<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
TRUSTMARK CORPORATION
(Exact name of Registrant as specified in charter)
<TABLE>
<S> <C> <C>
MISSISSIPPI 6712 64-0471500
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
248 East Capitol Street
Jackson, MS 39201
(601) 354-5111
(Address, including Zip Code,
and telephone, including area code, of
Registrant's principal executive offices)
GERARD R. HOST
TRUSTMARK CORPORATION
248 East Capitol Street
Jackson, Mississippi 39201
(601) 949-6651
(Name, address, including Zip Code, and telephone
number, including area code, of agent for service)
Copies of communications to:
ROBERT D. DRINKWATER
BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
P. O. Drawer 119
Jackson, Mississippi 39205
(601) 948-3101
and
CRAIG N. LANDRUM
WATKINS LUDLAM & STENNIS, P.A.
P. O. Box 427
Jackson, Mississippi 39205
(601) 949-4900
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after
the effective date of this Registration Statement
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE PROPOSED
OF EACH MAXIMUM PROPOSED
CLASS OF OFFERING MAXIMUM AMOUNT
SECURITIES AMOUNT PRICE AGGREGATE OF
TO BE TO BE PER OFFERING REGISTRATION
REGISTERED REGISTERED (1) UNIT (2) PRICE (2) FEE (2)
---------- -------------- -------- --------- -------
<S> <C> <C> <C> <C>
Common Stock 555,556 $ 16.13 $8,959,704 $2,715
</TABLE>
(1) Maximum number of shares issuable in connection with the Merger.
(2) Based on book value of SCB shares pursuant to Rule 457(f)(2).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
PROXY STATEMENT
OF
SMITH COUNTY BANK
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [_____], 1997
PROSPECTUS
OF
TRUSTMARK CORPORATION
Relating to up to 555,556 shares of
COMMON STOCK
This Proxy Statement-Prospectus ("Proxy Statement") is being furnished
to the holders of shares of the common stock of Smith County Bank ("SCB"), a
Mississippi banking corporation, on or about [_______], 1997, in connection
with the solicitation of proxies by the Board of Directors of SCB for use at a
special meeting of shareholders and any adjournment thereof (the "SCB Special
Meeting") to be held on [__________________________________], 1997, at [____]
o'clock a.m., local time, at the main office of SCB located at 404 Main Street,
Taylorsville, MS 39168. At the SCB Special Meeting, the shareholders of SCB
will be asked to vote upon the proposed merger (the "Merger") of SCB with
Trustmark National Bank ("Trustmark Bank") under the charter of Trustmark Bank,
in connection with which, subject to certain potential adjustments and
limitations, each share of the outstanding common stock of SCB will be
converted into the right to receive a number of shares of the common stock of
Trustmark Corporation ("Trustmark") having a market value of $1,000.00 as of
the date the Exchange Ratio is determined.
This Proxy Statement also constitutes the prospectus of Trustmark
relating to up to 555,556 shares of Trustmark common stock to be issued to SCB's
shareholders pursuant to the Merger. The actual number of shares of Trustmark
common shares to be issued in connection with the Merger will be determined in
accordance with the terms of the Merger Agreement.
------------------------------
THE SHARES OF TRUSTMARK TO BE ISSUED PURSUANT TO THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Proxy Statement is [___________], 1997.
<PAGE> 4
AVAILABLE INFORMATION
Trustmark is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). A Registration
Statement on Form S-4 under the Securities Act of 1933, as amended, including
this Proxy Statement, has been filed by Trustmark with the Commission with
respect to the Trustmark common shares to be issued upon consummation of the
Merger. For further information pertaining to Trustmark and the shares of
Trustmark to which this Proxy Statement relates, reference is made to such
Registration Statement, including the Exhibits filed as a part thereof. As
permitted by the rules and regulations of the Commission, certain information
included in the Registration Statement is omitted from this Proxy Statement.
Copies of the Registration Statement, as well as the reports, proxy statements
and other information that Trustmark has filed with the Commission can be
obtained from the Commission at prescribed rates by addressing a written
request for such copies to the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C., 20549. In addition, the reports, proxy
statements and other information filed by Trustmark with the Commission can be
inspected and copied at the public reference facilities referred to above, the
Commission's Web site (http://www.sec.gov), and at the regional offices of the
Commission at: Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661; and New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York, 10048. Trustmark's common shares are included
for quotation on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ/NMS") and reports, proxy statements and other
information concerning Trustmark are available for inspection and copying at
the offices of the National Association of Securities Dealers, 1735 K Street,
N.W. Washington, D.C., 20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS RELATING TO TRUSTMARK
ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR COPIES
OF DOCUMENTS RELATED TO TRUSTMARK SHOULD BE DIRECTED TO TRUSTMARK CORPORATION,
248 EAST CAPITOL STREET, JACKSON, MISSISSIPPI, 39201, ATTN: GERARD R. HOST,
TELEPHONE NUMBER (601) 949-6651. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE
DATE OF THE SCB SPECIAL MEETING.
The following documents filed by Trustmark with the Commission under
Section 13 of the Exchange Act are hereby incorporated by reference into this
Proxy Statement: (i) Trustmark's Annual Report on Form 10-K for the year ended
December 31, 1996; (ii) Trustmark's Proxy Statement in connection with its 1997
Annual Shareholders' Meeting; (iii) Trustmark's Quarterly Reports on Form 10-Q
for the periods ended March 31 and June 30, 1997; and (iv) the description of
Trustmark's common stock contained in the registration of Trustmark's common
stock on Form
ii
<PAGE> 5
10 (SEC File No.0-3683) filed pursuant to Section 12 of the Exchange Act, and
all amendments thereto.
All documents filed by Trustmark pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date hereof and prior to the
SCB Special Meeting are hereby incorporated by reference into this Proxy
Statement and shall be deemed a part hereof from the date of filing of such
documents.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement and, if given or made,
such information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this Proxy
Statement, or the solicitation of a proxy, in any jurisdiction or to any person
to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Proxy Statement nor any distribution of the securities to
which this Proxy Statement relates shall, under any circumstances, create any
implication that there has been no change in the affairs of Trustmark since the
date hereof.
This Proxy Statement does not relate to any resales of Trustmark
common stock received by any person upon consummation of the Merger, and no
person is authorized to make any use of this Proxy Statement in connection with
any such resale.
iii
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The SCB Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Votes Required; Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SCB Board of Directors' Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Opinion of SCB's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Representations, Warranties, Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Resales of Trustmark Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Regulatory Authority Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Equivalent Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
TRUSTMARK CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SMITH COUNTY BANK SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THE SMITH COUNTY BANK SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Special Meeting; Voting; Proxies; Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting Securities and Principal Holders Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Securities Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TRUSTMARK CORPORATION AND TRUSTMARK NATIONAL BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SMITH COUNTY BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Market Prices of and Dividends Paid on SCB Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
iv
<PAGE> 7
<TABLE>
<S> <C>
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Liquidity, Capital Resources and Interest Rate Sensitivity . . . . . . . . . . . . . . . . . . . . . 17
Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SCB's Reasons for Effecting the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Opinion of SCB's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Trustmark's Reasons for Effecting the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Opinion of Trustmark's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Conversion; Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Special Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PROCEDURE FOR EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
RIGHTS OF DISSENTING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ACCOUNTING TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
RESALES OF TRUSTMARK COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
REGULATORY AUTHORITY APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
COMPARISON OF RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Board of Directors; Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Required Vote for Authorization of Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Amendment of Articles of Incorporation or Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Loans Secured By Issuer's Stock; Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Voluntary Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Issuance of Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
v
<PAGE> 8
<TABLE>
<S> <C>
Fiduciary Duties of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Annex A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Smith County Bank Financial
Statements December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . A-2
Smith County Bank Financial Statements
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
Annex B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Opinion of Chaffe & Associates, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Annex C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Opinion of Southard Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-2
Annex D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
Merger Agreement dated September 9, 1997, among Trustmark,
Trustmark Bank and Smith County Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . D-2
</TABLE>
vi
<PAGE> 9
SUMMARY
The following summary is not intended to be complete and is qualified
in all respects by the more detailed information included in this Proxy
Statement, the annexes hereto (which are hereby incorporated herein by
reference) and the documents incorporated herein by reference. A complete copy
of the Merger Agreement has been included as Annex D to this Proxy Statement.
Shareholders are urged to carefully review the entire Proxy Statement and other
documents to which this Proxy Statement refers. All information concerning
Trustmark and Trustmark Bank included in this Proxy Statement has been
furnished by Trustmark, and all information concerning SCB has been furnished
by SCB. Neither Trustmark nor SCB warrants the accuracy or completeness of
information relating to any other party.
THE PARTIES
Trustmark Corporation and Trustmark National Bank
Trustmark, a Mississippi corporation, is a one-bank holding company
which owns 100 percent of the outstanding shares of Trustmark Bank. As of June
30, 1997, Trustmark had total assets of $5.27 billion, net loans of $2.67
billion, total deposits of $3.70 billion and total stockholders' equity of $565
million. Through Trustmark Bank, Trustmark conducts a general commercial
banking and trust business. Trustmark Financial Services, Inc., a subsidiary
of Trustmark Bank, provides a broad range of securities brokerage services,
including the marketing of Trustmark's proprietary market funds. Trustmark's
principal executive offices are located at 248 East Capitol Street, Jackson,
Mississippi, 39201, Telephone Number (601) 354-5111. See the heading
"Trustmark Corporation and Trustmark National Bank."
Smith County Bank
SCB is a Mississippi state chartered banking institution. As of June
30, 1997, SCB had total assets of $96.89 million, net loans of $45.19 million,
total deposits of $87.31 million and total stockholders' equity of $8.96
million. SCB conducts a general commercial banking business through five
banking facilities located in Taylorsville, Mize, Soso and Raleigh,
Mississippi. SCB's principal executive offices are located at 404 Main Street,
Taylorsville, MS 39168, Telephone Number (601) 785-4305. See the heading
"Smith County Bank."
THE MERGER
Pursuant to the Merger Agreement dated September 9, 1997 (the "Merger
Agreement"), SCB will be merged with and into Trustmark Bank, under the charter
of Trustmark Bank. As a result of the Merger, other than shares with respect
to which holders perfect their dissenters' rights of appraisal, and subject to
certain potential adjustments and limitations set out in the Merger Agreement,
each outstanding share of the common stock of SCB issued and outstanding on the
Effective Date of the
1
<PAGE> 10
Merger (the date the Merger is consummated) shall be converted into the right to
receive a number of shares of Trustmark common stock having a market value, as
of the date the Exchange Ratio is determined, equal to $1,000.00 per SCB share
(the "Merger Consideration"). The "Exchange Ratio" is the quotient of $1,000.00
divided by the "Average Trustmark Price". The "Average Trustmark Price" is the
closing bid/asked price of Trustmark shares as reported on the NASDAQ market
system for the 15 consecutive trading days preceding the third calendar day
prior to the date of the SCB Special Meeting. IF THE AVERAGE TRUSTMARK PRICE IS
LESS THAN $27.00 OR GREATER THAN $30.25 ON THE DATE THE EXCHANGE RATIO IS
DETERMINED, THE EXCHANGE RATIO IS SUBJECT TO RENEGOTIATION BY THE BOARDS OF
DIRECTORS OF TRUSTMARK AND SCB. SEE THE HEADING "THE MERGER-THE MERGER
AGREEMENT."
The table set forth below shows examples of the Exchange Ratio,
assuming various Average Trustmark Prices:
<TABLE>
<CAPTION>
Number of
Assumed Average Trustmark Shares
Trustmark Price for SCB Bank Shares
--------------- -------------------
<S> <C>
$30.25 33.0579
$30.00 33.3333
$29.00 34.4828
$28.00 35.7143
$27.00 37.0370
</TABLE>
Any fractional Trustmark shares which would otherwise be issued as a
result of the Merger will not be issued. Instead, cash will be paid to SCB
shareholders in lieu of fractional Trustmark shares. See the heading, "The
Merger-Merger Agreement."
THE SCB SPECIAL MEETING
The SCB Special Meeting to consider and vote on the Merger will be
held on [______], 1997, at [____] o'clock [A.M.], local time, at the main
office of SCB located at 404 Main Street, Taylorsville, MS 39168. Only holders
of record of SCB's common shares at the close of business on [_____], 1997 (the
"SCB Record Date") will be entitled to notice of and to vote at the SCB Special
Meeting. On the SCB Record Date, there were 15,000 shares of SCB common stock
outstanding, each of which is entitled to one vote on each matter to be acted
on. See the heading "The Smith County Bank Special Meeting."
2
<PAGE> 11
VOTES REQUIRED; INTERESTS OF CERTAIN PERSONS
Approval of the Merger requires the affirmative vote of two-thirds of
the outstanding shares of SCB and Trustmark Bank. Trustmark, which owns 100
percent of the Trustmark Bank shares, intends to vote its shares in favor of
the Merger.
As of June 30, 1997, SCB's directors and executive officers
beneficially owned 4,033 (26.89 percent) of the outstanding common shares of
SCB. This includes 2,806 (18.7 percent) shares owned by Frank R. Day, Chairman
of the Board of Trustmark and 449 shares owned by Friend B. Walker, Jr. whose
brother is the President of Trustmark. SCB's directors have agreed to vote the
SCB shares owned by them in favor of the Merger.
Certain employees, officers and directors of Trustmark and their
family members are substantial shareholders of SCB. The Robert M. Hearin
Support Foundation and Capitol Street Corporation, in which the Robert M.
Hearin Support Foundation has a substantial indirect interest, own 2,038 (13.59
percent) SCB Shares. Trustmark Corporation owns 749 (4.99 percent) shares and
Trustmark National Bank holds 2 shares in a fiduciary capacity. Various other
directors, officers and employees of Trustmark own approximately 392 (2.6
percent). Various persons who are former employees of or who are otherwise
affiliated with Trustmark own approximately 725 (4.8 percent) shares.
Since persons affiliated with Trustmark have a significant ownership
interest in SCB, Trustmark's obligation to consummate the Merger is conditioned
upon Trustmark's receipt of an opinion from Trustmark's financial advisor that
the Merger is fair, from a financial point of view, to the shareholders of
Trustmark. See the heading "The Merger-Opinion of Trustmark's Financial
Advisor." THE OPINION OF TRUSTMARK'S FINANCIAL ADVISOR SHOULD NOT BE RELIED
UPON BY SCB'S SHAREHOLDERS AS ANY INDICATION OF THE FAIRNESS OF THE MERGER TO
THE SHAREHOLDERS OF SCB.
SCB BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors of SCB, which is soliciting proxies in
connection with the SCB Special Meeting, unanimously voted to approve the
Merger and recommends that SCB's shareholders vote FOR adoption of the Merger
Agreement.
The Board of Directors of SCB believes that the Merger Agreement is in
the best interests of SCB's shareholders. The Merger will provide significant
value to all SCB shareholders and will enable them to participate in
opportunities for growth that the Board believes the Merger makes possible. In
recommending the Merger to the shareholders, the Board considered, among other
factors, the financial terms of the Merger Agreement, including the
consideration to be paid to its shareholders; the liquidity it will afford
SCB's shareholders and particularly, Frank R. Day's expressed desire for
liquidity; the parties' respective earnings and dividend records, financial
3
<PAGE> 12
conditions, historical stock prices and management; and the likelihood and
potential adverse impact of increased competition in the market area if SCB
remains an independent bank.
Frank R. Day is a director of SCB, but abstained in voting on the
Merger due to the potential conflict of interest caused by Mr. Day's position
with Trustmark. See the heading "The Merger-Background of the Merger" and "
SCB's Reasons for Effecting the Merger."
OPINION OF SCB'S FINANCIAL ADVISOR
SCB retained Southard Financial, a Memphis, Tennessee, financial
valuation consulting firm, to render its opinion as to the fairness, from a
financial point of view, to the holders of SCB Common Stock of the
consideration to be paid in the Merger (the "Fairness Opinion"). In connection
with this engagement, Southard Financial evaluated the financial terms of the
Merger, but was not asked to, and did not recommend a specific Exchange Ratio
and did not assist in negotiating the Merger.
Southard Financial provided a written Fairness Opinion and supporting
documentation to the SCB Board. The full text of the Fairness Opinion is
attached as Annex C to this Proxy Statement. The summary of the Fairness
Opinion set forth in this Proxy Statement is qualified in its entirety by
reference to the Fairness Opinion.
REPRESENTATIONS, WARRANTIES, COVENANTS AND CONDITIONS
Pursuant to the Merger Agreement, both Trustmark and SCB made certain
representations and warranties to the other. The continued truth and accuracy
of those representations and warranties is a condition to consummation of the
Merger.
Trustmark's and Trustmark Bank's obligations to consummate the Merger
are additionally subject to, among other things: (i) the approval of the Merger
by SCB's Board of Directors and shareholders; (ii) receipt of all required
approvals of regulatory authorities; (iii) no material adverse change having
occurred in the financial condition, tangible properties or prospects of SCB
since December 31, 1996; (iv) the reserve for loan losses then maintained by
SCB being adequate to provide for the anticipated loan losses of SCB as of such
date in accordance with accepted audit, bank examination and bank regulatory
standards; (v) the tangible assets of SCB having a fair market value equal to
or greater than its liabilities; (vi) Trustmark having received the legal
opinion of counsel to SCB in accordance with the Merger Agreement; (vi)
Trustmark's receipt of an acceptable opinion of its counsel that the Merger
will qualify as a tax-free reorganization for federal income tax purposes; and
(vii) Trustmark having received the fairness opinion contemplated by the
Merger Agreement.
SCB's obligation to consummate the Merger is additionally subject to,
among other things: (i) the approval of the Merger by the Board of Directors
of Trustmark and the Board of Directors and shareholders of Trustmark Bank;
(ii) receipt of all required approvals of regulatory authorities; (iii) SCB's
receipt of an acceptable opinion of Trustmark's counsel that the Merger will
qualify as a tax-
4
<PAGE> 13
free reorganization for federal income tax purposes; (iv) receipt of the
opinion of counsel to Trustmark in accordance with the Merger Agreement; and
(v) no material adverse change having occurred in the condition, financial or
otherwise, of Trustmark or Trustmark Bank since December 31, 1996. See the
heading "The Merger-The Merger Agreement."
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned under
certain circumstances. See the heading "The Merger-The Merger Agreement."
EFFECTIVE DATE
The Effective Date is currently scheduled to occur on February 6, 1998
if, by such date, all conditions precedent are satisfied or waived. If the
Effective Date is delayed, it will occur within 30 days after all conditions to
closing have been satisfied or have been waived. See the heading "Regulatory
Authority Approvals."
EXCHANGE OF CERTIFICATES
If the Merger is approved, SCB's shareholders will be sent
instructions on the procedure for exchanging SCB share certificates for
certificates representing Trustmark shares. See the heading "Procedure for
Exchange of Certificates."
DIVIDENDS
SCB will be permitted to declare and pay an annual cash dividend out
of current operating profits earned since January 1, 1997 of up to $7.00 per
share. If the Effective Date does not occur by March 1, 1998, SCB will be
permitted to pay a quarterly dividend out of current operating profits of up to
$1.75 per share. Except as set forth above, SCB shall not declare or pay any
cash or other dividends prior to the Effective Date. See the heading "The
Merger-The Merger Agreement-Special Agreements."
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brunini, Grantham, Grower & Hewes, PLLC counsel to
Trustmark, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986. Accordingly, SCB's
shareholders, except for shareholders exercising dissenters' rights of
appraisal, will not recognize gain or loss for federal income tax purposes upon
the conversion of SCB common shares into Trustmark common shares. See the
heading "Federal Income Tax Consequences."
5
<PAGE> 14
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
"purchase" for financial reporting purposes. See the heading "Accounting
Treatment."
DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Federal law, SCB's shareholders will have dissenters'
rights of appraisal as a result of the Merger and will, accordingly, be
entitled to be paid cash for the value of their SCB shares. SCB's shareholders
should be aware that the assertion of dissenters' rights of appraisal requires
compliance with specific federal statutes. See the heading "Rights of
Dissenting Shareholders."
RESALES OF TRUSTMARK SHARES
Except for Trustmark shares held by "affiliates" of SCB or Trustmark,
the Trustmark shares received as a consequence of the Merger will be freely
transferrable. Shares acquired by persons who are deemed affiliates of SCB can
freely transfer their Trustmark shares, but, for a period of one year following
the Merger, must do so in "brokerage" transactions. See the heading "Resales of
Trustmark Common Shares."
REGULATORY AUTHORITY APPROVALS
An application relating to the Merger has been filed with the Office
of the Comptroller of the Currency. The Merger is also subject to antitrust
review by the United States Department of Justice. As of the date hereof, no
required regulatory authority approvals have been obtained. See the heading
"Regulatory Authority Approvals."
MARKETS AND MARKET PRICES
Trustmark's common shares are included for quotation on the
NASDAQ/NMS.
There is no active trading market for the outstanding common shares of
SCB. However, SCB's management is aware of one transaction involving 20 shares
for $30.00 per share in April, 1997 and one transaction involving 14 shares at
$300.00 per share in June, 1996.
EQUIVALENT PER SHARE DATA
The following table sets forth certain equivalent per share data
concerning SCB's outstanding common shares. This data reflects the equivalent
per share value of SCB common stock at September 8, 1997 (the day prior to the
public announcement of the Merger) assuming an Average Trustmark Price of
$30.125 (which was the Trustmark share closing price on that date) and at
October [__],1997 when Trustmark's shares closed at[____] multiplied by the
applicable Exchange Ratio based on an
6
<PAGE> 15
Average Trustmark Price between $27.00 and 30.25. The "Average Trustmark Price"
is the closing bid/asked price of Trustmark shares as reported on the NASDAQ
market system for the 15 consecutive trading days preceding the third calendar
day prior to the date of the SCB Special Meeting.
Pursuant to the Merger Agreement, if the Average Trustmark Price is
less than $27.00 or greater than $30.25 on the date the Exchange Ratio is
determined and the Merger is approved by SCB's shareholders, SCB and Trustmark
will be required to renegotiate the Exchange Ratio. If Trustmark and SCB are
unable to negotiate a mutually acceptable Exchange Ratio, either Trustmark or
SCB may terminate the Merger Agreement upon written notice delivered personally
to the other party on or before ten (10) days prior to Effective Date. THE
PARTY TERMINATING THE MERGER AGREEMENT MUST PAY THE NON-TERMINATING PARTY'S
REASONABLE EXPENSES, INCLUDING, BUT NOT LIMITED TO, ATTORNEY'S FEES, INCURRED
IN PURSUANCE OF THE MERGER.
SCB'S SHAREHOLDERS SHOULD BE AWARE THAT THIS PROVISION AUTHORIZES THE
BOARD OF DIRECTORS OF SCB TO NEGOTIATE AND APPROVE AN EXCHANGE RATIO THAT WILL
RESULT IN EACH SCB SHARE BEING CONVERTED IN THE RIGHT TO RECEIVE LESS MERGER
CONSIDERATION THAN TRUSTMARK SHARES HAVING A MARKET VALUE OF $1,000.00.
SCB'S SHAREHOLDERS SHOULD ALSO BE AWARE THAT SINCE THE EXCHANGE RATIO
WILL BE DETERMINED AS OF THREE BUSINESS DAYS PRIOR TO THE SCB SPECIAL MEETING,
SCB'S SHAREHOLDERS BEAR THE MARKET RISK INHERENT IN THE OWNERSHIP OF TRUSTMARK
STOCK FOR THE PERIOD SUBSEQUENT TO THE SCB SPECIAL MEETING. See the heading
"The Merger Agreement."
<TABLE>
<CAPTION>
Average SCB's Equivalent
Date Trustmark Price Per Share Value
- ---- --------------- ---------------
<S> <C> <C>
September 8, 1997 $ 30.125 $ 1,000.00
October , 1997 $[ ] $ [ ]
---- ----- -----
</TABLE>
7
<PAGE> 16
COMPARATIVE PER SHARE DATA
The following table presents certain data concerning net income per share,
dividends per share and book value per share for Trustmark and SCB on a
historical and pro forma basis.
The pro forma data gives effect to the Merger accounted for as a purchase
using an Exchange Ratio of 33.3333 (which is the Exchange Ratio if the Average
Trustmark Price is $30.00 per share) Trustmark common shares for each SCB
common share. Equivalent pro forma per share amounts for SCB are calculated by
multiplying the pro forma income per share, pro forma book value per share and
pro forma dividends per share of Trustmark by an Exchange Ratio of 33.3333.
This information is not necessarily indicative of the results of operations or
combined financial condition that would have resulted if the Merger had been
consummated at the beginning of the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
----------------------- ------------
1997 1996 1996
--------- ---------- ------------
<S> <C> <C> <C>
TRUSTMARK CORPORATION AND SUBSIDIARIES:
Net Income Per Share:
Historical $ 0.97 $ 0.90 $ 1.87
Pro Forma 0.97 0.90 1.86
Cash Dividends Per Share:
Historical 0.28 0.24 0.50
Pro Forma 0.28 0.24 0.50
Book Value Per Share:
Historical 15.52 14.23 15.01
Pro Forma 15.71 14.45 15.23
SMITH COUNTY BANK:
Net Income Per Share:
Historical 30.16 24.65 46.70
Equivalent Pro Forma 32.33 30.00 62.00
Cash Dividends Per Share:
Historical 0.00 0.00 7.00
Equivalent Pro Forma 9.33 8.00 16.67
Book Value Per Share:
Historical 597.31 548.59 567.22
Equivalent Pro Forma 523.67 481.67 507.67
</TABLE>
8
<PAGE> 17
TRUSTMARK CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA
The following table presents, on a historical basis, selected consolidated
financial data for Trustmark. This information is based upon the consolidated
financial statements of Trustmark incorporated herein by reference. Results for
the six months ended June 30, 1997, are not necessarily indicative of results to
be expected for the entire year. All adjustments necessary to arrive at a fair
statement of results of interim operations of Trustmark, in the opinion of
management of Trustmark, have been made. All information is in thousands except
per share data.
<TABLE>
<CAPTION>
Six months ended
June 30,
(unaudited) Year Ended December 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME
Total interest income $ 185,632 $ 178,535 $ 358,063 $ 348,341 $ 315,449 $ 310,607 $ 310,626
Total interest expense 85,069 82,158 161,267 161,545 124,290 116,770 138,369
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 100,563 96,377 196,796 186,796 191,159 193,837 172,257
Provision for loan losses 2,265 3,508 5,783 2,439 2,786 18,596 26,737
Noninterest income 36,773 32,138 66,974 59,467 48,670 47,898 45,583
Noninterest expense 82,070 76,509 160,557 152,484 152,801 150,781 132,844
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 53,001 48,498 97,430 91,340 84,242 72,358 58,259
Income taxes 17,784 16,942 32,291 31,582 29,237 20,106 17,490
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 35,217 $ 31,556 $ 65,139 $ 59,758 $ 55,005 $ 52,252 $ 40,769
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA
Net income per share $ 0.97 $ 0.90 $ 1.87 $ 1.71 $ 1.58 $ 1.55 $ 1.23
========== ========== ========== ========== ========== ========== ==========
Cash dividends per share $ 0.28 $ 0.24 $ 0.50 $ 0.44 $ 0.41 $ 0.37 $ 0.34
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
June 30,
(unaudited) Year Ended December 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS
Total assets $5,269,515 $5,168,134 $5,193,684 $4,992,592 $4,763,365 $4,708,206 $4,346,985
Securities - nontrading 2,054,415 2,091,469 1,953,202 1,842,325 1,862,351 1,980,566 1,718,635
Net loans 2,666,117 2,460,181 2,571,573 2,510,091 2,282,551 2,166,004 2,007,629
Deposits 3,697,423 3,606,785 3,597,436 3,530,045 3,449,229 3,428,781 3,431,383
</TABLE>
9
<PAGE> 18
SMITH COUNTY BANK SELECTED FINANCIAL DATA
The following table presents, on a historical basis, selected financial
data for SCB. This information is based upon the financial statements for SCB
attached as Annex A hereto. Results for the six months ended June 30, 1997, are
not necessarily indicative of results to be expected for the entire year. All
adjustments necessary to arrive at a fair statement of results of interim
operations of SCB, in the opinion of management of SCB, have been made. All
information is in thousands except per share data.
<TABLE>
<CAPTION>
Six months ended
June 30,
(unaudited) Year Ended December 31,
---------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
Total interest income $ 3,445 $ 3,470 $ 6,980 $ 6,580 $ 5,666 $ 4,078 $ 4,422
Total interest expense 1,800 1,827 3,643 3,396 2,434 1,612 1,920
-------- -------- -------- -------- -------- -------- --------
Net interest income 1,645 1,643 3,337 3,184 3,232 2,466 2,502
Provision for loan losses 60 120 0 205 1,974 231 250
Noninterest income 361 344 701 740 749 636 605
Noninterest expense 1,335 1,377 3,001 2,935 2,849 2,061 2,079
-------- -------- -------- -------- -------- -------- --------
Income before income taxes 611 490 1,037 784 (842) 810 778
Income taxes 159 120 336 250 (581) 200 151
-------- -------- -------- -------- -------- -------- --------
Net income $ 452 $ 370 $ 701 $ 534 ($ 261) $ 610 $ 627
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA
Net income per share $ 30.16 $ 24.65 $ 46.70 $ 35.62 ($ 17.41) $ 40.66 $ 41.78
======== ======== ======== ======== ======== ======== ========
Cash dividends per share $ 0.00 $ 0.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00
======== ======== ======== ======== ======== ======== ========
<CAPTION>
June 30,
(unaudited) December 31,
---------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEETS
Total assets $ 96,889 $ 94,608 $ 94,209 $ 91,230 $ 85,292 $ 56,493 $ 54,722
Securities - nontrading 39,724 42,235 41,897 33,115 31,349 22,190 20,908
Net loans 45,191 43,215 44,375 43,714 45,982 26,676 24,763
Deposits 87,311 86,598 85,081 82,789 75,654 48,526 47,208
</TABLE>
10
<PAGE> 19
THE SMITH COUNTY BANK SPECIAL MEETING
This Proxy Statement is being sent to the shareholders of SCB in
connection with the solicitation by the Board of Directors of SCB of proxies
for use at the SCB Special Meeting. A notice of the SCB Special Meeting
accompanies this Proxy Statement. At the SCB Special Meeting, SCB's
shareholders will be asked to consider and vote upon the proposed Merger of SCB
with and into Trustmark Bank pursuant to the terms of the Merger Agreement. If
the Merger is approved, SCB will be merged with and into Trustmark Bank under
the charter of Trustmark Bank. As a consequence of the Merger, other than
shares with respect to which holders have perfected their dissenters' rights of
appraisal, and subject to certain potential adjustments and limitations set out
in the Merger Agreement, each outstanding share of the common stock of SCB
issued and outstanding on the Effective Date shall be converted into the right
to receive shares of Trustmark common stock having a market value, as of the
date the Exchange Ratio is determined, equal to $1,000.00 per share.
Other than considering and voting upon the Merger, the Board of
Directors of SCB is not aware of any other business which may come before the
SCB Special Meeting. If any other business should come before the shareholders
assembled at the SCB Special Meeting, it is the intention of the Board of
Directors that the persons named in the proxies will vote the shares
represented by the proxies in accordance with the direction of the Board of
Directors of SCB.
The Board of Directors of SCB believes that the Merger is in the best
interests of SCB's shareholders and recommends that SCB's shareholders vote FOR
approval of the Merger Agreement.
SPECIAL MEETING; VOTING; PROXIES; REVOCATION
The SCB Special Meeting has been called for [____] o'clock [A.M.],
local time, on [_______], 1997, at the main office of SCB located at 404 Main
Street, Taylorsville, MS 39168. The Board of Directors of SCB has fixed the
close of business on [______], 1997, as the SCB Record Date for determining the
SCB shareholders entitled to notice of and to vote at the SCB Special Meeting
and any adjournment or adjournments thereof.
There are 15,000 shares of the common stock of SCB issued and
outstanding. Each share is entitled to cast one vote in connection with the
Merger. Adoption of the Merger Agreement will require the affirmative vote of
the holders of two-thirds of the outstanding SCB common shares, or 10,000
shares. For purposes of voting on the Merger, abstentions and nonvotes have
the same effect as "no" votes.
EACH SHAREHOLDER IS REQUESTED TO PROMPTLY FILL OUT AND MAIL THE
ENCLOSED PROXY TO SCB. Shares represented by properly executed proxies
received in time for the SCB Special Meeting will be voted in accordance with
the choice specified. Where no choice is specified, the shares will be voted
FOR the Merger.
11
<PAGE> 20
A shareholder executing and returning a proxy has the power to revoke
it at any time before it is voted on the specific matter to be voted upon. A
proxy may be revoked by execution of a subsequently dated proxy, by filing a
written revocation with the secretary of SCB prior to the meeting or by
revoking the proxy in person at the SCB Special Meeting.
SCB will pay all of the expenses incurred in connection with the
preparation and distribution of this Proxy Statement. Proxies may be solicited
by mail, personal contact, telephone, telegram or other form of communication
by directors, officers and employees of SCB. These persons will not receive any
special or additional compensation for soliciting proxies. Nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to the beneficial owners of shares held of record by them, and such
nominees, fiduciaries and other custodians will be reimbursed for their
reasonable out-of-pocket expenses.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SCB has outstanding 15,000 shares of common stock, $15.00 par value,
owned by approximately 148 shareholders. The following is certain information
about shares owned by SCB's management and by shareholders beneficially owning
more than five percent of the outstanding common stock of SCB.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
<S> <C> <C>
The Robert M. Hearin Support Foundation 1,499 10
Capitol Street Corp.
711 West Capitol St
Jackson, MS 39207
Frank R. Day 2,806 18.7
Third Floor
Trustmark Building
248 East Capitol St.
Jackson, MS 39201
Mrs. Jack R. Gibson(1) 784 5.2
P. O. Box 386
Collins, MS 39428
</TABLE>
- ------------------
(1) Includes 423 shares for which named person is co-trustee and, accordingly,
has shared voting and investment power.
12
<PAGE> 21
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the SCB Record Date, certain
information with respect to the beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), of SCB common stock for (i) each
director and executive officer of SCB; and (ii) all directors and executive
officers of SCB as a group. Unless otherwise indicated, all shares indicated
as beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF
OF BENEFICIAL OWNER SCB COMMON STOCK PERCENT OF CLASS
<S> <C> <C>
William D. Bassett 55 *
P. O. Box 239
Taylorsville, MS 39168
D. Michael Bryant 15 *
P. O. Box 233
Taylorsville, MS 39168
Bobbie G. Butler 10(1) *
512 Haven Drive
Taylorsville, MS 39168
Lynette M. Craft 10(1) *
Route 2, Box 236A
Mize, MS 39116
Cliff Currie 14 *
P. O. Box 616
Raleigh, MS 39153
Frank R. Day 2,806 18.71%
P. O. Box 291
Jackson, MS 39205
</TABLE>
- -------------------------
*Less than 1%
(1)Owned jointly with spouse
13
<PAGE> 22
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF
OF BENEFICIAL OWNER SCB COMMON STOCK PERCENT OF CLASS
<S> <C> <C>
Robert Edwin Grissom 20 *
Route 3, Box 89
Taylorsville, MS 39168
Robert Lindsey, Jr. 276 1.84%
2144 Old Bay Springs Road
Laurel, MS 39440
John K. Mayfield 25 *
P. O. Box 339
Taylorsville, MS 39168
John W. Murray 343(2) 2.29%
908 Summerland Road
Taylorsville, MS 39168
Diane R. Thompson 10(1) *
Route 3, Box 330
Taylorsville, MS 39168
F. B. Walker, Jr. 449(3) 3.00%
P. O. Box 393
Taylorsville, MS 39168
All directors and executive officers 4,033 26.89%
as a group ===== =====
</TABLE>
INTERESTS OF CERTAIN PERSONS
Certain directors of SCB may be said to have an interest in the
proposed Merger in addition to that person's interest as a shareholder of SCB.
Frank R. Day is the Chairman of the Board of Trustmark. The brother of F. B.
Walker, Jr. is the Secretary of Trustmark and the President of Trustmark Bank.
Pursuant to the Merger Agreement, Trustmark has agreed to continue the
employment of the employees of SCB for a minimum of one year after the
Effective Date.
- -------------------------
(2)Includes 323 shares owned jointly with spouse
(3)Includes 235 shares owned jointly with spouse, 5 shares owned by
daughter and 42 shares owned by spouse
14
<PAGE> 23
TRUSTMARK CORPORATION AND TRUSTMARK NATIONAL BANK
Trustmark is a one-bank holding company which currently owns 100
percent of the outstanding common shares of Trustmark Bank. The principal
executive offices of Trustmark are located in the Trustmark National Bank
Building, 248 East Capitol Street, Jackson, MS 39201, Telephone No. (601)
354-5111.
Through Trustmark Bank, Trustmark conducts a full range of commercial
banking and trust activities. For a more complete description of the business
of Trustmark, its historical financial condition and results of operations, its
summary of quarterly results of operations, and management's discussion and
analysis of financial condition and results of operations, shareholders of SCB
are referred to the information incorporated herein by reference including (i)
Trustmark's annual report on Form 10-K for the year ended December 31, 1996,
(ii) Trustmark's quarterly reports on Form 10-Q for the periods ended March 31
and June 30, 1997, (iii) Trustmark's proxy statement in connection with its
1997 annual shareholders' meeting, and (iv) the information contained in the
registration of Trustmark's common shares filed under Section 12 of the
Exchange Act, including any amendments or reports filed for the purpose of
updating this information. Copies of any of these documents can be obtained by
request addressed to Trustmark Corporation, 248 East Capitol Street, Jackson,
MS 39201, Attn: Gerard R. Host.
SMITH COUNTY BANK
BUSINESS
SCB is a Mississippi chartered banking institution insured by the
Federal Deposit Insurance Corporation. The principal executive offices of SCB
are located at 404 Main St., Taylorsville, MS 39168. SCB's main office and
three of its branches (Mize and Raleigh(2)) are located in Smith County and one
branch is located in Jones County, Mississippi. SCB's primary activities are
those associated with commercial banking, such as business and consumer
lending. Funds for lending are obtained from deposits, repayments of existing
loans, investments, and other sources. At June 30, 1997, SCB had total assets
of $96.89 million, total deposits of $87.31 million, net outstanding loans of
$45.19 million and total equity capital of $8.96 million.
MARKET PRICES OF AND DIVIDENDS PAID ON SCB STOCK
SCB has issued and outstanding 15,000 shares of common stock. There
is no established trading market in the shares of SCB common stock. However,
SCB's management is aware of one transaction involving 20 shares for $30.00
per share in April, 1997 and one transaction involving 14 shares at $300.00 per
share in June, 1996.
SCB has paid a $7.00 per share cash dividend in each of the last five
calendar years.
15
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discusses and analyzes SCB's financial condition,
changes in financial condition and results of operations. Also included is
information regarding SCB's operations which may not be readily evident in the
financial statements. This discussion and analysis should be read in
conjunction with the financial statements and related notes thereto included
elsewhere herein.
Financial Condition
Total assets increased 2.8% or $2,680,000 to $96,889,000 at June 30,
1997, from $94,209,000 at December 31, 1996. The significant changes in the
composition of the assets and liabilities as compared to December 31, 1996 were
related to the increase in cash and loans with funds received from increases in
deposits .
Cash and due from banks increased $3,474,000 to $7,802,000 from
$4,328,000 at December 31, 1996. The increase is due to approximately
$1,000,000 in investments maturing at June 30, 1997 which had not been
reinvested, requirements from the County to maintain 40% of their funds at The
Bank of Taylorsville which totaled $1,500,000 at June 30, 1997 and timing
differences related to cash letters and currency orders.
Federal funds sold at June 30, 1997 increased $600,000 from December
31, 1996 due to Bank investing excess non-interesting bearing funds.
Investments decreased from $41,897,000 at December 31, 1996 to
$39,724,000 as of June 30, 1997 or $2,173,000. The decrease is due to the cash
requirements regarding The Bank of Taylorsville and the maturing of investments
at June 30, 1997 as mentioned above.
Bank premises and equipment at June 30, 1997 increased $85,000 from
December 31,1996. The increase is due to renovations made to the Raleigh
branches.
Deposits increased $2,230,000 to $87,311,000 at June 30, 1997 from
$85,081,000 at December 31, 1996. The change is principally related to the
increase in public deposits.
Total assets increased 3.3% or $2,979,000 to $94,209,000 at December
31, 1996, from $91,230,000 at December 31, 1995. The significant changes in
the composition of the assets and liabilities as compared to December 31, 1995
were related principally to the increase in investments and loans funded by the
increase in deposits.
Federal funds sold at December 31, 1996 decreased $5,400,000 from
December 31, 1995. The decrease is due to excess funds being transferred to
long-term investments in order to obtain higher yields.
Investment securities increased $8,782,000 to $41,897,000 at December
31, 1996 from $33,115,000 at December 31, 1995. The increase is attributed to
the federal funds sold mentioned above and to the increase in deposits.
16
<PAGE> 25
Bank premises and equipment at December 31, 1996 increased $226,000
from December 31, 1995. The increase is due to the renovations being made at
the Raleigh branches.
Accrued interest receivable at December 31, 1996 increased $151,000
from December 31, 1995 which can be attributed to the increase in investment
securities and loans.
Deferred taxes at December 31, 1996 decreased $207,000 to $140,000
from $347,000 at December 31, 1995. The decrease is due to the utilization of a
net operating loss carryforward.
Deposits increased $2,292,000 to $85,081,000 at December 31, 1996 from
$82,789,000 at December 31, 1995. The change is principally related to the
increase in public deposits.
Liquidity, Capital Resources and Interest Rate Sensitivity
Liquidity represents SCB's ability to meet financial commitments
through the maturity and sale of existing assets or the availability of
additional funds. The primary assets of SCB are portfolios of investment
securities and loans, while liabilities are primarily composed of interest
bearing deposits. Assets and liabilities have varying maturities, and the
associated rates may be fixed or variable. Asset/liability management
techniques are used to maintain what are believed to be appropriate levels and
relationships between rate-sensitive assets and liabilities. They represent
the efforts to maximize overall returns and to minimize the risk of loss
associated with significant, often unforeseen, shifts in overall interest rates.
Management measures interest rate sensitivity by "gaps", which is the
difference between interest earning assets and interest-earning liabilities
which reprice or mature within specific time intervals. A positive gap
indicates that interest-earning assets exceed interest-bearing liabilities
within a given interval. A positive gap position results in increased net
interest income when rates increase and the opposite when rates decline.
Management attempts to structure the balance sheet to provide the repricing of
approximately equal amounts of assets and liabilities within specific time
intervals.
SCB had a negative gap to total assets for the one-year period as of
December 31, 1996 of 30.4%. A balance position is considered to be maintained
if the gap at the 12-month horizon is plus/minus 10% of total assets. The Board
of Directors will allow flexibility to act in accordance with anticipated
interest rate cycle phases while attempting to minimize any adverse effect on
earnings due to incorrect rate forecast. Therefore, the gap between rate
sensitive assets and liabilities will be allowed to fluctuate between plus/minus
30%.
Stockholders' Equity
SCB is subject to minimum capital requirements which are administered
by various federal and state regulatory authorities. These capital
requirements, as defined by federal guidelines, involve quantitative and
qualitative measures of assets, liabilities and certain off-balance sheet
instruments. Quantitative measures established by regulation to ensure capital
adequacy require SCB to maintain minimum amounts and ratios of total and Tier I
capital (as defined in the
17
<PAGE> 26
regulations) to risk-weighted assets (as defined). At December 31, 1996, SCB
meets all capital adequacy requirements to which it is subject. At December
31, 1996, the most recent notification from the Federal Deposit Insurance
Corporation categorized SCB as well capitalized. Additional information
related to capital requirements is included in Note I of the notes to financial
statements included elsewhere herein.
Results of Operations
Total interest income for the six months ended June 30, 1997 was
$3,445,000 compared to $3,470,000 for the six months ended June 30, 1996 or a
decrease of $25,000. The decrease is due to slight reduction in the effective
rate that was charged on loans. Also, total interest expense for the six
months ended June 30, 1997 decreased $27,000 from June 30, 1996 due to a change
in the effective rate being charged on deposits.
The provision for loan loss for the period ended June 30, 1997
decreased $60,000 from the period ended June 30, 1996. The decrease is due to
management's evaluation of the adequacy of the allowance of loan loss as
compared to total loans, which indicated a lesser provision was needed.
Noninterest income for the six month period ended June 30, 1997
increased $17,000 or 5.0% over the same period in 1996. The increase was
related to income earned from commissions from credit life insurance.
Noninterest expenses for the six month period ended June 30, 1997
decreased $43,000 or 3.1% over the same period in 1996. The decrease was
primarily related to the reduction in professional fees and advertising.
Total interest income for the year ended December 31, 1996 increased
$400,000 to $6,980,000 from $6,580,000 for the year ended December 31, 1995.
For 1996 average earning assets increased $4,471,000 and the yield on average
interest earning assets did not change from prior year which was 8.2%. Average
interest earning liabilities for 1996 increased $1,439,000 from 1995. The
average rate paid on these liabilities increased only marginally from 1995 to
1996.
Total interest income for the year ended December 31, 1995 increased
$914,000 to $6,580,000 from $5,666,000 for the year ended December 31, 1994.
The increase is due to acquisition of the Bank of Raleigh during 1994. The
yield on average assets increased slightly in 1995 due to the transitional
period in 1994 of converting Bank of Raleigh to the policies used by SCB.
Total interest expense increased $962,000 to $3,396,000 for 1995 from
$2,434,000 in 1994. The increase is also due to the acquisition of the Bank of
Raleigh and policy differences between the two Banks.
The provision for loan losses decreased $205,000 and $1,769,000 for
1996 and 1995, respectively, when compared to the prior year. The substantial
decrease in 1995 was due to several loans received in the acquisition of the
Bank of Raleigh which were written off as bad debts in 1994.
18
<PAGE> 27
The decrease in the provision in 1996 was due to management's evaluation of the
adequacy of the allowance of loan loss in relation to total loans which
indicated a provision was not needed in 1996.
There were only marginal differences in noninterest income for 1996
and 1995 which were related to the decrease in service charges on deposit
accounts in 1996 and in 1995 the change was related to service charges on
deposit accounts and credit life and other insurance commissions.
Noninterest expenses increased $64,000 and $88,000 for the years 1996
and 1995, respectively. The increase in 1996 was related primarily to the
reduction of FDIC assessment and an adjustment made in relation to deferred
taxes. The increase in 1995 was related primarily to the increase in salaries
and the reduction in FDIC assessment.
THE MERGER
BACKGROUND OF THE MERGER
In previous years, Trustmark Bank and SCB have engaged in informal
discussions concerning expanded banking opportunities. On July 16, 1997, Mr.
Gerard Host, the Treasurer of Trustmark and Executive Vice President and Chief
Financial Officer of Trustmark Bank, met with the Board of Directors of SCB for
the purpose of presenting a financial summary of a proposed transaction between
the SCB and Trustmark Bank. Following the presentation, the Board of Directors
of SCB engaged legal counsel to provide advice and counsel during the
negotiations. The Board also engaged Southard Financial, of Memphis,
Tennessee, to perform an informal valuation of SCB. Southard advised the SCB
Board that SCB would be valued at $13.5 Million to $16.5 Million.
Subsequently, the President of SCB met with Mr. Host to commence
negotiations. As a result of the negotiations, the parties agreed on a
purchase price of $1,000 per share, which represents a total price of $15
million for SCB.
Trustmark submitted a letter of intent to the Bank on August 20, 1997.
The letter of intent was executed by SCB on August 29, 1997, and negotiations
with respect to a definitive Merger Agreement commenced immediately thereafter.
On September 9, 1997, the Board of Directors of the Bank met and unanimously
approved the Merger Agreement, subject to shareholder and regulatory approval.
The Directors also voted to recommend to their shareholders that they approve
the Merger.
SCB'S REASONS FOR EFFECTING THE MERGER.
During the last several years there have been significant
developments in the banking industry. These developments have included the
increased emphasis and dependence on automation, specialization of products and
services, increased competition from other financial institutions, and a trend
toward consolidation and geographic expansion. SCB and its Board of Directors
concluded
19
<PAGE> 28
that SCB and the Board could best serve their shareholders, employees,
customers and communities by combining with a regional banking organization,
provided that SCB could obtain a fair price for its shareholders.
In deciding to enter into the Merger Agreement, the SCB Board of
Directors concluded that the Merger Agreement was in the best interests of SCB
and its shareholders because it would permit shareholders to exchange on
favorable terms their ownership interests in SCB for participation in the
ownership of a larger, more diversified, regional banking organization.
The Board of Directors also concluded that the shareholders of SCB
would benefit from the Merger since that they would attain greater liquidity in
their investment by obtaining shares of stock of a corporation whose securities
are more widely held and significantly more actively traded.
The Board of Directors also considered the expressed desire of Frank
R. Day (who is a significant shareholder and Chairman of SCB as well as the
Chairman of the Board of Trustmark) to combine the operations of the parties as
well as his desire to convert his SCB ownership into a more liquid investment.
SCB's Board of Directors consulted with its financial and other
advisors, as well as with SCB's management and considered a number of factors,
including, but not limited to, the following: (i) the parties' respective
earnings and dividend records, financial conditions, historical stock prices
and managements; (ii) the market for SCB's services and the competitive
pressures existing in SCB's market area; (iii) the outlook for SCB in the
financial institutions industry; (iv) the amount and type of consideration to
be received by SCB's shareholders pursuant to the Merger Agreement; (v) the
fact that Trustmark stock to be received pursuant to the Merger Agreement will
be listed for trading on the NASDAQ National Market and should provide SCB's
shareholders with liquidity that is currently unavailable to them; (vi) recent
changes in the regulatory environment which are anticipated to result in SCB
facing additional competitive pressures in its market area from other financial
institutions with greater financial resources capable of offering a broad array
of financial services; and (vii) the tax-free character of the Merger which
will result in neither SCB or its shareholders (except to the extent that cash
is received in respect of their shares) recognizing any gain in the
transaction.
SCB's Board of Directors did not assign any specific or relative
weights to the foregoing factors in its considerations. SCB's Board of
Directors believes that the Merger Agreement will provide significant value to
all SCB shareholders and will enable them to participate in opportunities for
growth that SCB's Board of Directors believes the Merger makes possible.
In considering the recommendation of SCB's Board of Directors with
respect to the Merger, SCB's shareholders are advised that Frank R. Day is the
Chairman of the Board of both SCB and Trustmark. Mr. Day has certain interests
respecting the Merger apart from his interest as a shareholder of SCB
generally. Frank R. Day has abstained from voting with respect to the approval
and adoption of the Merger Agreement due to this potential conflict of
interest.
20
<PAGE> 29
BASED ON THE FOREGOING, THE BOARD OF DIRECTORS OF SCB HAS APPROVED THE
MERGER AGREEMENT AND MERGER, BELIEVES THAT THE MERGER IS IN THE BEST INTEREST
OF SCB'S SHAREHOLDERS, AND RECOMMENDS THAT ALL SHAREHOLDERS OF SCB VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
OPINION OF SCB'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of September 24, 1997 (the
"Southard Financial Agreement"), SCB retained Southard Financial, a Memphis,
Tennessee, financial valuation consulting firm, to render its opinion as to the
fairness, from a financial point of view, to the holders of SCB Common Stock of
the consideration to be paid in the Merger (the "Fairness Opinion"). In
connection with this engagement, Southard Financial evaluated the financial
terms of the Merger, but was not asked to, and did not recommend a specific
Exchange Ratio and did not assist in negotiating the Merger. Although Southard
Financial advised SCB as to the potential range of value for its common stock,
the Exchange Ratio was determined by Trustmark and SCB after arm's length
negotiations. SCB did not place any limitations on the scope of Southard
Financial's investigation or review.
Southard Financial provided a written Fairness Opinion and supporting
documentation to the SCB Board. The full text of the Fairness Opinion, dated
October[ ___], 1997, which sets forth certain assumptions made, matters
considered, and limitations on the review performed by Southard Financial, is
attached as Annex C to this Proxy Statement and is incorporated herein by
reference. The summary of the Fairness Opinion set forth in this Proxy
Statement is qualified in its entirety by reference to the Fairness Opinion.
In arriving at its opinion, Southard Financial conducted interviews
with officers of Trustmark and SCB and reviewed the documents indicated in the
Fairness Opinion. Southard Financial did not independently verify the accuracy
and/or the completeness of the financial and other information reviewed in
rendering its opinion. Southard Financial did not, and was not requested to,
solicit third party indications of interest in acquiring any or all of the
assets of SCB. Further, other than as disclosed, Southard Financial did not
make an independent determination of the value of the assets of SCB or
Trustmark, nor was it furnished with any such determinations of value.
In connection with rendering its opinion, Southard Financial performed
a variety of financial analyses, which are summarized below. Southard
Financial believes that its analyses must be considered as a whole and that
considering only selected factors could create an incomplete view of the
analyses and the process underlying the Fairness Opinion. In its analyses,
Southward Financial made numerous assumptions, many of which are beyond the
control of SCB and Trustmark. Any estimates contained in the analyses prepared
by Southard Financial are not necessarily indicative of future results or
values, which may vary significantly from such estimates. Estimates of value
of companies do not purport to be appraisals or necessarily reflect the prices
at which companies or their securities may actually be sold. None of the
analyses performed by Southward Financial was assigned a greater significance
than any other.
21
<PAGE> 30
Dividend Yield Analysis: In evaluating the impact of the proposed
Merger on the shareholders of SCB, Southard Financial reviewed the dividend
paying histories of SCB and Trustmark. Based upon this review, it is
reasonable to expect that the shareholders of SCB, in total, will receive
dividends ____________________________ the level currently paid by SCB after
consummation of the Merger. This is predicated on the assumption that
Trustmark will continue per share dividends at or above current levels.
Earnings Yield Analysis: In evaluating the impact of the proposed
Merger on the shareholders of SCB, Southard Financial determined that, based
upon the Exchange Ratio of ______ Shares of Trustmark Common Stock for each
share of SCB Common Stock, the shareholders of SCB would realize a ________ of
_____% in their earnings per share, based upon 1996 and 1997 year-to-date
earnings of Trustmark and SCB. The analysis also suggests expected _________
earnings yields for SCB shareholders in subsequent years if the Merger in
consummated.
Book Value Analysis: In evaluating the impact of the proposed Merger
on the shareholders of SCB, Southard Financial determined that the shareholders
of SCB would have realized a ___________ in the book value of their investment
had the Merger been consummated at June 30, 1997. Reported book value of SCB
at June 30, 1997 was $_________ per share, while reported book value of
Trustmark at June 30, 1997 was $________ per share. Had the Merger been
consummated as of June 30, 1997, each former share of SCB Common Stock would
have had a book value of $______________ . This represents _________ % of
SCB's book value as of June 30, 1997.
Analysis of Alternatives: In evaluating the fairness of the proposed
Merger to the shareholders of SCB, Southard Financial reviewed with management
other offers received for the acquisition or merger of SCB. Further, Southard
Financial considered recent public market merger pricing information.
Analysis of Market Transactions: Based upon the terms of the Plan and
Agreement of Merger, and the October ___ , 1997 price of Trustmark Common
Stock, SCB shareholders would receive _____% of SCB's June 30, 1997 book value
per share, _____ times SCB's reported 1996 earnings and ___ times SCB's
estimated 1997 earnings. Based upon the review conducted by Southard
Financial, the pricing for SCB in the Merger is ______ the range of pricing
multiples seen in recent bank acquisitions.
Financial Analysis: Southard Financial reviewed the financial
characteristics of Trustmark and SCB with respect to profitability, capital
ratios, liquidity, asset quality, and other factors. Southward Financial
compared Trustmark and SCB to a universe of publicly traded banks and bank
holding companies and to peer groups prepared by the Federal Financial
Institutions Examination Council. Southard Financial found that the
post-Merger combined entity will have capital ratios and profitability ratios
_____ those of the public peer group.
Liquidity: Unlike SCB Common Stock, shares of Trustmark Common Stock
to be received in the Merger will be registered with the SEC and Trustmark
Common Stock is actively traded on
22
<PAGE> 31
the NASDAQ national market system. Further, except in the case of officers,
directors, and certain large shareholders of SCB ("Affiliates"), Trustmark
shares received in connection with the Merger will be freely tradeable with no
restrictions.
Southard Financial is a financial valuation consulting firm,
specializing in the valuation of closely-held companies and financial
institutions. Since is founding in 1987, Southard Financial has valued
non-traded securities of banks, thrifts, and other companies for mergers and
acquisitions, management buyouts, employee stock ownership plans, and other
purposes. For rendering the Fairness Opinion, SCB has agreed to pay Southard
Financial a fee of $10,000, plus reasonable out-of-pocket expenses. Except as
noted above, Southward Financial has never been engaged previously by SCB or
Trustmark. Neither Southward Financial nor its principals own an interest in
the securities of SCB or Trustmark.
TRUSTMARK'S REASONS FOR EFFECTING THE MERGER
Trustmark and Trustmark Bank's Boards of Directors met and approved
the merger on September 9, 1997. Frank R. Day, Harry M. Walker and Matthew L.
Holleman, III, all abstained from voting because of their positions as
Directors of Trustmark and shareholders (and, in Mr. Day's case, a Director) of
SCB.
Among the factors considered by Trustmark and Trustmark Bank were the
opportunity for Trustmark Bank to enhance its geographic market in the central
portion of the State by entering a new banking market in Smith County,
Mississippi that is bordered by counties in which Trustmark Bank has a market
presence, the enhancement of its statewide banking system, the financial
condition, current business, and future prospects of the two banks, and the
enhanced future ability of the combined entities to compete in the broader
product and geographical markets that have developed as a result of changes in
the financial services industry.
OPINION OF TRUSTMARK'S FINANCIAL ADVISOR
Chaffe & Associates, Inc. ("Chaffe") was retained as financial advisor
by Trustmark in connection with the Merger. Trustmark selected Chaffe because
of its experience in advising on mergers and acquisitions of and by financial
institutions. As part of its assignment, Chaffe was requested to provide an
opinion as to the fairness of the Merger from a financial point of view to the
stockholders of Trustmark. No limitations were imposed by Trustmark upon
Chaffe with respect to the investigations made or procedures followed by it in
rendering its opinion.
Neither Chaffe nor any of its officers or employees has any interest
in the shares of SCB or Trustmark.
Trustmark paid Chaffe approximately $7,500 in fees plus out-of-pocket
expenses for rendering its opinion. For any other services requested of Chaffe
by Trustmark, Trustmark agreed
23
<PAGE> 32
to pay Chaffe on an hourly basis. The fees received by Chaffe in connection
with its services to Trustmark were not dependent or contingent upon the
occurrence or lack thereof of any transaction.
Trustmark has agreed to indemnify and hold harmless Chaffe, its
subsidiaries and affiliates, and its officers, directors, stockholders,
employees, attorneys, agents and representatives, and the successor and assigns
of each of the foregoing parties from and against any person claiming to have
relied on Chaffe's advice or services, or the performance or nonperformance
thereof, or claiming to have been entitled to some benefit therefrom, or
claiming that such services were not adequately performed, and all related
damages, claims, demands, expenses or costs of any kind or nature, including
reasonable attorney fees and expenses, arising directly or indirectly, from or
in any way related to, the opinions or any other services performed by Chaffe,
provided that Chaffe has not been negligent or guilty of reckless or willful
misconduct in connection with the opinions, or any other services.
The Merger Consideration to be received by SCB's stockholders was
determined as the result of arm's length negotiations between representatives
of Trustmark and SCB. Chaffe did not participate in those negotiations or
recommend the amount or nature of the Merger Consideration.
The text of the opinion of Chaffe is attached as Annex B to this Proxy
Statement. The following discussion is a summary of Chaffe's fairness opinion,
the procedures it followed and its findings. SHAREHOLDERS OF SCB SHOULD NOT
RELY ON THE OPINION OF CHAFFE AS ANY INDICATION OF THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE MERGER TO THE SHAREHOLDERS OF SCB.
Analysis of Selected Financial Data
Chaffe reviewed the financial performance of SCB and utilized several
valuation models to examine fairness. These valuation models are based on a
public peer group, the discounted cash flow model (DCF) and three merger peer
groups with various pricing multiples. In the process of valuation, Chaffe
gave the most weight to the values derived from the merger peer group model.
The circumstances of the valuation are more directly in line with these
specific valuation models than the public peer group models, which indicate
marketable, minority value and must be adjusted for a control value. The
valuation emphasizes earnings, as they are more indicative of value than other
pricing parameters.
SCB's 1996 net income was $701,000, compared to $534,000 in 1995 and a
($261,000) loss in 1994. Net income for the three months end March 31,1997 and
six months ending June, 30, 1997 was $191,000 and $452,000, respectively.
SCB's annualized ROAA as of March 3l, 1997 was 0.86%, compared to 1.22% for the
UBPR peer group. SCB's figure was up from 0.74% for the same period in 1996.
SCB's ROAE increased from 8.49% in March 1996 to 9.44% in March 1997.
However, SCB's UBPR peer group's ROAE decreased from 12.97% in March
1996 to 12.65% in March 1997. SCB's net interest income has historically been
below that of its peer group. SCB's net interest income as of March 31, 1996
was 3.49% of average assets versus 4.37% for the
24
<PAGE> 33
peer group. SCB's noninterest income was 0.71% of assets compared to 0.66% for
the peer group. Also, SCB's personnel expense is 1.53% of average assets
compared with 1.59% for its peer group, and SCB's average annual personnel
expense per employee is $28,550 compared with $31,930 for its peer group.
SCB's asset quality improved with a NPA-to-asset ratio of 0.43% as
of March 31, 1997, compared with 0.83% as of December 31,1996. The
NPA-to-asset ratio as of December 31, 1995, 1994, and 1993 was 0.42%, 1.03%,
and 0.62%, respectively. March 1997 nonperforming loans to loan loss reserve
ratio was 33.39% versus 53.74% for its UBPR peer group, sharply down from
60.66% at December 31, 1996. Historically, the nonperforming loans to loan
loss reserve ratio was 36.93%, 96.67%, and 65.08% as of December 31, 1995,
1994, and 1993, respectively. Net loss to average total loans was 0.06% for
both SCB and its peer group. In 1996, SCB had more recoveries than
charge-offs, reflecting a conservative charge-off policy in earlier years.
Historically, net loss to average total loans was 0.13%, 5.38%, and 0.85%,
respectively, in 1995, 1994, and 1993.
SCB is well capitalized with a tier I leverage capital ratio of 9.02%
as of March 31, 1997, compared to 8.78% as of December 31, 1996.
Stock Price and Dividend Review
Chaffe reviewed certain historical market information concerning SCB
common stock and noted that no independent market exists for these shares.
Chaffe noted that management of SCB knew of only one arm's length transaction
in SCB stock during the last 18 months.
Chaffe reviewed the dividend histories and current dividend levels of
SCB and Trustmark, and noted that SCB's and Trustmark's annual dividend per
share were $7.00 and $0.50, respectively. According to the Merger Agreement,
each outstanding share of SCB shall be converted into a number of shares of
Trustmark common stock equal to the quotient of $1,000.00 divided by the
average closing bid/asked market price of Trustmark shares over a certain
period ("Average Trustmark Price"). If the Average Trustmark Price is less
than $27.00 or greater than $30.25 per share, the boards of Trustmark and SCB
are authorized to renegotiate the Exchange Ratio. Based on Trustmark's closing
price of $30.937 at September 25, 1997, and assuming that the computation of
the Exchange Ratio pursuant to the Merger Agreement is unchanged, each
outstanding share of SCB should receive an equivalent cash dividend of $16.16.
Analysis Of Selected Merger Transactions
In order to obtain a valuation range for SCB, Chaffe performed an
analysis of prices paid for selected banks with characteristics comparable to
SCB, although Chaffe noted that no transaction was identical to the transaction
proposed. Comparable transactions were considered to be those announced in the
United States for the period July 1, 1996 to June 30, 1997, in which the
sellers had total assets of between $50 million and $120 million, a tangible
equity ratio between 8% and 15%, return on average equity between 6% and 12%,
and nonperforming assets less than 1.00%. In addition, Chaffe performed an
analysis of prices paid for a similar group of selected banks, limited
25
<PAGE> 34
in geographic area to sixteen states in the southern United States. Finally,
Chaffe performed an analysis of prices paid for substantially all Mississippi
banks sold during the period July 1, 1996 to June 30, 1997. With respect to
each of these groups of transactions and the proposed Merger, Chaffe compared
the prices to be received by the peer groups as a multiple of their tangible
equity, their earnings per share for the four quarters prior to the
announcement of the transaction, their premium over tangible equity to core
deposits, and their total assets. The following table summarizes certain
results of this analysis:
<TABLE>
<CAPTION>
SCB/ U.S. PEER GROUP SOUTHERN PEER MISSISSIPPI PEER
TRUSTMARK GROUP GROUP
<S> <C> <C> <C> <C>
SELLER TOTAL ASSETS (000'S)
MEAN $72,285 $72,386 $313,128
MEDIAN $96,774 $68,047 $69,215 $126,508
SELLER TANGIBLE EQUITY/ ASSETS 9.10% 10.46% 10.67% 11.17%
SELLER YTD ROAA 0.95% 0.94% 0.93% 1.26%
SELLER YTD ROAE 10.53% 9.10% 8.77% 12.13%
SELLER NPA/ ASSETS 0.69% 0.20% 0.21% 0.46%
PRICE/ TANGIBLE EQUITY 1.70X 2.08% 2.08X 2.30X
PRICE/ 4-QUARTER EPS 19.16X 19.57X 20.63X 20.67X
TANG. BOOK PREMIUM/ 7.79% 14.17% 14.17% 19.93%
CORE DEPOSITS
PRICE/ ASSETS 15.48% 21.63% 21.63% 25.10%
</TABLE>
Discounted Cash Flow Analysis
Using the discounted cash flow analysis of SCB, Chaffe determined a
range of net present values for the SCB common stock based on the stream of
after-tax cash flows of SCB, which included forecast of cash flow for the years
1997-2001 based on 6% annual growth projected by Chaffe after reviewing SCB's
historical growth, and constant cash flow thereafter. Chaffe reviewed these
forecasts and assessed the likelihood of SCB achieving such forecasts. Chaffe
then discounted these cash flow streams assuming an estimated required rate of
return for SCB of 14.27% determined by using established capital asset pricing
methods (CAPM). The CAPM is commonly used to determine the expected return on
an individual security.
As reported in the Ibbotson Associates Stocks, Bonds, Bills and
Inflation 1996 Yearbook, the S & P 500 stock composite index has produced an
average per annum return premium of 7.4% when
26
<PAGE> 35
measured against the 20-year Treasury rate over a 69 year period (1926-1995).
This rate modified by the appropriate beta, is used as the systematic market
risk premium. The risk-free rate, the yield on 20-year treasury, was 7.12%.
The small company premium was 3.60%.
Beta is the measurement of the relationship between the return on an
individual security and the return on the market as measured by a broad market
index, such as the S & P 500 index. In other words, beta measures the
volatility of the return of an individual security relative to the market as a
whole. When a stock is not widely traded and no specific beta is available, a
beta for a group of similar companies is used in its place. Chaffe used an
average of the betas for the larger publicly-traded banks or bank holding
companies with market share in Louisiana, calculated on the weekly stock
closing price versus the S & P 500 index for a period of two years. Beta is
calculated to be 0.48.
Together, these rates indicate an expected rate of return of 14.27%
(14.27% = 7.12% + (7.40% x 0.48) + 3.600/o). Chaffe also analyzed the estimated
future dividend stream of SCB through the year 2001 plus a terminal value for
SCB common stock as part of its determination of a range of net present values
for shares of SCB common stock.
The DCF model resulted in a lower value, based on 1997-2001
projections from SCB's strategic plan, than most other values derived from
public and merger peer groups. This is understandable because the DCF value
represented the total value of SCB on an independent basis, without any benefit
from cost savings/revenue enhancements that an acquiror may otherwise realize.
Chaffe gave substantial weight to the value derived from merger peer groups to
reach our conclusion.
In arriving at its fairness opinion, Chaffe did not rely on any single
analysis, but relied on a combination of factors derived from all of the
analytical procedures employed. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Conclusions based on these analyses are not necessarily
mathematical. Chaffe believes that the summary set forth above and Chaffe's
analysis must be considered as a whole and that selecting portions of the
analyses performed by Chaffe are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the value of
businesses do not purport to be appraisals or necessarily reflect the prices at
which businesses actually may be sold. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis.
Neither Chaffe nor any of its officers or employees has any interest
in the any securities of SCB or Trustmark. Through its experience in the
securities industry, in investment analysis and appraisal, and in related
corporate finance and investment banking activities, Chaffe has stated that it
is competent to perform an fair market value of this transaction.
27
<PAGE> 36
The proposed transaction implies a value of $15,000,000, or $1,000 per
SCB share. In fact, Trustmark will not pay $15,000,000, since those shares
already owned by Trustmark will be canceled. This value is at the lower end of
the range of control value we determined for SCB. Based on the financial
information as of June 30,1997, this offer represented a P/E ratio of 19.35,
P/TB ratio of 1.70, price to deposits ratio of 17.20%, price to core deposits
ratio of 18.91%, a tangible book premium/core deposits of 7.79%, and
price-to-assets ratio of 15.50%.
In summary, Chaffe's opinion is that the proposed price of $1,000
per SCB County share is fair to the Shareholders of Trustmark from a financial
point of view.
THE MERGER AGREEMENT
The following describes certain aspects of the Merger Agreement dated
as of September 9, 1997, and of the proposed Merger. This description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement which is attached hereto as Annex D.
CONVERSION; FRACTIONAL SHARES
On the Effective Date, other than shares with respect to which holders
have perfected their dissenters' rights of appraisal, and subject to certain
adjustments and limitations set out in the Merger Agreement, each outstanding
share of the common stock of SCB issued and outstanding on the Effective Date
shall be converted into the right to receive a number of shares of Trustmark
common stock having a market value, as of the date the Exchange Ratio is
determined, equal to $1,000.00 per share. The Exchange Ratio is the quotient of
$1,000.00 divided by the Average Trustmark Price. The "Average Trustmark Price"
is the closing bid/asked price of Trustmark shares as reported on the NASDAQ
market system for the 15 consecutive trading days preceding the third calendar
day prior to the date of the SCB Special Meeting.
The table set forth below shows examples of the Exchange Ratio,
assuming the Average Trustmark price of Trustmark Common Stock.
<TABLE>
<CAPTION>
Assumed Average Number of
Trustmark Price of Trustmark Shares
Trustmark Common Stock for SCB Bank Shares
---------------------- -------------------
<S> <C>
$30.25 33.0579
$30.00 33.3333
$29.00 34.4828
$28.00 35.7143
$27.00 37.0370
</TABLE>
On [RECORD DATE] the Average Trustmark Price of a share of Trustmark
Common Stock was $__________.
28
<PAGE> 37
DUE TO FLUCTUATION IN THE TRADING PRICES OF TRUSTMARK COMMON STOCK,
THE ACTUAL NUMBER OF SHARES TO BE RECEIVED BY SCB SHAREHOLDERS CANNOT CURRENTLY
BE DETERMINED.
If, between the date of the Merger Agreement and the Effective Date,
Trustmark's shares are changed into a different number of shares or shares of a
different class by reason of any reclassification, recapitalization, stock
split or stock dividend with a record date within such period, the number of
Trustmark common shares to be issued and delivered in connection with the
Merger shall be appropriately and proportionately adjusted so that the number
of Trustmark shares to be issued in connection with the Merger will equal the
number of Trustmark shares that SCB's shareholders would have received had the
record date for such reclassification, recapitalization, stock split or stock
dividend been immediately following the Effective Date.
No fractional shares of Trustmark will be issued. In lieu of the
issuance of fractional shares, each holder of SCB common shares who would
otherwise be entitled to a fractional share of Trustmark common stock will be
paid cash upon surrender of all of the shareholder's SCB share certificates in
an amount equal to the product of the fractional Trustmark share to which such
shareholder would otherwise have been entitled multiplied by the Average
Trustmark Price used to determine the Exchange Ratio.
The number of Trustmark shares to be received by SCB's shareholders in
connection with the Merger is subject to adjustment in certain circumstances.
Pursuant to Section 2.4 of the Merger Agreement, if the Average
Trustmark Price is less than $27.00 per share or greater than $30.25 per share
and the Merger is approved by SCB's shareholders, then SCB and Trustmark are
required to meet to consider the implications of the Average Trustmark Price on
the proposed transaction. The Boards of Directors of Trustmark and SCB are
authorized to renegotiate the Exchange Ratio for the number of shares of
Trustmark stock into which SCB common shares shall be converted. If Trustmark
and SCB are unable to negotiate a mutually acceptable Exchange Ratio, either
Trustmark or SCB may terminate Merger Agreement upon written notice delivered
personally to the other party on or before ten (10) days prior to Effective
Date.
The party terminating the Merger Agreement must pay the
non-terminating party's reasonable expenses, including, but not limited to,
attorney's fees, incurred in pursuance of the Merger.
SCB'S SHAREHOLDERS SHOULD BE AWARE THAT THIS PROVISION AUTHORIZES THE
BOARD OF DIRECTORS OF SCB TO NEGOTIATE AND APPROVE AN EXCHANGE RATIO THAT WILL
RESULT IN EACH SCB SHARE BEING CONVERTED INTO THE RIGHT TO RECEIVE LESS MERGER
CONSIDERATION THAN TRUSTMARK SHARES HAVING A MARKET VALUE OF $1,000.00.
29
<PAGE> 38
REPRESENTATIONS, WARRANTIES AND COVENANTS
Pursuant to the Merger Agreement, SCB made various representations and
warranties concerning SCB's corporate and capital structure, financial
condition, liabilities, legal and regulatory compliance, litigation and related
matters. Similar representations and warranties were made by Trustmark and
Trustmark Bank. The continued truth and accuracy of these representations and
warranties are conditions precedent to consummation of the Merger.
SCB undertook certain covenants in the Merger Agreement, including
agreements: to cause to be convened a meeting of SCB's shareholders for the
purpose of approving the Merger as promptly as practical after the effective
date of the Registration Statement for the Trustmark shares to be issued in
connection with the Merger; to allow Trustmark access to its records and
properties; subject to the fiduciary obligations of SCB's Board of Directors,
not to encourage or solicit any other "Acquisition Proposal" or to enter into
any negotiations concerning, furnish any nonpublic information relating to SCB
in connection with or agree to any Acquisition Proposal; to operate its
business in substantially the same manner as such business is currently being
operated and to use its best efforts to maintain the goodwill of depositors,
customers and suppliers; to use its best efforts to retain the services of its
officers and employees; to maintain its properties; to duly and timely file all
reports, returns and similar documents and, unless contesting same by
appropriate proceedings, pay all taxes and assessments; to notify Trustmark of
any unusual or material problems or developments with respect to its business;
not to incur any material obligation except current contracts entered into in
the ordinary course of business; not to increase the compensation of any
director and, except for normal increases as a result of regular salary reviews
of officers and employees in January 1998 if the Merger has not been
consummated by such a date, increase the compensation of any officer or
employee or enter into or amend any contract of employment or enter into or
amend any insurance, profit-sharing, pension, severance pay, bonus, incentive,
deferred compensation or retirement plan or arrangement; not to make, extend or
renew any loan or other extension of credit to any of its officers, directors
or employees other than loans made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and that do not involve more than the normal
risks of collectability or present other unfavorable features; except as
expressly permitted, not to pay any dividend or make any distribution; not to
sell any of its investment securities other than in the ordinary course of
business; not to make, advance, extend or renew any loan or credit above
$100,000; and not to issue or sell any of its capital stock, or any of its debt
securities, authorize a stock split or dividend, or otherwise affect its
capital structure.
Trustmark and Trustmark Bank's covenants include agreements: to use
their reasonable efforts to operate their businesses in substantially the same
manner as currently being operated and to use their best efforts to maintain
the goodwill of their depositors, customers and suppliers; to use their best
efforts to retain the services of their officers and employees; to maintain
their properties; to duly and timely file all reports, returns and similar
documents and, unless contesting same by appropriate proceedings, pay all taxes
and assessments; and to notify SCB of any unusual or material problems or
developments with respect to the business of either Trustmark or Trustmark
Bank.
30
<PAGE> 39
SCB, Trustmark and Trustmark Bank are each obligated to use their best
efforts to bring about the transactions contemplated by the Merger Agreement.
SPECIAL AGREEMENTS
Dividends
Pursuant to Section 5.1 of the Merger Agreement, SCB will be permitted
to declare and pay an annual cash dividend out of current operating profits
earned since January 1, 1997 of up to $7.00 per share; and if the Closing of
the transaction has not occurred by March 1, 1998 a quarterly dividend out of
current operating profit of up to $1.75 per share. Except as set forth above,
SCB shall not declare any cash or other dividends prior to closing.
Employee Benefits
Pursuant to Section 5.2 of the Merger Agreement, Trustmark stated its
intention to continue the employment of the employees of SCB for a minimum of
one year after the Effective Date. However, as employees of Trustmark Bank,
such persons are subject to salary review, reassignment and termination in the
same manner as other employees of Trustmark Bank.
Pursuant to Section 5.6 of the Merger Agreement, following the
Effective Date, employees of SCB will be entitled to the same employee benefits
as are presently being provided to employees of Trustmark Bank. At Trustmark's
option, SCB's existing retirement plan will either be (i) terminated on the
Effective Date, and, with Trustmark's assistance, converted to self-directed
individual retirement accounts for the employees, or (ii) if permissible under
applicable laws, rules and regulations, transfer the employee portion of SCB's
existing plan to Trustmark's existing plan and the employer portion to a
separate newly created retirement plan maintained by Trustmark. All employees
of SCB will receive credit for years of service at SCB for purposes of vesting
in Trustmark's retirement plan.
Covenant Not to Compete
Pursuant to Section 5.4 of the Merger Agreement, all of SCB's
directors agreed that prior to one year after the Effective Date, they will not
become, directly, indirectly or beneficially, an employee, five percent or more
stockholder or director of any bank, savings bank, savings association, trust
company, financial institution or similar business enterprise which competes
with Trustmark Bank within Smith County, Mississippi. Other than in the
capacity of an officer of Trustmark Bank subsequent to the Effective Date,
these directors further agreed not to initiate any action to induce any officer
of Trustmark Bank, as successor to SCB, to leave Trustmark Bank's employment or
directly or indirectly assist any other person or entity in requesting or
inducing any such other employee of Trustmark Bank to leave such employment for
a period of one year from the Effective Date.
31
<PAGE> 40
Recommendation of SCB's Directors
Pursuant to Section 5.7 of the Merger Agreement, the directors of SCB
agreed to recommend that the shareholders of SCB approve the Merger and to vote
their SCB shares in favor of the Merger; provided, the directors are not
required to take any action which, in the opinion of SCB's counsel, would
constitute a breach of the directors' fiduciary duties to SCB's shareholders.
Each director agreed to vote his SCB shares in favor of the Merger.
Fairness Opinion
Pursuant to Section 5.12 of the Merger Agreement, Trustmark shall
obtain, at its own expense, an opinion that the Merger is fair, from a
financial point of view, to the shareholders of Trustmark and Trustmark Bank.
CONDITIONS TO CONSUMMATION OF THE MERGER
Trustmark and Trustmark Bank's obligations to consummate the Merger
are conditioned upon, among other things, the continued truth and accuracy of
the representations and warranties of SCB; SCB's compliance with its covenants,
agreements and undertakings in the Merger Agreement; receipt of all required
regulatory and governmental authority approvals; approval of the Merger by the
Board of Directors and shareholders of SCB; the absence of any material adverse
change in the financial condition, tangible properties or prospects of SCB
subsequent to December 31, 1996; receipt of the opinion of counsel to SCB
required by the Merger Agreement; receipt of the fairness opinion contemplated
by the Merger Agreement; the reserve for loan losses then maintained by SCB
adequately providing for the anticipated loan losses of SCB as of such date in
accordance with the accepted audit, bank examination and bank regulatory
standards; the tangible assets of SCB having a fair market value equal to or
greater than its liabilities; and Trustmark having received an opinion from
its counsel that the Merger will qualify as tax-free reorganization for federal
income tax purposes.
The obligation of SCB to consummate the Merger is conditioned upon,
among other things, the continued truth and accuracy of the representations and
warranties of Trustmark and Trustmark Bank; Trustmark and Trustmark Bank's
compliance with its covenants, agreements and undertakings in the Merger
Agreement; receipt of all required regulatory and governmental authority
approvals; approval of the Merger by the Board of Directors and shareholder of
Trustmark Bank and the Directors of Trustmark; the absence of any material
adverse change in the financial condition, tangible properties or prospects of
Trustmark Bank subsequent to December 31, 1996; receipt of the opinion of
counsel to Trustmark required by the Merger Agreement; and SCB having received
an opinion from Trustmark's counsel that the Merger will qualify as tax-free
reorganization for federal income tax purposes.
32
<PAGE> 41
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Date without liability on the part of any party as
follows:
(a) By the mutual consents of the Board of Directors of SCB and
Trustmark;
(b) By either party, if a state or federal governmental agency or
authority shall, at any time, fail to approve the transactions contemplated by
the Merger Agreement or shall have instituted and not dismissed court
proceedings to restrain or prohibit such transactions and such court
proceedings shall not have been resolved within one year of the date of the
Merger Agreement;
(c) By either party, if the Effective Date of the Merger shall not
have occurred within one year of the date of the Merger Agreement, without the
fault of such party;
(d) By Trustmark, if at the time of such a termination there shall
have occurred a material adverse change in the financial condition or tangible
properties of SCB subsequent to the completion of Trustmark's review of SCB's
books, records, assets and liabilities;
(e) By SCB, if at the time of such a termination there shall have
occurred a material adverse change in the financial condition or tangible
properties of Trustmark or Trustmark Bank subsequent to December 31, 1996;
(f) By either party, if the Average Trustmark Price is less than
$27.00 or greater than $30.25 on the SCB Special Meeting date, and SCB and
Trustmark are unable to negotiate a mutually acceptable Exchange Ratio;
(g) By either Trustmark or SCB, if the shareholders of SCB fail to
approve the Merger at the meeting of stockholders called for such
purpose(including any adjournment or postponement thereof);
(h) By Trustmark, if there has been a material breach by SCB of
(A)any representation, warranty or obligation set forth in the Merger
Agreement, or (B) any of its obligations set forth in the Merger Agreement
which has not been promptly cured after notice thereof from Trustmark; or
(i) By SCB, if there has been a material breach by either of
Trustmark or Trustmark Bank of (A)any representation, warranty or obligation
set forth in the Merger Agreement, or (B) any of its obligations set forth in
the Merger Agreement which has not been promptly cured after notice thereof
from SCB.
PROCEDURE FOR EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Date of the Merger,
Trustmark shall send to SCB's shareholders transmittal materials for use in
exchanging their SCB common shares for Trustmark
33
<PAGE> 42
shares. SCB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THESE MATERIALS.
Any SCB shareholder whose stock certificates have been lost or
destroyed will be required to provide Trustmark with a statement certifying
such loss or destruction and an indemnity (such as a lost or stolen securities
bond) satisfactory to Trustmark sufficient to indemnify Trustmark against any
loss or expense which may result from such lost or destroyed certificates being
thereafter presented to Trustmark for exchange.
Until such a former SCB shareholder has surrendered the certificates
representing his SCB shares or provided indemnity as provided above, such
shareholder shall not receive the cash or be issued the Trustmark share
certificates to which he is entitled, and no dividends or other distributions
with respect to such Trustmark shares shall be paid. However, when such
certificates are surrendered or indemnity provided, the former SCB shareholder
shall be issued the Trustmark shares and paid the cash and dividends, without
interest, to which such a shareholder is entitled.
RIGHTS OF DISSENTING SHAREHOLDERS
SCB is being merged with and into Trustmark Bank pursuant to 12 U.S.C.
Section 215a. Pursuant to this law, any shareholder of SCB who has voted
against the Merger at the SCB Special Meeting or who has given notice in
writing at or prior to such a meeting to the presiding officer that he dissents
from the plan of merger, is entitled to receive the value of the shares so held
by him when the Merger is approved by the Comptroller of the Currency upon
written request made to Trustmark Bank, as the surviving association, at any
time before the 30 days after the date of consummation of the Merger,
accompanied by the surrender of his SCB stock certificates.
The value of the SCB shares of any dissenting shareholder shall be
ascertained, as of the Effective Date by an appraisal made by a committee of
three persons composed of (1) one selected by a vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of Trustmark Bank; (3) one selected by the two so
selected. The valuation agreed upon by any two of the three appraisers shall
govern. If the value so fixed shall not be satisfactory to any dissenting
shareholder who has requested payment, that shareholder may, within five days
after being notified of the appraised value of his shares, appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made which
shall be final and binding as to the value of the shares.
If, within 90 days from the date of consummation of the Merger, for
any reason one or more of the appraisers fails to determine the value of such
shares, the Comptroller of the Currency shall, upon written request of any
interested party, cause an appraisal to be made, which shall be final and
binding on all parties. The expenses of the Comptroller of the Currency in
making the reappraisal or appraisal, as the case may be, shall be paid by the
surviving banking association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the surviving banking
association. Within 30 days after payment has been made to all dissenting
shareholders, the shares
34
<PAGE> 43
of stock which would have been delivered to such dissenting shareholders had
they not requested payment shall be sold at an advertised public auction,
unless some other method of sale is approved by the Comptroller of the
Currency, and the surviving banking association shall have the right to
purchase any such shares at such public auction, if it is the highest bidder
therefor, for the purpose of reselling such shares within 30 days thereafter to
such person or persons and at any such price no less than par as its Board of
Directors by resolution may determine. If these shares are sold at public
auction at a price greater than the amount paid to the dissenting shareholders,
the excess of such sales price shall be paid to such shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The following federal income tax discussion addresses certain of the
material federal income tax consequences of the Merger. This discussion does
not necessarily address all aspects of federal income taxation that may be
applicable to each SCB shareholder and does not address the effect of any
applicable state, local or foreign tax laws. In view of the individual nature
of federal income tax consequences, SCB's shareholders should consult their own
tax advisors as to the particular tax consequences of the Merger to them. The
discussion is based on the Internal Revenue Code of 1986, regulations and
rulings now in effect or proposed thereunder, current administrative rulings
and practices, and judicial precedent, all of which are subject to change. Any
such change, which may or may not be retroactive, could alter the tax
consequences discussed herein. The discussion is also based on certain
representations made by the parties. If any such representations are
inaccurate, the tax consequences of the Merger could differ from those
described below.
The Merger Agreement provides that, as a condition to the parties'
obligations to consummate the Merger, each party must be satisfied that the
Merger will qualify. Brunini, Grantham, Grower & Hewes, PLLC, counsel to
Trustmark, will render its opinion that the Merger will so qualify. However, no
ruling on this issue will be obtained from the Internal Revenue Service.
It is intended that, for federal income tax purposes, the Merger will
be treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and that, accordingly, (i) no gain or loss will be
recognized by SCB's shareholders upon the receipt of Trustmark common shares in
exchange for SCB common shares in connection with the Merger (except as
discussed below with respect to the cash received in lieu of fractional
shares), (ii) the tax basis of the Trustmark common shares to be received by
SCB's shareholders in connection with the Merger shall be the same as the basis
in the SCB shares surrendered in exchange therefor (reduced by the amount of
cash received and increased by the amount of cash received treated as a
dividend), and (iii) the holding period of the Trustmark shares to be received
by SCB's shareholders in connection with the Merger will include the holding
period of the SCB common shares surrendered in exchange therefor, provided that
the SCB shares are held as a capital asset as of the Effective Date.
The payment of cash in lieu of fractional Trustmark shares in
connection with the Merger will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed
35
<PAGE> 44
by Trustmark. These cash payments will be treated as distributions in full
payment in exchange for the shares redeemed, subject to the provisions of
Section 302 of the Internal Revenue Code.
The cash received by SCB's shareholders exercising dissenters' rights
of appraisal will be treated as having been received by such shareholders as a
distribution in redemption of such shareholder's stock, subject to the
provisions and limitations of Section 302 of the Internal Revenue Code.
ACCOUNTING TREATMENT
Trustmark intends to effect the Merger by acquiring the necessary
number of its shares in open market transactions for cash and exchanging such
shares for shares of SCB. Accordingly, the Merger will be accounted for by
Trustmark under the purchase method of accounting. Under this method, the
aggregate Merger Consideration will be allocated to SCB's assets and
liabilities based upon their estimated fair values, and the results of
operations of SCB will be included in the results of operations of Trustmark
only for periods subsequent to the Merger.
RESALES OF TRUSTMARK COMMON SHARES
The Trustmark common shares to be issued in connection with the Merger
have been registered under the Securities Act of 1933 and, if necessary,
applicable state securities laws. However, such registrations do not cover
resales by persons who are "affiliates" of SCB. Persons who may be deemed
affiliates of SCB generally include individuals or entities that control, are
controlled by or are under common control with such entities and may include
certain officers, directors and principal shareholders. In general, for a
period of one year following the Merger, persons who were affiliates of SCB at
the time the Merger was submitted to a shareholder vote and who do not become
affiliates of Trustmark may resell the Trustmark shares acquired in the Merger;
however, during any three-month period they cannot sell more than one percent
of the number of Trustmark shares outstanding and must make all sales pursuant
to "brokerage" transactions. After this one-year period, these persons may
generally resell the Trustmark shares acquired in the Merger without
limitation. Since one percent of Trustmark's outstanding shares will be in
excess of 360,000 shares following the Merger, the foregoing limitation should
have no practical effect on resales by SCB affiliates. Trustmark common shares
issued pursuant to the Merger to persons who are not affiliates of SCB should
be freely transferrable without restriction.
Persons who are affiliates of Trustmark following the Merger may
resell Trustmark shares acquired in the Merger subject to the limitations of
Rule 144 promulgated under the Securities Act of 1933.
36
<PAGE> 45
REGULATORY AUTHORITY APPROVALS
Consummation of the Merger is subject to and conditioned upon the
receipt of the approval of the Comptroller of the Currency and the absence of
objection by the United States Department of Justice.
Trustmark and SCB have filed applications for approval of the Merger
with the Comptroller of the Currency. There can be no assurance that the
Merger will be approved, that any such approvals will occur in a timely manner
or that any such approvals or acquiescence will not be conditioned upon matters
that would cause the parties to abandon the Merger.
COMPARISON OF RIGHTS OF SHAREHOLDERS
SCB is a Mississippi state chartered banking institution, subject to
the provisions of various Mississippi and federal banking laws, rules and
regulations ("Applicable Banking Laws or "ABL"). The rights of shareholders of
SCB are governed by these laws and the articles of incorporation and bylaws of
SCB.
Trustmark is a Mississippi business corporation. The rights of
shareholders of Trustmark are governed by the Mississippi Business Corporation
Act ("MBCA") and the articles of incorporation and bylaws of Trustmark.
The following is a summary of certain material differences in the
rights of shareholders of SCB and Trustmark and is qualified in its entirety
by reference to the laws governing each and the articles of incorporation and
bylaws of each of Trustmark and SCB.
BOARD OF DIRECTORS; ELECTIONS
SCB's bylaws provide for ten directors which are elected annually at
the annual meeting of shareholders for one year terms. Vacancies may be filled
by the remaining directors. Nominations for election to SCB's Board of
Directors may be made by the Board of Directors or by the shareholders.
Nominations for election to the Board of Directors made on behalf of management
shall be made in writing and delivered or mailed to the chairman at least ten
days prior to any meeting of shareholders held for the purpose of electing
directors. SCB's Articles and Bylaws do not permit cumulative voting.
A special shareholders meeting may be called by the Chairman of the
Board, President, by a majority of the Board of Directors or by the holders of
one-third or more of the shares outstanding and entitled to vote.
Trustmark's bylaws provide for a Board of Directors of five to
twenty-five members fixed by board or stockholder resolution. Directors hold
office for one year terms. Vacancies in the board may be filled by the
remaining directors.
37
<PAGE> 46
Trustmark's articles of incorporation and bylaws provide for
cumulative voting in the election of directors. Nominations for election to
Trustmark's Board of Directors may be made by the Board of Directors or by any
shareholder. Shareholder nominations to the Board must be made in writing and
delivered to the Chairman of the Board not less than 14 nor more than 50 days
prior to any meeting of shareholders held for the purpose of electing
directors.
A special shareholders meeting may be called by the president or by a
majority of the Board of Directors and shall be called by the president or
Board of Directors upon the request of shareholders owning in the aggregate 10
percent of the outstanding stock of Trustmark.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
ABL's provide that the approval of two-thirds of the outstanding
shares of SCB entitled to vote thereon is required to effect a merger or
consolidation.
The MBCA provides that the approval of the Trustmark Board of
directors and of a majority of the outstanding shares of Trustmark entitled to
vote thereon is generally required to approve a merger, consolidation or share
exchange or to sell, lease, exchange or otherwise dispose of substantially all
of its assets. In accordance with the MBCA, submission by the Trustmark Board
of any such action may be conditioned on any basis.
With respect to a merger, no vote of the shareholders of Trustmark is
needed if Trustmark is the surviving corporation and (i) Trustmark's charter
remains unchanged after the merger, subject to certain exceptions; (ii) each
shareholder of Trustmark whose shares were outstanding immediately before the
effective date of the merger will hold the same number of shares, with
identical designations, preferences, limitations, and relative rights,
immediately after the merger; (iii) the number of voting shares outstanding
immediately after the merger, plus the number of voting shares issuable as a
result of the merger (either by the conversion of securities issued pursuant to
the merger or the exercise of rights and warrants issued pursuant to the
merger), will not exceed by more than twenty percent (20%) the total number of
voting shares of the surviving corporation outstanding immediately before the
merger; and (iv)the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger (either by the conversion of securities issued pursuant to the
merger or the exercise of rights and warrants issued pursuant to the merger),
will not exceed by more than twenty percent (20%) the total number of
participating shares of the surviving corporation outstanding immediately
before the merger.
With respect to a sale, lease, exchange or other disposition of
substantially all the assets of Trustmark, no vote of the shareholders of
Trustmark would be required if such transfer was conducted in the regular
course of business or if such transfer was made to a wholly-owned subsidiary of
Trustmark.
38
<PAGE> 47
AMENDMENT OF ARTICLES OF INCORPORATION OR CHARTER
ABL's provide that the Commissioner, the Attorney General and the
Governor must approve any amendment to the articles of a state chartered
banking organization after the amendment is first authorized by the vote of a
majority of all the outstanding voting shares.
Pursuant to the MBCA, the articles of incorporation of Trustmark must
only be approved by a majority of Trustmark's Directors and holders of a
majority of Trustmark's outstanding shares.
INDEMNIFICATION
Subject to certain limitations, the articles of incorporation of SCB
provides for the indemnification of directors or officers.
The MBCA and the bylaws of Trustmark provide, in certain situations,
for mandatory and permissive indemnification of directors and officers. See
the heading "Indemnification."
LOANS SECURED BY ISSUER'S STOCK; OTHER TRANSACTIONS
Under ABL's, SCB may not make any loan on the security of SCB common
stock or purchase any such shares unless such security or purchase is necessary
to prevent loss upon a debt previously contracted in good faith. Unless full
payment of such debt is made, stock so purchased or acquired must be disposed
of within twelve months of its acquisition. ABL's contain various additional
restrictions and conditions on the ability of a bank to make loans to its
directors and officers.
The MBCA does not prohibit Trustmark from securing loans with
Trustmark stock and expressly provides that a corporation may acquire its own
shares and shares so acquired constitute authorized but unissued shares. The
MBCA imposes certain procedural and substantive conditions on the ability of a
business corporation to engage in transactions with its directors.
VOLUNTARY DISSOLUTION
ABL's provide that SCB may be dissolved upon approval by the vote of
two-thirds of the outstanding voting stock and written notice to the
Commissioner.
The MBCA provides that Trustmark may be dissolved if the Trustmark
Board of Directors proposes dissolution and a majority of the shares of
Trustmark entitled to vote thereon approve the dissolution. In accordance with
the MBCA, the Trustmark Board may condition its submission of a proposal for
dissolution on any basis.
DIVIDENDS AND OTHER DISTRIBUTIONS
Under ABL's, SCB may not declare any dividend upon its common stock
unless it is approved by the Commissioner.
39
<PAGE> 48
The MBCA provides that Trustmark may make dividends or other
distributions to its shareholders, unless after the distribution either (i)
Trustmark would not be able to pay its debts as they become due in the usual
course of business, or (ii) Trustmark's total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if Trustmark
were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution.
ISSUANCE OF ADDITIONAL SHARES
ABL's require that the Commissioner and a majority of the outstanding
shares approve the issuance of preferred shares by SCB.
Subject to certain limitations, the board of directors of a
Mississippi business corporation can, without shareholder vote, authorize
issuance of any shares provided for pursuant to the articles of incorporation.
If the maximum number and class of shares is not authorized in the
articles of incorporation, board of directors and shareholders action is
required as described above.
FIDUCIARY DUTIES OF DIRECTORS AND OFFICERS
Pursuant to ABL's, a director or officer of a state chartered bank is
not held personally liable to the bank or its shareholders for monetary damages
unless the director or officer acted in a grossly negligent manner, or engaged
in conduct which demonstrates a greater disregard of the duty of care than
gross negligence, such as intentional, tortious conduct or intentional breach
of the duty of loyalty or intentional commission of corporate waste.
For purposes of these statutes, the term "gross negligence" is defined
to mean a reckless disregard of, or a carelessness amounting to gross
indifference to, the best interests of the bank or the shareholders thereof,
and involves a substantial deviation below the standard of care expected to be
maintained by a reasonably careful person under like circumstances.
Under the MBCA, directors and officers of Trustmark are required to
act in good faith, with the care an ordinary prudent person in a like position
would exercise under similar circumstances and in a manner the director or
officer reasonably believes to be in the best interests of the corporation.
REPORTS TO SHAREHOLDERS
Trustmark common shares are registered under the Exchange Act.
Accordingly, Trustmark is required to provide annual reports containing audited
financial statements to its shareholders, file certain required reports with
the SEC and solicit proxies in accordance with the rules of the SEC.
40
<PAGE> 49
Trustmark also provides reports to its shareholders on an interim basis
containing unaudited financial information.
SCB common shares are not registered under the Exchange Act.
Accordingly, SCB is not required to and does not provide its shareholders with
similar periodic reports.
LEGAL OPINIONS
The validity of the Trustmark common shares to be issued in connection
with the Merger will be passed upon by Brunini, Grantham, Grower & Hewes, PLLC,
counsel to Trustmark. Brunini, Grantham, Grower & Hewes, PLLC will also issue
the opinion on behalf of Trustmark required by the Merger Agreement and an
opinion on the tax aspects of the Merger. Brunini, Grantham, Grower & Hewes,
PLLC, its pension plan and its current and former members have a substantial
direct and indirect stock ownership interest in Trustmark and own a nominal
amount of SCB shares.
EXPERTS
The consolidated statements of Trustmark Corporation and subsidiaries
as of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, incorporated by reference in this Proxy
Statement and elsewhere in the Registration Statement, have been audited by
Arthur Andersen LLP, Independent Public Accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The financial statements of Smith County Bank as of December 31, 1996
and 1995, and for each of the three years in the period ended December 31,
1996, included in this Prospectus have been audited by May & Company,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
INDEMNIFICATION
Pursuant to Mississippi law and the bylaws of Trustmark, the officers
and directors of Trustmark are entitled to indemnification against certain
liabilities, which may include liabilities under federal and state securities
laws.
41
<PAGE> 50
ANNEX A
A-1
<PAGE> 51
ANNEX A
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----------
<S> <C>
Smith County Bank:
Independent Auditors' Report ................................... A-3
Balance Sheets as of December 31, 1996 and 1995 ................ A-4
Statements of Income for the Years Ended December 31, 1996,
1995 and 1994.............................................. A-6
Statements of Changes in Stockholders' Equity for the Years,
Ended December 31, 1996, 1995 and 1994..................... A-8
Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994 ....................................... A-9
Notes to Financial Statements Years Ended December 31,
1996, 1995 and 1994 ....................................... A-12
Compilation Report.............................................. A-31
Balance Sheet as of June 30, 1997 (Unaudited)................... A-32
Statements of Income for the Three Months Ended and Six
Months Ended June 30, 1997 and 1996 (Unaudited)............ A-34
Statements of Cash Flows for the Six Months Ended June 30,
1997 and 1996 (Unaudited).................................. A-36
Note to Financial Statements for the Six Months Ended
June 30, 1997 and 1996 (Unaudited)......................... A-38
</TABLE>
A-2
<PAGE> 52
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Smith County Bank
Taylorsville, Mississippi
We have audited the accompanying balance sheets of Smith County Bank as of
December 31, 1996 and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Bank'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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. 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 Smith County Bank as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ MAY & COMPANY
- ------------------------
MAY & COMPANY
Jackson, Mississippi
January 17, 1997
(except for Note N, as to which
the date is September 22, 1997)
A-3
<PAGE> 53
SMITH COUNTY BANK
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------- ----------------
<S> <C> <C>
Cash and due from banks $ 4,327,637 $ 5,316,335
Federal funds sold - 5,400,000
Investment securities:
Held-to-maturity (Fair value of $35,145,920 in 1996
and $25,732,356 in 1995) 35,185,285 25,430,362
Available-for-sale 6,712,170 7,684,400
Loans 45,760,744 45,531,545
Less: Allowance for loan losses (1,210,400) (1,048,395)
Unearned income (175,534) (589,451)
--------------- ---------------
Net loans 44,374,810 43,893,699
Bank premises and equipment, net 2,062,647 1,836,821
Accrued interest receivable 1,132,358 981,850
Deferred income taxes 139,561 347,310
Other assets 274,654 339,453
--------------- ---------------
Total assets $ 94,209,122 $ 91,230,230
=============== ===============
</TABLE>
See accompanying notes to the financial statements.
A-4
<PAGE> 54
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------- ----------------
<S> <C> <C>
LIABILITIES:
Deposits:
Interest bearing:
Demand $ 11,947,990 $ 10,679,424
NOW accounts 9,449,143 11,099,951
Savings 6,378,330 6,221,993
Time 47,157,929 45,246,807
-------------- ----------------
Total interest-bearing 74,933,392 73,248,175
Noninterest-bearing 10,147,896 9,540,522
-------------- ----------------
Total deposits 85,081,288 82,788,697
Accrued interest payable 416,220 415,508
Accrued taxes and other liabilities 203,375 95,369
-------------- ----------------
Total liabilities 85,700,883 83,299,574
-------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $15 par value, 15,000 shares authorized,
issued and outstanding 225,000 225,000
Capital surplus 8,100,000 7,500,000
Retained earnings 209,878 214,337
-------------- ----------------
8,534,878 7,939,337
Less: Net unrealized losses on securities available
for sale, net of taxes (26,639) (8,681)
-------------- ----------------
Total stockholders' equity 8,508,239 7,930,656
-------------- ----------------
Total liabilities and stockholders' equity $ 94,209,122 $ 91,230,230
============== ================
</TABLE>
A-5
<PAGE> 55
SMITH COUNTY BANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 4,299,208 $ 4,336,166 $ 3,853,949
Interest on investment securities:
Taxable interest income 2,198,360 1,650,577 1,440,511
Exempt from federal income tax 234,933 271,423 311,650
Interest on federal funds sold 247,147 321,868 59,481
-------------- --------------- ---------------
Total interest income 6,979,648 6,580,034 5,665,591
-------------- --------------- ---------------
INTEREST EXPENSE:
Interest on demand deposits 873,411 856,433 598,433
Interest on savings deposits 180,749 174,908 190,991
Interest on time deposits 2,589,279 2,363,245 1,630,766
Interest on federal funds purchased - 1,594 13,770
-------------- --------------- ---------------
Total interest expense 3,643,439 3,396,180 2,433,960
-------------- --------------- ---------------
NET INTEREST INCOME 3,336,209 3,183,854 3,231,631
-------------- --------------- ---------------
PROVISION FOR LOAN LOSSES - 205,000 1,974,126
-------------- --------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,336,209 2,978,854 1,257,505
-------------- --------------- ---------------
OTHER INCOME:
Service charges on deposit accounts 548,926 601,328 590,741
Credit life and other insurance commissions 76,272 77,142 106,562
Safe deposit box rentals 14,446 14,326 13,747
Gain on sale of securities 450 2,150 -
Other 61,316 47,425 38,027
-------------- --------------- ---------------
Total other income 701,410 742,371 749,077
-------------- --------------- ---------------
OTHER EXPENSES:
Salaries and employee benefits 1,518,954 1,532,641 1,334,201
Occupancy expense 249,137 235,914 236,943
</TABLE>
Continued.........
A-6
<PAGE> 56
SMITH COUNTY BANK
STATEMENTS OF INCOME - CONTINUED
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
OTHER EXPENSES - CONTINUED:
Equipment expense 287,245 365,614 $ 337,018
Stationery and supplies 189,405 204,043 180,580
Service and professional fees 159,805 156,019 164,151
Amortization of goodwill 13,601 13,601 11,334
FDIC assessments 2,000 88,889 179,016
Other real estate expense 46,205 29,983 18,467
Other 534,726 310,288 387,004
-------------- --------------- ---------------
Total other expenses 3,001,078 2,936,992 2,848,714
-------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME
TAXES 1,036,541 784,233 (842,132)
INCOME TAXES (BENEFIT) 336,000 250,000 (581,038)
-------------- --------------- ---------------
NET INCOME (LOSS) $ 700,541 $ 534,233 $ (261,094)
============== =============== ===============
INCOME (LOSS) PER COMMON SHARE $ 46.703 $ 35.616 $ (17.406)
============== =============== ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING 15,000 15,000 15,000
====== ====== ======
</TABLE>
See accompanying notes to the financial statements.
A-7
<PAGE> 57
SMITH COUNTY BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Unrealized
Losses on
Securities
Common Capital Retained Available
Total Stock Surplus Earnings For Sale, Net
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 7,696,758 $ 225,000 $ 7,470,000 $ 40,567 $ (38,809)
Prior period adjustment 140,631 - - 140,631 -
--------------- --------------- --------------- --------------- ---------------
BALANCE, December 31, 1993 as
restated 7,837,389 225,000 7,470,000 181,198 (38,809)
Net loss (261,094) - - (261,094) -
Cash dividends paid ($7.00 per
share) (105,000) - - (105,000) -
Change in net unrealized loss on
securities available for sale (88,597) - - - (88,597)
Transfer to surplus - - (690,858) 690,858 -
--------------- --------------- --------------- --------------- ---------------
BALANCE, December 31, 1994 7,382,698 225,000 6,779,142 505,962 (127,406)
Net income 534,233 - - 534,233 -
Cash dividends paid ($7.00 per
share) (105,000) - - (105,000) -
Change in net unrealized losses
on securities available for
sale, net 118,725 - - - 118,725
Transfer to surplus - - 720,858 (720,858) -
--------------- --------------- --------------- --------------- ---------------
BALANCE, December 31, 1995 7,930,656 225,000 7,500,000 214,337 (8,681)
Net income 700,541 - - 700,541 -
Cash dividends paid
($7.00 per share) (105,000) - - (105,000) -
Change in net unrealized
losses on securities
available for sale, net (17,958) - - - (17,958)
Transfer to surplus - - 600,000 (600,000) -
--------------- --------------- --------------- --------------- ---------------
BALANCE, December 31, 1996 $ 8,508,239 $ 225,000 $ 8,100,000 $ 209,878 $ (26,639)
=============== =============== =============== =============== ===============
</TABLE>
See accompanying notes to the financial statements.
A-8
<PAGE> 58
SMITH COUNTY BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 700,541 $ 534,233 $ (261,094)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization of premium paid on
purchase of deposits and assets 13,601 13,601 11,334
Provision for loan losses - 205,000 1,974,126
Provision for depreciation 210,122 270,395 239,802
Deferred income taxes 217,000 250,000 (581,038)
Gain on sale of equipment (5,987) - (1,981)
Gain on sale of securities (450) (2,150) (957)
Accretion on investment securities, net 40,640 10,513 91,133
(Increase) decrease in:
Accrued interest receivable (150,508) (124,383) 42,132
Other assets 100,852 (27,985) 122,064
Increase (decrease) in:
Accrued interest payable 712 115,680 (143)
Accrued taxes and other liabilities 108,006 (59,806) (14,573)
-------------- -------------- --------------
Net cash provided by operating activities 1,234,529 1,185,098 $ 1,620,805
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from Bank of Raleigh, net of cash
paid for acquisition of deposits and assets - - 1,601,823
Net (increase) decrease in federal funds sold 5,400,000 (5,400,000) 3,750,000
Purchases of available-for-sale securities (1,033,750) (3,444,548) (1,252,538)
Purchases of held-to-maturity securities (14,776,469) (3,270,703) (3,213,635)
Proceeds from maturities of held-to-maturity
securities 4,960,127 5,121,021 4,130,458
Proceeds from sale of held-to-maturity
securities - - 758,475
Proceeds from sale of available-for-sale securities 2,000,000 - 494,063
Purchases of bank premises and equipment (438,361) (169,692) (354,820)
Proceeds from sale of equipment 8,400 - 6,000
Net (increase) decrease in loans (530,765) 2,062,846 (1,744,029)
-------------- -------------- --------------
Net cash provided by (used in)
investing activities (4,410,818) (5,101,076) 4,175,797
-------------- -------------- --------------
</TABLE>
Continued........
A-9
<PAGE> 59
SMITH COUNTY BANK
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
-------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 2,292,591 7,134,551 $ (7,128,860)
Cash dividends paid (105,000) (105,000) (105,000)
Net decrease in federal funds purchased - (1,800,000) 1,800,000
-------------- --------------- --------------
Net cash provided by (used in)
financing activities 2,187,591 5,229,551 (5,433,860)
-------------- --------------- --------------
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS (988,698) 1,313,573 362,742
CASH AND DUE FROM BANKS, at beginning
of year 5,316,335 4,002,762 3,640,000
-------------- --------------- --------------
CASH AND DUE FROM BANKS, at end
of year $ 4,327,637 $ 5,316,335 $ 4,002,742
============== =============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOWS INFORMATION-
Cash paid during the year for:
Interest $ 3,642,727 $ 3,280,500 $ 2,312,064
============== =============== ==============
Income taxes $ 9,000 $ 84,000 $ 78,200
============== =============== ==============
SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Total increase (decrease) in unrealized gains
(losses) on securities available for sale $ 27,207 $ (179,885) $ 134,237
============== =============== ==============
Transfer of loans foreclosed to other real estate $ 49,654 $ - $ 72,500
============== =============== ==============
Net deferred tax effect related to unrealized
gains (losses) on securities $ 9,251 $ 61,160 $ 45,640
============== =============== ==============
</TABLE>
Continued..........
A-10
<PAGE> 60
SMITH COUNTY BANK
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES- CONTINUED:
Purchase of deposits and assets of the Bank
of Raleigh:
Fair value of assets acquired:
Cash and due from banks $ - $ - $ 2,171,823
Federal funds sold - - 1,750,000
Investment securities - - 10,320,009
Loans, net - - 19,658,009
Bank premises and equipment - - 466,417
Accrued interest receivable - - 388,095
Other assets - - 99,071
-------------- -------------- ---------------
Total fair value of assets acquired - - 34,853,424
-------------- -------------- ---------------
Liabilities assumed:
Deposits - - 34,256,589
Accrued interest payable - - 122,039
-------------- -------------- ---------------
Total liabilities assumed - - 34,378,628
-------------- -------------- ---------------
Fair value of assets acquired in excess of
liabilities assumed - - 474,796
Premium paid in excess of value acquired - - 95,204
-------------- -------------- ---------------
Cash paid in acquisition of the Bank
of Raleigh $ - $ - $ 570,000
============== ============== ===============
</TABLE>
See accompanying notes to the financial statements.
A-11
<PAGE> 61
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Smith County Bank is engaged in the general banking business and
activities closely related to banking as authorized by the Banking
Laws of the State of Mississippi. The accounting and reporting
policies of the Bank conform to generally accepted accounting
principles and the general practices within the banking industry.
Those policies which materially affect the determination of financial
position, cash flows, and results of operations are presented below.
Investment Securities
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and the Bank has
the ability at the time of purchase to hold debt securities until
maturity, they are classified as held-to-maturity and carried at cost,
adjusted for amortization of premiums and accretion of discounts using
methods approximating the interest method. Securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as available for sale and carried at fair value.
Securities held for indefinite periods of time include securities that
management intends to use as part of its assets and liability
management strategy and that may be sold in response to changes in
interest rates, resultant prepayment risk and other factors related to
interest rate and resultant prepayment risk changes.
Realized gains and losses on dispositions are based on the net
proceeds and the adjusted book value of the securities sold, using the
specific identification method. Unrealized gains and losses on
investment securities available for sale are based on the difference
between book value and fair value of each security. These gains and
losses are credited or charged to stockholders' equity, net of
applicable taxes. Realized gains and losses flow through the Bank's
yearly operations.
The Bank does not engage in trading account activities.
Continued..........
A-12
<PAGE> 62
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Loans
Loans are reported at the principal amount outstanding, net of
unearned income and the allowance for loan losses. Unearned discount
on installment loans is recognized as income over the terms of the
loans by a method which approximates the interest method. Interest on
other loans is calculated by using the simple interest method on the
daily balance of the principal amount outstanding.
The Bank generally discontinues the accrual of interest income when a
loan becomes 90 days past due as to principal or interest; however,
management may elect to continue the accrual when the estimated net
realizable value of collateral is sufficient to cover the principal
balance and the accrued interest. Interest on impaired loans is
discontinued when, in management's opinion, the borrower may be unable
to meet payments as they become due. Any unpaid interest previously
accrued on nonaccrual loans is reversed from income or charged to the
allowance for loan losses. Interest income, generally, is not
recognized on specific impaired loans unless the likelihood of further
loss is remote. Interest payments received on such loans are applied
as a reduction of the loan principal balance. Interest income on
other nonaccrual loans is recognized only to the extent of interest
payments received.
Loan origination costs are deferred and amortized as a yield
adjustment over the life of the loans by a method which approximates
the interest method. Amortization of deferred loan fees is
discontinued when a loan is placed on nonaccrual status.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the loan is unlikely. The allowance is an amount
that management believes will be adequate to absorb losses inherent in
existing loans and commitments to extend credit, based on evaluations
of the collectibility and prior loss experience of loans and
commitments to extend credit. The evaluations take into consideration
such factors as changes in the nature and volume of the portfolio,
overall portfolio quality, loan concentrations, specific problem
loans, and current and anticipated economic conditions that may affect
the borrowers' ability to pay.
Continued.........
A-13
<PAGE> 63
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Allowance for Loan Losses - Continued
Allowances for impaired loans are generally determined based on
collateral values or the present value of estimated cash flows. The
allowance is increased by a provision for loan losses, which is
charged to expense, and reduced by charge-offs net of recoveries.
Bank Premises and Equipment
Bank premises and equipment owned are stated at cost, less accumulated
depreciation. Depreciation is computed using both the straight-line
and accelerated methods over the estimated useful lives of the
property, generally 25 to 31 years on buildings and 5 to 10 years on
equipment.
Other Real Estate
Real estate acquired by foreclosure is carried in other assets at the
lower of the loan balance or fair market value of the property. Any
resultant writedown at the time of foreclosure is charged to the
allowance for loan losses. Any subsequent write-downs are charged
against operating expenses. Operating expenses of such properties,
net of related income, and gains and losses on their disposition are
included in other expenses.
Income Taxes
Deferred income taxes are provided on the temporary differences
resulting from the recognition of certain income and expense items for
financial statement purposes in different time periods than for income
tax purposes. These differences result primarily from the methods of
recognition of expenses for depreciation, premium on purchased
deposits and assets and provision for loan losses.
Income Per Common Share
Income per common share is calculated by dividing net income by the
weighted average number of outstanding shares of the Bank's common
stock during the year.
Continued.........
A-14
<PAGE> 64
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Cash and Cash Equivalents
For the purposes of the cash flow statement, the Bank has defined cash
equivalents as those amounts included in the balance sheet caption
"Cash and Due from Banks".
Reclassifications
Certain prior period amounts have been reclassified to conform with
current year presentation.
Premium on Purchased Deposits and Assets
The excess of the purchase price over the fair value of net assets
acquired (goodwill) is being amortized by the straight-line method
over seven years. The amortization expense for the years ended
December 31, 1996, 1995 and 1994 was $13,601; $13,601 and $11,334;
respectively.
Advertising Costs
The Bank's policy is to expense the cost of advertising the first time
the advertising takes place. Advertising expense was $50,573; $30,035
and $64,096 at December 31, 1996, 1995 and 1994, respectively.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into
off-balance-sheet financial instruments consisting of commitments to
extend credit, commitments under credit card arrangements and
commercial letters of credit. Such financial instruments are recorded
in the financial statements when they become payable.
Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Statement on Financial
Accounting Standards No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," which becomes
effective for transfers and servicing of
Continued........
A-15
<PAGE> 65
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Recent Accounting Pronouncements - Continued:
financial assets and extinguishments of liabilities occurring after
December 31, 1996. The standards are based on the constant
application of the "financial-components approach," which recognizes
that financial assets and liabilities can be divided into various
components. Under that approach, an entity recognizes all financial
assets and servicing it controls and liabilities it has incurred and
would derecognize financial assets when control has been surrendered
and liabilities when extinguished. The effect of the implementation
of this standard is not expected to be material. The Financial
Accounting Standards Board subsequently issued Statement No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125." This statement defers, for one year, certain
provisions contained in Statement No. 125.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities
held-to-maturity at December 31, 1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 8,506,744 $ 70,685 $ (38,276) $ 8,539,153
U. S. Government Agencies 20,874,768 34,233 (182,101) 20,726,900
Obligations of states and
political subdivisions 5,803,773 109,681 (33,587) 5,879,867
------------ --------- ---------- ------------
$ 35,185,285 $ 214,599 $ (253,964) $ 35,145,920
============ ========= ========== ============
</TABLE>
Continued..........
A-16
<PAGE> 66
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE B. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities
held-to-maturity at December 31, 1995 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 9,281,572 $ 148,791 $ (19,575) $ 9,410,788
U. S. Government Agencies 9,387,668 70,343 (43,081) 9,414,930
Obligations of states and
political subdivisions 6,761,122 185,413 (39,897) 6,906,638
----------- ---------- ---------- ------------
$25,430,362 $ 404,547 $ (102,553) $ 25,732,356
=========== ========== ========== ============
</TABLE>
The amortized cost and fair value of investment securities
available-for-sale at December 31, 1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 2,528,184 $ 1,083 $ (27,387) $ 2,501,880
U. S. Government Agencies 3,224,343 90,530 - 3,314,873
Other 1,000,005 - (104,588) 895,417
------------ -------- ---------- -----------
$ 6,752,532 $ 91,613 $ (131,975) $ 6,712,170
============ ======== ========== ===========
</TABLE>
The amortized cost and fair value of investment securities
available-for-sale at December 31, 1995 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 2,491,334 $ 14,472 $ - $ 2,505,806
U. S. Government Agencies 4,206,216 41,777 (634) 4,247,359
Other 1,000,005 - (68,770) 931,235
------------ -------- --------- -----------
$ 7,697,555 $ 56,249 $ (69,404) $ 7,684,400
============ ======== ========= ===========
</TABLE>
Continued..........
A-17
<PAGE> 67
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE B. INVESTMENT SECURITIES - CONTINUED
During the years ended 1996, 1995 and 1994, the Bank had gross
realized gains of $450; $2,150 and $957, respectively, resulting from
securities held to maturity that were called.
Investment securities with amortized costs aggregating $15,816,827 at
December 31, 1996, and $14,495,428 at December 31, 1995, were pledged
to secure public and other deposits and for other purposes as required
by law. Their corresponding market values were $15,987,685 and
$14,623,560, respectively.
The amortized cost and fair values of investment securities
available-for-sale and held-to-maturity at December 31, 1996, by
contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties. Mortgage backed securities are included in the table based
on contractual maturity.
<TABLE>
<CAPTION>
Securities Securities
Held-to-Maturity Available-for-Sale
-------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ------ --------- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 5,053,447 $ 5,134,557 $ - $ -
Due after one year but less
than five years 21,382,693 21,437,060 4,498,626 4,488,064
Due after five years but
less than ten years 8,696,182 8,520,282 - -
Due after ten years 52,963 54,021 1,253,901 1,328,689
Other securities - - 1,000,005 895,417
------------ ------------ ----------- -----------
Total securities $ 35,185,285 $ 35,145,920 $ 6,752,532 $ 6,712,170
============ ============ =========== ===========
</TABLE>
Continued.........
A-18
<PAGE> 68
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE C. LOANS
At December 31, 1996 and 1995, the loan portfolio was composed of the
following types of loans:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Commercial, industrial and agricultural $ 5,041,293 $ 7,503,297
Non residential real estate 9,557,787 8,804,216
Residential real estate 17,038,928 14,344,720
Consumer 13,680,222 14,348,165
All other loans 442,514 351,147
------------ ------------
$ 45,760,744 $ 45,351,545
============ =============
</TABLE>
Final loan maturities and rate sensitivity of the loan portfolio before
unearned income at December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
Within One One - Five After Five
Year Years Years Total
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Commercial and industrial $ 837 $ 823 $ 346 $ 2,006
Agricultural 938 1,741 356 3,035
Non residential real estate 1,434 1,970 6,154 9,558
Residential real estate 825 4,942 11,272 17,039
Consumer 3,501 9,887 292 13,680
All other loans 62 358 23 443
---------- ----------- ----------- ------------
$ 7,597 $ 19,721 $ 18,443 $ 45,761
========== =========== =========== ============
</TABLE>
Continued.........
A-19
<PAGE> 69
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE C. LOANS - CONTINUED
<TABLE>
<CAPTION>
Within One One - Five After Five
Year Years Years Total
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Loans at fixed interest rates $ 26,629
=========
Loans at variable interest rates $ 18,738
=========
Nonaccruing loans $ 276
=========
Capitalized loan cost $ 118
=========
</TABLE>
In the ordinary course of business, the Bank makes loans to its
executive officers, principal stockholders, directors and to companies
in which these borrowers are principal owners amounted to $168,914 and
$113,958 at December 31, 1996 and 1995, respectively. These loans were
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions
with other persons, and did not involve more than a normal risk of
collectibility or present other unfavorable features.
An analysis of activity with respect to related party loans was as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Beginning balance $ 113,958 $ 238,021
New Loans 152,484 57,606
Repayments (97,528) (181,669)
--------- ----------
Ending balance $ 168,914 $ 113,958
========= ==========
</TABLE>
Unamortized loan fees at 1996 and 1995 were $117,745 and $116,573,
respectively.
Continued.........
A-20
<PAGE> 70
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE D. ALLOWANCE FOR LOAN LOSSES
An analysis of the changes of the allowance for loan losses for the
years ended December 31, 1996, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
Balance, at beginning of year $ 1,048,395 $ 902,456 $ 504,000
Provision charged to expense - 205,000 1,974,126
Loans charged off, net of recoveries:
Charge-offs (278,333) (582,101) 1,670,832
Recoveries 440,338 523,040 (95,162)
-------------- --------------- ---------------
Net (charge-offs) recoveries 162,005 (59,061) 1,575,670
-------------- --------------- ---------------
Balance, at end of year $ 1,210,400 $ 1,048,395 $ 902,456
============== =============== ===============
</TABLE>
NOTE E. BANK PREMISES AND EQUIPMENT
An analysis of bank premises and equipment at December 31, 1996 and
1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Building and improvements $ 2,099,021 $ 2,099,021
Equipment 1,536,924 1,444,359
Land 247,524 135,316
Construction in progress 212,641 -
--------------- ---------------
4,096,110 3,678,696
Less accumulated depreciation 2,033,463 1,841,875
--------------- ---------------
$ 2,062,647 $ 1,836,821
=============== ===============
</TABLE>
Continued.........
A-21
<PAGE> 71
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE E. BANK PREMISES AND EQUIPMENT - CONTINUED
Depreciation expense charged to operations during the years ended
December 31, 1996, 1995 and 1994 totaled $210,122; $270,395 and
$239,802; respectively.
NOTE F. TIME DEPOSITS
Included in time deposits are certificates of deposit issued in
amounts of $100,000 or more. These certificates totaled $7,754,102
and $8,475,102 at December 31, 1996 and 1995, respectively.
At December 31, 1996, the maturities of certificates of deposit in
excess of $100,000 are as follows:
<TABLE>
<S> <C>
3 month or less $ 1,657,000
3 - 12 months 1,785,000
Over 12 months 4,312,102
---------------
$ 7,754,102
===============
</TABLE>
At December 31, 1996, scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1997 $ 28,418,438
1998 6,651,699
1999 5,259,174
2000 5,491,419
2001 1,337,199
-----------------
$ 47,157,929
=================
</TABLE>
Continued..........
A-22
<PAGE> 72
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE G. INCOME TAXES
The provision for federal income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- --------------- --------------
<S> <C> <C> <C>
Current $ 119,000 $ - $ -
Deferred 5,895 (3,048) (581,038)
Tax benefit of net operating loss
carryforward 211,105 253,048 -
-------------- --------------- --------------
Total $ 336,000 $ 250,000 $ (581,038)
============== =============== ==============
</TABLE>
The differences between the applicable income taxes shown in the
statements of income and the amounts computed by applying the
statutory federal income tax rate to income before income taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- --------------- --------------
<S> <C> <C> <C>
Federal income tax computed
on income before income taxes $ 352,424 $ 266,639 $ (286,325)
Decrease in tax due to
tax-exempt income, net (70,349) (81,091) (97,979)
Other changes, net 53,925 64,452 (196,734)
-------------- --------------- --------------
Applicable income taxes $ 336,000 $ 250,000 $ (581,038)
============== =============== ==============
</TABLE>
Prepaid federal income taxes of $-0- in 1996 and $84,000 in 1995 are
included in other assets. Income taxes payable of $123,994 in 1996
are included in accrued taxes and other liabilities.
Deferred income taxes includes deferred tax assets of $531,476 in 1996
and $625,195 in 1995, net of allowance of $287,350 and $267,260,
respectively, and deferred tax liabilities of $104,565 in 1996 and
$10,625 in 1995.
At December 31, 1996, the Bank had unused net operating loss
carryforwards of $5,747,035 to apply against future state taxable
income expiring as follows:
Continued.........
A-23
<PAGE> 73
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE G. INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
State
Available Net Operating
Through December 31 Loss
------------------- ---------------
<S> <C>
2007 $ 751,741
2008 666,300
2009 2,393,125
2010 704,200
2011 1,231,669
---------------
$ 5,747,035
===============
</TABLE>
NOTE H. PROFIT SHARING PLAN
The Bank maintains a non-contributory employee profit sharing plan
that is available for all employees who have completed one (1) year of
service. Contributions to the plan are determined by the Board of
Directors. Contributions totaled $100,000; $100,000 and $50,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE I. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the Federal Deposit
Insurance Corporation (FDIC). Failure to meet the minimum regulatory
capital requirements can initiate certain mandatory, and possible
additional discretionary actions by regulators, that if undertaken,
could have a direct material affect on the Bank. Under the regulatory
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines
involving quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification
under the prompt corrective action guidelines are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Continued.........
A-24
<PAGE> 74
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE I. REGULATORY MATTERS - CONTINUED
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of
total Tier I capital to risk-weighted assets (as defined in the
regulations) and Tier I capital to average assets (as defined).
As of December 31, 1996, the most recent notification from the FDIC,
the Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank would have to maintain minimum total risk-based,
Tier I risk-based, and Tier I leverage ratios as disclosed in the
table below. There are no conditions or events since the most recent
notification that management believes have changed the Bank's prompt
corrective action category.
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
------------------------------ ----------------------------------
Amount Ratio Amount Ratio
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk-Weighted Assets) $ 8,508,239 17.28% $ 3,938,399 > or equal to 8.0%
Tier I Capital
(to Risk-Weighted Assets) $ 8,392,415 17.04% $ 1,969,200 > or equal to 4.0%
Tier I Capital
(to Average Assets) $ 8,392,415 9.50% $ 3,708,787 > or equal to 4.0%
As of December 31, 1995
Total Capital
(to Risk-Weighted Assets) $ 7,930,656 15.99% $ 3,965,406 > or equal to 8.0%
Tier I Capital
(to Risk-Weighted Assets) $ 7,360,647 14.85% $ 1,982,703 > or equal to 4.0%
Tier I Capital
(to Average Assets) $ 7,630,647 8.65% $ 3,530,442 > or equal to 4.0%
</TABLE>
<TABLE>
<CAPTION>
To be Well
Capitalized Under
Prompt Corrective
Action Provisions
-----------------------------------
Amount Ratio
------------ --------------
<S> <C> <C>
As of December 31, 1996
Total Capital
(to Risk-Weighted Assets) $ 4,922,999 > or equal to 10.0%
Tier I Capital
(to Risk-Weighted Assets) $ 2,953,799 > or equal to 6.0%
Tier I Capital
(to Average Assets) $ 4,635,983 > or equal to 5.0%
As of December 31, 1995
Total Capital
(to Risk-Weighted Assets) $ 4,956,757 > or equal to 10.0%
Tier I Capital
(to Risk-Weighted Assets) $ 2,974,054 > or equal to 6.0%
Tier I Capital
(to Average Assets) $ 4,413,052 > or equal to 5.0%
</TABLE>
The Bank is restricted by banking regulatory agencies in making
dividend payments above prescribed limits. The Bank is required to
obtain approval from the State Banking Regulators prior to the payment
of any dividend.
The Bank is required to maintain certain reserves at the Federal
Reserve Bank. This requirement was $100,000 at December 31, 1996 and
$100,000 at December 31, 1995. The Bank was in compliance with these
requirements.
Continued.........
A-25
<PAGE> 75
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE J. COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit and interest rate risk
in excess of the amounts recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instruments for commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The amount and type of collateral obtained, if deemed
necessary by the Bank upon extension of credit, varies and is based on
management's credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party.
Standby letters of credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The
Bank's policy for obtaining collateral, and the nature of such
collateral, is essentially the same as that involved in making
commitments to extend credit.
The Bank's maximum exposure to credit loss is represented by the
contractual amount of the commitments to extend credit and letters of
credit as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------- ------------
<S> <C> <C>
Commitments to extend credit $ 1,083,032 $ 1,304,722
Standby letters of credit $ 184,000 $ 248,000
</TABLE>
Continued.........
A-26
<PAGE> 76
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE J. COMMITMENTS AND CONTINGENCIES - CONTINUED
The Bank is involved in certain litigation incurred in the normal
course of business. In the opinion of management and legal counsel,
liabilities arising from such claims, if any, would not have a
material effect upon the Bank's financial statements.
NOTE K. CONCENTRATION OF CREDIT RISK
The Bank provides deposit and loan products and other financial
services to consumer and corporate customers located principally in
Smith County. Securities and short-term investment activities are
conducted with a diverse group of domestic governments, corporations
and depository and other financial institutions. The Bank evaluates
the counterparty's creditworthiness and the need for collateral on a
case by case basis. The concentrations of credit by type of loan are
set forth in Note C. The distribution of commitments to extend credit
approximates the distribution of loans outstanding. Standby letters
of credit are granted primarily to commercial borrowers.
NOTE L. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is possible
to estimate that value:
Cash and Due from Banks
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment Securities
Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable
instruments.
Continued.........
A-27
<PAGE> 77
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE L. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
Loans
The fair value of loans 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 amounts.
The fair value 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.
Deposits
The fair value of demand deposits, savings accounts and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using discounted cash flow analysis, with interest rates currently
offered for deposits of similar remaining maturities.
Loan Commitments and Standby Letters of Credit
There is no material difference between the contractual amount and the
estimated fair value of loan commitments which are generally priced at
market at the time of funding. In addition, fees collected from loan
commitments are considered to be immaterial. The fair value of
letters of credit would approximate the contractual value since the
fees currently collected on these instruments would be deemed
immaterial.
Federal Funds Purchased and Sold
The carrying amount is a reasonable estimate of fair value.
Continued..........
A-28
<PAGE> 78
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE L. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
The estimated fair values of the Bank's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996
----------------------------------
Carrying Fair
Amount Value
--------------- ---------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 4,327,637 $ 4,327,637
Investment securities:
Held-to-maturity $ 35,185,285 $ 35,145,920
Available-for-sale $ 6,712,170 $ 6,712,170
Loans, net of allowance $ 44,550,344 $ 44,850,986
Financial liabilities-
Deposits $ 85,081,288 $ 85,254,055
Other:
Commitments to extend credit $ - $ 1,083,032
Standby letters of credit $ - $ 184,000
1995
----------------------------------
Carrying Fair
Amount Value
--------------- ---------------
Financial assets:
Cash and due from banks $ 5,316,335 $ 5,316,335
Federal funds sold $ 5,400,000 $ 5,400,000
Investment securities:
Held-to-maturity $ 25,430,362 $ 25,732,356
Available-for-sale $ 7,684,400 $ 7,684,400
Loans, net of allowance $ 44,483,150 $ 44,277,920
Financial liabilities-
Deposits $ 82,788,697 $ 82,612,536
Other:
Commitments to extend credit $ - $ 1,304,722
Standby letters of credit $ - $ 248,000
</TABLE>
Continued..........
A-29
<PAGE> 79
SMITH COUNTY BANK
NOTES TO FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE M. PRIOR PERIOD ADJUSTMENT
Adjustments have been made to certain prior period balances to comply
with Internal Revenue Service Adjustments made during a recent tax
examination. These adjustments are largely reflected in the loans,
bank premises and equipment, depreciation expense, and income tax
expense as noted below:
<TABLE>
<S> <C>
Capitalized loan fees $ 104,672
Capitalized bank premises and equipment,
net of depreciation 114,203
Taxes related to IRS adjustment (78,244)
----------
Net increase in undivided profits $ 140,631
==========
</TABLE>
NOTE N. SUBSEQUENT EVENT
Pursuant to a Merger Agreement dated September 9, 1997 Smith County
Bank will be merged with and into Trustmark Bank, under the charter of
Trustmark Bank. The effective date of the merger is scheduled to
occur within the first quarter of 1998.
A-30
<PAGE> 80
To the Board of Directors
Smith County Bank
Taylorsville, Mississippi
We have compiled the accompanying balance sheet of Smith County Bank as of June
30, 1997 and the related statements of income for the three month and six month
period ended June 30, 1997 and 1996 and cash flows for the six month period
ended June 30, 1997 and 1996, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements, accordingly, do not express an
opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures and the
statements of cash flows for the three months period ended June 30, 1997 and
1996 required by generally accepted accounting principles. If the omitted
disclosures and statement of cash flows for the three month period ended June
30, 1997 and 1996, were included in the financial statements, they might
influence the user's conclusions about the Company's financial position, results
of operations, and cash flows. Accordingly, these financial statements are not
designed for those who are not informed about such matters.
/s/ MAY & COMPANY
- --------------------------
MAY & COMPANY
Jackson, Mississippi
September 22, 1997
A-31
<PAGE> 81
SMITH COUNTY BANK
BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 7,802,415
Federal funds sold 600,000
Investment securities:
Held-to-maturity 33,501,021
Available-for-sale 6,223,000
Loans:
Less: Allowance for loan losses 46,529,493
Unearned income (1,240,719)
(97,328)
------------
Net loans 45,191,446
------------
Bank premises and equipment, net 2,147,555
Accrued interest receivable 1,063,217
Deferred income taxes 140,011
Other assets 219,947
------------
Total assets $ 96,888,612
============
</TABLE>
See accompanying note and accountant's report.
A-32
<PAGE> 82
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES:
Deposits:
Interest bearing:
Demand $ 11,177,356
NOW accounts 10,877,159
Savings deposits 6,558,588
Time 47,904,601
-------------
Total interest-bearing 76,517,704
Noninterest-bearing 10,793,037
-------------
Total deposits 87,310,741
Accrued interest payable 424,664
Accrued taxes and other liabilities 193,503
-------------
Total liabilities 87,928,908
-------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $15 par value, 15,000 shares
authorized, issued and outstanding 225,000
Capital surplus 8,100,000
Retained earnings 662,217
-------------
8,987,217
Less: Net unrealized loss on securities available
for sale (27,513)
-------------
Total stockholders' equity 8,959,704
-------------
Total liabilities and stockholders' equity $ 96,888,612
=============
</TABLE>
A-33
<PAGE> 83
SMITH COUNTY BANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,053,932 $1,068,900 $2,101,869 $2,168,857
Interest on investment securities:
Taxable interest income 603,646 550,411 1,193,628 1,005,421
Exempt from federal income taxes 52,879 59,095 105,887 120,622
Interest on federal funds sold 22,520 77,182 43,399 174,846
---------- ---------- ---------- ----------
Total interest income 1,732,977 1,755,588 3,444,783 3,469,746
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on demand deposits 186,740 234,653 366,174 455,453
Interest on savings deposits 44,982 45,077 89,392 89,612
Interest on time deposits 680,792 638,130 1,344,715 1,282,026
---------- ---------- ---------- ----------
Total interest expense 912,514 917,860 1,800,281 1,827,091
---------- ---------- ---------- ----------
NET INTEREST INCOME 820,463 837,728 1,644,502 1,642,655
---------- ---------- ---------- ----------
Provision for loan losses 30,000 60,000 60,000 120,000
---------- ---------- ---------- ----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 790,463 777,728 1,584,502 1,522,655
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Service charges on deposit accounts 142,359 138,001 276,711 271,862
Credit life and other insurance
commission 28,663 18,081 52,716 36,691
Safe deposit box rentals 3,902 4,266 8,200 8,734
Other 18,120 15,996 23,779 27,010
---------- ---------- ---------- ----------
Total noninterest income 193,044 176,344 361,406 344,297
---------- ---------- ---------- ----------
</TABLE>
Continued..........
A-34
<PAGE> 84
SMITH COUNTY BANK
STATEMENTS OF INCOME - CONTINUED
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NONINTEREST EXPENSES:
Salaries and employee benefits 367,775 365,673 731,399 723,286
Occupancy expense 60,694 59,789 125,973 135,185
Equipment expenses 79,063 84,009 161,074 166,236
Service and professional fees 22,584 43,186 62,722 83,505
Stationery and supplies 39,784 37,530 92,087 93,602
FDIC assessment 2,700 500 4,939 1,000
Amortization of goodwill 3,400 3,400 6,800 6,800
Other 58,249 93,379 149,574 167,549
---------- ---------- ---------- ----------
Total noninterest expenses 634,249 687,466 1,334,568 1,377,163
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 349,258 266,606 611,340 489,789
INCOME TAXES 99,000 60,000 159,000 120,000
---------- ---------- ---------- ----------
NET INCOME $ 250,258 $ 206,606 $ 452,340 $ 369,789
========== ========== ========== ==========
NET INCOME PER SHARE $ 16.68 $ 13.77 $ 30.16 $ 24.65
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 15,000 15,000 15,000 15,000
========== ========== ========== ==========
</TABLE>
See accompanying note and accountant's report.
A-35
<PAGE> 85
SMITH COUNTY BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 452,340 $ 369,789
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of premium paid on
purchase of deposits and assets 6,800 6,800
Provision for loan losses 60,000 120,000
Provision for depreciation 127,800 127,800
Gain on sale of equipment (9,462) --
Gain on sale of securities -- (450)
Accretion on investment securities, net 10,064 16,682
(Increase) decrease in:
Accrued interest receivable 69,141 (194,816)
Other assets 47,907 59,456
Increase (decrease) in:
Accrued interest payable 8,443 (21,868)
Accrued taxes and other liabilities (9,872) 110,172
------------ ------------
Net cash provided by operating activities 763,161 593,565
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in federal funds sold (600,000) 3,400,000
Purchases of available-for-sale securities (500,000) (1,033,750)
Purchases of held-to-maturity securities (2,550,000) (11,980,469)
Proceeds from maturities of held-to-maturity securities 4,212,046 1,778,866
Proceeds from sale of available-for-sale securities 1,000,000 2,000,000
Purchases of bank premises and equipment (232,727) (156,050)
Proceeds from sale of equipment 29,481 --
Net (increase) decrease in loans (876,636) 558,908
------------ ------------
Net cash provided by (used in) investing activities 482,164 (5,432,495)
------------ ------------
</TABLE>
Continued..........
A-36
<PAGE> 86
SMITH COUNTY BANK
STATEMENTS OF CASH FLOWS- CONTINUED
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES-
Net increase in deposits 2,229,453 3,808,926
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS 3,474,778 (1,030,004)
CASH AND DUE FROM BANKS,
at beginning of period 4,327,637 5,316,335
----------- -----------
CASH AND DUE FROM BANKS,
at end of period $ 7,802,415 $ 4,286,331
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOWS INFORMATION-
Cash paid during the year for:
Interest $ 1,791,837 $ 1,848,959
=========== ===========
Income taxes $ 39,750 $ 3,000
=========== ===========
SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Total increase (decrease) in unrealized
gains (losses) on securities available for sale $ 1,324 $ 99,179
=========== ===========
Net deferred tax effect related to unrealized
gains (losses) on securities $ 450 $ 33,720
=========== ===========
</TABLE>
See accompanying note and accountant's report.
A-37
<PAGE> 87
SMITH COUNTY BANK
SELECTED INFORMATION - SUBSTANTIALLY
ALL DISCLOSURES OMITTED
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NOTE A. BASIS OF PRESENTATION
The unaudited interim financial statements of Smith County Bank have
been prepared in accordance with generally accepted accounting
principles. Smith County Bank's significant accounting policies are
set forth in the annual financial statements for the year ended
December 31, 1996.
In the opinion of management, the unaudited financial statements
reflect all adjustment (all of which are normal and recurring in
nature) necessary for a fair presentation of the financial position,
results of operations, and cash flows of Smith County Bank. The
results of operations for the interim periods are not necessarily
indicative of results to be expected for the full year.
The interim financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1996,
and the notes related thereto.
A-38
<PAGE> 88
ANNEX B
B-1
<PAGE> 89
September 26, 1997
Trustmark Corporation
P.O. Box 291
Jackson, MS 39205-0291
Gentlemen:
We understand that Smith County Bank ("Smith"), Trustmark Corp. ("Trustmark")
and Trustmark National Bank ("Trustmark Bank") have entered into a Merger
Agreement, dated as of September 9, 1997 (the "Agreement") which provides,
among other things, for the merger of Smith with and into Trustmark Bank (the
"Merger"). Pursuant to the Merger, each issued and outstanding share of Smith
common stock, par value $15.00 per share (the "Smith Common Stock"), excluding
shares held by Trustmark (other than shares held in a fiduciary capacity) or in
the treasury of Smith, shall cease to be outstanding and shall be converted
into and exchanged for either cash or shares of Trustmark no par value common
stock as more fully described in section 2 of the Agreement.
You have asked our opinion as to whether the purchase price is fair, from a
financial point of view, to the stockholders of Trustmark.
Chaffe & Associates, Inc. ("Chaffe"), through its experience in the securities
industry, investment analysis and appraisal, and in related corporate finance
and investment banking activities, including mergers and acquisitions,
corporate recapitalization, and valuations for estate, corporate and other
purposes, states that it is competent to provide an opinion as to the fairness
of the purchase price contemplated herein. Nether Chaffe nor any of its
officers or employees has an interest in Smith's or Trustmark's Common Stock.
The fee received for the preparation and delivery of this opinion is not
dependent or contingent upon any transaction.
In connection with rendering its opinion, Chaffe, among other things: (i)
reviewed the Agreement; (ii) reviewed and analyzed certain publicly-available
financial statements and other information of Smith and Trustmark,
respectively; (iii) reviewed and analyzed certain internal financial statements
and other financial and operating data concerning Smith, prepared by the
management of Smith, including financial projections; (iv) directed such
questions as it deemed necessary to the President and Chief Executive Officer
of Smith, and the management of Trustmark, respectively; (v) compared the
financial performance of Smith with that of certain comparable publicly-traded
companies and their securities; (vi) reviewed the financial terms of business
combinations in the commercial banking industry specifically and other
industries generally, which Chaffe deemed generally comparable to the Merger;
(vii) considered a number of valuation methodologies, including among
B-2
<PAGE> 90
others, those that incorporate book value, deposit base premium and
capitalization of earnings; and (viii) performed such other studies and analyses
as we deemed appropriate to this opinion.
In its review, Chaffe relied, without independent verification, upon the
accuracy and completeness of the historical and projected financial
information, and all other information reviewed by it for purposes of its
opinions. Chaffe did not make or obtain an independent review of Smith's or
Trustmark's assets or liabilities, nor was Chaffe furnished with any such
appraisals. Chaffe relied solely on Smith and Trustmark for information as to
the adequacy of their respective loan loss reserves and values of other real
estate owned. With respect to Smith's projected financial results, Chaffe has
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgements of the management of Smith of
future financial performances of Smith. This opinion was necessarily based
upon market, economic and other conditions as they existed on, and could be
evaluated as of, the date hereof. Chaffe expressed no opinion on the tax
consequences of the proposed transaction or the effect of any tax consequences
on the value to be received by the shareholders of Smith Common Stock.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, it is our opinion on the date hereof that the purchase
price is fair, from a financial point of view, to the holders of Trustmark
common stock.
Very truly yours,
CHAFFE & ASSOCIATES, INC.
B-3
<PAGE> 91
ANNEX C
C-1
<PAGE> 92
ANNEX D
D-1
<PAGE> 93
MERGER AGREEMENT
This Merger Agreement ("Agreement") is executed the _____ day of
September, 1997, between and among TRUSTMARK CORPORATION, a Mississippi
corporation ("Trustmark"), TRUSTMARK NATIONAL BANK, a national banking
association ("Trustmark Bank") (Trustmark and Trustmark Bank hereinafter
sometimes collectively referred to as "Buyers") and Smith County Bank, a
Mississippi state-chartered banking institution ("Bank").
The parties desire to merge Bank with Trustmark Bank, with Trustmark
Bank as the surviving association;
NOW, THEREFORE, for the consideration and mutual covenants and
conditions contained in this Agreement, Buyers and Bank do hereby agree as
follows:
1. THE MERGER.
Pursuant to this Agreement and the Plan and Agreement of
Merger in the form attached as Exhibit "A", Bank shall be merged with and into
Trustmark Bank (the "Merger"). As a result of and as part of the Merger, on
the effective date of the Merger ("Effective Time of the Merger") each of the
issued and outstanding shares of the common stock of Smith County Bank shall be
converted into Trustmark common shares on the basis described in Section 2
herein.
As a consequence of the Merger, all assets of Bank, as they
exist at the Effective Time of the Merger, shall pass to and vest in Trustmark
Bank without any conveyance or other transfer, and Trustmark Bank shall be
responsible for all of the liabilities of every kind and description of Bank as
of the Effective Time of the Merger.
D-2
<PAGE> 94
2. CONVERSION OF BANK COMMON STOCK.
2.1 Conversion of Shares. Subject to Sections 2.2, 2.3,
and 2.4 of this Agreement, as of the Effective Time of the Merger, by virtue of
the Merger and without any further action on the part of holders of any Bank
shares, each outstanding share of the Bank shall be converted into a number of
shares of Trustmark common stock equal to the "Exchange Ratio". The "Exchange
Ratio" shall be equal to the quotient of $1,000.00 divided by the average
closing bid/asked market price ("Average Trustmark Price")(computed on the
basis of the last trade of the day) of Trustmark shares as reported in the
National Association of Securities' Dealers Automated Quotation System for
National Market Issues for the fifteen consecutive trading days preceding the
third (3rd) calendar day prior to the date of the Bank's special shareholders'
meeting (the "Meeting Date").
2.2 Bank Shares Held by Trustmark and Treasury Shares.
Any Bank common shares held by Trustmark, whether outright or under option,
(excluding shares held in a fiduciary capacity) or in the treasury of Bank at
the Effective Time of the Merger shall not be converted but shall be canceled
and retired, and no cash, stock, or other property shall be issuable with
respect thereto.
2.3 Fractional Shares. No fractional Trustmark common
shares shall be issued upon the surrender for exchange of certificates
representing Bank common shares. In lieu of any such fractional share, each
holder of Bank common shares who would otherwise be entitled to a fractional
share of Trustmark common stock will be paid cash upon surrender of all the
stock certificates representing Bank common shares held by such holder in the
amount equal to the product of such fraction multiplied by the Average
Trustmark Price.
D-3
<PAGE> 95
2.4 Calculations and Adjustments. If, between the date
of this Agreement and the Effective Time of the Merger, Trustmark shares shall
be changed into a different number of shares or shares of a different class by
reason of any reclassification, recapitalization, stock split or stock dividend
with a record date within said period, the number of Trustmark common shares to
be issued and delivered upon the Merger as provided in this Agreement shall be
appropriately and proportionately adjusted so that the number of such shares
that will be issued and delivered as a result of the Merger will equal the
number of Trustmark common shares that holders of shares of Bank common stock
would have received had the record date for such reclassification,
recapitalization, stock split or stock dividend been immediately following the
Effective Time of the Merger.
If the Average Trustmark Price is less than $27.00 or greater
than $30.25 per share and the Merger is approved by the Bank's shareholders on
the Meeting Date, the following provisions shall apply:
(a) Buyers and Bank shall promptly meet to consider the
implications of the Average Trustmark Price on the proposed transaction;
(b) The Boards of Directors of Trustmark and Bank shall be
fully authorized, under the circumstances and in the best interests of each
organization, to renegotiate the Exchange Ratio for the number of shares of
Trustmark stock in to which each Bank common share shall be converted;
(c) If Trustmark and Bank are unable to negotiate a mutually
acceptable exchange ratio for the number of shares of Trustmark stock in to
which each Bank common share shall be
D-4
<PAGE> 96
converted, either Trustmark or Bank may terminate this Agreement upon written
notice delivered personally to the other party on or before ten (10) days prior
to the Closing Date.
(d) In the event that either party exercises its right of
termination under and in accordance with the above provisions of this Section
2.4, the terminating party shall reimburse and pay to the other party all of
the non-terminating party's reasonable expenses, including but not limited to,
attorneys' fees which such party shall have incurred under this Agreement and
in pursuance of the transaction covered by this Agreement.
2.5 Distribution of Trustmark Stock. As soon as
practical after the Effective Time of the Merger, notice will be given to all
shareholders of Bank as of the Effective Date of the Merger, of the procedure
for surrendering and exchanging their share certificates representing Bank
common shares for share certificates representing Trustmark shares. The notice
will include instructions with respect to the surrender of certificates
representing the Bank common shares and the distribution of Trustmark shares in
exchange therefor and a letter of transmittal for use in surrendering Bank
common share certificates.
2.6 Rights Prior to Exchange. Until a former Bank common
shareholder has surrendered the certificates representing his Bank common
shares or provided indemnity as permitted in Section 2.7, such former Bank
common shareholder shall not be entitled to receive cash or certificates
representing the Trustmark shares to which such shareholder is entitled by
virtue of the Merger and no dividend or other distribution with respect of
Trustmark shares will be paid to such persons; provided, however, that when
such certificates shall have been surrendered or indemnity provided, there
shall be paid to such persons, without interest, all dividends and other
distributions payable in respect of a record date after the Effective Time of
D-5
<PAGE> 97
the Merger on the Trustmark shares for which such Bank common shares shall have
been exchanged.
2.7 Lost or Destroyed Certificates. Any person whose
certificates representing shares of Bank common stock shall have been lost or
destroyed may nevertheless obtain the shares of Trustmark or any cash to which
such Bank shareholder is entitled as a result of the Merger if such Bank
shareholder provides Trustmark with the statement certifying such loss or
destruction and an indemnity satisfactory to Trustmark sufficient to indemnify
Trustmark against any loss or expense that may occur as a result of such lost
or destroyed certificate being thereafter presented to Trustmark for exchange.
3. REPRESENTATION AND WARRANTIES OF BANK.
Bank makes the following representations and warranties, each
of which is being relied upon by Buyers, which representations and warranties
shall, individually and in the aggregate, be true in all material respects upon
the date of this Agreement and on the Closing Date and shall survive the
Closing Date and the Merger:
3.1 Organization. Bank is a state-chartered banking
institution duly organized, validly existing and in good standing under the
laws of the State of Mississippi and has full corporate power to carry on its
business as now being conducted and to own and lease its properties.
3.2 Authority. This Agreement has been duly and validly
approved by the Board of Directors of Bank. Upon approval by the shareholders
of Bank and upon obtaining the required approvals of all applicable regulatory
and judicial authorities (and such approvals are no
D-6
<PAGE> 98
longer subject to judicial or administrative review, and all waiting periods
required by law have expired):
(a) This Agreement shall be a valid and binding obligation
of Bank, enforceable in accordance with its terms, and
(b) Consummation of the transactions contemplated by this
Agreement will not: (i) result in a breach of or default under any agreement
to which Bank is a party, (ii) conflict with or result in the breach of any
law, rule or regulation, or any writ, injunction or decree of any court or
governmental agency, or (iii) conflict with, or result in the breach of, the
charter or bylaws of Bank.
3.3 Capitalization. The authorized capital stock of Bank
consists of 15,000 shares of common stock $15.00 par value, of which 15,000
shares are issued and outstanding.
Each share of Bank stock outstanding as of the date hereof is
duly authorized, validly issued, fully paid and non-assessable and free of
preemptive rights. Other than as described in this Section 3.3, Bank does not
have outstanding any other equity securities or any subscriptions, options,
warrants, rights, calls or other commitments to issue any securities or to
convert any presently outstanding securities into securities of a different
kind or class. Bank does not have any debt securities outstanding.
3.4 Financial Statements. Bank has delivered to Buyers
the audited financial statements of Bank for the periods ended December 31,
1994, December 31, 1995, and December 31, 1996. As promptly as same are
available, Bank shall deliver to Buyers a copy of any subsequent quarterly and
annual financial statements of Bank and its quarterly call reports. The
financial statements delivered pursuant to this Section 3.4 do and will fairly
present the
D-7
<PAGE> 99
financial condition of Bank as of the dates thereof in all material respects
and have been or will be prepared in conformity with generally accepted
accounting principles, consistently applied, for the periods involved. All
other statements and reports delivered pursuant to this Section 3.4 do and will
fairly present the financial information purported to be shown therein in all
material respects. The $1,200,400 reserve for loan losses reflected in the
audited financial statements for the period ended December 31, 1996, to the
best of Bank's knowledge adequately provides for the anticipated loan losses of
Bank as of such date in accordance with generally accepted accounting
principles and bank regulatory standards.
3.5 Absence of Undisclosed Liabilities. Bank has no known
liabilities or obligations of any nature whatsoever, whether absolute, accrued,
contingent or otherwise, due or to become due, as principal or guarantor, not
recorded or disclosed in the audited financial statements for the period ended
December 31, 1996, or otherwise disclosed in this Agreement or the documents,
statements, lists, and exhibits referred to herein and delivered on the date
hereof which could have a material adverse effect on the financial condition,
properties or prospects of Bank.
3.6 Compliance with Laws. To the best of Bank's
knowledge, Bank has no uncorrected deficiencies noted in any examination
report by federal or state regulatory authorities and is not in violation of
any material federal, state or local law, rule, ordinance or regulation. Bank
will promptly notify Buyers of receipt of any examination reports of and
material communications with all federal and state regulatory authorities from
the date hereof until the Closing Date.
D-8
<PAGE> 100
3.7 Contracts and Commitments. As of the date of this
Agreement, Bank has supplied Buyers with copies of all contracts, leases,
licenses, pension or profit sharing agreements and other agreements ("Plans")
relating in any way to Bank, such agreements being described in Exhibit "B"
hereto. To the best of Bank's knowledge, there have been no material breaches
of or defaults under any of the provisions of any such contracts, leases,
licenses, Plans or other agreements, not previously cured. No prohibited
transaction (as defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code) (the "Code"), accumulated funding deficiency (as defined
in Section 412 of the Code) or reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Plan. The present value of all
benefits vested under all Plans does not exceed the value of the assets of such
Plans allocable to such vested benefits.
3.8 Assets Employed. All of Bank's significant tangible
assets are reflected in the financial statements delivered pursuant to
Section 3.4 hereof, and such assets constitute all of the significant tangible
assets necessary to or used or employed in the business and operations of Bank
as currently conducted. Bank has good, indefeasible, marketable title to all
of its significant tangible assets free of all liens, encumbrances and claims,
except as required by law for deposits of public funds and to secure repurchase
agreements. Leases covering material tangible assets in which Bank has a
leasehold interest only are valid and enforceable in accordance with their
terms and the Merger will not result in a default thereunder.
3.9 Litigation. Except as described in Exhibit "C"
(Pending Litigation - Bank), neither Bank nor any of its officers or directors
is (i) a party to any action, suit or proceeding or
D-9
<PAGE> 101
(ii) subject to any pending or threatened administrative, judicial or other
action, suit, proceeding, inquiry or investigation nor is there any basis known
to Bank therefor.
3.10 Brokers, Finders or Advisers. Bank has not employed
or incurred any liability to any broker, finder or adviser in connection with
the transactions contemplated by this Agreement.
3.11 Taxes. The amounts provided for taxes on the audited
financial statement for the period ended December 31, 1996, are sufficient in
all material respects for the payment of all accrued and unpaid federal, state,
county and municipal taxes and all levies, licenses, franchise and registration
fees, charges or withholdings of any nature whatsoever of Bank for the period
ending on the date of such financial statements and for all prior periods.
Bank has filed all material federal, state, county, municipal and other tax
returns and all other reports which are required to be filed in respect of all
such taxes and, to the extent that its liabilities for taxes have not been
fully discharged, full and adequate reserves have been established in the
financial statements therefor. The federal income tax returns of Bank have
been audited by the Internal Revenue Service through the year ending December
31, 1993. Bank is not in default in the payment of any taxes due or payable or
of any assessments of any kind, and has not received any notice of material
assessment or proposed material assessment of any tax.
3.12 Insurance. True and correct copies of all insurance
policies covering Bank or its officers, directors or employees have been
provided to Buyers, such policies being described in Exhibit "D" hereto. Such
insurance policies, or policies providing substantially equivalent coverage,
have been in force continuously, without gaps in coverage, for at least the
D-10
<PAGE> 102
preceding three (3) years and provide the coverage indicated, or substantially
equivalent coverages, for all insurable events occurring during such three year
period.
3.13 Parent, Subsidiaries. Bank has no parent corporation
or subsidiaries.
3.14 Other Regulatory Filings. Subject to applicable
disclosure restrictions, Bank has delivered to Buyers true and correct copies
of all reports filed by it with the Mississippi Department of Banking and
Consumer Finance and the Federal Deposit Insurance Corporation and any other
financial regulatory agency since January 1, 1994, such reports being described
in Exhibit "E" hereto. Each of such reports is true and correct in all
material respects.
3.15 Full Disclosure. To the best of Bank's knowledge,
this Agreement, including all information provided to Buyers pursuant to this
Agreement, does not contain any untrue statement of material fact and Bank has
not omitted to disclose to Buyers any material fact concerning the financial
condition, properties or prospects of Bank.
3.16 Disclosure Documents. With respect to information
supplied or to be supplied by Bank for inclusion in the proxy statement
relating to the meeting of Bank's stockholders for the approval of the Merger
(the "Proxy Statement") and the registration statement on Form S-4 (or other
appropriate registration form) to be filed with the Securities and Exchange
Commission by Trustmark for the registration of the shares of Trustmark common
stock to be offered and sold in the Merger (the "Registration Statement"), (i)
the Proxy Statement, at the time of the mailing thereof to stockholders of Bank
and at the time of the meeting of Bank's stockholders will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading and (ii)
the
D-11
<PAGE> 103
Registration Statement, at the time it becomes effective under the Securities
Act, will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYERS.
In order to induce Bank to enter into this Agreement and to
consummate the transactions contemplated herein, Buyers represent and warrant
the following matters to Bank, each of which is being relied on by Bank, which
representations and warranties shall, individually and in the aggregate, be
true in all material respects upon the date of this Agreement and on the
Closing Date and shall survive the Closing Date:
4.1 Organization, Power and Authorization. Trustmark is a
Mississippi corporation, duly organized, validly existing and in good standing
under the laws of the state of Mississippi and has all requisite corporate
power and authority to carry on its business as it is now being conducted and
to own and lease its properties. The business activities of Trustmark do not
require it to be qualified to do business in any other state. The execution
and performance of this Agreement and the Merger have been duly authorized by
the Board of Directors of Trustmark and upon obtaining the approval of all
governmental and regulatory agencies or authorities whose approval is required
as identified in Section 4.11 (and such approvals are no longer subject to
judicial or administrative review, and all waiting periods required by law have
expired), this Agreement will be a valid, binding obligation of Trustmark,
enforceable in accordance with its terms.
Trustmark Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States and has all requisite corporate power and authority to carry on its
business as it is now being conducted and to own and lease its
D-12
<PAGE> 104
properties. The business activities of Trustmark Bank do not require it to be
qualified to do business in any other state. The execution and performance of
this Agreement and the Merger have been duly authorized by the Board of
Directors of Trustmark Bank and upon obtaining the approval of all
governmental and regulatory agencies or authorities whose approval is required
as identified in Section 4.11 (and such approvals are no longer subject to
judicial or administrative review, and all waiting periods required by law have
expired), this Agreement will be a valid, binding obligation of Trustmark Bank,
enforceable in accordance with its terms.
4.2 Absence of Conflict. The execution and delivery of
this Agreement and the performance and compliance with the terms hereof by
Buyers will not: (i) conflict with or result in the breach of the charter or
bylaws of Buyers, (ii) result in a breach of or default under any agreement to
which Buyers are presently a party, or (iii) conflict with or result in the
breach of any law, rule or regulation, or any writ, injunction or decree of any
court or governmental agency.
4.3 Capitalization. The authorized capital stock of
Trustmark consists of 100,000,000 shares of common stock, no par value, of
which 36,230,808 shares are issued and outstanding as of September 4, 1997.
The authorized capital stock of Trustmark Bank consists of
2,677,955 shares of common stock, $5.00 par value, of which 2,677,955 shares
are presently issued and outstanding.
Trustmark has granted to certain of its executive officers
non-qualified and incentive stock options to purchase shares of the capital
stock of Trustmark in the present aggregate amount of 86,000 shares. Other
than as described herein, neither Trustmark nor Trustmark Bank presently has
outstanding any other securities or any options, warrants, rights, calls or
other commitments to issue any securities or to convert any presently
outstanding
D-13
<PAGE> 105
securities into securities of a different kind or class. Bank understands and
agrees that Trustmark and Trustmark Bank may issue additional shares of common
stock or other securities at any time for the purpose of making acquisitions or
for other business purposes.
4.4 Financial Statements. Buyers have delivered to Bank
the audited financial statements of Trustmark and its consolidated subsidiaries
for the periods ended December 31, 1994, December 31, 1995, and December 31,
1996. As promptly as same are available, Buyers shall deliver to Bank a copy
of any subsequent quarterly and annual financial statements of Trustmark and
consolidated subsidiaries, and quarterly call reports of Trustmark Bank. The
financial statements delivered pursuant to this Section 4.4 (subject to audit
adjustments to any unaudited financial statements) do and will fairly present
the financial conditions of Trustmark and consolidated subsidiaries as of the
dates thereof in all material respects and have been or will be prepared in
conformity with generally accepted accounting principles, consistently applied,
for the periods involved. All other statements and reports delivered pursuant
to this Section 4.4 will fairly present the financial information purported to
be shown therein in all material respects.
4.5 Absence of Undisclosed Liabilities. Neither Trustmark
nor Trustmark Bank has any known liabilities or obligations of any nature
whatsoever, whether absolute, accrued, contingent or otherwise, due or to
become due, as principal or guarantor, not recorded or disclosed in the audited
financial statements for the period ended December 31, 1996, or otherwise
disclosed in this Agreement or the documents, statements, lists and schedules
referred to herein and delivered on the date hereof which could have a material
adverse effect on the financial condition, properties or prospects of Trustmark
or Trustmark Bank.
D-14
<PAGE> 106
4.6 Assets Employed. All of Trustmark and Trustmark
Bank's significant tangible assets are reflected in the financial statements
delivered pursuant to Section 4.4 hereof in accordance with generally accepted
accounting principles, and such assets constitute all of the significant
tangible assets necessary to or used or employed in the business and operations
of Trustmark and Trustmark Bank as currently conducted. Trustmark and
Trustmark Bank have good, indefeasible, marketable title to all of their
significant tangible assets free of all liens, encumbrances and claims, except
as required by law for deposits of public funds and to secure repurchase
agreements. Leases covering material tangible assets in which Trustmark Bank
has a leasehold interest only are valid and enforceable in accordance with
their terms and the Merger will not result in a default thereunder.
4.7 Taxes. The amounts provided for taxes on the audited
financial statement for the period ending December 31, 1996, are sufficient in
all material respects for the payment of all accrued and unpaid federal, state,
county and municipal taxes and all levies, licenses, franchise and registration
fees, charges or withholdings of any nature whatsoever of Trustmark and
Trustmark Bank for the period ending on the date of such financial statements
and for all prior periods. Trustmark and Trustmark Bank have filed all
material federal, state, county, municipal and other tax returns and all other
material reports which are required to be filed in respect of all such taxes
and, to the extent that their liabilities for taxes have not been fully
discharged, full and adequate reserves have been established in the financial
statements therefor. Neither Trustmark nor Trustmark Bank is in default in the
payment of any taxes due or payable or of any assessments of any kind, and
neither has received any notice of material assessment or proposed material
assessment of any tax.
D-15
<PAGE> 107
4.8 Exchange Act Filings. Trustmark has filed with or
furnished to the Securities and Exchange Commission, as applicable, all annual,
quarterly and other reports, all proxy statements and all annual reports to
stockholders required by the Exchange Act to be so filed or furnished. Such
reports and proxy statements are true and correct in all material respects and
do not omit to state a material fact required to be stated therein or necessary
to make the statement contained therein, in light of the circumstances under
which they were made, not misleading. The financial statements and schedules
included in such reports and proxy statements, together with the notes
thereto, represent fairly, in all material respects, the financial position of
Trustmark and its consolidated subsidiaries, as of their respective dates and
the results of operations and changes in financial position for the periods
indicated therein, in each case in conformity with generally accepted
accounting principles, consistently applied.
4.9 Full Disclosure. To the best of Buyers' knowledge,
this Agreement, including all information provided to Bank pursuant to this
Agreement, does not contain any untrue statement of material fact and Buyers
have not omitted to disclose to Bank any material fact concerning the financial
condition, properties or prospects of Trustmark or Trustmark Bank.
4.10 Brokers, Finders or Advisers. Neither of the Buyers
has employed or incurred any liability to any broker, finder or adviser in
connection with the transactions contemplated by this Agreement.
4.11 Governmental and Judicial Consents and Approvals.
The execution, delivery and performance by Buyers of this Agreement, and the
consummation of the transactions contemplated by this Agreement, require no
action by or in respect of, or filing with, any governmental or judicial body,
agency, official or authority other than:
D-16
<PAGE> 108
(a) compliance with the applicable requirements, if any, of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
(b) compliance with the applicable requirements of the
Securities Exchange Act of 1934 ("Exchange Act") and the rules and regulations
promulgated thereunder;
(c) compliance with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder;
(d) compliance with applicable foreign or state securities
or "blue sky" laws;
(e) compliance with the applicable requirements of the
Bank Holding Company Act of 1956 and the National Bank Act, both as amended;
and
(f) such other filings or registrations with, or
authorizations, consents or approvals of, governmental bodies, agencies,
officials or authorities, the failure of which to make or obtain would not
materially and adversely affect the ability of Buyers to consummate the Merger.
4.12 Litigation. Except as disclosed in the reports
referred to in Section 4.8 or as set forth in Exhibit "F", neither of the
Buyers is a party to any action, suit or proceeding, or is subject to any
pending or threatened administrative, judicial or other action, suit,
proceeding, inquiry or investigation, in which an unfavorable decision, ruling
or finding could have a material adverse effect on the financial condition or
operations of Trustmark and its consolidated subsidiaries taken as a whole or
on the consummation of the transactions contemplated by this Agreement, and to
the knowledge of Buyers there is no basis for any such action, suit,
proceeding, inquiry or investigation.
4.13 Disclosure Documents. With respect to information
supplied or to be supplied by Buyers for inclusion in the proxy statement
relating to the meeting of Bank's
D-17
<PAGE> 109
stockholders for the approval of the Merger (the "Proxy Statement") and the
registration statement on Form S-4 (or other appropriate registration form) to
be filed with the Securities and Exchange Commission by Trustmark for the
registration of the shares of Trustmark common stock to be offered and sold in
the Merger (the "Registration Statement"), (i) the Proxy Statement, at the
time of the mailing thereof to stockholders of Bank and at the Meeting Date,
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading and (ii) the Registration Statement, at the time it becomes
effective under the Securities Act, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Registration
Statement will comply as to form in all material respects with the provisions
of the Securities Act and Exchange Act, respectively, and the rules and
regulations thereunder.
4.14 Absence of Certain Changes. Since December 31,
1996, Trustmark and its subsidiaries have in all material respects conducted
their businesses in the ordinary course and there has not been:
(a) any material adverse change with respect to the
business, financial condition or prospects of Trustmark and its subsidiaries:
(b) except for regular dividends declared in the ordinary
course of business, any declaration, setting aside or payments of any dividend
or other distribution in respect of any shares of capital stock of Trustmark,
or any repurchase, redemption or other acquisition by Trustmark of any
outstanding shares of capital stock;
D-18
<PAGE> 110
(c) any amendment of any material term of any outstanding
Trustmark capital stock;
(d) any material damage, destruction or other casualty
loss (whether or not covered by insurance) affecting the business or assets of
Trustmark or any of its subsidiaries; or
(e) any material change in any method of accounting or
accounting practice by Trustmark or any of its subsidiaries, except for any
such change that is required by reason of a concurrent change in generally
accepted accounting principles.
4.15 Compliance with Laws. Neither Trustmark nor Trustmark
Bank has, in its best judgment, any material uncorrected deficiencies noted in
any examination report by federal or state regulatory authorities or is in
violation of any material federal, state or local law, rule, ordinance or
regulation.
5. SPECIAL AGREEMENTS.
5.1 Dividends. Bank shall be permitted to declare and pay
an annual cash dividend out of current operating profits earned since January
1, 1997 of up to $7.00 per share. If the Closing of the transaction has not
occurred by March 1, 1998, the Bank shall be entitled to declare and pay a
quarterly dividend out of current operating profits in an amount not to exceed
$1.75 per share. Except as set forth in this Section 5.1, Bank shall not
declare or pay any cash or other dividends prior to the Closing.
5.2 Employment. Trustmark intends to continue the
employment of the employees of Bank for a minimum of one (1) year after the
Closing Date. However, as employees of Trustmark, such persons are subject to
salary review, reassignment and termination in the same manner as other
employees of Trustmark.
D-19
<PAGE> 111
5.3 Confidentiality. Buyers and Bank represent and agree
that any confidential information received concerning the other in connection
with the transactions contemplated by this Agreement shall be maintained as
confidential, and in the event the Closing does not occur without the default
of the other party, Buyers and Bank agree to return all materials concerning
the other to the party from which obtained. Notwithstanding this Section 5.3,
either party may disclose any such information to the extent required by
federal securities laws or otherwise required by any governmental agency or
authority.
5.4 Covenant Not to Compete. Each Director of Bank
agrees that for the period from the date hereof until one year after the
Closing Date, he will not become directly, indirectly or beneficially an
employee, five percent or more stockholder or director of any bank, savings
bank, savings association, trust company, financial institution or other
similar business enterprise which competes with Trustmark Bank within Smith
County, Mississippi. Other than in the capacity of an officer of Trustmark
Bank subsequent to Closing, the Directors of Bank further agree not to initiate
any action to induce any officer of Trustmark Bank to leave Trustmark Bank's
employment or directly or indirectly assist any other person or entity in
requesting or inducing any such other employee of Trustmark Bank to leave such
employment for the period from the date hereof until one year after the Closing
Date.
5.5 Payment of Expenses. Except as otherwise provided
herein, each party shall bear their own expenses in connection with the
negotiation and consummation of the transactions contemplated by this
Agreement.
5.6 Employee Benefit Plans. Following the Closing Date,
the employees of Bank will be entitled to the same employee benefits as are
presently being provided to employees of Trustmark Bank. At Buyer's option,
Bank's existing retirement plan shall either be (i)
D-20
<PAGE> 112
terminated on the Closing Date and, with Buyer's assistance, converted to
self-directed individual retirement accounts for the employees or (ii) if
permissible under applicable laws, rules and regulations, transfer the employee
portion of Bank's existing plan to Buyer's existing retirement plan and the
employer portion of Bank's existing plan to a separate newly created retirement
plan maintained by Buyer. All employees of Bank will receive credit for years
of service at Bank for purposes of vesting in Buyer's retirement plan.
5.7 Recommendation of Directors; Voting of Shares. The
Board of Directors of Bank hereby agree to recommend that the shareholders of
Bank approve the Merger, provided, nothing herein shall require the Board of
Directors of Bank to take any action which, in the legal opinion of Watkins,
Ludlam & Stennis, P.A., would constitute a breach of any fiduciary duties that
are owed to the shareholders of Bank under applicable law. Each of the
Directors of Bank agree to vote his Bank shares in favor of the Merger and to
take all action reasonably required to effect the Merger.
5.8 Public Announcements. The parties will consult with
each other as to the timing, form and content of all public announcements
regarding any aspect of this Agreement or the Merger, provided that no party
hereto shall be prohibited from making any press release or other public
statement which its legal counsel deems necessary.
5.9 Due Diligence. Buyers shall promptly conduct a due
diligence examination of the books, records, assets, and liabilities of Bank,
which shall be completed no later than October 24, 1997. If such inquiry or
examination should reveal any previously unknown financial information which
Buyers, in their sole discretion, deem to be adverse, then Buyers may promptly
notify Bank of such finding and may exercise their right of termination set
forth in Section 11(d) of this Agreement. Notwithstanding the performance of
the due diligence
D-21
<PAGE> 113
examination, the representations and warranties of Bank set forth in this
Agreement shall be true in all material respects on the Closing Date and shall
survive the Closing Date.
5.10 Credit Extensions. Bank agrees to notify and
consult with Buyers before making, advancing, extending or renewing any loans
or credits above $100,000 before the Closing Date.
5.11 Fairness Opinion. Buyers shall obtain, at Buyers'
expense, an opinion that the Merger is fair, from a financial point of view, to
the shareholders of Trustmark and Trustmark Bank.
5.12 Board of Directors. Following the consummation of
Merger, the existing Board of Directors of Bank who so desire shall become
advisory directors to the Taylorsville community bank office of Trustmark Bank
and shall be entitled to the comparable benefits as are provided to other
advisory directors of Trustmark Bank's community bank offices.
5.13 Registration Statement. Trustmark agrees to use all
reasonable efforts to file the Registration Statement on or before October 3,
1997.
6. COVENANTS OF BANK PENDING CLOSING.
6.1 Shareholders' Meeting. As promptly as practical
after the effective date of the Registration Statement for the Trustmark shares
to be issued in connection with the Merger, Bank and its directors shall cause
to be convened a meeting of the shareholders of Bank for the purpose of
considering and voting on the Merger. Such meeting shall be properly called
and held in accordance with applicable law and the charter and bylaws of Bank.
6.2 Documents of Title. Bank agrees to allow Buyers to
examine all documents relating to any real or personal property owned by Bank.
D-22
<PAGE> 114
6.3 Access to Properties and Records. Bank will provide
Buyers and their authorized representatives full access during normal business
hours and under reasonable circumstances to any and all of its premises,
properties, contracts, commitments, books, records and other information and
will cause its officers to furnish any and all financial, technical and
operating data and other information pertaining to its business as Buyers shall
from time to time reasonably request.
6.4 Solicitation of Further Offers. From the date
hereof until the termination of this Agreement, subject to their fiduciary
obligations and duties, Bank and its Board of Directors will not, directly or
indirectly, take any action to solicit, initiate or encourage the making of any
Acquisition Proposal (as hereinafter defined); nor will they enter into any
negotiations concerning, furnish any non-public information relating to Bank in
connection with, or agree to any Acquisition Proposal. The term "Acquisition
Proposal" as used herein means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving Bank, or the
acquisition of a majority of the outstanding shares of Bank's common stock or a
majority of the assets of Bank, other than the transaction contemplated by
this Agreement.
6.5 Other Affirmative Covenants. Bank covenants with
Buyers that at all times prior to the Closing Date, Bank will:
(a) Operate its business in substantially the manner in
which such business is now being operated and use its reasonable efforts to
maintain the goodwill of the depositors, customers and suppliers of Bank;
D-23
<PAGE> 115
(b) Use its reasonable efforts to retain the services of
its officers and employees; provided, however, that Bank shall have the right
to terminate the employment of any officer or employee in accordance with
established procedures;
(c) Maintain its properties in good repair and working
order, reasonable wear and tear excepted;
(d) Duly and timely file all reports, tax returns and
other documents required to be filed with federal, state and local tax and
regulatory authorities;
(e) Unless contesting same in good faith by appropriate
proceedings and having established reasonable reserves therefor, pay, when
required to be paid, all taxes indicated by tax returns as filed or otherwise
levied or assessed upon it or any of its properties and to withhold or collect
and pay to the proper governmental authorities or hold in separate bank
accounts for such payments all taxes and other assessments required by law to
be withheld or collected;
(f) Notify Buyers of any unusual or material problems or
developments with respect to its business; and
(g) Use its reasonable efforts to bring about the
transaction contemplated by this Agreement.
6.6 Negative Covenants of Bank. From the date hereof
until the Closing Date, without the prior written consent of Buyers, Bank will
not:
(a) Incur any material obligation except current
contracts entered into in the ordinary course of business;
(b) Increase the compensation of any director, and,
except for normal increases as a result of regular salary reviews for officers
and employees that will be conducted
D-24
<PAGE> 116
in January of 1998 if the Merger has not been consummated by such date,
increase the compensation of any officer or employee or enter into or amend any
contract of employment or enter into or amend any insurance, profit-sharing,
pension, severance pay, bonus, incentive, deferred compensation or retirement
plan or arrangement;
(c) Amend its charter or bylaws;
(d) Sell, transfer or convey any of its investment securities
other than in the ordinary course of business;
(e) Sell, assign or transfer any of its assets other than
in the ordinary course of business;
(f) Mortgage, pledge or subject to any lien, charge or
encumbrance any of its assets except in the ordinary course of business;
(g) Intentionally waive any material right, contractual
or otherwise, or cancel or release any material debts or claims whether or not
in the ordinary course of business;
(h) Intentionally suffer any material uninsured damage,
destruction or loss to its tangible properties;
(i) Except to the extent permitted pursuant to Section
5.1 hereof, declare or pay any dividend or make any other distribution with
respect to its stock;
(j) Make, extend or renew any loan or other extension of
credit to any of its officers, directors, or employees other than loans made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and that
do not involve more than the normal risk of collectability or present other
unfavorable features;
D-25
<PAGE> 117
(k) Issue or sell any of its capital stock, or any of its
debt securities, authorize a stock split, stock dividend, reclassification,
recapitalization or otherwise affect its capital structure;
(l) Take any action that causes a failure to comply with
any representation, warranty or covenant contained herein;
(m) Make, advance, extend or renew any loan or credit
above $100,000; or
(n) Enter into any agreement to do any of the foregoing
matters.
7. COVENANTS OF BUYERS PENDING CLOSING.
7.1 Corporate Action. Prior to the Closing Date, Buyers
shall cause the Merger to be approved by the directors of Trustmark and the
shareholder of Trustmark Bank.
7.2 Other Affirmative Covenants. Buyers covenant with
Bank that at all times prior to the Closing Date, Buyers will and will cause
Trustmark Bank to:
(a) Operate their businesses in substantially the manner
in which such businesses are now being operated and use their reasonable
efforts to maintain the good will of the depositors, customers and suppliers of
Trustmark Bank;
(b) Use their reasonable efforts to retain the services
of the officers and employees of Trustmark Bank; provided, however, that Buyers
shall have the right to terminate the employment of any officer or employee of
either of them in accordance with established procedures;
(c) Maintain their properties in good repair and working
order, reasonable wear and tear excepted;
(d) Duly and timely file all reports, tax returns and
other documents required to be filed with federal, state and local tax and
regulatory authorities;
D-26
<PAGE> 118
(e) Unless contesting same in good faith by appropriate
proceedings and having established reasonable reserves therefor, pay, when
required to be paid, all taxes indicated by tax returns as filed or otherwise
levied or assessed upon them or any of their properties and to withhold or
collect and pay to the proper governmental authorities or hold in separate bank
accounts for such payments all taxes and other assessments either of them is
required by law to withhold or collect;
(f) Use their reasonable efforts to bring about the
transaction contemplated by this Agreement; and
(g) Notify Bank of any unusual or material problems or
developments with respect to the business of Trustmark or Trustmark Bank.
8. CONDITIONS PRECEDENT TO BUYERS' OBLIGATIONS TO CLOSE.
Buyers obligations to consummate the Merger are subject to
each of the following conditions precedent, any of which may be waived by
Buyers in writing.
8.1 Warranties and Representations at Closing. All
warranties and representations contained in this Agreement by or concerning
Bank shall be true and correct on the Closing Date in all material respects.
8.2 Governmental Authority Approval. The consummation of
the Merger shall have been approved by all governmental and regulatory agencies
or authorities whose approval is required, such approvals shall be in full
force and effect and no longer subject to judicial or administrative review and
all waiting periods required by law shall have expired.
8.3 Corporate Approval. The Merger shall have been
authorized by the Board of Directors and shareholders of Bank in accordance
with the provisions of applicable law and the charter and bylaws of Bank, and
Bank shall have furnished Buyers with certified copies of
D-27
<PAGE> 119
resolutions duly adopted by the Board of Directors and shareholders of Bank
approving this Agreement and authorizing the Merger.
8.4 Compliance with Undertakings. Each of the acts,
covenants, agreements and undertakings of Bank and its directors to be
performed or caused to be complied with on or before the Closing Date pursuant
to the terms hereof shall have been duly performed and caused to be complied
with in all material respects.
8.5 No Material Adverse Change. There shall have been no
material adverse change in the financial condition, tangible properties or
prospects of Bank since December 31, 1996, other than as a result of the
transactions contemplated hereby.
8.6 Federal Income Taxation. Buyers shall have received
an opinion from Brunini Grantham Grower & Hewes, PLLC to the effect that the
Merger will qualify as a tax-free reorganization under Section 368 of the Code.
8.7 Fairness Opinion. Buyers shall have received the
fairness opinion described in Section 5.11 of the Agreement.
8.8 Opinion of Counsel. Bank shall cause to be delivered
to Trustmark the opinion of Watkins, Ludlam & Stennis, P.A. as of the Closing
Date to the effect that:
(a) Bank is duly organized, validly existing and in good
standing as a state-chartered banking institution under the laws of the State
of Mississippi. To the actual knowledge of such counsel, and following
reasonable inquiry, but without independent verification of facts presented or
represented by Bank to such counsel and with the ability to rely upon
certifications of officers, Bank's authorized capitalization consists of 15,000
common shares, of which 15,000 shares are issued and outstanding and such
outstanding shares have been duly authorized and validly issued and are fully
paid and not assessable.
D-28
<PAGE> 120
(b) This Agreement is valid, binding and enforceable
against Bank in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally.
(c) The Merger has been duly authorized by all requisite
corporate and shareholder action of Bank.
(d) Such counsel has no actual knowledge, following
reasonable inquiry, but without independent verification of facts presented or
represented by Bank to such counsel and with the ability to rely upon
certificates of officers and other legal opinions, of any material
misrepresentation, breach of any material warranty or breach of any material
covenant or condition in this Agreement or in any document, statement, list or
schedule referred to herein, by Bank.
8.9 Special Financial Covenants. On the Closing Date,
the reserve for loan losses then maintained by Bank shall adequately provide
for the anticipated loan losses of Bank as of such date in accordance with
accepted audit, bank examination and bank regulatory standards. Further, the
tangible assets of Bank, shall have a fair market value equal to or greater
than its liabilities.
8.10 Closing Certificate. At the Closing, the President
of Bank shall execute and deliver a closing certificate to the effect that all
representations and warranties by or concerning Bank are true and correct as of
the Closing Date and that all other conditions precedent to Buyers' obligations
to close have been performed and complied with in all material respects.
D-29
<PAGE> 121
9. CONDITIONS PRECEDENT TO BANK'S OBLIGATION TO CLOSE.
Bank 's obligation to consummate the Merger is subject to each
of the following conditions precedent, any of which may be waived by Bank in
writing.
9.1 Warranties and Representations at Closing. All
warranties and representations contained in this Agreement by or concerning
Buyers shall be materially true and correct on the Closing Date; provided,
nothing in this Agreement shall prohibit or impair the ability of Trustmark or
Trustmark Bank to make further acquisitions using cash or through the issuance
of additional securities or to grant any options or issue additional securities
for other business purposes.
9.2 Governmental Authority Approval. The consummation of
the Merger shall have been approved by all governmental and regulatory agencies
or authorities whose approval is required, such approvals shall be in full
force and effect and no longer subject to judicial or administrative review and
all waiting periods required by law shall have expired.
9.3 Corporate Approval. The Merger shall have been
authorized by the Board of Directors of Trustmark and Trustmark Bank and the
shareholder of Trustmark Bank in accordance with the provisions of applicable
law and the articles and bylaws of Trustmark Bank.
9.4 Compliance with Undertakings. Each of the acts,
covenants, agreements and undertakings of Buyers to be performed or caused to
be complied with on or before the Closing Date pursuant to the terms hereof
shall have been duly performed and caused to be complied with in all material
respects.
9.5 No Material Adverse Change. There shall have been no
material adverse change in the condition, financial or otherwise, of Trustmark
Bank since December 31, 1996, other than as a result of the transaction
contemplated hereby.
D-30
<PAGE> 122
9.6 Federal Income Taxation. Bank shall have received an
opinion from Brunini Grantham Grower & Hewes, PLLC to the effect that the
Merger will qualify as a tax-free reorganization under Section 368 of the Code.
9.7 Opinion of Counsel. Buyers shall cause to be
delivered to Bank the opinion of Brunini, Grantham, Grower & Hewes, PLLC to the
effect that:
(a) Trustmark Bank is duly organized, validly existing
and in good standing as a national banking association.
(b) Trustmark is a duly organized, validly existing
corporation in good standing under the laws of the State of Mississippi. The
outstanding shares of Trustmark's common stock are, and the shares of
Trustmark common stock to be issued as a result of Bank, upon execution and
delivery, will be, in each case duly authorized, validly issued, fully paid,
and nonassessable. The shares of Trustmark common stock are validly registered
under the Securities Act of 1933.
(c) This Agreement is valid, binding and enforceable
against Buyers in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally.
(d) The Merger has been duly authorized by all requisite
corporate and shareholder action of Trustmark and Trustmark Bank, and has been
appropriately approved by all applicable regulatory authorities.
(e) Such counsel has no actual knowledge, following
diligent inquiry, but without independent verification of facts certified by
appropriate officials of Trustmark and/or Trustmark Bank and relied upon by
such counsel, of any material misrepresentation, material
D-31
<PAGE> 123
breach of any warranty or breach of any material covenant or condition in this
Agreement or in any document, statement, list or schedule referred to herein by
the Buyers.
9.8 Closing Certificate. At the Closing, the President
and Chief Executive Officer of Trustmark shall execute and deliver a closing
certificate to the effect that all representations and warranties by or
concerning Trustmark and Trustmark Bank are true and correct in all material
respects as of the Closing Date and that all other conditions precedent to
Bank's obligation to Close have been performed and complied with in all
material respects.
10. CLOSING.
On the Closing Date, subject to the terms and conditions set forth in
this Agreement, Bank shall merge with and into Trustmark Bank pursuant to the
Plan and Agreement of Merger attached as Exhibit "A." The Merger will be
effective (the "Effective Time of the Merger") upon the date established by the
United States Comptroller of the Currency.
At the Effective Time of the Merger, the separate corporate existence
of Bank shall cease and Trustmark Bank shall be the surviving association of
the Merger.
If all of the conditions to closing are satisfied or waived by January
15, 1998, the Closing will take place at the main office of Bank on Friday,
January 30, 1998. If all of the conditions to closing are not satisfied by
January 15, 1998, the Closing will take place on a subsequent date selected by
Buyers within 30 days after all conditions to Closing are satisfied or waived
(the "Closing Date"). At the Closing, the certificates, letters and opinions
required by Articles 8 and 9 hereof shall be delivered and the appropriate
officers of Bank, Trustmark and Trustmark Bank shall execute, deliver,
acknowledge and file such documents, instruments and certificates required by
this Agreement or otherwise necessary to accomplish the Merger.
D-32
<PAGE> 124
11. TERMINATION.
This Agreement may be terminated and the Merger and the Closing
abandoned at any time prior to the Closing Date without liability on the part
of Bank or Buyers, as follows:
(a) By the mutual consents of the boards of directors of
Bank and Trustmark;
(b) By any party if a governmental agency or authority
shall at any time have failed to approve the transactions contemplated by this
Agreement or shall have instituted and not dismissed court proceedings to
restrain or prohibit such transactions and such court proceedings have not been
resolved prior to one year after the date of this Agreement.
(c) By any party if the Closing Date shall not have
occurred on or prior to the day that is one year after the date of this
Agreement without the fault of such party;
(d) By Buyers at any time during the due diligence
examination period as provided in Section 5.9 if such examination, in Buyers'
opinion, reveals previously unknown, adverse information concerning Bank; or
(e) By Buyers, if at the time of such termination there
shall be a material adverse change in the financial condition or tangible
properties of Bank arising subsequent to the completion of due diligence as
referred to in Section 5.9 hereof.
(f) By Bank, if at the time of such termination there
shall be a material adverse change in the financial condition or tangible
properties of Buyers arising subsequent to December 31, 1996.
(g) By either Buyers or Bank in accordance with and
subject to the provisions of Section 2.4 hereof.
(h) By any party, if the stockholders of Bank fail to
approve the Merger at the meeting of stockholders called for such purposes
(including any adjournment or postponement thereof);
D-33
<PAGE> 125
(i) By Buyers if there has been a material breach by Bank
(A) of any of its representations and warranties set forth herein, or (B) of
any of its obligations herein which has not been promptly cured after notice
thereof from Buyers;
(j) By Bank if there has been a material breach by either
of the Buyers (A) of any of its representations and warranties set forth herein
or (B) of any of its obligations hereunder which has not been promptly cured
after notice thereof by Bank.
12. MISCELLANEOUS.
12.1 Further Assurances. If at any time after the
Effective Time of the Merger, Buyers shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm, of record or otherwise,
in Trustmark Bank its right, title or interest in, to or under any of the
rights, properties or assets of Bank acquired or to be acquired as a result of
the Merger or to otherwise carry out this Agreement, the officers and directors
of Buyers shall, and will be authorized to, execute and deliver, in the name
and on behalf of Bank all such deeds, bills of sale, assignments and assurances
and take and do, in the name of and on behalf of Bank, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or
assets in Trustmark Bank or to otherwise carry out this Agreement.
12.2 Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Mississippi, except to the extent
federal law is applicable.
12.3 Notices and Communications. Any and all notices or
other communications required or permitted under this Agreement shall be in
writing and shall be
D-34
<PAGE> 126
deemed given when delivered in person or 5 days after being mailed by United
States certified or registered mail, return receipt requested, postage prepaid
and addressed:
TO: Smith County Bank
ATTN: Friend B. Walker, Jr.
Post Office Box 375
Taylorsville, MS 39168-0375
WITH A COPY TO: Craig N. Landrum
Watkins, Ludlam & Stennis, P.A.
P.O. Box 427
Jackson, MS 39205-0427
TO: Trustmark or Trustmark Bank
ATTN: Gerard R. Host
248 E. Capitol Street
Jackson, Mississippi 39201
WITH A COPY TO: Granville Tate, Jr.
Brunini, Grantham, Grower & Hewes,
PLLC
P. O. Drawer 119
Jackson, Mississippi 39205
Any party may change the address to which notice or other
communication to him or it is sent by delivery of written notice of the change
to the other parties to this Agreement.
12.4 Headings and Exhibits. Any section headings in this
Agreement are for convenience of reference only and shall not be deemed to
alter or affect any provisions hereof. All documents, statements, lists and
schedules referred to herein shall be initialed for identification or may be
physically annexed hereto, but in either event such documents, statements,
lists and schedules shall be deemed a part hereof.
12.5 Benefit. This Agreement shall be binding upon and
shall inure to the exclusive benefit of the parties hereto, their heirs,
successors or assigns. This Agreement is not intended to nor shall it create
any rights in any other party.
D-35
<PAGE> 127
12.6 Partial Invalidity. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
12.7 Waiver. Neither the failure nor any delay on the
part of any party hereto in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, or of any other right, power or remedy; nor
shall any single or partial exercise of any
right, power or remedy preclude any further or other exercise thereof or the
exercise of any other right, power or remedy.
12.8 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
12.9 Interpretation. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or entity or the context may require.
Further, it is acknowledged by the parties that this Agreement has been drafted
and negotiated by both parties hereto and, therefore, no presumptions shall
arise favoring either party by virtue of the authorship of any of its
provisions.
12.10 Entire Agreement. This Agreement and the documents,
statements, lists and schedules referred to herein constitute the entire
Agreement between the parties hereto, and it is understood and agreed that all
undertakings, negotiations and agreements heretofore had between the parties
are merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by either Trustmark or Trustmark Bank, on the one
hand, and Bank, on the other.
D-36
<PAGE> 128
12.11 Time of the Essence. With respect to any act called
for by any party to this Agreement, including regulatory authority approvals
and registration of the Trustmark shares with appropriate state and federal
agencies, time is of the essence.
12.12 Definition of Material. With reference to the
representations, warranties and covenants of Bank contained in this Agreement,
such representations, warranties and covenants shall be strictly satisfied and
complied with. Accordingly, when used with reference to Bank "material" and
"materially" shall be understood to mean a breach of any representation,
warranty or covenant contained in this Agreement which, separately or in the
aggregate with any other such breach, does or could result in a cost, loss,
detriment or obligation in excess of $200,000. Provided, however, with
reference to the representations, warranties and covenants of Buyers contained
in this Agreement, "material" and "materially" shall have the meaning normally
accorded such terms considering the relative importance of such representation,
warranty or covenant in the context of a business of the type and size of
Buyers. Any reduction in the book value of Bank or Trustmark which may result
by virtue of the adoption of SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" shall not constitute a material adverse change
in the condition, financial or otherwise, of Bank or Trustmark.
D-37
<PAGE> 129
WITNESS the signatures of the parties as of the date first set forth above.
TRUSTMARK CORPORATION
By:
------------------------------
Richard G. Hickson, Its President
and Chief Executive Officer
(SEAL)
TRUSTMARK NATIONAL BANK
By:
------------------------------
Richard G. Hickson, Its Vice Chairman
and Chief Executive Officer
(SEAL)
D-38
<PAGE> 130
SMITH COUNTY BANK
By:
------------------------
Friend B. Walker, Jr.,
President
(SEAL)
Board of Directors of Smith County Bank
---------------------------------
William D. Bassett
---------------------------------
D. Michael Bryant
---------------------------------
Cliff Currie
---------------------------------
Frank R. Day
---------------------------------
R. Edwin Grissom
---------------------------------
Robert Lindsey, Jr.
---------------------------------
John K. Mayfield
---------------------------------
John W. Murray
---------------------------------
Friend B. Walker, Jr.
D-39
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit "A" Plan and Agreement of Merger
Exhibit "B" Contracts
Exhibit "C" Pending Litigation - Bank
Exhibit "D" Insurance Policies
Exhibit "E" Regulatory Reports
Exhibit "F" Pending Litigation - Buyers
</TABLE>
<PAGE> 132
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Article VI, Section 2 of the bylaws of Trustmark
Corporation, the corporation may indemnify or reimburse the expenses of any
person against all reasonable expenses incurred in connection with any
litigation or proceeding in which such person may have been involved because he
is or was a director (including honorary or advisory directors) officer or
employee of the corporation or of any other firm, corporation or organization
which he served in any such capacity at the request of the corporation.
Provided, such person shall have no right to indemnification or reimbursement
in relation to any matters in which he is finally adjudged to have been guilty
of or liable for negligence or willful misconduct in the performance of his
duties; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any administrative proceeding or action instituted by
any appropriate bank regulatory agency which proceeding or action results in a
final order assessing civil monetary penalties or requiring affirmative action
by an individual or individuals in the form of payments to the corporation.
In addition, pursuant to the Mississippi Business Corporation Act,
directors and officers are entitled to indemnification in certain events as
summarized below:
The Mississippi Business Corporation Act provides for indemnification
of directors and officers in certain events. Directors and officers are
entitled to indemnification if they are wholly successful, on the merits or
otherwise, in the defense of any proceeding to which such person is a party
because he was a director or officer of the corporation against reasonable
expenses incurred by him in connection with the proceeding. A corporation may
indemnify an individual who is a party to a proceeding because he is or was a
director or officer against a liability incurred in the proceeding if the
person conducted himself in good faith and he reasonably believed, in the case
of conduct in his official capacity, that his conduct was in the best interests
of the corporation, and, in all other cases, that his conduct was not opposed
to the best interests of the corporation, and, in the case of any criminal
proceeding, that he had no reasonable cause to believe his conduct was unlawful
or, he engaged in conduct for which broader indemnification has been made
permissible or obligatory under a provision of the corporation's articles of
incorporation. Unless ordered by a court, a corporation may not indemnify a
director or officer in connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant standard
of conduct specified above, or, in connection with any proceeding with respect
to conduct for which he was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, whether or not involving action
in his official capacity.
A corporation may, additionally, before final disposition of a
proceeding, advance funds to pay for or reimburse the reasonable expenses
incurred by the director or officer who is a party to a proceeding under
certain circumstances.
<PAGE> 133
ITEM 21.(a)
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C> <C>
2. Merger Agreement Exhibit 2
3. Articles of Incorporation of
Trustmark Corporation *
3.1 Bylaws of Trustmark *
5. Proposed Opinion of Brunini,
Grantham, Grower, & Hewes, PLLC Exhibit 5
8. Proposed Tax Opinion of Brunini,
Grantham, Grower, & Hewes, PLLC Exhibit 8
10. Material Contracts *
13. Annual Report to Security Holders *
13.1 Quarterly Report to Security Holders *
21. Subsidiaries of Registrant *
23.1 Consent of Arthur Andersen LLP Exhibit 23.1
23.2 Consent of May & Company Exhibit 23.2
23.3 Consent of Brunini, Grantham,
Grower, & Hewes, PLLC Exhibit 23.3
23.4 Consent of Chaffe & Associates, Inc. Exhibit 23.4
23.5 Consent of Southard Financial Exhibit 23.5
27 Financial Data Schedule *
</TABLE>
<PAGE> 134
<TABLE>
<S> <C> <C>
99 Form of Notice of Special
Meeting and Proxy to be used
in connection with Special Meeting
of Shareholders of SCB Exhibit 99
</TABLE>
(*) Included in documents incorporated by reference
<PAGE> 135
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Proxy Statement
pursuant to Items 4, 10(b), 11 or 13 of the Form S-4, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it becomes effective.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 (Section 230.415 of this
chapter), will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Trustmark pursuant to Trustmark's bylaws, or otherwise, Trustmark
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against pub lic policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Trustmark of expenses
incurred or paid by a director, officer or controlling person of Trustmark in
the successful defense of any action, suit or proceeding) is asserted by such
director,
<PAGE> 136
officer or controlling person in connection with the securities being
registered, Trustmark will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
<PAGE> 137
INDEX TO EXHIBITS
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C> <C>
2. Merger Agreement Exhibit 2
3. Articles of Incorporation of
Trustmark Corporation *
3.1 Bylaws of Trustmark *
5. Proposed Opinion of Brunini,
Grantham, Grower, & Hewes, PLLC Exhibit 5
8. Proposed Tax Opinion of Brunini,
Grantham, Grower, & Hewes, PLLC Exhibit 8
10. Material Contracts *
13. Annual Report to Security Holders *
13.1 Quarterly Report to Security Holders *
21. Subsidiaries of Registrant *
23.1 Consent of Arthur Andersen LLP Exhibit 23.1
23.2 Consent of May & Company Exhibit 23.2
23.3 Consent of Brunini, Grantham,
Grower, & Hewes, PLLC Exhibit 23.3
23.4 Consent of Chaffe & Associates, Inc. Exhibit 23.4
23.5 Consent of Southard Financial Exhibit 23.5
27 Financial Data Schedule *
99 Form of Notice of Special
Meeting and Proxy to be used
in connection with Special Meeting
of Shareholders of SCB Exhibit 99
</TABLE>
(*) Included in documents incorporated by reference
<PAGE> 1
Exhibit 2
See Annex D to Proxy Statement
<PAGE> 1
Exhibit 5
[BRUNINI, GRANTHAM, GROWER & HEWES, PLLC LETTERHEAD]
______________, 1997
Board of Directors and Shareholders
Smith County Bank
404 Main Street
Taylorsville, MS 39168
We have acted as counsel to Trustmark Corporation, a Mississippi
corporation ("Trustmark") and Trustmark National Bank, a national banking
association ("Trustmark Bank") in connection with a Merger Agreement dated as
of September 9, 1997, (the "Merger Agreement") by and among Trustmark,
Trustmark Bank and Smith County Bank, a Mississippi banking corporation
("SCB"). In connection with this representation, we have examined the charter
and bylaws of Trustmark Bank, the articles of incorporation and bylaws of
Trustmark, the corporate proceedings of Trustmark and Trustmark Bank in
connection with the transactions contemplated by the Merger Agreement and such
other documents and instruments as we deemed necessary to render the following
opinions.
Based upon the foregoing, we are of the opinion that:
1. Trustmark Bank is duly organized, validly existing and in good
standing as a national banking association.
2. Trustmark is duly organized, validly existing and in good
standing as a business corporation under the laws of the State
of Mississippi. The shares of Trustmark's common stock to be
issued as a result of the Merger will be, upon execution and
delivery, duly authorized, validly issued, fully paid and
nonassessable shares of the common stock of Trustmark and are
registered on Form S-4 pursuant to the Securities Act of 1933.
3. The Merger Agreement is valid, binding and enforceable against
Trustmark and Trustmark Bank in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating
to or affecting the enforcement of creditors' rights
generally.
<PAGE> 2
Trustmark Corporation
______________, 1997
Page 2
4. The Merger has been duly authorized by all requisite corporate
and shareholder action of Trustmark and Trustmark Bank.
5. To the best of our knowledge, following diligent inquiry, but
without independent verification of facts certified by
appropriate officials of Trustmark and/or Trustmark Bank and
relied upon by us, neither Trustmark nor Trustmark Bank has
made any material misrepresentation, materially breached any
warranty or materially breached any covenant or condition in
the Merger Agreement or in any document, statement, list or
schedule referred to therein.
Very truly yours,
BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
Robert D. Drinkwater
RDD/vll
<PAGE> 1
Exhibit 8
[BRUNINI, GRANTHAM, GROWER & HEWES, PLLC LETTERHEAD]
______________, 1997
Board of Directors
Trustmark Corporation
248 East Capitol Street, Suite 300
Jackson, Mississippi 39201
Board of Directors and Shareholders
Smith County Bank
404 Main Street
Taylorsville, MS 39168
Re: Merger Agreement by and among Trustmark Corporation, Trustmark
National Bank and Smith County Bank
Gentlemen:
We have acted as counsel to Trustmark Corporation, a Mississippi
corporation and registered bank holding company ("Trustmark") and its
subsidiary, and Trustmark National Bank, a national banking association
("Trustmark Bank"), in connection with the proposed merger (the "Merger") of
Smith County Bank, a Mississippi chartered bank, ("SCB"), with Trustmark Bank
under the existing charter of Trustmark Bank pursuant to the terms of the
Merger Agreement dated as of September 9, 1997, (the "Merger Agreement"), by
and among Trustmark, Trustmark Bank and SCB, each as described in the
Registration Statement on Form S-4 filed by Trustmark with the Securities and
Exchange Commission (the "Registration Statement"). All capitalized terms,
unless otherwise specified, have the meanings assigned to them in the
Registration Statement.
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Merger Agreement, (ii) the Registration Statement, and
(iii) such other documents as we have deemed necessary or appropriate in order
to enable us to render the opinions below. In our examination, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified, conformed
or photostatic copies and the authenticity of the originals of such copies. In
rendering the opinions set forth below, we have relied upon certain written
representations and covenants of Trustmark, Trustmark Bank and SCB.
<PAGE> 2
Trustmark Corporation
____________, 1997
Page 2
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. The following opinion is based upon the foregoing
authorities as existing on the date of this opinion, any of which could be
changed at any time. Any such changes may be retroactive and could
significantly modify the statements and opinions expressed herein. Similarly,
any change in the facts and assumptions upon which this opinion is based could
modify the conclusions reached herein. In rendering this opinion we assume no
obligation to advise you of any such changes or to update this opinion as a
result of any such changes.
Our opinion covers only the matters expressly set forth herein, and no
opinions should be inferred as to any other matters or as to any other tax
aspects of the above-described transactions that are not specifically
addressed.
This opinion represents our best judgment as to the probable outcome
of the tax issues discussed and is not binding on the Internal Revenue Service.
We can give no assurance that the Service will not challenge our conclusions
and prevail in the courts in such a manner as to cause adverse tax consequences
to Trustmark, Trustmark Bank, SCB or their respective shareholders.
Based upon and subject to the foregoing, we are of the opinion that
the Merger will, under current law, constitute a tax-free reorganization under
Section 368(a) of the Code. It is further our opinion that Trustmark,
Trustmark Bank and SCB will each be a party to the Merger.
As a tax-free reorganization, the Merger will have the following
Federal income tax consequences for SCB and their shareholders and Trustmark
and Trustmark Bank:
1. No gain or loss will be recognized by the holders of the
common stock of SCB as a result of the exchange of such shares for shares of
Trustmark common stock ("Trustmark Common Stock") pursuant to the Merger. Cash
received by any SCB shareholder or as a consequence of perfecting dissenters'
rights of appraisal with respect to their SCB shares will be treated as having
been received by such shareholders as a distribution in redemption of his or
her stock, subject to the provisions and limitations of Code Section 302. The
payment of cash in lieu of fractional share interests will be treated as if the
shares were distributed as part of the exchange and then were redeemed by
Trustmark. These cash payments will be treated as distributions in full
payment in exchange for the stock redeemed, subject to the provisions and
limitations of Code Section 302.
2. The tax basis of the shares of Trustmark Common Stock received
by each shareholder of SCB will equal the tax basis of such shareholder's
shares of SCB (reduced by any amount allocable to fractional share interests
for which cash is received) exchanged in the Merger, decreased
<PAGE> 3
Trustmark Corporation
____________, 1997
Page 3
by the amount of cash received by the shareholder and increased by the amount
which was treated as a dividend and the amount of any gain recognized on the
exchange and not treated as a dividend.
3. The holding period for the shares of Trustmark Common Stock
received by each shareholder of SCB will include the holding period for the
shares of SCB exchanged in the Merger.
4. Trustmark and Trustmark Bank will not recognize gain or loss
as a result of the Merger.
5. SCB will not recognize gain or loss as a result of the Merger.
Except as set forth above, we express no opinion as to the tax
consequences to any party, whether Federal, state, local or foreign, of the
Merger, or of any transactions related to the Merger, or contemplated by the
Merger Agreement. This opinion is being furnished only to you in connection
with the Merger and solely for your benefit in connection therewith and may not
be used or relied upon for any other purpose and may not be circulated, quoted
or otherwise referred to for any other purpose without our express written
consent.
Very truly yours,
BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
Louis G. Fuller
LGF/vll
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 17, 1997 on the
consolidated financial statements of Trustmark Corporation and to all
references to our Firm included in or made a part of this Registration
Statement on Form S-4.
/s/ Arthur Andersen LLP
-----------------------------
ARTHUR ANDERSEN LLP
Jackson, Mississippi,
October 30, 1997.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement of Trustmark
Corporation on Form S-4 of our report dated January 17, 1997 (except for Note
N, as to which the date is September 22, 1997), on our audits of the financial
statements of Smith County Bank as of December 31, 1996 and 1995, and for each
of the three years in the period ended December 31, 1996, and our report dated
September 22, 1997 on the compiled financial statements of Smith County Bank as
of June 30, 1997, and for the three month and six month periods ended June 30,
1997 and 1996 appearing in the Prospectus, which is part of this Registration
Statement.
/s/ May & Company
- -----------------------------
May & Company
Jackson, Mississippi
October 30, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
We hereby consent to the references to this firm under the heading
"Legal Opinions" in the Registration Statement on Form S-4 of Trustmark
Corporation filed in connection with the proposed merger of Smith County Bank
into Trustmark National Bank.
BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
/s/ Robert D. Drinkwater
-----------------------------
Robert D. Drinkwater
Jackson, Mississippi
October 30, 1997
<PAGE> 1
Exhibit 23.4
CONSENT OF CHAFFE & ASSOCIATES, INC.
We hereby consent to the references to our firm under the heading
"The Merger-Opinion of Trustmark's Financial Advisor" in the Registration
Statement of Form S-4 of Trustmark Corporation filed in connection with the
proposed merger of Smith County Bank into Trustmark National Bank. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder.
CHAFFE & ASSOCIATES, INC.
By:/s/ Sherwood G. Briggs
-----------------------------
Sherwood G. Briggs
Vice-President
New Orleans, Louisiana
October 30, 1997
<PAGE> 1
Exhibit 23.5
Consent of Southard Financial
We hereby consent to the references to our firm under the heading
"The Merger-Opinion of SCB's Financial Advisor" in the Registration Statement
of Form S-4 of Trustmark Corporation filed in connection with the proposed
merger of Smith County Bank into Trustmark National Bank.
SOUTHARD FINANCIAL
By: Southard Financial
Memphis, Tennessee
October ________, 1997
<PAGE> 1
Exhibit 99
SMITH COUNTY BANK
-------------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _______, 1997
TO THE STOCKHOLDERS:
Notice is hereby given that a Special Meeting of the stockholders of
Smith County Bank ("SCB") will be held at 404 Main St., Taylorsville, MS
39168, on ___________, 1997, at ____ o'clock a.m., local time, for the purpose
of considering and voting on the following matters, all as more fully described
in the accompanying Proxy Statement:
(1) Approval of the Merger Agreement dated September 9, 1997 among
SCB, Trustmark Corporation and Trustmark National Bank which
provides for the merger of SCB with and into Trustmark
National Bank.
(2) Transaction of such other business as may properly come before
the Special Meeting or any adjournments thereof.
Only those stockholders of record at the close of business on
___________, 1997, shall be entitled to notice of and to vote at the Special
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
<PAGE> 2
PROXY
Smith County Bank
Taylorsville , Mississippi
SPECIAL MEETING OF STOCKHOLDERS
______________, 1997
The undersigned hereby appoint(s)____________________
and________________, or either of them, the true and lawful attorneys-in-fact
for the undersigned, with full power of substitution, to vote as proxies for
the undersigned at a Special Meeting of Stockholders of Smith County Bank
("SCB") to be held at 404 Main Street, Taylorsville, Mississippi 39168, at ___
o'clock a.m., local time, on __________, 1997, and at any and all adjournments
thereof, the number of shares of SCB held by the undersigned on _______, 1997,
(the "Record Date") which the undersigned would be entitled to vote if then
personally present, for the following purposes:
1. Approval of the Merger Agreement which provides for the merger
of SCB with and into Trustmark National Bank.
Approve _____ Disapprove _____ Abstain _____
2. In their discretion the proxies are authorized to vote on such
other business as may properly come before the Special Meeting or any
adjournments thereof.
THIS PROXY, WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SCB, WILL BE VOTED FOR PROPOSAL 1 UNLESS A CONTRARY DIRECTION IS INDICATED,
IN WHICH CASE IT WILL BE VOTED AS DIRECTED. THE PROXIES INTEND TO VOTE ON ANY
OTHER BUSINESS COMING BEFORE THE SPECIAL MEETING PURSUANT TO THE AUTHORITY
GRANTED IN PARAGRAPH 2 IN ACCORDANCE WITH THE DIRECTION OF A MAJORITY OF THE
BOARD OF DIRECTORS OF SCB.
Your vote is important. Accordingly, even if you plan to attend the
Special Meeting, please date the Proxy and sign your name exactly as it appears
on the stock records of SCB and return this Proxy to SCB in the enclosed
envelope. When shares are held by joint tenants, both are requested to sign.
This Proxy may be revoked prior to its exercise by contacting
_________________ and by following the procedures set out in the attached Proxy
Statement.
<PAGE> 3
Statement. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If signed as a corporation, please
sign full corporate name by authorized officer.
-----------------------------
Signature
-----------------------------
Date
-----------------------------
Signature if held jointly
-----------------------------
Date
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE
ENCLOSED ENVELOPE.
<PAGE> 4
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Jackson, State of
Mississippi on October 30, 1997.
TRUSTMARK CORPORATION
BY: /s/ RICHARD G. HICKSON
---------------------------------
RICHARD G. HICKSON, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ GERARD R. HOST Principal Financial & October 30, 1997
- ------------------------- Accounting Officer of
Gerard R. Host Trustmark
/s/ FRANK R. DAY Chairman October 30, 1997
- -------------------------
Frank R. Day
/s/ RICHARD G. HICKSON Director & Chief October 30, 1997
- ------------------------- Executive Officer
Richard G. Hickson
/s/ J. KELLY ALLGOOD Director October 30, 1997
- -------------------------
J. Kelly Allgood
/s/ REUBEN V. ANDERSON Director October 30, 1997
- -------------------------
Reuben V. Anderson
/s/ JOHN L. BLACK, JR. Director October 30, 1997
- -------------------------
John L. Black, Jr.
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
/s/ HARRY H. BUSH Director October 30, 1997
- ----------------------------
Harry H. Bush
/s/ ROBERT P. COOKE, III Director October 30, 1997
- ----------------------------
Robert P. Cooke, III
/s/ WILLIAM C. DEVINEY, JR. Director October 30, 1997
- ----------------------------
William C. Deviney, Jr.
/s/ D. G. FOUNTAIN, JR. Director October 30, 1997
- ----------------------------
D. G. Fountain, Jr.
/s/ GERALD GARNETT Director October 30, 1997
- ----------------------------
Gerald Garnett
/s/ MATTHEW L. HOLLEMAN, III Director October 30, 1997
- ----------------------------
Matthew L. Holleman, III
/s/ FRED A. JONES Director October 30, 1997
- ----------------------------
Fred A. Jones
/s/ T. H. KENDALL, III Director October 30, 1997
- ----------------------------
T. H. Kendall, III
/s/ LARRY L. LAMBIOTTE Director October 30, 1997
- ----------------------------
Larry L. Lambiotte
/s/ ROBERT V. MASSENGILL Director October 30, 1997
- ----------------------------
Robert V. Massengill
/s/ DONALD E. MEINERS Director October 30, 1997
- ----------------------------
Donald E. Meiners
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
/s/ WILLIAM NEVILLE, III Director October 30, 1997
- ----------------------------
William Neville, III
/s/ RICHARD H. PUCKETT Director October 30, 1997
- ----------------------------
Richard H. Puckett
/s/ CHARLES W. RENFROW Director October 30, 1997
- ----------------------------
Charles W. Renfrow
Director , 1997
- ---------------------------- ----------
Clyda S. Rent
/s/ WILLIAM THOMAS SHOWS Director October 30, 1997
- ----------------------------
William Thomas Shows
/s/ HARRY M. WALKER Director October 30, 1997
- ----------------------------
Harry M. Walker
/s/ LEROY G. WALKER, JR. Director October 30, 1997
- ----------------------------
LeRoy G. Walker, Jr.
/s/ PAUL H. WATSON, JR. Director October 30, 1997
- ----------------------------
Paul H. Watson, Jr.
Director , 1997
- ---------------------------- ----------
John C. Wheeless, Jr.
/s/ ALLEN WOOD Director October 30, 1997
- ----------------------------
Allen Wood
</TABLE>
