<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, 1994
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. ( )
Based on the closing sales price of March 4, 1995, the aggregate market value
of the voting stock held by nonaffiliates of the Registrant was $392,710,863.
As of March 4, 1995, there were issued and outstanding 34,910,683 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 1994 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated February 15, 1995 (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
1994 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, 1994, the
Corporation had total consolidated assets of $4.8 billion and total
consolidated equity of $421 million. The Corporation's primary business
activities are generated through its wholly-owned subsidiary, Trustmark
National Bank (Trustmark). The Corporation became the sole owner of Trustmark
on October 7, 1994 when it exchanged 137,514 shares of the Corporation's common
stock for the minority shareholders' interest. Trustmark accounts for
substantially all of the 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, 1994, of approximately $4.8 billion and deposits of $3.4
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 Corporation and First National Financial Corporation
(FNFC) of Vicksburg, Mississippi. This merger was consummated after the close
of business on October 7, 1994, and has been accounted for as a pooling of
interests. The stockholders of FNFC received 3,600,262 shares of Trustmark
Corporation stock and approximately $1,105,000 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 156 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, Trustmark successfully introduced the
Trustmark Express Check debit card in 1994 which allows customers to access
their checking or savings account through any merchant that accepts MasterCard
and at any Trustmark Express, Gulfnet or Cirrus automated teller machine.
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
<PAGE> 4
subsidiary. Full-service brokerage was added as a service in 1994, and plans
are being made for expansion of offices in Trustmark branch locations.
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 own real estate investments. Today, F. S.
Corporation and First Building Corporation are dormant corporations and are
not significant subsidiaries.
As of January 31, 1995, the Corporation and its subsidiaries employed 2,206
full-time equivalent 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
<PAGE> 5
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 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 made 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, 63, 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.
Harry M. Walker, 44, Secretary-Treasurer of Trustmark
Corporation since January 1995; Executive Vice President,
Trustmark National Bank from May 1987 to March 1992; since
March 1992, President, Trustmark National Bank.
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 at year end, 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>
DECEMBER 31,
----------------------------------------------------------------
1994 1993
------------------------------ -----------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $156,650 $6,188 3.95% $162,375 $5,079 3.13%
Trading securities 964 68 7.05% 1,445 111 7.68%
Securities available for sale 628,073 40,599 6.46% 176,359 7,914 4.49%
Securities held to maturity:
U.S. Treasury and U.S. Government agencies 1,148,516 67,360 5.86% 1,575,415 109,557 6.95%
Obligations of states and political subdivisions 173,238 14,396 8.31% 136,380 13,085 9.59%
Other securities 4,433 372 8.39% 24,698 1,598 6.47%
Loans, net of unearned income 2,246,350 191,739 8.54% 2,108,314 178,872 8.48%
---------- -------- ---------- --------
Total interest-earning assets 4,358,224 320,722 7.36% 4,184,986 316,216 7.56%
Cash and due from banks 267,107 251,115
Other assets 224,336 202,789
Allowance for loan losses (64,958) (58,221)
---------- ----------
TOTAL ASSETS $4,784,709 $4,580,669
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $1,139,553 28,216 2.48% $1,151,466 28,244 2.45%
Savings deposits 253,968 6,012 2.37% 234,848 5,807 2.47%
Time deposits 1,349,727 56,926 4.22% 1,393,569 60,657 4.35%
Federal funds purchased and securities sold
under repurchase agreements 873,480 33,136 3.79% 762,909 22,062 2.89%
---------- -------- ---------- --------
Total interest-bearing liabilities 3,616,728 124,290 3.44% 3,542,792 116,770 3.30%
-------- --------
Noninterest-bearing demand deposits 695,289 622,783
Accrued expenses and other liabilities 62,876 59,911
Stockholders' equity 409,816 355,183
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,784,709 $4,580,669
========== ==========
NET INTEREST MARGIN 196,432 4.51% 199,446 4.77%
Less tax equivalent adjustments:
Investments 3,634 4,217
Loans 1,639 1,392
-------- --------
NET INTEREST MARGIN PER ANNUAL REPORT $191,159 $193,837
======== ========
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1992
-------------------------------
AVERAGE YIELD/
BALANCE INTEREST RATE
---------- -------- --------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $172,215 $6,862 3.98%
Trading securities 1,372 90 6.56%
Securities available for sale 27,506 956 3.48%
Securities held to maturity:
U.S. Treasury and U.S. Government agencies 1,433,333 111,906 7.81%
Obligations of states and political subdivisions 156,771 16,083 10.26%
Other securities 31,437 1,657 5.27%
Loans, net of unearned income 2,008,855 179,582 8.94%
---------- --------
Total interest-earning assets 3,831,489 317,136 8.28%
Cash and due from banks 233,234
Other assets 185,806
Allowance for loan losses (46,360)
----------
TOTAL ASSETS $4,204,169
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $1,072,145 34,019 3.17%
Savings deposits 207,149 6,556 3.16%
Time deposits 1,571,772 81,736 5.20%
Federal funds purchased and securities sold
under repurchase agreements 454,128 16,058 3.54%
---------- --------
Total interest-bearing liabilities 3,305,194 138,369 4.19%
--------
Noninterest-bearing demand deposits 542,823
Accrued expenses and other liabilities 47,491
Stockholders' equity 308,661
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,204,169
==========
NET INTEREST MARGIN 178,767 4.67%
Less tax equivalent adjustments:
Investments 5,111
Loans 1,399
--------
NET INTEREST MARGIN PER ANNUAL REPORT $172,257
========
</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 1994 and 1993 and 34% for 1992. Certain reclassifications
have been made to the 1993 and 1992 statements to conform to the 1994 method of
presentation.
<PAGE> 8
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>
1994 COMPARED TO 1993 1993 COMPARED TO 1992
INCREASE (DECREASE) DUE TO: INCREASE (DECREASE) DUE TO:
------------------------------ ----------------------------
YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
------- -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Federal funds sold and securities purchased
under reverse repurchase agreements ($184) $1,293 $1,109 ($377) ($1,406) ($1,783)
Trading securities (35) (8) (43) 5 16 21
Securities available for sale 27,905 4,780 32,685 5,390 1,568 6,958
Securities held to maturity:
U.S. Treasury and U.S. Government agencies (26,727) (15,470) (42,197) 10,567 (12,916) (2,349)
Obligations of states and political subdivisions 3,215 (1,904) 1,311 (1,996) (1,002) (2,998)
Other securities (1,597) 371 (1,226) (394) 335 (59)
Loans, net of unearned income 11,612 1,255 12,867 8,715 (9,425) (710)
------- -------- ------- ------- ------ -------
Total interest-earning assets 14,189 (9,683) 4,506 21,910 (22,830) (920)
INTEREST PAID ON:
Interest-bearing demand deposits (329) 301 (28) 2,374 (8,149) (5,775)
Savings deposits 451 (246) 205 801 (1,550) (749)
Time deposits (1,913) (1,818) (3,731) (8,633) (12,446) (21,079)
Federal funds purchased and securities sold
under repurchase agreements 3,517 7,557 11,074 9,376 (3,372) 6,004
------- -------- ------- ------- ------ -------
Total interest-bearing liabilities 1,726 5,794 7,520 3,918 (25,517) (21,599)
------- -------- ------- ------- ------ -------
CHANGE IN NET INTEREST INCOME ON A
TAX EQUIVALENT BASIS $12,463 ($15,477) ($3,014) $17,992 $2,687 $20,679
======= ======== ======= ======= ====== =======
</TABLE>
The change in interest due to both volume and yield/rate has been
allocated to change due to volume and change due to yield/rate in proportion to
the absolute value of the change in each. Tax-exempt income has been adjusted
to a tax equivalent basis using a tax rate of 35% for 1994 and 1993 and 34% for
1992. The balances of nonaccrual loans and related income recognized have been
included for purposes of these computations.
<PAGE> 9
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 3 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY
The table below indicates amortized costs of securities available for sale and
held to maturity by type at year-end for each of the last three years ($ in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury and U. S. Government agencies $ 439,690 $ 148,737 $ 89,397
Obligations of states and political subdivisions 8,420 13,805
Equity securities 12,909
---------- ---------- ----------
Total securities available for sale $ 452,599 $ 157,157 $ 103,202
========== ========== ==========
SECURITIES HELD TO MATURITY
U. S. Treasury and U. S. Government agencies $1,226,913 $1,650,040 $1,463,220
Obligations of states and political subdivisions 192,321 158,193 132,765
Other securities 3,426 3,207 5,864
---------- ---------- ----------
Total debt securities 1,422,660 1,811,440 1,601,849
Equity securities 11,969 13,584
---------- ---------- ----------
Total securities held to maturity $1,422,660 $1,823,409 $1,615,433
========== ========== ==========
</TABLE>
<PAGE> 10
TABLE 4 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND
SECURITIES HELD TO MATURITY
The following table details the maturities of securities available for sale and
held to maturity using amortized cost at December 31, 1994 and the weighted
average yield for each range of maturities (Tax Equivalent Basis - $ in
thousands):
<TABLE>
<CAPTION>
MATURING
----------------------------------------------------------------------
AFTER ONE, AFTER FIVE,
WITHIN BUT WITHIN BUT WITHIN
ONE YEAR YIELD FIVE YEARS YIELD TEN YEARS YIELD
------- ------- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury and U. S.
Government agencies $63,123 4.73% $312,166 5.78% $ 14,959 7.66%
======= ======== ========
Equity securities
Total securities available for sale
SECURITIES HELD TO MATURITY
U. S. Treasury and U. S.
Government agencies $12,423 5.94% $315,451 6.34% $134,393 6.78%
Obligations of states and
political subdivisions 18,616 8.19% 56,534 7.73% 66,316 7.63%
Other securities 3,277 8.38%
------- -------- --------
Total securities held to maturity $31,039 7.29% $371,985 6.55% $203,986 7.08%
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
MATURING
--------------------------------
AFTER
TEN YEARS YIELD TOTAL
--------- ----- ----------
<S> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury and U. S.
Government agencies $ 49,442 7.27% $439,690
Equity securities ======== 12,909
--------
Total securities available for sale $452,599
========
SECURITIES HELD TO MATURITY
U. S. Treasury and U. S.
Government agencies $764,646 6.48% $1,226,913
Obligations of states and
political subdivisions 50,855 9.43% 192,321
Other securities 149 8.28% 3,426
-------- ----------
Total securities held to maturity $815,650 6.66% $1,422,660
======== ==========
</TABLE>
Included in the above maturity schedule are mortgage related securities
totaling $977,518,000 which have contractual maturities as follow: Within One
Year - $924,000; After One, But Within Five Years - $17,437,000; After Five,
But Within Ten Years - $144,920,000; After Ten Years - $814,237,000. 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 4.18 years.
As of December 31, 1994 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 $104,702,000
and an approximate fair value of $102,336,000 were held on December 31, 1994.
Included in the aforementioned State of Mississippi holdings are bonds with an
aggregate carrying value of $24,786,000 and an approximate fair value of
$24,891,000 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
<PAGE> 11
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the end of
each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real estate loans:
Construction and land development $ 123,364 $ 102,873 $ 86,164 $ 92,189 $ 99,830
Secured by 1-4 family residential properties 504,078 569,411 485,378 436,540 405,730
Secured by nonfarm, nonresidential properties 345,130 340,058 308,755 325,029 352,358
Other real estate loans 63,169 52,295 50,550 39,935 37,248
Term federal funds sold 125,000 120,000
Loans to finance agricultural production 34,910 35,490 21,213 18,887 20,435
Commercial and industrial 594,836 531,054 487,322 505,370 552,379
Loans to individuals for personal expenditures 606,444 529,907 413,457 418,215 452,031
Obligations of states and political subdivisions 50,033 38,407 41,320 46,675 55,282
Loans for purchasing or carrying securities 1,840 3,995 6,490 6,549 6,455
Lease financing receivables 3,871 4,427 3,837 2,470 3,428
Other loans 19,890 23,101 30,014 34,108 16,247
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $2,347,565 $2,231,018 $2,059,500 $2,045,967 $2,001,423
========== ========== ========== ========== ==========
</TABLE>
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories outstanding as
of December 31, 1994, which, based on the remaining scheduled repayments of
principal, are due in the periods indicated ($ 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 $ 95,482 $ 27,882 $ 123,364
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 99,339 204,498 $104,462 408,299
Commercial and industrial 349,629 196,215 48,992 594,836
Other loans (excluding loans to individuals) 50,415 35,590 24,539 110,544
-------- -------- -------- ----------
Total $594,865 $464,185 $177,993 $1,237,043
======== ======== ======== ==========
</TABLE>
The following table shows all loans due after one year classified according to
their sensitivity to changes in interest rates ($ 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 $266,395 $ 75,361 $341,756
Floating interest rates 197,790 102,632 300,422
-------- -------- --------
Total $464,185 $177,993 $642,178
======== ======== ========
</TABLE>
<PAGE> 12
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Corporation's nonperforming assets and past due loans
at the end of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $12,817 $13,730 $14,008 $20,023 $20,227
Restructured loans 2,552 1,373
------- ------- ------- ------- -------
Nonperforming loans 12,817 13,730 16,560 21,396 20,227
Other real estate owned 3,723 5,709 9,711 16,670 21,896
------- ------- ------- ------- -------
Nonperforming assets 16,540 19,439 26,271 38,066 42,123
Accruing loans past due 90 days or more 2,252 1,816 2,396 3,133 4,964
------- ------- ------- ------- -------
Total nonperforming assets and past due loans $18,792 $21,255 $28,667 $41,199 $47,087
======= ======= ======= ======= =======
</TABLE>
Interest which would have been accrued on nonaccrual and restructured
loans if they had been in compliance with their original terms is immaterial.
At December 31, 1994 the Corporation had no loan concentrations greater
than ten percent of total loans except as shown in Table 5.
At December 31, 1994 there were no interest-earning assets that would be
required to be disclosed if such assets were loans.
It is the Corporation's policy that interest will not be accrued on any
loan for which payment in full of interest or principal is not expected, on any
loan which is seriously delinquent unless the obligation is both well secured
and in the process of collection, or on any loan that is maintained on a cash
basis due to deterioration in the financial condition of the borrower.
Management considers a debt to be "well secured" if it is secured by collateral
in the form of liens on or pledges of real or personal property that have a
realizable value sufficient to discharge the debt in full or by the guaranty of
a financially responsible party. A debt is considered to be "in process of
collection" if, based on a probable specific event, it is expected that the
loan will be repaid or brought current. At December 31, 1994, the Corporation
has no loans about which Management has serious doubts as to their
collectibility other than those disclosed above.
<PAGE> 13
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Corporation's loan loss experience for each of
the last five years ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Amount of loan loss reserve at beginning of period $65,014 $51,871 $41,542 $32,456 $33,929
Loans charged off:
Real estate loans (1,034) (2,451) (6,728) (7,855) (9,780)
Loans to finance agricultural production (21) (178) (131) (80) (2)
Commercial and industrial (979) (4,278) (7,698) (6,778) (3,740)
Loans to individuals for personal expenditures (4,780) (4,496) (5,499) (5,631) (4,601)
Lease financing receivables
All other loans (267) (162) (120) (272) (1,423)
------- ------- ------- ------- -------
Total charge-offs (7,081) (11,565) (20,176) (20,616) (19,546)
Recoveries on loans previously charged off:
Real estate loans 732 590 890 787 194
Loans to finance agricultural production 8 11 13
Commercial and industrial 581 2,796 1,221 401 734
Loans to individuals for personal expenditures 2,703 2,226 1,495 1,222 812
Lease financing receivables
All other loans 271 178 151 115 72
------- ------- ------- ------- -------
Total recoveries 4,295 5,790 3,768 2,525 1,825
------- ------- ------- ------- -------
Net charge-offs (2,786) (5,775) (16,408) (18,091) (17,721)
Additions to allowance charged to operating expense 2,786 18,596 26,737 27,177 16,248
Other additions to loan loss reserve 322
------- ------- ------- ------- -------
Amount of loan loss reserve at end of period $65,014 $65,014 $51,871 $41,542 $32,456
======= ======= ======= ======= =======
Percentage of net charge-offs during period to average
loans outstanding during the period 0.12% 0.27% 0.82% 0.93% 0.90%
======= ======= ======= ======= =======
</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 collection 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, as well as additional guidance provided by
regulatory authorities. Each review includes analyses of historical loss
experience, trends in portfolio volume and composition and consideration of
current economic conditions. Once this information is analyzed, it is used as
the basis for allocations for significant credits that are individually
analyzed and for pools of other problem credits, homogeneous uncriticized
loans, credits by industry or concentration, and other off-balance sheet
commitments to lend. During 1994, the provision for loan losses equalled net
charge-offs. Management considered it prudent to maintain the allowance for
loan losses at $65.014 million at December 31, 1994 in light of recent
improvements in net charge-offs and nonperforming assets.
<PAGE> 14
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of the Corporation's
allowance for loan losses at December 31, 1994. These allocations were
determined by internal formulas based upon Management's analyses of the various
types of risk associated with the Corporation's loan portfolio. A discussion
of Management's methodology for performing these analyses follows the table ($
in thousands):
<TABLE>
<S> <C>
Allocation for pools of
risk-rated loans $ 22,986
Additional allocation for
risk-rated loans 2,522
Allocation for selected
industries 1,030
General allocation for
all other loans 8,842
Allocation for available lines
of credit and letters of credit 2,194
Discretionary 27,440
--------
Total $ 65,014
========
</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 as well as guidance provided in the Interagency Policy Statement.
Loss percentages were uniformly applied to pools of risk-rated loans within the
commercial 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-rated 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 residential 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
1994, 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. Arbitrary percentages, which were
the same as those applied to the funded portions of the commercial and retail
loan portfolios, were applied to cover any potential losses in these
off-balance sheet categories.
The remaining $27,440,000 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. Because of the imprecision
inherent in most estimates of expected credit losses, Management will continue
to take a prudent, yet conservative approach in the evaluation of the allowance
for loan losses.
<PAGE> 15
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000 or
more at December 31, 1994 ($ in thousands):
<TABLE>
<CAPTION>
CERTIFICATES OTHER TIME
OF DEPOSIT DEPOSITS
---------- --------
<S> <C> <C>
3 months or less $151,495
Over 3 months through 6 months 53,036
Over 6 months through 12 months 40,568
Over 12 months 83,226
-------- -------
Total $328,325 $ 0
======== =======
</TABLE>
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Return on average assets 1.15% 1.14% 0.97%
Return on average equity 13.42% 14.71% 13.21%
Dividend payout ratio 25.95% 23.87% 27.64%
Equity to assets ratio 8.57% 7.75% 7.34%
</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>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Federal funds purchased and securities
sold under repurchase agreements:
Amount outstanding at end of period $851,038 $842,733 $555,162
Weighted average interest rate at end of period 5.38% 2.92% 3.07%
Maximum amount outstanding at any
month-end during each period $997,525 $911,888 $555,162
Average amount outstanding during each period $873,480 $762,909 $454,128
Weighted average interest rate during each period 3.79% 2.89% 3.54%
</TABLE>
<PAGE> 16
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. Trustmark operates 98 full-service and 27
limited-service branches. In addition, the Bank's ATM Network includes 68 ATMs
at on-premise locations with 42 located at off-premise sites. Trustmark leases
35 of the 156 total locations with the remainder being owned.
ITEM 3. LEGAL PROCEEDINGS
In January 1995, a judgment was rendered in a Mississippi circuit court
against the Corporation's subsidiary, Trustmark National Bank, in a case
related to the placement of collateral protection insurance ("CPI") by
Trustmark on a particular loan. The judgment awarded $500 thousand in actual
damages and $38 million in punitive damages to the plaintiffs. Several other
suits relating to CPI have been filed against Trustmark and are pending at
various stages. Management of the Corporation is vigorously pursuing the appeal
of the judgment mentioned above and the defense of the other pending suits.
While the ultimate outcome of any litigation is uncertain, Management believes,
based on the advice of legal counsel, that the judgment referred to above will
be reversed or substantially reduced and that the impact of this matter, the
other CPI related suits or any additional claims related to CPI will not be
material to the results of operations or financial position of the Corporation.
Trustmark is involved in various other legal matters and claims which are
being defended and handled in the ordinary course of business. None of these
other matters is expected, in the opinion of Management, to have a material
adverse effect upon the financial position or results of operations of the
Corporation.
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 1994.
<PAGE> 17
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, 1995 there were approximately 5,300 shareholders of
record of the Corporation's common stock. Other information required by this
item can be found in Note 13, "Stockholders' Equity," (page 32) and the table
captioned "Principal Markets and Prices of the Corporation's Stock" (page 34)
included in the Registrant's 1994 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" (page 33) included in the Registrant's 1994 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"
(pages 35-40) included in the Registrant's 1994 Annual Report to Shareholders
and is incorporated herein by reference.
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
1994 Annual Report to Shareholders (pages 19-40) and are incorporated herein by
reference. The table captioned "Summary of Quarterly Results of Operations"
(page 34) is also included in the Registrant's 1994 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, 1994.
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 VIII, "Other
<PAGE> 18
Information Concerning Directors," contained in Trustmark Corporation's Proxy
Statement dated February 15, 1995 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 VI,
"Compensation of Executive Officers and Directors," and Section VIII, "Other
Information Concerning Directors," contained in Trustmark Corporation's Proxy
Statement dated February 15, 1995 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 IV, "Voting Securities and Principal Holders
Thereof," and Section V, "Ownership of Equity Securities by Management,"
contained in Trustmark Corporation's Proxy Statement dated February 15, 1995
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 VII, "Transactions with Management," contained in Trustmark
Corporation's Proxy Statement dated February 15, 1995 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 LLP, independent auditors, and the following
consolidated financial statements of Trustmark Corporation and Subsidiaries are
included in the Registrant's 1994 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, 1994 and 1993
Consolidated Statements of Income for the
Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1994, 1993 and 1992
<PAGE> 19
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1994, 1993
and 1992
Notes to Consolidated Financial Statements
(Notes 1 through 14)
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
Report on Form 8-K filed on October 21, 1994 reporting the merger of First
National Financial Corporation of Vicksburg, Mississippi with Trustmark
Corporation.
<PAGE> 20
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/ HARRY M. WALKER
------------------ --------------------
Frank R. Day Harry M. Walker
Chairman of the Board, Secretary-Treasurer
President and Chief
Executive Officer
DATE: March 14, 1995 DATE: March 14, 1995
<PAGE> 21
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 14, 1995 BY: /s/ J. Kelly Allgood
---------------------------------
J. Kelly Allgood, Director
DATE: March 14, 1995 BY: /s/ Reuben V. Anderson
---------------------------------
Reuben V. Anderson, Director
DATE: March 14, 1995 BY: /s/ John L. Black, Jr.
---------------------------------
John L. Black, Jr., Director
DATE: March 14, 1995 BY: /s/ Harry H. Bush
---------------------------------
Harry H. Bush, Director
DATE: March 14, 1995 BY: /s/ Robert P. Cooke III
---------------------------------
Robert P. Cooke III, Director
DATE: March 14, 1995 BY: /s/ William C. Deviney, Jr.
---------------------------------
William C. Deviney, Jr., Director
DATE: March 14, 1995 BY: /s/ D. G. Fountain, Jr.
---------------------------------
D. G. Fountain, Jr., Director
DATE: March 14, 1995 BY: /s/ C. Gerald Garnett
---------------------------------
C. Gerald Garnett, Director
DATE: March 14, 1995 BY: /s/ Matthew L. Holleman III
---------------------------------
Matthew L. Holleman III, Director
DATE: March 14, 1995 BY: /s/ Fred A. Jones
---------------------------------
Fred A. Jones, Director
DATE: March 14, 1995 BY: /s/ T. H. Kendall III
---------------------------------
T. H. Kendall III, Director
<PAGE> 22
DATE: March 14, 1995 BY:
---------------------------------
Larry L. Lambiotte, Director
DATE: March 14, 1995 BY: /s/ Robert V. Massengill
---------------------------------
Robert V. Massengill, Director
DATE: March 14, 1995 BY: /s/ Donald E. Meiners
---------------------------------
Donald E. Meiners, Director
DATE: March 14, 1995 BY: /s/ William Neville III
---------------------------------
William Neville III, Director
DATE: March 14, 1995 BY: /s/ Richard H. Puckett
---------------------------------
Richard H. Puckett, Director
DATE: March 14, 1995 BY: /s/ Charles W. Renfrow
---------------------------------
Charles W. Renfrow, Director
DATE: March 14, 1995 BY: /s/ Clyda S. Rent
---------------------------------
Clyda S. Rent, Director
DATE: March 14, 1995 BY: /s/ William Thomas Shows
---------------------------------
William Thomas Shows, Director
DATE: March 14, 1995 BY: /s/ Harry M. Walker
---------------------------------
Harry M. Walker, Director
DATE: March 14, 1995 BY: /s/ LeRoy G. Walker, Jr.
---------------------------------
LeRoy G. Walker, Jr., Director
DATE: March 14, 1995 BY: /s/ Paul H. Watson, Jr.
---------------------------------
Paul H. Watson, Jr., Director
DATE: March 14, 1995 BY: /s/ John C. Wheeless, Jr.
---------------------------------
John C. Wheeless, Jr., Director
DATE: March 14, 1995 BY: /s/ Allen Wood, Jr.
---------------------------------
Allen Wood, Jr., Director
<PAGE> 23
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.
3-c Articles of Incorporation, as amended. Filed as
Exhibit 3-c to the Corporation's Form 10-K Annual Report
for the year ended December 31, 1994.
10-a Deferred Compensation Plan for Directors of Trustmark
Corporation, as amended. 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. Filed as Exhibit 10-b to the
Corporation's Form 10-K Annual Report for the year
ended December 31, 1993.
10-c Deferred Compensation Plan for Directors of First
National Financial Corporation, acquired October 7, 1994.
Filed as Exhibit 10-c to the Corporation's Form 10-K
Annual Report for the year ended December 31, 1994.
10-d Life Insurance Plan for Executive Officers of First
National Financial Corporation, acquired October 7, 1994.
Filed as Exhibit 10-d to the Corporation's Form 10-K
Annual Report for the year ended December 31, 1994.
13 Only those portions of the Registrant's 1994 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.
27 Financial Data Schedule.
All other exhibits are omitted as they are inapplicable or not required by
the related instructions.
<PAGE> 1
EXHIBIT 3-C
STATE OF MISSISSIPPI
OFFICE OF SECRETARY OF STATE
JACKSON
CERTIFICATE OF INCORPORATION
OF
FIRST CAPITAL CORP.
The undersigned, as Secretary of State of the State of Mississippi
hereby certifies that duplicate originals of Articles of Incorporation for the
above named corporation duly signed and verified pursuant to the provisions of
the Mississippi Business Corporation Act, have been received in this office and
are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue
of the authority vested in him by law, hereby issues this CERTIFICATE OF
INCORPORATION, and attaches hereto a duplicate original of the Articles of
Incorporation.
(SEAL) Given under my hand and Seal of Office
this the 5th day of August 1968.
/s/ HEBER LADNER
SECRETARY OF STATE
<PAGE> 2
ARTICLES OF INCORPORATION
OF
FIRST CAPITAL CORP.
The undersigned natural persons of the age of twenty-one (21) years
or more, acting as incorporators of a corporation under the Mississippi
Business Corporation Act, hereby adopt the following Articles of Incorporation
for such corporation:
FIRST: The name of the Corporation is FIRST CAPITAL CORP.
SECOND: The period of its duration is ninety-nine (99) years.
THIRD: The specific purposes for which the corporation is organized
stated in general terms are:
(1) To receive and hold the common stock and other securities of
a commercial bank and other financial institutions and business
interests.
(2) To engage in acts and activities which directly or
indirectly relate to or complement the business of banking or other
financial institutions and business interests.
(3) To engage in other investment activities and in the
furnishing of goods and services to financial, trade and commercial
activities.
(4) To engage in any and all types of business activity.
(5) To do all things necessary, convenient or desirable for the
accomplishment of any of the purposes or the attainment of any of the
objectives herein set forth and to do all things incidental thereto
which are not prohibited by law.
<PAGE> 3
FOURTH: The aggregate number of shares which the corporation shall
have authority to issue is five million (5,000,000) having a par value of Five
and No/100 ($5.00) each.
FIFTH: The corporation will not commence business until
consideration of the value of at least One Thousand and No/100 Dollars
($1,000.00) has been received for the issuance of shares.
SIXTH: Shareholders shall have no preemptive right to acquire
additional or treasury shares of the corporation.
SEVENTH: The post office address of the corporation's initial
registered office is 248 East Capital Street, Jackson, Mississippi, and the
name of its initial registered agent at such address is John P. Maloney.
EIGHTH: The number of directors constituting the initial board of
directors of the corporation is (3). Subsequently the corporation shall have
the number of directors (but not less than three) as may be designated in its
bylaws, any additional directors to be elected at an annual or special meeting
of shareholders called for that purpose. The names and addresses of the
persons who are to serve as initial directors until the first annual meeting of
shareholders or until their successors are elected and shall qualify are:
<TABLE>
<CAPTION>
Name Street and Post Office Address
---- ------------------------------
<S> <C>
Robert M. Hearin 248 East Capitol Street
Jackson, Mississippi
R. B. Lampton 248 East Capitol Street
Jackson, Mississippi
Edmund L. Brunini 248 East Capitol Street
Jackson, Mississippi
</TABLE>
-2-
<PAGE> 4
NINTH: The name and post office address of each incorporator is:
<TABLE>
<CAPTION>
Name Street and Post Office Address
---- ------------------------------
<S> <C>
Robert M. Hearin 248 East Capitol Street
Jackson, Mississippi
John B. Tullos 248 East Capitol Street
Jackson, Mississippi
</TABLE>
DATED this 5th day of August, 1968.
/s/ ROBERT M. HEARIN
ROBERT M. HEARIN
/s/ JOHN B. TULLOS
JOHN B. TULLOS
INCORPORATORS
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named ROBERT M. HEARIN and JOHN B.
TULLOS, incorporators of the corporation known as FIRST CAPITAL CORP. who
acknowledged that they signed and executed the above and foregoing articles of
incorporation as their act and deed on the day and year therein mentioned.
GIVEN UNDER MY HAND AND OFFICIAL SEAL, this the 5th day of August,
1968.
/s/ DAISY S. BLACKWELL
NOTARY PUBLIC
My Commission Expires: Oct 1, 1968
-3-
<PAGE> 5
STATE OF MISSISSIPPI
OFFICE OF
SECRETARY OF STATE
JACKSON
---------
CERTIFICATE
I, HEBER LADNER, Secretary of State of the State of Mississippi, and
as such, the legal custodian of the corporate records, required by the laws of
Mississippi, to be filed in my office, do hereby certify as follows:
THAT APPLICATION FOR RESERVATION OF CORPORATE NAME "FIRST CAPITAL CORP." DATED
JULY 16, 1968, WAS FILED IN THIS OFFICE JULY 17, 1968.
THAT SAID NAME IS RESERVED FROM JULY 17, 1968, FOR A PERIOD OF ONE HUNDRED
TWENTY (120) DAYS.
Given under my hand and seal of office,
this the 17th day of July 1968
By /s/ HEBER LADNER
SECRETARY OF STATE
<PAGE> 6
(TO BE EXECUTED IN DUPLICATE)
APPLICATION FOR RESERVATION OF CORPORATE NAME
TO THE SECRETARY OF STATE
OF THE STATE OF MISSISSIPPI
Pursuant to the provisions of the Mississippi Business Corporation
Act, the undersigned hereby applies for reservation of the following corporate
name for a period of one hundred twenty days:
FIRST CAPITAL CORP.
Dated July 16, 1968
/s/ JOHN P. MALONEY
John P. Maloney
Applicant
P.O. Box 291, Jackson, Mississippi
By _____________________________________
Its ____________________________________
<PAGE> 7
STATEMENT OF
CANCELLATION OF REACQUIRED SHARES
(OTHER THAN REDEEMABLE SHARES)
OF
FIRST CAPITAL CORP.
TO THE SECRETARY OF STATE
OF THE STATE OF MISSISSIPPI
Pursuant to the provision of Section 68 of the Mississippi Business
Corporation Act, the undersigned corporation submits the following statement of
cancellation by resolution of its board of directors of shares of the
corporation reacquired by it, other than redeemable shares redeemed or
purchased:
1. The name of the Corporation is:
FIRST CAPITAL CORP.
2. A resolution was duly adopted by the board of directors on
January 14, 1969, authorizing the cancellation of two hundred (200) shares of
its common stock, par value $5.00 per share.
3. The aggregate Number of issued shares, after giving effect to
such cancellation is 1,495,444 shares of its common stock, par value $5.00 per
share.
4. The amount of the stated capital of the corporation, after giving
effect to such cancellation is $7,477,220.
DATED January 14, 1969.
FIRST CAPITAL CORP.
By /s/ ROBERT M. HEARIN
Robert M. Hearin, President
By /s/ JOHN B. TULLOS
John B. Tullos, Secretary
<PAGE> 8
STATE OF MISSISSIPPI
COUNTY OF HINDS
I, the undersigned notary public, do hereby certify that on this 14th
day of January, 1969, personally appeared before me, ROBERT M. HEARIN, who,
being by me first duly sworn, declared that he is the President of FIRST
CAPITAL CORP., that he executed the foregoing document as President of the
corporation, and that the statements therein contained are true.
/s/ MARGARET T. WILDER
NOTARY PUBLIC
My Commission Expires:
May 2, 1969
(SEAL)
-2-
<PAGE> 9
STATE OF MISSISSIPPI
OFFICE OF SECRETARY OF STATE
JACKSON
CERTIFICATE OF AMENDMENT
OF
FIRST CAPITAL CORP.
changing name to
FIRST CAPITAL CORPORATION
The undersigned, as Secretary of State of the State of Mississippi,
hereby certifies that duplicate originals of Articles of Amendment to the
Articles of Incorporation of the above corporation duly signed and verified
pursuant to the provisions of the Mississippi Business Corporation Act, have
been received in this office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by
virtue of the authority vested in him by law, hereby issues this Certificate of
Amendment to the Articles of Incorporation and attaches hereto a duplicate
original of the Articles of Amendment.
[SEAL] Given under my hand and Seal of Office,
this the 7th day of January, 1970.
/s/ HEBER LADNER
SECRETARY OF STATE.
<PAGE> 10
(TO BE EXECUTED IN DUPLICATE)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST CAPITAL CORP.
Pursuant to the provisions of Section 61 of the Mississippi Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of this corporation is First Capital Corp.
SECOND: The following amendment of the Articles of Incorporation was
adopted by the shareholders of the corporation on November 11, 1969 , in the
manner prescribed by the Mississippi Business Corporation Act:
(INSERT AMENDMENT)
The name of FIRST CAPITAL CORP. be changed from
FIRST CAPITAL CORP. to FIRST CAPITAL CORPORATION.
<PAGE> 11
THIRD: The number of shares of the corporation outstanding at the
time of such adoption was 1,495,444, and the number of shares entitled to vote
thereon was 1,495,444.
FOURTH: The designation and number of outstanding shares of each
class entitled to vote thereon as a class were as follows:
<TABLE>
<CAPTION>
CLASS (NOTE 1) NUMBER OF SHARES
------ -------- ----------------
<S> <C> <C>
Common 1,495,444
</TABLE>
FIFTH: The number of shares voted for such amendment was unanimous;
and the number of shares voted against such amendment was -0-.
SIXTH: The number of shares of each class entitled to vote thereon
as a class voted for and against such amendment, respectively, was:
<TABLE>
<CAPTION>
NUMBER OF SHARES VOTED
CLASS (NOTE) FOR AGAINST
------ ------ --- -------
<S> <C> <C> <C>
Common Unanimous -0-
</TABLE>
SEVENTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: (Note 2)
No Change.
-2-
<PAGE> 12
EIGHTH: The manner in which such amendment effects a change in the
amount of stated capital, and the amount of stated capital (expressed in
dollars) as changed by such amendment, are as follows: (Note 2)
No Change
Dated January 7, 1970
FIRST CAPITAL CORPORATION
(Exact Corporate Title)
By /s/ ROBERT M. HEARIN
Its President
By /s/ JOHN B. TULLOS
Its Secretary
Notes: 1. If inapplicable, insert "None".
2. If inapplicable, insert "No Change".
STATE OF MISSISSIPPI
COUNTY OF HINDS
I, Mrs. Jean Turnage, a notary public, do hereby certify that on this
7th day of January, 1970, personally appeared before me Robert M. Hearin and
John B. Tullos, who, being by me first duly sworn, declared that they are the
President and Secretary, respectively, of First Capital Corporation, that they
executed the foregoing document as President and Secretary of the corporation,
and that the statements therein contained are true.
/s/ MRS. JEAN TURNAGE
Notary Public
My Commission Expires March 31, 1970
(NOTARIAL SEAL)
-3-
<PAGE> 13
STATE OF MISSISSIPPI
OFFICE OF SECRETARY OF STATE
JACKSON
CERTIFICATE OF AMENDMENT
OF
FIRST CAPITAL CORPORATION
The undersigned, as Secretary of State of the State of Mississippi,
hereby certifies that duplicate originals of Articles of Amendment to the
Articles of Incorporation of the above corporation duly signed and verified
pursuant to the provisions of the Mississippi Business Corporation Act, have
been received in this office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue
of the authority vested in him by law, hereby issues this Certificate of
Amendment to the Articles of Incorporation and attaches hereto a duplicate
original of the Articles of Amendment.
[SEAL] Given under my hand and Seal of Office,
this the 5th day of September 1986.
/s/ DICK MOLPUS
SECRETARY OF STATE
<PAGE> 14
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST CAPITAL CORPORATION
Pursuant to the provisions of the Mississippi Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment to
its Articles of Incorporation:
FIRST: The name of this corporation is FIRST CAPITAL CORPORATION.
SECOND: The following Amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation on August 26, 1986, in the
manner prescribed by the Mississippi Business Corporation Act:
Article Fourth of the Articles of Incorporation of First
Capital Corporation is hereby amended as follows:
The aggregate number of shares which the corporation shall
have the authority to issue is forty million (40,000,000)
having no par value.
Each issued and outstanding share of the common stock of the
corporation as of the close of business on September 5, 1986
shall be split into two shares of common stock, each with no
par value.
THIRD: The number of shares of the corporation outstanding at the
time of the adoption of the Amendment was 4,358,030 and the number of shares
entitled to vote thereon was 4,358,030. No shares were entitled to vote on the
Amendment as a class.
FOURTH: The number of shares voted for the Amendment was 3,190,177
and the number of shares voted against the Amendment was 5,512.
FIFTH: The Amendment does not effect a change in the amount of
stated capital of the corporation.
<PAGE> 15
DATED this the 3rd day of September, 1986.
FIRST CAPITAL CORPORATION
BY: /s/ RICHARD D. CHOTARD
President
BY: /s/ DAVID R. CARTER
Secretary
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named Richard D. Chotard, who
acknowledged that he is the President of FIRST CAPITAL CORPORATION, and David
R. Carter, who acknowledged that he is the Secretary of FIRST CAPITAL
CORPORATION, a Mississippi corporation, and that for and on behalf of said
corporation they signed and delivered the foregoing Articles of Amendment to
the Articles of Incorporation of First Capital Corporation on the day and year
therein mentioned as its act and deed, being first duly authorized so to do.
GIVEN under my hand and official seal of office, this the 3rd day of
September, 1986.
/s/ MARGARET T. WILDER
NOTARY PUBLIC
My Commission Expires:
August 11, 1989
2
<PAGE> 16
STATE OF MISSISSIPPI
OFFICE OF SECRETARY OF STATE
JACKSON
CERTIFICATE OF AMENDMENT
OF
FIRST CAPITAL CORPORATION
The undersigned, as Secretary of State of the State of Mississippi,
hereby certifies that duplicate originals of Articles of Amendment to the
Articles of Incorporation of the above corporation duly signed and verified
pursuant to the provisions of the Mississippi Business Corporation Act, have
been received in this office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue
of the authority vested in him by law, hereby issues this Certificate of
Amendment to the Articles of Incorporation and attaches hereto a duplicate
original of the Articles of Amendment.
Given under my hand and seal of Office,
[SEAL] this the 7th day of December 1984.
/s/ DICK MOLPUS
SECRETARY OF STATE.
<PAGE> 17
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST CAPITAL CORPORATION
Pursuant to the provisions of the Mississippi Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
FIRST: The name of this corporation is FIRST CAPITAL CORPORATION.
SECOND: The following Amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation on December 6, 1984, in the
manner prescribed by the Mississippi Business Corporation Act:
Article Fourth of the Articles of Incorporation of First
Capital Corporation is hereby amended as follows:
FOURTH: The aggregate number of shares which the
corporation shall have authority to issue is ten million
(10,000,000) having a par value of two and 50/100 Dollars
($2.50) each.
each issued and outstanding share of the common stock of the
corporation as of the close of business on December 7, 1984
shall be split into two shares of common stock, each with a
par value of Two and 50/100 Dollars ($2.50)
THIRD: The number of shares of the corporation outstanding at the
time of the adoption of the Amendment was 2,179,015 and the number of shares
entitled to vote thereon was 2,179,015. No shares were entitled to vote on the
Amendment as a class.
FOURTH: The number of shares voted for the Amendment was 1,725,232
and the number of shares voted against the Amendment was 4,176.
<PAGE> 18
FIFTH: The amendment does not effect a change in the amount of
stated capital of the corporation.
DATED this the 6th day of December, 1984.
FIRST CAPITAL CORPORATION
By: /s/ R D CHOTARD
President
By: /s/ JOHN B TULLOS
Secretary
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named Richard D. Chotard, who
acknowledged that he is the President of FIRST CAPITAL CORPORATION, and John B.
Tullos, who acknowledged that he is the secretary of FIRST CAPITAL CORPORATION,
a Mississippi corporation, and that for and on behalf of said corporation they
signed and delivered the foregoing Articles of Amendment to the Articles of
Incorporation of First Capital Corporation on the day and year therein
mentioned as its act and deed, being first duly authorized so to do.
GIVEN under my hand and official seal of office, this the 6th day of
December, 1984.
/s/ MARGARET T. WILDER
NOTARY PUBLIC
My Commission Expires
August 15, 1985
<PAGE> 19
ARTICLES OF MERGER
FIRST CAPITAL ACQUISITION CORPORATION,
A MISSISSIPPI CORPORATION,
AND
FIRST CAPITAL CORPORATION,
A MISSISSIPPI CORPORATION
Pursuant to the provisions of the Mississippi Business Corporation
Law, as amended, First Capital Acquisition Corporation, a Mississippi
corporation ("FCA"), and First Capital Corporation, a Mississippi corporation
("FCC"), hereby adopt the following Articles of Merger for the purpose of
merging FCA with and into FCC.
1. PARTIES TO THE MERGER. The names of the merging corporations
and the states under the laws of which they are respectively organized are:
<TABLE>
<CAPTION>
Name State
---- -----
<S> <C>
First Capital Acquisition Corporation Mississippi
First Capital Corporation Mississippi
</TABLE>
2. PLAN OF MERGER. The following Plan and Agreement of Merger
was adopted by the Board of Directors of FCC as owner of all the issued and
outstanding shares of the common stock of FCA on June 9, 1987.
PLAN AND AGREEMENT OF MERGER
First Capital Acquisition Corporation, a Mississippi
corporation ("FCA"), shall be merged with and into First Capital
Corporation, a Mississippi corporation ("FCC") pursuant to Miss. Code
Ann. Section 79-3-149, with FCC as the surviving corporation.
1. The subsidiary corporation is FCA and the name of
the corporation owning at least 95 percent of its shares which is
hereinafter designated as the surviving corporation is FCC.
2. On the effective date of the merger, all the
issued and outstanding shares of the common stock of FCA shall be
cancelled.
<PAGE> 20
3. FCC as sole shareholder of FCA hereby waives the
mailing of a copy of the Plan and Agreement of Merger to it as
shareholder of FCA.
3. STOCK OWNERSHIP. FCA has one thousand shares of common
stock, $1.00 par value, outstanding all of which are owned by FCC.
4. As sole shareholder of FCA, FCC waived the mailing to it of
a copy of the Plan and Agreement of Merger.
DATED this the 31st day of August, 1987.
FIRST CAPITAL CORPORATION
/s/ RICHARD D. CHOTARD
RICHARD D. CHOTARD,
Its President
ATTEST:
BY: /s/ DAVID R. CARTER
Its Secretary
FIRST CAPITAL ACQUISITION CORPORATION
/s/ RICHARD D. CHOTARD
RICHARD D. CHOTARD
Its President
ATTEST:
BY: /s/ JOHN B TULLOS
JOHN B. TULLOS,
Its Secretary
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named Richard D. Chotard, who
acknowledged to me that he is the President of First Capital Corporation, and
that he signed and delivered the foregoing instrument of writing on the day and
year therein mentioned for and on behalf of said
2
<PAGE> 21
corporation and as its official act and deed, being duly authorized so to do.
GIVEN UNDER MY HAND and official seal, this the 31st day of August,
1987.
/s/ MARGARET T. WILDER
Notary Public
My Commission expires:
August 13, 1989
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named Richard D. Chotard, who
acknowledged to me that he is the President of First Capital Acquisition
Corporation, and that he signed and delivered the foregoing instrument of
writing on the day and year therein mentioned for and on behalf of said
corporation and as its official act and deed, being duly authorized so to
do.
GIVEN UNDER MY HAND and official seal, this the 31st day of August,
1987.
/s/ MARGARET T. WILDER
Notary Public
My Commission Expires:
August 13, 1989
<PAGE> 22
ARTICLES OF AMENDMENT
OF
FIRST CAPITAL CORPORATION
The undersigned corporation, pursuant to the Mississippi Business
Corporation Act, as amended, hereby executes the following document and sets
forth;
1. The name of the corporation is First Capital Corporation.
2. The following amendment to Article "First" of the Articles
of Incorporation was adopted by the shareholders of the Corporation on
March 13, 1990, in the manner prescribed by the Mississippi Business
Corporation Act.
First: The name of the Corporation is Trustmark Corporation.
3. The number of shares of the corporation outstanding at the
time of the adoption of the amendment was 9,825,461 shares of common stock, and
the number of votes entitled to be cast on the amendment was 9,825,461. The
number of votes indisputably represented at the meeting was 7,968,481. The
total number of votes cast in favor of the amendment was 7,833,836 and the
total number abstaining or cast against the amendment was 134,645. No shares
were entitled to vote as a separate voting group.
<PAGE> 23
4. This amendment shall be effective as of 5:00 o'clock, p.m.,
local time, on March 14, 1990.
Dated this 14th day of March 1990.
FIRST CAPITAL CORPORATION
BY: /s/ FRANK R. DAY
FRANK R. DAY
ITS: PRESIDENT
<PAGE> 24
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TRUSTMARK CORPORATION
Pursuant to the provision of the Mississippi Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of this corporation is TRUSTMARK CORPORATION.
SECOND: The following Amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation in the manner prescribed by the
Mississippi Business Corporation Act:
Article Fourth of the Articles of Incorporation of Trustmark
Corporation is hereby amended as follows:
The aggregate number of shares which the corporation shall
have the authority to issue is one hundred million
(100,000,000) having no par value.
THIRD: N/A
FOURTH: The amendment to the Articles of Incorporation was adopted by
the shareholders on March 14, 1995.
FIFTH: N/A
SIXTH: (i) 34,910,683 shares of common stock were outstanding at
the time of the adoption of the amendment and 34,910,683 shares of common stock
were entitled to vote thereon and 29,145,112 shares of common stock were
represented at the meeting with each share having one vote. There is no other
voting group.
(ii) The number of common shares voted for the Amendment
was 27,067,028 and the number of common shares voted against the Amendment was
1,494,583 with 314,023 common shares abstaining.
<PAGE> 25
DATED this the 27th day of March, 1995.
TRUSTMARK CORPORATION
BY: ____________________________
Frank R. Day
Chairman and President
BY: ____________________________
Harry M. Walker
Secretary
STATE OF MISSISSIPPI
COUNTY OF HINDS
Personally appeared before me, the undersigned authority in and for
the aforesaid jurisdiction, the within named Frank R. Day, who acknowledged
that he is Chairman and President of TRUSTMARK CORPORATION, and Harry M.
Walker, who acknowledged that he is the Secretary of TRUSTMARK CORPORATION, a
Mississippi corporation, and that for and on behalf of said corporation they
signed and delivered the foregoing Articles of Amendment to the Articles of
Incorporation of Trustmark Corporation on the day and year therein mentioned as
its act and deed, being first duly authorized so to do.
GIVEN under my hand and official seal of office, this the 27th day of
March, 1995.
__________________________________
Notary Public
My Commission Expires:
________________________________
<PAGE> 1
Exhibit 10-c
(Sample)
FIRST NATIONAL BANK
VICKSBURG, MISSISSIPPI
DIRECTORS DEFERRED INCOME AGREEMENT
This Agreement is entered into by and between FIRST NATIONAL BANK,
VICKSBURG, MISSISSIPPI (the "Bank"), and (the "Director").
W I T N E S S E T H :
WHEREAS, the Bank recognizes that the competent and faithful efforts
of the Director on behalf of the Bank have contributed significantly to the
success and growth of the Bank;
WHEREAS, the Bank values the efforts, abilities and accomplishments of
the Director and recognizes the Director's services will substantially
contribute to its continued growth and profits in the future;
WHEREAS, the Bank desires to compensate the Director and retain the
services of the Director if re-elected to serve on the Board of Directors;
WHEREAS, the Director, in consideration of the foregoing, agrees to
continue to serve as a Director, if re-elected;
WHEREAS, the Director has agreed to defer receipt of fees to be earned
in the future.
1
<PAGE> 2
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE 1. DEFINITIONS
For the purposes of this Agreement, whenever the context so indicates,
the capitalized terms shall have the following meanings:
Beneficiary: The person or persons designated by the Director who
may become entitled to receive the compensation
payable Under Article 3 and Article 4 of this
Agreement (see Article 8).
Deferral Period: The Sixty (60) month period which commenced on the
date shown on the Addendum to this Agreement. An
Election to Participate Form signed by the Director is
included and made a part of this Agreement.
ARTICLE 2. DEFERRAL OF FEES
The Director has elected to defer receipt of Director's fees to be
earned during the Deferral Period. Once the Director has executed the Election
to Participate Form, a subsequent increase in the Director's fees payable due
to an increase in the fee structure shall also be deferred under the provisions
of this Agreement, unless the Director directs the Secretary in writing within
10 days after notification of the increase and prior to the right to receive
the additional fees that such additional fees are not to be deferred. If
Director fees are increased or decreased during the Deferral Period, the
compensation payable under Article 3 and Article 4 shall be actuarially
determined and evidenced by an Addendum to this Agreement.
ARTICLE 3. COMPENSATION
The Bank agrees to pay Director, if living, and if not, then to the
designated Beneficiary, the annualized amount as shown in the Addendum to this
Agreement, payable in monthly
2
<PAGE> 3
installments, for a total of One Hundred Twenty (120) consecutive monthly
installments, commencing on the first business day of the month following the
end of the Deferral Period, or upon Director's death if such shall occur before
the payments have commenced. The payments may be accelerated or paid in a lump
sum at the request of the Director and subject to the Board's discretion.
Accelerated payments are to be actuarially determined to be of substantially the
same value as payments made under the terms of this Article using the Pension
Benefit Guarantee Corporation interest rate for and valuing deferred and
immediate annuities. However, in any event, post-retirement amounts payable
under this Article 3 and the Addendum to this Agreement shall be adjusted as
provided by the provisions of Article 5 as required therein.
ARTICLE 4. DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS
If the Director dies after the beginning of monthly payments, but
prior to receiving the full One Hundred Twenty (120) monthly installments, the
Bank shall continue to pay such monthly installments to the Director's
Beneficiary until the total number of payments made to the Director and his or
her Beneficiary equal One Hundred Twenty (120).
ARTICLE 5. BENEFIT REDUCTION CLAUSE
(a) Termination. If the Director shall terminate service on the Board
during the Deferral Period, the post-retirement benefits provided under this
Agreement will be reduced prorata by the amount of time remaining in the
Deferral Period.
(b) Absenteeism. Post-retirement benefits payable under this Agreement
shall be reduced for meetings missed during the Deferral Period. The amount of
reduction shall be determined by treating each year separately. The reduction
shall be actuarially calculated and shall depend upon the fees attributed to
the meeting missed and the year in which missed.
3
<PAGE> 4
ARTICLE 6. STATUS OF AGREEMENT
This Agreement does not constitute a contract of employment between the
parties, nor shall any provision of this Agreement restrict the right of the
Bank's shareholders to replace the Director or the right of the Director to
terminate service on the Board.
ARTICLE 7. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and upon the successors and assigns of the Bank, and upon the
heirs and legal representatives of the Director.
ARTICLE 8. BENEFICIARY DESIGNATION
For purposes of this Agreement, the Director may from time to time
designate, in writing, any person or persons, contingently or successively to
whom the Bank shall pay the Director's benefits on event of the Director's
death. The Bank shall prescribe the form for the written designation or
Beneficiary and, upon the Director's filing the form with the Bank, it
effectively shall revoke all designations filed prior to that date by the
Director. If the Director fails to designate a Beneficiary or if the
Beneficiary designated by the Director predeceases him or dies before complete
distribution of the Director's benefits, then the Bank shall pay the Director's
benefits to the legal representative of the estate of the last to die of the
Director and his or her Beneficiary.
ARTICLE. 9. INCOMPETENCY
If the Bank shall find that any person to whom any payment is payable
under this Agreement is unable to care for his or her affairs because of
illness or accident, or is a minor, any payment due (unless a prior claim
therefore shall have been made by a duly appointed guardian, committee or other
legal representative) may be paid to the spouse, a child, a parent, a brother
or sister, or a custodian
4
<PAGE> 5
determined pursuant to the Uniform Gift to Minors Act, or to any person deemed
by the Bank to have incurred expense for such person otherwise entitled to
payment, in such manner and proportions as the Bank may determine. Any such
payment shall be a complete discharge of the liabilities of the Bank under this
Agreement.
ARTICLE 10. ASSIGNMENT OF RIGHTS
None of the rights to compensation under this Agreement are assignable
by the Director or any Beneficiary or designee of the Director, and any attempt
to anticipate, sell, transfer, assign, pledge, encumber, or change the
Director's right to receive compensation shall be void.
ARTICLE 11. NAMED FIDUCIARY
(a) The Bank is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible
for establishing and carrying out a funding policy and method consistent with
the objectives of this Agreement.
(b) The Bank shall make all determinations as to rights to benefits
under this Agreement. Any decision by the Bank denying a claim made by the
Director or by a Beneficiary for benefits under this Agreement shall be stated
in writing and delivered or mailed to the Director or such Beneficiary. Such
statement shall set forth the specific reasons for the denial, written to the
best of the Bank's ability in a manner that may be understood without legal or
actuarial counsel. In addition, the Bank shall afford a reasonable opportunity
to the Director or such Beneficiary for a full and fair review of the decision
denying such claim.
(c) Subject to the foregoing, the Board of Directors of the Bank shall
have full power and authority to interpret, construe and administer this
Agreement. No member of the Board of Directors of the Bank shall, in any event,
be liable
5
<PAGE> 6
to any person for any action taken or omitted in connection with the
interpretation, construction or administration of this Agreement, so long as
such action or omission to act be made in good faith. In no event, however,
shall the provisions of Article 12 or any other provisions in this Agreement
prevent the Director from seeking legal recourse for any claim he may have
under this Agreement.
ARTICLE 12. FUNDING
The Bank's obligations under this Agreement shall be an unfunded and
unsecured promise to pay. The Bank shall not be obligated under any
circumstances to fund or otherwise secure its obligations under this Agreement.
Under no circumstances will the Bank, without the consent of the Director,
cause this Agreement to be directly funded in whole or part through escrow,
trust, or otherwise such as to create a pre-retirement or post-retirement
taxable event to the Director or the Director's Beneficiary.
ARTICLE 13. DIRECTOR RIGHTS
The rights of the Director, any designated Beneficiary of the
Director, or any other person claiming through the Director under this
Agreement, shall be solely those of an unsecured general creditor of the Bank.
The Director, a designated Beneficiary of the Director, or any other person
claiming through the Director shall only have the right to receive from the
Bank those payments as specified under this Agreement.
ARTICLE 14. ASSETS
The Director, the Director's designated Beneficiary, or any other
person claiming through the Director shall have no rights or interests
whatsoever in any asset of the Bank in connection with the liabilities the Bank
has assumed under this Agreement, or otherwise. Any asset used or acquired by
the Bank in connection with the liabilities it has assumed
6
<PAGE> 7
under this Agreement shall not be deemed to be held in trust for the benefit of
the Director or the Director's designated Beneficiary, nor shall it be
considered security for the performance of the obligations of the Bank, and it
shall be, and remain, a general, unpledged, and unrestricted asset of the Bank.
ARTICLE 15. AMENDMENT
During the lifetime of the Director and prior to retirement, this
Agreement may be amended or revoked at any time, in whole or part, by the
mutual written agreement of the Bank and the Director.
ARTICLE 16. LAW GOVERNING
This Agreement shall be governed by the laws of the state of
Mississippi.
ARTICLE 17. SEVERABILITY
In the event that any of the provisions of this Agreement or portion
thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provision held invalid or inoperative, and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.
ARTICLE 18. SUICIDE
Notwithstanding anything to the contrary in this Agreement, the
benefits otherwise provided herein shall not be payable if the Director's death
results from suicide, whether sane or insane, within two years after the
execution of this Agreement. If the Director dies during this two year period
due to suicide, the fees deferred will be paid to the Director's designated
Beneficiary in a single payment. Payment is to be made within thirty days
after the Director's death is declared a suicide by competent legal authority.
7
<PAGE> 8
Credit shall be given to the Bank for payments made prior to determination of
suicide.
ARTICLE 19. PERIOD OF ECONOMIC HARDSHIP
If, in any year, payments made under this Agreement would, in the sole
judgment of the Board of Directors, create economic hardship for the Bank's
depositors, the Board of Directors has full authority to postpone such
payments. However, upon such postponement, the Bank will increase the total
sum payable to the Director or the Director's Beneficiaries under this
Agreement by an actuarially determined amount.
ARTICLE 20. PRIOR AGREEMENTS
This Agreement sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby, and any previous
agreements or understandings between the parties hereto regarding the subject
matter hereof are merged into and superseded by this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement, in
triplicate, the day and year written here below.
------------------------- --------------------------------------
Date
FIRST NATIONAL BANK
VICKSBURG, MISSISSIPPI
-------------------------- By --------------------------------------
Date Title
8
<PAGE> 1
EXHIBIT 10-D
(SAMPLE)
Exhibit A
DESIGNATION OF BENEFICIARY
Pursuant to the terms of an EXECUTIVE SUPPLEMENTAL INCOME PLAN AGREEMENT, dated
_____________________, between myself and First National Bank of Vicksburg, I
hereby designate the following beneficiary(ies) to receive my payments which
may be due under such Agreement after my death:
Primary Individual Beneficiary(ies):
______________________________ __________________________________
Name Relationship
______________________________ __________________________________
Name Relationship
Contingent Individual Beneficiary(ies):
_______________________________ __________________________________
Name Relationship
_______________________________ __________________________________
Name Relationship
This designation hereby revokes any prior designation which may have been in
effect.
Date:_____________________________
_______________________________ __________________________________
Witness Officer
Acknowledged By: __________________________________________________
Title
<PAGE> 2
EXECUTIVE SUPPLEMENTAL INCOME PLAN
EXECUTIVE BENEFIT SHEET
NAME: OFFICER
PLAN COMPENSATION: $351,000
<TABLE>
<CAPTION>
YOUR BENEFITS
-------------
<S> <C>
Family Income - In the event of your
death prior to age 65, your family
will receive an annual income for
one year from the Bank
in the amount of............................. $39,000.00
for 4 years thereafter, an annual
income in the amount of...................... $29,250.00
and for 10 years thereafter, an annual
income in the amount of...................... $19,500.00
</TABLE>
* This projection does not constitute a benefit agreement.
Actual benefits are provided by a separate agreement which
must be executed by the Bank and the Individual selected to
participate.
HOW THE PLAN WORKS
As a participant in the EXECUTIVE SUPPLEMENTAL INCOME PLAN, there will be no
reduction in your take-home pay. Also, you will pay no taxes during the years
prior to death. When your family receives the benefits upon your death, they
will be taxed as salary.
These benefits are provided to you by the Bank and are in addition to Social
Security, and any other benefit which you may be entitled to participate in
such as Pension Plan, ESOP and other fringe benefits provided by the Bank.
<PAGE> 3
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(Pre-Retirement)
THIS AGREEMENT is entered into this _____day of ______________1993, by
and between First National Bank (hereinafter called the "BANK"), party of the
first part, and _________________ (hereinafter called "EMPLOYEE"), party of the
second part.
WITNESSETH:
WHEREAS, Employee has been employed by the Bank in an executive
capacity and has discharged all duties in a capable and efficient manner
resulting in substantial profits to the Bank; and
WHEREAS, the Bank desires to retain the services of Employee and
realizes that if the Employee were to enter into competition with the Bank it
may suffer financial loss; and
WHEREAS, Employee is willing to remain in the employment of the Bank
if the Bank will agree to pay the Employee's spouse or designated
beneficiaries, certain annual amounts, all in accordance with the provisions
and conditions set forth hereinafter;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, and for good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto covenant and agree
as follows:
<PAGE> 4
Page 2
1. The Bank agrees that, provided Employee shall die prior to
attaining age sixty-five (65), and provided further that such death occurs
while Employee is still in the active employment of the Bank, that commencing
with the first day of the month following the month in which Employee shall
die, it will pay Employee's spouse, if then living, the sum of Thirty-Nine
Thousand and 00/100 Dollars ($39,000.00) per annum for one (1) year, payable in
equal installments of Three Thousand Two Hundred Fifty and 00/100 Dollars
($3,250.00) each for twelve (12) months immediately following the death of
Employee; and at the conclusion of the first twelve-month period following
Employee's death, the Bank will pay the sum of Twenty-Nine Thousand Two Hundred
Fifty and 00/100 Dollars ($29,250.00) per annum for four (4) years payable in
equal installments of Two Thousand Four Hundred Thirty-Seven and 50/100 Dollars
($2,437.50) per month for forty eight (48) months; and at the conclusion of
this four-year period following Employee's death, the Bank will pay the sum of
Nineteen Thousand Five Hundred and 00/100 Dollars ($19,500) per annum for ten
(10) years, payable in equal installments of One Thousand Six Hundred
Twenty-Five and 00/100 Dollars ($1,625.00) per month for one hundred twenty
(120) months subject to the conditions and limitations set out elsewhere in
this Agreement; payable upon the first business day of each month. If said
spouse shall have predeceased Employee or should die during the one hundred
eighty (180) months following Employee's death, the balance of such payments
shall be made on the same monthly basis to the designated beneficiaries of
Employee living at Employee's death or the death of Employee's spouse,
whichever is later, share and share alike, until the Bank shall have made said
one hundred eighty (180) monthly payments. If, at the date of death of the
Employee, no spouse or duly designated Beneficiary exists, or if the spouse or
designated beneficiary shall have died prior to the death of the Employee, or
if the Employee has revoked a prior designation by a writing filed with the
Bank without having filed a new designation, then any death benefits which
would have been payable to the Beneficiary shall be payable to the Employee's
surviving children, equally; of if none survive, then to the Employee's estate.
2. The Bank agrees that if Employee's spouse and designated
beneficiaries shall die before receiving the said one hundred eighty (180)
monthly payments, the balance of each payment shall be made to the Employee's
Estate until the Bank shall have made one hundred eighty (180) monthly
payments.
3. It is agreed that neither Employee nor spouse or designated
beneficiaries shall have any right to commute, sell, assign, transfer, or
otherwise convey the right to receive any payments hereunder which payments and
the right thereto are expressly declared to be nonassignable and
nontransferable, and any attempted assignment shall be void.
<PAGE> 5
Page 3
4. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or the successors of any of the
aforementioned.
5. If Employee shall voluntarily terminate employment during
Employee's lifetime, or if employment shall be terminated by the Board of
Directors of the Bank during Employee's lifetime, this Agreement shall
automatically terminate and the Bank shall have no further obligation
hereunder.
6. During the lifetime of Employee, this Agreement may be amended or
revoked at any time in whole or in part by the Bank.
7. Notwithstanding anything to the contrary in this Agreement, the
benefit otherwise provided herein shall not be payable if the Employee's death
results from suicide, whether sane or insane within two years after the
execution of this Agreement.
8. The Bank's obligations under this Agreement shall be an unfunded
and unsecured promise to pay. The Bank shall not be obligated under any
circumstances to fund its obligations under this Agreement. The Bank
may,however, at its sole and exclusive option, elect to informally fund this
Agreement in whole or in part.
9. This Agreement shall not be deemed to create a contract of
employment between the Bank and the Employee and shall create no right in the
Employee to continue in the Bank's employ for any specific period of time, or
to create any other rights in the Employee or obligations on the part of the
Bank, except as are set forth in this Agreement. Nor shall this Agreement
restrict the right of the Bank to terminate the Employee or restrict the right
of the Employee to terminate his employment.
10. The rights of the Employee, any designated recipient of the
Employee, or any other person claiming through the Employee under this
Agreement, shall be solely those of an unsecured general creditor of the Bank.
The employee, the designated recipient of the Employee, or any other person
claiming through the Employee, shall only have the right to receive from the
Bank those payments as specified under this Agreement.
11. The Employee agrees that he, his designated recipient, or any
other person claiming through him shall have no rights or interests whatsoever
in any asset of the Bank. Any asset used or acquired by the Bank in connection
with the liabilities it has assumed under this Agreement, except as expressly
provided, shall not be deemed to be held under any trust for the benefit of the
<PAGE> 6
Page 4
Employee or his recipients. Nor shall it be considered security for the
performance of the obligations of the Bank. It shall be, and remain, a
general, unpledged, and unrestricted asset of the Bank.
12. The Bank reserves the right to accelerate the payment of any
benefits payable under this Agreement without the consent of the Employee, the
Employee's spouse, estate, designated recipients, or any other person claiming
through the Employee. In the event the Bank determines to accelerate these
payments, the present value of any future payments shall be paid to the
recipient. The current federal reserve discount rate which is charged on loans
to the Bank shall be used in discounting any payments as determined by the
employer.
13. This Agreement shall be governed by the laws of the State or
Commonwealth wherein the Bank has its main office.
14. In the event that any of the provisions, or portion thereof, of
this Agreement are held to be inoperative or invalid by any court of competent
jurisdiction, then (1) insofar as is reasonable, effect will be given to the
intent manifested in the provision held invalid or inoperative and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.
15. For purposes of this Agreement the Employee shall designate a
Beneficiary on forms furnished by the Bank. (a copy of which is attached
hereto and labeled Exhibit A.) Such Employee may then from time to time change
the designated Beneficiary by written notice to the Bank and upon such
change,the rights of all previously designated Beneficiaries to receive any
benefits under this Agreement shall cease.
16. If the Bank shall find that any person to whom any payment is
payable under this Agreement is unable to care for their affairs because of
illness or accident, or is a minor, any payment due (unless a prior claim
therefor shall have been made by a duly appointed guardian, committee or other
legal representative) may be paid to the spouse, a child, a parent, a brother
or sister or a custodian determined pursuant to the Uniform Gift to Minors Act,
or to any person deemed by the Bank to have incurred expense for such person
otherwise entitled to payment, in such manner and proportions as the Bank may
determine. Any such payment shall be a complete discharge of the liabilities
of the Bank under this Agreement.
<PAGE> 7
Page 5
17. This Agreement shall be executed in triplicate, each copy of
which, when so executed and delivered, shall be an original, but all three
copies shall together constitute one and the same instrument.
--------------------------------
Officer
-----------------------------------
Witness
Approved by authorized officer of the Bank:
--------------------------------
Authorized Officer Title
<PAGE> 1
EXHIBIT 13
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,
1994 and 1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. 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.
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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Corporation changed its method of accounting for
securities.
/s/ ARTHUR ANDERSEN LLP
Jackson, Mississippi,
January 27, 1995.
<PAGE> 2
Trustmark Corporation and Subsidiaries
Consolidated Balance Sheets
($ In Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31, 1994 1993
-------- --------
<S> <C> <C>
Assets
Cash and due from banks (noninterest-bearing) $ 280,114 $ 252,906
Federal funds sold and securities purchased under reverse
repurchase agreements 105,731 95,206
Trading account securities 1,150 2,555
Securities available for sale 439,691 157,157
Securities held to maturity (fair value: $1,345,614 - 1994;
$1,865,585 - 1993) 1,422,660 1,823,409
Loans 2,365,683 2,264,564
Less: Unearned income 18,118 33,546
Allowance for loan losses 65,014 65,014
------------ ------------
Net loans 2,282,551 2,166,004
Premises and equipment, net 64,078 62,924
Accrued interest receivable 37,200 34,567
Intangible assets 38,074 40,426
Other assets 92,116 73,052
------------ ------------
Total Assets $ 4,763,365 $ 4,708,206
============ ============
Liabilities
Deposits:
Noninterest-bearing $ 732,635 $ 708,789
Interest-bearing 2,716,594 2,719,992
Total deposits 3,449,229 3,428,781
Federal funds purchased 160,140 79,295
Securities sold under repurchase agreements 690,898 763,438
Accrued expenses and other liabilities 42,088 49,101
------------ ------------
Total Liabilities 4,342,355 4,320,615
Commitments and Contingencies
Stockholders' Equity
Common stock, no par value:
Authorized, 40,000,000 shares
Issued and outstanding: 34,910,683 shares - 1994;
34,773,169 shares - 1993 14,546 14,489
Surplus 244,578 243,209
Retained earnings 169,857 129,893
Net unrealized loss on securities available for sale, net of tax (7,971)
------------ ------------
Total Stockholders' Equity 421,010 387,591
------------ ------------
Total Liabilities and Stockholders' Equity $ 4,763,365 $ 4,708,206
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
Trustmark Corporation and Subsidiaries
Consolidated Statements of Income
($ In Thousands Except Share Data)
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 190,100 $ 177,480 $ 178,183
Interest on securities:
Taxable interest income 112,446 120,213 115,707
Interest income exempt from federal income taxes 6,715 7,835 9,874
Interest on federal funds sold and securities purchased
under reverse repurchase agreements 6,188 5,079 6,862
------------ ------------ ------------
Total Interest Income 315,449 310,607 310,626
Interest Expense
Interest on deposits 91,154 94,708 122,311
Interest on federal funds purchased and securities
sold under repurchase agreements 33,136 22,062 16,058
------------ ------------ ------------
Total Interest Expense 124,290 116,770 138,369
------------ ------------ ------------
Net Interest Income 191,159 193,837 172,257
Provision for loan losses 2,786 18,596 26,737
------------ ------------ ------------
Net Interest Income After Provision
for Loan Losses 188,373 175,241 145,520
Other Income
Trust service income 8,715 8,176 7,406
Service charges on deposit accounts 18,666 18,335 17,839
Other account charges, fees and commissions 20,214 16,825 13,995
Securities (losses) gains (1,374) 503 3,100
Other 2,449 4,059 3,243
------------ ------------ ------------
Total Other Income 48,670 47,898 45,583
Other Expenses
Salaries 61,319 58,040 53,688
Employee benefits 11,178 11,191 9,105
Net occupancy-premises 8,401 7,986 7,305
Equipment expenses 13,482 12,521 12,187
Services and fees 18,874 17,081 16,767
Other real estate expenses 1,159 3,377 2,527
FDIC insurance assessment 7,689 7,749 7,486
Amortization of intangible assets 6,932 8,291 5,318
Other 23,767 24,545 18,461
------------ ------------ ------------
Total Other Expenses 152,801 150,781 132,844
------------ ------------ ------------
Income before income taxes and cumulative
effect of change in accounting principle 84,242 72,358 58,259
Income taxes 29,237 21,681 17,490
------------ ------------ ------------
Income before cumulative effect of
change in accounting principle 55,005 50,677 40,769
Cumulative effect on prior years (to December 31, 1992)
of change in accounting for income taxes 1,575
------------ ------------ ------------
Net Income $ 55,005 $ 52,252 $ 40,769
============ ============ ============
Per Share Data
Income before cumulative effect of
change in accounting principle $ 1.58 $ 1.50 $ 1.23
Cumulative effect on prior years (to December 31, 1992)
of change in accounting for income taxes 0.05
------------ ------------ ------------
Net Income Per Share $ 1.58 $ 1.55 $ 1.23
============ ============ ============
Weighted average shares outstanding 34,805,193 33,787,791 33,076,645
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
Trustmark Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
($ In Thousands Except Share Data)
<TABLE>
<CAPTION>
Unrealized
Common Retained Gains
Total Stock Surplus Earnings (Losses)
---------- ------------ ------------ ----------- -----------
<C> <C>
Balance, January 1, 1992 $ 293,797 $ 13,782 $ 219,316 $ 60,699
Net income for year 40,769 40,769
Cash dividends paid ($0.34 per share) (11,323) (11,323)
---------- ------------ ------------ -----------
Balance, December 31, 1992 323,243 13,782 219,316 90,145
Net income for year 52,252 52,252
Cash dividends paid ($0.37 per share) (12,504) (12,504)
Common stock issued in connection with business
combination 24,600 707 23,893
---------- ------------ ------------ -----------
Balance, December 31, 1993 387,591 14,489 243,209 129,893
Adjustment to beginning balance for change in
accounting method, net of tax 14,326 $ 14,326
Net income for year 55,005 55,005
Cash dividends paid ($0.41 per share) (13,936) (13,936)
Cash paid in connection with business combination (1,105) (1,105)
Common stock issued for purchase of subsidiary
minority interest 1,426 57 1,369
Net change in unrealized gains (losses) on
securities available for sale, net of tax (22,297) (22,297)
---------- ------------ ------------ ----------- -----------
Balance, December 31, 1994 $ 421,010 $ 14,546 $ 244,578 $ 169,857 $ (7,971)
========== ============ ============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
Trustmark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
($ In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1993 1992
------------ ------------ -----------
<C> <C> <C>
Operating Activities
Net income $ 55,005 $ 52,252 $ 40,769
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 2,786 18,596 26,737
Provision for depreciation and amortization 17,069 17,634 14,640
Write-downs and losses on sales of other real estate 802 2,648 1,432
Net amortization (accretion) of securities 416 2,243 (3,236)
Securities losses (gains) 1,374 (503) (3,100)
Other (31) (3,311) (594)
(Increase) decrease in accrued interest receivable (2,633) 463 1,290
Increase in intangible assets (4,579) (6,822) (3,534)
Increase in deferred income taxes (612) (11,046) (6,553)
(Increase) decrease in other assets (14,166) (2,050) 3,034
(Decrease) increase in other liabilities (5,587) 4,354 (30,955)
------------ ------------ -----------
Net cash provided by operating activities 49,844 74,458 39,930
Investing Activities
Proceeds from calls and maturities of securities available for sale 246,536 271,026 39,300
Proceeds from calls and maturities of securities held to maturity 269,779 572,204 604,874
Proceeds from sales of securities available for sale 392,136 50,076 5,640
Proceeds from sales of securities held to maturity 22,725 86,903
Purchases of securities available for sale (327,706) (282,475) (61,866)
Purchases of securities held to maturity (477,228) (860,285) (951,064)
Net (increase) decrease in federal funds sold and securities
purchased under reverse repurchase agreements (10,525) 74,436 78,922
Net increase in loans (119,470) (68,820) (21,082)
Purchases of premises and equipment (10,016) (8,615) (8,456)
Proceeds from sales of premises and equipment 146 165 463
Cash equivalents of acquired bank, net of cash paid 20,601 25,722
Cash paid in connection with business combination (1,105)
------------ ------------ -----------
Net cash used by investing activities (37,453) (208,962) (200,644)
Financing Activities
Net increase (decrease) in deposits 20,448 (155,997) 6,001
Net increase in federal funds purchased and securities sold
under repurchase agreements 8,305 292,571 169,553
Cash dividends (13,936) (12,504) (11,323)
------------ ------------ -----------
Net cash provided by financing activities 14,817 124,070 164,231
------------ ------------ -----------
Increase (decrease) in cash and cash equivalents 27,208 (10,434) 3,517
Cash and cash equivalents at beginning of year 252,906 263,340 259,823
------------ ------------ -----------
Cash and cash equivalents at end of year $ 280,114 $ 252,906 $ 263,340
============ ============ ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Trustmark Corporation and
subsidiaries (the Corporation) follow generally accepted accounting principles
and policies within the financial services industry. The following is a
summary of the more significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Trustmark
Corporation, its wholly-owned subsidiaries, First Building Corporation, F. S.
Corporation, Trustmark National Bank (the Bank) and the Bank's wholly-owned
subsidiary, Trustmark Financial Services, Inc. In 1994, the Corporation
exchanged 137,514 shares of the Corporation's common stock for the minority
shareholders' interest in the Bank. As discussed in Note 2, the financial data
of the Corporation as previously reported has been restated for a business
combination in 1994 using the pooling of interests method of accounting. 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.
SECURITIES
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
The Corporation adopted the provisions of the new standard for investments held
as of or acquired after January 1, 1994. In adopting SFAS No. 115, securities
have been
<PAGE> 7
classified as either trading, available for sale or held to maturity. In
accordance with the statement, prior period financial statements have not been
restated to reflect the change in accounting principle. Management determines
the appropriate classification of securities at the time of purchase.
Trading account securities are held for resale in anticipation of
short-term market movements. Trading account securities, consisting primarily
of debt securities, are carried at fair value. Gains and losses, both realized
and unrealized, are reported in other income.
Securities available for sale are carried at fair value. The unrealized
difference between amortized cost and fair value on securities available for
sale is excluded from earnings and is reported net of deferred taxes as a
component of stockholders' equity. This caption includes debt and equity
securities that Management 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 needs, or for other purposes. Prior to January 1,
1994, securities available for sale were stated at the lower of amortized cost
or fair value with any resulting adjustments reflected in the statement of
income.
Securities held to maturity are carried at amortized cost. This caption
includes debt securities for which Management has the positive intent and the
Corporation has the ability to hold until maturity.
Amortization of premium and accretion of discount are computed under the
interest method. The adjusted cost of the specific security sold is used to
compute the realized gain or loss on the sale of securities.
Fair values for securities are based on quoted market prices where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
LOANS
Loans are stated at the amount of unpaid principal, reduced by unearned
income and an allowance for loan losses. Unearned income on instalment 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 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
<PAGE> 8
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 5, 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 of 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 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 upon foreclosure are charged
to the allowance for 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 changed the
Corporation's method of accounting for income taxes from the deferred method to
the liability method. The cumulative effect of adopting SFAS No. 109 on the
Corporation's financial
<PAGE> 9
statements in 1993 was to increase net income $1,575,000 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 10 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
noninterest-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 8 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 and qualified senior
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 and senior 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
Per share data is based on the weighted average number of shares
outstanding during each period. Per share data for all periods presented has
been restated for the effect of a business combination accounted for as a
pooling of interests in 1994.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks.
<PAGE> 10
The Corporation paid income taxes approximating $32,725,000 in 1994,
$32,124,000 in 1993, and $21,606,000 in 1992. Interest paid on deposit
liabilities and other borrowings approximated $124,581,000 in 1994,
$119,355,000 in 1993, and $144,749,000 in 1992.
For the years ended December 31, 1994, 1993, and 1992, noncash transfers
from loans to foreclosed properties were $1,490,000, $2,989,000, and
$6,456,000, respectively.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform to the 1994 method of presentation.
NOTE 2 - BUSINESS COMBINATIONS
On October 7, 1994, First National Financial Corporation (FNFC) and its
wholly-owned subsidiary, First National Bank of Vicksburg, were merged with the
Corporation. The stockholders of FNFC received 3,600,262 shares of the
Corporation's common stock in connection with the merger. In addition, cash
payments of approximately $1,105,000 were made in connection with the merger.
All financial data of the Corporation has been restated to reflect the business
combination using the pooling of interests method of accounting. There were no
material adjustments to the net assets of FNFC as a result of adopting the same
accounting practices as the Corporation. The effect of the pooling of
interests on previously reported operations follows ($ in thousands):
<TABLE>
<CAPTION>
For the Year
Nine Months Ended
Ended December 31,
September 30, -------------------------
1994 1993 1992
------------- -------- --------
<S> <C> <C> <C>
Total Income:
Trustmark Corporation $252,876 $335,933 $332,252
FNFC 16,813 22,572 23,957
-------- -------- --------
Combined $269,689 $358,505 $356,209
======== ======== ========
Net Income:
Trustmark Corporation $ 40,384 $ 50,150 $ 38,257
FNFC 2,072 2,102 2,512
-------- -------- --------
Combined $ 42,456 $ 52,252 $ 40,769
======== ======== ========
</TABLE>
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,
<PAGE> 11
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.
NOTE 3 - CASH AND DUE FROM BANKS
The Corporation is required to maintain average reserve balances with the
Federal Reserve Bank. The reserve balance varies depending upon the types and
amounts of deposits. At December 31, 1994, the reserve balance with the
Federal Reserve Bank was approximately $30,375,000.
<PAGE> 12
NOTE 4 - Securities Available for Sale and Securities Held to Maturity
A summary of the amortized cost and estimated fair value of securities
available for sale and held to maturity at December 31, 1994 and 1993
follows ($ in thousands):
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
--------------------------------------------- ------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
1994 Cost Gains (Losses) Value Cost Gains (Losses) Value
---- --------- ---------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $376,302 $ 14 $(13,856) $362,460 $ 316,109 $ 745 $(10,773) $ 306,081
Obligations of states and
political subdivisions 192,321 4,214 (7,117) 189,418
Debt securities of foreign
governments 100 100
Mortgage-backed securities 63,388 246 (2,933) 60,701 914,130 309 (64,424) 850,015
Other securities 12,909 3,621 16,530
-------- ------ -------- -------- ---------- ------- -------- ----------
Total $452,599 $3,881 $(16,789) $439,691 $1,422,660 $ 5,268 $(82,314) $1,345,614
======== ====== ======== ======== ========== ======= ======== ==========
1993
----
U.S. Treasury and other U.S.
Government agencies $ 97,484 $ 323 $ (32) $ 97,775 $ 722,567 $23,456 $ (1,167) $ 744,856
Obligations of states and
political subdivisions 8,420 44 8,464 158,193 10,281 (292) 168,182
Debt securities of foreign
governments 100 100
Mortgage-backed securities 51,253 767 (232) 51,788 927,625 10,764 (3,911) 934,478
Other securities 14,924 3,045 17,969
-------- ------ -------- -------- ---------- ------- ------- ----------
Total $157,157 $1,134 $ (264) $158,027 $1,823,409 $47,546 $(5,370) $1,865,585
======== ====== ======== ======== ========== ======= ======== ==========
</TABLE>
On January 1, 1994, in adopting SFAS No. 115, the Corporation transferred
securities with an amortized cost of approximately $629,000,000 from held to
maturity to available for sale. There were no other transfers made between
classifications during 1994.
Gross gains of $4,197,000 and gross losses of $5,594,000 were realized in
1994 as a result of calls and dispositions of securities classified as
available for sale. During 1993 and 1992 gross gains and gross losses on
dispositions of securities carried at lower of aggregate cost or fair value
were not material. At December 31, 1994, the net adjustment to unrealized
holding losses on available for sale securities included as a separate
component of stockholders' equity was $7,971,000.
During 1994, there were no sales of securities held to maturity. Gross
gains of $23,000 were realized on securities called prior to maturity. Gross
gains of $623,000 and gross losses of $148,000 were realized in 1993 as the
result of calls and the disposition of securities held to maturity. All sales
of securities held to maturity during 1993 were related to business
combinations. Gross securities gains of $3,126,000 and gross securities losses
of $26,000 were realized during 1992.
The amortized cost and estimated fair value of securities available for
sale and held to maturity at December 31, 1994, by contractual maturity, are
shown below ($ in thousands). Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
Available for Sale Held to Maturity
--------------------------- --------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 88,462 $ 87,585 $ 83,347 $ 83,533
Due after one year through five years 287,840 274,875 315,957 304,762
Due after five years through ten years 65,128 63,922
Due after ten years 12,909 16,530 44,098 43,382
-------- ------- ---------- ---------
389,211 378,990 508,530 495,599
Mortgage-backed securities 63,388 60,701 914,130 850,015
-------- ------- ---------- ---------
Total $452,599 $439,691 $1,422,660 $1,345,614
======== ======== ========== ==========
</TABLE>
Securities with a carrying value of $1,491,333,000 at December 31, 1994
and $1,423,145,000 at December 31, 1993 were pledged to collateralize public
deposits, securities sold under agreements to repurchase, and for other
purposes as required or permitted by law.
<PAGE> 13
NOTE 5 - Loans
At December 31, 1994 and 1993, the loan portfolio carrying values consisted
of the following ($ in thousands):
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Real estate loans:
Construction and land development $ 123,364 $ 102,873
Secured by 1-4 family residential properties 504,078 569,411
Secured by nonfarm, nonresidential properties 345,130 340,058
Other 63,169 52,295
Loans to finance agricultural production 34,910 35,490
Commercial and industrial 594,836 531,054
Loans to individuals for personal expenditures 606,444 529,907
Obligations of states and political subdivisions 50,033 38,407
Loans for purchasing or carrying securities 1,840 3,995
Lease financing receivables 3,871 4,427
Other loans 19,890 23,101
----------- -----------
Loans, net of unearned interest 2,347,565 2,231,018
Allowance for loan losses (65,014) (65,014)
----------- -----------
Net loans $ 2,282,551 $ 2,166,004
=========== ===========
</TABLE>
The fair value estimates of loans, net of unearned interest, at December 31,
1994 and 1993 were $2,319,329,000 and $2,259,605,000, respectively. Management
has made estimates of the fair value based on assumptions that it believes to
be reasonable as discussed in Note 1 .
In the ordinary course of business, the Corporation makes loans to its
directors and to companies in which these directors are principal owners. In
the opinion of Management, such loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other parties. An analysis of changes in these
loans follows ($ in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1994 $ 38,091
New loans 99,439
Repayments (70,995)
-----------
Balance at December 31, 1994 $ 66,535
===========
</TABLE>
Changes in the allowance for loan losses were as follows ($ in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ------------
<S> <C> <C> <C>
Balance at January 1 $ 65,014 $ 51,871 $ 41,542
Provision charged to expense 2,786 18,596 26,737
Loans charged off (7,081) (11,565) (20,176)
Recoveries 4,295 5,790 3,768
Allowance applicable to loans of acquired bank 322
----------- ----------- ------------
Balance at December 31 $ 65,014 $ 65,014 $ 51,871
=========== =========== ============
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
approximated $12,817,000 and $13,730,000 at December 31, 1994 and 1993,
respectively. The foregone interest associated with such loans is immaterial.
<PAGE> 14
NOTE 6 - Premises and Equipment
Premises and equipment are summarized as follows ($ in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------
1994 1993
--------- ---------
<S> <C> <C>
Land $ 10,594 $ 9,943
Buildings and leasehold improvements 70,289 67,913
Furniture and equipment 64,465 59,034
--------- ---------
145,348 136,890
Less accumulated depreciation and amortization 81,270 73,996
--------- ---------
Premises and equipment, net $ 64,078 $ 62,894
========= =========
</TABLE>
<PAGE> 15
NOTE 7 - Employee Benefit Plans
Net periodic pension costs included the following components ($ in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- -----------
<S> <C> <C> <C>
Service cost earned during period $ 2,489 $ 2,140 $ 1,259
Interest cost on projected benefit obligation 2,030 1,557 1,603
Actual return on assets 47 (2,888) (2,198)
Net amortization and deferral:
Amortization of unrecognized net assets and prior service cost (144) (191) (238)
Asset (loss) gain deferred (2,502) 911 136
--------- --------- -----------
Net periodic pension costs $ 1,920 $ 1,529 $ 562
========= ========= ===========
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Corporation's consolidated balance sheets at December 31,
1994 and 1993 ($ in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested $ 22,709 $ 19,906
Nonvested 452 588
--------- ---------
Accumulated benefit obligation $ 23,161 $ 20,494
========= =========
Projected benefit obligation $ (30,635) $ (27,676)
Plan assets at fair value 31,549 29,935
--------- ---------
Plan assets in excess of projected benefit obligation 914 2,259
Unrecognized net loss 2,186 785
Unrecognized net assets being amortized over 15 years (2,758) (3,121)
Unrecognized prior service cost 2,878 2,540
Other 51
--------- ---------
Prepaid pension assets $ 3,220 $ 2,514
========= =========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.5%. The rate of
increase in future compensation was 6.0%. The expected long-term rate of
return on plan assets was 8.5%.
Plan assets included common stocks, trust department pooled funds,
short-term investment funds, and fixed investment funds guaranteed by insurance
carriers.
Operating expenses included $4,651,000 (1994), $5,450,000 (1993), and
$4,216,000 (1992) for contributions to the Corporation's other employee benefit
plans.
<PAGE> 16
NOTE 8 - Deposits
At December 31, 1994 and 1993, deposits consisted of the following ($ in
thousands):
<TABLE>
<CAPTION>
1994 1993
----------------------------- ------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 732,635 $ 732,635 $ 708,789 $ 708,789
NOW accounts 486,998 486,998 462,788 462,788
Money market deposit accounts 582,794 582,794 684,913 684,913
Savings accounts 236,202 236,202 244,987 244,987
Certificates of deposit 1,410,600 1,410,863 1,327,304 1,346,277
----------- ------------ ------------ ------------
Total $ 3,449,229 $ 3,449,492 $ 3,428,781 $ 3,447,754
=========== ============ ============ ============
</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> 17
NOTE 9 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1994, 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 $ 42,364
Term up to 30 days 43,017
Term of 30 to 90 days 27,130
Term of 90 days and over 66,239
Demand 512,148
-------
Total $690,898
=======
</TABLE>
The weighted average interest rate for these repurchase agreements was
5.17% at December 31, 1994. The repurchase agreements are collateralized by
specific U. S. Treasury and other U. S. Government agency securities with
carrying values of approximately $746,889,000 and fair values of approximately
$704,123,000.
<PAGE> 18
NOTE 10 - Income Taxes
The income tax provision included in the statements of income was as
follows ($ in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current $ 28,626 $ 32,671 $ 24,043
Deferred 611 (10,990) (6,553)
--------- --------- ---------
Net income tax provision $ 29,237 $ 21,681 $ 17,490
========= ========= =========
</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>
1994 1993 1992
--------------------- --------------------- ---------------------
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 $ 29,485 35.0% $ 25,325 35.0% $ 19,808 34.0%
(Decrease) increase in tax resulting from:
Tax exempt security interest net of
premium amortization (3,393) (4.0) (3,550) (4.9) (4,178) (7.2)
Nondeductible interest expense 429 0.5 247 0.3 546 0.9
State income tax 2,075 2.5 2,259 3.1 520 0.9
Other 641 0.7 (2,600) (3.6) 794 1.4
--------- --------- --------- --------- --------- ---------
Net income tax provision $ 29,237 34.7% $ 21,681 29.9% $ 17,490 30.0%
========= ========= ========= ========= ========= =========
</TABLE>
The income tax (benefit) provision included ($526,000) in 1994, $192,000 in
1993 and $1,156,000 in 1992 resulting from securities transactions.
Temporary differences between the financial statement carrying amounts and
the tax bases of assets and liabilities give rise to the following net deferred
tax asset, which is included in other assets ($ in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Allowance for loan losses $ 24,304 $ 24,156
Unrealized securities losses 4,937
Deferred compensation 2,827 2,197
Capitalized mortgage servicing costs 1,783 2,288
Accretion of discounts on securities (1,142) (1,160)
Accelerated depreciation and amortization (730) (1,128)
Other (145) 1,278
--------- ---------
Net deferred tax asset $ 31,834 $ 27,631
========= =========
</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 1994, the Corporation reached a settlement with the Internal
Revenue Service regarding the deduction for amortization of core deposit
intangibles. The effects of this settlement, which are not material, are
included in the Corporation's consolidated financial statements.
<PAGE> 19
NOTE 11 - LEASE COMMITMENTS
The Corporation currently has lease commitments for banking premises and
general offices and equipment which expire from 1995 to 2008. The majority of
these commitments contain renewal options which extend the base lease from 5 to
20 years. Rental expense approximated $2,221,000 in 1994, $1,855,000 in 1993,
and $1,960,000 in 1992.
Minimum rental commitments at December 31, 1994, under material,
noncancelable leases for banking premises and general offices and equipment,
were as follows ($ in thousands):
<TABLE>
<CAPTION>
Year ended Minimum Rental
December 31, Commitment
------------ --------------
<S> <C>
1995 $ 913
1996 749
1997 622
1998 518
1999 408
2000-2008 1,362
</TABLE>
NOTE 12 - 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. At December 31, 1994, obligations under forward contracts consist of
commitments to sell mortgages originated or purchased by the Corporation into
the secondary market at a future date. These obligations are entered into by
the Corporation in order to fix the interest rate at which it can offer
mortgage loans to its customers or purchase mortgages from other financial
institutions. Gains or losses on the sale of mortgages into the secondary
market (which
<PAGE> 20
have not been material) are recorded upon the sale of the mortgages. Any
decline in market value of mortgages held by the Corporation at the end of a
financial reporting period pending sale into the secondary market is recognized
at that time. As of December 31, 1994, the Corporation's exposure under
commitments to sell mortgages in the future is immaterial.
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 at December 31, 1994, as
represented below ($ in thousands):
<TABLE>
<CAPTION>
Contractual or
Notional Amount
---------------
<S> <C>
Financial instruments whose contractual amounts
represent credit risk:
Loan commitments $575,328
Standby and commercial letters
of credit written 35,304
Financial instruments whose contractual or notional
amounts exceed the amount of credit risk:
Forward contracts 34,250
</TABLE>
The fair values of loan commitments, letters of credit and forward
contracts approximate the fees currently charged for similar agreements or the
estimated cost to terminate or otherwise settle similar obligations. The fees
associated with these financial instruments or the estimated cost to terminate,
as applicable, are immaterial.
In January 1995, a judgment was rendered in a Mississippi circuit court
against the Corporation's subsidiary, Trustmark National Bank, in a case
related to the placement of collateral protection insurance ("CPI") by the Bank
on a particular loan. The judgment awarded $500 thousand in actual damages and
$38 million in punitive damages to the plaintiffs. Several other suits
relating to CPI have been filed against the Bank and are pending at various
stages. Management of the Corporation is vigorously pursuing the appeal of the
judgment mentioned above and the defense of the other pending suits. While the
ultimate outcome of any litigation is uncertain, Management believes, based on
the advice of legal counsel, that the judgment referred to above will be
reversed or substantially reduced and that the impact of this matter, the other
CPI related suits or any additional claims related to CPI will not be material
to the results of operations or financial position of the Corporation.
The Bank is involved in various other legal matters and claims which are
being defended and handled in the ordinary course of business. None of these
other matters is expected, in the opinion of Management, to have a material
adverse effect upon the financial position or results of operations of the
Corporation.
<PAGE> 21
NOTE 13 - STOCKHOLDERS' EQUITY
As mentioned in Note 1, the Corporation adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," on January 1, 1994. In
accordance with the statement, prior period financial statements have not been
restated to reflect the change in accounting principle. As of January 1, 1994,
stockholders' equity was increased by $14,326,000 (net of $8,874,000 in
deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available for sale.
Banking regulations limit the amount of dividends that may be paid without
prior approval of the Bank's regulatory agency. At December 31, 1994,
approximately $123,924,000 of undistributed earnings of the Bank included in
consolidated surplus and retained earnings was available for future
distribution to the Corporation as dividends, subject to approval by the Board
of Directors. Banking regulations also require maintaining certain minimum
levels of capital for which the Bank is in compliance.
<PAGE> 22
NOTE 14 - Summarized Financial Information of Trustmark Corporation
Summarized financial information of Trustmark Corporation, parent company
only, was as follows ($ in thousands):
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
------------------------
1994 1993
--------- ----------
<S> <C> <C>
Assets
Investment in bank $ 414,095 $ 382,227
Other assets 8,276 8,666
---------- ----------
Total Assets $ 422,371 $ 390,893
========== ==========
Liabilities and Stockholders' Equity
Accrued expenses $ 1,361 $ 3,302
Stockholders' equity 421,010 387,591
---------- ----------
Total Liabilities and Stockholders' Equity $ 422,371 $ 390,893
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
Dividends received from bank $ 14,178 $ 12,808 $ 11,502
Equity in undistributed earnings of subsidiaries 40,805 37,081 29,509
Other income 1,119 2,612 410
---------- ---------- ----------
56,102 52,501 41,421
Expenses 1,097 249 652
---------- ---------- ----------
Net Income $ 55,005 $ 52,252 $ 40,769
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended December 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operating Activities
Net income $ 55,005 $ 52,252 $ 40,769
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in investment in subsidiaries (40,805) (37,081) (29,509)
Other 473 (2,473) (712)
---------- ---------- ----------
Net cash provided by operating activities 14,673 12,698 10,548
Investing Activities
Cash paid in connection with business combination (1,105) (677)
Purchases of securities (567)
---------- ----------
Net cash used by investing activities (1,672) (677)
Financing Activities
Cash dividends-net cash used by financing activities (13,936) (12,504) (11,323)
---------- ---------- ----------
Decrease in cash and cash equivalents (935) (483) (775)
Cash and cash equivalents at beginning of year 1,308 1,791 2,566
---------- ---------- ----------
Cash and cash equivalents at end of year $ 373 $ 1,308 $ 1,791
========== ========== ==========
</TABLE>
Trustmark Corporation paid income taxes of approximately $32,725,000 in
1994, $32,124,000 in 1993, and $21,606,000 in 1992. No interest was paid by
the parent company during the three years ended December 31, 1994.
<PAGE> 23
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1993 1992 1991 1990
--------- ----------- ----------- ----------- ----------- Trustmark
<S> <C> <C> <C> <C> <C> Corporation
Consolidated Statements of Income and
Total interest income $ 315,449 $ 310,607 $ 310,626 $ 333,668 $ 328,883 Subsidiaries
Total interest expense 124,290 116,770 138,369 187,215 201,814
--------- ----------- ----------- ----------- -----------
Net interest income 191,159 193,837 172,257 146,453 127,069 Selected
Provision for loan losses 2,786 18,596 26,737 27,177 16,248 Financial
Other income 48,670 47,898 45,583 40,269 37,895 Data
Other expenses 152,801 150,781 132,844 120,226 109,527 (unaudited)
--------- ----------- ----------- ----------- ----------- ($ In Thousands
Income before income taxes and cumulative Except Share
effect of change in accounting principle 84,242 72,358 58,259 39,319 39,189 Data)
Income taxes 29,237 21,681 17,490 9,107 7,546
Cumulative effect of change in
accounting for income taxes 1,575
--------- ----------- ----------- ----------- -----------
Net income $ 55,005 $ 52,252 $ 40,769 $ 30,212 $ 31,643
========= =========== =========== =========== ===========
Consolidated Balance Sheets
Total assets $ 4,763,365 $ 4,708,206 $ 4,346,985 $ 4,136,835 $ 3,951,237
Securities - nontrading 1,862,351 1,980,566 1,718,635 1,436,086 1,287,692
Net loans 2,282,551 2,166,004 2,007,629 2,004,425 1,968,968
Deposits 3,449,229 3,428,781 3,431,383 3,389,989 3,293,558
Per Share Data
Net income per share before cumulative
effect of change in accounting principle $1.58 $1.50 $1.23 $0.91 $0.96
Cumulative effect of change in accounting
for income taxes 0.05
--------- ----------- ----------- ----------- -----------
Net income per share $1.58 $1.55 $1.23 $0.91 $0.96
========= ============ =========== =========== ===========
Cash dividends per share $0.41 $0.37 $0.34 $0.33 $0.32
========= ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1994 March 31 June 30 September 30 December 31
--------- ---------- ----------- ------------ ----------- Summary
<S> <C> <C> <C> <C> <C> of Quarterly
Interest income $76,326 $77,770 $79,558 $81,795 Results of
Net interest income 47,770 47,890 47,853 47,646 Operations
Provision for loan losses 312 423 694 1,357 (undaudited)
Income before income taxes 20,617 21,999 21,412 20,214 ($ In Thousands
Net income 13,820 14,696 13,940 12,549 Except Share
Net income per share $0.40 $0.42 $0.40 $0.36 Data)
<CAPTION>
1993 March 31 June 30 September 30 December 31
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income $76,181 $77,400 $78,775 $78,251
Net interest income 46,157 48,072 49,853 49,755
Provision for loan losses 4,082 4,517 6,963 3,034
Income before income taxes and cumulative
effect of change in accounting principle 16,226 20,164 17,263 18,705
Net income 12,259 14,352 13,247 12,394
Net income per share:
Before effect of change in accounting principle $0.32 $0.43 $0.39 $0.36
Cumulative effect of change in accounting
for income taxes 0.05
---------- ----------- ------------ -----------
Net income per share $0.37 $0.43 $0.39 $0.36
========== =========== ============ ===========
</TABLE>
All financial information has been restated for a business combination in 1994
accounted for as a pooling of interests.
<PAGE> 24
<TABLE>
<CAPTION>
Trustmark Dividends Stock Prices
Corporation Per ---------------------------
and 1994 Share High Low
Subsidiaries ----------- --------- ------------ ------------
<S> <C> <C> <C> <C>
1st Quarter $ .10 17 1/4 14 1/2
2nd Quarter .10 19 1/2 14 3/4
Principal 3rd Quarter .10 19 3/4 17 3/4
Markets 4th Quarter .11 19 1/2 15 3/4
And Prices
of The 1993
Corporation's -----------
Stock 1st Quarter $ .09 15 1/4 12 3/4
2nd Quarter .09 17 13 3/4
3rd Quarter .09 18 1/2 13 3/4
4th Quarter .10 19 1/2 14
</TABLE>
The Corporation's common stock is listed for trading on
the Nasdaq stock market as stock symbol TRMK.
<PAGE> 25
BUSINESS OF THE CORPORATION AND ITS SUBSIDIARIES
Trustmark Corporation is a one-bank holding company which was incorporated
under the Mississippi Business Corporation Act on August 5, 1968. On October
7, 1994, the Corporation became the sole owner of its major subsidiary,
Trustmark National Bank, when it exchanged 137,514 shares of the Corporation's
common stock for the minority shareholders' interest. Trustmark National Bank
now has 156 locations serving 44 Mississippi communities and offering a wide
range of financial services through 98 full-service branches and 27
limited-service branches. In addition, the Bank's ATM network includes 68
automated teller machines at on-premise locations with 42 located at
off-premise sites. Trustmark National Bank's wholly-owned subsidiary,
Trustmark Financial Services, Inc., provides a wide range of brokerage products
through a full-service investment center. The Corporation also 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 own real estate
investments. Today, F. S. Corporation and First Building Corporation are
primarily dormant and are not considered significant subsidiaries.
<PAGE> 26
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 financial statements found elsewhere in this report.
BUSINESS COMBINATIONS
On October 7, 1994, the Corporation was able to achieve its goal of
acquiring one financial institution annually by completing a merger with First
National Financial Corporation (FNFC) of Vicksburg, Mississippi and its
wholly-owned subsidiary, First National Bank of Vicksburg (FNBV). At the date
of consummation, FNBV had achieved the largest deposit market share in the
Vicksburg area through its 10 locations. The business combination was
accounted for as a pooling of interests; therefore, all financial data of the
Corporation as previously reported has been restated. At September 30, 1994,
FNFC reported total assets of $278 million, total deposits of $243 million,
total equity of $29 million and net income of $2.1 million.
On July 31, 1993, UniSouth Banking Corporation (UniSouth), of Columbus,
Mississippi, was merged with Trustmark National Bank. On August 7, 1992, the
Corporation purchased a substantial portion of the assets and substantially all
of the liabilities of the former Foxworth Bank from the Federal Deposit
Insurance Corporation. Both of these business combinations have been accounted
for by the purchase method of accounting. Accordingly, the financial
statements include the effect of these business combinations only since their
consummation. Please see Note 2 of the Notes to Consolidated Financial
Statements for additional information.
EARNINGS SUMMARY
Trustmark Corporation reported net income for the year ended December 31,
1994 of $55.0 million or $1.58 per share compared to $52.3 million or $1.55 per
share for 1993 and $40.8 million or $1.23 per share for 1992. The Corporation
was able to achieve record earnings as a result of a substantially lower
provision for loan losses combined with modest growth in noninterest income and
continuing efforts to improve its operating efficiency. It should also be
noted that net income for 1993 was positively impacted by the adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," as of January 1, 1993. The cumulative effect of this change in
accounting principle was to increase net income by $1.6 million or $.05 per
share.
Two key measures of profitability in the banking industry are return on
average assets (ROA) and return on average equity (ROE). ROA rose to 1.15% in
1994 from 1.14% in 1993 and .97% in 1992. ROE was 13.42% in 1994 versus 14.71%
in 1993 and 13.21% in 1992. ROE declined in 1994 because the pace of growth for
equity, which included for the entire year the effect of common stock issued in
the July 31, 1993 UniSouth merger, has exceeded the growth of earnings.
ASSET/LIABILITY MANAGEMENT AND LIQUIDITY
A key objective of asset/liability management is to manage the
<PAGE> 27
Corporation's assets and liabilities to optimize and maintain the spread
between interest earned and interest paid while ensuring an adequate liquidity
position. The Asset/Liability Committee monitors and adjusts the Corporation's
exposure to interest rates, within specific policy guidelines, based on its
view of current and expected market conditions. The primary tool utilized by
this committee is an asset/liability modeling system which is used to evaluate
exposure to interest rate risk and to project earnings and balance sheet
growth. The Asset/Liability Committees of both senior bank officials and the
Board of Directors meet monthly to review Trustmark's interest rate risk
position. Interest rate risk tolerances are defined by policy and, if
exceeded, are addressed and appropriate action taken to reduce any excess to an
acceptable level. The Corporation's latest net interest income forecasts for
the six month, twelve month and second twelve month periods were within policy
guidelines.
Another tool used to monitor the Corporation's overall interest rate
sensitivity is a gap analysis. The table below represents the Corporation's 90
day and one year gap position as of December 31, 1994 ($ in thousands):
<TABLE>
<CAPTION>
Interest Sensitive Within
90 days One Year
----------- -----------
<S> <C> <C>
Total rate sensitive assets $1,054,438 $1,643,597
Total rate sensitive liabilities 1,484,118 2,219,168
----------- -----------
Net gap $ (429,680) $ (575,571)
=========== ===========
</TABLE>
The analysis indicates that the Corporation is in a negative gap position
over the next three month and twelve month time horizons. Management believes
that it has adequate flexibility to alter the overall rate sensitivity
structure as necessary to minimize exposure to changes in interest rates.
During the course of 1994, the Corporation's negative gap position has
decreased in response to rising interest rates and uncertain market conditions.
The Corporation's goal is to maintain an adequate liquidity position to
compensate for expected and unexpected balance sheet fluctuations and to
provide funds for growth. This is achieved by maintaining a stable base of
core deposits, accessibility to local, regional and national funding sources,
readily marketable assets and diversity in customers, products and market
areas. The ability to maintain liquidity is also enhanced by consistent
earnings power and adequate capital. The Asset/Liability Committee establishes
guidelines which monitor the current liquidity position and ensure adequate
funding capacity.
EARNING ASSETS
During 1994, the banking industry rode the wave of success for the third
straight year. However, certain events of this past year left many wondering
exactly what 1995 will bring. Rising interest rates during 1994 began to dampen
the desire for mortgage loans which had enjoyed unprecedented demand during the
past three years and also pushed down prices on bonds which has decreased the
fair
<PAGE> 28
value of some banks' portfolios. On the other hand, the Federal Reserve's
effort to corral inflation by pushing up interest rates has had a minimal
impact in slowing the economy outside of the housing market. Some predictions
show that business spending will help boost the economy for some time even as
higher interest rates begin to take their toll on consumer spending. The
general consensus of the banking industry is that given the varied predictions
for the economy and the interest rate environment, 1995 will be a difficult
year.
The Mississippi economy continued to show signs of growth and recovery
during 1994. The November 7, 1994 issue of U. S. NEWS AND WORLD REPORT rated
Mississippi as having the eighth best overall economic health since the
recovery began in 1991. This comes after 1993's ranking as number one in the
nation in economic growth. Six variables were used in the 1994 ranking to
determine overall economic growth: employment growth (ranked 8th in the United
States), income growth (4th), new business growth (8th), building permit growth
(4th), home price growth (6th) and retail sales growth (41st). Among
Mississippi's neighboring states, Georgia's overall economic health ranked
12th, Tennessee - 16th, North Carolina - 18th, Louisiana - 19th, Arkansas -
20th and Alabama - 21st. The success of the Mississippi economy is predicted to
continue as the latest index of leading economic indicators rose for the second
consecutive month and the fourth time in the last six months.
The Corporation has been able to take advantage of the improved economic
atmosphere in Mississippi by improving its mix of earning assets. At December
31, 1994, earning assets were $4.317 billion compared to $4.309 billion at
December 31, 1993. The combined increase from loans, federal funds sold and
securities purchased under reverse repurchase agreements more than offset the
decline in securities experienced during 1994.
Total loans increased by $116.5 million or 5.22% during 1994.
Mississippi's switch from an agricultural-based economy to a more
manufacturing-based economy has provided an increased demand for business
lending. This conversion plus an increased marketing effort by the Corporation
are the primary factors for the $63.8 million increase in commercial and
industrial loans during 1994. The Corporation's commercial loan portfolio is
very diverse, without a significant concentration of credit in any one
particular industry segment, thus allowing for risk diversification in the
portfolio.
Consumer loans have grown by $76.5 million during 1994 primarily in the
area of automobile loans. Trustmark remains one of the market leaders in the
indirect lending business with plans to continue to grow through the expansion
of its coverage and consistent service in current market areas.
The most substantial decrease in the loan portfolio during 1994 was seen
in real estate loans, which declined by $28.9 million. This decline can be
traced to two major factors. First, rapidly rising interest rates on real
estate loans secured by one-to-four family residential properties slowed the
volume of both new and refinanced mortgages. Second, the Corporation continued
to be committed to the growth of its mortgage servicing portfolio. The
<PAGE> 29
Corporation intends to package and sell substantially all qualified one-to-four
family residential mortgage loans that the Corporation has originated or
purchased while retaining the right to service these mortgages. At December
31, 1994, the Corporation's volume of residential mortgage loan servicing was
approximately $2.09 billion compared to $1.68 billion at the end of 1993. This
24.5% increase can be attributed to the strong growth of loans purchased in the
correspondent market and the utilization of loans originated within the
Corporation.
The decline in residential mortgage loans was somewhat offset by growth
from residential construction and development loans. The Corporation will
continue to strengthen its lending relationships with builders and developers
as an enhancement to the growth in residential mortgage loans. Please see Note
5 of the Notes to Consolidated Financial Statements for more information on the
Corporation's loan portfolio.
The Corporation's emphasis on credit quality has produced a healthy loan
portfolio and a conservative approach to providing for potential loan losses.
This emphasis on credit quality can be seen in the Corporation's commitment to
the continued refinement of credit administration systems designed to monitor
overall policy compliance and the adequacy of supporting financial and
collateral documentation. As a result of this commitment, it is anticipated
that the Corporation's ability to identify and address actual and potential
credit problems will be further strengthened.
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 as well as
additional guidance provided by regulatory authorities. Specifically, the
analysis is based on a consideration of the following factors: estimated future
loss in significant and criticized loans, known deterioration in concentrations
of credit, classes of loans or pledged collateral, historical loss experience
based on volume and types of loans, results of independent review of the loan
portfolio, trends in portfolio volume, maturity and composition, off- balance
sheet risk, volume and trends in delinquencies and nonaccruals, consideration
of current economic conditions and downturns in specific local industries,
lending policies and procedures and experience, ability and depth of lending
management and staff. This analysis is presented to the Credit Policy
Committee with subsequent review and approval by the Board of Directors.
The current level of the allowance for loan losses approximates 2.77% of
total loans outstanding and provides the Corporation with an adequate reserve
coverage of nonperforming loans. Because of the imprecision and subjectivity
inherent in most estimates of expected credit losses, Management will continue
to take a prudent, yet conservative approach in the evaluation of the allowance
for loan losses. Please see Note 5 of the Notes to Consolidated Financial
Statements for an analysis of the changes in
<PAGE> 30
the allowance for loan losses.
Net charge-offs totaled $2.79 million in 1994, which resulted in an
annualized net charge-off ratio of .12%. This compares to $5.78 million in net
charge-offs, or a net charge-off ratio of .27%, realized in 1993. The current
level of net charge-offs for the Corporation remains below that of its peer
group.
A measure of asset quality in the financial institutions industry is the
level of nonperforming assets. Nonperforming assets include nonperforming
loans, consisting of nonaccrual and restructured loans, and other real estate.
See the table below for more details ($ in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------
1994 1993
------- -------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $12,817 $13,730
Other real estate 3,723 5,709
Loans past due 90 days or more and still accruing 2,252 1,816
------- -------
Total nonperforming assets and past due loans $18,792 $21,255
======= =======
</TABLE>
Asset quality of the Corporation is considered to be very good. The
overall volume of classified assets, which is comprised of classified loans and
other real estate owned, remains at approximately the same level reported at
December 31, 1993 and is favorable. As the table above illustrates, overall
nonperforming assets and past due loans remain well-controlled and continue to
compare favorably to peer levels. As of December 31, 1994, the Corporation
knows of no additional loans, other than those identified above, that
Management has serious doubts as to the ability of such borrowers to repay
principal and interest.
The securities portfolio is utilized to provide a quality investment
alternative for available funds and to provide a stable source of interest
income. At the end of 1994, total securities were $1.86 billion, a decline of
$118.2 million or 6.0% from the end of 1993. This decline is partially
attributable to the Corporation's decision to utilize this liquidity to reduce
its overnight borrowing position and to provide funds for loan growth.
Securities backed by the U. S. Government and its agencies comprise over 85% of
the total portfolio. For more information on the composition of the securities
portfolio, please see Note 4 of the Notes to Consolidated Financial Statements.
On January 1, 1994, the Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Under this accounting
standard, debt securities that the Corporation has the positive intent and
ability to hold to maturity are classified as held to maturity and reported at
amortized cost. Debt and equity securities which are not classified as held to
maturity or as trading securities are classified as available for sale and
reported at fair value, with unrealized gains and losses reported as a separate
component of stockholders' equity, net of income taxes. At the date of
adoption, the Corporation transferred
<PAGE> 31
securities of approximately $629 million from held to maturity to available for
sale. There were no other transfers made between classifications during 1994.
Within the securities portfolio, the available for sale portfolio has been
reduced since the end of the first quarter of 1994 due to instability in the
bond market resulting from the current rising interest rate environment.
Reinvestment activity was primarily in securities held to maturity having
higher yields, with the balance going to reduce the Corporation's overnight
borrowing position. The latest comparisons of the tax equivalent yield of the
securities portfolio show the Corporation remaining in the upper quartile when
compared to its peer group. This has been accomplished while maintaining the
quality of the portfolio.
At December 31, 1994, the amortized cost and fair value of securities
classified as available for sale were $452.6 million and $439.7 million,
respectively. This resulted in an unrecognized loss, net of tax, of
approximately $7.97 million as a separate component of stockholders' equity.
During 1994, the Corporation decreased the size of its short-term
portfolio as it sought funds for loan growth and the reduction of its overnight
borrowing needs. Products included in the short-term portfolio are primarily
U. S. Government agency securities classified as available for sale and reverse
repurchase agreements. As necessary, this portfolio is utilized as an
alternative to the overnight funds market and has contributed an additional
$721 thousand in interest income when compared to 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.
In 1994, realized gains were $4.197 million on securities available for
sale while realized losses totaled $5.594 million, resulting in net securities
losses of $1.397 million. Gross unrealized gains approximated $3.9 million
while gross unrealized losses approximated $16.8 million on these securities.
During 1994, there were no sales of securities held to maturity. Gross
gains of $23 thousand were realized on securities called prior to their
maturity. Gross unrealized gains approximated $5.3 million and gross unrealized
losses approximated $82.3 million on securities classified as held to maturity
at December 31, 1994.
Federal funds sold and securities purchased under reverse repurchase
agreements increased by $10.5 million when compared to the end of 1993. Market
conditions and liquidity needs are the driving forces behind the utilization of
federal funds sold and securities purchased under reverse repurchase agreements
as short-term investment products. Trading account securities continue to
represent an immaterial portion of the balance sheet.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Deposits are the primary source of funding for the Corporation's earning
assets. Trustmark offers a variety of products designed to attract and retain
customers with the primary focus on core deposits.
Total deposits at December 31, 1994 increased by $20.4 million when
compared to December 31, 1993. Interest-bearing deposits
<PAGE> 32
decreased by $3.4 million while noninterest-bearing deposits increased $23.8
million during that time period. Although interest-bearing deposits decreased
only slightly during 1994, the mix changed significantly. With rates rising
throughout the year, customers began to shift from shorter-term savings
instruments, primarily money market deposit accounts, to longer-term
certificates of deposit. As the rates on other money market products began to
rise, the Corporation successfully offered a certificate of deposit product
with a step-up feature that allowed it to retain its core deposit customers. In
1995, Management's strategy will be to increase core deposits and to reduce the
Corporation's dependence on short-term borrowings, principally federal funds
purchased and securities sold under repurchase agreements. The composition of
total deposits is presented in more detail in Note 8 of the Notes to
Consolidated Financial Statements.
Federal funds purchased increased $80.8 million when compared to December
31, 1993. This can be traced to an increase in funds purchased from
correspondent banks. With current market conditions uncertain, the Corporation
plans to reduce its position in federal funds purchased with excess funds from
maturing securities.
Securities sold under repurchase agreements fell by $72.5 million during
1994. With interest rates on the rise, some customers who had purchased
securities sold under repurchase agreements have sought alternative products
that would provide additional yield. However, this remains a very popular
alternative to traditional deposit products. More information on securities
sold under repurchase agreements is presented in Note 9 of the Notes to
Consolidated Financial Statements.
STOCKHOLDERS' EQUITY
The Corporation has always placed a great emphasis on maintaining a strong
capital base. The Corporation's Management and Board of Directors continually
review factors which could have an unfavorable impact on the level of
stockholders' equity. It is the Corporation's goal to maintain its position as
a "well capitalized" financial institution by expanding its capital base
through continued profitability, business combinations and possibly the sale of
stock. Based on the capital levels defined by banking regulators, a "well
capitalized" institution is one that has at least a 10% total risk-based
capital ratio, a 6% Tier 1 risk-based capital ratio and a 5% Tier 1 leverage
ratio. The Corporation's solid capital base is reflected in its regulatory
capital ratios. The table below illustrates these ratios at December 31, 1994
($ in thousands):
<TABLE>
<S> <C>
Tier 1 Capital $416,909
Tier 2 Capital 34,140
--------
Total Qualifying Capital $451,049
========
Total Risk Weighted Assets $2,700,308
=========
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
Tier 1/Risk Weighted Assets 15.44%
Tier 2/Risk Weighted Assets 1.26%
------
Total Qualifying Capital/Risk Weighted Assets 16.70%
======
Leverage Ratio 8.81%
======
</TABLE>
As shown in the table above, the Corporation's capital ratios surpass the
minimum requirements of 4% for the Tier 1 capital ratio and 8% for the total
risk-based capital ratio. The Tier 1 leverage ratio generally must exceed 3%
and is driven by evaluation and discretion of the regulators.
At December 31, 1994, the Corporation had stockholders' equity of $421.0
million which contained a net unrealized loss on securities available for sale,
net of taxes, of $7.97 million. This compares to total stockholders' equity of
$387.6 million at the end of 1993 and $323.2 million at the end of 1992.
During 1994, 3,737,776 shares of common stock were issued in connection with
business combinations. These additional shares bring the total outstanding at
December 31, 1994 to 34,910,683. In addition, the Corporation's adoption of
SFAS No. 115 on January 1, 1994 resulted in an increase to stockholders' equity
of $14.326 million to reflect the unrealized holding gains on securities
classified as available for sale, net of deferred taxes.
Based on its dividend payout ratio of 26.0%, the Corporation retained
74.0% of its earnings for 1994, generating an internal capital growth rate of
9.9%. Dividends for the fourth quarter of 1994 were raised to $.1075 per share
resulting in an annual dividend rate of $.43 per share. Book value for the
Corporation's common stock was $12.06 at December 31, 1994 compared to the
closing market price of $17.50.
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.
During 1994, the Corporation's level of net interest income dropped by 1.38% or
$2.7 million when compared to 1993 essentially due to its cost of funding
increasing at a somewhat faster pace than its yield on earning assets.
When compared to 1993, average earning assets rose 4.1% during 1994.
During the same time period, the yield on average earning assets declined by 20
basis points. This combination resulted in interest income generated by
earning assets increasing $4.8 million or 1.6% during 1994. The primary
contributor to this gain came from interest and fees on loans, which increased
7.1% during 1994 as a result of multiple increases in the prime rate combined
with growth in average loans. This more than offset declines in interest
earned on securities, which experienced reduced yields resulting from a lower
interest rate environment for reinvestment activity.
Average interest-bearing liabilities rose 2.1% in 1994, with
<PAGE> 34
the rate paid increasing by 14 basis points when compared to 1993. As a
result, interest expense generated by interest-bearing liabilities increased by
$7.5 million or 6.44% when compared to 1993. An increase in both the average
balance and rate paid on federal funds purchased and securities sold under
repurchase agreements more than offset a decline in the average balances of
interest-bearing deposits combined with an increased rate paid.
The table below illustrates the changes in net interest margin as a
percentage of average earning assets for the year ended:
<TABLE>
<CAPTION>
December 31,
---------------
1994 1993 Change
------ ------ -------
<S> <C> <C> <C>
Yield on interest-earning assets-FTE 7.36% 7.56% (.20)%
Rate on interest-bearing liabilities 2.85% 2.79% .06 %
------ ------ -------
Net interest margin-FTE 4.51% 4.77% (.26)%
====== ====== =======
</TABLE>
The fully taxable equivalent (FTE) yield on tax exempt income has been computed
based on a 35% federal marginal tax rate for both 1994 and 1993. While the
Corporation did experience a decline in the net interest margin during 1994, it
was able to maintain a stable level of net interest income in the face of an
uncertain interest rate environment and unstable market conditions. The
Corporation will continue to take the necessary precautions in order to
minimize exposure to changes in interest rates.
PROVISION FOR LOAN LOSSES
Earnings for 1994 were positively impacted by the substantial reduction in
the Corporation's provision for loan losses when compared to 1993 and 1992.
The provision for loan losses was $2.8 million in 1994 compared to $18.6
million in 1993 and $26.7 million in 1992 and covered net charge-offs on a
dollar for dollar basis thus bringing the allowance for loan losses at December
31, 1994 back to its December 31, 1993 level. Management will continue to take
a prudent, yet conservative approach in the evaluation of the allowance for
loan losses.
NONINTEREST INCOME
The Corporation stresses the importance of growth in noninterest income as
one of its key long-term strategies. Noninterest income for 1994, excluding
securities losses, increased $2.6 million or 5.6% when compared to 1993 and
$7.6 million or 17.8% when compared to 1992.
Trust service income increased by 6.6% in 1994 as Trustmark continued to
be one of the largest bank providers of asset management services in
Mississippi, with over $4.1 billion in assets under administration.
During 1994, other account charges, fees and commissions became the
largest component of noninterest income. The two major contributors to the
20.1% increase in this category were fees generated from residential mortgage
servicing and ATM usage.
<PAGE> 35
Management's commitment to the continued growth of the mortgage servicing
portfolio was evidenced by the $2.2 million or 35.6% increase in fees collected
from servicing mortgages during 1994. The Corporation's commitment to customer
service is reflected in the growth of ATMs experienced during 1994. The
Trustmark Express ATM System added an average of two automated teller machines
per month during the year, bringing the total in service to 110. As a result,
fees resulting from ATM usage grew significantly during 1994.
Year-to-date service charges have remained at essentially the same level
as 1993 as the Corporation continued to experience marginal deposit growth.
The primary reason for the 39.7% decline in other income during 1994 was a
reduction in gains on mortgage loans sold. Rising interest rates combined with
a reduction in refinancing volume contributed to this decline.
The Corporation recorded securities losses during 1994 as securities
acquired from the FNFC merger were sold in order to maintain the Corporation's
current investment management policies and practices. In addition, in response
to rising interest rates and uncertain market conditions, the Corporation sold
a portion of its securities available for sale in order to reposition itself
for the future.
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.
The utilization of the newest technological advances in the financial services
industry has allowed the Corporation to provide enhanced customer service while
improving its efficiency. The Corporation's commitment to lowering its cost
position is demonstrated by its efficiency ratios which remain substantially
below that of its peer group. Noninterest expense for 1994 increased $2.0
million or 1.3% when compared to 1993. This nominal increase is especially
noteworthy considering that expenses from both the Columbus and Tupelo
branches, which were acquired during the UniSouth acquisition, have been
included for the entire year of 1994 while expenses for 1993 were included only
from the acquisition date of July 31, 1993.
Salaries and employee benefits continue to comprise the largest portion of
other expenses and have increased 4.7% during 1994. This increase can be
primarily attributed to the additional salary expense incurred during 1994 from
the UniSouth acquisition and annual salary increases. The number of full-time
equivalent employees totaled 2,214 at December 31, 1994 compared to 2,230 at
December 31, 1993. This decrease points out the Corporation's commitment to
improving its operational efficiencies through the continued evaluation of its
staff levels. Personnel expense for the Corporation remains well below that of
its peer group.
Renovations to facilities purchased and leased in business combinations as
well as the general maintenance of existing facilities have contributed to the
5.2% increase in net occupancy expenses during 1994. Equipment expenses have
increased by 7.7% as the Corporation strengthens its retail delivery and
support systems through the purchase and implementation of the latest
technology.
<PAGE> 36
These investments will reduce back-office costs and enhance customer service
and sales effectiveness.
Market write-downs on other real estate decreased by 65.7% in 1994 due to
substantial improvement in asset quality. The Corporation's volume of other
real estate compares very favorably to that of its peer group. FDIC insurance
expense remained at essentially the same level as that of the prior year.
The amortization of intangible assets decreased 16.4% during 1994.
Increased prepayments of mortgages serviced resulted in the accelerated
amortization of mortgage servicing rights during 1993 which has more than
offset the amortization of intangible assets associated with the UniSouth
acquisition that began during the third quarter of 1993. In addition, the
amortization of intangible assets associated with a business combination in
1983 was completed during the fourth quarter of 1993.
Services and fees expense increased by 10.5% during 1994 due to increased
expenses for communications and advertising. Other expenses decreased 3.2%
during 1994 primarily due to declines in operational losses and the 1993
accrual of interest on the projected settlement of the core deposit case with
the Internal Revenue Service.
INCOME TAXES
In 1994, the Corporation's effective tax rate was 34.7% compared to 29.9%
in 1993 and 30.0% in 1992. The effective tax rate for 1994 was higher than
1993 and 1992 as the result of three factors. First, tax exempt income as a
percentage of total income declined during 1994. Second, the Corporation had
several nonrecurring favorable permanent differences in 1993. And finally,
differences arising from the nondeductible core deposit amortization related to
a business combination consummated in July of 1993 and the reduction in
deductible amortization related to the 1994 settlement of the core deposit
amortization issue with the Internal Revenue Service caused the effective tax
rate to rise in 1994.
The Corporation adopted SFAS No. 109, "Accounting for Income Taxes," as of
January 1, 1993. SFAS No. 109 required 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 $1.6 million
or $.05 per share.
OTHER REGULATORY MATTERS
The Financial Accounting Standards Board has issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures." The statement 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. Management expects the implementation
of this statement to be immaterial.
<PAGE> 37
During 1994, the Corporation adopted SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments."
This statement requires new disclosures about why a company uses derivative
financial instruments (such as futures, forwards, swaps and options) and what
strategies underlie their use. At December 31, 1994, obligations under forward
contracts consist of commitments to sell mortgages originated or purchased by
the Corporation into the secondary market at a future date. These obligations
are entered into by the Corporation in order to fix the interest rate at which
it can offer mortgage loans to its customers or purchase mortgages from other
financial institutions. As of December 31, 1994, the Corporation's exposure
under commitments to sell mortgages in the future is immaterial.
Prior to its merger with the Corporation, First National Financial
Corporation's subsidiary, First National Bank of Vicksburg (FNBV) entered into
an agreement with the Office of the Comptroller of the Currency and the United
States Department of Justice settling allegations that FNBV had discriminated
against certain minority borrowers. This agreement required FNBV to establish
a $750,000 fund to compensate certain borrowers and to reimburse $50,000 in
costs incurred by regulators during its investigation that was completed in
1993. At December 31, 1994, the Corporation believes it has complied with all
provisions of the agreement. As successor to FNBV, the Corporation will ensure
that future conformity with the agreement is honored.
PRINCIPAL OCCUPATION OF THE CORPORATION'S DIRECTORS AND
EXECUTIVE OFFICERS
This information is included elsewhere in this report in 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:
Harry M. Walker
Secretary & Treasurer
Trustmark Corporation
Post Office Box 291
Jackson, Mississippi 39205-0291
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