inherent in
swap agreements. As of December 31, 1996, the Company had no aggregate
estimated cost of replacement (the cost of replacing an existing contract if
the counterparty defaults) for the interest rate swap contracts. All active
interest rate swap counterparties have collateral arrangements with the
Company.

   Interest rate caps with three-year maturities were purchased during 1994 in
anticipation of further increases in interest rates, and were assigned to
certificates of deposit with maturities of three months or less. The interest
rate caps allow the Company


<PAGE>   44

to limit its exposure to unfavorable interest fluctuations over and above a
"capped" rate. A premium is paid for this protection. The risk assumed by the
Company is limited to the amount of the premium and not the notional amount of
the interest rate cap. At December 31, 1996, the unamortized portion of the
interest rate cap premium was $751 thousand.

   Interest rate floors with five-year maturities were purchased during 1996
and 1995 in anticipation of decreases in interest rates and were assigned to
floating rate commercial loans. The interest rate floors allow the Company to
limit its exposure to unfavorable interest fluctuations below a particular
rate. A premium is paid for this protection. The risk assumed by the Company is
limited to the amount of the premium and not the notional amount of the
interest rate floor. At December 31, 1996, the unamortized portion of the
interest rate floor was $2.6 million.

   Futures and forward contracts are contracts for the delayed delivery of
securities in which the seller agrees to make delivery of a specified
instrument at a specified future date, at a specified price or yield. Risks
arise from the possible inability of the counterparties to meet the terms of
their contracts and from movements in interest rates and securities values. The
Company intends to offset or close out open positions prior to settlement;
therefore, the total contract amounts of futures and forward contracts
represent the extent of the Company's involvement. The Company is subject only
to the change in value of the instruments. Futures contracts settle in cash
daily; therefore, there is minimal risk to the Company.

   The Company was a party to a small number of foreign exchange spot and
forward transactions during 1996 and 1995. These contracts generally involve
the exchange of United States currency for a foreign currency. Spot foreign
exchange transactions normally settle within two business days, and forward
transactions can settle up to a year in the future. At December 31, 1996, the
Company had no foreign exchange contracts outstanding.

   Option contracts allow the holder of the option to purchase or sell a
financial instrument from/to the seller or writer of the option at a specified
price within a specified period of time. The Company has sold options on
securities held in the available for sale securities portfolio during the year.
The premiums received on those options totaled $1.8 million. Options which have
been sold do not expose the Company to credit risk. At December 31, 1996, the
Company had no option contracts outstanding.

LITIGATION

   DGNB is a defendant in a case in which the plaintiffs are some of the
beneficiaries of a trust for which DGNB is the trustee. In an amended
complaint, the plaintiffs claim that DGNB was negligent in its dealings with
the trust property, breached its trust duties by allegedly abusing its
discretion and negligently handling trust assets, engaged in self dealing, and
was grossly negligent in its handling of the trusts. The case seeks actual
damages for waste of trust assets and loss of income and punitive damages, both
in an unspecified amount to be proven at trial, and attorney fees and court
costs. While the ultimate outcome of the lawsuit cannot be predicted with
certainty, management denies all liability and believes that the ultimate
resolution of this matter will not have a material effect on the Company's
consolidated financial statements.

   In addition, the Company is subject to numerous other pending and threatened
legal actions arising in the normal course of business, and management believes
that the ultimate resolution of these matters will not have a material effect
on the Company's consolidated financial statements.

NOTE 15 - STOCK SPLIT

   The Company declared a two-for-one stock split effective December 2, 1996.
All issuances of shares, shares outstanding, and per share results are
calculated assuming the split occurred at the beginning of the earliest period
presented.

NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS

   SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires that the Company disclose estimated fair values for its financial
instruments. Because no market exists for a significant portion of the
financial instruments, fair value estimates are based on judgment regarding
future expected loss experience, current economic conditions, and other
factors.

   These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions significantly affect the estimates and as
such, the derived fair value may not be indicative of the value negotiated in
an actual sale and may not be comparable for the Company versus other financial
institutions.

   In addition, the fair value estimates are based on existing on-and-off
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. For example, the Company has significant
fee generation businesses that are not considered financial instruments and
their value has not been incorporated into the fair value estimates.
Significant assets that are not considered financial assets include trust
services, the mortgage banking operation, brokerage network, deferred tax
assets, bank premises and equipment, core deposit intangibles and goodwill. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in the estimates. Fair value estimates, methods, and
assumptions are set forth below.

   CASH AND SHORT-TERM INVESTMENTS: The carrying amount is a reasonable
estimate of fair value for cash, interest-bearing bank balances, federal funds
sold and securities purchased under agreements to resell due to the maturity of
those instruments being less than six months.

<PAGE>   45

   TRADING ACCOUNT SECURITIES: The carrying amount of trading account
securities is fair value which is based on quoted market prices, where
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

   SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES: Fair values for
securities available for sale and investment securities are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.

   LOANS: The fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type such as commercial taxable and
nontaxable, residential mortgage and consumer. Each loan category is further
segmented into fixed and adjustable rate interest terms and by performing and
nonperforming categories.

   The fair value of performing adjustable-rate loans is the carrying amount
adjusted for the discounted value of the expected future loan losses. The fair
value of performing fixed-rate loans is calculated by discounting cash flows
based on estimated scheduled maturities reduced by expected future loan losses.
The discount rate is estimated using the rate currently offered for similar
loans with similar maturities. The fair value of residential mortgage loans is
based on quoted market prices.

   The fair value of nonperforming loans is calculated by discounting expected
cash flows as projected based on historical cash flows of such nonperforming
loans adjusted for expected loan losses. The discount rate is estimated using
the rates currently offered for acceptable credit quality loans with similar
maturities.

   DEPOSITS: The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits and savings accounts, is equal to the
amount payable on demand, which is also their carrying amount. The fair value
of certificates of deposit is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered for
deposits of similar maturities.

   SHORT-TERM BORROWINGS: The carrying amounts of federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings
approximate their fair values due to the short maturity of those instruments.

   LONG-TERM DEBT: The fair value of the Company's long-term debt is estimated
using discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

   COMMITMENTS: The fair value of commercial commitments to extend credit and
letters of credit is the remaining unamortized amount of the prepaid fee
charged to enter into the agreement or the discounted cash flows of estimated
fees that will be charged over the life of the agreement taking into account
the remaining terms of the agreements and counterparties' credit standing. The
fair value of residential mortgage lending commitments is based on quoted
market prices considering expected funding, the contractual interest rates and
current market rates.

   DERIVATIVES: Interest rate swaps, interest rate caps, interest rate floors,
futures, forwards, and option contracts are the primary derivative financial
instruments used by the Company. The fair value of interest rate swap
agreements, interest rate caps, interest rate floors, futures, forwards, and
option contracts are obtained from market quotes. These values represent the
estimated amount the Company would receive or pay to terminate the contracts or
agreements, taking into account current interest rates and, when appropriate,
the current creditworthiness of the counterparties. The estimated fair values
of the Company's financial instruments are as follows (in thousands):

<TABLE>
<CAPTION>
                                                    December 31,
-----------------------------------------------------------------------------------------
                                       1996                              1995
-----------------------------------------------------------------------------------------
                             Carrying          Fair            Carrying           Fair
                              Amount          Value             Amount           Value
-----------------------------------------------------------------------------------------
<S>                        <C>              <C>              <C>              <C>
Financial assets
Cash and short-term
   investments             $   434,381      $   434,381      $   784,721      $   784,721
Trading account
   securities                    2,505            2,505            3,381            3,381
Securities available
   for sale                  1,462,038        1,462,038        1,199,391        1,199,391
Investment securities          145,087          152,412          139,033          141,649
Loans                        3,917,672        3,919,005        3,520,583        3,539,719

Financial liabilities
Deposits                     5,025,749        5,042,909        4,780,659        4,805,225
Short-term
   borrowings                  543,029          543,029          599,482          599,482
Long-term debt                  99,405          100,659               --               --

Commitments
Commitments to
   extend credit                (1,514)          (6,576)          (1,621)          (5,990)
Letters of credit                   --           (1,222)              --           (1,034)
Commitments to
   purchase securities              --             (894)              --              121
Commitments to
   sell securities                  --              (18)              --              180

Risk management
derivatives
Interest rate swap
   agreements                      198            1,607              (88)          (1,423)
Forward contracts                   --              377               --           (1,623)
Interest rate caps                 751                7            1,537               99
Interest rate floors             2,669            2,814            1,288            2,734
</TABLE>


<PAGE>   46



NOTE 17 - DEPOSIT GUARANTY CORP. (PARENT COMPANY ONLY) FINANCIAL INFORMATION


STATEMENTS OF CONDITION
(in Thousands)

<TABLE>
<CAPTION>
                                             December 31,
--------------------------------------------------------------
                                           1996         1995
--------------------------------------------------------------
<S>                                      <C>          <C>
Assets
Cash on deposit with bank subsidiary     $ 47,196     $  6,446
Investment in subsidiaries:
   Bank subsidiaries                      637,423      557,731
   Nonbank subsidiaries                     7,742        7,501
Notes receivable from nonbank
   subsidiaries                                --        2,990
Cash dividends receivable from
   bank subsidiaries                        8,376        7,510
Other assets                               27,651       20,938
--------------------------------------------------------------
   Total assets                          $728,388     $603,116
==============================================================
Liabilities
Cash dividends payable                   $  8,156        6,664
Short-term borrowings                          --       27,600
Long-term debt                             99,405           --
Other liabilities                          39,561       29,799
--------------------------------------------------------------
   Total liabilities                      147,122       64,063
--------------------------------------------------------------
Stockholders' equity                      581,266      539,053
--------------------------------------------------------------
   Total liabilities and
      stockholders' equity               $728,388     $603,116
==============================================================
</TABLE>

STATEMENTS OF EARNINGS
(in Thousands)

<TABLE>
<CAPTION>
                                       Year Ended December 31,
------------------------------------------------------------------
                                    1996        1995        1994
------------------------------------------------------------------
<S>                                <C>         <C>         <C>
Income
Cash dividends from
   bank subsidiaries               $30,620     $24,334     $19,296
Service and management
   fees from subsidiaries           34,289      28,114      27,295
Interest from subsidiaries           1,963         557         663
Other                                  167         108         606
------------------------------------------------------------------
   Total income                     67,039      53,113      47,860
------------------------------------------------------------------
Expenses
Interest                             4,693         437       1,220
Salaries and employee benefits      25,597      21,118      20,058
Other                               18,213      13,968      14,523
------------------------------------------------------------------
   Total expenses                   48,503      35,523      35,801
------------------------------------------------------------------
Income before income taxes
   and equity in undistributed
   income of subsidiaries           18,536      17,590      12,059
Income tax benefit                   5,211       4,513       3,738
------------------------------------------------------------------
Income before equity in
   undistributed income
   of subsidiaries                  23,747      22,103      15,797
Equity in undistributed income
   of subsidiaries:
   Bank subsidiaries                59,337      49,691      50,835
   Nonbank subsidiaries                526         826         498
------------------------------------------------------------------
Net income                         $83,610     $72,620     $67,130
==================================================================
</TABLE>


STATEMENTS OF CASH FLOWS
(in Thousands)
<TABLE>
<CAPTION>
                                         Year Ended December 31,
-------------------------------------------------------------------------
                                      1996          1995          1994
-------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>
Cash flows from
operating activities
Net income                           $ 83,610      $ 72,620      $ 67,130
Adjustments to reconcile net
   income to net cash provided
   by operating activities:
      Provision for depreciation
         and amortization               3,344         2,986         2,811
      Increase in other
         liabilities                   11,723         5,557         4,505
      Increase in other assets         (9,129)       (3,424)       (3,996)
      Equity in undistributed
         income of
         subsidiaries                 (59,863)      (50,517)      (51,333)
-------------------------------------------------------------------------
   Net cash provided by
      operating activities             29,685        27,222        19,117
-------------------------------------------------------------------------

Cash flows from
investing activities
Net decrease in securities
   purchased from bank
   subsidiary under
   agreements to resell                    --        13,466         2,620
Net (increase) decrease in notes
   receivable from nonbank
   subsidiary                           2,990           750        (2,810)
Payments for investments in and
   advances to subsidiaries              (174)       (9,294)       (1,311)
Purchases of premises and
   equipment                           (2,071)       (1,086)       (1,699)
Proceeds from sales of bank
   premises and equipment                 301            11            --
Capital contributed to bank
   subsidiary                              --            --          (467)
-------------------------------------------------------------------------
   Net cash provided (used)
      by investing activities           1,046         3,847        (3,667)
-------------------------------------------------------------------------

Cash flows from
financing activities
Increase (decrease) in
   short-term borrowings              (27,600)       27,600            --
Proceeds from issuance of
   long-term debt                      99,381            --            --
Proceeds from exercise of
   common stock options                 3,845           997           282
Purchases of
   common stock                       (39,100)      (32,382)       (1,097)
Cash dividends paid                   (26,507)      (21,355)      (18,201)
-------------------------------------------------------------------------
   Net cash provided (used)
      by financing activities          10,019       (25,140)      (19,016)
-------------------------------------------------------------------------
   Net increase (decrease)
      in cash                          40,750         5,929        (3,566)
Cash at beginning of year               6,446           517         4,083
-------------------------------------------------------------------------
Cash at end of year                  $ 47,196      $  6,446      $    517
=========================================================================
</TABLE>
<PAGE>   47
                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Deposit Guaranty Corp.:

   We have audited the accompanying consolidated statements of condition of
Deposit Guaranty Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deposit
Guaranty Corp. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.

   As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for debt securities in 1994 to adopt the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."

KPMG PEAT MARWICK LLP

Jackson, Mississippi
February 5, 1997,
      except for the last
      paragraph of Note 3
      which is as of
      February 20, 1997
<PAGE>   48
ITEM 14.  DESCRIPTION OF EXHIBITS

<TABLE>
<CAPTION>
                                Exhibit
          Exhibit                Number         Sequential Page Number
          -------                ------         ----------------------
<S>                              <C>        <C>
Articles of Incorporation          3(a)     This document was previously filed
                                            as Exhibit 3(a) to the Company's
                                            Form 10-Q Quarterly Report for the
                                            quarter-ended March 31, 1996 and is
                                            hereby specifically incorporated by
                                            reference herein.

Bylaws                             3(b)     This document was previously filed
                                            as Exhibit 1 to the Company's Annual
                                            Report on Form 10-K (file number
                                            0-4518) for the fiscal year ended
                                            December 31, 1989 and is hereby
                                            specifically incorporated by
                                            reference herein.


Material Contracts                   10
(1)  Executive Variable Pay                 The written description of the
                                            Executive Variable Pay Plan included
                                            under the caption "Executive
                                            Compensation" in the definitive
                                            Proxy Statement of the Company,
                                            dated March 24, 1992 filed with
                                            the Commission pursuant to Rule
                                            14a-6 and is hereby specifically
                                            incorporated by reference herein.

(2)  Deferred Income Plan                   The original plan and an amendment
     and Amendment I                        to the plan were previously filed as
                                            Exhibit to the Company's Annual
                                            Report on Form 10-K (file number
                                            0-4518) for the fiscal year ended
                                            December 31, 1994. Both documents
                                            are hereby specifically incorporated
                                            by reference herein.

(3)  Stock-Based, Long-Term                 Filed herewith.
     Incentive Plan

(4)  Stock-Based, Long-Term                 This document was previously
     Incentive Plan II                      previously filed as Exhibit "A" to
                                            the definitive Proxy Statement of
                                            the Company dated March 29, 1993,
                                            filed with the Commission pursuant
                                            to Rule 14a-6 and is hereby
                                            specifically incorporated by
                                            reference herein.
</TABLE>



<PAGE>   49


<TABLE>
<S>                              <C>        <C>
(5)  Employment Contracts                   Filed herewith

Statement Re:  Computation of        11     Filed herewith
Per Share Earnings

Subsidiaries of the Company          22     Filed herewith

Independent Auditors' Consent        23     Filed herewith

Financial Data Schedule              27     Filed herewith
</TABLE>


<PAGE>   50


                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized, in the City of
Jackson, Mississippi, on March 28, 1997.


                                        DEPOSIT GUARANTY CORP.


                                        BY: /s/ E. B. ROBINSON, JR.
                                           -----------------------------------
                                            E. B. Robinson, Jr.
                                            Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
             Name                         Title                   Date
             ----                         -----                   ----
<S>                               <C>                        <C>

/s/  E. B. ROBINSON, JR.          Chairman of the Board      March 19, 1997
------------------------------    and Director
E. B. Robinson, Jr.
Principal Executive Officer

/s/  HOWARD L. MCMILLAN, JR.      President and Director     March 19, 1997
------------------------------
Howard L. McMillan, Jr.

/s/  ARLEN L. MCDONALD            Executive Vice President   March 24, 1997
------------------------------
Arlen L. McDonald
Principal Financial Officer

/s/  STEPHEN E. BARKER            Controller                 March 17, 1997
------------------------------
Stephen E. Barker
Principal Accounting Officer

                                  Director                   March __, 1997
------------------------------
Michael B. Bemis

/s/  RICHARD H. BREMER            Director                   March 19, 1997
------------------------------
Richard H. Bremer

                                  Director                   March __, 1997
------------------------------
Warren A. Hood, Jr.

                                  Director                   March __, 1997
------------------------------
Charles L. Irby

/s/  RICHARD D. MCRAE, JR.        Director                   March 19, 1997
------------------------------
Richard D. McRae, Jr.
</TABLE>
<PAGE>   51
<TABLE>
<S>                               <C>                        <C>

/s/  W. R. NEWMAN, III            Director                   March 19, 1997
------------------------------
W. R. Newman, III

                                  Director                   March __, 1997
------------------------------
John N. Palmer

/s/  STEVEN C. WALKER             Director                   March 19, 1997
------------------------------
Steven C. Walker

/s/  J. KELLEY WILLIAMS           Director                   March 27, 1997
------------------------------
J. Kelley Williams
</TABLE>

<PAGE>   52

EXHIBIT


     The following exhibits are included herein.



<TABLE>
<CAPTION>
  Page
 Number               Description
 ------               -----------
 <S>                  <C>
 54-63                Stock-Based Long-Term Incentive Plan

 64-192               Employment Contracts

193-195               Computation of Per Share Earnings

  196                 Subsidiaries of the Registrant

  197                 Independent Auditors' Consent

  198                 Financial Data Schedule
</TABLE>



<PAGE>   53
                              INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>           <C>
  10(3)       Stock-Based, Long-Term Incentive Plan

  10(5)       Employment Contracts

  11          Computation of Per Share Earnings

  21          Deposit Guaranty Corp. List of Subsidiaries

  23          Independent Auditors' Consent

  27          Financial Data Schedule
</TABLE>