<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 2-29897
TRUSTMARK CORPORATION
(Exact name of Registrant as specified in its charter)
MISSISSIPPI 64-0471500
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
248 EAST CAPITOL STREET, JACKSON, MISSISSIPPI 39201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 354-5111
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE NASDAQ STOCK MARKET
(Title of Class) (Name of Exchange on Which Registered)
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 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 this Form 10-K or any amendment to
this Form 10-K. (X)
Based on the closing sales price of February 15, 1994, the aggregate market
value of the voting stock held by nonaffiliates of the Registrant was
$385,547,772.
As of March 28, 1994, there were issued and outstanding 31,172,907 shares of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference to parts I,
II and III of the Form 10-K report: (1) Registrant's 1993 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated February 11, 1994 (Part III).
<PAGE> 2
TRUSTMARK CORPORATION
FORM 10-K
INDEX
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the
Registrant
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
SIGNATURES
EXHIBIT INDEX
<PAGE> 3
TRUSTMARK CORPORATION
1993 FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (Corporation) is a one-bank holding company which
was incorporated under the Mississippi Business Corporation Act on August 5,
1968 and commenced doing business in November 1968. At December 31, 1993, the
Corporation had total consolidated assets of $4.4 billion and total
consolidated equity of $358.6 million. The Corporation's primary business
activities are generated through its majority-owned subsidiary, Trustmark
National Bank (Trustmark), which accounts for approximately 99.9% of total
assets and total revenues of the Corporation. Trustmark, which was chartered by
the State of Mississippi in 1889, is headquartered in Jackson and is the
largest bank in the state having total assets at December 31, 1993, of
approximately $4.4 billion and deposits of $3.2 billion.
Trustmark's primary means of asset growth has been through mergers and
acquisitions of financial institutions. The most recent acquisition involved
the merger of Trustmark National Bank and the UniSouth Banking Corporation
(UniSouth) of Columbus, Mississippi. This merger was consummated after the
close of business on July 31, 1993, and has been accounted for by the purchase
method of accounting. The stockholders of UniSouth received 1,696,524 shares
of Trustmark Corporation stock and approximately $677,000 in cash in connection
with this merger.
Trustmark's retail banking system offers a variety of deposit, investment
and credit products to its customers through a branch network with facilities
in 142 locations. Trustmark is well established as a provider of depository,
credit and cash management services to middle-market and larger businesses.
These services range from payroll checking, business checking accounts,
corporate savings, secured and unsecured lines of credit and loans to direct
deposit payroll, sweep accounts and letters of credit. Trustmark also offers
MasterCard, VISA and VISA Gold credit card services to consumers and merchants
throughout Mississippi. In addition, customers continue to have access to over
95,000 ATM's worldwide through the Gulfnet and CIRRUS systems. Trustmark's
Trust Services business unit provides services in three areas: custody,
investment management and ancillary services such as a third party fiscal
agent. Trustmark's Investment Services unit provides both institutional and
retail customers with quality investment opportunities through its Dealer Bank
Department and Trustmark Financial Services, Inc. (TFSI), its wholly-owned
subsidiary. During 1993, TFSI opened new offices in Columbus, Meridian and
Hernando with more openings planned for 1994.
In addition, the Corporation directly owns all of the stock of F. S.
Corporation and First Building Corporation, both non-bank Mississippi
corporations. F. S. Corporation previously developed
<PAGE> 4
automobile financing, including all incidental and related matters. First
Building Corporation previously managed and operated its real estate
investments. Today, F. S. Corporation and First Building Corporation are not
considered significant subsidiaries.
As of January 31, 1994, the Corporation and its subsidiaries employed
approximately 2,058 employees.
COMPETITION
Trustmark competes with national and state banks in its service areas for
all types of depository, credit, investment and trust services. In addition,
Trustmark competes in its respective service areas with other financial
institutions including savings and loan associations, personal loan companies,
consumer finance companies, mortgage companies, insurance companies, brokerage
firms, investment companies, credit unions and financial service operations of
major retailers. Trustmark competes with these financial institutions in the
areas of interest rates, the availability and quality of services and products,
and the pricing of these services and products.
SUPERVISION AND REGULATION
The Corporation is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. As such, the Corporation is required
to file an annual report and such additional information as the Board of
Governors of the Federal Reserve System may require. The Act requires every
bank holding company to obtain the prior approval of the Board of Governors
before it may acquire substantially all the assets of any bank, or ownership
or control of any voting shares of any bank, if, after the acquisition, it
would own or control, directly or indirectly, more than five percent of
the voting shares of the bank. In addition, a bank holding company is generally
prohibited from engaging in or acquiring direct or indirect control of voting
shares of any company engaged in nonbanking activities. One of the principal
exceptions to this prohibition is for activities found by the Board of
Governors, by order or regulation, to be closely related to banking or managing
or controlling banks "as to be a proper incident thereto." The Board has by
regulation determined that a number of activities are closely related to
banking within the meaning of the Act. In addition, the Corporation is subject
to regulation by the State of Mississippi under its laws of incorporation.
Trustmark is subject to various requirements and restrictions by federal
and state banking authorities including the Office of the Comptroller of the
Currency (OCC) and the Mississippi Department of Banking. Areas subject to
regulation include loans, reserves, investments, issuance of securities,
establishment of branches, loans to directors, executive officers and their
related interests, relationships with correspondent banks, consumer protection
and other aspects of operations. In addition, national banks are subject to
legal limitations on the amount of earnings they may pay as dividends.
Trustmark also is insured by, and
<PAGE> 5
therefore subject to the regulations of the Federal Deposit Insurance
Corporation.
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA) was enacted. FDICIA substantially revised the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other federal banking statutes. Among other
things, FDICIA requires banking regulators to take prompt corrective action
whenever financial institutions do not meet minimum capital requirements. In
addition, FDICIA has created restrictions on capital distributions that would
leave a depository institution undercapitalized.
In May of 1993, the FDIC adopted the final rule implementing Section 112
of FDICIA. This regulation includes requirements, procedures and interpretive
guidelines that mandate new audit and reporting requirements for financial
institutions. As a result of these new requirements, certain formal
attestations, assertions and documentation must be imposed on existing control
structures. This regulation became effective for fiscal years ending after
December 31, 1992.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant including their positions with the
Registrant, their ages and their principal occupations for the last five years
are as follows:
Frank R. Day, 62, Director, Chairman of the Board, President
and Chief Executive Officer, Trustmark Corporation; Chairman
of the Board and Chief Executive Officer, Trustmark National
Bank since January, 1988. Assumed additional office of
President of Trustmark Corporation at that time.
David R. Carter, 42, Secretary-Treasurer of Trustmark
Corporation since March 1986; Chief Financial Officer of
Trustmark National Bank since May 1987.
STATISTICAL DISCLOSURES
The statistical disclosures for Trustmark Corporation are contained in
Tables 1 through 12.
<PAGE> 6
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES
TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
The Average Assets and Liabilities table below shows the average balances for
all assets and liabilities of the Corporation, the interest income or expense
associated with those assets and liabilities, and the computed yield or rate
based upon the interest income or expense for each of the last three years (Tax
Equivalent Basis - $ in thousands):
<TABLE>
<CAPTION>
1993 1992
------------ --------- -------- ------------ --------- -------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
Assets ------------ --------- -------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $152,553 $4,786 3.14% $164,449 $6,574 4.00%
Trading securities 1,445 111 7.68% 1,372 90 6.56%
Securities held for sale 119,728 4,590 3.83% 27,506 956 3.48%
Investment securities:
U.S. Treasury and U.S. Government
agencies 1,559,498 108,501 6.96% 1,375,430 106,762 7.76%
Obligations of states and political
subdivisions 127,470 11,958 9.38% 144,013 14,422 10.01%
Other securities 15,427 914 5.92% 19,613 1,401 7.14%
Loans, net of unearned income 1,959,831 164,932 8.42% 1,853,178 164,404 8.87%
------------ --------- ------------ ---------
Total interest-earning assets 3,935,952 295,792 7.52% 3,585,561 294,609 8.22%
Cash and due from banks 238,472 223,610
Other assets 181,659 168,691
Allowance for loan losses (55,890) (42,540)
------------ ------------
Total Assets $4,300,193 $3,935,322
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $1,078,949 26,126 2.42% $1,004,640 31,546 3.14%
Savings deposits 197,192 4,624 2.34% 171,531 5,182 3.02%
Time deposits 1,294,709 56,208 4.34% 1,464,004 75,922 5.19%
Federal funds purchased and securities sold
under repurchase agreements 762,120 22,044 2.89% 454,062 16,055 3.54%
------------ --------- ------------ ---------
Total interest-bearing liabilities 3,332,970 109,002 3.27% 3,094,237 128,705 4.16%
--------- ---------
Noninterest-bearing demand deposits 590,753 514,163
Accrued expenses and other liabilities 50,194 44,997
Stockholders' equity 326,276 281,925
------------ ------------
Total Liabilities and Stockholders' Equity $4,300,193 $3,935,322
------------ ------------
------------ ------------
Net Interest Margin 186,790 4.75% 165,904 4.63%
Less tax equivalent adjustments:
Investments 3,841 4,547
Loans 1,392 1,399
--------- ---------
Net Interest Margin per Annual Report $181,557 $159,958
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
1991
------------ --------- -------
Average Revenue/ Yield/
Balance Expense Rate
Assets ------------ --------- -------
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $286,504 $16,360 5.71%
Trading securities 3,277 278 8.48%
Securities held for sale
Investment securities:
U.S. Treasury and U.S. Government
agencies 1,102,843 95,541 8.66%
Obligations of states and political
subdivisions 139,982 15,107 10.79%
Other securities 25,379 1,924 7.58%
Loans, net of unearned income 1,797,006 187,208 10.42%
------------ ---------
Total interest-earning assets 3,354,991 316,418 9.43%
Cash and due from banks 214,974
Other assets 169,232
Allowance for loan losses (34,267)
------------
Total Assets $3,704,930
------------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $750,184 34,317 4.57%
Savings deposits 153,673 7,268 4.73%
Time deposits 1,667,825 113,403 6.80%
Federal funds purchased and securities sold
under repurchase agreements 355,274 19,354 5.45%
------------ ---------
Total interest-bearing liabilities 2,926,956 174,342 5.96%
---------
Noninterest-bearing demand deposits 476,411
Accrued expenses and other liabilities 43,093
Stockholders' equity 258,470
------------
Total Liabilities and Stockholders' Equity $3,704,930
------------
------------
Net Interest Margin 142,076 4.23%
Less tax equivalent adjustments:
Investments 4,966
Loans 1,782
---------
Net Interest Margin per Annual Report $135,328
---------
---------
</TABLE>
Nonaccruing loans have been included in the average loan balances and
interest collected prior to these loans having been placed on nonaccrual has
been included in interest income. 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 1993 and 34% for 1992 and 1991. Certain reclassifications
have been made to the 1992 and 1991 statements to conform to the 1993 method
of presentation.
<PAGE> 7
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS
The Volume and Yield/Rate variance table below shows the change from year to
year for each component of the tax equivalent net interest margin separated
into the amount generated by volume changes and the amount generated by
changes in the yield or rate (Tax Equivalent Basis - $ in thousands):
<TABLE>
<CAPTION>
1993 Compared to 1992 1992 Compared to 1991
Change Due To: Change Due To:
------------------------------------- -------------------------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue earned on:
Federal funds sold and securities purchased
under reverse repurchase agreements ($450) ($1,338) ($1,788) ($5,746) ($4,040) ($9,786)
Trading securities 5 16 21 (135) (53) (188)
Securities held for sale 3,528 106 3,634 956 0 956
Investment securities:
U.S. Treasury and U.S. Government agencies 13,413 (11,674) 1,739 21,875 (10,654) 11,221
Obligations of states and political subdivision (1,592) (872) (2,464) 427 (1,112) (685)
Other securities (271) (216) (487) (416) (107) (523)
Loans, net of unearned income 9,145 (8,617) 528 5,714 (28,518) (22,804)
----------- ----------- ----------- ----------- ----------- -----------
Total interest-earning assets 23,778 (22,595) 1,183 22,675 (44,484) (21,809)
Interest paid on:
Interest-bearing demand deposits 2,206 (7,626) (5,420) 9,719 (12,490) (2,771)
Savings deposits 708 (1,266) (558) 771 (2,857) (2,086)
Time deposits (8,159) (11,555) (19,714) (12,760) (24,721) (37,481)
Federal funds purchased and securities sold
under repurchase agreements 9,358 (3,369) 5,989 4,545 (7,844) (3,299)
----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 4,113 (23,816) (19,703) 2,275 (47,912) (45,637)
----------- ----------- ----------- ----------- ----------- -----------
Change in net interest income on a
tax equivalent basis $19,665 $1,221 $20,886 $20,400 $3,428 $23,828
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The change in interest due to both volume and yield/rate has been
allocated to change due to volume and change due to yield/rate in proportion
to the absolute value of the change in each. Tax-exempt income has been
adjusted to a tax equivalent basis using a tax rate of 35% for 1993 and 34%
for 1992 and 1991. The balances of nonaccrual loans and related income
recognized have been included for purposes of these computations.
<PAGE> 8
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 3 - INVESTMENT PORTFOLIO
The table below indicates book values of investment securities by type at
year-end for each of the last three years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1993 1992 1991
<S> <C> <C> <C>
Securities held for sale ------------- ------------- -------------
U. S. Treasury and U. S. Government agencies $75,858 $89,397
Obligations of states and political subdivision 8,420 13,805
------------- -------------
Total securities held for sale $84,278 $103,202
============ =============
Investment securities
U. S. Treasury and U. S. Government agencies $1,634,212 $1,392,938 $1,188,526
Obligations of states and political subdivision 149,396 122,635 150,654
Other securities 1,251 3,991 12,030
------------- ------------- -------------
Total debt securities 1,784,859 1,519,564 1,351,210
Equity securities 11,969 13,584 10,641
------------- ------------- -------------
Total investment securities $1,796,828 $1,533,148 $1,361,851
============= ============= =============
</TABLE>
TABLE 4 - MATURITY DISTRIBUTION AND YIELDS OF INVESTMENT PORTFOLIO
The following table details the maturities of investment securities at December
31, 1993 and the weighted average yield for each range of maturities
(Tax Equivalent Basis - $ in thousands):
<TABLE>
<CAPTION>
Maturing
--------------------------------------------------------------------------
After One,
Within But Within
One Year Yield Five Years Yield
--------- ------- ------------ ------
<S> <C> <C> <C> <C>
Securities held for sale
U. S. Treasury and U. S.
Government agencies $48,974 3.40% $26,884 3.71%
Obligations of states and
political subdivisions 8,420 6.01%
--------- ------------
Total securities held $57,394 3.78% $26,884 3.71%
========= ============
Investment securities
U. S. Treasury and U. S.
Government agencies $93,248 8.54% $625,816 6.14%
Obligations of states and
political subdivisions 14,591 8.00% 42,808 7.55%
Other securities 999 7.90%
--------- ------------
Total debt securities $107,839 8.47% $669,623 6.23%
========= ============
</TABLE>
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------------------------------
After Five,
But Within After
Ten Years Yield Ten Years Yield Total
------------- ------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Securities held for sale
U. S. Treasury and U. S.
Government agencies $75,858
Obligations of states and
political subdivisions 8,420
-------------
Total securities held $84,278
=============
Investment securities
U. S. Treasury and U. S.
Government agencies $161,457 6.82% $753,691 6.62% $1,634,212
Obligations of states and
political subdivisions 54,237 7.67% 37,760 10.66% 149,396
Other securities 252 7.06% 1,251
------------- ------------- -------------
Total debt securities $215,694 7.04% $791,703 6.81% 1,784,859
============= =============
Equity securities 11,969
-------------
Total investment
securities $1,796,828
=============
</TABLE>
Included in the above maturity schedule are mortgage related securities
totaling $914,918,000 which have contractual maturities as follow: Within One
Year - $6,402,000; After One, But Within Five Years - $17,492,000; After Five,
But Within Ten Years - $137,181,000; After Ten Years - $753,843,000. Due to
the nature of mortgage related securities, the actual maturities of these
investments can be substantially shorter than their contractual maturity.
Management believes the actual weighted average maturity of the entire mortgage
related portfolio to be approximately 2.98 years.
As of December 31, 1993 the Corporation held securities of one issuer with
a carrying value exceeding ten percent of total stockholders' equity. General
obligations of the State of Mississippi with a carrying value of $77,348,000
and an approximate fair value of $81,739,000 were held on December 31, 1993.
Included in the aforementioned State of Mississippi holdings are bonds with an
aggregate carrying value of $27,112,000 and an approximate fair value of
$29,459,000 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
<PAGE> 9
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the end of
each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Real Estate Loans:
Construction and land development $96,750 $81,188 $88,381 $96,900 $118,299
Secured by 1-4 family residential properties 520,343 437,700 381,762 355,270 343,560
Secured by non-farm, non-residential properties 329,908 295,837 310,926 336,024 320,978
Other real estate loans 49,756 44,478 33,068 33,129 28,612
Term federal funds sold 125,000 120,000
Loans to finance agricultural production 29,248 15,261 13,552 15,243 14,674
Commercial and industrial 471,942 427,384 448,737 500,361 477,975
Loans to individuals for personal expenditures 521,119 403,484 405,625 433,474 428,321
Obligations of states and political subdivisions 36,973 39,622 44,733 53,159 51,509
Loans for purchasing or carrying securities 3,995 6,490 6,549 6,455 7,866
Lease financing receivables 4,427 3,837 2,470 3,428 2,768
Other loans 19,365 25,432 31,288 15,567 18,377
------------- ------------- ------------- ------------- -------------
Loans, net of unearned income $2,083,826 $1,905,713 $1,887,091 $1,849,010 $1,812,939
============= ============= ============= ============= =============
</TABLE>
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories outstanding as
of December 31, 1993, which, based on the remaining scheduled repayments of
principal, are due in the periods indicated ($ in thousands):
<TABLE>
<CAPTION>
Maturing
----------------------------------------------------------
One Year
Within Through After
One Year Five Five
or Less Years Years Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Construction and land development $76,369 $20,381 $96,750
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 114,006 189,621 $76,037 379,664
Commercial and industrial 270,503 173,075 28,364 471,942
Other loans (excluding loans to individuals) 47,137 25,254 21,617 94,008
------------- ------------- ------------- -------------
$508,015 $408,331 $126,018 $1,042,364
============= ============= ============= =============
</TABLE>
The following table shows all loans due after one year classified according to
their sensitivity to changes in interest rates ($ in thousands):
<TABLE>
<CAPTION>
Maturing
-------------------------------------------
One Year
Through After
Five Five
Years Years Total
------------- ------------- -------------
<S> <C> <C> <C>
Above loans due after one year which have:
Predetermined interest rates $223,370 $43,941 $452,759
Floating interest rates 184,961 82,077 589,605
------------- ------------- -------------
$408,331 $126,018 $1,042,364
============= ============= =============
</TABLE>
<PAGE> 10
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Corporation's nonperforming assets and past due loans
at the end of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $9,784 $10,338 $15,922 $18,364 $11,119
Restructured loans 2,552 1,373 6,198
---------- ---------- ---------- ---------- ----------
Nonperforming loans 9,784 12,890 17,295 18,364 17,317
Other real estate owned 3,961 6,554 14,631 20,528 7,838
---------- ---------- ---------- ---------- ----------
Nonperforming assets 13,745 19,444 31,926 38,892 25,155
Accruing loans past due 90 days or more 1,217 1,872 1,410 3,270 7,378
---------- ---------- ---------- ---------- ----------
Total nonperforming assets and past due loans $14,962 $21,316 $33,336 $42,162 $32,533
========== ========== ========== ========== ==========
</TABLE>
Interest which would have been accrued on nonaccrual and restructured
loans if they had been in compliance with their original terms is immaterial.
At December 31, 1993 the Corporation had no loan concentrations greater
than ten percent of total loans except as shown in Table 5.
At December 31, 1993 there were no interest-earning assets that would be
required to be disclosed if such assets were loans.
It is the Corporation's policy that interest will not be accrued on any
loan for which payment in full of interest or principal is not expected, on any
loan which is seriously delinquent unless the obligation is both well secured
and in the process of collection, or on any loan that is maintained on a cash
basis due to deterioration in the financial condition of the borrower.
Management considers a debt to be "well secured" if it is secured by collateral
in the form of liens on or pledges of real or personal property that have a
realizable value sufficient to discharge the debt in full or by the guaranty of
a financially responsible party. A debt is considered to be "in process of
collection" if, based on a probable specific event, it is expected that the
loan will be repaid or brought current. At December 31, 1993, the Corporation
has no loans about which Management has serious doubts as to their
collectibility other than those disclosed above.
<PAGE> 11
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Corporation's loan loss experience for each of
the last five years ($ in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Amount of loan loss reserve at beginning of period $49,500 $39,000 $30,610 $32,200 $31,875
Loans charged off:
Real estate loans (2,220) (6,098) (7,651) (9,780) (4,337)
Loans to finance agricultural production (178) (131) (80) (2) (6)
Commercial and industrial (3,251) (5,215) (5,715) (2,765) (4,516)
Loans to individuals for personal expenditures (4,244) (5,172) (5,312) (4,322) (4,108)
Lease financing receivables
All other loans (162) (120) (272) (1,423) (219)
--------- --------- --------- --------- ---------
Total charge-offs (10,055) (16,736) (19,030) (18,292) (13,186)
Recoveries on loans previously charged off:
Real estate loans 545 597 677 194 97
Loans to finance agricultural production 11 0 13 10
Commercial and industrial 2,441 1,004 246 551 515
Loans to individuals for personal expenditures 2,123 1,405 1,175 739 778
Lease financing receivables
All other loans 178 151 115 72 88
--------- --------- --------- --------- ---------
Total recoveries 5,287 3,168 2,213 1,569 1,488
--------- --------- --------- --------- ---------
Net charge-offs (4,768) (13,568) (16,817) (16,723) (11,698)
Additions to allowance charged to operating expense 17,596 24,068 25,207 15,133 11,523
Other additions to loan loss reserve 322 500
--------- --------- --------- --------- ---------
Amount of loan loss reserve at end of period $62,650 $49,500 $39,000 $30,610 $32,200
========= ========= ========= ========= =========
Percentage of net charge-offs during period to average
loans outstanding during the period 0.24% 0.73% 0.94% 0.91% 0.65%
========= ========= ========= ========= =========
</TABLE>
The allowance for loan losses is established through a provision for loan
losses charged to expenses. Loans are charged against the allowance for loan
losses when Management believes that the collectibility of the principal is
unlikely.
The allowance for loan losses is maintained at a level which Management
and the Board of Directors believe is adequate to absorb estimated losses
inherent in the loan portfolio. The adequacy of the allowance is reviewed on a
quarterly basis by using the criteria specified in revised Comptroller of the
Currency Banking Circular 201. Each review includes analyses of historical
loss experience, trends in portfolio volume and composition, consideration of
current economic conditions, estimated future losses in significant criticized
loans and other pertinent information. Once this information is analyzed, it
is used as the basis for allocation for pools of criticized loans, loans by
industry or concentration, letters of credit and off-balance sheet commitments
to lend. During 1993, the Corporation felt it was prudent to continue to
increase the allowance given the uncertainty surrounding the national and state
economies and its commitment to sound, conservative banking practices. Because
the current economic recovery is predicted to produce only modest economic
growth during 1994, Management will continue to take a prudent approach to the
evaluation of the allowance for loan losses.
<PAGE> 12
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of the Corporation's
allowance for loan losses at December 31, 1993. These allocations were
determined by internal formulas based upon Management's analyses of the various
types of risk associated with the Corporation's loan portfolio. A discussion of
Management's methodology for performing these analyses follows the table ($ in
thousands):
<TABLE>
<S> <C>
Allocation for pools of
risk-rated loans $ 22,425
Additional allocation for
risk-rated loans 2,192
Allocation for industry
concentrations 820
General allocation for
all other loans 7,136
Allocation for available lines
of credit and letters of credit 2,055
Discretionary 28,022
----------
TOTAL $ 62,650
==========
</TABLE>
The Corporation maintains an allowance for loan losses which is considered
sufficient to absorb potential losses. The methodology employed in order to
determine an amount which is considered adequate utilizes the criteria
specified in the Office of the Comptroller of the Currency's revised Banking
Circular 201 and guidance provided in the recently issued Interagency Policy
Statement. Loss percentages were uniformly applied to pools of risk-rated
loans within the total portfolio. The percentages utilized were determined
based on migration analysis, previously established floors for each category
and economic factors. In addition, relationships of $500,000 or more which
were risk-rated Other Loans Especially Mentioned (OLEM) or Substandard and
all which were risk-related Doubtful were reviewed by the Corporation's
Internal Asset Review staff to determine if the standard percentages
appeared to be sufficient to cover potential loss on each line. In the event
that the percentages on any particular lines were determined to be
insufficient, additional allocations were made based upon recommendations
of lending and asset review personnel.
Industry allocations were made based on concentrations of credit within
the portfolio as well as arbitrary designation of certain other industries by
Management.
The general allocation is included in the allowance to cover potential loan
losses within portions of the loan portfolio not addressed in the preceeding
allocations. The types of loans included in the general allocation were
mortgage loans, direct and indirect installment loans, credit card loans and
overdrafts. The actual allocation amount was based upon the more conservative
estimate of loss experience within these categories during 1993 or the
historical 5-year moving average for each category or previously established
floors.
The amount included in the allocation for lines of credit and letters of
credit consists of a percentage of the unused portion of those lines and the
amount outstanding in letters of credit. Since the Corporation has had
negligible loss experience in these categories, arbitrary percentages, which
represented the same percentages applied to the funded portions of the
commercial and retail loan portfolios, were applied to cover any potential
losses.
The remaining $28,022,000 is discretionary and serves as added protection
in the event that any of the above specific components are determined to be
inadequate or for issues that cannot or have not been measured on a quantitative
basis over a prolonged period of time. During 1993, the Corporation felt it was
prudent to continue to increase the allowance given the uncertainty surrounding
the economy and its commitment to sound, conservative banking practices. Because
of the imprecision inherent in most estimates of expected credit losses,
Management will continue to take a prudent approach in the evaluation of the
allowance for loan losses.
As is shown in Table 8, net charge-offs decreased during 1993 compared to
1992. With a similar decline in nonperforming assets during 1993, it is
anticipated that the level of net charge-offs for 1994 will compare favorably
to those experienced in recent years.
<PAGE> 13
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000 or
more at December 31, 1993 ($ in thousands):
<TABLE>
<CAPTION>
Certificates Other Time
of Deposit Deposits
---------- ----------
<S> <C> <C>
3 months or less $113,619 $3,900
Over 3 months through 6 months 34,888 4,290
Over 6 months through 12 months 24,364 1,755
Over 12 months 63,903 9,555
---------- ----------
TOTAL $236,774 $19,500
---------- ----------
---------- ----------
</TABLE>
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Return on average assets 1.17% 0.97% 0.74%
Return on average equity 15.37% 13.57% 10.67%
Dividend payout ratio 24.05% 27.76% 37.01%
Equity to assets ratio 7.59% 7.16% 6.98%
</TABLE>
TABLE 12 - SHORT-TERM BORROWINGS
The table below presents certain information concerning the Corporation's
short-term borrowings for each of the last three years ($ in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Federal funds purchased and securities
sold under repurchase agreements:
Amount outstanding at end of period $845,135 $555,162 $382,108
Weighted average interest rate at end of period 2.92% 3.07% 4.14%
Maximum amount outstanding at any
month-end during each period $911,888 $555,162 $382,108
Average amount outstanding during each period $762,120 $454,062 $355,274
Weighted average interest rate during each period 2.89% 3.54% 5.45%
</TABLE>
<PAGE> 14
ITEM 2. PROPERTIES
The Corporation does not directly own or lease any physical properties.
All properties are owned or leased by Trustmark whose main office is located in
Jackson, Mississippi and is housed in a 14-floor combination office and bank
building owned in fee. Approximately 132,000 square feet (50%) of the rentable
space in the building is allocated to bank use with the remainder occupied by
tenants on a lease basis. In total, Trustmark operates 89 full-service
branches, 27 limited-service branches and 26 off-premise automated teller
machines. Trustmark leases 34 of the 142 total locations with the remainder
being owned.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is defendant in various legal actions arising in the
normal course of business. Management and legal counsel are of the opinion
that the outcome of these matters will not have a material adverse effect on
the Corporation's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Corporation's shareholders during
the fourth quarter of 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Corporation's common stock is listed for trading on the Nasdaq Stock
Market. At February 28, 1994 there were approximately 4,200 shareholders of
record of the Corporation's common stock. Other information required by this
item can be found in Note 14-Stockholders' Equity and the table captioned
"Principal Markets and Prices of the Corporation's Stock" included in the
Registrant's 1993 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item can be found in the table captioned
"Selected Financial Data" included in the Registrant's 1993 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Registrant's 1993 Annual Report to Shareholders and is
incorporated herein by reference.
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Trustmark Corporation and
Subsidiaries, the accompanying Notes to Consolidated Financial Statements and
the Report of Independent Public Accountants are contained in the Registrant's
1993 Annual Report to Shareholders and are incorporated herein by reference.
The table captioned "Summary of Quarterly Results of Operations" is also
included in the Registrant's 1993 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of accountants within the two-year period prior
to December 31, 1993.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found in Section II,
"Election of Directors" and Section IX, "Other Information Concerning
Directors" contained in Trustmark Corporation's Proxy Statement dated February
11, 1994 and is incorporated herein by reference. Information on the
Registrant's executive officers is included in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in Section V, "Executive
Compensation", Section VI, "Compensation Committee Report on Executive
Compensation", Section VII, "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions" and Section IX, "Other Information
Concerning Directors" contained in Trustmark Corporation's Proxy Statement
dated February 11, 1994 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners and
Management can be found in Section III, "Voting Securities and Principal
Holders Thereof" and Section IV, "Ownership of Equity Securities by Management"
contained in Trustmark Corporation's Proxy Statement dated February 11, 1994
and is incorporated herein by reference.
The Registrant knows of no arrangements which may at a subsequent date
result in a change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions can
be found in Section VIII, "Transactions with
<PAGE> 16
Management" contained in Trustmark Corporation's Proxy Statement dated February
11, 1994 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
A-1. Financial Statements
The report of Arthur Andersen & Co., independent auditors, and the
following consolidated financial statements of Trustmark Corporation and
Subsidiaries are included in the Registrant's 1993 Annual Report to
Shareholders and are incorporated into Part II, Item 8 herein by reference:
Report of Independent Public Accountants
Consolidated Balance Sheets as of
December 31, 1993 and 1992
Consolidated Statements of Income for the
Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1993, 1992
and 1991
Notes to Consolidated Financial Statements
(Notes 1 through 15)
Selected Financial Data, Summary of Quarterly
Results of Operations, and Principal
Markets and Prices of the Corporation's
Stock
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set forth by
Article 9 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
A-3. Exhibits
The exhibits listed in the Exhibit Index are filed herewith or are
incorporated herein by reference.
B. Reports on Form 8-K
There have been no reports on Form 8-K filed by the Registrant for the
quarter ended December 31, 1993.
<PAGE> 17
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.
TRUSTMARK CORPORATION
BY: /s/ FRANK R. DAY BY: /s/ DAVID R. CARTER
Frank R. Day David R. Carter
Chairman of the Board, Secretary-Treasurer
President and Chief
Executive Officer
DATE: March 8, 1994 DATE: March 8, 1994
<PAGE> 18
SIGNATURES
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:
DATE: March 8, 1994 BY: /s/ J. KELLY ALLGOOD
J. Kelly Allgood, Director
DATE: March 8, 1994 BY: /s/ REUBEN V. ANDERSON
Reuben V. Anderson, Director
DATE: March 8, 1994 BY: /s/ JOHN L. BLACK, JR.
John L. Black, Jr., Director
DATE: March 8, 1994 BY: /s/ HARRY H. BUSH
Harry H. Bush, Director
DATE: March 8, 1994 BY: /s/ ROBERT P. COOKE III
Robert P. Cooke III, Director
DATE: March 8, 1994 BY: /s/ D. G. FOUNTAIN, JR.
D. G. Fountain, Jr., Director
DATE: March 8, 1994 BY: /s/ C. GERALD GARNETT
C. Gerald Garnett, Director
DATE: March 8, 1994 BY: /s/ WILLIAM F. GOODMAN, JR.
William F. Goodman, Jr., Director
DATE: March 8, 1994 BY: /s/ MATTHEW L. HOLLEMAN III
Matthew L. Holleman III, Director
DATE: March 8, 1994 BY: /s/ AARON J. JOHNSTON
Aaron J. Johnston, Director
DATE: March 8, 1994 BY: /s/ FRED A. JONES
Fred A. Jones, Director
DATE: March 8, 1994 BY: /s/ T. H. KENDALL III
T. H. Kendall III, Director
<PAGE> 19
DATE: March 8, 1994 BY: /s/ ROBERT V. MASSENGILL
Robert V. Massengill, Director
DATE: March 8, 1994 BY: /s/ DONALD E. MEINERS
Donald E. Meiners, Director
DATE: March 8, 1994 BY: /s/ WILLIAM NEVILLE III
William Neville III, Director
DATE: March 8, 1994 BY: /s/ GUS A. PRIMOS
Gus A. Primos, Director
DATE: March 8, 1994 BY: /s/ BEN PUCKETT
Ben Puckett, Director
DATE: March 8, 1994 BY:
Clyda S. Rent, Director
DATE: March 8, 1994 BY: /s/ WILLIAM THOMAS SHOWS
William Thomas Shows, Director
DATE: March 8, 1994 BY: /s/ HARRY M. WALKER
Harry M. Walker, Director
DATE: March 8, 1994 BY: /s/ PAUL H. WATSON, JR.
Paul H. Watson, Jr., Director
DATE: March 8, 1994 BY: /s/ ALLEN WOOD, JR.
Allen Wood, Jr., Director
<PAGE> 20
EXHIBIT INDEX
3-a Articles of Incorporation, as amended. Filed as
Exhibit 3 to the Corporation's Form 10-K Annual Report
for the year ended December 31, 1990, incorporated
herein by reference
3-b Bylaws, as amended. Filed as Exhibit 3-b to the
Corporation's Form 10-K Annual Report for the year
ended December 31, 1991, incorporated herein by
reference.
10-a Deferred Compensation Plan for Directors of Trustmark
Corporation. Filed as Exhibit 10 to the Corporation's
Form 10-K Annual Report for the year ended December 31,
1991, incorporated herein by reference.
10-b Deferred Compensation Plan for Executive Officers of
Trustmark National Bank.
13 Only those portions of the Registrant's 1993 Annual Report
to Shareholders expressly incorporated by reference
herein are included in this exhibit and, therefore, are
filed as a part of this report on Form 10-K.
All other exhibits are omitted as they are inapplicable or not required by
the related instructions.
<PAGE> 1
EXECUTIVE DEFERRAL PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
<PAGE> 2
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
TABLE OF CONTENTS
Article Subject
I Definitions and Construction
II Eligibility and Participation
III Death Benefit
IV Retirement Benefit
V Beneficiary
VI Leave of Absence
VII Source of Benefits
VIII Termination of Employment
IX Termination of Participation
X Termination, Amendment, Modification,
or Supplement of Plan
XI Other Benefits and Agreements
XII Restrictions on Alienation of Benefits
XIII Administration of this Plan
XIV Named Fiduciary and Claims Procedure
XV Adoption of Plan by Subsidiary,
Affiliated or Associated Companies
XVI Miscellaneous
Plan Agreement
<PAGE> 3
EXECUTIVE DEFERRAL PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
PURPOSE AND EFFECTIVE DATE
The purpose of the Executive Deferral Plan of Trustmark National Bank, Jackson,
Mississippi is to provide specified benefits to a select group of management
and highly compensated Employees who contribute materially to the continued
growth, development and future business success of Trustmark National Bank,
Jackson, Mississippi. It is the intention of Trustmark National Bank, Jackson,
Mississippi that this program and the individual plans established hereunder be
administered as unfunded welfare benefit plans established and maintained for a
select group of management or highly compensated Employees. The effective date
of this Plan is January 1, 1994.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For purposes of this Plan, the following phrases or
terms shall have the indicated meanings unless otherwise clearly apparent from
the context:
(a) "Beneficiary" shall mean the person, persons or estate of a
Participant, entitled to receive any benefits subsequent to the death of a
Participant under a Plan Agreement entered into in accordance with the terms of
this Plan.
(b) "Beneficiary Designation" shall mean the form of written agreement,
attached hereto as Annex II, by which the Participant names the
Beneficiary(ies) of the Plan.
(c) "Board of Directors" shall mean the Board of Directors of Trustmark
National Bank, Jackson, Mississippi unless otherwise indicated or the context
otherwise requires.
(d) "Committee" shall mean the Administrative Committee appointed to
manage and administer the Plan and individual Plan Agreements in accordance
with the provisions of Article XIII hereof.
(e) "Bank" shall mean Trustmark National Bank, Jackson, Mississippi and
any Subsidiary that duly adopts the Plan as provided in Article XV hereof.
Where the context dictates, the term "Bank" as used herein refers to the
particular Bank that has entered into a Plan Agreement with a particular
Participant.
<PAGE> 4
(f) "Covered Salary" shall mean the amount specified in Item 1 of the Plan
Agreement that is used as a basis for computation of Participant's Death and
Retirement Benefits pursuant to the terms and conditions of the Plan.
(g) "Employee" shall mean any person who is in the full time employment of
the Bank or Subsidiary, as determined by the personnel rules and practices of
the Bank or a Subsidiary.
(h) "Normal Retirement Date" shall be the first day of the month following
the month in which the Participant attains his or her sixty-fifth (65th)
birthday.
(i) "Early Retirement Date" shall be the date of Participant's Retirement
prior to his or her Normal Retirement Date which may occur on the first day of
any month following the month in which the Participant attains his or her
fifty-fifth (55th) birthday and has completed five (5) full years of
participation in the Plan.
(j) "Participant" shall mean an Employee who is selected and elects to
participate in the Plan through the execution of a Plan Agreement in accordance
with the provisions of Article II.
(k) "Plan" shall mean the Executive Deferral Plan of Trustmark National
Bank, Jackson, Mississippi as amended from time to time.
(l) "Plan Agreement" shall mean the form of written agreement, attached
hereto as Annex I, which is entered into from time to time by and between the
Bank and an Employee selected to become a Participant as a condition to
participation in the Plan. Each Plan Agreement executed by a Participant shall
provide for the entire benefit to which such Participant is entitled under the
Plan, and the Plan Agreement bearing the latest date shall govern such
entitlement.
(m) "Retirement" and "Retire" shall mean severance of employment with the
Bank at or after the attainment of his or her Normal Retirement Date or, with
the consent of the Bank, at or after attainment of his or her Early Retirement
Date.
(n) "Just Cause" shall mean theft, fraud, embezzlement or willful
misconduct causing significant property damage to the Bank or personal injury
to another employee.
(o) "Disability" or "Disabled", as used herein, means permanent and/or
total disability of the person referred to, as determined by the Committee in
its sole discretion.
(p) "Election to Participate" shall mean the form of written agreement
that will be executed and entered into between a Participant and the Bank
specifying the amount of annual compensation to be deferred immediately
following the date of execution of said "Election to Participate" and
continuing thereafter under the terms of the Plan.
<PAGE> 5
(q) "Actuarially Reduced" shall mean the present value of Participant's
Retirement Benefit as set forth in Item 3(a) of his or her Plan Agreement at
the time of Participant's Early Retirement Date using a discount rate as
determined by the Committee in its sole and absolute discretion not to exceed
the Monthly Average of the Composite Yield on Seasoned Corporate Bonds as
published by Moody's Investors Services, Inc. or its successor as stated for
the month of October preceding December 31 of the year immediately prior to the
date of Early Retirement.
(r) "Subsidiary" shall mean any business organization in which Trustmark
National Bank, Jackson, Mississippi, directly or indirectly, owns an interest,
excluding ownership interests Trustmark National Bank, Jackson, Mississippi may
hold in their fiduciary capacities as trustee or otherwise, and any other
business organization that the Board of Directors designates as a Subsidiary
for purposes of this Plan.
1.2 Construction. The masculine gender when used herein shall be deemed
to include the feminine gender, and the singular may include the plural unless
the context clearly indicates to the contrary. The words "hereof", "herein,"
"hereunder", and other similar compounds of the word "here" shall mean and
refer to the entire Plan and not to any particular provision or section.
Whenever the words "Article" or "Section" are used in this Plan, or a
cross-reference to an "Article" or "Section" is made, the Article or Section
referred to shall be an Article or Section of this Plan unless otherwise
specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. In order to be eligible for participation in the Plan,
an Employee must be selected by the Committee in the year in which the Employee
is eligible to participate and in each succeeding year thereafter as
hereinafter provided. The Committee, in its sole and absolute discretion,
shall determine eligibility for participation in accordance with the purposes
of the Plan.
2.2 Participation. After being selected by the Committee to participate
in this Plan, an Employee shall, as a condition precedent to participation
herein, complete and return to the Committee a duly executed Plan Agreement and
Election to Participate electing to participate herein and agreeing to the
terms and conditions thereof, and by the execution of such a Participant shall
agree that all amounts deferred thereby shall be irrevocably deferred and that
in lieu thereof the Participant shall be entitled solely to the benefits
provided under this Plan. Such Plan Agreement shall be completed and returned
to the committee at the time specified thereby, and should be subsequent to
December 31st of the year preceding the year to which the Plan Agreement
relates.
<PAGE> 6
ARTICLE III
DEATH BENEFIT
3.1 Amount and Payment of Death Benefit. If a Participant dies before
Retirement and the Plan is in effect at that time, the Bank will pay or cause
to be paid a Death Benefit to such Participant's Beneficiary. The said Death
Benefit shall be one hundred percent (100%) of the Participant's Covered Salary
as set forth in the Plan Agreement paid monthly for the next twelve (12) months
after such death and seventy five percent (75%) of said Participant's Covered
Salary paid monthly for the next one hundred and eight (108) months or until
the Participant would have been age sixty-five (65), whichever is later. Such
payments shall commence effective the first day of the month following the date
of death.
Notwithstanding the immediately preceding paragraph of this Section
3.1, the Bank will pay or cause to be paid the Death Benefit specified therein
only if:
(a) At the time of the Participant's death prior to attaining his or her
Normal Retirement Date:
(i) Such Participant was an Employee and had not Retired, or was
totally disabled or on authorized leave of absence, and all deferrals and
payments required to be made by such Participant under Sections 3.2 et. seq.
have been made, or
(ii) Such required deferrals or payments were waived pursuant to
Section 3.5 because of such Participant's total disability;
(b) The Participant's Plan Agreement had been kept in force throughout the
period commencing on the date of such Plan Agreement and ending on the date of
his or her death;
(c) The Participant's death was due to causes other than suicide within
two (2) years of the date of his or her original Plan Agreement or within two
(2) years of the date of any amendment to his or her Plan Agreement or any
subsequent Plan Agreement resulting from additional benefits granted because of
an increase in the Participant's Covered Salary; but the Participant's suicide
shall relieve the Bank only of its obligation to pay that portion of the Death
Benefit that was granted within two (2) years prior to the date of such
suicide;
(d) The Participant's death is determined not to be from a bodily or
mental cause or causes, information about which was withheld, or knowingly
concealed, or falsely provided by the Participant when requested by the Bank to
furnish evidence of good health upon the Participant's enrolling in the Plan or
upon an application for an increase in benefits because of an increase in
Participant's Covered Salary; and
(e) Proof of death in such form as determined acceptable by the
<PAGE> 7
Committee is furnished.
3.2 Amount of Participant Deferral and Payments. In consideration for the
Death Benefit selected in Participant's Plan Agreements, each Participant shall
defer an amount of his or her compensation in such amounts and at such times as
shall be determined by the Committee and as specified in his or her Election to
Participate, and the Committee may change the amount of such deferral. If a
Participant is authorized to take a leave of absence from his or her employment
or, subject to the provisions of Section 3.5, is disabled, the Participant
shall be required to make payments to the Bank in accordance with Article VI in
order to maintain his or her Plan Agreement in force. A Participant's
obligation to defer an amount of his or her compensation in accordance with
this Section 3.2 or to make the payments required by Article VI shall be stated
in his or her Plan Agreement and Election to Participate, shall commence on the
date his or her Plan Agreement becomes effective, and shall continue thereafter
during the term of his or her Plan Agreement or until the earlier of such
Participant's death or attainment of his or her Normal Retirement Date. A
Participant shall have the right to increase or decrease the amount of his or
her deferral initially selected by him by amending his or her Plan Agreement
and Election to Participate in accordance with the rules adopted by the
Committee for this purpose.
3.3 Time and Manner of Deferring or Making Payments. A Participant shall,
in his or her Plan Agreement and Election to Participate, authorize the Bank to
defer an amount of such Participant's compensation equal to the amount
specified pursuant to Section 3.2. A Participant who is on authorized leave of
absence or is disabled and who is required to make the payments required in
Article VI shall make such payments at such time and in such manner as the Bank
shall provide; provided, however, that the Participant shall not continue to
make such payments during any period in which a portion of his or her
compensation is being deferred or such payments have been waived pursuant to
Section 3.5.
3.4 Participant Deferrals and Payments - Use and Forfeitability. The
amount of each Participant's compensation deferred pursuant to Sections 3.2 and
3.3 shall be and remain solely the property of the Bank and the amount
collected by the Bank pursuant to Sections 3.2 and 3.3 from each Participant
who is on an authorized leave of absence or disabled shall be and become solely
the property of the Bank, and a Participant shall have no right thereto, nor
shall the Bank be obligated to use such amounts in any specific manner. Except
as provided in Article IV, if a Participant's death occurs under circumstances
other than those specified in Section 3.1, no benefit shall be payable
hereunder or under his or her Plan Agreement to his or her Beneficiary or any
other person or entity on his or her behalf, and any payments made by such
Participant under Sections 3.2 and 3.3 shall be forfeited.
3.5 Waiver of Participant Deferral or Payments. If a Participant becomes
totally disabled, and such disability is certified by the
<PAGE> 8
Committee before attaining his or her Normal Retirement Date, if such total
disability continues for more than three (3) months, and the disability benefit
specified in paragraph 4 of the Participant's Plan Agreement is in effect, such
Participant shall not be required to defer a portion of his or her compensation
pursuant to Sections 3.2 and 3.3 or make the payments provided for in Sections
3.2 and 3.3, commencing with the fourth (4th) month following the date of such
total disability and continuing thereafter for as long as such total disability
continues.
The Bank may waive such required deferral or payments only if:
(a) Such disability was not either intentionally self-inflicted or caused
by illegal or criminal acts of the Participant;
(b) The Participant was an Employee at the time he or she became totally
disabled (or was then on authorized leave of absence) and had made all payments
required hereunder;
(c) The Participant's Plan Agreement has been kept in force until the time
of such total disability; and
(d) The Committee approves the waiver of such compensation.
If a Participant dies prior to Retirement and while the waiver
described in this Section 3.5 is in effect, the Death Benefit provided in this
Article III shall be paid. If a Participant Retires while the waiver described
in this Section 3.5 is in effect, the Retirement Benefit provided in Article IV
shall be paid.
The determination of what constitutes total disability and the removal
thereof for purposes of this Article III shall be made by the Committee, in its
sole and absolute discretion, and such determination shall be conclusive.
ARTICLE IV
RETIREMENT BENEFIT
4.1 Normal Retirement. If a Participant has remained an Employee until
his or her Normal Retirement Date and shall then Retire, and if the Plan and
his or her Plan Agreement have been kept in force, the Bank shall pay or cause
to be paid to such Participant, as a Retirement Benefit (herein so called), the
amount per month specified in his or her Plan Agreement as a Retirement
Benefit. Payment of such monthly amount shall commence on the Participant's
Normal Retirement Date and shall continue for the life of the Participant. If
such Participant shall die before receiving one hundred and twenty (120)
monthly payments, the Retirement Benefit will be continued to the Participant's
Beneficiary as set forth in the Beneficiary Designation until the balance of
the one hundred and twenty (120) monthly payments has been paid to the
Participant and his or her Beneficiary.
<PAGE> 9
4.2 Retirement After Normal Retirement Date. A Participant who continues
as an Employee with the Bank after his or her Normal Retirement Date may remain
a Participant in the Plan with the consent of the Bank. Upon Retirement such a
Participant shall be entitled to the benefits provided in Section 4.8 hereof.
The monthly payments provided for in Section 4.8 hereof shall commence on the
date the Participant Retires.
4.3 Early Retirement. The Committee, in its sole and absolute discretion,
may permit a Participant to receive an Early Retirement Benefit commencing as
of the first day of any month coincident with or following the Participant's
Early Retirement Date, but before the attainment of his or her Normal
Retirement Date. In such event, the Participant's monthly Early Retirement
Benefit shall be the Retirement Benefit set forth in his or her Plan Agreement
Actuarially Reduced to the Participant's Early Retirement Date. The said
reduced monthly amount, payable for life shall be the only benefit to which
such Participant is entitled. If Participant shall die before receiving one
hundred and twenty (120) installments after commencement of the Early
Retirement Benefit, said amount will be continued to Participant's Beneficiary
as set forth in the Beneficiary Designation until a total of one hundred and
twenty (120) installments has been paid to the Participant and his or her
Beneficiary.
4.4 Post Retirement Death Benefit. If a Participant dies after Retirement
but before the applicable Retirement Benefit is paid in full, the unpaid
Retirement Benefit payments to which such Participant is entitled shall
continue and be paid to that Participant's Beneficiary. Such payments shall be
made in accordance with the payment schedule to that Participant pursuant to
Sections 4.1 and 4.2 of the Plan.
4.5 Exclusivity of Post Retirement Death Benefit. No Death Benefit as
defined in Article III shall be paid to the Beneficiary of a Participant who
dies after Retirement.
4.6 Accrual of Retirement Benefit. A Participant who ceases to be an
Employee before completion of one (1) full year of participation in the Plan,
except as a result of death, Retirement, total Disability within the meaning of
Section 3.5, or Just Cause at any time shall not be entitled to any benefits
hereunder and the Bank shall have no obligation hereunder to such Participant.
4.7 Deferred Termination Benefit. A Participant who ceases to be an
Employee after the completion of one (1) full year of participation in the Plan
shall receive a portion of his or her monthly Retirement Benefit upon the
earlier of (i) the Participant's death or (ii) attainment of his or her Normal
Retirement Date. Said portion shall be the monthly amount of the Retirement
Benefit set forth in the Participant's Plan Agreement multiplied by a fraction,
not to exceed one (1), the numerator of which is the number of whole years said
Employee was a Participant in the Plan and the denominator of which is fifteen
(15). If the
<PAGE> 10
Participant's benefits have been increased since the Participant's initial
entry into this Plan, or successor or predecessor plans, the reduced monthly
Retirement Benefit shall be determined by reducing each incremental benefit
increase in accordance with the formula. The resulting reduced monthly amount
shall be the only benefit to which such Participant is entitled. The reduced
monthly amount will be payable for life, if Participant so survives, at the
attainment of the Participant's Normal Retirement Date. If such Participant
shall die before receiving one hundred and twenty (120) monthly payments, the
reduced amount will be continued to the Participant's Beneficiary as set forth
in the Beneficiary Designation until the balance of the one hundred and twenty
(120) monthly payments has been paid to the Participant and his or her
Beneficiary.
If Participant dies before attainment of his or her Normal Retirement
Date, the reduced monthly amount will be paid to Participant's Beneficiary as
set forth in Participant's Beneficiary Designation for one hundred and twenty
(120) months. Such payments shall commence effective the first day of the
month following the date of death.
4.8 Benefit at Retirement After Attainment of Normal Retirement Date. If
a Participant elects to continue employment beyond his or her Normal Retirement
Date, the Committee, and only the Committee, will specify the amount of the
Participant's Retirement Benefit, which shall be evidenced by a new Plan
Agreement to be executed by the Participant. Such benefit will be no less than
the amount as set forth in Item 3(a) of the Plan Agreement.
ARTICLE V
BENEFICIARY
A Participant shall designate his or her Beneficiary to receive benefits under
the Plan and his or her Plan Agreement by completing the Beneficiary
Designation. If more than one Beneficiary is named, the shares and/or
precedence of each Beneficiary shall be indicated. A Participant shall have
the right to change the Beneficiary by submitting to the Committee a new
Beneficiary Designation. The Beneficiary Designation must be approved in
writing by the Bank; however, upon the Bank's acknowledgment of approval, the
effective date of the Beneficiary Designation shall be the date it was executed
by the Participant. If the Bank has any doubt as to the proper Beneficiary to
receive payments hereunder, it shall have the right to withhold such payments
until the matter is finally adjudicated. Any payment made by the Bank in good
faith and in accordance with the provisions of this Plan and a Participant's
Plan Agreement and Beneficiary Designation shall fully discharge the Bank from
all further obligations with respect to such payment.
<PAGE> 11
ARTICLE VI
LEAVE OF ABSENCE
6.1 Required Payments. If a Participant is authorized by the Bank for any
reason, including military, medical or other, to take a leave of absence, such
Participant shall be required to make payments in order to maintain his or her
Plan Agreement in force. Such required payments shall be an amount equal to
the amount of the Participant's compensation that is to be deferred under the
terms of his or her Plan Agreement and Election to Participate. A Participant
required to make payments under this Section 6.1 shall continue making such
required payments until the earlier of (i) the date he or she returns to his or
her duties following a leave of absence, (ii) the date such payments are waived
pursuant to Section 3.5, or (iii) the effective date that he or she enters into
a new Plan Agreement. If a Participant's payments are waived pursuant to
Section 3.5 and subsequently the Participant returns to his or her duties, he
or she shall be required to resume deferring his or her compensation, in the
amount specified above.
6.2 Failure to Make Required Payments. Failure to make payments required
by Section 6.1 shall cause Participant's Plan Agreement to terminate without
the necessity of any notice from either party to the other. From and after
such termination, except as provided in Section 4.7 hereof, neither party shall
have any further obligation to the other party under this Plan or such Plan
Agreement.
ARTICLE VII
SOURCE OF BENEFITS
7.1 Benefits Payable from General Assets. Amounts payable hereunder shall
be paid exclusively from the general assets of the Bank, and no person entitled
to payment hereunder shall have any claim, right, security interest, or other
interest in any fund, trust, account, or other asset of the Bank that may be
looked to for such payment. The Bank's liability for the payment of benefits
hereunder shall be evidenced only by this Plan and each Plan Agreement entered
into between the Bank and a Participant.
7.2 Investments to Facilitate Payment of Benefits. Although the Bank is
not obligated to invest in any specific asset or fund in order to provide the
means for the payment of any liabilities under this Plan, the Bank may elect to
do so and, in such event, no Participant shall have any interest whatever in
such asset or fund. As a condition precedent to the Bank's obligation to
provide any benefits, including incremental increases in benefits, under this
Plan, the Participant shall, if so requested by the Bank, provide evidence of
insurability at standard and other rates, in such amounts, and with such
insurance carrier or carriers as the Bank may require, including the results
and reports of previous Bank and other insurance carrier physical examinations,
taking such additional physical examinations as the Bank may request, and
<PAGE> 12
taking any other action that the Bank may request. If a Participant is
requested to and does not or cannot provide evidence of insurability as
specified in the immediately preceding sentence, then the Bank shall have no
further obligation to such Participant under this Plan, and such Participant's
Plan Agreement shall terminate, except as to benefits previously granted.
Notwithstanding the foregoing, if a Participant cannot provide evidence of
insurability at standard rates or for the amounts initially contemplated in
connection with his or her participation in the Plan, the Bank may, at its
discretion, permit the Participant to participate herein for such benefits and
upon such deferral of his or her compensation as the Bank may, in its sole
discretion, deem appropriate.
The Participant also understands and agrees that his or her
participation, in any way, in the acquisition of any such insurance policy or
any other general asset by the Bank shall not constitute a representation to
the Participant, his designated recipient, or any person claiming through the
Participant that any of them has a special or beneficial interest in such
general asset.
7.3 Bank Obligation. The Bank shall have no obligation of any nature
whatsoever to a Participant under this Plan or a Participant's Plan Agreement,
except otherwise expressly provided herein and in such Plan Agreement.
7.4 Withholding of Information, Etc. If, in connection with a
Participant's enrolling in or applying for incremental benefit increases under
the Plan, the Bank requests the Participant to furnish evidence of
insurability, the Participant dies, and it is determined that the Participant
withheld, knowingly concealed, or knowingly provided false information about
the bodily or mental condition or conditions that caused the Participant's
death, the Bank shall have no obligation to provide the benefits contracted for
on the basis of such withholding, concealment, or false information.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
Neither this Plan nor a Participant's Plan Agreement, either singly or
collectively, in any way obligate the Bank to continue the employment of a
Participant with the Bank nor does either limit the right of the Bank at any
time and for any reason to terminate the Participant's employment. Termination
of a Participant's employment with the Bank for any reason, whether by action
of the Bank, shall immediately terminate his or her participation in this Plan
and his or her Plan Agreement, and all further obligations of either party
thereunder, except as may be provided in Section 4.7. In no event shall this
Plan or a Plan Agreement, either singly or collectively, by their terms or
implications constitute an employment contract of any nature whatsoever between
the Bank and a Participant.
<PAGE> 13
ARTICLE IX
TERMINATION OF PARTICIPATION
9.1 Termination of Participation - General. A Participant reserves the
right to terminate his or her participation in this Plan and his or her Plan
Agreement at his or her election at any time by giving the Committee written
notice of such termination not less than 30 days prior to an anniversary date
of the date of execution of his or her Plan Agreement. A Participant's
termination shall be effective as soon as administratively convenient after
such anniversary date.
9.2 Rights After Termination of Participation. Participants who elect to
terminate participation in the Plan after one (1) full year of participation
but before eligibility for Retirement will be entitled to the same benefits as
a Participant who ceases to be an Employee as described in Section 4.7. Such
Participants will not be entitled to a Death Benefit under Article III.
ARTICLE X
TERMINATIONS, AMENDMENTS, MODIFICATION OR
SUPPLEMENT OF PLAN
10.1 Termination Amendment, Etc. The Bank reserves the right to terminate,
amend, modify or supplement this Plan, wholly or partially, and from time to
time, at any time. The Bank likewise reserves the right to terminate, amend,
modify, or supplement any Plan Agreement, wholly or partially, from time to
time. Such right to terminate, amend, modify, or supplement this Plan or any
Plan Agreement shall be exercised for the Bank by the Committee; provided,
however, that:
(a) No action to terminate this Plan or a Plan Agreement shall be taken
except upon written notice to each Participant to be affected thereby, which
notice shall be given not less than thirty (30) days prior to such action; and
(b) The Committee shall take no action to terminate this Plan or a Plan
Agreement with respect to a Participant or his or her Beneficiary after the
payment of any benefit has commenced in accordance with Article III or Article
IV but has not been completed.
10.2 Rights and Obligations Upon Termination. Upon the termination of this
Plan or any Plan Agreements, by either the Committee or a Participant in
accordance with the provisions for such termination, neither this Plan nor the
Plan Agreement shall be of any further force and effect, and no party shall
have any further obligation under either this Plan or any Plan Agreement so
terminated except as may be provided for in Section 4.7 or the preceding
provisions of this Article X.
<PAGE> 14
10.3 Revocation. In the event Participant is discharged for Just Cause at
any time, this Plan and his or her Plan Agreement shall be terminated and
considered null and void with neither the Participant nor Participant's
Beneficiary having any claim or right against Bank thereafter.
ARTICLE XI
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and his or her Beneficiary hereunder
and under such Participant's Plan Agreement are in addition to any other
benefits available to such Participant under any other program or plan of the
Bank for its Employees, and, except as may otherwise be expressly provided for,
this Plan and Plan Agreements entered into hereunder shall supplement and shall
not supersede, modify, or amend any other program or plan of the Bank or a
Participant. Moreover, benefits under this Plan and Plan Agreements entered
into hereunder shall not be considered compensation for the purpose of
computing deferrals or benefits under any plan maintained by the Bank that is
qualified under section 401 (a) of the Internal Revenue Code of 1954, as
amended.
ARTICLE XII
RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Plan or a Plan Agreement shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge
the same shall be void. No right or benefit hereunder or under any Plan
Agreement shall in any manner be liable for or subject to the debts, contract,
liabilities, or torts of the person entitled to such benefit. If any
Participant or Beneficiary under this Plan or a Plan Agreement should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge any right to a benefit hereunder or under any Plan Agreement, then such
right or benefit shall, in the discretion of the Committee, terminate, and, in
such event, the Committee shall hold or apply the same or any part thereof for
the benefit of such Participant or Beneficiary, his or her spouse, children, or
other dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion, may deem proper.
ARTICLE XIII
ADMINISTRATION OF THIS PLAN
13.1 Appointment of Committee. The general administration of this Plan,
and any Plan Agreements executed hereunder, as well as construction and
interpretation thereof, shall be vested in the Committee, the number and
members of which shall be designated and appointed from time to time by, and
shall serve at the pleasure of,
<PAGE> 15
the Board of Directors. Any such member of the Committee may resign by notice
in writing filed with the secretary of the Committee. Vacancies shall be
filled promptly by the Board of Directors but any vacancies remaining unfilled
for ninety days may be filled by a majority vote of the remaining members of
the Committee. Each person appointed a member of the Committee shall signify
his or her acceptance by filing a written acceptance with the secretary of the
Committee.
13.2 Committee Officials. The Board of Directors shall designate one of
the members of the Committee as chairman and shall appoint a secretary who need
not be a member of the Committee. The secretary shall keep minutes of the
Committee's proceedings and all data, records and documents relating to the
Committee's administration of this Plan and any Plan Agreements executed
hereunder. The Committee may appoint from its number such subcommittees with
such powers as the Committee shall determine and may authorize one or more of
its members or any agent to execute or deliver any instrument or make any
payment on behalf of the Committee.
13.3 Committee Action. All resolutions or other actions taken by the
Committee shall be by the vote of a majority of those members present at a
meeting at which a majority of the members are present, or in writing by all
the members at the time in office if they act without a meeting.
13.4 Committee Rules and Powers - General. Subject to the provisions of
this Plan, the Committee shall from time to time establish rules, forms, and
procedures for the administration of this Plan, including Plan Agreements. The
Committee shall have the exclusive right to determine, among other matters, (i)
total disability with respect to a Participant and (ii) the degree thereof,
either or both determinations to be made on the basis of such medical and/or
other evidence that the Committee, in its sole and absolute discretion, may
require. Such decisions, actions, and records of the Committee shall be
conclusive and binding upon the Bank and all person having or claiming to have
any right or interest in or under this Plan.
13.5 Reliance on Certificate, etc. The members of the Committee and the
officers and directors of the Bank shall be entitled to rely on all
certificates and reports made by any duly appointed accountants, and on all
opinions given by any duly appointed legal counsel. Such legal counsel may be
counsel for the Bank.
13.6 Liability of Committee. No member of the Committee shall be liable
for any act or omission of any other member of the Committee, or for any act or
omission on his or her own part, excepting only his or her own willful
misconduct. The Bank shall indemnify and save harmless each member of the
Committee against any and all expenses and liabilities arising out of his or
her membership on the Committee, excepting only expenses and liabilities
arising out of his or her own willful misconduct.
<PAGE> 16
Expenses against which a member of the Committee shall be indemnified hereunder
shall include, without limitation, the amount of any settlement or judgment,
costs, counsel fees, and related charges reasonably incurred in connection with
a claim asserted, or a proceeding brought, or settlement thereof. The
foregoing right of indemnification shall be in addition to any other rights to
which any such member may be entitled as a matter of law.
13.7 Determination of Benefits. In addition to the powers hereinabove
specified, the Committee shall have the power to compute and certify, under
this Plan and any Plan Agreement, the amount and kind of benefits from time to
time payable to Participants and their Beneficiaries, and to authorize all
disbursements for such purposes.
13.8 Information to Committee. To enable the Committee to perform its
functions, the Bank shall supply full and timely information to the Committee
on all matters relating to the compensation of all Participants, their
retirement, death or other cause for termination of employment, and such other
pertinent facts as the Committee may require.
13.9 Manner and time of Payment of Benefits. The Committee shall have the
power, in its sole and absolute discretion, to change the manner and time of
payment of benefits to be made to a Participant or his or her Beneficiary from
that set forth in the Participant's Plan Agreement if requested to do so by
such Participant or Beneficiary.
ARTICLE XIV
NAMED FIDUCIARY AND CLAIMS PROCEDURE
14.1 Named Fiduciary. The named Fiduciary of the Plan for purposes of the
claims procedure under this Plan is the Chief Financial Officer.
14.2 Right to Change Named Fiduciary. The Bank shall have the right to
change the Named Fiduciary created under this Plan. The Bank shall also have
the right to change the address and telephone number of the Named Fiduciary.
The Bank shall give the Participant written notice of any change of the Named
Fiduciary, or any change in the address and telephone number of the Named
Fiduciary.
14.3 Procedure for Claims. Benefits shall be paid in accordance with the
provisions of this Plan. The Participant, or a designated recipient, or any
other person claiming through the Participant (hereinafter collectively
referred to as the "Claimant") shall make a written request for the benefits
provided under this Plan. This written claim shall be mailed or delivered to
the Named Fiduciary.
14.4 Notification of Denial of Claim. If the claim is denied, either
wholly or partially, notice of the decision shall be mailed to the Claimant
within a reasonable time period. This time period
<PAGE> 17
shall not exceed more than 90 days after the receipt of the claim by the Named
Fiduciary.
14.5 Procedure if Claim Denied. The Named Fiduciary shall provide a
written notice to every Claimant who is denied a claim for benefits under this
Plan. The notice shall set forth the following information:
(a) the specific reasons for the denial;
(b) the specific reference to pertinent plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) appropriate information and explanation of the claims
procedure under this Agreement so to permit the Claimant to submit his claim
for review.
14.6 Procedure for Appeal by Claimant. The claims procedure under this
Plan shall allow the Claimant a reasonable opportunity to appeal a denied claim
and to get a full and fair review of that decision from the Named Fiduciary.
(a) The Claimant shall exercise his right of appeal by submitting
a written request for a review of the denied claim to the Named Fiduciary.
This written request for review must be submitted to the Named Fiduciary within
sixty (60) days after receipt by the Claimant of the written notice of denial.
(b) The Claimant shall have the following rights under this appeal
procedure:
(1) to request a review upon written application to the Named
Fiduciary;
(2) to review pertinent documents with regard to the Participant's
benefit plan created under this Plan;
(3) the right to submit issues and comments in writing;
(4) to request an extension of time to make a written submission
of issues and comments; and
(5) to request that a hearing be held to consider Claimant's
appeal.
14.7 Procedure for Decision to Review Appeal. The decision on the review
of the denied claim shall promptly be made by the Named Fiduciary:
(a) within sixty (60) days after the receipt of the request
<PAGE> 18
for review if no hearing is held; or
(b) within one hundred and twenty (120) days after the receipt of
the request for review, if an extension of time is necessary in order to hold a
hearing.
(1) If an extension of time is necessary in order to hold a
hearing, the Named Fiduciary shall give the Claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension.
(2) The written notice of extension shall indicate that an
extension of time will occur in order to hold a hearing on Claimant's appeal.
The notice shall also specify the place, date, and time of that hearing and the
Claimant's opportunity to participate in the hearing. It may also include any
other information the Named Fiduciary believes may be important or useful to
the Claimant in connection with the appeal.
14.8 Discretion of Fiduciary for Hearing. The decision to hold a hearing
to consider the Claimant's appeal of the denied claim shall be within the sole
discretion fo the Named Fiduciary, whether or not the Claimant requests such a
hearing.
14.9 Procedure After Review. The Named Fiduciary's decision on review
shall be made in writing and provided to the Claimant within the specified time
periods in Section 14.7. This written decision on review shall contain the
following information:
(a) the decision(s);
(b) the reasons for the decision(s); and
(c) specific references to the Plan provisions of the Plan on
which the decision(s) is/are based.
ARTICLE XV
ADOPTION OF PLAN BY SUBSIDIARY,
AFFILIATED OR ASSOCIATED COMPANIES
Any corporation that is a Subsidiary may, with the approval of the Board of
Directors, adopt this Plan and thereby come within the definition of Bank in
Article I hereof.
ARTICLE XVI
MISCELLANEOUS
16.1 Execution of Receipts and Releases. Any payment to any Participant, a
Participant's legal representative, or Beneficiary in accordance with the
provisions of this Plan or Plan Agreement executed hereunder shall, to the
extent thereof, be in full satisfaction of all claims hereunder against the
Bank. The Bank
<PAGE> 19
may require such Participant, legal representative, or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release therefore
in such form as it may determine.
16.2 No Guarantee of Interests. Neither the Committee nor any of its
members guarantees the payment of any amounts which may be or become due to any
person or entity under this Plan or any Plan Agreement executed hereunder. The
liability of the Bank to make any payment under this Plan or any Plan Agreement
executed hereunder is limited to the then available assets of the Bank.
16.3 Bank Records. Records of the Bank as to a Participant's employment,
termination of employment and the reason therefor authorized leaves of absence,
and compensation shall be conclusive on all persons and entities, unless
determined to be incorrect.
16.4 Evidence. Evidence required of anyone under this Plan and any Plan
Agreement executed hereunder may be by certificate, affidavit, document, or
other information which the person or entity acting on it considers pertinent
and reliable, and signed, made, or presented by the proper party or parties.
16.5 Notice. Any notice which shall be or may be given under this Plan or
a Plan Agreement executed hereunder shall be in writing and shall be mailed by
United States mail, postage prepaid. If notice is to be given to the Bank,
such notice shall be addressed to the Bank at:
Trustmark National Bank, Jackson, Mississippi
Box 291
Jackson, Mississippi 39205
marked to the attention of the Secretary, Administrative Committee,
Executive Deferral Plan; or, if notice to a Participant, addressed to the
address shown on such Participant's Plan Agreement.
16.6 Change of Address. Any party may, from time to time, change the
address to which notices shall be mailed by giving written notice of such new
address.
16.7 Effect of Provisions. The provisions of this Plan and of any Plan
Agreement executed hereunder shall be binding upon the Bank and its successors
and assigns, and upon a Participant, his or her Beneficiary, assigns, heirs,
executors, and administrators.
16.8 Headings. The titles and headings of Articles and Sections are
included for convenience of reference only and are not to be considered in the
construction of the provisions hereof or any Plan Agreement executed hereunder.
16.9 Governing Law. All questions arising with respect to this Plan and
any Plan Agreement executed hereunder shall be determined by reference to the
laws of the State of Mississippi, as in effect
<PAGE> 20
at the time of their adoption and execution, respectively.
COMPLETE
<PAGE> 1
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Trustmark Corporation
We have audited the accompanying consolidated statements of income, changes in
stockholders' equity and cash flows of Trustmark Corporation and subsidiaries
for the year ended December 31, 1991. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of Trustmark Corporation and
subsidiaries for the year ended December 31, 1991, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche
Jackson, Mississippi
January 27, 1992
<PAGE> 2
Report of Independent Public Accountants
To the Board of Directors and Shareholders
Trustmark Corporation:
We have audited the accompanying consolidated balance sheets of Trustmark
Corporation (a Mississippi corporation) and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Trustmark Corporation and subsidiaries
for the year ended December 31, 1991, were audited by other auditors whose
report dated January 27, 1992, expressed an unqualified opinion on those
statements.
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 financial statements referred to above present fairly, in
all material respects, the financial position of Trustmark Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1993, the Corporation changed its method of accounting for income
taxes.
/s/ Arthur Andersen & Co.
Jackson, Mississippi,
January 14, 1994.
<PAGE> 3
<TABLE>
<CAPTION>
Assets December 31, 1993 1992
------ ------------ ----------- -----------
<S> <C> <C> <C>
Trustmark
Corporation
and Cash and due from banks (noninterest-bearing) $ 238,433 $ 252,410
Subsidiaries Federal funds sold and securities purchased under reverse
repurchase agreements 91,506 167,742
Trading account securities 2,555 4,942
Consolidated Securities held for sale (fair value: $84,346 - 1993;
Balance $103,271 - 1992) 84,278 103,202
Sheets Investment securities (fair value: $1,838,485 - 1993;
($ In Thousands $1,587,593 - 1992) 1,796,828 1,533,148
Except Share Loans 2,116,938 1,943,766
Data) Less: Unearned income 33,112 38,053
Allowance for loan losses 62,650 49,500
----------- -----------
Net loans 2,021,176 1,856,213
Premises and equipment, net 58,749 52,483
Accrued interest receivable 34,982 33,478
Intangible assets 40,426 29,376
Other assets 63,093 52,146
----------- -----------
Total Assets $ 4,432,026 $ 4,085,140
----------- -----------
----------- -----------
Liabilities
-----------
Deposits:
Noninterest-bearing deposits $ 676,601 $ 590,996
Interest-bearing deposits 2,512,604 2,605,886
Total deposits 3,189,205 3,196,882
Federal funds purchased 84,295 93,345
Securities sold under repurchase agreements 760,840 461,817
Accrued expenses and other liabilities 39,059 37,690
----------- -----------
Total Liabilities 4,073,399 3,789,734
Stockholders' Equity
--------------------
Common stock, no par value:
Authorized, 40,000,000 shares
Issued and outstanding: 31,172,907 shares- 1993;
29,476,383 shares - 1992 12,989 12,282
Surplus 220,888 196,995
Retained earnings 124,750 86,129
----------- -----------
Total Stockholders' Equity 358,627 295,406
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,432,026 $ 4,085,140
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
----------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 163,540 $ 163,005 $ 185,426 Trustmark
Interest and dividends on securities: Corporation
Taxable interest and dividend income 115,099 110,257 98,245 and
Interest income exempt from federal income taxes 7,134 8,827 9,639 Subsidiaries
Interest on federal funds sold and securities purchased
under reverse repurchase agreements 4,786 6,574 16,360
------------ ------------ ------------ Consolidated
Total Interest Income 290,559 288,663 309,670 Statements
of Income
Interest Expense ($ In Thousands
Interest on deposits 86,958 112,650 154,988 Except Share
Interest on federal funds purchased and securities Data)
sold under repurchase agreements 22,044 16,055 19,354
------------ ------------ ------------
Total Interest Expense 109,002 128,705 174,342
------------ ------------ ------------
Net Interest Income 181,557 159,958 135,328
Provision for loan losses 17,596 24,068 25,207
------------ ------------ ------------
Net Interest Income After Provision
for Loan Losses 163,961 135,890 110,121
Other Income
Trust service income 7,914 7,106 6,103
Service charges on deposit accounts 17,322 16,924 16,272
Other account charges, fees and commissions 16,621 13,775 12,065
Securities gains 118 2,887 1,458
Other 3,399 2,897 2,593
------------ ------------ ------------
Total Other Income 45,374 43,589 38,491
Other Expenses
Salaries 54,349 50,116 45,280
Employee benefits 10,161 8,326 6,997
Net occupancy-premises 7,206 6,687 6,637
Equipment expenses 11,699 11,399 10,352
Services and fees 16,082 16,044 14,472
Other real estate expenses 2,376 2,256 3,462
FDIC insurance assessment 7,208 6,951 6,374
Amortization of intangible assets 8,291 5,318 4,790
Other 22,239 17,414 13,997
------------ ------------ ------------
Total Other Expenses 139,611 124,511 112,361
------------ ------------ ------------
Income before income taxes and cumulative
effect of change in accounting principle 69,724 54,968 36,251
Income taxes 21,093 16,711 8,680
------------ ------------ ------------
Income before cumulative effect of
change in accounting principle 48,631 38,257 27,571
Cumulative effect on prior years (to December 31, 1992)
of change in accounting for income taxes 1,519
------------ ------------ ------------
Net Income $ 50,150 $ 38,257 $ 27,571
------------ ------------ ------------
------------ ------------ ------------
Per Share Data
Income before cumulative effect of
change in accounting principle $ 1.61 $ 1.30 $ 0.94
Cumulative effect on prior years (to December 31, 1992)
of change in accounting for income taxes 0.05
------------ ------------ ------------
Net Income Per Share $ 1.66 $ 1.30 $ 0.94
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares outstanding 30,187,529 29,476,383 29,476,383
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
Common Retained
Total Stock Surplus Earnings
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Trustmark Balance, January 1, 1991 $ 250,335 $ 12,282 $ 196,995 $ 41,058
Corporation Net income for year 27,571 27,571
and Cash dividends paid ($0.35 per share) (10,195) (10,195)
Subsidiaries --------- --------- --------- ---------
Balance, December 31, 1991 267,711 12,282 196,995 58,434
Net income for year 38,257 38,257
Consolidated Cash dividends paid ($0.36 per share) (10,562) (10,562)
Statements --------- --------- --------- ---------
of Changes in Balance, December 31, 1992 295,406 12,282 196,995 86,129
Stockholders' Net income for year 50,150 50,150
Equity Cash dividends paid ($0.38 per share) (11,529) (11,529)
($ In Thousands Common stock issued in connection with acquisition 24,600 707 23,893
Except Share --------- --------- --------- ---------
Data) Balance, December 31, 1993 $ 358,627 $ 12,989 $ 220,888 $ 124,750
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
----------------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Trustmark Operating Activities
Corporation Net income $ 50,150 $ 38,257 $ 27,571
and Adjustments to reconcile net income to net cash provided
Subsidiaries by operating activities:
Provision for loan losses 17,596 24,068 25,207
Consolidated Provision for depreciation and amortization 16,936 14,101 12,092
Statements Writedowns and losses on sales of other real estate 1,848 1,349 2,443
of Cash Flows Amortization of security discounts (5,703) (8,127) (6,897)
($ In Thousands) Gain on sales of securities (118) (2,887) (1,458)
Other (2,568) (511) (1,209)
(Increase) decrease in accrued interest receivable (36) 742 3,165
Increase in intangible assets (6,822) (3,534) (2,933)
Increase in deferred income taxes (10,489) (6,695) (2,097)
Decrease (increase) in other assets 1,007 2,492 (5,535)
(Decrease) increase in other liabilities (3,280) (30,329) 24,567
--------- --------- ---------
Net cash provided by operating activities 58,521 28,926 74,916
Investing Activities
Cash equivalents of acquired bank, net of cash paid 20,601 25,722 46,163
Proceeds from sales of securities 59,457 89,434 76,317
Proceeds from maturities of securities 818,685 628,014 208,484
Purchases of securities (1,080,137) (980,932) (425,678)
Net decrease in federal funds sold and securities
purchased under reverse repurchase agreements 76,236 83,822 4,160
Net increase in loans (77,017) (22,213) (53,202)
Purchases of premises and equipment (7,860) (7,927) (8,180)
Proceeds from sales of premises and equipment 165 463 107
--------- --------- ---------
Net cash used by investing activities (189,870) (183,617) (151,829)
Financing Activities
Net (decrease) increase in deposits (161,072) 836 48,668
Net increase in federal funds purchased and securities sold
under repurchase agreements 289,973 173,053 40,635
Cash dividends (11,529) (10,562) (10,195)
--------- --------- ---------
Net cash provided by financing activities 117,372 163,327 79,108
--------- --------- ---------
(Decrease) increase in cash and cash equivalents (13,977) 8,636 2,195
Cash and cash equivalents at beginning of year 252,410 243,774 241,579
--------- --------- ---------
Cash and cash equivalents at end of year $ 238,433 $ 252,410 $ 243,774
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Trustmark
Corporation, its wholly-owned subsidiaries, First Building Corporation and F.
S. Corporation, and its majority-owned subsidiary, Trustmark National Bank (the
Bank) and the Bank's wholly-owned subsidiary, Trustmark Financial Services,
Inc. Minority interest in the Corporation's majority-owned subsidiary is not
material. All intercompany profits, balances and transactions have been
eliminated.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107 "Disclosures
about Fair Value of Financial Instruments" requires disclosure of financial
instruments' fair values, as well as the methodology and significant
assumptions used in estimating fair values. These requirements have been
incorporated throughout the notes to the consolidated financial statements. In
cases where quoted market prices are not available, fair values are based on
estimates using present value techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates for those
assets or liabilities cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of
the instrument. All nonfinancial instruments, by definition, have been
excluded from these disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Corporation and may not be indicative of amounts that might ultimately be
realized upon disposition or settlement of those assets and liabilities.
CASH AND SHORT-TERM INVESTMENTS
The carrying amounts for cash and due from banks and short-term
investments (federal funds sold and securities purchased under reverse
repurchase agreements) approximate fair values because of the short maturities
of those financial instruments.
TRADING ACCOUNT SECURITIES
Trading account securities are carried at fair value. Fair values for the
Corporation's trading account assets 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. Gains or losses on the sale of
trading account securities (based on the adjusted average cost of the
certificates sold) and adjustments to fair value are reported currently as
other income.
SECURITIES HELD FOR SALE AND INVESTMENT SECURITIES
Management determines the appropriate classification of securities at the
time of purchase. When Management has the intent and the Corporation has the
ability at the time of purchase to hold securities until maturity or on a
long-term basis, these securities are classified as investment securities and
carried at amortized
<PAGE> 7
cost. Securities to be held for indefinite periods of time which may not be
held until maturity or on a long-term basis are classified as securities held
for sale and carried at the lower of cost or fair value. Securities held for
sale include securities that Management intends to use as part of its
asset/liability management strategy and that may be sold in response to changes
in interest rates or other economic factors.
The amortized costs of the specific securities sold are used to compute
gains and losses on the sale of securities and classified as securities gains
(losses). Adjustments to fair value for securities held for sale are also
classified as securities gains (losses).
Fair values for investment securities and securities held for sale 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.
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 115 "Accounting for Certain Investments in Debt and Equity Securities,"
which the Corporation will adopt on January 1, 1994. This statement addresses
the accounting and reporting for investments in debt and certain equity
securities. Debt securities not classified as trading account securities or
investment securities expected to be held to maturity and all equity securities
will be classified as available-for-sale securities and reported at fair value,
with net unrealized gains and losses reported, net of tax, as a separate
component of stockholders' equity. The Corporation has given considerable
attention to the classification of its securities portfolio pursuant to SFAS
No. 115. Upon adoption of this statement on January 1, 1994, the Corporation
will classify all of its securities held for sale and certain of its investment
securities as available-for-sale. At December 31, 1993, the carrying values
and fair values of securities expected to be classified as available-for-sale
are approximately $627,000,000 and $646,000,000, respectively, which would
result in an unrecognized gain, net of tax, of approximately $12,000,000 as a
separate component of stockholders' equity.
LOANS
Loans are stated at the amount of unpaid principal, reduced by unearned
income and an allowance for loan losses. Unearned income on installment loans
is recognized as income over the terms of the loans by a method which
approximates the interest method. Interest on other loans is calculated by
using the simple interest method on daily balances of the principal amount
outstanding. The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against the allowance
for loan losses when Management believes that the collectibility of the
principal is unlikely. The allowance, which is based on evaluations of the
collectibility of loans and prior loan loss experience, is an amount that
Management believes will be adequate to absorb probable losses on loans
existing at the reporting date. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current economic
conditions
<PAGE> 8
that may affect a borrower's ability to pay. Accrual of interest is
discontinued on a loan when Management believes, after considering economic and
business conditions and collection efforts, that the borrower's financial
condition is such that collection of principal or interest is doubtful.
The fair values of loans, as disclosed in Note 6, are estimated for
portfolios of loans with similar financial characteristics. For variable-rate
loans that reprice frequently and with no significant change in credit risk,
fair values are based on carrying values. The fair values for certain mortgage
loans, such as one to four family residential properties, are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. The fair
values of other types of loans are estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
In June 1993, FASB issued SFAS No. 114 "Accounting by Creditors for
Impairment of a Loan" which becomes effective for the Corporation beginning in
1995. This statement defines the measurement requirements for loans that are
impaired or deemed to be troubled debt restructures. Based upon the existing
loan portfolio, the effect of the implementation of this statement is not
expected to be material.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is charged to expense over the estimated useful
lives of the assets. Leasehold improvements are amortized over the terms of
the respective leases or the estimated useful lives of the improvements,
whichever is shorter. Depreciation and amortization expenses are computed by
the straight-line and accelerated methods.
INTANGIBLE ASSETS
Intangible assets, which consist primarily of core deposits and purchased
mortgage servicing rights, are being amortized by the straight-line method over
10 years and 9 years, respectively.
OTHER REAL ESTATE
Other real estate owned is reported in other assets and is recorded at
the lower of cost or estimated fair value less the estimated cost of
disposition. Any valuation adjustments required prior to foreclosure are
charged to the allowance for possible loan losses. Subsequent to foreclosure,
losses on the periodic revaluation of the property are charged to current
period earnings as other real estate expenses. Costs of operating and
maintaining the properties, net of related income and gains (losses) on their
disposition, are charged to other real estate expenses as incurred.
INCOME TAXES
The Corporation adopted SFAS No. 109 "Accounting for Income Taxes"
effective January 1, 1993. The adoption of SFAS No. 109 changes the
Corporation's method of accounting for income taxes
<PAGE> 9
from the deferred method to a liability method. The cumulative effect of
adopting SFAS No. 109 on the Corporation's financial statements was to increase
net income in the amount of $1,519,000 or 5 cents per share.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Refer to Note 11 for
the detail of temporary differences which give rise to deferred tax assets and
liabilities.
DEPOSITS
The fair values of deposits with no stated maturity, such as non-interest
bearing demand deposits, NOW accounts, MMDA products and savings accounts are,
by definition, equal to the amount payable on demand. This amount is commonly
referred to as the carrying value. Fair values for certificates of deposit are
based on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities. See Note 9 for a detail of carrying values and fair values for all
deposit liabilities.
SHORT-TERM LIABILITIES
The carrying amounts for federal funds purchased, securities sold under
repurchase agreements and other liabilities approximate their fair values.
EMPLOYEE BENEFIT PLANS
The Corporation has a noncontributory pension plan covering substantially
all of its employees. The funding policy for the plan is to make contributions
within the limits required by applicable regulations. Employees of the
Corporation participate in a profit-sharing plan covering substantially all
employees with more than one year's service. Executive officers participate in
a supplemental executive incentive program. Contributions to these plans are
made at the discretion of the Corporation's Board of Directors and are funded
accordingly. The Corporation has a trusteed, contributory, self-insured
medical benefit plan covering substantially all employees who work at least 30
hours per week and have completed the required waiting period. Contributions
to the plan are made as prescribed by the trustees. The Corporation has a
deferred compensation plan for its directors and certain executive officers.
In 1993, the Corporation adopted SFAS No. 106 "Accounting for
Postretirement Benefits Other than Pensions." The effect of implementing this
statement was immaterial.
PER SHARE DATA
Income per share is based on the weighted average of shares outstanding
during the year. All per share data and number of shares outstanding have been
retroactively restated to reflect the effect of a three for one stock split
(see Note 14).
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash
<PAGE> 10
equivalents include cash on hand and amounts due from banks.
The Corporation paid income taxes approximating $31,200,000 in 1993,
$20,925,000 in 1992, and $10,645,000 in 1991. Interest paid on deposit
liabilities and other borrowings approximated $111,316,000 in 1993,
$134,562,000 in 1992, and $180,227,000 in 1991.
For the years ended December 31, 1993, 1992, and 1991, noncash transfers
from loans to foreclosed properties were $2,989,000, $6,456,000, and
$7,623,000, respectively.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1992 and 1991 financial
statements to conform to the 1993 method of presentation.
<PAGE> 11
NOTE 2 - ACQUISITIONS
On July 31, 1993, UniSouth Banking Corporation (UniSouth) was merged with
Trustmark National Bank in a business combination accounted for by the purchase
method of accounting. The total purchase price was approximately $29,647,000.
The stockholders of UniSouth received 1,696,524 shares of the Corporation's
common stock and approximately $677,000 cash in connection with the merger.
The Corporation received cash and cash equivalents of approximately
$20,601,000, loans and other assets of approximately $153,895,000 and assumed
deposits and other liabilities of approximately $158,044,000. Excess cost over
net assets acquired approximated $12,518,000 and has been allocated to core
deposits. The results of operations of UniSouth, which are not material,
subsequent to July 31, 1993 are included in the consolidated statements of
income.
On August 7, 1992, the Corporation purchased a substantial portion of the
assets and assumed substantially all of the liabilities of the former Foxworth
Bank from the Federal Deposit Insurance Corporation for approximately $450,000
cash, which has been allocated to core deposits. The Corporation received cash
and cash equivalents of approximately $25,722,000, loans and other assets of
approximately $9,768,000 and assumed deposit liabilities of approximately
$35,490,000.
On July 12, 1991, the Corporation purchased approximately $47,000,000 of
deposit liabilities of the former First Jackson Federal Savings Bank from the
Resolution Trust Corporation for approximately $507,000 cash, which has been
allocated to core deposits. The Corporation primarily received cash and
assumed deposit and other liabilities of approximately $47,100,000.
<PAGE> 12
NOTE 3 - CASH AND DUE FROM BANKS
The Corporation is required to maintain certain reserves at the Federal
Reserve Bank. The requirement approximated $40,428,000 at December 31, 1993.
<PAGE> 13
NOTE 4 - Securities Held for Sale
A comparison of the carrying values and estimated fair values of securities
held for sale follows ($ in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
1993 Value Gains Losses Value
- --- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies $ 75,858 $ 24 $ 0 $ 75,882
Obligations of states and
political subdivisions 8,420 44 8,464
--------- --------- --------- ---------
Total securities held
for sale $ 84,278 $ 68 $ 0 $ 84,346
--------- --------- --------- ---------
--------- --------- --------- ---------
1992
- ---
U.S. Treasury and other
U.S. Government agencies $ 89,397 $ 10 $ (10) $ 89,397
Obligations of states and
political subdivisions 13,805 69 13,874
--------- --------- --------- ---------
Total securities held
for sale $ 103,202 $ 79 $ (10) $ 103,271
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Securities held for sale at December 31, 1993 mature over periods ranging
from 4 days to 3.89 years and have a weighted average maturity of
approximately 11 months. Gross gains realized from the sale of securities
held for sale were immaterial in 1993.
<PAGE> 14
NOTE 5 - Investment Securities
A comparison of the amortized cost and estimated fair values of investment
securities owned follows ($ in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
1993 Cost Gains Losses Value
- --- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $ 719,446 $ 23,435 $ (1,165) $ 741,716
Obligations of states and political
subdivisions 149,396 9,784 (257) 158,923
Debt securities of foreign governments 100 100
Mortgage-backed securities 914,918 10,699 (3,884) 921,733
Other securities 12,968 3,045 16,013
---------- ----------- ----------- ------------
Total investment securities $ 1,796,828 $ 46,963 $ (5,306) $ 1,838,485
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
1992
- ---
U.S. Treasury and other U.S.
Government agencies $ 624,194 $ 25,270 $ (1,160) $ 648,304
Obligations of states and political
subdivisions 122,635 6,304 (225) 128,714
Debt securities of foreign governments 200 (1) 199
Mortgage-backed securities 771,293 24,211 (2,621) 792,883
Other securities 14,826 2,729 (62) 17,493
---------- ----------- ----------- ------------
Total investment securities $ 1,533,148 $ 58,514 $ (4,069) $ 1,587,593
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
</TABLE>
The amortized cost and estimated fair value of investment securities at
December 31, 1993, by contractual maturity, are shown below. 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>
Estimated
Amortized Fair
Cost Value
----------- ------------
<S> <C> <C>
Due in one year or less $ 101,438 $ 103,910
Due after one year through five years 652,143 672,946
Due after five years through ten years 78,513 82,165
Due after ten years 49,816 57,731
----------- ------------
881,910 916,752
Mortgage-backed securities 914,918 921,733
----------- ------------
$ 1,796,828 $ 1,838,485
----------- ------------
----------- ------------
</TABLE>
Gross gains of $156,000 and gross losses of $67,000 were realized in 1993
as a result of calls and the disposition of investment securities purchased in
the UniSouth acquisition. Gross gains of $2,909,000 and $2,078,000 and gross
losses of $22,000 and $620,000 were realized on the sales of investment
securities in 1992 and 1991, respectively. At December 31, 1993, Management
does not anticipate disposing of investment securities in the forseeable
future to meet the Corporation's investment objectives or operational needs.
Management has the intent and believes the Corporation has the ability to hold
these securities on a long-term basis or until maturity. However, as discussed
in Note 1, effective January 1, 1994 the Corporation will adopt SFAS No. 115
and reclassify a portion of its investment securities portfolio as
available-for-sale.
Investment securities carried at $1,360,503,000 at December 31, 1993 and
$1,254,426,000 at December 31, 1992 were pledged to collateralize public
deposits, securities sold under agreements to repurchase, and for other
purposes as required or permitted by law.
<PAGE> 15
NOTE 6 - Loans
At December 31, 1993 and 1992, the loan portfolio carrying values consisted
of the following ($ in thousands):
<TABLE>
<CAPTION>
1993 1992
Real estate loans: ----------- -----------
<S> <C> <C>
Construction and land development $ 96,750 $ 81,188
Secured by 1-4 family residential properties 520,343 437,700
Secured by nonfarm, nonresidential properties 329,908 295,837
Other real estate loans 49,756 44,478
Term federal funds sold 125,000
Loans to finance agricultural production 29,248 15,261
Commercial and industrial 471,942 427,384
Loans to individuals for personal expenditures 521,119 403,484
Obligations of states and political subdivisions 36,973 39,622
Loans for purchasing or carrying securities 3,995 6,490
Lease financing receivables 4,427 3,837
Other loans 19,365 25,432
----------- -----------
Loans, net of unearned interest $ 2,083,826 $ 1,905,713
----------- -----------
----------- -----------
</TABLE>
The fair value estimates of net loans at December 31, 1993 and 1992 were
$2,110,051,000 and $1,940,058,000 respectively. Management has made
estimates of the fair value based on assumptions that it believes to be
reasonable as discussed in Note 1.
In the ordinary course of business, the Corporation makes loans to its
directors and to companies in which these directors are principal owners.
Loans made to such borrowers (including companies in which they are principal
owners) amounted to $38,091,000 at December 31, 1993 and $31,371,000 at
December 31, 1992. These loans were made on substantially the same terms,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than
normal risk of collectibility or present other unfavorable features.
An analysis of changes in these loans follows ($ in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1993 $ 31,371
New loans 80,790
Repayments (74,070)
-----------
Balance at December 31, 1993 $ 38,091
-----------
-----------
</TABLE>
In addition, in the normal course of business the Corporation entered into
transactions with companies whose principals are officers, directors or
shareholders.
Changes in the allowance for loan losses were as follows ($ in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1 $ 49,500 $ 39,000 $ 30,610
Provision charged to expense 17,596 24,068 25,207
Loans charged off (10,055) (16,736) (19,030)
Recoveries 5,287 3,168 2,213
Allowance applicable to loans of acquired bank 322
----------- ----------- -----------
Balance at December 31 $ 62,650 $ 49,500 $ 39,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
approximated $9,784,000 and $12,890,000 at December 31, 1993 and 1992,
respectively. The foregone interest associated with such loans is immaterial.
<PAGE> 16
NOTE 7 - Premises and Equipment
Premises and equipment are summarized as follows ($ in thousands):
<TABLE>
<CAPTION>
December 31
------------------------
1993 1992
--------- ---------
<S> <C> <C>
Land $ 9,439 $ 8,274
Buildings and leasehold improvements 64,090 55,865
Furniture and equipment 56,004 49,455
-------- -------
129,533 113,594
Less accumulated depreciation and amortization 70,784 61,111
-------- --------
Premises and equipment, net $ 58,749 $ 52,483
-------- --------
-------- --------
</TABLE>
<PAGE> 17
NOTE 8 - Employee Benefit Plans
<TABLE>
<CAPTION>
Net periodic pension costs included the following
components ($ in thousands) 1993 1992 1991
--------- --------- -----------
<S> <C> <C> <C>
Service cost earned during period $ 1,980 $ 1,177 $ 946
Interest cost on projected benefit obligation 1,321 1,379 1,212
Actual return on assets (2,498) (1,806) (2,506)
Net amortization and deferral:
Amortization of unrecognized net assets and prior service cost (177) (169) (150)
Asset gain deferred 929 153 1,067
--------- --------- -----------
Net periodic pension costs $ 1,555 $ 734 $ 569
--------- --------- -----------
--------- --------- -----------
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Corporation's consolidated balance sheets ($ in thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of accumulated plan benefits: --------- ---------
Vested $ 16,188 $ 11,931
Nonvested 487 350
--------- ---------
Accumulated benefit obligation $ 16,675 $ 12,281
--------- ---------
Projected benefit obligation $ (23,567) $ (15,228)
Plan assets at fair value 24,415 18,765
--------- ---------
Plan assets in excess of projected benefit obligation 848 3,537
Unrecognized net loss (gain) 1,572 (1,404)
Unrecognized net assets being amortized over 15 years (2,426) (2,720)
Unrecognized prior service cost 1,757 1,288
Other 51
--------- ---------
Prepaid pension assets $ 1,802 $ 701
--------- ---------
--------- ---------
Assumptions used in the accounting were:
Discount rate 7.5% 8.5%
Rate of increase in compensation levels 6% 6%
Expected long-term rate of return on assets 8.5% 9.5%
</TABLE>
Plan assets included common stocks, trust department pooled funds,
short-term investment funds, and fixed investment funds guaranteed by insurance
carriers.
Operating expenses included $5,311,000 (1993), $4,081,000 (1992), and
$2,944,000 (1991) for contributions to the Corporation's other employee benefit
plans.
<PAGE> 18
NOTE 9 - Deposits
At December 31, 1993 and 1992, deposits consisted of the following ($ in
thousands):
<TABLE>
<CAPTION>
1993 1992
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 676,601 $ 676,601 $ 590,996 $ 590,996
NOW accounts 440,005 440,005 411,321 411,321
Money market deposit accounts 637,009 637,009 653,137 653,137
Savings accounts 208,793 208,793 178,389 178,389
Certificates of deposit 1,226,797 1,245,191 1,363,039 1,380,728
---------- ---------- ---------- ----------
Total deposits $ 3,189,205 $ 3,207,599 $ 3,196,882 $ 3,214,571
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
As disclosed in Note 1, SFAS No. 107 defines fair value of demand deposits
as the amount payable upon demand and prohibits adjusting fair value for any
value derived from retaining these deposits for an expected future period in
time. That component, commonly referred to as a core deposit intangible, is
not considered in the above fair value amounts.
<PAGE> 19
NOTE 10 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1993, the carrying values of securities sold under
repurchase agreements, by contractual maturity, are shown below ($ in
thousands):
<TABLE>
<CAPTION>
Carrying
Value
--------
<S> <C>
In one day $ 9,456
Term up to 30 days 100,897
Term of 30 to 90 days 58,861
Term of 90 days and over 5,502
Demand 586,124
Total Securities Sold Under --------
Repurchase Agreements $760,840
--------
--------
</TABLE>
The weighted average interest rate for these repurchase agreements was
2.92% at December 31, 1993. The repurchase agreements are collateralized by
specific U. S. Treasury and other U. S. Government agency securities with
carrying values of approximately $761,557,000 and fair values of approximately
$776,145,000.
<PAGE> 20
NOTE 11 - Income Taxes
The income tax provision included in the statements of income was as
follows ($ in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Current $ 31,582 $23,406 $10,777
Deferred (10,489) (6,695) (2,097)
-------- ------- -------
Net income tax provision $ 21,093 $16,711 $ 8,680
-------- ------- -------
-------- ------- -------
</TABLE>
The net income tax provision differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes as a result
of the following ($ in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------------------ ------------------ -----------------
Percent Percent Percent
of Pretax of Pretax of Pretax
Tax Income Tax Income Tax Income
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax computed on income before income taxes $ 24,403 35.0% $18,689 34.0% $12,313 34.0%
(Decrease) increase in tax resulting from:
Tax exempt security interest net of premium amortization (3,317) (4.8) (3,810) (6.9) (4,354) (12.0)
Nondeductible interest expense 247 0.4 546 1.0 476 1.3
AMT credit carryforwards (1,037) (2.8)
State income tax 2,259 3.2 520 0.9
Other (2,499) (3.5) 766 1.4 1,282 3.5
-------- ------- ------- -------- ------- -------
Net income tax provision $ 21,093 30.3% $16,711 30.4% $ 8,680 24.0%
-------- ------- ------- -------- ------- -------
-------- ------- ------- -------- ------- -------
</TABLE>
The income tax provision included $45,000 in 1993, $1,076,000 in 1992 and
$496,000 in 1991 resulting from securities transactions.
At December 31, 1993, temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities give rise to the
following net deferred tax asset, which is included in other assets ($ in
thousands):
<TABLE>
<S> <C>
Allowance for loan losses $ 23,910
Accretion of discounts on investment securities (1,160)
Accelerated depreciation and amortization (1,128)
Capitalized mortgage servicing costs 2,288
Deferred compensation 1,958
Other 1,024
--------
Net deferred tax asset $ 26,892
--------
--------
</TABLE>
The Corporation has evaluated the need for a valuation allowance and,
based on the weight of the available evidence, has determined that it is more
likely than not that all deferred tax assets will eventually be realized.
During 1991, the Corporation concluded an income tax examination for years
1987 and 1988. The effects, which are not material, are included in the
Corporation's consolidated financial statements. The Corporation is contesting
the disallowance of amortization relating to the core deposit intangibles.
Management believes that the ultimate outcome of this matter will not have a
material adverse effect on the Corporation's financial condition or results of
operations.
<PAGE> 21
NOTE 12 - LEASE COMMITMENTS
The Corporation currently has lease commitments for banking premises and
general offices and equipment which expire from 1994 to 2008. The majority of
these commitments contain renewal options which extend the base lease from 5 to
20 years. Rental expense approximated $1,784,000 in 1993, $1,889,000 in 1992,
and $1,909,000 in 1991.
Minimum rental commitments at December 31, 1993, under material,
noncancelable leases for banking premises and general offices and equipment,
were as follows ($ in thousands):
<TABLE>
<CAPTION>
Year ended Minimum Rental
December 31, Commitment
------------ --------------
<S> <C>
1994 $ 874
1995 787
1996 622
1997 546
1998 473
1999-2008 1,484
</TABLE>
<PAGE> 22
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Corporation makes commitments to extend credit and issues standby and
commercial letters of credit in the normal course of business in order to
fulfill the financing needs of its customers. The Corporation also engages in
forward contracts in order to manage its own exposure to the risks of interest
rate fluctuations.
Commitments to extend credit are agreements to lend money to customers
pursuant to certain specified conditions. Commitments generally have fixed
expiration dates or other termination clauses. Since many of these commitments
are expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Corporation applies
the same credit policies and standards as it does in the lending process when
making these commitments. The collateral obtained is based upon the assessed
creditworthiness of the borrower.
Standby and commercial letters of credit are conditional commitments
issued by the Corporation to guarantee the performance of a customer to a third
party. Essentially, the same policies regarding credit risk and collateral
which are followed in the lending process are used when issuing letters of
credit.
Forward contracts are agreements to purchase or sell securities or other
money market instruments at a future specified 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 securities values and interest
rates.
The Corporation's maximum exposure to credit loss in the event of
nonperformance by the other party for loan commitments and letters of credit is
represented by the contractual notional amount of those instruments. However,
for forward contracts, the contractual or notional amounts do not represent the
Corporation's actual exposure to credit loss as represented below ($ in
thousands):
<TABLE>
<CAPTION>
Contract or
Notional Amount
---------------
<S> <C>
Financial instruments whose contract amounts
represent credit risk:
Loan commitments $554,200
Standby and commercial letters
of credit written 31,351
Financial instruments whose notional or contract
amounts exceed the amount of credit risk:
Forward contracts 184,800
</TABLE>
There is no material difference between the notional amount and the
estimated fair value of loan commitments which are generally priced at market
at the time of funding. In addition, fees collected from loan commitments are
considered to be immaterial. The fair values of letters of credit approximate
the fees currently collected on such financial instruments. The fees
associated with these letters of credit are immaterial. Fair values for the
Corporation's financial forward contracts shown
<PAGE> 23
above exceed their contract values by approximately $405,000. Fair values are
based on current settlement values.
The Corporation is defendant in various legal actions arising in the
normal course of business. Management and legal counsel are of the opinion
that the outcome of these matters will not have a material adverse effect on
the Corporation's financial condition or results of operations.
<PAGE> 24
NOTE 14 - STOCKHOLDERS' EQUITY
On September 15, 1993, the Corporation announced a three for one stock
split. The additional shares were issued on October 8, 1993 to shareholders of
record on September 30, 1993. As a result, the Corporation's total number of
shares outstanding increased to 31,172,907. All per share data and number of
shares outstanding have been retroactively restated to reflect the effect of
this stock split.
Banking regulations limit the amount of dividends that may be paid without
prior approval of the Bank's regulatory agency. At December 31, 1993,
approximately $93,907,000 of undistributed earnings of the Bank included in
consolidated surplus and retained earnings was available for future
distribution to the Corporation as dividends, subject to approval by the Board
of Directors. Banking regulations also require maintaining certain minimum
levels of capital for which the Bank is in compliance.
<PAGE> 25
NOTE 15 - Summarized Financial Information of Trustmark Corporation
Summarized financial information of Trustmark Corporation, parent company
only, was as follows ($ in thousands):
<TABLE>
<CAPTION>
BALANCE SHEETS December 31,
----------------------
1993 1992
<S> <C> <C>
Assets --------- ---------
Investment in bank $ 353,707 $ 284,366
Other assets 6,616 11,357
--------- ---------
$ 360,323 $ 295,723
--------- ---------
--------- ---------
Liabilities and Stockholders' Equity
Accrued expenses $ 1,696 $ 317
Stockholders' equity 358,627 295,406
--------- ---------
$ 360,323 $ 295,723
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Year Ended December 31,
-----------------------------------
1993 1992 1991
<S> <C> <C> <C>
Revenue --------- --------- ---------
Dividends received from bank $ 11,833 $ 10,741 $ 10,404
Equity in undistributed earnings of subsidiaries 35,946 27,682 16,917
Other income 2,562 386 410
--------- --------- ---------
50,341 38,809 27,731
Expenses 191 552 160
--------- --------- ---------
Net Income $ 50,150 $ 38,257 $ 27,571
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------
1993 1992 1991
<S> <C> <C> <C>
Operating Activities --------- --------- ---------
Net income $ 50,150 $ 38,257 $ 27,571
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in investment in subsidiaries (35,946) (27,682) (16,917)
Other (2,561) (541) (213)
--------- --------- ---------
Net cash provided by operating activities 11,643 10,034 10,441
Investing Activities
Cash paid to acquire bank - net cash used by investing activities (677)
Financing Activities
Cash dividends-net cash used by financing activities (11,529) (10,562) (10,195)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents (563) (528) 246
Cash and cash equivalents at beginning of year 1,460 1,988 1,742
--------- --------- ---------
Cash and cash equivalents at end of year $ 897 $ 1,460 $ 1,988
--------- --------- ---------
--------- --------- --------
</TABLE>
Trustmark Corporation paid income taxes of approximately $31,200,000 in
1993, $20,925,000 in 1992, and $10,645,000 in 1991. No interest was paid by the
parent company during the three years ended December 31, 1993.
<PAGE> 26
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991 1990 1989
- ------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements of Income Trustmark
Total interest income $ 290,559 $ 288,663 $ 309,670 $ 304,750 $ 277,222 Corporation
Total interest expense 109,002 128,705 174,342 187,901 172,392 and
--------- --------- --------- --------- --------- Subsidiaries
Net interest income 181,557 159,958 135,328 116,849 104,830
Provision for loan losses 17,596 24,068 25,207 15,133 11,523
Other income 45,374 43,589 38,491 36,456 30,385
Other expenses 139,611 124,511 112,361 102,151 90,620 Selected
Income before income taxes and --------- --------- --------- --------- --------- Financial
cumulative effect of change
in accounting principles 69,724 54,968 36,251 36,021 33,072 Data
Income taxes 21,093 16,711 8,680 6,944 5,015 ($ In Thousands
Cumulative effect of change in Except Share
accounting for income taxes 1,519 Data)
--------- --------- --------- --------- ---------
Net Income $ 50,150 $ 38,257 $ 27,571 $ 29,077 $ 28,057
========= ========= ========= ========= =========
Consolidated Balance Sheets
Total assets $ 4,432,026 $ 4,085,140 $ 3,878,394 $ 3,700,022 $3,108,432
Investment securities 1,796,828 1,533,148 1,361,851 1,212,619 679,481
Net loans 2,021,176 1,856,213 1,848,091 1,818,400 1,780,739
Deposits 3,189,205 3,196,882 3,160,667 3,065,633 2,570,266
Per Share Data
Net income per share before cumulative
effect of change in accounting
principle $1.61 $1.30 $0.94 $0.99 $0.95
Cumulative effect of change in accounting
for income taxes 0.05
--------- --------- --------- --------- ---------
Net income per share $1.66 $1.30 $0.94 $0.99 $0.95
========= ========= ========= ========= =========
Cash dividends per share $0.38 $0.36 $0.35 $0.34 $0.32
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1993 March 31 June 30 September 30 December 31 Summary
- ------------------------------------------------ --------- --------- --------- --------- of Quarterly
<S> <C> <C> <C> <C> <C>
Interest income $71,212 $72,202 $73,717 $73,428 Results of
Net interest income 43,213 44,836 46,726 46,782 Operations
Provision for loan losses 3,786 4,218 6,759 2,833 ($ In Thousands
Income before income taxes and cumulative Except Share
effect of change in accounting principle 15,332 19,092 16,414 18,886 Data)
Net income 11,521 13,536 12,606 12,487
Net income per share:
Before effect of change in accounting principle $0.34 $0.46 $0.41 $0.40
Cumulative effect of change in accounting
for income taxes 0.05
--------- --------- --------- ---------
Net income per share $0.39 $0.46 $0.41 $0.40
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1992 March 31 June 30 September 30 December 31
- ------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income $72,715 $72,588 $71,902 $71,458
Net interest income 36,684 38,896 41,191 43,187
Provision for loan losses 6,064 5,958 6,740 5,306
Income before income taxes 12,056 12,486 14,982 15,444
Net income 8,540 8,766 9,924 11,027
Net income per share $0.29 $0.30 $0.34 $0.37
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Trustmark ----------------------------------------------------------------------
Corporation Dividends Stock Prices
and Per ---------------------------
Subsidiaries Share High Low
-----------------------------------------------------------------
Principal 1993
Markets --------
<S> <C> <C> <C>
And Prices 1st Quarter .093 15 1/4 12 3/4
of The 2nd Quarter .093 17 13 3/4
Corporation's 3rd Quarter .093 18 1/2 13 3/4
Stock 4th Quarter .100 19 1/2 14
1992
--------
1st Quarter .088 10 1/2 7 1/2
2nd Quarter .088 12 10
3rd Quarter .088 12 1/4 11
4th Quarter .093 13 3/4 11
</TABLE>
All per share data and stock prices reflect a three for one
stock split declared in 1993 (Note 14).
<PAGE> 28
BUSINESS OF THE CORPORATION AND ITS SUBSIDIARIES
Trustmark Corporation (Corporation) is a one-bank holding company which
was incorporated under the Mississippi Business Corporation Act on August 5,
1968. The Corporation has a 99.63% ownership in its major subsidiary,
Trustmark National Bank (Trustmark), which accounts for approximately 99.9% of
total assets and total revenues of the Corporation. Trustmark is located in
43 Mississippi communities and offers complete banking and trust services
through its 89 full-service branches, 27 limited-service branches and 26
off-premise automated teller machines. During the second quarter of 1992,
Trustmark Financial Services, Inc. (TFSI), a wholly-owned subsidiary of
Trustmark, officially opened and began providing a wide range of brokerage
products through a full- service investment center. In addition, the
Corporation directly owns all of the stock of F. S. Corporation and First
Building Corporation, both nonbank Mississippi corporations. F. S. Corporation
previously developed automobile financing, including all incidental and related
matters. First Building Corporation previously managed and operated its real
estate investments. Today, F. S. Corporation and First Building Corporation
are primarily dormant and are not considered significant subsidiaries.
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated statements found elsewhere in this report.
ACQUISITIONS
After the close of business on July 31, 1993, UniSouth Banking Corporation
(UniSouth), of Columbus, Mississippi, was merged with Trustmark National Bank.
The stockholders of UniSouth received 1,696,524 shares of Trustmark Corporation
common stock and approximately $677,000 cash in connection with the merger.
This business combination has been accounted for by the purchase method of
accounting; therefore, the results of operations, ending balances and average
balances include the impact of this merger since its consummation. This merger
allowed the Corporation to move into an area of Mississippi with outstanding
potential for additional growth. Please see Note 2 of the Notes to
Consolidated Financial Statements for additional information.
EARNINGS SUMMARY
Trustmark Corporation reported net income of $50.2 million for 1993
compared to $38.3 million in 1992 and $27.6 million in 1991. The 1993 growth
in net income represents an increase of 31.1% when compared to 1992 and 81.9%
when compared to 1991. On a per share basis, net income was $1.66 in 1993
compared to $1.30 in 1992 and $.94 in 1991. Earnings for 1993 increased
primarily because of substantial improvement in net interest income combined
with continued growth in noninterest income, effective management of
noninterest expenses and a lower provision for loan losses. For 1992 compared
to 1991, substantially higher net interest income was the primary factor for
the growth in earnings.
On September 15, 1993, Trustmark Corporation announced a three for one
stock split. The additional shares were issued on October 8, 1993 to
shareholders of record on September 30, 1993. As a result, the Corporation's
total number of shares outstanding increased to 31,172,907. All per share
information listed above and the shares issued to UniSouth stockholders have
been adjusted to reflect the effect of this stock split.
The return on average assets (ROA) for 1993 was 1.17% compared to .97% for
1992 and .74% for 1991. The return on average equity (ROE) was 15.37% for 1993
compared to 13.57% for 1992 and 10.67% in 1991. Both ROA and ROE have improved
because the pace of earnings growth has exceeded the growth of both assets and
equity.
ASSET/LIABILITY MANAGEMENT AND LIQUIDITY
A key objective of asset/liability management is to control interest rate
risk in order to provide stability in the net interest margin. The
Asset/Liability Committee monitors and adjusts the Corporation's exposure to
interest rates, within specific policy guidelines, based on its view of current
and expected market conditions. The primary tool utilized by this committee is
an earnings simulation model which can quantify variations in net interest
income in future periods under a variety of interest rate
<PAGE> 30
environments. Each month, the committee reviews the output of this model with
respect to the estimated impact of various interest rate scenarios on net
interest income and its compliance with policy guidelines.
Another tool used to monitor the Corporation's overall interest rate
sensitivity is a gap analysis. The table below represents the Corporation's 90
day and one year gap position as of December 31, 1993 ($ in thousands):
<TABLE>
<CAPTION>
Interest Sensitive Within
--------------------------
90 days One Year
----------- -----------
<S> <C> <C>
Total rate sensitive assets $1,009,506 $1,433,701
Total rate sensitive liabilities 1,885,175 2,297,956
----------- -----------
Net gap $ (875,669) $ (864,255)
=========== ===========
</TABLE>
The gap position shown above indicates little change in the Corporation's
interest sensitivity position from the 90 day to the one year category. Using
this analysis as a guide, the Corporation should continue to benefit from the
expected slow movement of interest rates during 1994. However, the Corporation
will continue to take the necessary precautions in order to protect itself
against rapidly changing interest rates.
The principal aim of liquidity management is to ensure that the
Corporation has the ability to meet the cash flow requirements of depositors
and borrowers while meeting its corporate cash needs. The Corporation has
historically funded its liquidity requirements with funds generated from
operations, including new deposits and proceeds from the repayments of loans
and maturing investments. In addition, the Corporation maintains a short-term
investment portfolio that consists primarily of overnight funds and short-term
U. S. Government agency securities in order to provide additional liquidity
needs, if necessary. The Corporation also maintains funding relationships with
other financial institutions as part of its liquidity management process.
EARNING ASSETS
An improving national economy and low interest rates on deposits drove
profits for the commercial banking industry to record heights during 1993.
Improvements in consumer confidence also boosted growth in loans to consumers;
however, loans to businesses were still declining. It is predicted that
lending to businesses will improve during 1994 with estimates for moderate
economic improvement and modest increases in interest rates.
Mississippi's economic indicators point toward increased economic growth
during 1994. The state unemployment rate for November dropped below 5% for the
first time in more than 14 years. This improvement is attributed to the state's
economic development efforts and increased consumer confidence. Employment
growth has been one of the major factors in the increase in consumer confidence
with the largest growth coming from the services industry, where 10,000 new
jobs are attributed to the gaming
<PAGE> 31
industry. The November 8, 1993 issue of U. S. NEWS AND WORLD REPORT ranked
Mississippi's economic growth as number one in the nation. Six variables were
used to determine overall economic growth: changes in income (ranked 5th in
the United States), employment growth (6th), unemployment decline (1st), home
prices (8th), business bankruptcies (3rd) and new business growth (4th). With
projected increases in gross state product, personal income growth and
employment during 1994, the Mississippi economy should continue to outpace the
rest of the nation.
The Corporation enhanced its profitability during 1993 by improving its
percentage of earning assets to total assets from 90.9% at the end of 1992 to
91.6% at December 31, 1993. The primary factors in this growth were increases
in the major earning asset categories of investment securities and loans. Loan
growth has been stimulated by the improving Mississippi economy, which, when
combined with the continued low interest rate environment, created a positive
atmosphere for borrowers. Investment growth has been generated by the
Corporation's decision to utilize its excess liquidity to maximize its return
through the purchase of investment securities instead of investments in the
overnight funds market.
Total loans grew by $178.1 million during 1993, an increase of 9.35%. The
loan balance at December 31, 1992 contained term federal funds sold, which are
classified as loans for reporting purposes, of $125 million. At the end of
1993, the Corporation had no term federal funds sold contracts classified as
loans. In addition, approximately $104.8 million in loans were purchased from
UniSouth and have been included in the December 31, 1993 balance. Excluding
the items referred to above, loan growth for 1993 would have exceeded $198
million.
Within the loan portfolio, substantial increases were seen in real estate
loans secured by one to four family residential properties, loans to
individuals and commercial and industrial loans. The lingering low interest
rate environment continued to provide a major boost to real estate lending as
evidenced by the 18.9% increase in loans secured by one to four family
residential properties. The Corporation has established itself in the field
of real estate lending by offering a superior mix of real estate products and
services offered through a growing number of delivery channels. At December
31, 1993, the Corporation's volume of residential mortgage loan servicing was
approximately $1.68 billion compared to $1.17 billion at the end of 1992. This
increase can be attributed to strong growth in loans purchased from the
correspondent market and loans originated within the Corporation. The
Corporation will continue to emphasize the growth of the mortgage servicing
portfolio as one of its primary providers of noninterest income growth.
The growth in loans to individuals has come predominantly from the area of
automobile loans. The Corporation's Indirect Lending business unit is the
leader in the Jackson metropolitan area in automobile financing. This success
can be attributed to the Corporation's competitive rates combined with its
responsiveness to consistent customer service. The Corporation will continue
to seek opportunities to expand this service while improving its productivity.
<PAGE> 32
Commercial and industrial loans have benefited from the improving economic
atmosphere within the state. This has generated better than projected growth
from both the services industry and real estate investors and developers.
Predictions of continued economic improvement on both the national and state
level during 1994 should improve future loan growth prospects for the
Corporation.
The Corporation's emphasis on credit quality has produced a healthy loan
portfolio and a conservative approach to potential loan losses. In addition,
Management has continued to stress that one of the primary components of
continued profitability is credit quality. In order to achieve and maintain
its credit quality, the Corporation made a major commitment during 1991 to
improve its credit administration systems and create a risk-related rating
system. This system has allowed for better identification of credits with
potential and defined problems, thus allowing for an earlier and more favorable
resolution of those problems. This approach to the early identification and
intervention of problem credits has allowed the Corporation to reduce its level
of nonperforming assets and net charge-offs during both 1992 and 1993. In
addition, exception tracking systems for policy compliance, financial
information, and collateral documentation were implemented during 1992 in order
to monitor the underwriting of credits, as well as the adequacy of supporting
loan documentation. These systems were all revised and refined during 1993 as
the Corporation continued its efforts to ensure that it has adequately
maintained effective systems and controls for identifying, monitoring and
addressing asset quality problems in an accurate and timely manner.
The allowance for loan losses is maintained at a level which Management
and the Board of Directors believe is adequate to absorb estimated losses
inherent in the loan portfolio, plus estimated losses associated with
off-balance sheet credit instruments such as letters of credit. The adequacy of
the allowance is reviewed on a quarterly basis by using the criteria specified
in revised Comptroller of the Currency Banking Circular 201 and recently issued
interagency guidelines addressing this area. Each review includes analyses of
historical loss experience, trends in portfolio volume and composition,
consideration of current economic conditions, estimated future losses in
significant criticized loans, changes in lending policies and procedures,
changes in the experience, ability and depth of lending management and staff
and other pertinent information. This review is then presented to the Credit
Policy Committee with subsequent review and approval by the Board of Directors.
Since the end of 1992, the allowance for loan losses has increased $13.2
million or 26.6% to equal $62.7 million at December 31, 1993. During 1993, the
Corporation felt it was prudent to continue to increase the allowance given the
uncertainty surrounding the economy and its commitment to sound, conservative
banking practices. The allowance currently approximates 3.0% of total loans
outstanding compared to 2.6% at December 31, 1992 and provides the Corporation
with an adequate reserve coverage of nonperforming loans. Because of the
imprecision inherent in most
<PAGE> 33
estimates of expected credit losses, Management will continue to take a prudent
approach in the evaluation of the allowance for loan losses. Please see Note 6
of the Notes to Consolidated Financial Statements for an analysis of the
changes in the allowance for loan losses.
While the allowance grew significantly during 1993, net charge-offs were
at their lowest level since 1989. Although this is partially attributable to
large recoveries on one credit which was charged off in 1992, it is also the
result of a lower volume of gross losses for the year. The following table
summarizes the Corporation's loan loss experience during the past two years ($
in thousands):
<TABLE>
<CAPTION>
Net Charge-Offs 1993 1992
- --------------- ------- -------
<S> <C> <C>
First quarter $ 986 $ 4,379
Second quarter 1,520 4,923
Third quarter 931 2,460
Fourth quarter 1,331 1,806
------- -------
Total net charge-offs $ 4,768 $13,568
------- -------
------- -------
</TABLE>
Because of the overall decline in net charge-offs during 1993, the
Corporation's net loan losses as a percentage of average loans decreased from
.73% at the end of 1992 to .24% at the end of 1993. The level of net
charge-offs for the Corporation remains well below that of banks within its
peer group. Because of the decline in nonperforming assets experienced during
1993, it is anticipated that the level of net charge-offs for 1994 will compare
favorably to those experienced by the Corporation in recent years.
A measure of asset quality in the financial institutions industry is the
level of nonperforming assets. Nonperforming assets include nonperforming
loans, consisting of nonaccrual and restructured loans, and other real estate.
See the table below for more details ($ in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1993 1992
------- -------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 9,784 $10,338
Restructured loans 0 2,552
------- -------
Nonperforming loans 9,784 12,890
Other real estate and covered transactions 3,961 6,040
In-substance foreclosures 0 514
------- -------
Other real estate 3,961 6,554
------- -------
Nonperforming assets 13,745 19,444
Loans past due 90 days or more and still accruing 1,217 1,872
------- -------
Total nonperforming assets and past due loans $14,962 $21,316
------- -------
------- -------
</TABLE>
<PAGE> 34
Asset quality of the Corporation is considered to be very good. This is
illustrated by the 29.8% decrease in the overall level of nonperforming assets
and past due loans since the end of 1992. The overall volume of classified
assets, which is comprised of classified loans and other real estate owned,
continues to decrease and is very favorable at this time. Nonperforming loans
have historically been well-controlled and continue to compare very favorably
to peer levels. As of December 31, 1993, the Corporation had no additional
loans, other than those identified above, that Management has serious doubts as
to the ability of such borrowers to comply with loan repayment terms.
As the table above indicates, the overall total of other real estate owned
decreased by 39.6% from the previous year-end and compares very favorably to
peer levels. Efforts were increased to dispose of foreclosed property in a
more expedient manner throughout the year. During a portion of 1993, other real
estate consisted of real estate acquired through foreclosure, covered
transactions and in-substance foreclosures. As a result of changes in the
regulatory guidance on impaired loans, real estate loans meeting in-substance
foreclosure criteria are no longer reported as other real estate unless the
Corporation has actually taken possession of the underlying collateral. In
addition, regulatory authorities revised their definition of covered
transactions which had the effect of eliminating all loans previously reported
by the Corporation as such. If covered transactions and in-substance
foreclosures had been eliminated from other real estate at the end of 1992, the
decrease for 1993 would have been 31.5%.
During 1993, the investment securities portfolio continued to provide the
Corporation with a quality investment alternative for available funds, a major
source of asset-based liquidity, an instrument to assist in the maintenance of
proper interest sensitivity in the balance sheet and a stable source of
interest income. Total growth in the investment securities portfolio during
1993 exceeded $263 million, an increase of over 17.2%. This growth has come
primarily from the purchase of U. S. Treasury securities and other U. S.
Government agency obligations in addition to mortgage-backed securities. During
1993, the Corporation's basic strategy was for maturing securities to be
reinvested into the investment securities portfolio. This strategy provided
the Corporation with an investment vehicle that ensured adequate liquidity and
a stable cash flow with negligible credit risk. However, with the interest
rate environment projected to be slightly higher or flat, during the second
quarter of 1993 the Corporation adopted a strategy to reduce its investment in
overnight funds and its short-term investment portfolio and to invest in
securities in the five year maturity zone. The Corporation's liquidity during
the short-term would be replenished by maturing investment securities. This
same strategy was also undertaken during the fourth quarter. These strategies
involved the purchase of $550 million of predominately U. S. Treasury and
mortgage-backed securities. The objective of these purchases is to enhance net
interest income without assuming undue interest rate risk. The latest
comparisons of the tax equivalent yield of the investment portfolio show the
Corporation remaining in the upper
<PAGE> 35
quartile when compared to its peer group. This has been accomplished while
maintaining the quality of the portfolio.
The short-term investment portfolio developed during 1992 provides the
Corporation with a valuable alternative to the overnight funds market.
Products included in the short-term portfolio are primarily U. S. Government
agency securities and reverse repurchase agreements. The reduction in the
short-term portfolio experienced during 1993 can be traced to the Corporation's
decision to purchase securities for the investment portfolio and to provide
funding for loan growth. However, the utilization of the short-term portfolio
did allow the Corporation to increase its income by approximately $1.09 million
when compared to alternative investments in the overnight funds market. The
short-term portfolio will continue to play a vital role in maintaining the
Corporation's liquidity and profitability.
Federal funds sold and securities purchased under reverse repurchase
agreements decreased by $76.2 million or 45.5% when compared to the end of
1992. This reduction is directly related to Management's decision to purchase
investment securities, given the low interest rate environment during 1993 and
the Corporation's satisfactory liquidity position. In addition, the overall
balance of federal funds sold at the end of 1992 was reduced by the
classification of $125 million in term federal funds sold as loans in
accordance with regulatory requirements. At December 31, 1993, the Corporation
had no term federal funds sold contracts. This will allow the Corporation the
opportunity to purchase other short- term investment products or provide
funding for loan growth.
At December 31, 1993, the Corporation had $84.3 million in securities held
for sale which consisted of U. S. Treasury and other U. S. Government agency
securities and obligations of states and political subdivisions. This compares
to December 31, 1992, when the Corporation had $103.2 million in securities
held for sale. The Corporation defines securities held for sale as securities
to be held for indefinite periods of time and which may not be held to maturity
or on a long-term basis. These securities would include those that the
Corporation intends to use as part of its asset/liability management strategy
or that may be sold in response to changes in interest rates, changes in
prepayment risk, or other similar factors. These securities are accounted for
at the lower of cost or fair value. For 1993, realized gains were $29 thousand
on securities held for sale while there were no realized losses. Gross
unrealized gains approximated $68 thousand while there were no gross unrealized
losses on these securities. The composition of securities held for sale is
analyzed in more detail in Note 4 of the Notes to Consolidated Financial
Statements.
Management determines the appropriate classification of securities at the
time of purchase. When the Corporation has the intent and ability at the time
of purchase to hold securities until maturity or on a long-term basis, they are
classified as investment securities and carried at amortized cost. For 1993,
realized gains on the sale of investment securities totaled $156 thousand and
realized losses totaled $67 thousand, resulting in a net realized gain of
approximately $89 thousand. These gains and losses have resulted from the call
of investment securities and have not
<PAGE> 36
resulted from Management's decision to sell investment securities that were not
classified as securities held for sale. In addition, the Corporation has sold
a portion of the investment portfolio purchased in the UniSouth acquisition in
order to maintain its current investment management policies and practices.
Gross unrealized gains approximated $47.0 million and gross unrealized losses
approximated $5.3 million at December 31, 1993. An analysis of the investment
securities portfolio is provided in Note 5 of the Notes to Consolidated
Financial Statements.
Trading account securities decreased by $2.4 million or 48.3% during 1993.
This decline resulted from trading account securities that had been sold but
not settled at December 31, 1992. The Corporation does not use the trading
account for speculative investment purposes.
During 1993, the Corporation continued to heavily market its investment
products and services through its dealer bank area and TFSI. During the year,
three new TFSI offices were opened with additional expansion planned in 1994.
TFSI has been well accepted by the market and is an important part of the
Corporation's strategy of building strong customer relationships and expanding
its opportunities for noninterest income growth.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Deposits provide the Corporation with its primary source of funds. Total
deposits at December 31, 1993 decreased by $7.7 million or .24% when compared
to December 31, 1992. Adjusting this total by deposits of $153.4 million
purchased in the UniSouth acquisition, total deposits for 1993 declined by
$161.1 million. This total can be separated into an increase in
noninterest-bearing deposits of $22.1 million and a decrease in
interest-bearing deposits of $183.2 million. The decline of interest-bearing
deposits has resulted from the continued low interest rate environment that has
caused depositors to seek alternative investment products. A large portion of
corporate and governmental customers have found an alternative deposit product
in securities sold under repurchase agreements resulting in an increase of over
$299 million or 64.8% during 1993. Similarly, personal depositors have
responded to the continued low interest rate environment by shifting their
deposits from short- and intermediate-term (60 day to two year maturity)
certificates of deposit to shorter and longer term savings products. Increases
were seen in savings and NOW accounts plus certificates of deposit with
maturities of three to five years during 1993. This would indicate that there
continues to be uncertainty among depositors about the expected duration of the
current interest rate environment. With economic forecasts for 1994 projecting
moderate growth and continued increases in employment, it is expected that the
Federal Reserve will begin to raise interest rates. However, the modest
inflation rate should moderate the rise. In order to ease the pressures on
deposit customers from the continued low interest rate environment, Management
has emphasized the retention and growth of its core deposit customer base by
offering a wide variety of competitively priced products and services while
continuing to give customer service the highest priority. The composition of
total deposits is
<PAGE> 37
analyzed in more detail in Note 9 of the Notes to Consolidated Financial
Statements.
Federal funds purchased decreased $9.1 million or 9.7% when compared to
December 31, 1992. The Corporation has continued to utilize federal funds
purchased from downstream correspondent banks as an inexpensive source of
overnight funds.
STOCKHOLDERS' EQUITY
The Corporation has always placed a great emphasis on maintaining its
strong capital base. The Corporation's Management and Board of Directors
continually evaluate business decisions that may have an impact on the level of
stockholders' equity. It is their goal that the Corporation maintain a "well
capitalized" equity position. Based on the capital levels defined by banking
regulators as part of the provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991, a "well-capitalized" institution is one
that has at least a 10% total risk-based capital ratio, a 6% Tier 1 risk-based
capital ratio and a 5% Tier 1 leverage ratio. The Corporation's solid capital
base is reflected in its regulatory capital ratios. The table below
illustrates these ratios at December 31, 1993 ($ in thousands):
<TABLE>
<CAPTION>
<S> <C>
Tier 1 Capital $346,772
Tier 2 Capital 29,138
--------
Total Qualifying Capital $375,910
--------
--------
Total Risk Weighted Assets $2,297,547
----------
----------
Tier 1/Risk Weighted Assets 15.09%
Tier 2/Risk Weighted Assets 1.27%
------
Total Qualifying Capital/Risk Weighted Assets 16.36%
-----
-----
Leverage Ratio 7.80%
----
----
</TABLE>
As shown in the table above, the Corporation's capital ratios surpass the
minimum requirements of 4% for the Tier 1 capital ratio, 8% for the total
risk-based capital ratio and 4% for the Tier 1 leverage ratio.
Stockholders' equity increased by $63.2 million, or 21.4% during 1993 with
approximately $24.6 million of this increase resulting from the Corporation's
issuance of 1,696,524 shares of its common stock to the shareholders of the
UniSouth Banking Corporation. Based on its 1993 dividend payout ratio of 24.1%,
the Corporation retained 75.9% of its earnings, generating an internal capital
growth rate of 11.7% compared to 9.8% during 1992. Dividends paid during 1993
were $.38 per share compared to $.36 paid during 1992. Dividends for 1994 are
projected to be $.40 per share based on the increase approved during the fourth
quarter of 1993 to $.10 per share per quarter. Book value for the
Corporation's common stock was $11.50 at December 31, 1993, compared to the
closing market price of $14.50. Both dividends and book value per share have
been adjusted for the three for one stock
<PAGE> 38
split that was effective for the Corporation's common stock on September 30,
1993.
NET INTEREST INCOME
Net interest income is an effective measurement of how well Management has
managed the Corporation's interest rate sensitive assets and liabilities. The
long-term objective of the Corporation is to manage those assets and
liabilities to provide the maximum amount of net interest income on a
consistent basis. The achievement of this objective is critical for success in
the banking industry. During 1993, the Corporation's net interest income
increased by $21.6 million or 13.5% when compared to 1992 and $46.2 million or
34.2% when compared to 1991. The growth of net interest income has been the
primary component of the Corporation's increased profitability during 1992 and
1993.
During 1993, the Corporation experienced growth in both of its major
components of earning assets, loans and investments. Overall, earning assets
experienced growth of 9.3% during 1993 compared to 6.1% for 1992. This growth
created a .7% increase in interest income during 1993 compared to a decline of
6.8% during 1992. Interest-bearing liabilities grew by 6.2% during 1993
compared to 4.9% in 1992. This growth was primarily centered in securities
sold under repurchase agreements which increased by 64.8% during 1993. At the
same time, interest-bearing deposits were declining by 3.6% as depositors
continued to seek alternative investment products. Consequently, interest
expense declined 15.3% during 1993 compared to 26.2% during 1992. The table
below illustrates the effect of the Corporation's strategies and actions on the
net interest margin expressed as a percentage of average earning assets:
<TABLE>
<CAPTION>
1993 1992 Change
----- ------ -------
<S> <C> <C> <C>
Yield on interest-earning assets-FTE 7.51% 8.22% (.71)%
Rate on interest-bearing liabilities 2.77% 3.59% (.82)%
----- ------ -------
Net interest margin-FTE 4.74% 4.63% .11 %
----- ------ -------
----- ------ -------
</TABLE>
The fully taxable equivalent (FTE) yield on tax exempt income has been computed
based on a 35% federal marginal tax rate for 1993 and 34% for 1992. While
interest rates declined in both yields earned and rates paid, the wider
interest spreads resulted in a greater impact on rates paid. This action
combined with more rapid growth in earning assets when compared to
interest-bearing liabilities generated a positive impact on net interest income
during 1993.
Given the projection for slow moving interest rates during 1994 and the
Corporation's projection of remaining negatively gapped, net interest income
should continue to be positively impacted. However, the Corporation will
continue to take the necessary precautions in order to protect itself against a
rapidly changing interest rate environment.
NONINTEREST INCOME
The Corporation stresses the importance of growth in noninterest income as
one of its key long-term strategies. The
<PAGE> 39
growth of noninterest income is an important component in the Corporation's
profitability given the intense competition for its services and the uncertain
regulatory environment. Noninterest income for 1993, excluding security gains,
increased 11.2% when compared to 1992 and 22.2% when compared to 1991.
Trustmark is one of the largest bank providers of asset management
services in Mississippi, with over $3.5 billion in assets under administration
at the end of 1993. This compares to $2.5 billion in assets under
administration at the end of 1992. This growth has stimulated an increase in
trust service income of 11.4% during 1993 compared to the 16.4% increase
experienced during 1992. Future asset growth is expected to come from the
further development of Trustmark's existing distribution network and a multi-
phase marketing effort.
Service charges on deposit accounts continued to be the largest source of
noninterest income during 1993. However, because of the sluggishness of
deposit growth experienced during 1993, service charge income increased by only
2.4% compared to the 4.0% increase experienced during 1992.
The two major contributors to the 20.7% increase in other account charges,
commissions and fees experienced during 1993 were fees generated by the
mortgage servicing area and the growth of TFSI. The mortgage servicing
portfolio grew by over 43% during 1993 and approximated $1.68 billion in
mortgages serviced as interest rates on mortgage loans dropped to their lowest
level in many years. Because of this increased volume, fees collected from
servicing mortgages increased by approximately $2.25 million or 58.6% when
compared to 1992. Continued growth of the mortgage servicing portfolio is
expected during 1994 as the Corporation seeks to increase its mortgage
correspondent and loan production network of offices and branches. Trustmark's
newest subsidiary, TFSI, began operations during the second quarter of 1992
and, therefore, has shown a significant increase in fees and commissions earned
during 1993. Fees generated by TFSI during 1993 increased by over 224% when
compared to 1992. The growth of fees generated by TFSI is expected to continue
during 1994 as it explores various strategies for the enhancement of its
delivery system and the marketing of its products.
The revenues from other income increased by 17.3% in 1993 when compared to
an increase of 11.7% in 1992, primarily as a result of a higher level of net
gains on the sale of loans and fixed assets.
NONINTEREST EXPENSE
Another long-term strategy of the Corporation is to continue to provide
quality service to its customers within the context of economic discipline.
One of the Corporation's methods for lowering its cost position is to continue
the automation and operations consolidation efforts that began during 1991.
During 1994, the Corporation will complete its conversion to an integrated
banking system which will provide better customer service through convenient
access to information and integration with related applications, plus the
introduction of new products and enhanced profitability analysis. The
Corporation's utilization of the newest technological advances in the financial
industry has allowed
<PAGE> 40
for improved customer service and enhanced efficiency. This enhanced efficiency
is measured by the improvement in the Corporation's efficiency ratio from 60.3%
for 1992 to 59.4% for 1993. Recent comparisons have shown that the
Corporation's percentage of overhead expenses to average assets is
substantially below that of its peer group.
Salaries and employee benefits continue to comprise the largest portion of
other expenses and have increased 10.4% during 1993 due to normal annual
compensation increases combined with an increase in contributions to both
employee benefit and incentive plans. The number of full-time equivalent
employees totaled 2,072 at December 31, 1993, including 117 gained from the
purchase of UniSouth. Excluding the UniSouth employees, the Corporation's
workforce totals 1,955 compared to 2,005 at December 31, 1992 and 1,967 at
December 31, 1991. The Corporation has been able to control the size of its
workforce through the increased automation of its operations in spite of its
increasing asset base.
The Corporation has controlled net occupancy and equipment expenses during
1993 while continuing to maintain and upgrade its property and equipment.
Expenses in these two categories showed a combined increase of $819 thousand
during 1993. This compares to an increase of $1.1 million during 1992.
Renovations to facilities purchased in the UniSouth acquisition will add to
projected expenses in these categories during 1994.
Services and fees expense was maintained at substantially the same level
as 1992. This is demonstrated by an increase of $38 thousand in 1993 compared
to $1.57 million during 1992. The increase during 1992 can be attributed to
increased expenses for consultant fees, advertising and software amortization.
Other real estate expenses increased by $120 thousand, or 5.3% during
1993. The Corporation's volume of other real estate declined by 39.6% during
1993 as a result of intensified sales efforts and the write-downs of these
properties to their current fair value. Increased valuation adjustments
slightly offset reductions in the level of expenses related to other real
estate during 1993.
FDIC insurance expense increased by 3.7% during 1993 compared to 9.1%
during 1992. This is the result of the Corporation's stable deposit base
combined with the stability of the assessment rate charged by the FDIC. The
Corporation's risk-related deposit insurance assessment rate has been
maintained throughout 1993 at the rate of 23 cents per $100 of domestic
deposits, the lowest assessment rate charged by the FDIC.
The amortization of intangible assets has increased 55.9% during 1993
primarily due to accelerated amortization resulting from increased prepayments
of mortgages serviced. In addition, increased amortization has resulted from
the core deposit intangible created by the purchase of UniSouth during 1993.
Other expenses increased $4.8 million, or 27.7% during 1993 primarily due
to increased expenses related to the purchase and sale of loans in the mortgage
servicing portfolio, operational losses and the accrual of interest on the
estimated settlement of tax issues with the IRS. During 1992, other expenses
increased by $3.4 million, or 24.4% due to increased expenses related to
mortgage servicing, charitable contributions, deferred compensation
<PAGE> 41
expenses and other taxes.
INCOME TAXES
In 1993, the Corporation's effective tax rate was 30.3% compared to 30.4%
in 1992 and 24.0% in 1991. The effective tax rates for 1993 and 1992 were
significantly higher than for 1991 due to the utilization of the remainder of
the Corporation's Alternative Minimum Tax Credit during that year. For a
reconciliation of the Corporation's effective tax rates, please refer to Note
11 of the Notes to Consolidated Financial Statements.
The Corporation adopted SFAS No. 109, "Accounting for Income Taxes," as of
January 1, 1993. SFAS No. 109 requires an asset and liability approach to
accounting for the effect of income taxes that result from a company's
activities during the current and preceding years. The cumulative effect of
this change in accounting principle was to increase net income by $1.5 million.
OTHER REGULATORY MATTERS
In 1993, the Corporation adopted SFAS No. 106, "Accounting for
Postretirement Benefits Other than Pensions." The effect of implementing this
statement was immaterial.
In May 1993, FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which becomes effective for the Corporation on
January 1, 1994. This statement addresses the accounting and reporting for
investments in debt and certain equity securities. Debt securities not
classified as trading account securities or investment securities expected to
be held to maturity and all equity securities will be classified as
available-for-sale securities and reported at fair value, with net unrealized
gains and losses reported, net of tax, as a separate component of stockholders'
equity. The Corporation has given considerable attention to the classification
of its securities portfolio pursuant to SFAS No. 115. Upon adoption of this
statement on January 1, 1994, the Corporation will classify all of its
securities held for sale and certain of its investment securities as
available-for-sale. At December 31, 1993, the carrying values and fair values
of securities expected to be classified as available- for-sale are
approximately $627 million and $646 million, respectively, which would result
in an unrecognized gain, net of tax, of approximately $12 million as a separate
component of stockholders' equity.
In June 1993, FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," that addresses how creditors should establish
allowances for credit losses on individual loans determined to be impaired.
This standard offers a definition of impairment and how the amount of
impairment is measured. SFAS No.114 applies to financial statements for fiscal
years beginning after December 15, 1994. The effect of the implementation of
this statement is not expected to be material.
PRINCIPAL OCCUPATION OF THE CORPORATION'S DIRECTORS AND
EXECUTIVE OFFICERS
This information is included elsewhere in this report in
<PAGE> 42
conjunction with listings of Directors and Officers.
SECURITIES AND EXCHANGE COMMISSION (SEC) FORM 10-K
A copy of the annual report on Form 10-K, as filed with the SEC, may be
obtained without charge by directing a written request to:
David R. Carter
Secretary & Treasurer
Trustmark Corporation
Post Office Box 291
Jackson, Mississippi 39205-0291
