<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-3683
TRUSTMARK CORPORATION
(Exact name of Registrant as specified in its charter)
MISSISSIPPI 64-0471500
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
248 East Capitol Street, Jackson, Mississippi 39201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 354-5111
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value Nasdaq Stock Market
(Title of Class) (Name of Exchange on Which Registered)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Based on the closing sales price of February 28, 1997, the aggregate market
value of the voting stock held by nonaffiliates of the Registrant was
$708,260,757 .
As of February 28, 1997, there were issued and outstanding 36,386,808 shares of
the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference to parts I, II
and III of the Form 10-K report: (1) Registrant's 1996 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated February 14, 1997 (Part III).
1
<PAGE>
TRUSTMARK CORPORATION
FORM 10-K
INDEX
PART I
Item 1. Business 3-13
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the
Registrant 15
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial
Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 16-17
SIGNATURES 18-21
EXHIBIT INDEX 22
2
<PAGE>
TRUSTMARK CORPORATION
1996 FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (the Corporation) is a one-bank holding company which
was incorporated under the Mississippi Business Corporation Act on August 5,
1968 and commenced doing business in November 1968. The Corporation's primary
business activities are conducted through its wholly-owned subsidiary, Trustmark
National Bank (the Bank) and the Bank's wholly-owned subsidiary, Trustmark
Financial Services, Inc. (TFSI). The Bank accounts for substantially all of the
assets and revenues of the Corporation. Chartered by the State of Mississippi in
1889, it is headquartered in Jackson and is the largest bank in the state. The
Corporation also owns all of the stock of F. S. Corporation and First Building
Corporation, both nonbank Mississippi corporations. F. S. Corporation and First
Building Corporation are primarily dormant and are not considered significant
subsidiaries.
The Bank offers a variety of deposit, investment and credit products to its
customers through a branch network with facilities in 166 locations. The Bank is
well established as a provider of depository, credit and cash management
services to middle-market and larger businesses. These services range from
payroll checking, business checking accounts, corporate savings, secured and
unsecured lines of credit and loans to direct deposit payroll, sweep accounts
and letters of credit. The Bank also offers MasterCard, VISA, VISA Gold and,
beginning in June of 1996, VISA Business credit card services to consumers and
merchants throughout Mississippi. In addition, the Trustmark Express Check debit
card, which allows customers to access their checking or savings account through
any merchant that accepts MasterCard and at any Trustmark Express, Gulfnet or
Cirrus automated teller machine (ATM), continues to be very successful. During
1996, the Bank introduced TrustTouch pc, an on-line banking service allowing
customers to do their banking around the clock from their homes or offices.
Customers may also obtain information about the Bank's services via the Internet
by accessing its web site. The Trust Services business unit provides services in
three areas: custody, investment management and ancillary services such as a
third party fiscal agent. The Investment Services unit provides both
institutional and retail customers with quality investment opportunities through
its Dealer Bank Department and TFSI. Beginning in 1997, full service brokerage
services will be offered at discount prices.
As of February 28, 1997, the Corporation and the Bank employed 2,267
full-time equivalent employees.
COMPETITION
The Bank competes with national and state banks in its service areas for
all types of depository, credit, investment and trust services. In addition, it
competes in its respective service areas with other financial institutions
including savings and loan associations, personal loan companies, consumer
finance companies, mortgage companies, insurance companies, brokerage firms,
investment companies, credit unions and financial service operations of major
retailers. All these institutions compete in the areas of interest rates, the
availability and quality of services and products, and the pricing of these
services and products.
3
<PAGE>
SUPERVISION AND REGULATION
The Corporation is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended. As such, the Corporation is required to file an
annual report and such additional information as the Board of Governors of the
Federal Reserve System may require. The Act requires every bank holding company
to obtain the prior approval of the Board of Governors before it may acquire
substantially all of the assets of any bank, or ownership or control of any
voting shares of any bank, if, after the acquisition, it would own or control,
directly or indirectly, more than five percent of the voting shares of the bank.
In addition, a bank holding company is generally prohibited from engaging in or
acquiring direct or indirect control of voting shares of any company engaged in
nonbanking activities. One of the principal exceptions to this prohibition is
for activities found by the Board of Governors, by order or regulation, to be
closely related to banking or managing or controlling banks "as to be a proper
incident thereto." The Board has by regulation determined that a number of
activities are closely related to banking within the meaning of the Act. In
addition, the Corporation is subject to regulation by the State of Mississippi
under its laws of incorporation.
The Bank is subject to various requirements and restrictions by federal and
state banking authorities, including the Office of the Comptroller of the
Currency (OCC) and the Mississippi Department of Banking. Areas subject to
regulation include loans, reserves, investments, issuance of securities,
establishment of branches, loans to directors, executive officers and their
related interests, relationships with correspondent banks, consumer protection
and other aspects of operations. In addition, national banks are subject to
legal limitations on the amount of earnings they may pay as dividends.
The Bank also is insured by, and therefore subject to, the regulations of
the Federal Deposit Insurance Corporation (FDIC). Consequently, the Bank is
subject to FDIC insurance assessments. The Bank qualifies for the lowest
assessment rate of zero per $100 for deposits insured by the Bank Insurance Fund
(BIF) and the Savings Insurance Fund (SAIF). The Bank has deposits insured by
the SAIF as a result of assisted purchases through the Resolution Trust
Corporation during the early 1990's. As a result of the passage of the Deposit
Insurance Funds Act on September 30, 1996, the Bank was charged a one-time
special assessment during the third quarter of 1996 in order to capitalize the
SAIF. Beginning in 1997, the FDIC will assess the Bank only for the purpose of
retiring debt of the Financing Corporation (FICO). This assessment will be
charged at an annual rate of $.01296 per $100 of BIF deposits and $.0648 per
$100 of SAIF deposits.
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 (FDICIA) was enacted. FDICIA substantially revised the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and made revisions to several other federal banking statutes. Among other
things, FDICIA requires banking regulators to take prompt corrective action
whenever financial institutions do not meet minimum capital requirements. In
addition, FDICIA has created restrictions on capital distributions that would
leave a depository institution undercapitalized.
In May of 1993, the FDIC adopted the final rule implementing Section 112 of
FDICIA. This regulation includes requirements, procedures and interpretive
guidelines that mandate new audit and reporting requirements for financial
institutions. As a result of these new requirements, certain formal
attestations, assertions and documentation must be imposed on existing control
structures. This regulation became effective for fiscal years ending after
December 31, 1992.
4
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Trustmark Corporation (the Registrant) and its
bank subsidiary, Trustmark National Bank, including their ages, their positions
and their principal occupations for the last five years are as follows:
Frank R. Day, 65, Director, Chairman of the Board, President and Chief
Executive Officer, Trustmark Corporation; Chairman of the Board and Chief
Executive Officer, Trustmark National Bank since January 1988.
Harry M. Walker, 46, Secretary, Trustmark Corporation since January 1995;
President and Chief Operating Officer, Trustmark National Bank since March 1992.
Gerard R. Host, 42, Treasurer, Trustmark Corporation since September 1995;
Executive Vice President and Chief Financial Officer, Trustmark National Bank
since November 1995.
George R. Day, 61, Executive Vice President and Chief Credit Officer,
Trustmark National Bank since November 1991.
Richard E. Horne, 49, Executive Vice President and Chief Lending Officer,
Trustmark National Bank since September 1992. Senior Vice President in Lending
and Branch Administration, C & S National Bank, Fort Lauderdale, Florida from
August 1988 to August 1992.
Thomas W. Mullen, 54, Executive Vice President for Strategic Planning,
Trustmark National Bank since November 1991.
William O. Rainey, 57, Executive Vice President and Chief Banking Officer,
Trustmark National Bank since November 1991.
All executive officers, with the exception of Richard E. Horne, have held
executive or senior management positions with the Corporation or the Bank for
more than five years.
STATISTICAL DISCLOSURES
The consolidated statistical disclosures for Trustmark Corporation and
subsidiaries are contained in Tables 1 through 12.
5
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES
TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
The Average Assets and Liabilities table below shows the average balances
for all assets and liabilities of the Corporation at year end and the interest
income or expense associated with those assets and liabilities. The yields or
rates have been computed based upon the interest income or expense for each of
the last three years ended (tax equivalent basis - $ in thousands):
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------------- ---------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $76,203 $4,223 5.54% $113,594 $6,815 6.00%
Trading securities 340 69 20.29% 500 68 13.60%
Securities available for sale:
Taxable 605,467 34,754 5.74% 455,176 28,872 6.34%
Securities held to maturity:
Taxable 1,324,384 84,285 6.36% 1,291,136 81,052 6.28%
Nontaxable 92,160 8,245 8.95% 99,933 9,060 9.07%
Loans, net of unearned income 2,556,811 231,339 9.05% 2,481,030 227,322 9.16%
--------- ------- --------- -------
Total interest-earning assets 4,655,365 362,915 7.80% 4,441,369 353,189 7.95%
Cash and due from banks 282,165 275,235
Other assets 234,758 223,468
Allowance for loan losses (62,785) (62,547)
--------- ---------
TOTAL ASSETS $5,109,503 $4,877,525
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $978,165 26,472 2.71% $1,080,817 31,712 2.93%
Savings deposits 334,925 7,520 2.25% 235,223 6,109 2.60%
Time deposits 1,493,721 78,622 5.26% 1,448,962 74,553 5.15%
Federal funds purchased and securities sold
under repurchase agreements 969,413 48,653 5.02% 898,439 49,171 5.47%
--------- ------- --------- -------
Total interest-bearing liabilities 3,776,224 161,267 4.27% 3,663,441 161,545 4.41%
------- -------
Noninterest-bearing demand deposits 741,324 701,357
Other liabilities 93,442 60,891
Stockholders' equity 498,513 451,836
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,109,503 $4,877,525
========= =========
NET INTEREST MARGIN 201,648 4.33% 191,644 4.31%
Less tax equivalent adjustments:
Investments 2,886 3,171
Loans 1,966 1,677
-------- --------
NET INTEREST MARGIN PER ANNUAL REPORT $196,796 $186,796
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
---------------------------
Average Yield/
Balance Interest Rate
------- -------- -------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $156,650 $6,188 3.95%
Trading securities 964 68 7.05%
Securities available for sale:
Taxable 628,073 40,599 6.46%
Securities held to maturity:
Taxable 1,215,805 71,797 5.91%
Nontaxable 110,382 10,331 9.36%
Loans, net of unearned income 2,246,350 191,739 8.54%
--------- -------
Total interest-earning assets 4,358,224 320,722 7.36%
Cash and due from banks 267,107
Other assets 224,336
Allowance for loan losses (64,958)
---------
TOTAL ASSETS $4,784,709
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $1,139,553 28,216 2.48%
Savings deposits 253,968 6,012 2.37%
Time deposits 1,349,727 56,926 4.22%
Federal funds purchased and securities sold
under repurchase agreements 873,480 33,136 3.79%
--------- -------
Total interest-bearing liabilities 3,616,728 124,290 3.44%
-------
Noninterest-bearing demand deposits 695,289
Other liabilities 62,876
Stockholders' equity 409,816
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,784,709
=========
NET INTEREST MARGIN 196,432 4.51%
Less tax equivalent adjustments:
Investments 3,634
Loans 1,639
--------
NET INTEREST MARGIN PER ANNUAL REPORT $191,159
========
</TABLE>
Nonaccruing loans have been included in the average loan balances and
interest collected prior to these loans having been placed on nonaccrual has
been included in interest income. Loan fees included in interest associated with
the average loan balances are immaterial. Interest income and average yield on
tax-exempt assets have been calculated on a fully tax equivalent basis using a
tax rate of 35% for each of the three years presented. Certain reclassifications
have been made to the 1995 and 1994 statements to conform to the 1996 method of
presentation.
6
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS
The Volume and Yield/Rate Variance table below shows the change from year
to year for each component of the tax equivalent net interest margin separated
into the amount generated by volume changes and the amount generated by changes
in the yield or rate (tax equivalent basis - $ in thousands):
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due To: Increase (Decrease) Due To:
---------------------------- ----------------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Federal funds sold and securities purchased
under reverse repurchase agreements ($2,102) $(490) $(2,592) ($2,007) $2,634 $627
Trading securities (26) 27 1 (43) 43 0
Securities available for sale:
Taxable 8,817 (2,935) 5,882 (10,985) (742) (11,727)
Securities held to maturity:
Taxable 2,163 1,070 3,233 4,604 4,651 9,255
Nontaxable (696) (119) (815) (958) (313) (1,271)
Loans, net of unearned income 6,801 (2,784) 4,017 20,994 14,589 35,583
------- ------- ------- ------- ------- -------
Total interest-earning assets 14,957 (5,231) 9,726 11,605 20,862 32,467
INTEREST PAID ON:
Interest-bearing demand deposits (2,926) (2,314) (5,240) (1,496) 4,992 3,496
Savings deposits 2,320 (909) 1,411 (463) 560 97
Time deposits 2,406 1,663 4,069 4,410 13,217 17,627
Federal funds purchased and securities sold
under repurchase agreements 3,707 (4,225) (518) 971 15,064 16,035
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities 5,507 (5,785) (278) 3,422 33,833 37,255
------- ------- ------- ------- ------- -------
CHANGE IN NET INTEREST INCOME ON A
TAX EQUIVALENT BASIS $9,450 $554 $10,004 $8,183 ($12,971) ($4,788)
======= ======= ======= ======= ======= =======
</TABLE>
The change in interest due to both volume and yield/rate has been allocated
to change due to volume and change due to yield/rate in proportion to the
absolute value of the change in each. Tax-exempt income has been adjusted to a
tax equivalent basis using a tax rate of 35% for 1996, 1995 and 1994 . The
balances of nonaccrual loans and related income recognized have been included
for purposes of these computations.
7
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 3 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY
The table below indicates amortized costs of securities available for sale
and held to maturity by type at year end for each of the last three years ($ in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury and U. S. Government agencies $469,396 $413,385 $376,302
Mortgage-backed securities 39,536 53,382 63,388
--------- --------- ---------
Total debt securities 508,932 466,767 439,690
Equity securities 13,813 13,080 12,909
--------- --------- ---------
Total securities available for sale $522,745 $479,847 $452,599
========= ========= =========
SECURITIES HELD TO MATURITY
U. S. Treasury and U. S. Government agencies $267,636 $257,335 $316,109
Obligations of states and political subdivisions 220,073 212,065 192,321
Mortgage-backed securities 937,451 884,132 914,130
Other securities 100 100 100
--------- --------- ---------
Total securities held to maturity $1,425,260 $1,353,632 $1,422,660
========= ========= =========
</TABLE>
TABLE 4 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND
SECURITIES HELD TO MATURITY
The following table details the maturities of securities available for sale
and held to maturity using amortized cost at December 31, 1996 and the weighted
average yield for each range of maturities (tax equivalent basis - $ in
thousands):
<TABLE>
<CAPTION>
Maturing
------------------------------------------------------------------------------------------
After One, After Five,
Within But Within But Within After
One Year Yield Five Years Yield Ten Years Yield Ten Years Yield Total
-------- ----- ---------- ----- ---------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury and U. S.
Government agencies $167,378 5.47% $302,018 5.57% $469,396
Mortgage-backed securities $10,463 7.10% $29,073 7.05% 39,536
-------- -------- -------- -------- ---------
Total debt securities 167,378 302,018 10,463 29,073 508,932
Equity securities 13,813
-------- -------- -------- -------- ---------
Total securities available for sale $167,378 $302,018 $10,463 $29,073 $522,745
======== ======== ======== ======== =========
SECURITIES HELD TO MATURITY
U. S. Treasury and U. S.
Government agencies $79,333 6.48% $188,303 6.10% $267,636
Obligations of states and
political subdivisions 16,860 6.88% 74,526 7.10% $90,246 7.63% $38,441 8.68% 220,073
Mortgage-backed securities 2,858 8.97% 36,114 7.04% 194,183 6.49% 704,296 6.46% 937,451
Other securities 100 7.50% 100
-------- -------- -------- -------- ---------
Total securities held to maturity $99,051 $298,943 $284,529 $742,737 $1,425,260
======== ======== ======== ======== =========
</TABLE>
Due to the nature of mortgage related securities, the actual maturities of
these investments can be substantially shorter than their contractual maturity.
Management believes the actual weighted average maturity of the entire mortgage
related portfolio to be approximately 2.67 years.
As of December 31, 1996 the Corporation held securities of one issuer with
a carrying value exceeding ten percent of total stockholders' equity. General
obligations of the State of Mississippi with a carrying value of $136,117,000
and an approximate fair value of $138,445,000 were held on December 31, 1996.
Included in the aforementioned State of Mississippi holdings are bonds with an
aggregate carrying value of $19,586,000 and an approximate fair value of
$19,849,000 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
8
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the end
of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real estate loans:
Construction and land development $168,650 $144,010 $123,364 $102,873 $86,164
Secured by 1-4 family residential properties 543,661 553,997 504,078 569,411 485,378
Secured by nonfarm, nonresidential properties 398,350 380,734 345,130 340,058 308,755
Other real estate loans 73,229 69,422 63,169 52,295 50,550
Term federal funds sold 125,000
Loans to finance agricultural production 33,950 37,434 34,910 35,490 21,213
Commercial and industrial 642,758 616,949 594,836 531,054 487,322
Loans to individuals for personal expenditures 645,829 641,409 606,444 529,907 413,457
Obligations of states and political subdivisions 84,918 63,557 50,033 38,407 41,320
Loans for purchasing or carrying securities 20,469 11,626 1,840 3,995 6,490
Lease financing receivables 997 2,360 3,871 4,427 3,837
Other loans 21,762 50,593 19,890 23,101 30,014
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $2,634,573 $2,572,091 $2,347,565 $2,231,018 $2,059,500
========== ========== ========== ========== ==========
</TABLE>
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories
outstanding as of December 31, 1996, which, based on the remaining scheduled
repayments of principal, are due in the periods indicated ($ in thousands):
<TABLE>
<CAPTION>
Maturing
--------------------------------------------
Within One Year After
One Year Through Five
or Less Five Years Years Total
-------- ---------- ------- --------
<S> <C> <C> <C> <C>
Construction and land development $145,119 $23,531 $168,650
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 266,270 136,771 $68,538 471,579
Commercial and industrial 400,073 194,069 48,616 642,758
Other loans (excluding loans to individuals) 82,001 25,837 54,258 162,096
-------- -------- -------- ---------
Total $893,463 $380,208 $171,412 $1,445,083
======== ======== ======== =========
</TABLE>
The following table shows all loans due after one year classified according
to their sensitivity to changes in interest rates ($ in thousands):
<TABLE>
<CAPTION>
Maturing
--------------------------------
One Year After
Through Five
Five Years Years Total
---------- ------- -------
<S> <C> <C> <C>
Above loans due after one year which have:
Predetermined interest rates $361,533 $155,351 $516,884
Floating interest rates 18,675 16,061 34,736
-------- -------- --------
Total $380,208 $171,412 $551,620
======== ======== ========
</TABLE>
9
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Corporation's nonperforming assets and past due
loans at the end of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $8,390 $10,055 $12,817 $13,730 $14,008
Restructured loans 2,552
------- ------- ------- ------- -------
Nonperforming loans 8,390 10,055 12,817 13,730 16,560
Other real estate 2,734 3,982 3,723 5,709 9,711
------- ------- ------- ------- -------
Nonperforming assets 11,124 14,037 16,540 19,439 26,271
Accruing loans past due 90 days or more 2,407 1,810 2,252 1,816 2,396
------- ------- ------- ------- -------
Total nonperforming assets and loans
past due 90 days or more $13,531 $15,847 $18,792 $21,255 $28,667
======= ======= ======= ======= =======
</TABLE>
Generally, a loan is classified as nonaccrual and the accrual of interest
on such loan is discontinued when the contractual payment of principal or
interest has become 90 days past due or Management has serious doubts about
further collectibility of principal or interest, even though the loan is
currently performing. A loan may remain on nonaccrual status if it is in the
process of collection and is either guaranteed or well secured. When a loan is
placed on nonaccrual status, unpaid interest credited to income in the current
and prior years is reversed against interest income. Interest received on
nonaccrual loans is applied against principal. Loans are restored to accrual
status when the obligation is brought current or has performed in accordance
with the contractual terms for a reasonable period of time and the ultimate
collectibility of the total contractual principal and interest is no longer in
doubt. Interest which would have been accrued on nonaccrual and restructured
loans if they had been in compliance with their original terms is immaterial. In
addition, interest income on these loans that was included in net income for the
periods presented was immaterial.
At December 31, 1996 Management is not aware of any additional credits,
other than those identified above, where serious doubts as to the repayment of
principal and interest exist. There are no interest-earning assets which would
be required to be disclosed above if those assets were loans. The Corporation
had no loan concentrations greater than ten percent of total loans other than
those loan categories shown in Table 5.
10
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Corporation's loan loss experience for each
of the last five years ($ in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $62,000 $65,014 $65,014 $51,871 $41,542
Loans charged off:
Real estate loans (1,507) (1,663) (1,034) (2,451) (6,728)
Loans to finance agricultural production (177) (115) (21) (178) (131)
Commercial and industrial (1,334) (764) (979) (4,278) (7,698)
Loans to individuals for personal expenditures (5,651) (6,300) (4,780) (4,496) (5,499)
All other loans (603) (648) (267) (162) (120)
------- ------- ------- ------- -------
Total charge-offs (9,272) (9,490) (7,081) (11,565) (20,176)
Recoveries on loans previously charged off:
Real estate loans 325 981 732 590 890
Loans to finance agricultural production 3 10 8 11
Commercial and industrial 1,334 736 581 2,796 1,221
Loans to individuals for personal expenditures 2,087 1,848 2,703 2,226 1,495
All other loans 740 462 271 178 151
------- ------- ------- ------- -------
Total recoveries 4,489 4,037 4,295 5,790 3,768
------- ------- ------- ------- -------
Net charge-offs (4,783) (5,453) (2,786) (5,775) (16,408)
Additions to allowance charged to operating expense 5,783 2,439 2,786 18,596 26,737
Other additions to allowance for loan losses 322
------- ------- ------- ------- -------
Balance at end of period $63,000 $62,000 $65,014 $65,014 $51,871
======= ======= ======= ======= =======
Percentage of net charge-offs during period to average
loans outstanding during the period 0.19% 0.22% 0.12% 0.27% 0.82%
======= ======= ======= ======= =======
</TABLE>
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb estimated probable loan losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Corporation's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay (including the timing
of future payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and other
relevant factors. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change.
11
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of the
Corporation's allowance for loan losses at December 31, 1996. These allocations
were determined by internal formulas based upon Management's analyses of the
various types of risk associated with the Corporation's loan portfolio. A
discussion of Management's methodology for performing these analyses follows the
table ($ in thousands):
Allocation for pools of
risk-rated loans $26,532
Additional allocation for
risk-rated loans 1,630
Allocation for selected
industries 2,592
General allocation for
all other loans 8,648
Allocation for available lines
of credit and letters of credit 2,312
Discretionary 21,286
-------
Total $63,000
=======
The allowance for loan losses is maintained at a level which Management and
the Board of Directors believe is adequate to absorb estimated losses inherent
in the loan portfolio, plus estimated losses associated with off-balance sheet
credit instruments such as letters of credit and unfunded lines of credit. The
adequacy of the allowance is reviewed quarterly utilizing the criteria specified
in the Office of the Comptroller of the Currency's revised Banking Circular 201
as well as additional guidance provided in the Interagency Policy Statement.
Loss percentages were uniformly applied to pools of risk-rated loans within the
commercial portfolio. These percentages were determined based on migration
analysis, previously established floors for each category and economic factors.
In addition, relationships of $500,000 or more which were risk-rated Other Loans
Especially Mentioned or Substandard and all which were risk-rated Doubtful were
reviewed by the Corporation's Internal Asset Review staff to determine if the
standard percentages appeared to be sufficient to cover potential loss on each
line. In the event that the percentages on any particular lines were determined
to be insufficient, additional allocations were made based upon recommendations
of lending and asset review personnel.
Industry allocations were made based on concentrations of credit within the
portfolio as well as arbitrary designation of certain other industries by
Management.
The general allocation is included in the allowance to cover potential loan
losses within portions of the loan portfolio not addressed in the preceeding
allocations. The types of loans included in the general allocation were
residential mortgage loans, direct and indirect consumer loans, credit card
loans and overdrafts. The actual allocation amount was based upon the more
conservative estimate of loss experience within these categories during 1996,
the historical 5-year moving average for each category, or previously
established floors.
The amount included in the allocation for lines of credit and letters of
credit consists of a percentage of the unused portion of those lines and the
amount outstanding in letters of credit. Arbitrary percentages, which were the
same as those applied to the funded portions of the commercial and retail loan
portfolios, were applied to cover any potential losses in these off-balance
sheet categories.
The remaining $21,286,000 is discretionary and serves as added protection
in the event that any of the above specific components are determined to be
inadequate or for issues that cannot or have not been measured on a quantitative
basis over a prolonged period of time.
Because of the stability shown by the Corporation's level of nonperforming
assets, Management estimates that the anticipated amount of net charge-offs for
1997 will be at approximately the same level as 1996. However, because of the
imprecision inherent in most estimates of expected credit losses, Management
will continue to take a prudent approach in the evaluation of the allowance for
loan losses.
12
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES (CONTINUED)
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000
or more at December 31, 1996 ($ in thousands):
3 months or less $195,625
Over 3 months through 6 months 80,114
Over 6 months through 12 months 49,102
Over 12 months 69,702
--------
Total $394,543
========
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
1996 1995 1994
------ ------ ------
Return on average assets 1.27% 1.23% 1.15%
Return on average equity 13.07% 13.23% 13.42%
Dividend payout ratio 26.74% 25.73% 25.95%
Equity to assets ratio 9.76% 9.26% 8.57%
TABLE 12 - SHORT-TERM BORROWINGS
The table below presents certain information concerning the Corporation's
short-term borrowings for each of the last three years ($ in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal funds purchased and securities
sold under repurchase agreements:
Amount outstanding at end of period $967,191 $932,983 $851,038
Weighted average interest rate at end of period 5.46% 5.13% 5.38%
Maximum amount outstanding at any
month end during each period $1,036,564 $945,207 $997,525
Average amount outstanding during each period $969,413 $898,439 $873,480
Weighted average interest rate during each period 5.02% 5.47% 3.79%
</TABLE>
13
<PAGE>
ITEM 2. PROPERTIES
The Corporation's principal offices are housed in a 14-floor combination
office and bank building located in Jackson, Mississippi. This building, along
with all other physical properties of the Corporation, are owned by its bank
subsidiary. Approximately 155,000 square feet (55%) of the available space in
the main office building is allocated to bank use with the remainder occupied by
tenants on a lease basis. The Bank also operates 99 full-service branches, 26
limited-service branches and an ATM network which includes 73 ATMs at on-premise
locations and 58 ATMs located at off-premise sites. The Bank leases 32 of its
166 total locations with the remainder being owned.
ITEM 3. LEGAL PROCEEDINGS
The information required by this item can be found in Note 10, "Commitments
and Contingencies," (page 31) included in the Registrant's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Corporation's shareholders during
the fourth quarter of 1996.
14
<PAGE>
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Corporation's common stock is listed for trading on the Nasdaq Stock
Market. At March 3, 1997 there were approximately 5,248 shareholders of record
of the Corporation's common stock. Other information required by this item can
be found in Note 12, "Stockholders' Equity," (page 33) and the table captioned
"Principal Markets and Prices of the Corporation's Stock" (page 37) included in
the Registrant's 1996 Annual Report to Shareholders and is incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item can be found in the table captioned
"Selected Financial Data" (page 36) included in the Registrant's 1996 Annual
Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (pages
38-43) included in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Trustmark Corporation and
Subsidiaries, the accompanying Notes to Consolidated Financial Statements and
the Report of Independent Public Accountants are contained in the Registrant's
1996 Annual Report to Shareholders (pages 19-43) and are incorporated herein by
reference. The table captioned "Summary of Quarterly Results of Operations"
(page 36) is also included in the Registrant's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of accountants within the two-year period prior to
December 31, 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found in Section II,
"Election of Directors," and Section VIII, "Other Information Concerning
Directors," contained in Trustmark Corporation's Proxy Statement dated February
14, 1997 and is incorporated herein by reference. Information on the
Registrant's executive officers is included in Part I, page 5 of this report.
15
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in Section VI, "Compensation
of Executive Officers and Directors," and Section VIII, "Other Information
Concerning Directors," contained in Trustmark Corporation's Proxy Statement
dated February 14, 1997 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
Management can be found in Section IV, "Voting Securities and Principal Holders
Thereof," and Section V, "Ownership of Equity Securities by Management,"
contained in Trustmark Corporation's Proxy Statement dated February 14, 1997 and
is incorporated herein by reference.
The Registrant knows of no arrangements which may at a subsequent date
result in a change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions can be
found in Section VII, "Transactions with Management," contained in Trustmark
Corporation's Proxy Statement dated February 14, 1997 and is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A-1. Financial Statements
The report of Arthur Andersen LLP, independent auditors, and the following
consolidated financial statements of Trustmark Corporation and Subsidiaries are
included in the Registrant's 1996 Annual Report to Shareholders and are
incorporated into Part II, Item 8 herein by reference:
Report of Independent Public Accountants
Consolidated Balance Sheets as of
December 31, 1996 and 1995
Consolidated Statements of Income for the
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1996, 1995
and 1994
Notes to Consolidated Financial Statements
(Notes 1 through 14)
Selected Financial Data, Summary of Quarterly
Results of Operations, and Principal
Markets and Prices of the Corporation's Stock
16
<PAGE>
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set forth by Article
9 of Regulation S-X are not required under the related instructions or are
inapplicable and therefore have been omitted.
A-3. Exhibits
The exhibits listed in the Exhibit Index are filed herewith or are
incorporated herein by reference.
B. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
C. Exhibits
The response to this portion of Item 14 is submitted as a separate section
of this report.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRUSTMARK CORPORATION
BY: /s/ Frank R. Day BY: /s/ Gerard R. Host
---------------------- ------------------------
Frank R. Day Gerard R. Host
Chairman of the Board, Treasurer
President and Chief
Executive Officer
DATE: March 11, 1997 DATE: March 11, 1997
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
DATE: March 11, 1997 BY:
--------------------------------------
J. Kelly Allgood, Director
DATE: March 11, 1997 BY: /s/ Reuben V. Anderson
--------------------------------------
Reuben V. Anderson, Director
DATE: March 11, 1997 BY: /s/ John L. Black, Jr.
---------------------------------------
John L. Black, Jr., Director
DATE: March 11, 1997 BY: /s/ Harry H. Bush
---------------------------------------
Harry H. Bush, Director
DATE: March 11, 1997 BY: /s/ Robert P. Cooke III
---------------------------------------
Robert P. Cooke III, Director
DATE: March 11, 1997 BY: /s/ Frank R. Day
---------------------------------------
Frank R. Day, Principal
Executive Officer and Director
DATE: March 11, 1997 BY: /s/ William C. Deviney, Jr.
---------------------------------------
William C. Deviney, Jr., Director
DATE: March 11, 1997 BY: /s/ D. G. Fountain, Jr.
---------------------------------------
D. G. Fountain, Jr., Director
DATE: March 11, 1997 BY: /s/ C. Gerald Garnett
---------------------------------------
C. Gerald Garnett, Director
DATE: March 11, 1997 BY: /s/ Matthew L. Holleman III
---------------------------------------
Matthew L. Holleman III, Director
19
<PAGE>
DATE: March 11, 1997 BY: /s/ Fred A. Jones
---------------------------------------
Fred A. Jones, Director
DATE: March 11, 1997 BY: /s/ T. H. Kendall III
---------------------------------------
T. H. Kendall III, Director
DATE: March 11, 1997 BY:
---------------------------------------
Larry L. Lambiotte, Director
DATE: March 11, 1997 BY: /s/ Robert V. Massengill
---------------------------------------
Robert V. Massengill, Director
DATE: March 11, 1997 BY: /s/ Donald E. Meiners
---------------------------------------
Donald E. Meiners, Director
DATE: March 11, 1997 BY: /s/ William Neville III
---------------------------------------
William Neville III, Director
DATE: March 11, 1997 BY: /s/ Richard H. Puckett
---------------------------------------
Richard H. Puckett, Director
DATE: March 11, 1997 BY: /s/ Charles W. Renfrow
---------------------------------------
Charles W. Renfrow, Director
DATE: March 11, 1997 BY: /s/ Clyda S. Rent
---------------------------------------
Clyda S. Rent, Director
DATE: March 11, 1997 BY: /s/ William Thomas Shows
---------------------------------------
William Thomas Shows, Director
DATE: March 11, 1997 BY: /s/ Harry M. Walker
---------------------------------------
Harry M. Walker, Director
DATE: March 11, 1997 BY: /s/ LeRoy G. Walker, Jr.
---------------------------------------
LeRoy G. Walker, Jr., Director
20
<PAGE>
DATE: March 11, 1997 BY: /s/ Paul H. Watson, Jr.
---------------------------------------
Paul H. Watson, Jr., Director
DATE: March 11, 1997 BY:
---------------------------------------
John C. Wheeless, Jr., Director
DATE: March 11, 1997 BY: /s/ Allen Wood, Jr.
---------------------------------------
Allen Wood, Jr., Director
21
<PAGE>
EXHIBIT INDEX
3-a Articles of Incorporation, as amended. Filed as Exhibit 3 to the
Corporation's Form 10-K Annual Report for the year ended December
31, 1990, incorporated herein by reference.
3-b Bylaws, as amended. Filed as Exhibit 3-b to the Corporation's Form
10-K Annual Report for the year ended December 31, 1991,
incorporated herein by reference.
3-c Articles of Incorporation, as amended. Filed as Exhibit 3-c to the
Corporation's Form 10-K Annual Report for the year ended December
31, 1994.
10-a Deferred Compensation Plan for Directors of Trustmark Corporation,
as amended. Filed as Exhibit 10 to the Corporation's Form 10-K
Annual Report for the year ended December 31, 1991, incorporated
herein by reference.
10-b Deferred Compensation Plan for Executive Officers of Trustmark
National Bank. Filed as Exhibit 10-b to the Corporation's Form 10-K
Annual Report for the year ended December 31, 1993.
10-c Deferred Compensation Plan for Directors of First National Financial
Corporation, acquired October 7, 1994. Filed as Exhibit 10-c to the
Corporation's Form 10-K Annual Report for the year ended December
31, 1994.
10-d Life Insurance Plan for Executive Officers of First National
Financial Corporation, acquired October 7, 1994. Filed as Exhibit
10-d to the Corporation's Form 10-K Annual Report for the year ended
December 31, 1994.
10-e Long Term Incentive Plan for key employees of Trustmark Corporation
and its subsidiaries, approved March 11, 1997.Filed as Exhibit 10-e
to the Corporation's Form 10-K Annual Report for the year ended
December 31, 1996.
13 Only those portions of the Registrant's 1996 Annual Report to
Shareholders expressly incorporated by reference herein are included
in this exhibit and, therefore, are filed as a part of this report
on Form 10-K.
27 Financial Data Schedule.
All other exhibits are omitted as they are inapplicable or not required by
the related instructions.
22
<PAGE>
TRUSTMARK CORPORATION
1997 LONG TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The name of this Plan is the Trustmark Corporation 1997 Long Term Incentive Plan
(the "Plan"). The purpose of the Plan is to promote the long-term success of
Trustmark Corporation (the "Corporation") and its subsidiaries by providing
select key employees of the Corporation and its subsidiaries with the
opportunity to acquire shares of common stock of the Corporation. By encouraging
such stock ownership, the Corporation seeks to attract, retain and motivate the
best available personnel for positions of substantial responsibility and to
provide additional incentives to key employees of the Corporation, Trustmark
National Bank (the "Bank") and their subsidiaries to promote the success of the
business.
2. DEFINITIONS.
For purposes of this Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
(b) "Agreement" means a written agreement entered into in accordance with
Section 5(c).
(c) "Award" means an Option.
(d) "Bank" means Trustmark National Bank, a national banking association.
(e) "Board" means the Board of Directors of the Corporation.
(f) "Change in Control" means any one of the following events: (i) the
acquisition of ownership of, holding or power to vote more than 20% of the
Corporation's voting stock, (ii) the acquisition of the ability to control the
election of a majority of the Corporation's Board, (iii) the acquisition of a
controlling influence over the management or policies of the Corporation by any
person or by persons acting as a "group" (within the meaning of Section 13(d) of
the Exchange Act), or (iv) during any period of two consecutive years,
individuals (the "Continuing Directors") who at the beginning of such period
constitute the Board (the "Existing Board") cease for any reason to constitute
at least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Existing Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director. Notwithstanding the foregoing, in the case of
(i), (ii) and (iii) hereof, ownership or control of the Corporation's voting
stock by the Bank or any employee benefit plan sponsored by the Corporation or
the Bank shall not constitute a Change in Control. For purposes of this
paragraph only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization of any other form of
<PAGE>
entity not specifically listed herein.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(h) "Committee" means the Executive Compensation Committee appointed by the
Board from time to time, which shall consist of Directors, each of whom shall be
both a Non-Employee Director and an Outside Director.
(i) "Common Stock" means the common stock of the Corporation.
(j) "Continuous Service" means the absence of any interruption or termination of
service as an Employee of the Corporation or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Corporation, in the case of transfers
between payroll locations of the Corporation or between the Corporation, an
Affiliate or a successor.
(k) "Corporation" means Trustmark Corporation.
(l) "Director" means any member of the Board.
(m) "Disability" means a physical or mental condition, which in the sole and
absolute discretion of the Committee, is reasonably expected to be of indefinite
duration and to substantially prevent a Participant from fulfilling his or her
duties or responsibilities to the Corporation or an Affiliate.
(n) "Effective Date" means the date specified in Section 13 hereof.
(o) "Employee" means any person employed by the Corporation or an Affiliate.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(q) "Executive Officer" means a person holding one of the offices enumerated in
Rule 16a-1(f) of the Exchange Act.
(r) "Exercise Price" means the price per Optioned Share at which an Option may
be exercised.
(s) "ISO" means an option to purchase Common Stock which meets the requirements
set forth in the Plan, and which is intended to be and is identified as an
"incentive stock option" within the meaning of Section 422 of the Code.
(t) "Market Value" means the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(u) "Non-Employee Director" has the meaning provided in Rule 16b-3 of the
Exchange Act.
(v) "NQSO" means an option to purchase Common Stock which meets the requirements
set forth in the Plan but which is not intended to be and is not identified as
an ISO.
(w) "Option" means an ISO and/or NQSO.
<PAGE>
(x) "Optioned Shares" means Shares subject to an Award granted pursuant to this
Plan.
(y) "Outside Director" has the meaning provided in the U.S. Treasury Regulations
promulgated under Section 162(m) of the Code.
(z) "Participant" means any person who receives an Award pursuant to the Plan.
(aa)"Plan" means this Trustmark Corporation Long Term Incentive Plan.
(bb)"Rule 16b-3" means Rule 16b-3 of the Exchange Act.
(cc)"SEC" means the Securities and Exchange Commission.
(dd)"Share" means one share of Common Stock.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten years
from the Effective Date, unless sooner terminated pursuant to Section 15 hereof.
No Award shall be granted under the Plan after ten years from the Effective
Date.
(b) Term of Awards. The term of each Award granted under the Plan shall be
established by the Committee, but shall not exceed 10 years; provided, however,
that in the case of an Employee who owns Shares representing more than 10% of
the Corporation's outstanding Common Stock at the time an ISO is granted, the
term of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required under Section 10, the aggregate number of Shares
deliverable pursuant to Awards shall not exceed 3,491,068 Shares, provided,
however, that Awards granting no more than 1% of the Corporation's outstanding
Shares (determined as of the last day of the fiscal year preceding the year of
grant of the Award) may be issued in any one fiscal year. Such Shares may either
be authorized but unissued Shares, Shares held in treasury, or Shares held in a
grantor trust created by the Corporation. If any Awards should expire, become
unexercisable, or be forfeited for any reason without having been exercised, the
Optioned Shares shall, unless the Plan shall have been terminated, be available
for the grant of additional Awards under the Plan. For purposes of this Section
4, the aggregate number of Shares that may be issued at any time pursuant to
Awards granted under the Plan shall be reduced by: (i) the number of Shares
previously issued pursuant to Awards granted under the Plan, other than Shares
subsequently reacquired by the Corporation pursuant to the terms and conditions
of such Awards and with respect to which the holder thereof receives no future
benefits of ownership, such as dividends; and (ii) the number of Shares which
were otherwise issuable pursuant to Awards granted under this Plan but which
were withheld by the Corporation as payment of the purchase price of the Common
Stock issued pursuant to such Awards or as payment of the recipient's tax
withholding obligation with respect to such issuance.
<PAGE>
5. ADMINISTRATION OF THE PLAN.
(a) Administration. The Plan shall be administered by the Committee.
(b) Powers of the Committee. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to select Participants and grant Awards,
(ii) to determine the form and content of Awards to be issued and evidenced by
Agreements under the Plan, (iii) to interpret the Plan, (iv) to prescribe, amend
and rescind rules and regulations relating to the Plan, and (v) to make other
determinations necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the entire
Committee shall constitute a quorum and the action of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by a majority of the Committee without a meeting, shall be deemed the action of
the Committee.
(c) Agreement. Each Award shall be evidenced by an Agreement containing such
provisions as may be approved by the Committee. Each such Agreement shall
constitute a binding contract between the Corporation and the Participant, and
every Participant, upon acceptance of such Agreement, shall be bound by the
terms and restrictions of the Plan and of such Agreement. The terms of each such
Agreement shall be in accordance with the Plan, but each Agreement may include
such additional provisions and restrictions determined by the Committee, in its
discretion, provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan. In particular, the Committee shall set
forth in each Agreement (i) the Exercise Price of an Option, (ii) the number of
Shares subject to, and the expiration date of, the Award, (iii) the manner, time
and rate (cumulative or otherwise) of exercise or vesting of such Award, and
(iv) the restrictions, if any, to be placed upon such Award, or upon Shares
which may be issued upon exercise of such Award.
The Chairman of the Committee and such other Directors and officers as shall be
designated by the Committee are hereby authorized to execute Agreements on
behalf of the Corporation and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
(e) Indemnification. In addition to such other rights of indemnification as they
may have, the members of the Committee shall be indemnified by the Corporation
in connection with any claim, action, suit, expense (including attorneys fees)
or proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Award granted hereunder to the
<PAGE>
full extent provided for under the Corporation's governing instruments with
respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee shall have the discretion to make Awards to
Employees. In selecting those Employees to whom Awards will be granted and the
number of Shares covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible Employees, the value of
their services to the Corporation and its Affiliates, and any other factors the
Committee may deem relevant.
(b) Vesting. The Committee may determine that all or a portion of any Award
granted to a Participant shall vest at such times and upon such terms as may be
selected by the Committee in its sole discretion; provided, however, that unless
otherwise expressly determined by the Committee, all Awards granted to Employees
shall provide for vesting in four equal annual installments commencing on the
first anniversary of the date of grant of such Award.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Corporation or
any present or future Affiliate of the Corporation) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case such Options granted in excess of such
limitation shall be Options which are NQSOs. Each Option, or portion thereof,
that is not an ISO shall be a NQSO.
(d) Maximum Awards. A Participant may be granted multiple Awards under the Plan.
However, notwithstanding any other provision of this Plan, the maximum number of
Shares with respect to which Options may be granted under the Plan to any
Participant during any fiscal year shall be 45,000, subject to adjustment as
provided in Section 10 hereof.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any particular
Option shall be determined by the Committee but, in the case of an ISO, shall
not be less than 100% of the Market Value of the Optioned Shares on the date of
grant. In the case of an Employee who owns Shares representing more than 10% of
the Corporation's outstanding Shares at the time an ISO is granted, the Exercise
Price shall not be less than 110% of the Market Value of the Optioned Shares at
the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is listed on a
national securities exchange (including the NASDAQ National Market System) on
the date in question, then the Market Value per Share shall be the average of
the highest and lowest selling price on such exchange on such date, or if there
<PAGE>
were no sales on such date, then the Exercise Price shall be the mean between
the bid and asked price on such date. If the Common Stock is traded otherwise
than on a national securities exchange on the date in question, then the Market
Value per Share shall be the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and asked
price is available, then the Market Value per Share shall be its fair market
value as determined by the Committee, in its sole and absolute discretion.
8. EXERCISE OF OPTION.
(a) Generally. The Committee shall determine whether an Option shall become
exercisable in cumulative or non-cumulative installments or in part or in full
at any time. An Option may be exercised only with respect to whole Shares.
(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Corporation (contemporaneously with
delivery of such notice)(i) in cash, (ii) in Common Stock, (iii) by authorizing
the Corporation to withhold whole Shares which would otherwise be delivered upon
exercise of the Option, (iv) in cash by a broker-dealer acceptable to the
Corporation to whom the Participant has submitted an irrevocable notice of
exercise or (v) a combination of (i), (ii) and (iii), in each case to the extent
determined by the Committee at the time the Option is granted, in the amount of
the Exercise Price for the number of Shares with respect to which the Option is
then being exercised. The Committee shall have sole discretion to disapprove of
an election pursuant to any of clauses (ii)-(v) in the preceding sentence and,
in the case of a Participant who is subject to Section 16 of the Exchange Act,
the Corporation may require that the method of making such payment be in
compliance with Section 16 of the Exchange Act and the rules and regulations
thereunder. Each such notice (and payment where required) shall be delivered, or
mailed by prepaid registered or certified mail, addressed to the Personnel
Director of the Corporation at its executive offices. Common Stock utilized in
full or partial payment of the Exercise Price for Options shall be valued at its
Market Value at the date of exercise, and may consist of Shares subject to the
Option being exercised.
(c) Period of Exercisability for ISOs. Except to the extent otherwise provided
in the terms of an Agreement, an ISO may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the ISO, or within three months after termination of such
Continuous Service (but not later than the date on which the ISO would otherwise
expire), except if the Employee's Continuous Service terminates by reason of the
following:
(1) Death, then to the extent that the Employee would have been entitled to
exercise the ISO immediately prior to his death, such
<PAGE>
ISO of the deceased Employee may be exercised within 90 days from the date of
his death (but not later than the date on which the ISO would otherwise expire)
by the personal representatives of his estate or person or persons to whom his
rights under such ISO shall have passed by Will or by laws of descent and
distribution; or
(2) Disability, then to the extent that the Employee would have been entitled to
exercise the ISO immediately prior to his or her Disability, such ISO may be
exercised within 90 days from the date of termination of employment due to
Disability, but not later than the date on which the ISO would otherwise expire.
(d) Period of Exercisability for NQSOs. Except as otherwise provided in an
Agreement, a NQSO may be exercised by a Participant only during the period
during which he has maintained Continuous Service from the date of grant of the
NQSO, provided that such NQSO shall continue to be exercisable for 90 days
following his termination of Continuous Service for any reason. In the event of
the Participant's death, then to the extent that the Participant would have been
entitled to exercise the NQSO immediately prior to his death, such NQSO of the
deceased Participant may be exercised within 90 days from the date of his death
(but not later than the date on which the NQSO would otherwise expire) by the
personal representatives of his estate or person or persons to whom his rights
under such NQSO shall have passed by Will or by laws of descent and
distribution. Notwithstanding the foregoing, a NQSO may not be exercised later
than the date on which the NQSO would otherwise expire.
(e) Suspension or Termination of Awards. If the Committee determines that a
Participant has committed an act of personal dishonesty, embezzlement, fraud,
non-payment of any obligation owed to the Corporation or any Affiliate, breach
of fiduciary duty or deliberate disregard of any rule of the Corporation or any
Affiliate, willful misconduct, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than misdemeanors,
traffic violations or similar offenses) or final cease-and-desist order, or if a
Participant makes an unauthorized disclosure of trade secret or confidential
information of the Corporation or any Affiliate, engages in any conduct
constituting unfair competition, or induces any customer of the Corporation or
any Affiliate to breach a contract with the Corporation or any Affiliate, the
Committee may terminate the Participant's rights under any then outstanding
Award.
(f) Effect of the Committee's Decisions. The Committee's determination on any
matter concerning this Plan or an Award, and the effective date thereof, shall
be final and conclusive on all persons affected thereby.
9. CHANGE IN CONTROL.
Notwithstanding the provisions of any Award which provides for its exercise or
vesting in installments, all Options shall upon a Change in Control be fully
vested and immediately exercisable. Unless otherwise expressly determined by the
Committee, each Award
<PAGE>
shall provide that each Participant shall be provided with written notice of an
imminent Change in Control and shall have the right during a thirty-day period
ending on the fifth day prior to such Change in Control to exercise his or her
Award, in whole or in part, without regard to any installment provisions under
his or her Agreement; provided, however, that the Participant shall not be
deemed to have exercised his or her Award until immediately prior to a Change in
Control; provided, further, that the effectiveness of such exercise may be
conditioned upon the actual occurrence of such Change in Control; provided,
further, that the ability to exercise any Award which, except for the occurrence
of a Change in Control, would not then be exercisable, shall be conditioned upon
the actual occurrence of such Change in Control, and if such Change in Control
is abandoned or otherwise does not occur, the Participant's exercise of the
Award during such ten-day period shall be null and void; provided, further, that
the Participant shall not be obligated to deliver the Exercise Price, if any,
until he or she is informed by the Committee that such delivery is required
(which notice shall be given no less than 24 hours prior to the required
delivery time) and if any Change in Control is abandoned or otherwise does not
occur, the Corporation will return such Exercise Price to the Participant
without penalty or interest; provided, further, that if the Participant effects
such exercise by delivery of Shares and/or other property issuable pursuant to
an Award, such Shares and/or other property shall be held in escrow by the
Corporation until the consummation of the Change in Control; and if such Change
in Control is abandoned or otherwise does not occur, the Corporation will return
such Shares and/or other property to the Participant without penalty or
interest. At the time of a Change in Control, the Participant shall, at the
discretion of the Committee, be entitled to receive cash in an amount equal to
the excess of the Market Value of the Common Stock subject to the Option over
the Exercise Price thereof, in exchange for the cancellation of such Options by
the Participant.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of Shares reserved
for issuance under the Plan, and the number and kind of Shares subject to
outstanding Awards, and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of Shares or other securities of the Corporation which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock split, stock dividend, combination or exchange of
shares, or similar event in which the number or kind of Shares is changed
without the receipt or payment of consideration by the Corporation.
(b) Other Transactions. In the event of a merger, reorganization or
consolidation in which the stockholders of the Corporation receive shares in
another entity (referred to herein as a "Transaction"), all outstanding Awards,
together with the Exercise Prices thereof, shall be equitably adjusted for any
change or exchange of Shares for a different number or kind of Shares or other
securities which results from the Transaction.
<PAGE>
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs (a) or
(b) hereof shall be made in such manner as not to constitute a modification,
within the meaning of Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Section, the issuance
by the Corporation or an Affiliate of shares of stock of any class, or of
securities convertible into shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
11. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by Will or by the laws of descent and distribution.
Upon any attempt to sell, pledge, assign, hypothecate, transfer or dispose of
any Award, such Award and all rights thereunder shall immediately become null
and void. Notwithstanding any other provision of this Plan to the contrary, to
the extent permissible under Rule 16b-3 of the Exchange Act, a Participant who
is granted NQSOs pursuant to this Plan may transfer such NQSOs to his or her
spouse, lineal ascendants, lineal descendants, or to trusts for their benefit,
provided that NQSOs so transferred may not again be transferred other than to
the Participant originally receiving the grant of NQSOs or to an individual or
trust to whom such Participant could have transferred NQSOs pursuant to this
Section 11. NQSOs which are transferred pursuant to this Section 11 shall be
exercisable by the transferee subject to the same terms and conditions as would
have applied to such NQSOs in the hands of the Participant originally receiving
the grant of such NQSOs.
12. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of the date
on which the Committee makes the determination of granting such Award or the
Effective Date. Notice of the determination shall be given to each Participant
to whom an Award is so granted within a reasonable time after the date of such
grant.
<PAGE>
13. EFFECTIVE DATE.
This Plan shall become effective immediately upon its approval by a favorable
vote of stockholders owning at least a majority of the total votes cast at a
duly called meeting of the Corporation's stockholders held in accordance with
applicable laws. No Awards may be made prior to approval of the Plan by the
stockholders of the Corporation.
14. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the Committee to
direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall (i) confer on the holder
of said Award any right or benefit which could not be conferred on him by the
grant of a new Award at such time, or (ii) impair the Award without the consent
of the holder of the Award.
15. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with respect to
any Shares at the time not subject to Awards, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan shall, without the consent of
any affected holders of an Award, alter or impair any rights or obligations
under any Award theretofore granted.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance With Securities Laws. Shares of Common Stock shall not be issued
with respect to any Award unless the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Corporation to obtain approval
from any regulatory body or authority deemed by the Corporation's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Corporation of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the Corporation may require
the person exercising the Option to make such representations and warranties as
may be necessary to assure the availability of an exemption from the
registration requirements of federal or state securities laws.
(c) Committee Discretion. The Committee shall have the discretionary authority
to impose in Agreements such restrictions on Shares as it may deem appropriate
or desirable, including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these restrictions.
<PAGE>
17. RESERVATION OF SHARES.
The Corporation, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
18. WITHHOLDING TAX.
The Corporation's obligation to deliver Shares upon exercise of Options shall be
subject to the Participant's satisfaction of all applicable federal, state and
local income and employment tax withholding obligations. The Committee, in its
discretion, may permit the Participant to satisfy the obligation, in whole or in
part, by irrevocably electing to have the Corporation withhold Shares, or to
deliver to the Corporation Shares that he already owns, having a value equal to
the amount required to be withheld. The value of the Shares to be withheld, or
delivered to the Corporation, shall be based on the Market Value of the Shares
on the date the amount of tax to be withheld is to be determined. As an
alternative, the Corporation may retain, or sell without notice, a number of
such Shares sufficient to cover the amount required to be withheld.
19. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's eligibility to participate or participation in
the Plan create or be deemed to create any legal or equitable right of the
Employee or any other party to continue service with the Corporation, the Bank,
or any Affiliate. No Employee shall have a right to be granted an Award or,
having received an Award, the right to again be granted an Award. However, an
Employee who has been granted an Award may, if otherwise eligible, be granted an
additional Award or Awards.
20. RIGHTS AS STOCKHOLDER.
No person shall have any rights as a holder of Common Stock with respect to
Awards or Options hereunder, unless and until such person becomes a stockholder
of record with respect to such Common Stock.
21. GOVERNING LAW.
This Plan and each Award and Option granted hereunder shall be governed by and
construed in accordance with the laws of the State of Mississippi, except to the
extent that federal law shall be deemed to apply.
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Shareholders
Trustmark Corporation:
We have audited the accompanying consolidated balance sheets of Trustmark
Corporation (a Mississippi corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated 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 Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trustmark Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Jackson, Mississippi,
January 17, 1997.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Balance Sheets
($ In Thousands)
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
--------- ---------
ASSETS
<S> <C> <C>
Cash and due from banks (noninterest-bearing) $337,090 $299,006
Federal funds sold and securities purchased
under reverse repurchase agreements 92,718 113,585
Trading account securities 102 226
Securities available for sale (at fair value) 527,942 488,693
Securities held to maturity (fair value: $1,431,805 - 1996;
$1,370,670 - 1995) 1,425,260 1,353,632
Loans 2,637,320 2,580,219
Less: Unearned income 2,747 8,128
Allowance for loan losses 63,000 62,000
--------- ---------
Net loans 2,571,573 2,510,091
Premises and equipment 61,535 61,193
Intangible assets 38,637 37,671
Other assets 138,827 128,495
--------- ---------
TOTAL ASSETS $5,193,684 $4,992,592
========= =========
LIABILITIES
Deposits:
Noninterest-bearing $826,137 $767,051
Interest-bearing 2,771,299 2,762,994
--------- ---------
Total deposits 3,597,436 3,530,045
Federal funds purchased 201,965 75,675
Securities sold under repurchase agreements 765,226 857,308
Other liabilities 104,873 50,812
--------- ---------
TOTAL LIABILITIES 4,669,500 4,513,840
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value:
Authorized, 100,000,000 shares
Issued and outstanding: 34,910,683 shares 14,546 14,546
Surplus 244,578 244,578
Retained earnings 261,850 214,166
Net unrealized gain on securities available
for sale, net of tax 3,210 5,462
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 524,184 478,752
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,193,684 $4,992,592
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Statements of Income
($ In Thousands Except Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1995 1994
-------- -------- --------
INTEREST INCOME
<S> <C> <C> <C>
Interest and fees on loans $229,373 $225,645 $190,100
Interest on securities:
Taxable interest income 119,044 109,994 112,446
Interest income exempt from federal income taxes 5,354 5,887 6,715
Interest on federal funds sold and securities purchased
under reverse repurchase agreements 4,292 6,815 6,188
-------- -------- --------
TOTAL INTEREST INCOME 358,063 348,341 315,449
INTEREST EXPENSE
Interest on deposits 112,614 112,374 91,154
Interest on federal funds purchased and securities
sold under repurchase agreements 48,653 49,171 33,136
-------- -------- --------
TOTAL INTEREST EXPENSE 161,267 161,545 124,290
-------- -------- --------
NET INTEREST INCOME 196,796 186,796 191,159
Provision for loan losses 5,783 2,439 2,786
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 191,013 184,357 188,373
NONINTEREST INCOME
Trust service income 10,102 9,275 8,715
Service charges on deposit accounts 23,425 21,765 18,666
Other account charges, fees and commissions 29,256 24,817 20,214
Securities gains (losses) 113 323 (1,374)
Other income 4,078 3,287 2,449
-------- -------- --------
TOTAL NONINTEREST INCOME 66,974 59,467 48,670
NONINTEREST EXPENSES
Salaries and employee benefits 77,890 74,107 72,497
Net occupancy-premises 9,353 9,220 8,401
Equipment expenses 12,522 11,750 11,851
Services and fees 20,996 20,636 20,505
FDIC insurance assessment 2,781 4,328 7,689
Amortization of intangible assets 8,372 7,266 6,932
Other expenses 28,643 25,177 24,926
-------- -------- --------
TOTAL NONINTEREST EXPENSES 160,557 152,484 152,801
-------- -------- --------
INCOME BEFORE INCOME TAXES 97,430 91,340 84,242
Income taxes 32,291 31,582 29,237
-------- -------- --------
NET INCOME $65,139 $59,758 $55,005
======== ======== ========
NET INCOME PER SHARE $1.87 $1.71 $1.58
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 34,910,683 34,910,683 34,805,193
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
($ In Thousands Except Share Data)
<TABLE>
<CAPTION>
Unrealized
Common Retained Gains
Total Stock Surplus Earnings (Losses)
-------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 387,591 $ 14,489 $ 243,209 $ 129,893
Cumulative effect of a change in accounting
method, net of tax 14,326 $ 14,326
Net income for year 55,005 55,005
Cash dividends paid ($0.41 per share) (13,936) (13,936)
Cash paid in business combination (1,105) (1,105)
Common stock issued for purchase of subsidiary
minority interest 1,426 57 1,369
Net change in unrealized gains (losses) on
securities available for sale, net of tax (22,297) (22,297)
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1994 421,010 14,546 244,578 169,857 (7,971)
Net income for year 59,758 59,758
Cash dividends paid ($0.44 per share) (15,449) (15,449)
Net change in unrealized gains (losses) on
securities available for sale, net of tax 13,433 13,433
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1995 478,752 14,546 244,578 214,166 5,462
Net income for year 65,139 65,139
Cash dividends paid ($0.50 per share) (17,455) (17,455)
Net change in unrealized gains (losses) on
securities available for sale, net of tax (2,252) (2,252)
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 $ 524,184 $ 14,546 $ 244,578 $ 261,850 $ 3,210
======== ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
($ In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $65,139 $59,758 $55,005
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 5,783 2,439 2,786
Provision for depreciation and amortization 17,993 17,477 17,069
Net (accretion) amortization of securities (4,316) (4,614) 416
Securities (gains) losses (113) (323) 1,374
Losses and write-downs (gains) on other real estate 85 (52) 802
Other (2,269) (730) (31)
Increase in intangible assets (9,490) (6,863) (4,579)
Increase in deferred income taxes (2,206) (1,628) (612)
Increase in other assets (10,305) (9,016) (19,371)
Increase (decrease) in other liabilities 54,061 8,724 (5,587)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 114,362 65,172 47,272
INVESTING ACTIVITIES
Proceeds from calls and maturities of securities
available for sale 137,863 320,074 246,536
Proceeds from calls and maturities of securities
held to maturity 197,880 150,321 269,779
Proceeds from sales of securities available for sale 215,344 119,404 392,136
Proceeds from sales of securities held to maturity
Purchases of securities available for sale (392,145) (462,147) (327,706)
Purchases of securities held to maturity (269,037) (80,935) (477,228)
Net decrease (increase) in federal funds sold and securities
purchased under reverse repurchase agreements 20,867 (7,854) (10,525)
Net increase in loans (65,030) (229,311) (119,470)
Purchases of premises and equipment (8,573) (6,134) (10,016)
Proceeds from sales of premises and equipment 40 182 146
Proceeds from sales of other real estate 2,369 2,808 2,572
Cash paid in business combination (1,105)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (160,422) (193,592) (34,881)
FINANCING ACTIVITIES
Net increase in deposits 67,391 80,816 20,448
Net increase in federal funds purchased and securities sold
under repurchase agreements 34,208 81,945 8,305
Cash dividends (17,455) (15,449) (13,936)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 84,144 147,312 14,817
-------- -------- --------
Increase in cash and cash equivalents 38,084 18,892 27,208
Cash and cash equivalents at beginning of year 299,006 280,114 252,906
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $337,090 $299,006 $280,114
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTE 1 - BUSINESS, BASIS OF FINANCIAL STATEMENT PRESENTATION,
ACCOUNTING POLICIES AND RECENT PRONOUNCEMENTS
BUSINESS
Trustmark Corporation, through its wholly-owned bank subsidiary, provides a
broad array of financial products and services primarily to customers in
Mississippi. The bank subsidiary's principal activities include retail and
commercial banking, indirect and real estate lending, investment services and
trust services. The corporation and its bank subsidiary are subject to the
regulations of federal agencies which perform periodic examinations.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the amounts of Trustmark
Corporation (the Corporation), its wholly-owned bank subsidiary, Trustmark
National Bank (the Bank), and the Bank's wholly-owned subsidiary, Trustmark
Financial Services, Inc. Also included are its wholly-owned non-bank
subsidiaries, First Building Corporation and F. S. Corporation, which are
dormant and insignificant. All intercompany accounts and transactions have been
eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Management is required to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
ACCOUNTING POLICIES
Trading Account Securities
Trading account securities are held for resale in anticipation of
short-term market movements. Trading account securities, consisting primarily of
debt securities, are carried at fair value. Gains and losses, both realized and
unrealized, are classified as other income.
Securities Available for Sale
Effective January 1, 1994, the Corporation adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Under this statement,
securities available for sale are reported at fair value with unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholders' equity, net of related deferred income taxes. The effect of this
change at January 1, 1994 was to increase stockholders' equity by $14.3 million.
Gains or losses on the sale of these securities, computed based on the carrying
value of the specific securities sold, are classified as securities gains
(losses) in noninterest income.
Securities Held to Maturity
Securities held to maturity are securities which the Corporation has the
intent and ability to hold to maturity. Securities held to maturity are stated
at cost, adjusted for premium amortization and discount accretion using the
interest method. Gains and losses on the sale of securities held to maturity,
computed based on the adjusted cost of the specific securities sold, are
classified as securities gains (losses) in noninterest income.
<PAGE>
Loans
Loans generally are stated at the amount of unpaid principal, reduced by
unearned income and an allowance for loan losses. Unearned income on consumer
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
applying the simple interest method to the daily outstanding principal balance.
Generally, a loan is classified as nonaccrual and the accrual of interest
on such loan is discontinued when the contractual payment of principal or
interest has become 90 days past due or Management has serious doubts about
further collectibility of principal or interest, even though the loan currently
is performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed on
nonaccrual status, unpaid interest credited to income in the current and prior
years is reversed against interest income. Interest received on nonaccrual loans
is applied against principal. Loans are restored to accrual status when the
obligation is brought current or has performed in accordance with the
contractual terms for a reasonable period of time and the ultimate
collectibility of the total contractual principal and interest is no longer in
doubt.
Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan
losses charged against earnings. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance.
In 1995, the Corporation adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure." Under the standard,
the allowance for loan losses related to loans that are identified for
evaluation in accordance with SFAS No. 114 is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans.
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb estimated probable loan losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Corporation's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay (including the timing
of future payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and other
relevant factors. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change.
<PAGE>
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is charged to expense over the estimated useful lives
of the assets. Leasehold improvements are amortized over the terms of the
respective leases or the estimated useful lives of the improvements, whichever
is shorter. Depreciation and amortization expenses are computed by the
straight-line and accelerated methods.
Intangible Assets
Core deposit intangibles represent the net present value of the future
economic benefits related to the use of deposits purchased and are amortized on
a straight-line basis over 10 years. At December 31, 1996 and 1995, net core
deposit intangibles totaled $15.8 million and $20.3 million, respectively.
Mortgage servicing rights represent the cost of the right to receive future
servicing income. Mortgage servicing rights are amortized using an accelerated
method over the estimated lives of the related mortgage loans. Periodically the
Corporation evaluates the carrying value of its mortgage servicing rights by
analyzing the discounted cash flows of such assets under current market
conditions. At December 31, 1996 and 1995, net mortgage servicing rights totaled
$22.8 million and $17.4 million, respectively.
In January 1996, the Corporation adopted SFAS No 122, "Accounting for
Mortgage Servicing Rights and Excess Servicing Receivables and for
Securitization of Mortgage Loans." The statement amends SFAS No. 65, "Accounting
for Certain Mortgage Banking Activities," and primarily eliminates the
distinction between purchased mortgage servicing rights and mortgage servicing
rights on loans originated within the financial institution. The adoption of
this statement did not have a material impact on the Corporation's consolidated
financial statements.
Other Real Estate Owned
Other real estate owned includes assets that have been acquired in
satisfaction of debt through foreclosure. Other real estate owned is reported in
other assets and is recorded at the lower of cost or estimated fair value less
the estimated cost of disposition. Valuation adjustments required at foreclosure
are charged to the allowance for loan losses. Subsequent to foreclosure, losses
on the periodic revaluation of the property are charged to current period
earnings as other expenses. Costs of operating and maintaining the properties,
net of related income and gains (losses) on their disposition, are charged to
other expenses as incurred.
Improvements made to properties are capitalized if the expenditures are
expected to be recovered upon the sale of the property.
Income Taxes
When income and expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income taxes currently payable,
deferred taxes are provided on such temporary differences. Deferred tax assets
and liabilities are recognized for the expected future tax consequences of
events that have been recognized in the financial statements or tax returns.
Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be realized or settled.
<PAGE>
Off-Balance Sheet Instruments
The Corporation regularly enters into interest rate contracts as part of
its normal asset/liability management activities. These contracts consist
entirely of forward contracts. Forward contracts are agreements to purchase or
sell securities or other money market instruments at a future specified date at
a specified price or yield. At December 31, 1996, the Corporation's obligations
under forward contracts consist of commitments to sell mortgages originated or
purchased by the Corporation in the secondary market at a future date. These
obligations are entered into by the Corporation in order to fix the interest
rate at which it can offer mortgage loans to its customers or purchase mortgages
from other financial institutions. Gains or losses on the sale of mortgages in
the secondary market are recorded upon the sale of the mortgages and included in
other income. Any decline in market value of mortgages held by the Corporation
at the end of a financial reporting period, pending sale in the secondary
market, is recognized at that time. As of December 31, 1996, the Corporation's
exposure under commitments to sell mortgages in the future is immaterial.
Per Share Data
Per share data is based on the weighted average number of shares
outstanding during each year.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks.
The Corporation paid income taxes approximating $36.0 million in 1996 and
$32.7 million in 1995 and 1994. Interest paid on deposit liabilities and other
borrowings approximated $163.7 million in 1996, $159.3 million in 1995 and
$124.6 million in 1994. For the years ended December 31, 1996, 1995 and 1994,
noncash transfers from loans to foreclosed properties were $1.5 million, $3.0
million and $1.5 million, respectively.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the 1996 method of presentation.
RECENT PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." This statement requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. SFAS
No. 121 is effective for fiscal years beginning after December 15, 1995. The
adoption of this statement did not have a material impact on the Corporation's
consolidated financial statements.
In October of 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans and is effective
for fiscal years beginning after December 15, 1995. Since the Corporation
currently does not have any stock-based employee compensation plans, the
adoption of this statement had no effect on the Corporation's consolidated
financial statements.
<PAGE>
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 (SFAS No. 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities." SFAS No.
125 provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities based on consistent
application of a "financial-components approach" that focuses on control. The
impact of SFAS No. 125, when adopted on January 1, 1997, on the Corporation's
financial condition or results of operations will not be material.
NOTE 2 - BUSINESS COMBINATIONS
On September 6, 1996, the Corporation entered into a definitive agreement
with First Corinth Corp.(FCC), a bank holding company located in Corinth
Mississippi, to merge FCC and its bank subsidiary, National Bank of Commerce of
Corinth (NBC), with and into the Bank. FCC and subsidiary have approximately
$139 million in total assets. Under the terms of the agreement, the Corporation
will exchange approximately 1.5 million shares of common stock for all of the
issued and outstanding shares of FCC and for NBC's minority shares outstanding.
The final exchange ratio will be based on the average fair value of the
Corporation's common stock over a specific period prior to the merger. The
transaction, which will be accounted for as a pooling of interests is subject to
the approval of the stockholders of FCC and regulatory authorities and is
expected to be consummated during the first quarter of 1997.
On October 7, 1994, First National Financial Corporation (FNFC) and its
wholly-owned subsidiary, First National Bank of Vicksburg, were merged with the
Corporation. The stockholders of FNFC received 3,600,262 shares of the
Corporation's common stock in connection with the merger. In addition, cash
payments of approximately $1.1 million were made in connection with the merger.
All financial data of the Corporation reflects the business combination using
the pooling of interests method of accounting.
NOTE 3 - CASH AND DUE FROM BANKS
The Corporation is required to maintain average reserve balances with the
Federal Reserve Bank based on a percentage of deposits. The average amount of
those reserves for the year ended December 31, 1996, was approximately $19.5
million.
<PAGE>
NOTE 4 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY
A summary of the amortized cost and estimated fair value of securities
available for sale and held to maturity at December 31, 1996 and 1995 follows ($
in thousands):
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
------------------------------------------- ----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value Cost Gains (Losses) Value
--------- ------- -------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
U.S. Treasury and other U.S.
Government agencies $469,396 $651 ($3,484) $466,563 $267,636 $1,359 ($878) $268,117
Obligations of states and
political subdivisions 220,073 5,469 (1,315) 224,227
Debt securities of
foreign governments 100 100
Mortgage-backed securities 39,536 299 (187) 39,648 937,451 6,575 (4,665) 939,361
Other securities 13,813 7,918 21,731
--------- ------- -------- --------- ---------- --------- --------- ----------
Total $522,745 $8,868 ($3,671) $527,942 $1,425,260 $13,403 ($6,858) $1,431,805
========= ======= ======== ========= ========== ========= ========= ==========
1995
U.S. Treasury and other U.S.
Government agencies $413,385 $2,479 ($263) $415,601 $257,335 $2,546 ($210) $259,671
Obligations of states and
political subdivisions 212,065 8,703 (909) 219,859
Debt securities of
foreign governments 100 100
Mortgage-backed securities 53,382 1,187 (50) 54,519 884,132 10,113 (3,205) 891,040
Other securities 13,080 5,498 (5) 18,573
--------- ------- -------- --------- ---------- --------- --------- ----------
Total $479,847 $9,164 ($318) $488,693 $1,353,632 $21,362 ($4,324) $1,370,670
========= ======= ======== ========= ========== ========= ========= ==========
</TABLE>
Gross gains and gross losses as a result of calls and dispositions of
securities available for sale were $106 thousand and $86 thousand, respectively
in 1996, $1.4 million and $1.3 million, respectively in 1995 and $4.2 million
and $5.6 million, respectively in 1994.
During 1996, 1995 and 1994, there were no sales of securities held to
maturity. Gross gains of $93 thousand, $217 thousand and $23 thousand were
realized on calls and other dispositions of these securities during 1996, 1995
and 1994, respectively.
The amortized cost and estimated fair value of securities available for
sale and held to maturity at December 31, 1996, by contractual maturity, are
shown below ($ in thousands). Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call of prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
Available for Sale Held to Maturity
------------------------- ----------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Due in one year or less $167,378 $167,109 $95,170 $95,512
Due after one year through five years 302,018 299,454 263,548 264,661
Due after five years through ten years 90,547 92,962
Due after ten years 13,813 21,731 38,544 39,309
---------- ---------- ------------ -------------
483,209 488,294 487,809 492,444
Mortgage-backed securities 39,536 39,648 937,451 939,361
---------- ---------- ------------ -------------
Total $522,745 $527,942 $1,425,260 $1,431,805
========== ========== ============ =============
</TABLE>
Securities with a carrying value of $1.8 billion at December 31, 1996 and
$1.6 billion at December 31, 1995 were pledged to collateralize public deposits,
securities sold under agreements to repurchase, and for other purposes as
required or permitted by law.
<PAGE>
NOTE 5 - LOANS
At December 31, 1996 and 1995, the loan portfolio carrying values consisted
of the following ($ in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Real estate loans:
Construction and land development $168,650 $144,010
Secured by 1-4 family residential properties 543,661 553,997
Secured by nonfarm, nonresidential properties 398,350 380,734
Other 73,229 69,422
Loans to finance agricultural production 33,950 37,434
Commercial and industrial 642,758 616,949
Loans to individuals for personal expenditures 645,829 641,409
Obligations of states and political subdivisions 84,918 63,557
Loans for purchasing or carrying securities 20,469 11,626
Lease financing receivables 997 2,360
Other loans 21,762 50,593
--------- ---------
Loans, net of unearned interest 2,634,573 2,572,091
Allowance for loan losses (63,000) (62,000)
--------- =========
Net loans $2,571,573 $2,510,091
========= =========
</TABLE>
In the ordinary course of business, the Corporation makes loans to its
directors and to companies in which these directors are principal owners. In the
opinion of Management, such loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other parties. An analysis of changes in these
loans follows ($ in thousands):
Balance at January 1, 1996 $61,928
New loans 202,990
Repayments (205,862)
-------
Balance at December 31, 1996 $59,056
=======
Changes in the allowance for loan losses were as follows ($ in thousands):
1996 1995 1994
------ ------ ------
Balance at January 1 $62,000 $65,014 $65,014
Provision charged to expense 5,783 2,439 2,786
Loans charged off (9,272) (9,490) (7,081)
Recoveries 4,489 4,037 4,295
------ ------ ------
Balance at December 31 $63,000 $62,000 $65,014
====== ====== ======
At December 31, 1996, the recorded investment in commercial loans that are
considered to be impaired under SFAS No. 114 was $6.3 million (all of which were
on a nonaccrual basis). As a result of direct write-downs, the specific
allowance related to these impaired loans is immaterial. The average recorded
investment in impaired loans during the year ended December 31, 1996 was
approximately $6.6 million. For the year ended December 31, 1996, the amount of
interest income recognized on impaired loans was immaterial.
Loans on which the accrual of interest has been discontinued or reduced
approximated $8.4 million at December 31, 1996. The foregone interest associated
with such loans is immaterial.
<PAGE>
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows ($ in thousands):
December 31,
-----------------------
1996 1995
------- -------
Land $11,132 $10,787
Buildings and leasehold improvements 74,650 71,705
Furniture and equipment 69,115 64,294
------- -------
154,897 146,786
Less accumulated depreciation and amortization 93,362 85,593
------- -------
Premises and equipment $61,535 $61,193
======= =======
<PAGE>
NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1996, the carrying values of securities sold under
repurchase agreements, by contractual maturity, are shown below ($ in
thousands):
Carrying
Value
--------
In one day $149,904
Term up to 30 days 45,798
Term of 30 to 90 days 92,422
Term of 90 days and over 28,120
Demand 448,982
--------
Total $765,226
========
The weighted average interest rate for these repurchase agreements was
5.22% at December 31, 1996. The repurchase agreements are collateralized by
specific U. S. Treasury and other U. S. Government agency securities with
carrying values and fair values of approximately $800 million.
<PAGE>
NOTE 8 - INCOME TAXES
The income tax provision included in the statements of income was as
follows ($ in thousands):
1996 1995 1994
------- ------- -------
Current:
Federal $31,767 $30,262 $26,556
State 2,730 2,948 2,070
Deferred:
Federal (1,879) (1,586) 606
State (327) (42) 5
------- ------- -------
Net income tax provision $32,291 $31,582 $29,237
======= ======= =======
The net income tax provision differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes as a result
of the following ($ in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------- -------------------
Percent Percent Percent
of Pretax of Pretax of Pretax
Tax Income Tax Income Tax Income
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax computed on income before income taxes $34,101 35.0% $31,969 35.0% $29,485 35.0%
(Decrease) increase in tax resulting from:
Tax exempt security interest net of premium amortization (3,103) (3.2) (3,111) (3.4) (3,393) (4.0)
Nondeductible interest expense 470 0.5 565 0.6 429 0.5
State income tax, net 2,403 2.5 2,906 3.2 2,075 2.5
Other (1,580) (1.7) (747) (0.8) 641 0.7
------ ------- ------ ------- ------ -------
Net income tax provision $32,291 33.1% $31,582 34.6% $29,237 34.7%
====== ======= ====== ======= ====== =======
</TABLE>
The income tax provision (benefit) included $43 thousand in 1996, $124
thousand in 1995 and ($526) thousand in 1994 resulting from securities
transactions.
Temporary differences between the financial statement carrying amounts and
the tax bases of assets and liabilities give rise to the following net deferred
tax asset, which is included in other assets ($ in thousands):
1996 1995
Deferred Tax Assets: ------ ------
Allowance for loan losses $23,854 $23,214
Deferred compensation 3,793 3,319
Capitalized mortgage servicing costs 1,186 1,731
Core deposit intangibles 1,596 1,295
Other 4,219 2,577
------ ------
Total gross deferred tax asset 34,648 32,136
Deferred Tax Liabilities:
Unrealized securities gains (1,988) (3,383)
Pension plan (1,814) (1,220)
Discount accretion of discounts on securities (1,042) (1,124)
Accelerated depreciation and amortization (465) (713)
Other (406) (365)
------ ------
Total gross deferred tax liability (5,715) (6,805)
------ ------
Net deferred tax asset $28,933 $25,331
====== ======
The Corporation has evaluated the need for a valuation allowance and, based
on the weight of the available evidence, has determined that it is more likely
than not that all deferred tax assets will eventually be realized.
During 1995, the Corporation concluded an income tax examination for the
years 1989, 1990 and 1991.
<PAGE>
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Corporation maintains a defined noncontributory pension plan which
covers substantially all employees with more than one year of service. The plan
provides pension benefits that are based on the length of credited service and
final average compensation as defined in the plan. The Corporation's policy is
to fund amounts allowable for federal income tax purposes. The following table
sets forth the funded status of the Corporation's defined noncontributory
pension plan and the amounts recognized in the consolidated balance sheets at
December 31, 1996 and 1995 ($ in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested $29,685 $25,446
Nonvested 609 563
------ ------
Total $30,294 $26,009
====== ======
Projected benefit obligation $(38,836) (34,675)
Plan assets at fair value - primarily listed stocks, pooled funds
and fixed income securities 43,448 37,585
------ ------
Plan assets in excess of projected benefit obligation 4,612 2,910
Unrecognized net (gain) from past experience different from
that assumed (1,549) (618)
Unrecognized net assets being amortized over 15 years (2,031) (2,394)
Unrecognized prior service cost 2,354 2,616
Contributions after measurement date 1,358 676
------ ------
Prepaid pension assets recorded in balance sheets $4,744 $3,190
====== ======
</TABLE>
Net pension costs included the following components ($ in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the period $2,776 $2,537 $2,489
Interest cost on projected benefit obligation 2,549 2,249 2,030
Actual (return) loss on assets (5,570) (6,278) 47
Net amortization and deferral 2,233 3,550 (2,646)
------ ------ ------
Net pension costs $1,988 $2,058 $1,920
====== ====== ======
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5%. The rate of increase
in future compensation was 4%. The expected long-term rate of return on plan
assets was 8.5%.
The Corporation also maintains a profit-sharing plan covering substantially
all employees with more than one year of service. The contributions to this plan
are made at the discretion of the Corporation's Board of Directors and are
funded accordingly. The discretionary contributions made by the Corporation to
this plan were $2.2 million in 1996, $1.9 million in 1995 and $1.8 million in
1994.
The Corporation provides a deferred compensation plan covering its
directors and key executives and senior officers. Participants of the deferred
compensation plan can defer a portion of their compensation for payment after
retirement. Life insurance contracts have been purchased which may be used to
fund payments under the plan. Expenses related to this plan were $601 thousand
in 1996, $1.3 million in 1995 and $580 thousand in 1994.
The Corporation does not provide any significant post-retirement or
post-employment benefits to its employees other than pension.
<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Corporation currently has lease commitments for banking premises and
general offices and equipment which expire from 1997 to 2010. The majority of
these commitments contain renewal options which extend the base lease from 5 to
20 years. Rental expense approximated $2.8 million in 1996, $2.4 million in 1995
and $2.2 million in 1994.
Minimum rental commitments at December 31, 1996, under material,
noncancelable leases for banking premises and general offices and equipment,
were as follows ($ in thousands):
Year ended Minimum Rental
December 31, Commitment
------------ --------------
1997 $899
1998 698
1999 531
2000 415
2001 370
2002-2010 1,090
Legal Proceedings
In January 1995, a judgment was rendered in a Mississippi trial court
against the Corporation's subsidiary, Trustmark National Bank, in a case related
to the placement of collateral protection insurance (CPI). The judgment awarded
$500 thousand in actual damages (against the Bank and the insurance agent,
jointly and severally) and $38 million in punitive damages. Upon reviewing
motions to reduce the verdict filed by the Bank, the judge reduced the punitive
damages from $38 million to $5 million. In September 1996, this specific CPI
case was settled out of court under confidential terms. The effects of this
settlement are included in the consolidated financial statements.
There are 23 suits pending in federal court against the Corporation's
subsidiary, Trustmark National Bank, relating to the placement of CPI on
particular automobile and mobile home loans. On September 18, 1995, one of the
suits was certified as a mandatory class action, with the class broadly defined
to include all persons who financed an automobile (or other property) through
Trustmark and whose loans were charged for CPI premiums. One of the CPI
insurers, the CPI underwriter and the insurance agency are also defendants to
the class action. All plaintiffs in pending suits are members of the mandatory
class. On January 10, 1996, the federal court entered an order in the class
action enjoining all other pending CPI-related lawsuits and enjoining all future
CPI-related lawsuits. In November 1996, a proposed settlement, filed in United
States District Court for the Southern District of Mississippi, received
preliminary court approval. The proposed settlement, which includes a cash
payment of $4 million, as well as forgiveness of uncollected CPI debts, is
subject to final court approval. Notices of the settlement and of a hearing
scheduled for April 14, 1997, at the United States Courthouse in Biloxi,
Mississippi, were mailed on December 2, 1996 to approximately 8,000 borrowers.
The effects of this proposed settlement are included in the consolidated
financial statements.
In addition, Trustmark is defendant in various other pending and threatened
legal actions arising in the normal course of business. In the opinion of
Management, and based on the advice of legal counsel, the ultimate resolution of
these matters will not have a material effect on the Corporation's consolidated
financial statements.
<PAGE>
NOTE 11 - OFF-BALANCE SHEET INSTRUMENTS
The Corporation makes commitments to extend credit and issues standby and
commercial letters of credit in the normal course of business in order to
fulfill the financing needs of its customers. The Corporation also engages in
forward contracts in order to manage its own exposure to the risks of interest
rate fluctuations.
Commitments to extend credit are agreements to lend money to customers
pursuant to certain specified conditions. Commitments generally have fixed
expiration dates or other termination clauses. Since many of these commitments
are expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Corporation applies the
same credit policies and standards as it does in the lending process when making
these commitments. The collateral obtained is based upon the assessed
creditworthiness of the borrower.
Standby and commercial letters of credit are conditional commitments issued
by the Corporation to guarantee the performance of a customer to a third party.
Essentially, the same policies regarding credit risk and collateral which are
followed in the lending process are used when issuing letters of credit.
Forward contracts are agreements to purchase or sell securities or other
money market instruments at a future specified date at a specified price or
yield. Credit risk may arise from the possibility that counter parties may not
have the ability to fulfill their commitments. Market risk arises from movements
in interest rates and securities values. At December 31, 1996, obligations under
forward contracts consist of commitments to sell mortgages originated or
purchased by the Corporation in the secondary market at a future date. As of
December 31, 1996, the Corporation's exposure under commitments to sell
mortgages in the future is immaterial.
The Corporation's maximum exposure to credit loss in the event of
nonperformance by the other party for loan commitments and letters of credit is
represented by the contractual or notional amount of those instruments. However,
for forward contracts, the contractual or notional amounts do not represent the
Corporation's actual exposure to credit loss at December 31, 1996, as
represented below ($ in thousands):
Contractual or
Notional Amount
-------------------
1996 1995
------- -------
Financial instruments whose contractual
amounts represent credit risk:
Loan commitments $728,166 $641,911
Standby and commercial letters
of credit written 34,781 28,195
Financial instruments whose contractual or
notional amounts exceed the amount of
credit risk:
Forward contracts 73,465 163,855
<PAGE>
NOTE 12 - STOCKHOLDERS' EQUITY
The Corporation and the Bank are subject to minimum capital requirements
which are administered by various Federal regulatory agencies. These capital
requirements, as defined by federal guidelines, involve quantitative and
qualitative measures of assets, liabilities and certain off-balance sheet
instruments. Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the financial statements of
the Corporation and Bank.
Management believes, as of December 31, 1996, that the Corporation and the
Bank meet all capital adequacy requirements to which they are subject. At
December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as defined in
applicable regulations as set forth in the table below. There are no conditions
or events since the notification that Management believes have changed the
Bank's category.
The Corporation and the Bank's actual regulatory capital amounts and ratios
are presented in the table below ($ in thousands):
<TABLE>
<CAPTION>
Minimum Regulatory
Actual Minimum Regulatory Provision to be
Regulatory Capital Capital Required Well Capitalized
------------------- ------------------ -----------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------ --------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1996:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation $548,479 18.82% $233,143 8.00% N/A
Trustmark National Bank $532,724 18.58% $229,369 8.00% $286,711 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $511,722 17.56% $116,572 4.00% N/A
Trustmark National Bank $496,550 17.32% $114,684 4.00% $172,026 6.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $511,722 10.16% $201,447 4.00% N/A
Trustmark National Bank $496,550 9.89% $200,857 4.00% $251,071 5.00%
At December 31, 1995:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation $498,164 17.69% $225,322 8.00% N/A
Trustmark National Bank $479,798 17.17% $223,613 8.00% $279,517 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $462,627 16.43% $112,661 4.00% N/A
Trustmark National Bank $444,524 15.90% $111,807 4.00% $167,710 6.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $462,627 9.39% $197,140 4.00% N/A
Trustmark National Bank $444,524 9.05% $196,431 4.00% $245,538 5.00%
</TABLE>
Dividends paid by the Corporation are substantially funded from dividends
received from the bank. The Bank's regulators limit the amount of dividends that
may be declared without prior approval. At December 31, 1996, approximately
$142.6 million of undistributed earnings of the Bank included in consolidated
surplus and retained earnings was available for future distribution to the
Corporation as dividends without prior regulatory approval.
<PAGE>
NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
requires disclosure of financial instruments' fair values, as well as the
methodology and significant assumptions used in estimating fair values. In cases
where quoted market prices are not available, fair values are based on estimates
using present value techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates for those assets or
liabilities cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments.
The estimated fair value of financial instruments with immediate and
shorter-term maturities (generally 90 days or less) is assumed to be the same as
the recorded book value. All nonfinancial instruments, by definition, have been
excluded from these disclosure requirements. Accordingly, the aggregate fair
value amounts presented below do not represent the underlying value of the
Corporation. The carrying amounts and estimated fair values of financial
instruments for December 31, 1996 and 1995 are as follows ($ in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------- ----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and short-term investments $429,808 $429,808 $412,591 $412,591
Trading account securities 102 102 226 226
Securities available for sale 527,942 527,942 488,693 488,693
Securities held to maturity 1,425,260 1,431,805 1,353,632 1,370,670
Net loans 2,571,573 2,580,802 2,510,091 2,514,973
Mortgage Servicing Rights 22,808 33,863 17,358 31,080
Financial Liabilities:
Deposits 3,597,436 3,598,840 3,530,045 3,536,141
Short-term liabilities 967,191 967,171 932,983 932,983
</TABLE>
The methodology and significant assumptions used in estimating the fair
values presented above are as follows:
Cash and Short-term Investments
The carrying amounts for cash and due from banks and short-term investments
(federal funds sold and securities purchased under reverse repurchase
agreements) approximate fair values due to the immediate and shorter-term
maturities.
Securities
Estimated fair values for trading account securities, securities available
for sale and securities held to maturity are based on quoted market prices where
available. If quoted market prices are not available, estimated fair values are
based on quoted market prices of comparable instruments.
Loans
The fair values 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
values. The fair values of certain mortgage loans, such as one-to-four family
residential properties, are based on quoted market prices of similar loans sold
in conjuction with securitization transactions, adjusted for differences in loan
characteristics. The fair values of other types of loans are estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.
Mortgage Servicing Rights
The estimated fair value of mortgage servicing rights is determined by
discounting the expected future cash flows using current market rates. For
purposes of evaluation and measuring fair value, mortgage servicing rights are
stratified using the predominant risk characteristics of the underlying loans.
These risk characteristics include loan type, maturity and interest rate.
Deposits
The fair values of deposits with no stated maturity, such as
noninterest-bearing demand deposits, NOW accounts, MMDA products and savings
accounts are, by definition, equal to the amount payable on demand. This amount
is commonly referred to as the carrying value. Fair values for certificates of
deposit are based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities.
Short-term Liabilities
The carrying amounts for federal funds purchased, securities sold under
repurchase agreements and other liabilities approximate their fair values.
Off-Balance Sheet Instruments
The fair values of loan commitments, letters of credit and forward
contracts approximate the fees currently charged for similar agreements or the
estimated cost to terminate or otherwise settle similar obligations. The fees
associated with these financial instruments, or the estimated cost to terminate,
as applicable, are immaterial.
<PAGE>
NOTE 14 - TRUSTMARK CORPORATION (Parent Company Only) FINANCIAL INFORMATION
($ in thousands)
BALANCE SHEETS
December 31,
------------------
1996 1995
------- -------
ASSETS
Investment in bank $511,702 $468,062
Other assets 12,687 11,906
------- -------
TOTAL ASSETS $524,389 $479,968
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $205 $1,216
Stockholders' equity 524,184 478,752
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $524,389 $479,968
======= =======
STATEMENTS OF INCOME
Year Ended December 31,
---------------------------
1996 1995 1994
------ ------ ------
REVENUE
Dividends received from bank $17,513 $17,487 $14,178
Equity in undistributed earnings of subsidiaries 47,393 41,693 40,805
Other income 800 779 1,119
------ ------ ------
65,706 59,959 56,102
EXPENSES 567 201 1,097
------ ------ ------
NET INCOME $65,139 $59,758 $55,005
====== ====== ======
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $65,139 $59,758 $55,005
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in investment in subsidiaries (47,393) (41,693) (40,805)
Other (630) (298) 473
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,116 17,767 14,673
INVESTING ACTIVITIES
Cash paid in connection with business combination (1,105)
Purchases of securities available for sale (733) (234) (567)
------- ------- -------
NET CASH USED BY INVESTING ACTIVITIES (733) (234) (1,672)
FINANCING ACTIVITIES
Cash dividends-net cash used by financing activities (17,455) (15,449) (13,936)
------- ------- -------
(Decrease) Increase in cash and cash equivalents (1,072) 2,084 (935)
Cash and cash equivalents at beginning of year 2,457 373 1,308
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,385 $2,457 $373
======= ======= =======
</TABLE>
The Corporation paid income taxes of approximately $36.0 million in 1996
and $32.7 million in 1995 and 1994. No interest was paid by the parent company
during the three years ended December 31, 1996.
<PAGE>
Trustmark Corporation and Subsidiaries
Selected Financial Data
(Unaudited)
($ in Thousands Except Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Income
Total interest income $358,063 $348,341 $315,449 $310,607 $310,626
Total interest expense 161,267 161,545 124,290 116,770 138,369
------- ------- ------- ------- -------
Net interest income 196,796 186,796 191,159 193,837 172,257
Provision for loan losses 5,783 2,439 2,786 18,596 26,737
Noninterest income 66,974 59,467 48,670 47,898 45,583
Noninterest expense 160,557 152,484 152,801 150,781 132,844
------- ------- ------- ------- -------
Income before income taxes 97,430 91,340 84,242 72,358 58,259
Income taxes 32,291 31,582 29,237 20,106 17,490
------- ------- ------- ------- =======
Net income $65,139 $59,758 $55,005 $52,252 $40,769
======= ======= ======= ======= =======
Per Share Data
Net income per share $1.87 $1.71 $1.58 $1.55 $1.23
===== ===== ===== ===== =====
Cash dividends per share $0.50 $0.44 $0.41 $0.37 $0.34
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheets
Total assets $5,193,684 $4,992,592 $4,763,365 $4,708,206 $4,346,985
Securities - nontrading 1,953,202 1,842,325 1,862,351 1,980,566 1,718,635
Net loans 2,571,573 2,510,091 2,282,551 2,166,004 2,007,629
Deposits 3,597,436 3,530,045 3,449,229 3,428,781 3,431,383
</TABLE>
Summary of Quarterly Results of Operations
(Unaudited)
($ in Thousands Except Share Data)
1996
---------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Interest income $89,203 $89,332 $90,306 $89,222
Net interest income 48,193 48,940 50,182 49,481
Provision for loan losses 2,144 1,364 1,190 1,085
Income before income taxes 23,646 24,852 26,206 22,726
Net income 15,369 16,187 17,517 16,066
Net income per share 0.44 0.47 0.50 0.46
1995
---------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Interest income $83,659 $86,924 $88,819 $88,939
Net interest income 45,881 45,898 47,357 47,660
Provision for loan losses 563 (791) 1,183 1,484
Income before income taxes 20,914 22,613 24,549 23,264
Net income 13,884 14,715 16,126 15,033
Net income per share 0.40 0.42 0.46 0.43
<PAGE>
Trustmark Corporation and Subsidiaries
Principal Markets and Prices of the Corporation's Stock
Dividends Stock Prices
Per -------------------
Share High Low
-------- -------- --------
1996
- -----------
1st Quarter $.12 23 1/4 19 1/2
2nd Quarter .12 24 3/4 21
3rd Quarter .12 22 1/2 20
4th Quarter .14 28 22
1995
- -----------
1st Quarter $.1075 17 1/2 15
2nd Quarter .1075 18 1/2 14 3/4
3rd Quarter .1075 19 3/8 17
4th Quarter .12 22 3/4 18
The Corporation's common stock is listed for trading on the Nasdaq stock
market as stock symbol TRMK.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements found elsewhere in this report.
FINANCIAL SUMMARY
Trustmark Corporation's net income increased 9.0% in 1996 and was $65.1
million compared with $59.8 million in 1995 and $55.0 million in 1994. Net
income per share for 1996 was $1.87 compared with $1.71 and $1.58 in 1995 and
1994, respectively. Contributing to the 1996 improvement was increased net
interest income and noninterest income, along with controlled increases in
noninterest expenses.
At year end 1996, total assets increased 4.0% over 1995 to $5.194 billion,
while stockholders' equity increased by 9.5% over 1995 and equaled $524.2
million. The return on average assets increased to 1.27% in 1996 from 1.23% in
1995 and 1.15% in 1994. The return on average equity in 1996 was 13.07% compared
with 13.23% and 13.42% in 1995 and 1994, respectively. The decline in return on
average equity during the three-year period presented results from a percentage
growth of equity that exceeds the percentage growth in net income.
BUSINESS COMBINATIONS
A strategic objective of the Corporation is to achieve asset growth through
mergers and acquisitions. Management is continually evaluating new market areas
in which to expand and provide its financial services.
On September 6, 1996, the Corporation entered into a definitive agreement
with First Corinth Corp.(FCC), a bank holding company located in Corinth,
Mississippi, to merge FCC and its bank subsidiary, National Bank of Commerce of
Corinth (NBC), with and into the Corporation. FCC and subsidiary have
approximately $139 million in total assets. The transaction, which will be
accounted for as a pooling of interests, is subject to the approval of the
stockholders of FCC and regulatory authorities and is expected to be consummated
during the first quarter of 1997.
On October 7, 1994, First National Financial Corporation (FNFC) and its
wholly-owned subsidiary, First National Bank of Vicksburg (FNBV), with assets of
$278 million, were merged with the Corporation. All financial data of the
Corporation reflect the business combination using the pooling of interests
method of accounting as of the earliest period presented.
ASSET/LIABILITY MANAGEMENT AND LIQUIDITY
A key objective of the Corporation's asset/liability management program is
to quantify, monitor and control interest rate risk and to assist Management in
maintaining stability in the net interest margin under varying interest rate
environments. The Asset/Liability Committee monitors and adjusts the
Corporation's exposure to interest rates, within specific policy guidelines,
based on its analysis of current and expected market conditions. The primary
tool utilized by this committee is an asset/liability modeling system used to
evaluate exposure to interest rate risk and to project earnings and manage
balance sheet growth. The
<PAGE>
Asset/Liability Committees of both executive officers and the Board of Directors
meet monthly to evaluate current and projected interest rate risk positions, as
well as review the balance sheet composition.
Another tool used to monitor the Corporation's overall interest rate
sensitivity is a gap analysis. The table below represents the Corporation's 90
day and one year gap position as of December 31, 1996 ($ in thousands):
Interest Sensitive Within
90 days One Year
---------- -----------
Total rate sensitive assets $ 1,349,347 $ 2,062,490
Total rate sensitive liabilities 1,773,461 2,545,826
---------- -----------
Net gap $ (424,114) $ (483,336)
========== ===========
The analysis indicates that the Corporation is in a negative gap position
over the next three and twelve month time horizons. This position has been
established in response to slightly falling interest rates. Management believes
there is adequate flexibility to alter the overall rate sensitivity structure as
necessary to minimize exposure to changes in interest rates should they occur.
The Asset/Liability Committee establishes guidelines by which they monitor
the current liquidity position to ensure adequate funding capacity. The
Corporation's goal is to maintain an adequate liquidity position to compensate
for expected and unexpected balance sheet fluctuations and to provide funds for
growth. This is accomplished through the active management of both the asset and
liability sides of the balance sheet and by maintaining accessibility to local,
regional and national funding sources. The ability to maintain consistent
earnings and adequate capital also enhances the Corporation's liquidity.
EARNING ASSETS
The percentage of earning assets to total assets measures the effectiveness
of Management's efforts to invest available funds into the most efficient and
profitable uses. Earning assets at December 31, 1996 were $4.7 billion compared
with $4.5 billion for December 31, 1995. During both periods this equaled
slightly more than 90% of total assets. Loans are the single largest category of
earning assets for the Corporation and produce the highest level of revenues. At
December 31, 1996, total loans were $2.635 billion, an increase of $62.5
million, or 2.43%, from the $2.572 billion reported at December 31, 1995.
Loans secured by real estate have increased $35.7 million during 1996
primarily in the area of construction and development. The Corporation's ability
to provide quality service to construction borrowers is instrumental in the
growth of residential construction and development loans. Commercial and
industrial loans grew by $25.8 million during 1996, with increases shown in
lending to the public utility and services industries.
<PAGE>
The Corporation continued its commitment to the growth of the mortgage
servicing portfolio during 1996. The Corporation's strategy is to package and
sell substantially all qualified one-to-four family residential mortgage loans
that the Corporation has originated or purchased while retaining the right to
service these mortgages. At December 31, 1996, the Corporation's volume of
residential mortgage loan servicing was approximately $2.831 billion compared
with $2.473 billion at the end of 1995. This increase of approximately $358
million can be attributed to the strong growth of loans purchased in the
correspondent market and the continued emphasis on loans originated within the
Corporation.
The Corporation's conservative lending policies have produced consistently
strong asset quality. A measure of asset quality in the financial institutions
industry is the level of nonperforming assets. Nonperforming assets include
nonperforming loans, consisting of nonaccrual and restructured loans, and other
real estate as reflected in the table below ($ in thousands):
December 31,
----------------
1996 1995
------- -------
Loans accounted for on a nonaccrual basis $ 8,390 $10,055
Other real estate (ORE) 2,734 3,982
Loans past due 90 days or more & still accruing 2,407 1,810
------- -------
Total nonperforming assets and
loans past due 90 days or more $13,531 $15,847
======= =======
Nonperforming assets/Total loans + ORE .42% .54%
======= =======
The Corporation's level of nonperforming assets and loans past due 90 days
or more remains well controlled and continues to compare favorably to peer
levels. At December 31, 1996, Management is not aware of any additional credits,
other than those identified above, where serious doubts as to the repayment of
principal and interest exist.
The current level of the allowance for loan losses approximates 2.39% of
total loans outstanding. The allowance for loan losses is maintained at a level
that Management and the Board of Directors believe is adequate to absorb
estimated losses inherent in the loan portfolio, plus estimated losses
associated with off-balance sheet credit instruments such as letters of credit
and unfunded lines of credit. The adequacy of the allowance is reviewed
quarterly by using the criteria specified in revised Banking Circular 201 as
well as additional guidance provided by regulatory authorities. This analysis is
presented to the Credit Policy Committee with subsequent review and approval by
the Board of Directors. Because of the imprecision and subjectivity inherent in
most estimates of expected credit losses, Management will continue to take a
prudent approach in the evaluation of the allowance for loan losses.
Net charge-offs totaled $4.8 million during 1996 compared with $5.5 million
for the same period in 1995, resulting in a net charge-off ratio of .19% and
.22%, respectively. Net charge-offs for 1995 contained a one-time charge of
approximately $2.3 million from a specific line of business. The Corporation's
level of net charge-offs for 1996 compares favorably to its peer group.
<PAGE>
The securities portfolio is utilized to provide a quality investment
alternative for available funds as well as a stable source of interest income.
At December 31, 1996, securities available for sale (AFS), with a carrying value
of $527.9 million, and securities held to maturity (HTM), with a carrying value
of $1.425 billion, combined to create a securities portfolio totaling $1.953
billion, an increase of $110.9 million or 6.02% from December 31, 1995. This
growth has come primarily from the purchase of shorter term U. S. Government
securities that have provided the Corporation a greater degree of liquidity in
addition to providing additional collateral for pledging purposes. This
liquidity will allow the Corporation to be flexible in assessing future
investment opportunities. The purchases of U. S. Government securities have also
reduced the historical average life of the portfolio from 2.93 years at the end
of 1995 to 2.78 years at the end of 1996. Management continues to stress credit
quality as one of the strategic goals of the securities portfolio. This is
clearly visible as more than 88% of the portfolio is invested in U. S.
Government and Agency securities.
At December 31, 1996, securities AFS have a carrying value of $527.9
million and an amortized cost of $522.7 million. This compares with a carrying
value of $488.7 million and an amortized cost of $479.8 million at December 31,
1995. At December 31, 1996, gross unrealized gains were $8.9 million on
securities AFS while gross unrealized losses were $3.7 million. Net unrealized
gains and losses are shown as a separate component of stockholders' equity, net
of taxes and equaled $3.2 million at December 31, 1996.
The carrying value of securities HTM was $1.425 billion at year end 1996
compared with $1.354 billion at year end 1995. The fair value of HTM securities
at year end 1996 and 1995 was $1.432 billion and $1.371 billion, respectively.
Gross unrealized gains were $13.4 million and gross unrealized losses were $6.9
million on securities HTM at year end 1996.
Federal funds sold and securities purchased under reverse repurchase
agreements were $92.7 million at year end 1996 and decreased by $20.9 million
when compared with year end 1995. Market conditions and liquidity needs are the
driving forces behind the use of federal funds sold and securities purchased
under reverse repurchase agreements as short-term investment products.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Deposits originating within the communities served by the Bank are the
primary source of funding for the Corporation's earning assets. Total deposits
were $3.597 billion at year end 1996, an increase of $67.4 million, or 1.9%,
over year end 1995 due primarily to growth in noninterest-bearing deposits.
Noninterest-bearing deposits increased $59.0 million in 1996 over 1995, while
interest-bearing deposits increased $8.4 million for the same period. The growth
in interest-bearing deposits is a direct result of a special certificates of
deposit program offered during 1996.
Federal funds purchased were $201.9 million at year end 1996 and increased
$126.3 million when compared with year end 1995. Because of weak deposit growth
and a decrease in securities sold under repurchase agreements, the Corporation
has utilized its upstream and downstream correspondent base to help supply
liquidity when needed.
<PAGE>
Securities sold under repurchase agreements totaled $765.2 million at year
end 1996, a decline of $92.1 million since year end 1995. Because it is
primarily a temporary investment alternative for deposit customers, fluctuation
in securities sold under repurchase agreements is common.
CONTINGENCIES
Twenty-three suits are pending in federal court against the Corporation's
subsidiary, Trustmark National Bank, relating to the placement of collateral
protection insurance (CPI) on particular automobile and mobile home loans. On
September 18, 1995, one of the suits was certified as a mandatory class action,
with the class broadly defined to include all persons who financed an automobile
(or other property) through Trustmark and whose loans were charged for CPI
premiums. One of the CPI insurers, the CPI underwriter and the insurance agent
are also defendants to the class action. All plaintiffs in pending suits are
members of the mandatory class. On January 10, 1996, the federal court entered
an order in the class action enjoining all other pending CPI-related lawsuits
and enjoining all future CPI-related lawsuits. In November 1996, a proposed
classwide settlement, filed in United States District Court for the Southern
District of Mississippi, received preliminary court approval. The proposed
settlement, which includes a cash payment of $4 million, as well as forgiveness
of uncollected CPI debts, is subject to final court approval. Notices of the
settlement and of a hearing scheduled for April 14, 1997, at the United States
Courthouse in Biloxi, Mississippi, were mailed on December 2, 1996 to
approximately 8,000 borrowers. The effects of this proposed settlement are
included in the consolidated financial statements.
STOCKHOLDERS' EQUITY
The Corporation and the Bank are subject to minimum capital requirements
which are administered by various regulatory agencies. These capital
requirements, as defined by federal guidelines, require that the Corporation and
the Bank maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios. Management believes, at December 31, 1996, that the Corporation
and the Bank meet all capital adequacy requirements to which they are subject.
At December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized. The
Corporation's and the Bank's actual, as well as minimum, regulatory capital
amounts and ratios at December 31, 1996 are presented in the table below ($ in
thousands):
Actual Minimum Regulatory
Regulatory Capital Capital Required
------------------ -----------------
Amount Ratio Amount Ratio
-------- ------- -------- -------
Total Capital (to Risk Weighted Assets)
Trustmark Corporation $548,479 18.82% $233,143 8.00%
Trustmark National Bank $532,724 18.58% $229,369 8.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $511,722 17.56% $116,572 4.00%
Trustmark National Bank $496,550 17.32% $114,684 4.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $511,722 10.16% $201,447 4.00%
Trustmark National Bank $496,550 9.89% $200,857 4.00%
<PAGE>
At December 31, 1996, the Corporation had stockholders' equity of $524.2
million, which contained a net unrealized gain on securities available for sale,
net of taxes, of $3.2 million. This compares to total stockholders' equity at
December 31, 1995 of $478.8 million, which contained a net unrealized gain on
securities available for sale, net of taxes, of $5.5 million.
Based on a dividend payout ratio of 26.74%, the Corporation retained 73.26%
of its earnings during 1996, generating an internal capital growth rate of
9.57%. Dividends for 1996 were $.50 per share compared with $.44 per share for
1995 and $.41 for 1994. Book value for the Corporation's common stock was $15.01
at December 31, 1996, compared with the closing market price of $25.50.
NET INTEREST INCOME
Net interest income (NII) is defined as the amount of interest income
generated by earning assets reduced by the interest expense of funding those
assets. NII is the principal source of income for the Corporation. Consequently,
changes in the mix and volume of earning assets and interest-bearing
liabilities, and their related yields and interest rates, have a major impact on
earnings.
For 1996, the Corporation's level of NII increased by $10.0 million, or
5.4%, when compared with 1995. The improvement in NII for 1996 was due to a
higher volume of average earning assets producing an increase in interest income
while the Corporation was able to maintain the costs of its funding sources.
In 1996, average earning assets increased 4.8%. This was driven by a 9.5%
increase in average securities and a 3.0% increase in average loans. While 1996
produced an increase in the volume of average earning assets, a slightly lower
interest rate environment created a decline in the yield on average earning
assets of 15 basis points. This combination resulted in an increase in total
interest income of $9.7 million, or 2.8%, when comparing 1996 with 1995.
Average interest-bearing liabilities grew 3.1% during 1996; however,
average interest-bearing deposits increased by only 1.5% while average federal
funds purchased and securities sold under repurchase agreements grew by 7.9%.
Since average interest-bearing deposits comprise nearly 75% of average
interest-bearing liabilities, the small growth in this category combined with a
5 basis point decline in yield created only $240 thousand in increased interest
expense on deposits during 1996. When this is combined with a decline of $518
thousand in interest expense on federal funds purchased and securities sold
under repurchase agreements, total interest expense declined by $278 thousand
during 1996.
During 1995, the Corporation's level of NII dropped by 2.3% or $4.4 million
when compared with 1994. This decline can be attributed to the Corporation's
cost of funds increasing at a faster pace than its yield on earning assets.
<PAGE>
Average earning assets increased by 1.9% during 1995. During the same
period, the yield on average earning assets increased by 59 basis points. This
combination resulted in interest income generated by earning assets increasing
$32.9 million or 10.4% when comparing 1995 and 1994. The primary contributor to
this gain was interest and fees on loans, which increased 18.7%. This resulted
from a 10.4% increase in average loan volume and a higher interest rate
environment when comparing 1995 with 1994.
During 1995, average interest-bearing liabilities increased by only 1.3%
when compared with 1994. However, during the same period, the average rate paid
increased by 79 basis points. As a result, during 1995 interest expenses
generated by interest-bearing liabilities increased by $37.3 million or 30.0%
when compared with 1994.
The table below illustrates the changes in the net interest margin as a
percentage of average earning assets for the periods shown:
Year Ended
December 31,
------------------
1996 1995 1994
---- ---- ----
Yield on interest-earning assets-FTE 7.80% 7.95% 7.36%
Rate on interest-bearing liabilities 3.47% 3.64% 2.85%
---- ---- ----
Net interest margin-FTE 4.33% 4.31% 4.51%
==== ==== ====
The fully taxable equivalent (FTE) yield on tax-exempt income has been
computed based on a 35% federal marginal tax rate for all periods shown. The
Corporation will continue to take the necessary precautions to minimize exposure
to changes in interest rates.
PROVISION FOR LOAN LOSSES
The provision for loan losses reflects Management's assessment of the
adequacy of the allowance for loan losses to absorb potential write-offs in the
loan portfolio. Factors considered in the assessment include growth and
composition of the loan portfolio, historical credit loss experience, current
and anticipated economic conditions and changes in borrowers' financial
positions. During 1996, the Corporation's provision for loan losses was $5.8
million compared with $2.4 million for 1995 and $2.8 million in 1994. The
increase in the provision during 1996 can be attributed to Management's decision
to raise the allowance for loan losses given the overall growth and composition
of the loan portfolio.
NONINTEREST INCOME
The Corporation stresses the importance of growth in noninterest income as
one of its key long-term strategies. This was accomplished during 1996, as
noninterest income, excluding securities gains, increased 13.0% when compared
with 1995 and 33.6% when compared with 1994.
The largest single category of noninterest income contributing to the
increase in 1996 was other account charges, fees and
<PAGE>
commissions, which increased $4.4 million, or 17.9%, over 1995. The same would
be true for 1995 as other account charges, fees and commissions increased by
$4.6 million, or 22.8%, when compared with 1994. The major contributors to the
growth in this category during these periods were fees generated from
residential mortgage servicing, discount brokerage services, credit cards, ATMs
and a variety of other fee producing products and services.
Service charges for 1996 grew by $1.7 million, or 7.6%, when compared with
1995. This increase can be attributed to a reduction in the amount of waived
service charges and a higher volume of consumer account activity. During 1995,
service charges grew by $3.1 million, or 16.6%, due to Management's reevaluation
of its service charge pricing.
Trust service income increased by 8.9% in 1996 as the Bank continued to be
one of the largest providers of asset management services in Mississippi. At
December 31, 1996, the Bank had trust accounts with an asset market value of
$5.0 billion.
The increase in other income experienced during 1996 and 1995 can be
attributed primarily to gains on the sale of mortgage loans in the secondary
market.
Gross securities gains of $106 thousand and gross securities losses of $86
thousand were realized during 1996 because of calls and dispositions of
securities classified as available for sale. There were no sales of securities
held to maturity during 1996. Gross securities gains of $93 thousand were
realized on calls and other dispositions of these securities during that period.
NONINTEREST EXPENSE
Another long-term strategy of the Corporation is to continue to provide
quality service to customers within the context of economic discipline. The
efficiency ratio, a key indicator of the control of noninterest expense and the
growth of noninterest income, has improved in each of the past two years. For
the year ended December 31, 1996, the efficiency ratio was 58.4% compared with
60.9% for 1995 and 62.0% for 1994.
Salaries and employee benefits continue to comprise the largest portion of
noninterest expenses and increased 5.1% when comparing 1996 with 1995 and 2.2%
when comparing 1995 with 1994. The number of full-time equivalent employees
totaled 2,247 at December 31, 1996, 2,208 at December 31, 1995 and 2,212 at
December 31, 1994. The Corporation's success in controlling the size of its
workforce can be attributed to Management's commitment to improving productivity
through a strong investment in technology.
The FDIC insurance assessment experienced major changes in both 1995 and
1996. During the third quarter of 1995, the Corporation received a refund of
approximately $1.9 million from the FDIC as a result of the Bank Insurance Fund
(BIF) being overcapitalized. This, in effect, lowered the FDIC expense for 1995
from $6.2 million to $4.3 million. In addition, the FDIC assessment rate on BIF
deposits declined from $.23 per $100 for the first three quarters of 1995 to
$.04 per $100 for the fourth quarter of 1995. During 1996, the assessment rate
on BIF deposits was zero. The rate on Savings Association Insurance Fund (SAIF)
deposits remained at $.23 per $100 of assessable deposits for both 1995 and
1996. On September 30, 1996, legislation was enacted that allowed the FDIC to
charge a special one-time assessment on SAIF
<PAGE>
assessable deposits in order to capitalize the SAIF. The Corporation has SAIF
deposits resulting from assisted purchases through the Resolution Trust
Corporation during the early 1990's. During the third quarter of 1996, the
Corporation was charged a special assessment on these SAIF insured deposits of
approximately $1.9 million. This increased the FDIC expense for 1996 from $900
thousand to $2.8 million. The BIF refund and the SAIF special assessment
resulted in a decline of FDIC expense from $5.3 million to $1.5 million.
Net occupancy expenses experienced only a modest increase of 1.4% during
1996 as the Corporation was successful in controlling its overhead expenses.
Equipment expenses increased by 6.6% when compared with 1995 primarily from the
increased cost of equipment rental. Equipment expenses dropped by 0.8% when
comparing 1995 with 1994.
Services and fees expense increased by 1.7% during 1996 due to increased
expenses for advertising and communications. Services and fees increased by only
0.6% when comparing 1995 with 1994.
The amortization of intangible assets increased 15.2% during 1996 compared
with an increase of 4.8% during 1995. The amount of mortgages serviced increased
14.5% during 1996 and provided a larger base of mortgage servicing rights that
began amortization during 1996. In addition, the Corporation adopted Statement
of Financial Accounting Standards(SFAS) No. 122 in January 1996 which eliminated
the distinction between purchased mortgage servicing rights and the mortgage
servicing rights on loans originated by the Corporation. This resulted in an
additional $1.6 million in originated mortgage servicing rights that began
amortization in 1996.
Increased fees related to the mortgage servicing portfolio combined with
the Corporation's settlement of the legal proceedings associated with the
placement of collateral protection insurance on automobile and mobile home loans
contributed to the 13.8% increase in other expenses when comparing 1996 with
1995. When comparing 1995 with 1994, other expenses increased 1.0%. This can be
traced to larger operational costs recorded during 1995 than in the same period
in 1994.
INCOME TAXES
In 1996, the Corporation's effective tax rate was 33.1% compared with 34.6%
in 1995 and 34.7% in 1994. The effective tax rate for 1996 was lower than in the
previous two years primarily due to the reversal of a liability for accrued
state income taxes. This liability was reversed due to passage of legislation
which effectively settled an ongoing dispute over the disallowance of interest
expense to carry U. S. Government securities.
OFF-BALANCE SHEET INSTRUMENTS
The Corporation's principal objective in issuing derivatives for purposes
other than trading is asset/liability management. To achieve that objective, the
Corporation enters into forward interest rate contracts involving commitments to
sell mortgages originated or purchased by the Corporation. Interest rate forward
contracts are commitments to either purchase or sell a financial instrument at a
specific future date for a specified price and may be settled in cash or through
delivery of the financial instrument. These contracts allow the Corporation to
fix the interest rate at
<PAGE>
which it can offer mortgage loans to its customers or purchase mortgages from
other financial institutions. Gains or losses on the sale of mortgages in the
secondary market are recorded upon the sale of the mortgages and included in
other income. Any decline in the market value of mortgages which are pending
sale in the secondary market and are held by the Corporation at the end of a
financial reporting period is recognized at that time. As of December 31, 1996,
the Corporation's exposure under commitments to sell mortgages is immaterial.
The remaining maturity on all forward interest rate contracts is less than one
year.
OTHER REGULATORY MATTERS
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities." SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a "financial-components approach" that
focuses on control. The impact of SFAS No. 125, when adopted on January 1, 1997,
on the Corporations's financial condition or results of operations will not be
material.
PRINCIPAL OCCUPATION OF THE CORPORATION'S DIRECTORS AND EXECUTIVE OFFICERS
This information is included elsewhere in this report in conjunction with
listings of Directors and Officers.
SECURITIES AND EXCHANGE COMMISSION (SEC) FORM 10-K
A copy of the annual report on Form 10-K, as filed with the SEC, may be
obtained without charge by directing a written request to:
Gerard R. Host, Treasurer
Trustmark Corporation
Post Office Box 291
Jackson, Mississippi 39205-0291
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 337,090
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 92,718
<TRADING-ASSETS> 102
<INVESTMENTS-HELD-FOR-SALE> 527,942
<INVESTMENTS-CARRYING> 1,425,260
<INVESTMENTS-MARKET> 1,431,805
<LOANS> 2,634,573
<ALLOWANCE> 63,000
<TOTAL-ASSETS> 5,193,684
<DEPOSITS> 3,597,436
<SHORT-TERM> 967,191
<LIABILITIES-OTHER> 104,873
<LONG-TERM> 0
0
0
<COMMON> 14,546
<OTHER-SE> 509,638
<TOTAL-LIABILITIES-AND-EQUITY> 5,193,684
<INTEREST-LOAN> 229,373
<INTEREST-INVEST> 124,398
<INTEREST-OTHER> 4,292
<INTEREST-TOTAL> 358,063
<INTEREST-DEPOSIT> 112,614
<INTEREST-EXPENSE> 161,267
<INTEREST-INCOME-NET> 196,796
<LOAN-LOSSES> 5,783
<SECURITIES-GAINS> 113
<EXPENSE-OTHER> 160,557
<INCOME-PRETAX> 97,430
<INCOME-PRE-EXTRAORDINARY> 97,430
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,139
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
<YIELD-ACTUAL> 4.33
<LOANS-NON> 8,390
<LOANS-PAST> 2,407
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 62,000
<CHARGE-OFFS> 9,272
<RECOVERIES> 4,489
<ALLOWANCE-CLOSE> 63,000
<ALLOWANCE-DOMESTIC> 41,714
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 21,286
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