<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, 1999
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 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.( )
Based on the closing sales price of February 18, 2000, the aggregate market
value of the voting stock held by nonaffiliates of the Registrant was
$949,921,361.
As of March 1, 2000, there were issued and outstanding 69,381,393 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 1999 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated March 10, 2000 (Part III).
<PAGE>
TRUSTMARK CORPORATION
FORM 10-K
INDEX
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Securities Holders
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants On Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
<PAGE>
TRUSTMARK CORPORATION
1999 FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (Trustmark) is a one-bank holding company
headquartered in Jackson, Mississippi which was incorporated under the
Mississippi Business Corporation Act on August 5, 1968, and commenced doing
business in November 1968. Trustmark's primary business activities are conducted
through its wholly-owned subsidiary, Trustmark National Bank (the Bank) and the
Bank's wholly-owned nonbanking subsidiaries, Trustmark Financial Services, Inc.
(TFSI) and Trustmark Insurance Agency, Inc. (TIA). The Bank accounts for
substantially all of the assets and revenues of Trustmark. Chartered by the
State of Mississippi in 1889, the Bank is also headquartered in Jackson,
Mississippi. As of January 31, 2000, the Bank employed approximately 2,304
full-time equivalent employees. Neither Trustmark or the Bank has any foreign
activities. Trustmark also owns all of the stock of F.S. Corporation and First
Building Corporation, both nonbank Mississippi corporations, which are primarily
dormant and not considered significant subsidiaries.
Through its subsidiaries, Trustmark operates as a statewide banking
organization providing banking, investment and insurance solutions to corporate,
institutional and individual customers within the state of Mississippi.
Trustmark engages in business through its three reportable segments: Retail
Banking, Commercial Banking and Financial Services.
Retail Banking provides a full range of financial products and services
to individuals and small business customers through Trustmark's 133 branch
locations located in 50 Mississippi communities. In order to allow customers to
do their banking around the clock from their homes or offices, Trustmark offers
the TrustTouch automated response system. Customers may also obtain information
about Trustmark's services via the Internet by accessing its web site
(www.trustmark.com). In addition, with various deposit products, customers can
utilize a Trustmark ATM card or ExpressCheck debit cards in one of 155 locations
throughout Mississippi and Pulse, Plus, MasterCard, Cirrus, Visa, American
Express and Discover ATM networks. Additional products provided for Retail
Banking customers include TrustTouch bank-by-telephone and TrustTouchpc service.
Retail Banking customers have access to various personal loan products including
installment loans, Express Line of Credit, Equity Line of Credit, as well as,
small business loans for inventory financing, facility expansion, equipment
loans and SBA Program loans. Trustmark recognizes the significant impact small
businesses have on our market and have addressed these needs through the
creation of a specialized Business Banking group. Trustmark also lends to
moderate and lower income homeowners in several markets through Community
Reinvestment Act programs such as the Downpayment Assistance Program and Farmers
Home Multi-Family Home Program.
Commercial Banking provides various financial products and services to
corporate and middle market clients through the Bank's Commercial Lending,
Commercial Real Estate, Indirect Lending and Private Banking groups. One of the
<PAGE>
newest products offered is Business Advantage which was designed to give
businesses a total package of business savings, financial management and
convenient services in one comprehensive package when combined with a regular
commercial or small business checking account. In addition, Trustmark has
introduced the ExpressCheck Business DebitCard for making cash disbursements
easier to manage. Cash management services available for businesses include
TrustNet PC Balance Reporting and Money Transfer, Wholesale and Retail Lockbox
Service, various Sweep Account products, Electronic Data Interchange Services,
Account Reconciliation and TaxTel Electronic Tax Depositing. To better deal with
the unique credit needs of larger businesses, the Commercial Lending group has
created relationship managers to work primarily with local middle market firms,
specialized industries such as real estate development and construction, health
care and automobile dealers, as well as, large regional and national firms. For
many years, Trustmark has been active in automobile finance directly throughout
its extensive branch network, as well as, through a long-established indirect
network of automobile dealers.
Financial Services includes trust and fiduciary services, discount
brokerage services, insurance services, as well as, credit card and mortgage
services. Trustmark's Card Services offer MasterCard, VISA, VISA Gold and VISA
Business credit card services to consumers and merchants throughout Mississippi
as well as the ExpressCheck debit card. Also included in Financial Services is
Trustmark's proprietary mutual fund family called Performance Funds, a group of
six mutual funds designed and managed by Trustmark investment professionals and
offered through TFSI, the Bank's full service brokerage subsidiary. With $6.2
billion in trust assets under administration, Trustmark's Trust Department
offers a full line of asset management and custodial services through its
Personal Trust, Employee Benefit and Corporate Trust groups. Trustmark's home
mortgage department services more than $3.7 billion in home loans throughout the
Southeast. Trustmark's Correspondent Banking Department maintains relationships
with independent banks across the state, providing competitively priced cash
management services, financing and clearing services. Trustmark's public
services bankers offer cash management products, loans and investment services
tailored for the needs of public entities such as state agencies, municipal
government and school districts. Trustmark significantly expanded its insurance
business in 1999 with the acquisition of the Bottrell Agency. This acquisition
will allow Trustmark to provide a variety of risk management services including
surety bonds, property, casualty, life and health insurance to businesses across
Mississippi. In addition, TIA has recently begun offering many personal
insurance products such as homeowners, renters, automobile, personal umbrella,
life and health.
Additional information on Trustmark's segments can be found in Note 16,
"Segment Information," (page 34) included in Trustmark's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
COMPETITION
Trustmark and its subsidiaries compete with other local, regional and
national providers of banking, investment and insurance products and services
such as other bank holding companies, commercial and state banks, savings and
loan associations, consumer finance companies, mortgage companies, insurance
agencies, brokerage firms, credit unions and financial service operations of
<PAGE>
major retailers. Trustmark competes in its markets by offering quality and
innovative products and services at competitive prices. Within Trustmark's
market area, none of the competitors are dominant.
SUPERVISION AND REGULATION
The following discussion sets forth certain material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to Trustmark.
General
Trustmark is a registered bank holding company under the Bank Holding
Company Act (BHC) of 1956, as amended. As such, Trustmark and its nonbank
subsidiaries are subject to the supervision, examination and reporting
requirements of the BHC Act and the regulations of the Federal Reserve Board. In
addition, as part of Federal Reserve policy, a bank holding company is expected
to act as a source of financial and managerial strength to subsidiary banks and
to maintain resources adequate to support each subsidiary bank. Under the BHC
Act, bank holding companies generally may not own or control more than 5% of the
voting shares or substantially all the assets of any company, including a bank,
without the Federal Reserve Board's prior approval. The BHC Act also prohibits
the acquisition by a bank holding company of more than 5% of the outstanding
voting shares of a bank located outside the state in which the operations of its
banking subsidiaries are principally conducted, unless such acquisition is
specifically authorized by statute of the state in which the bank to be acquired
is located. In addition, bank holding companies generally may engage, directly
or indirectly, only in banking and such other activities as are determined by
the Federal Reserve Board to be closely related to banking. Trustmark is also
subject to regulation by the State of Mississippi under its laws of
incorporation. In addition to the impact of regulation, Trustmark and its
subsidiaries may be affected by legislation which can change banking statutes in
substantial and unexpected ways, and by the actions of the Federal Reserve Board
as it attempts to control the money supply and credit availability in order to
influence the economy.
The Bank is a national banking association and, as such, is subject to
regulation primarily by the Office of the Comptroller of the Currency (OCC) and,
secondarily, by the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board and the Mississippi Department of Banking. Almost every area of
the operations and financial condition of the Bank is subject to extensive
regulation and supervision and to various requirements and restrictions under
federal and state law including loans, reserves, investments, issuance of
securities, establishment of branches, capital adequacy, liquidity, earnings,
dividends, management practices and the provision of services.
The Bank's nonbanking subsidiaries are subject to a variety of state
and federal laws. TFSI, the Bank's full service brokerage subsidiary, is subject
to supervision and regulation by the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc., state securities regulators
and the various exchanges through which it conducts business. TIA, the Bank's
insurance agency subsidiary, is subject to the insurance laws and regulations of
the states in which it is active. All nonbanking subsidiaries are supervised by
the Federal Reserve Board.
<PAGE>
Trustmark is also under the jurisdiction of the Securities and Exchange
Commission (SEC) for matters relating to the offering and sale of its
securities. Trustmark is subject to the disclosure and regulatory requirements
of the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, as administered by the SEC.
Capital Adequacy
Trustmark is subject to capital requirements and guidelines imposed on
bank holding companies by the Federal Reserve Board. The OCC imposes similar
capital requirements and guidelines on the Bank. These capital guidelines
involve quantitative and qualitative measures of assets, liabilities and certain
off-balance sheet instruments.
Trustmark, like other bank holding companies, is required to maintain
Tier 1 and total capital equal to at least 4% and 8% of its total risk-weighted
assets, respectively. At December 31, 1999, Trustmark exceeded both requirements
with Tier 1 capital and total capital equal to 15.39% and 16.76% of its total
risk-weighted assets, respectively. The Bank was in compliance with its
applicable minimum capital requirement at December 31, 1999.
The Federal Reserve Board also requires bank holding companies to
maintain a minimum leverage ratio. The guidelines provide for a minimum leverage
ratio of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. At December 31, 1999,
Trustmark's leverage ratio was 9.37%. The Bank is subject to similar
requirements from the OCC and was also in compliance with its applicable
leverage ratio requirement at December 31, 1999.
Failure to meet minimum capital requirements could subject a bank to a
variety of enforcement remedies. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA), among other things, identifies five capital
categories for insured depository institutions. These include well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. FDICIA requires banking regulators to take prompt
corrective action whenever financial institutions do not meet minimum capital
requirements. Failure to meet the capital guidelines could also subject a
depository institution to capital raising requirements. In addition, a
depository institution is generally prohibited from making capital
distributions, including paying dividends, or paying management fees to a
holding company if the institution would thereafter be undercapitalized. As of
December 31, 1999, the most recent notification from the OCC categorized the
Bank as well capitalized based on the prompt corrective action ratios and
guidelines described above.
Payment of Dividends and Other Restrictions
There are various legal and regulatory provisions which limit the
amount of dividends the Bank can pay to Trustmark without regulatory approval.
Approval of the OCC is required if the total of all dividends declared in any
calendar year exceeds the total of its net income for that year combined with
its retained net income of the preceding two years. Without prior regulatory
approval, the Bank may pay Trustmark dividends equal to approximately $46.5
<PAGE>
million plus its net income for the year 2000. In addition, subsidiary banks of
a bank holding company are subject to certain restrictions imposed by the
Federal Reserve Act on extensions of credit to the bank holding company or any
of its subsidiaries. Further, subsidiary banks of a bank holding company are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of any services to
the bank holding company.
FDIC Insurance Assessments
The deposits of the Bank are insured up to regulatory limits set by the
FDIC and, accordingly, are subject to deposit insurance assessments. The FDIC
has the authority to raise or lower assessment rates on insured deposits in
order to achieve certain designated ratios in the Bank Insurance Fund (BIF) and
the Savings Association Insurance Fund (SAIF) and to impose special assessments.
The FDIC applies a risk-based assessment system that places each financial
institution into one of nine categories based on capital levels and supervisory
evaluations provided to the FDIC by the institution's primary federal regulator.
Each institution's insurance assessment rate is then determined by the risk
category in which it is classified. At December 31, 1999, the Bank's annual BIF
and SAIF assessment rates were $0.0212 per $100 of insured deposits.
Financial Modernization - The Gramm Leach Bliley Act
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999
(Act) was signed by the President and enacted into law on November 12, 1999. The
Act potentially affects every facet of a depository institution's operations.
The Act does three fundamental things that affect the banking industry: (a)
repeals key provisions of the Glass Steagall Act to permit commercial banks to
affiliate with securities firms, insurance companies and other financial service
providers; (b) establishes a statutory framework pursuant to which full
affiliations can occur between these entities; and (c) provides financial
services organizations with flexibility in structuring these new financial
affiliations through a financial holding company structure or a financial
subsidiary.
As a result of the Act, banks will be able to offer customers a wide
range of financial products and services without the restraints of previous
legislation. In addition, bank holding companies and other financial services
providers will be able to commence new activities or new affiliations much more
readily. The primary provisions of the Act related to the establishment of
financial holding companies and financial subsidiaries became effective on March
11, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Trustmark Corporation (the Registrant) and
its bank subsidiary, Trustmark National Bank, including their ages, positions
and principal occupations for the last five years are as follows:
Richard G. Hickson, 55, President and Chief Executive Officer, Trustmark
Corporation and Vice Chairman and Chief Executive Officer, Trustmark National
Bank since May 1997; President and Chief Operating Officer, SouthTrust Bank of
Georgia, N.A. from 1995 to May 1997.
<PAGE>
T. H. Kendall III, 63, President and General Manager, The Gaddis Farms, Inc.
(Farming, Banking and Oil Production); Chairman of the Board, Trustmark National
Bank since February 1999; Chairman of the Board, Trustmark Corporation since
April 1999.
Harry M. Walker, 49, Secretary, Trustmark Corporation; President and Chief
Operating Officer - General Banking Group, Trustmark National Bank since March
1992.
Gerard R. Host, 45, Treasurer, Trustmark Corporation since September 1995;
President and Chief Operating Officer - Financial Services Group, Trustmark
National Bank since September 1999; Executive Vice President and Chief Financial
Officer from November 1995 to September 1999; Executive Vice President and Chief
Investment Officer from September 1994 to November 1995.
William O. Rainey, 60, Executive Vice President and Chief Banking Officer,
Trustmark National Bank since November 1991.
James S. Lenoir, 57, Executive Vice President and Chief Risk Management Officer,
Trustmark National Bank since March 1999; Executive Vice President and Chief
Credit Officer for Deposit Guaranty National Bank and Deposit Guaranty
Corporation from February 1983 to April 1998.
Thomas F. Darnell, 49, Executive Vice President and Chief Credit Officer,
Trustmark National Bank since October 1999; Senior Vice President and Manager of
Commercial Lending from January 1993 to October 1999.
George R. Day, 64, Executive Vice President and Senior Credit Officer, Trustmark
National Bank since October 1999; Executive Vice President and Chief Credit
Officer from November 1991 to October 1999.
George C. Gunn, 48, Executive Vice President and Commercial Banking Manager,
Trustmark National Bank since September 1999; Senior Vice President and Real
Estate Lending Manager from April 1987 to September 1999.
Thomas W. Mullen, 57, Executive Vice President and Chief Retail Administration
Officer, Trustmark National Bank since November 1991.
James M. Outlaw, Jr., 46, Executive Vice President and Chief Information
Officer, Trustmark National Bank since September 1999; Senior Vice President and
Operations Manager from February 1996 to September 1999; Regional Manager of
Affiliated Computer Services, Inc. from March 1993 to February 1996.
Zach L. Wasson, Jr., 46, Executive Vice President and Chief Financial Officer,
Trustmark National Bank since September 1999; Senior Vice President and Chief
Investment Officer from November 1995 to September 1999; Vice President and
Investment/ Treasury Manager from February 1990 to November 1995.
STATISTICAL DISCLOSURES
The consolidated statistical disclosures for Trustmark Corporation and
subsidiaries are contained in the following Tables 1 through 12.
During 1999, Trustmark completed one business combination. On April 9,
1999, Trustmark completed its acquisition of the Dan Bottrell Agency, Inc.
(Bottrell), an independent insurance agency located in Jackson, Mississippi,
with approximately $9 million in total assets. This transaction has been
accounted for as a purchase business combination. The results of operations,
which are not material, have been included in the financial statements from the
merger date.
<PAGE>
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES
TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
The table below shows the average balances for all assets and liabilities
of Trustmark 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>
Years Ended December 31,
--------------------------------------------------------------
1999 1998
----------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- -------- ------ ---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
<S> <C> <C> <C> <C> <C> <C>
under reverse repurchase agreements $ 159,566 $ 7,917 4.96% $ 112,986 $ 6,078 5.38%
Securities available for sale:
Taxable 747,885 46,997 6.28% 670,249 41,765 6.23%
Nontaxable 25 2 8.00%
Securities held to maturity:
Taxable 1,178,849 73,813 6.26% 1,184,223 75,683 6.39%
Nontaxable 122,931 10,048 8.17% 111,415 9,413 8.45%
Loans, net of unearned income 3,833,333 317,158 8.27% 3,344,381 293,855 8.79%
---------- -------- ---------- --------
Total interest-earning assets 6,042,564 455,933 7.55% 5,423,279 426,796 7.87%
Cash and due from banks 296,675 282,487
Other assets 304,968 271,215
Allowance for loan losses (65,856) (65,232)
---------- ----------
Total Assets $6,578,351 $5,911,749
========== ==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 719,981 $ 19,128 2.66% $ 734,682 $ 21,623 2.94%
Savings deposits 684,368 11,795 1.72% 660,222 14,006 2.12%
Time deposits 1,558,788 75,828 4.86% 1,652,252 87,940 5.32%
Federal funds purchased and securities
sold under repurchase agreements 1,491,515 70,847 4.75% 1,151,920 58,894 5.11%
Short-term borrowings 522,243 27,481 5.26% 172,168 9,437 5.48%
---------- -------- ---------- --------
Total interest-bearing liabilities 4,976,895 205,079 4.12% 4,371,244 191,900 4.39%
-------- --------
Noninterest-bearing demand deposits 880,468 865,484
Other liabilities 64,538 59,080
Shareholders' equity 656,450 615,941
---------- ----------
Total Liabilities and Shareholders' Equity $6,578,351 $5,911,749
========== ==========
Net Interest Margin 250,854 4.15% 234,896 4.33%
Less tax equivalent adjustments:
Investments 3,517 3,295
Loans 3,907 3,401
-------- --------
Net Interest Margin per Annual Report $243,430 $228,200
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997
-----------------------------
Average Yield/
Balance Interest Rate
---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
<S> <C> <C> <C>
under reverse repurchase agreements $ 64,096 $ 3,575 5.58%
Securities available for sale:
Taxable 612,745 36,671 5.98%
Nontaxable 320 37 11.56%
Securities held to maturity:
Taxable 1,301,175 83,208 6.39%
Nontaxable 103,212 8,938 8.66%
Loans, net of unearned income 2,771,662 250,108 9.02%
---------- --------
Total interest-earning assets 4,853,210 382,537 7.88%
Cash and due from banks 269,665
Other assets 252,260
Allowance for loan losses (63,897)
----------
Total Assets $5,311,238
==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 726,812 $ 21,736 2.99%
Savings deposits 573,528 12,333 2.15%
Time deposits 1,623,384 86,804 5.35%
Federal funds purchased and securities
sold under repurchase agreements 912,089 47,236 5.18%
Short-term borrowings 67,708 4,778 7.06%
---------- -------
Total interest-bearing liabilities 3,903,521 172,887 4.43%
--------
Noninterest-bearing demand deposits 789,041
Other liabilities 57,786
Shareholders' equity 560,890
----------
Total Liabilities and Shareholders' Equity $5,311,238
==========
Net Interest Margin 209,650 4.32%
Less tax equivalent adjustments:
Investments 3,141
Loans 2,504
--------
Net Interest Margin per Annual Report $204,005
========
</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 1998 and 1997 statements to conform to the 1999
presentation.
<PAGE>
TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS
The table below shows the change from year to year for each component of
the tax equivalent net interest margin in the amount generated by volume changes
and the amount generated by changes in the yield or rate (tax equivalent basis -
$ in thousands)
<TABLE>
<CAPTION>
1999 Compared to 1998 1998 Compared to 1997
Increase (Decrease) Due To: Increase (Decrease) Due To:
-------------------------------- --------------------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
-------- -------- -------- -------- -------- --------
Interest earned on:
Federal funds sold and securities purchased
<S> <C> <C> <C> <C> <C> <C>
under reverse repurchase agreements $ 2,345 ($ 506) $ 1,839 $ 2,635 ($ 132) $ 2,503
Securities available for sale:
Taxable 4,893 339 5,232 3,524 1,570 5,094
Nontaxable 0 (2) (2) (26) (9) (35)
Securities held to maturity:
Taxable (341) (1,529) (1,870) (7,525) 0 (7,525)
Nontaxable 953 (318) 635 696 (221) 475
Loans, net of unearned income 41,352 (18,049) 23,303 50,291 (6,544) 43,747
-------- -------- -------- -------- -------- --------
Total interest-earning assets 49,202 (20,065) 29,137 49,595 (5,336) 44,259
Interest paid on:
Interest-bearing demand deposits (433) (2,062) (2,495) 241 (354) (113)
Savings deposits 499 (2,710) (2,211) 1,847 (174) 1,673
Time deposits (4,790) (7,322) (12,112) 1,604 (468) 1,136
Federal funds purchased and securities sold
under repurchase agreements 16,342 (4,389) 11,953 12,302 (644) 11,658
Short-term borrowings 18,438 (394) 18,044 5,938 (1,279) 4,659
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 30,056 (16,877) 13,179 21,932 (2,919) 19,013
-------- -------- -------- -------- -------- --------
Change in net interest income on a
tax equivalent basis $ 19,146 ($ 3,188) $ 15,958 $ 27,663 ($ 2,417) $ 25,246
======== ======== ======== ======== ======== ========
</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 1999, 1998 and 1997. The
balances of nonaccrual loans and related income recognized have been included
for purposes of these computations.
<PAGE>
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,
------------------------------------
1999 1998 1997
---------- ---------- ----------
Securities available for sale
<S> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $ 387,465 $ 362,930 $ 480,965
Mortgage-backed securities 347,817 353,300 97,853
---------- ---------- ----------
Total debt securities 735,282 716,230 578,818
Equity securities 44,109 31,166 14,159
---------- ---------- ----------
Total securities available for sale $ 779,391 $ 747,396 $ 592,977
========== ========== ==========
Securities held to maturity
U. S. Treasury and U. S. Government agencies $ 188,792 $ 132,388 $ 221,929
Obligations of states and political subdivisions 270,566 239,441 230,642
Mortgage-backed securities 931,523 799,584 944,257
Other securities 100 100 100
---------- ---------- ----------
Total securities held to maturity $1,390,981 $1,171,513 $1,396,928
========== ========== ==========
</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, 1999 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
-------- ----- ---------- ----- ---------- ----- --------- ----- ----------
Securities available for sale
U. S. Treasury and U. S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Government agencies $ 90,748 6.14% $ 248,465 6.49% $ 6,344 6.52% $ 41,908 6.52% $ 387,465
Mortgage-backed securities 75 8.95% 24,420 6.51% 323,322 6.76% 347,817
-------- ---------- ---------- --------- ----------
Total debt securities 90,748 248,540 30,764 365,230 735,282
Equity securities 44,109
-------- ---------- ---------- --------- ----------
Total securities available for sale $ 90,748 $ 248,540 $ 30,764 $ 365,230 $ 779,391
======== ========== ========== ========= ==========
Securities held to maturity
U. S. Treasury and U. S
Government agencies $ 9,504 5.97% $ 178,297 6.04% $ 991 6.87% $ 188,792
Obligations of states and
political subdivisions 21,228 7.02% 102,252 7.22% 107,786 7.48% $ 39,300 7.57% 270,566
Mortgage-backed securities 1,098 6.09% 34,832 6.79% 109,884 6.23% 785,709 6.51% 931,523
Other securities 100 7.50% 100
-------- ---------- ---------- ---------- ----------
Total securities held to maturity $ 31,830 $ 315,481 $ 218,661 $ 825,009 $1,390,981
======== ========== ========== ========== ==========
</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 4.42 years.
As of December 31, 1999, Trustmark held securities of one issuer with a
carrying value exceeding ten percent of total shareholders' equity. General
obligations of the State of Mississippi with a carrying value of $100,603,733
and an approximate fair value of $101,196,184 were held on December 31, 1999.
Included in the aforementioned State of Mississippi holdings are bonds with an
aggregate carrying value of $16,919,958 and an approximate fair value of
$18,016,906 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
<PAGE>
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the end
of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Real estate loans:
<S> <C> <C> <C> <C> <C>
Construction and land development $ 297,231 $ 251,654 $ 195,728 $ 168,650 $ 144,010
Secured by 1-4 family residential properties 1,175,775 1,106,735 699,486 543,661 553,997
Secured by nonfarm, nonresidential properties 555,255 508,194 446,492 398,350 380,734
Other real estate loans 78,090 72,445 70,592 73,229 69,422
Loans to finance agricultural production 35,412 39,682 38,466 33,950 37,434
Commercial and industrial 824,017 721,483 702,361 642,758 616,949
Loans to individuals for personal expenditures 841,059 773,578 701,132 645,829 641,409
Obligations of states and political subdivisions 151,759 141,152 79,178 84,918 63,557
Loans for purchasing or carrying securities 16,160 24,854 17,622 20,469 11,626
Other loans 40,177 62,541 32,598 22,759 52,953
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $4,014,935 $3,702,318 $2,983,655 $2,634,573 $2,572,091
========== ========== ========== ========== ==========
</TABLE>
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories
outstanding as of December 31, 1999, which, based on the remaining scheduled
repayments of principal, are due in the periods indicated ($ in thousands):
<TABLE>
<CAPTION>
Maturing
-------------------------------------------
One Year
Within Through After
One Year Five Five
or Less Years Years Total
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Construction and land development $198,669 $ 98,562 $ 297,231
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 189,350 272,731 $171,264 633,345
Commercial and industrial 476,901 284,716 62,400 824,017
Other loans (excluding loans to individuals) 86,684 38,119 118,705 243,508
-------- -------- -------- ----------
Total $951,604 $694,128 $352,369 $1,998,101
======== ======== ======== ==========
</TABLE>
The following table shows all loans in certain categories due after one
year classified according to their sensitivity to changes in interest rates ($
in thousands):
Maturing
--------------------------------
One Year
Through After
Five Five
Years Years Total
-------- -------- ----------
Above loans due after one year which have:
Predetermined interest rates $ 596,225 $314,635 $ 910,860
Floating interest rates 97,903 37,734 135,637
--------- -------- ----------
Total $ 694,128 $352,369 $1,046,497
========= ======== ==========
<PAGE>
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows Trustmark's nonperforming assets and past due loans
at the end of each of the last five years ($ in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $16,671 $13,253 $14,242 $ 8,390 $10,055
Other real estate 1,987 1,859 2,340 2,734 3,982
Accruing loans past due 90 days or more 2,043 2,431 2,570 2,407 1,810
------- ------- ------- ------- -------
Total nonperforming assets and loans past due
90 days or more $20,701 $17,543 $19,152 $13,531 $15,847
======= ======= ======= ======= =======
</TABLE>
Generally, a loan is classified as nonaccrual and the accrual of interest
on such loan is discontinued when a contractual payment of principal or interest
has become 90 days or more past due, unless the loan is both well secured and in
the process of collection, or Management has serious doubts about the
collectibility of principal and/or interest even though the loan may be
currently performing. When a loan is placed in nonaccrual status, unpaid
interest credited to income in the current and prior years is reversed against
interest income. Interest received on nonaccrual loans is applied against
principal. Loans are restored to accrual status when the obligation is brought
current or has performed in accordance with the contractual terms for a
reasonable period of time, and the ultimate collectibility of all contractual
principal and interest is no longer in doubt. Interest which would have accrued
on nonaccrual and restructured loans if they had been in compliance with their
original terms is immaterial. In addition, interest income on these loans that
was included in net income for the periods presented was immaterial.
At December 31, 1999, Management is not aware of any additional credits,
other than those identified above, where serious doubts as to the repayment of
principal and interest exist. There are no interest-earning assets which would
be required to be disclosed above if those assets were loans. Trustmark had no
loan concentrations greater than ten percent of total loans other than those
loan categories shown in Table 5.
<PAGE>
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes Trustmark's loan loss experience for each of
the last five years ($ in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 66,150 $ 64,100 $ 63,000 $ 62,000 $ 65,014
Loans charged off:
Real estate loans (1,953) (1,121) (503) (1,507) (1,663)
Loans to finance agricultural production (243) (73) (79) (177) (115)
Commercial and industrial (3,242) (2,561) (1,406) (1,334) (764)
Loans to individuals for personal expenditures (7,863) (6,698) (6,353) (5,651) (6,300)
All other loans (1,685) (1,819) (619) (603) (648)
-------- -------- -------- -------- --------
Total charge-offs (14,986) (12,272) (8,960) (9,272) (9,490)
Recoveries on loans previously charged off:
Real estate loans 156 72 92 325 981
Loans to finance agricultural production 2 7 3 10
Commercial and industrial 791 1,181 877 1,334 736
Loans to individuals for personal expenditures 3,319 2,960 2,283 2,087 1,848
All other loans 1,348 1,036 775 740 462
-------- -------- -------- -------- --------
Total recoveries 5,614 5,251 4,034 4,489 4,037
-------- -------- -------- -------- --------
Net charge-offs (9,372) (7,021) (4,926) (4,783) (5,453)
Additions to allowance charged to operating expense 9,072 7,771 4,682 5,783 2,439
Other additions to allowance for loan losses 1,300 1,344
-------- -------- -------- -------- --------
Balance at end of period $ 65,850 $ 66,150 $ 64,100 $ 63,000 $ 62,000
======== ======== ======== ======== ========
Percentage of net charge-offs during period to average
loans outstanding during the period 0.24% 0.21% 0.18% 0.19% 0.22%
======== ======== ======== ======== ========
</TABLE>
The allowance for loan losses is maintained at a level that Management
and the Board of Directors believe is adequate to absorb probable losses in the
loan portfolio, as well as those associated with off-balance sheet credit
instruments such as letters of credit and unfunded lines of credit. A formal
analysis is prepared quarterly to assess the adequacy of the allowance for loan
losses. This analysis considers the overall mix and quality of the loan
portfolio, risk ratings of certain pools of loans, historical credit losses,
volumes and trends in delinquencies and non accruals, and both national and
local economic conditions. Since any allocation is judgmental and involves
consideration of many factors, the allocation may be more or less than the
chargeoffs that may ultimately occur.
<PAGE>
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of Trustmark's
allowance for loan losses at December 31, 1999. These allocations were
determined based upon Management's analysis of the various types of risk
associated with Trustmark's loan portfolio. A discussion of Management's
methodology for performing the analysis follows the table ($ in thousands):
Allocation for pools of
risk-rated loans $39,676
Additional allocation for
risk-rated loans 927
Allocation for selected
industries 4,637
General allocation for
all other loans 12,075
Allocation for available lines
of credit and letters of credit 1,963
Unallocated 6,572
-------
Total $65,850
=======
The allowance for loan losses is maintained at a level which Management
and the Board of Directors believe is adequate to absorb probable losses in the
loan portfolio, in addition to possible 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 are uniformly applied to pools of risk-rated loans within the
commercial portfolio. These percentages are determined based on migration
analysis, previously established floors for each category and economic factors.
In addition, relationships of $500,000 or more which are risk-rated as other
loans especially mentioned or substandard and all which are risk-rated doubtful
are reviewed by Trustmark's Internal Asset Review Department staff to determine
if standard percentages appear to be sufficient to cover probable losses in each
category. In the event that the percentages on any particular lines are
determined to be insufficient, additional allocations are made based upon
recommendations of lending and Asset Review Department personnel.
Industry allocations are 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 probable
loan losses within portions of the loan portfolio not addressed in the preceding
allocations. The types of loans included in the general allocation are
residential mortgage loans, direct and indirect consumer loans, credit card
loans and overdrafts. The actual allocation amount is based upon the more
conservative of: loss experience within these categories during the year, 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. Percentages, which are the same as
those applied to the funded portions of the commercial and retail loan
portfolios, are applied to cover any potential losses in these off-balance sheet
categories.
As the review of the allowance for loan losses involves a significant
degree of judgment by Management and is imprecise by nature, the unallocated
$6.6 million relates to issues that cannot be measured on a quantitative basis
over a prolonged period of time.
<PAGE>
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000
or more at December 31, 1999 ($ in thousands):
3 months or less $306,635
Over 3 months through 6 months 67,245
Over 6 months through 12 months 109,715
Over 12 months 90,102
--------
Total $573,697
========
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
1999 1998 1997
------ ------ ------
Return on average assets 1.49% 1.41% 1.34%
Return on average equity 14.93% 13.53% 12.67%
Dividend payout ratio 32.35% 30.92% 30.26%
Equity to assets ratio 9.98% 10.42% 10.56%
TABLE 12 - SHORT-TERM BORROWINGS
The table below presents certain information concerning Trustmark's
short-term borrowings for each of the last three years ($ in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
Federal funds purchased and securities
sold under repurchase agreements:
<S> <C> <C> <C>
Amount outstanding at end of period $1,377,420 $1,318,545 $ 948,700
Weighted average interest rate at end of period 4.51% 4.48% 5.72%
Maximum amount outstanding at any
month end during each period $1,630,136 $1,544,385 $1,003,907
Average amount outstanding during each period $1,491,515 $1,151,920 $ 912,089
Weighted average interest rate during each period 4.75% 5.11% 5.18%
</TABLE>
1999
----------
Other short-term borrowings:
Amount outstanding at end of period $ 733,024
Weighted average interest rate at end of period 5.86%
Maximum amount outstanding at any
month end during each period $ 757,854
Average amount outstanding during each period $ 522,243
Weighted average interest rate during each period 5.26%
Other short-term borrowings for 1998 and 1997 are not required to be
reported since the average balance was less than 30% of shareholders' equity at
the end of 1999.
<PAGE>
ITEM 2. PROPERTIES
Trustmark's principal offices are housed in a 14-floor combination
office and bank building located in Jackson, Mississippi and owned by the Bank.
Approximately 197,000 square feet (75%) 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, 23
limited-service branches, 11 in-store branches and an ATM network which includes
87 ATMs at on-premise locations and 68 ATMs located at off-premise sites. The
Bank leases 70 of its 181 locations with the remainder being owned.
ITEM 3. LEGAL PROCEEDINGS
Trustmark and its subsidiaries are parties to lawsuits and other claims
that arise in the ordinary course of business; some of the lawsuits assert
claims related to the lending, collection, servicing, investment, trust and
other business activities; and some of the lawsuits allege substantial claims
for damages. The cases are being vigorously contested. In the regular course of
business, Management evaluates estimated losses or costs related to litigation,
and provision is made for anticipated losses whenever Management believes that
such losses are probable and can be reasonably estimated. At the present time,
Management believes, based on the advice of legal counsel, that the final
resolution of pending legal proceedings will not have a material impact on
Trustmark's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to Trustmark's shareholders during the
fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
Trustmark's common stock is listed for trading on the Nasdaq Stock
Market. At March 1, 2000, there were approximately 5,100 shareholders of record
of Trustmark's common stock. Other information required by this item can be
found in Note 14, "Shareholders' Equity," (page 31) and the table captioned
"Principal Markets and Prices of Trustmark's Stock" (page 38) included in the
Registrant's 1999 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 37) included in the Registrant's 1999
Annual Report to Shareholders and is incorporated herein by reference.
<PAGE>
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
39-47) included in the Registrant's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (pages
39-41) included in the Registrant's 1999 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
1999 Annual Report to Shareholders (pages 15-36) and are incorporated herein by
reference. The table captioned "Summary of Quarterly Results of Operations"
(page 37) is also included in the Registrant's 1999 Annual Report of
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, 1999.
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 VII, "Other Information Concerning
Directors," contained in Trustmark Corporation's Proxy Statement dated March 10,
2000, and is incorporated herein by reference. Information on the Registrant's
executive officers is included in Part I, pages 6 and 7 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in Section V,
"Compensation of Executive Officers and Directors," and Section VII, "Other
Information Concerning Directors," contained in Trustmark Corporation's Proxy
Statement dated March 10, 2000, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and Management can be found in Section III, "Voting Securities and Principal
Holders Thereof," and Section IV, "Ownership of Equity Securities by
Management," contained in Trustmark Corporation's Proxy Statement dated March
10, 2000, and is incorporated herein by reference.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
can be found in Section VI, "Transactions with Management," contained in
Trustmark Corporation's Proxy Statement dated March 10, 2000, 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 1999 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, 1999 and 1998
Consolidated Statements of Income for the Years Ended December 31, 1999,
1998 and 1997
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements (Notes 1 through 17)
Selected Financial Data, Summary of Quarterly Results of Operations,
and Principal Markets and Prices of Trustmark's Stock
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set forth by
Article 9 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
B. Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
1999.
C. Exhibits
The exhibits listed in the Exhibit Index are filed herewith or are
incorporated herein by reference.
<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/ Richard G. Hickson BY: /s/ Gerard R. Host
----------------------- ------------------
Richard G. Hickson Gerard R. Host
President & Chief Treasurer (Principal
Executive Officer Financial Officer)
DATE: March 14, 2000 DATE: March 14, 2000
<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 14, 2000 BY: /s/ J. Kelly Allgood
------------------------------
J. Kelly Allgood, Director
DATE: March 14, 2000 BY: /s/ Reuben V. Anderson
------------------------------
Reuben V. Anderson, Director
DATE: March 14, 2000 BY: /s/ Adolphus B. Baker
------------------------------
Adolphus B. Baker, Director
DATE: BY: ------------------------------
John L. Black, Jr., Director
DATE: March 14, 2000 BY: /s/ William C. Deviney, Jr.
------------------------------
William C. Deviney, Jr., Director
DATE: March 14, 2000 BY: /s/ D. G. Fountain, Jr.
------------------------------
D. G. Fountain, Jr., Director
DATE: March 14, 2000 BY: /s/ C. Gerald Garnett
------------------------------
C. Gerald Garnett, Director
DATE: March 14, 2000 BY: /s/ Richard G. Hickson
------------------------------
Richard G. Hickson, President &
Chief Executive Officer and Director
DATE: March 14, 2000 BY: /s/ Matthew L. Holleman III
------------------------------
Matthew L. Holleman III, Director
DATE: March 14, 2000 BY: /s/ Gerard R. Host
------------------------------
Gerard R. Host, Treasurer (Principal
Financial Officer) and Director
DATE: March 14, 2000 BY: /s/ Fred A. Jones
------------------------------
Fred A. Jones, Director
<PAGE>
DATE: March 14, 2000 BY: /s/ T.H. Kendall III
------------------------------
T. H. Kendall III, Chairman of the
Board and Director
DATE: March 14, 2000 BY: /s/ Larry L. Lambiotte
------------------------------
Larry L. Lambiotte, Director
DATE: March 14, 2000 BY: /s/ Donald E. Meiners
------------------------------
Donald E. Meiners, Director
DATE: March 14, 2000 BY: /s/ William Neville III
------------------------------
William Neville III, Director
DATE: March 14, 2000 BY: /s/ Richard H. Puckett
------------------------------
Richard H. Puckett, Director
DATE: March 14, 2000 BY: /s/ William K. Ray
------------------------------
William K. Ray, Director
DATE: March 14, 2000 BY: /s/ Charles W. Renfrow
------------------------------
Charles W. Renfrow, Director
DATE: March 14, 2000 BY: /s/ Harry M. Walker
------------------------------
Harry M. Walker, Secretary
and Director
DATE: March 14, 2000 BY: /s/ LeRoy G. Walker, Jr.
------------------------------
LeRoy G. Walker, Jr., Director
DATE: March 14, 2000 BY: /s/ Paul H. Watson
------------------------------
Paul H. Watson, Jr., Director
DATE: BY:
------------------------------
Kenneth W. Williams, Director
DATE: March 14, 2000 BY: /s/ Allen Wood, Jr.
------------------------------
Allen Wood, Jr., Director
<PAGE>
EXHIBIT INDEX
3-a Articles of Incorporation, as amended. Filed as Exhibit 3 to
Trustmark'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 Trustmark'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
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
3-d Bylaws, as amended. Filed as Exhibit 3-d to Trustmark's Form 10-K
Annual Report for the year ended December 31, 1997, incorporated herein
by reference.
3-e Articles of Incorporation, as amended. Filed as Exhibit 3-e to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1998, incorporated herein by reference.
10-a Deferred Compensation Plan for Directors of Trustmark Corporation, as
amended. Filed as Exhibit 10 to Trustmark'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 Trustmark's Form 10-K Annual Report for
the year ended December 31, 1993, incorporated herein by reference.
10-c Deferred Compensation Plan for Directors of First National Financial
Corporation, acquired October 7, 1994. Filed as Exhibit 10-c to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
10-d Life Insurance Plan for Executive Officers of First National Financial
Corporation, acquired October 7, 1994. Filed as Exhibit 10-d to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
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
Trustmark's Form 10-K Annual Report for the year ended December 31,
1996, incorporated herein by reference.
10-f Employment Agreement between Trustmark Corporation and Richard G.
Hickson dated May 13, 1997. Filed as Exhibit 10-f to Trustmark's Form
10-K Annual Report for the year ended December 31, 1997, incorporated
herein by reference.
10-g Change in Control Agreement between Trustmark Corporation and Harry M.
Walker dated December 22, 1997. Filed as Exhibit 10-g to Trustmark's
Form 10-K Annual Report for the year ended December 31, 1997,
incorporated herein by reference.
10-h Change in Control Agreement between Trustmark Corporation and Gerard R.
Host dated December 22, 1997. Filed as Exhibit 10-h to Trustmark's Form
10-K Annual Report for the year ended December 31, 1997, incorporated
herein by reference.
10-i Deferred Compensation Plan for Directors of Trustmark National Bank,
as amended. Filed as a part of this report on Form 10-K.
10-j Deferred Compensation Plan for Executive of Trustmark National Bank,
as amended. Filed as a part of this report on Form 10-K. 13 Only those
portions of the Registrant's 1999 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.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
All other exhibits are omitted as they are inapplicable or not required
by the related instructions.
<PAGE>
Exhibit 10i
DIRECTORS'
DEFERRED FEE PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
<PAGE>
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
TABLE OF CONTENTS
Article Subject Page
- ------- ------- ----
I Definitions and Construction 1
II Eligibility and Participation 3
III Death Benefit 4
IV Retirement Benefit 6
V Beneficiary 7
VI Leave of Absence 7
VII Source of Benefits 8
VIII Termination of Relationship 9
IX Termination of Participation 9
X Termination, Amendment, Modification,
or Supplement of Plan 9
XI Other Benefits and Agreements 10
XII Restrictions on Alienation of Benefits 10
XIII Administration of this Plan 11
XIV Named Fiduciary and Claims Procedure 12
XV Adoption of Plan by Subsidiary,
Affiliated or Associated Companies 14
XVI Miscellaneous 14
Plan Agreement I-1
1/99
<PAGE>
DIRECTORS'
DEFERRED FEE PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
PURPOSE AND EFFECTIVE DATE
The purpose of the Directors' Deferred Fee Plan of Trustmark National
Bank, Jackson, Mississippi is to provide specified benefits to Directors who
contribute materially to the continued growth, development and future business
success of Trustmark National Bank, Jackson, Mississippi. It is the intention of
Trustmark National Bank, Jackson, Mississippi that this program and the
individual plans established hereunder be administered as unfunded welfare
benefit plans established for Directors of the Bank. The effective date of this
Plan is February 12, 1985, amended and restated as of February 12, 1986, and is
further amended and hereby restated as of January 1, 1999.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For purposes of this Plan, the following phrases or terms
shall have the indicated meanings unless otherwise clearly apparent
from the context:
(a) "Beneficiary" shall mean the person, persons or estate of a
Participant, entitled to receive any benefits subsequent to
the death of a Participant under a Plan Agreement entered into
in accordance with the terms of this Plan.
(b) "Beneficiary Designation" shall mean the form of written
agreement, attached hereto as Annex II, by which the
Participant names the Beneficiary(ies) of the Plan.
(c) "Board of Directors" shall mean the Board of Directors of
Trustmark National Bank, Jackson, Mississippi unless otherwise
indicated or the context otherwise requires.
(d) "Committee" shall mean the Compensation Committee of the Board
of Directors appointed to manage and administer the Plan and
individual Plan Agreements in accordance with the provisions
of Article XIII hereof.
<PAGE>
(e) "Bank" shall mean Trustmark National Bank, Jackson,
Mississippi and any Subsidiary that duly adopts the Plan as
provided in Article XV hereof. Where the context dictates, the
term "Bank" as used herein refers to the particular Bank that
has entered into a Plan Agreement with a particular
Participant.
(f) "Benefit Level" shall mean that level of Benefits (Death and
Retirement) which is made available by the Bank to the
Participant for computation of Retirement and Death Benefits
pursuant to the terms and conditions of the Plan.
"Participant's Benefit Level" shall mean that portion of the
Benefit Level which the Participant chooses as a basis for
computation of Death and Retirement Benefits pursuant to the
terms and conditions of the Plan.
(g) "Director" shall mean any person who is associated as a
Director or Advisory Director with the Bank or one of its
Subsidiaries.
(h) "Normal Retirement Date" shall be March 1 following
Participant's sixty-fifth (65th) birthday.
(i) "Participant" shall mean a Director who is selected and elects
to participate in the Plan through the execution of a Plan
Agreement in accordance with the provisions of Article II.
(j) "Plan" shall mean the Directors' Deferred Fee Plan of
Trustmark National Bank, Jackson, Mississippi as amended from
time to time.
(k) "Plan Agreement" shall mean the form of written agreement,
attached hereto as Annex I, which is entered into from time to
time by and between the Bank and a Director selected to become
a Participant as a condition to participation in the Plan.
Each Plan Agreement executed by a Participant shall provide
for the entire benefit to which such Participant is entitled
under the Plan, and the Plan Agreement bearing the latest date
shall govern such entitlement.
(l) "Retirement" and "Retire" shall mean severance of relationship
with the Bank at or after the attainment of his or her Normal
Retirement Date.
(m) "Disability" or "Disabled", as used herein, means permanent
and/or total Disability of the person referred to, as
determined by the Committee in its sole discretion.
<PAGE>
(n) "Election to Participate" shall mean the form of written
agreement that will be executed and entered into between a
Participant and the Bank specifying the amount of annual
compensation to be deferred immediately following the date of
execution of said "Election to Participate" and continuing
thereafter under the terms of the Plan.
(o) "Change in Control" shall mean a Buyout, Merger, or
Substantial Change in Ownership.
(p) "Buyout" shall mean a transaction or series of related
transactions by which the Bank or Holding Company is sold,
either through the sale of a Controlling Interest in the
Bank's or Holding Company's voting stock or through the sale
of substantially all of the Bank's or Holding Company's
assets, to a party not having a Controlling Interest in the
Bank's or Holding Company's voting stock.
(q) "Merger" shall mean a transaction or series of transactions
wherein the Bank or Holding Company is combined with another
business entity, and after which the persons or entities who
had owned, either directly or indirectly, a Controlling
Interest in the Bank's or Holding Company's voting stock own
less than a Controlling Interest in the voting stock of the
combined entity.
(r) "Substantial Change in Ownership" shall mean a transaction or
series of transactions in which a Controlling Interest in the
Bank or Holding Company is acquired by or for a person or
business entity, either of which did not own, either directly
or indirectly, a Controlling Interest in the Bank or Holding
Company. The above shall not apply to stock purchased by any
tax-qualified employee stock ownership plan or other such type
of benefit plan sponsored by the Bank or any company
affiliated with the Bank.
(s) "Controlling Interest" shall mean ownership, either directly
or indirectly, of more than twenty percent (20%) of the Bank's
or Holding Company's voting stock.
(t) "Subsidiary" shall mean any business organization in which
Trustmark National Bank, Jackson, Mississippi, directly or
indirectly, owns an interest, excluding ownership interests
Trustmark National Bank, Jackson, Mississippi may hold in
their fiduciary capacities as trustee or otherwise, and any
other business organization that the Board of Directors
designates as a Subsidiary for purposes of this Plan.
(u) "Holding Company " shall mean Trustmark Corporation.
<PAGE>
1.2 Construction. The masculine gender when used herein shall be deemed to
include the feminine gender, and the singular may include the plural
unless the context clearly indicates to the contrary. The words
"hereof", "herein," "hereunder", and other similar compounds of the
word "here" shall mean and refer to the entire Plan and not to any
particular provision or section. Whenever the words "Article" or
"Section" are used in this Plan, or a cross-reference to an "Article"
or "Section" is made, the Article or Section referred to shall be an
Article or Section of this Plan unless otherwise specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. In order to be eligible for participation in the Plan, a
Director must be selected by the Committee in the year preceding the
year in which the Director is eligible to participate and in each
succeeding year thereafter as hereinafter provided. The Committee, in
its sole and absolute discretion, shall determine eligibility for
participation in accordance with the purposes of the Plan.
2.2 Participation. After being selected by the Committee to participate in
this Plan, a Director shall, as a condition precedent to participation
herein, complete and return to the Committee a duly executed Plan
Agreement and Election to Participate electing to participate herein
and agreeing to the terms and conditions thereof, and by the execution
of such Plan Agreement and Election to Participate a Participant shall
agree that all amounts deferred thereby shall be irrevocably deferred
and that in lieu thereof the Participant shall be entitled solely to
the benefits provided under this Plan. Such Plan Agreement shall be
completed and returned to the committee at the time specified thereby,
and should be subsequent to December 31st of the year preceding the
year to which the Plan Agreement relates.
2.3 Participation during a Period of Disability. In the event that a
Participant is Disabled and is incapable of executing a Plan Agreement
for the forthcoming year, such Participant's Plan Agreement for the
year in which the Participant became disabled shall remain in force and
effect for purposes of benefits under Article III and IV and payments
under Article VI, until such time as Participant executed a new Plan
Agreement.
ARTICLE III
DEATH BENEFIT
3.1 Amount and Payment of Death Benefit. If a Participant dies before
Retirement and the Plan is in effect at that time, the Bank will pay or
cause to be paid a Death Benefit to such Participant's Beneficiary. The
said Death Benefit shall be one hundred percent (100%) of the
Participant's Benefit Level as set forth in the Plan Agreement paid
<PAGE>
monthly for the next one hundred and twenty (120) months. Such payments
shall commence effective the first day of the month following the date
of death.
Notwithstanding the immediately preceding paragraph of this Section
3.1, the Bank will pay or cause to be paid the Death Benefit specified
therein only if:
(a) At the time of the Participant's death prior to attaining his
or her Normal Retirement Date:
(i) Such Participant was a Director and had not Retired, or
was totally Disabled or on authorized leave of absence,
and all deferrals and payments required to be made by
such Participant under Sections 3.2 et. seq. have been
made, or
(ii) Such required deferrals or payments were waived
pursuant to Section 3.5 because of such Participant's
total Disability;
(b) The Participant's Plan Agreement had been kept in force
throughout the period commencing on the date of such Plan
Agreement and ending on the date of his or her death; and
(c) The Participant's death was due to causes other than suicide
within two (2) years of the date of his or her original Plan
Agreement or within two (2) years of the date of any amendment
to his or her Plan Agreement or any subsequent Plan Agreement
resulting from additional benefits granted because of an
increase in the Participant's Benefit Level; but the
Participant's suicide shall relieve the Bank only of its
obligation to pay that portion of the Death Benefit that was
granted within two (2) years prior to the date of such
suicide.
(d) The Participant's death is determined not to be from a bodily
or mental cause or causes, information about which was
withheld, or knowingly concealed, or falsely provided by the
Participant when requested by the Bank to furnish evidence of
good health upon the Participant's enrolling in the Plan or
upon an application for an increase in benefits because of an
increase in Participant's Benefit Level.
(e) Proof of death in such form as determined acceptable by
the Committee is furnished.
3.2 Amount of Participant Deferral and Payments. In consideration for the
Death Benefit selected in Participant's Plan Agreements, each
Participant shall defer an amount of his or her compensation in such
amounts and at such times as shall be determined by the Committee and
<PAGE>
as specified in his or her Election to Participate, and the Committee
may change the amount of such deferral. If a Participant is authorized
to take a leave of absence from his or her relationship or, subject to
the provisions of Section 3.5, is Disabled, the Participant shall be
required to make payments to the Bank in accordance with Article VI in
order to maintain his or her Plan Agreement in force. A Participant's
obligation to defer an amount of his or her compensation in accordance
with this Section 3.2 or to make the payments required by Article VI
shall be stated in his or her Plan Agreement and Election to
Participate, shall commence on the date his or her Plan Agreement
becomes effective, and shall continue thereafter during the term of his
or her Plan Agreement or until the earlier of such Participant's death
or attainment of his or her Normal Retirement Date. A Participant shall
have the right to increase or decrease the amount of his or her
deferral initially selected by him by amending his or her Plan
Agreement and Election to Participate in accordance with the rules
adopted by the Committee for this purpose.
3.3 Time and Manner of Deferring or Making Payments. A Participant shall,
in his or her Plan Agreement and Election to Participate, authorize the
Bank to defer an amount of such Participant's compensation equal to the
amount specified pursuant to Section 3.2. A Participant who is on
authorized leave of absence or is Disabled and who is required to make
the payments required in Article VI shall make such payments at such
time and in such manner as the Bank shall provide; provided, however,
that the Participant shall not continue to make such payments during
any period in which a portion of his or her compensation is being
deferred or such payments have been waived pursuant to Section 3.5.
3.4 Participant Deferrals and Payments - Use and Forfeitability. The amount
of each Participant's compensation deferred pursuant to Sections 3.2
and 3.3 shall be and remain solely the property of the Bank and the
amount collected by the Bank pursuant to Sections 3.2 and 3.3 from each
Participant who is on an authorized leave of absence or Disabled shall
be and become solely the property of the Bank, and a Participant shall
have no right thereto, nor shall the Bank be obligated to use such
amounts in any specific manner. Except as provided in Article IV, if a
Participant's death occurs under circumstances other than those
specified in Section 3.1, no benefit shall be payable hereunder or
under his or her Plan Agreement to his or her Beneficiary or any other
person or entity on his or her behalf, and any payments made by such
Participant under Sections 3.2 and 3.3 shall be forfeited.
3.5 Waiver of Participant Deferral or Payments. If a Participant becomes
totally Disabled before attaining his or her Normal Retirement Date, if
such total Disability continues for more than three (3) months, and the
Disability benefit specified in paragraph 4 of the Participant's Plan
Agreement is in effect, such Participant may not be required to defer a
portion of his or her compensation pursuant to Sections 3.2 and 3.3 or
make the payments provided for in Sections 3.2 and 3.3, commencing with
the fourth (4th) month following the date of such total Disability and
continuing thereafter for as long as such total Disability continues.
<PAGE>
The Bank may waive such required deferral or payments only if:
(a) Such Disability was not either intentionally self-inflicted
or caused by illegal or criminal acts of the Participant;
(b) The Participant was a Director at the time he or she became
totally Disabled (or was then on authorized leave of absence)
and had made all payments required hereunder;
(c) The Participant's Plan Agreement has been kept in force until
the time of such total Disability and;
(d) The Committee approves the waiver of such fee.
If a Participant dies prior to Retirement and while the waiver
described in this Section 3.5 is in effect, the death benefit provided
in this Article III shall be paid. If a Participant Retires, the
Retirement Benefit provided in Article IV shall be paid. The
determination of what constitutes total Disability and the removal
thereof for purposes of the Article III, shall be made by the
Committee, in its sole and absolute discretion, and such determination
shall be conclusive.
ARTICLE IV
RETIREMENT BENEFIT
4.1 Normal Retirement. If a Participant has remained a Director until his
or her Normal Retirement Date and shall then Retire, and if the Plan
and his or her Plan Agreement have been kept in force, the Bank shall
pay or cause to be paid to such Participant, as a Retirement Benefit
(herein so called), the amount per month specified in his or her Plan
Agreement as a Retirement Benefit. Payment of such monthly amount shall
commence on the Participant's Normal Retirement Date and shall continue
for the life of the Participant. If such Participant shall die before
receiving three hundred (300) monthly payments, the Retirement Benefit
will be continued to the Participant's Beneficiary as set forth in the
Beneficiary Designation until the balance of the three hundred (300)
monthly payments has been paid.
4.2 Retirement After Normal Retirement Date. A Participant who continues as
a Director with the Bank after his or her Normal Retirement Date may
remain a Participant in the Plan with the consent of the Committee.
Upon Retirement such a Participant shall be entitled to the benefits
provided in Section 4.7 hereof. The monthly payments provided for in
Section 4.7 hereof shall commence on the date the Participant Retires.
4.3 Post Retirement Death Benefit. If a Participant dies after Retirement
but before the applicable Retirement Benefit is paid in full, the
unpaid Retirement Benefit payments to which such Participant is
entitled shall continue and be paid to that Participant's Beneficiary.
Such payments shall be made in accordance with the payment schedule to
that Participant pursuant to Sections 4.1 and 4.2 of the Plan.
<PAGE>
4.4 Exclusivity of Post Retirement Death Benefit. No Death Benefit as
defined in Article III shall be paid to the Beneficiary of a
Participant who dies after retirement.
4.5 Accrual of Retirement Benefit. A Participant who ceases to be a
Director before completion of one (1) continuous full year of
participation in the Plan, except as a result of death, retirement, or
total Disability within the meaning of Section 3.5, shall not be
entitled to any benefits hereunder and the Bank shall have no
obligation hereunder to such Participant.
4.6 Deferred Termination Benefit. A Participant who ceases to be a Director
after the completion of one (1) full year of participation in the Plan
shall receive a portion of his or her monthly Retirement Benefit upon
the earlier of (i) the Participant's death or (ii) attainment of his or
her Normal Retirement Date. Said portion shall be the monthly amount of
the Retirement Benefit set forth in the Participant's Plan Agreement
multiplied by a fraction, the numerator of which is the number of whole
years said Director was a Participant in the Plan and the denominator
of which is the number of whole years between such Participant's age at
entry into the Plan and the Participant's age at his or her Normal
Retirement Date. If the Participant's benefits have been increased
since the Participant's initial entry into this Plan, or successor or
predecessor plans, the reduced monthly Retirement Benefit shall be
determined by reducing each incremental benefit increase in accordance
with the formula. The resulting reduced monthly amount shall be the
only benefit to which such Participant is entitled. The reduced monthly
amount will be payable for life at the attainment of the Participant's
Normal Retirement Date and shall be continued to Participant's
Beneficiary as set forth in the Beneficiary Designation until a total
of three hundred (300) monthly payments including those paid to
Participant have been made. In the event the Participant dies before
attaining his or her Normal Retirement Date, the reduced monthly amount
will be payable to Participant's Beneficiary as set forth in the
Beneficiary Designation. Such payments shall commence at the attainment
of what would have been the Participant's Normal Retirement Date and
shall be payable for three hundred (300) months.
4.7 Benefit at Retirement After Attainment of Normal Retirement Date. If a
Participant's relationship as a Director is continued beyond his or her
Normal Retirement Date, the Committee, and only the Committee, will
specify the amount of the Participant's Retirement Benefit, which shall
be evidenced by a new Plan Agreement to be executed by the Participant.
ARTICLE V
BENEFICIARY
A Participant shall designate his or her Beneficiary to receive
benefits under the Plan and his or her Plan Agreement by completing the
Beneficiary Designation. If more than one Beneficiary is named, the shares
and/or precedence of each Beneficiary shall be indicated. A Participant shall
<PAGE>
have the right to change the Beneficiary by submitting to the Committee a new
Beneficiary Designation. The Beneficiary Designation must be approved in writing
by the Bank; however, upon the Bank's acknowledgment of approval, the effective
date of the Beneficiary Designation shall be the date it was executed by the
Participant. If the Bank has any doubt as to the proper Beneficiary to receive
payments hereunder, it shall have the right to withhold such payments until the
matter is finally adjudicated. Any payment made by the Bank in good faith and in
accordance with the provisions of this Plan and a Participant's Plan Agreement
and Beneficiary Designation shall fully discharge the Bank from all further
obligations with respect to such payment.
ARTICLE VI
LEAVE OF ABSENCE
6.1 Required Payments. If a Participant is authorized by the Bank for any
reason, including military, medical or other, to take a leave of
absence, such Participant shall be required to make payments in order
to maintain his or her Plan Agreement in force. Such required payments
shall be an amount equal to the amount of the Participant's
compensation that is to be deferred under the terms of his or her Plan
Agreement and Election to Participate. A Participant required to make
payments under this Section 6.1 shall continue making such required
payments until the earlier of (i) the date he or she returns to his or
her duties following a leave of absence, (ii) the date such payments
are waived pursuant to Section 3.5, or (iii) the effective date that he
or she enters into a new Plan Agreement and Election to Participate. If
a Participant's payments are waived pursuant to Section 3.5 and
subsequently the Participant returns to his or her duties, he or she
shall be required to resume deferring his or her compensation, in the
amount specified above, to the Bank until he or she executes a new Plan
Agreement, in order to maintain his or her Plan Agreement in force in
accordance with Section 2.3.
6.2 Failure to Make Required Payments. Failure to make payments required by
Section 6.1 shall cause Participant's Plan Agreement to terminate
without the necessity of any notice from either party to the other.
From and after such termination, except as provided in Section 4.6
hereof, neither party shall have any further obligation to the other
party under this Plan or such Plan Agreement.
ARTICLE VII
SOURCE OF BENEFITS
7.1 Benefits Payable from General Assets. Amounts payable hereunder shall
be paid exclusively from the general assets of the Bank, and no person
entitled to payment hereunder shall have any claim, right, security
interest, or other interest in any fund, trust, account, or other asset
of the Bank that may be looked to for such payment. The Bank's
liability for the payment of benefits hereunder shall be evidenced only
by this Plan and each Plan Agreement entered into between the Bank and
a Participant.
<PAGE>
7.2 Investments to Facilitate Payment of Benefits. Although the Bank is not
obligated to invest in any specific asset or fund in order to provide
the means for the payment of any liabilities under this Plan, the Bank
may elect to do so and, in such event, no Participant shall have any
interest whatever in such asset or fund. As a condition precedent to
the Bank's obligation to provide any benefits, including incremental
increases in benefits, under this Plan, the Participant shall, if so
requested by the Bank, provide evidence of insurability at standard and
other rates, in such amounts, and with such insurance carrier or
carriers as the Bank may require, including the results and reports of
previous Bank and other insurance carrier physical examinations, taking
such additional physical examinations as the Bank may request, and
taking any other action that the Bank may request. If a Participant is
requested to and does not or cannot provide evidence of insurability as
specified in the immediately preceding sentence, then the Bank shall
have no further obligation to such Participant under this Plan, and
such Participant's Plan Agreement shall terminate, except as to
benefits previously granted. Notwithstanding the foregoing, if a
Participant cannot provide evidence of insurability at standard rates
or for the amounts initially contemplated in connection with his or her
participation in the Plan, the Bank may, at its discretion, permit the
Participant to participate herein for such benefits and upon such
deferral of his or her compensation as the Bank may, in its sole
discretion, deem appropriate.
The Participant also understands and agrees that his or her
participation, in any way, in the acquisition of any such insurance
policy or any other general asset by the Bank shall not constitute a
representation to the Participant, his designated recipient, or any
person claiming through the Participant that any of them has a special
or beneficial interest in such general asset.
7.3 Bank Obligation. The Bank shall have no obligation of any nature
whatsoever to a Participant under this Plan or a Participant's Plan
Agreement, except otherwise expressly provided herein and in such Plan
Agreement.
7.4 Withholding of Information, Etc. If, in connection with a Participant's
enrolling in or applying for incremental benefit increases under the
Plan, the Bank requests the Participant to furnish evidence of
insurability, the Participant dies, and it is determined that the
Participant withheld, knowingly concealed, or knowingly provided false
information about the bodily or mental condition or conditions that
caused the Participant's death, the Bank shall have no obligation to
provide the benefits contracted for on the basis of such withholding,
concealment, or false information.
<PAGE>
ARTICLE VIII
TERMINATION OF RELATIONSHIP
Neither this Plan nor a Participant's Plan Agreement, either singly or
collectively, in any way obligate the Bank to continue the relationship of a
Participant with the Bank nor does either limit the right of the Bank at any
time and for any reason to terminate the Participant's relationship. Termination
of a Participant's relationship with the Bank for any reason, whether by action
of the Bank, shall immediately terminate his or her participation in this Plan
and his or her Plan Agreement, and all further obligations of either party
thereunder, except as may be provided in Section 4.6 and\or Section 10.3. In no
event shall this Plan or a Plan Agreement, either singly or collectively, by
their terms or implications constitute an employment contract of any nature
whatsoever between the Bank and a Participant.
ARTICLE IX
TERMINATION OF PARTICIPATION
9.1 Termination of Participation - General. A Participant reserves the
right to terminate his or her participation in this Plan and his or her
Plan Agreement at his or her election at any time by giving the
Committee written notice of such termination not less than 30 days
prior to an anniversary date of the date of execution of his or her
Plan Agreement. A Participant's termination shall be effective as soon
as administratively convenient after such anniversary date.
9.2 Rights After Termination of Participation. Participants who elect to
terminate participation in the Plan after one (1) full year of
participation but before eligibility for Retirement will be entitled to
the same benefits as a Participant who ceases to be a Director as
described in Section 4.6. Such Participants will not be entitled to a
Death Benefit under Article III.
ARTICLE X
TERMINATIONS, AMENDMENTS, MODIFICATION OR
SUPPLEMENT OF PLAN
10.1 Termination Amendment, Etc. The Bank reserves the right to terminate,
amend, modify or supplement this Plan, wholly or partially, and from
time to time, at any time. The Bank likewise reserves the right to
terminate, amend, modify, or supplement any Plan Agreement, wholly or
partially, from time to time. Such right to terminate, amend, modify,
or supplement this Plan or any Plan Agreement shall be exercised for
the Bank by the Committee; provided, however, that:
<PAGE>
(a) No action to terminate this Plan or a Plan Agreement shall be
taken except upon written notice to each Participant to be
affected thereby, which notice shall be given not less than
thirty (30) days prior to such action; and
(b) The Committee shall take no action to terminate this Plan or a
Plan Agreement with respect to a Participant or his or her
Beneficiary after the payment of any benefit has commenced in
accordance with Article III or Article IV but has not been
completed.
10.2 Rights and Obligations Upon Termination. Upon the termination of this
Plan or any Plan Agreements, by either the Committee or a Participant
in accordance with the provisions for such termination, neither this
Plan nor the Plan Agreement shall be of any further force and effect,
and no party shall have any further obligation under either this Plan
or any Plan Agreement so terminated except as may be provided for in
Section 4.6 and 10.3 or the preceding provisions of this Article X.
10.3 Rights and Obligations Upon Termination as Result of "Change of
Control". In the event the Bank or Holding Company should undergo a
Change of Control to another corporation, firm or person and within
three (3) years of such Change of Control such corporation, firm or
person takes action to terminate this Plan or a Participant in the Plan
such Participant will, nevertheless, be entitled to a portion of his or
her monthly Retirement Benefit upon the earlier of (i) the
Participant's death or (ii) attainment of his or her Normal Retirement
Date. Said portion shall be the monthly amount of the Retirement
Benefit set forth in the Participant's Plan Agreement multiplied by a
fraction, not to exceed one (1), the numerator of which is the number
of whole years said Director was a Participant in the Plan plus five
(5) additional years and the denominator of which is the number of
whole years between such Participant's age at entry into the Plan and
the Participant's age at his or her Normal Retirement Date. If the
Participant's benefits have been increased since the Participant's
initial entry into this Plan, or successor or predecessor plans, the
reduced monthly Retirement Benefit shall be determined by reducing each
incremental benefit increase in accordance with the formula. The
resulting reduced monthly amount shall be the only benefit to which
such Participant is entitled. The reduced monthly amount will be
payable for life at the attainment of the Participant's Normal
Retirement Date and shall be continued to Participant's Beneficiary as
set forth in the Beneficiary Designation until a total of three hundred
(300) monthly payments including those paid to Participant have been
made. In the event the Participant dies before attaining his or her
Normal Retirement Date, the reduced monthly amount will be payable to
Participant's Beneficiary as set forth in the Beneficiary Designation.
Such payments shall commence at the attainment of what would have been
the Participant's Normal Retirement Date and shall be payable for three
hundred (300) months.
<PAGE>
ARTICLE XI
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and his or her Beneficiary
hereunder and under such Participant's Plan Agreement are in addition to any
other benefits available to such Participant under any other program or plan of
the Bank for its Directors, and, except as may otherwise be expressly provided
for, this Plan and Plan Agreements entered into hereunder shall supplement and
shall not supersede, modify, or amend any other program or plan of the Bank or a
Participant. Moreover, benefits under this Plan and Plan Agreements entered into
hereunder shall not be considered compensation for the purpose of computing
deferrals or benefits under any plan maintained by the Bank that is qualified
under section 401 (a) of the Internal Revenue Code of 1954, as amended.
ARTICLE XII
RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Plan or a Plan Agreement shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber,
or charge the same shall be void. No right or benefit hereunder or under any
Plan Agreement shall in any manner be liable for or subject to the debts,
contract, liabilities, or torts of the person entitled to such benefit. If any
Participant or Beneficiary under this Plan or a Plan Agreement should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge any right to a benefit hereunder or under any Plan Agreement, then such
right or benefit shall, in the discretion of the Committee, terminate, and, in
such event, the Committee shall hold or apply the same or any part thereof for
the benefit of such Participant or Beneficiary, his or her spouse, children, or
other dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion, may deem proper.
ARTICLE XIII
ADMINISTRATION OF THIS PLAN
13.1 Appointment of Committee. The general administration of this Plan, and
any Plan Agreements executed hereunder, as well as construction and
interpretation thereof, shall be vested in the Committee, the number
and members of which shall be designated and appointed from time to
time by, and shall serve at the pleasure of, the Board of Directors.
Any such member of the Committee may resign by notice in writing filed
with the secretary of the Committee. Vacancies shall be filled promptly
by the Board of Directors but any vacancies remaining unfilled for
ninety days may be filled by a majority vote of the remaining members
of the Committee. Each person appointed a member of the Committee shall
signify his or her acceptance by filing a written acceptance with the
secretary of the Committee.
<PAGE>
13.2 Committee Officials. The Board of Directors shall designate one of the
members of the Committee as chairman and shall appoint a secretary who
need not be a member of the Committee. The secretary shall keep minutes
of the Committee's proceedings and all data, records and documents
relating to the Committee's administration of this Plan and any Plan
Agreements executed hereunder. The Committee may appoint from its
number such subcommittees with such powers as the Committee shall
determine and may authorize one or more of its members or any agent to
execute or deliver any instrument or make any payment on behalf of the
Committee.
13.3 Committee Action. All resolutions or other actions taken by the
Committee shall be by the vote of a majority of those members present
at a meeting at which a majority of the members are present, or in
writing by all the members at the time in office if they act without a
meeting.
13.4 Committee Rules and Powers - General. Subject to the provisions of this
Plan, the Committee shall from time to time establish rules, forms, and
procedures for the administration of this Plan, including Plan
Agreements. The Committee shall have the exclusive right to determine
(i) total Disability with respect to a Participant and (ii) the degree
thereof, either or both determinations to be made on the basis of such
medical and/or other evidence that the Committee, in its sole and
absolute discretion, may require. Such decisions, actions, and records
of the Committee shall be conclusive and binding upon the Bank and all
person having or claiming to have any right or interest in or under
this Plan.
13.5 Reliance on Certificate, etc. The member of the Committee and the
officers and directors of the Bank shall be entitled to rely on all
certificates and reports made by any duly appointed accountants, and on
all opinions given by any duly appointed legal counsel. Such legal
counsel may be counsel for the Bank.
13.6 Liability of Committee. No member of the Committee shall be liable for
any act or omission of any other member of the Committee, or for any
act or omission on his or her own part, excepting only his or her own
willful misconduct. The Bank shall indemnify and save harmless each
member of the Committee against any and all expenses and liabilities
arising out of his or her membership on the Committee, excepting only
expenses and liabilities arising out of his or her own willful
misconduct. Expenses against which a member of the Committee shall be
indemnified hereunder shall include, without limitation, the amount of
any settlement or judgment, costs, counsel fees, and related charges
reasonably incurred in connection with a claim asserted, or a
proceeding brought, or settlement thereof. The foregoing right of
indemnification shall be in addition to any other rights to which any
such member may be entitled as a matter of law.
<PAGE>
13.7 Determination of Benefits. In addition to the powers hereinabove
specified, the Committee shall have the power to compute and certify,
under this Plan and any Plan Agreement, the amount and kind of benefits
from time to time payable to Participants and their Beneficiaries, and
to authorize all disbursements for such purposes.
13.8 Information to Committee. To enable the Committee to perform its
functions, the Bank shall supply full and timely information to the
Committee on all matters relating to the compensation of all
Participants, their retirement, death or other cause for termination of
relationship, and such other pertinent facts as the Committee may
require.
13.9 Manner and time of Payment of Benefits. The Committee shall have the
power, in its sole and absolute discretion, to change the manner and
time of payment of benefits to be made to a Participant or his or her
Beneficiary from that set forth in the Participant's Plan Agreement if
requested to do so by such Participant or Beneficiary.
ARTICLE XIV
NAMED FIDUCIARY AND CLAIMS PROCEDURE
14.1 Named Fiduciary. The named Fiduciary of the Plan for purposes of the
claims procedure under this Plan is the Chief Financial Officer.
14.2 Right to Change Named Fiduciary. The Bank shall have the right to
change the Named Fiduciary created under this Plan. The Bank shall also
have the right to change the address and telephone number of the Named
Fiduciary. The Bank shall give the Participant written notice of any
change of the Named Fiduciary, or any change in the address and
telephone number of the Named Fiduciary.
14.3 Procedure for Claims. Benefits shall be paid in accordance with the
provisions of this Plan. The Participant, or a designated recipient, or
any other person claiming through the Participant (hereinafter
collectively referred to as the "Claimant") shall make a written
request for the benefits provided under this Plan. This written claim
shall be mailed or delivered to the Named Fiduciary.
14.4 Notification of Denial of Claim. If the claim is denied, either wholly
or partially, notice of the decision shall be mailed to the Claimant
within a reasonable time period. This time period shall not exceed more
than 90 days after the receipt of the claim by the Named Fiduciary.
14.5 Procedure if Claim Denied. The Named Fiduciary shall provide a written
notice to every Claimant who is denied a claim for benefits under this
Plan. The notice shall set forth the following information:
(a) the specific reasons for the denial;
<PAGE>
(b) the specific reference to pertinent plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(d) appropriate information and explanation of the claims
procedure under this Agreement so to permit the Claimant to
submit his claim for review.
14.6 Procedure for Appeal by Claimant. The claims procedure under this Plan
shall allow the Claimant a reasonable opportunity to appeal a denied
claim and to get a full and fair review of that decision from the Named
Fiduciary.
(a) The Claimant shall exercise his right of appeal by submitting
a written request for a review of the denied claim to the
Named Fiduciary. This written request for review must be
submitted to the Named Fiduciary within sixty (60) days after
receipt by the Claimant of the written notice of denial.
(b) The Claimant shall have the following rights under this appeal
procedure:
(1) to request a review upon written application to the
Named Fiduciary;
(2) to review pertinent documents with regard to the
Participant's benefit plan created under this Plan;
(3) the right to submit issues and comments in writing;
(4) to request an extension of time to make a written
submission of issues and comments; and
(5) to request that a hearing be held to consider
Claimant's appeal.
14.7 Procedure for Decision to Review Appeal. The decision on the review of
the denied claim shall promptly be made by the Named Fiduciary:
(a) within sixty (60) days after the receipt of the request for
review if no hearing is held; or
(b) within one hundred and twenty (120) days after the receipt of
the request for review, if an extension of time is necessary
in order to hold a hearing.
<PAGE>
(1) If an extension of time is necessary in order to hold
a hearing, the Named Fiduciary shall give the
Claimant written notice of the extension of time and
of the hearing. This notice shall be given prior to
any extension.
(2) The written notice of extension shall indicate that
an extension of time will occur in order to hold a
hearing on Claimant's appeal. The notice shall also
specify the place, date, and time of that hearing and
the Claimant's opportunity to participate in the
hearing. It may also include any other information
the Named Fiduciary believes may be important or
useful to the Claimant in connection with the appeal.
14.8 Discretion of Fiduciary for Hearing. The decision to hold a hearing to
consider the Claimant's appeal of the denied claim shall be within the
sole discretion of the Named Fiduciary, whether or not the Claimant
requests such a hearing.
14.9 Procedure After Review. The Named Fiduciary's decision on review shall
be made in writing and provided to the Claimant within the specified
time periods in Section 14.7. This written decision on review shall
contain the following information:
(a) the decision(s);
(b) the reasons for the decision(s); and
(c) specific references to the Plan provisions of the Plan on
which the decision(s) is/are based.
ARTICLE XV
ADOPTION OF PLAN BY SUBSIDIARY,
AFFILIATED OR ASSOCIATED COMPANIES
Any corporation that is a Subsidiary may, with the approval of the
Board of Directors, adopt this Plan and thereby come within the definition of
Bank in Article I hereof.
ARTICLE XVI
MISCELLANEOUS
16.1 Execution of Receipts and Releases. Any payment to any Participant, a
Participant's legal representative, or Beneficiary in accordance with
the provisions of this Plan or Plan Agreement executed hereunder shall,
to the extent thereof, be in full satisfaction of all claims hereunder
against the Bank. The Bank may require such Participant, legal
representative, or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release therefore in such form as it
may determine.
<PAGE>
16.2 No Guarantee of Interests. Neither the Committee nor any of its members
guarantees the payment of any amounts which may be or become due to any
person or entity under this Plan or any Plan Agreement executed
hereunder. The liability of the Bank to make any payment under this
Plan or any Plan Agreement executed hereunder is limited to the then
available assets of the Bank.
16.3 Bank Records. Records of the Bank as to a Participant's relationship,
termination of relationship and the reason therefor authorized leaves
of absence, and compensation shall be conclusive on all persons and
entities, unless determined to be incorrect.
16.4 Evidence. Evidence required of anyone under this Plan and any Plan
Agreement executed hereunder may be by certificate, affidavit,
document, or other information which the person or entity acting on it
considers pertinent and reliable, and signed, made, or presented by the
proper party or parties.
16.5 Notice. Any notice which shall be or may be given under this Plan or a
Plan Agreement executed hereunder shall be in writing and shall be
mailed by United States mail, postage prepaid. If notice is to be given
to the Bank, such notice shall be addressed to the Bank at:
Trustmark National Bank, Jackson, Mississippi
Box 291
Jackson, Mississippi 39205
marked to the attention of the Secretary, Administrative Committee,
Directors' Deferred Fee Plan; or, if notice to a Participant, addressed
to the address shown on such Participant's Plan Agreement.
16.6 Change of Address. Any party may, from time to time, change the address
to which notices shall be mailed by giving written notice of such new
address.
16.7 Effect of Provisions. The provisions of this Plan and of any Plan
Agreement executed hereunder shall be binding upon the Bank and its
successors and assigns, and upon a Participant, his or her Beneficiary,
assigns, heirs, executors, and administrators.
16.8 Headings. The titles and headings of Articles and Sections are included
for convenience of reference only and are not to be considered in the
construction of the provisions hereof or any Plan Agreement executed
hereunder.
16.9 Governing Law. All questions arising with respect to this Plan and any
Plan Agreement executed hereunder shall be determined by reference to
the laws of the State of Mississippi, as in effect at the time of their
adoption and execution, respectively.
<PAGE>
Exhibit 10J
EXECUTIVE DEFERRAL PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
<PAGE>
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
TABLE OF CONTENTS
Article Subject Page
- ------- ------- ----
I Definitions and Construction 1
II Eligibility and Participation 4
III Death Benefit 4
IV Retirement Benefit 5
V Beneficiary 6
VI Source of Benefits 6
VII Termination of Employment 7
VIII Termination of Participation 8
IX Termination, Amendment, Modification,
or Supplement of Plan 8
X Other Benefits and Agreements 9
XI Restrictions on Alienation of Benefits 9
XII Administration of this Plan 10
XIII Named Fiduciary and Claims Procedure 11
XIV Adoption of Plan by Subsidiary,
Affiliated or Associated Companies 13
XV Miscellaneous 13
Plan Agreement I-1
<PAGE>
EXECUTIVE DEFERRAL PLAN
OF
TRUSTMARK NATIONAL BANK, JACKSON, MISSISSIPPI
PURPOSE AND EFFECTIVE DATE
The purpose of the Executive Deferral Plan of Trustmark National Bank,
Jackson, Mississippi is to provide specified benefits to a select group of
management and highly compensated Employees who contribute materially to the
continued growth, development and future business success of Trustmark National
Bank, Jackson, Mississippi. It is the intention of Trustmark National Bank,
Jackson, Mississippi that this program and the individual plans established
hereunder be administered as unfunded welfare benefit plans established and
maintained for a select group of management or highly compensated Employees. The
effective date of this Plan is January 1, 1993, amended and restated as of
January 1, 1996, and is further amended and restated as of January 1,1999.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For purposes of this Plan, the following phrases or terms
shall have the indicated meanings unless otherwise clearly apparent
from the context:
(a) "Beneficiary" shall mean the person, persons or estate of a
Participant, entitled to receive any benefits subsequent to
the death of a Participant under a Plan Agreement entered
into in accordance with the terms of this Plan.
(b) "Beneficiary Designation" shall mean the form of written
agreement, attached hereto as Annex II, by which the
Participant names the Beneficiary(ies) of the Plan.
(c) "Board of Directors" shall mean the Board of Directors of
Trustmark National Bank, Jackson, Mississippi unless otherwise
indicated or the context otherwise requires.
(d) "Committee" shall mean the Employee Benefits Committee
appointed to manage and administer the Plan and individual
Plan Agreements in accordance with the provisions of Article
XII hereof.
(e) "Bank" shall mean Trustmark National Bank, Jackson,
Mississippi and any Subsidiary that duly adopts the Plan as
provided in Article XIV hereof. Where the context dictates,
the term "Bank" as used herein refers to the particular Bank
that has entered into a Plan Agreement with a particular
Participant.
<PAGE>
(f) "Covered Salary" shall mean the amount specified in Item 1 of
the Plan Agreement that is used as a basis for computation of
Participant's Death and Retirement Benefits pursuant to the
terms and conditions of the Plan.
(g) "Employee" shall mean any person who is in the full time
employment of the Bank or Subsidiary, as determined by the
personnel rules and practices of the Bank or a Subsidiary.
(h) "Normal Retirement Date" shall be the first day of the month
following the month in which the Participant attains his or
her sixty-fifth (65th) birthday.
(i) "Early Retirement Date" shall be the date of Participant's
Retirement prior to his or her Normal Retirement Date which
may occur on the first day of any month following the month in
which the Participant attains his or her fifty-fifth (55th)
birthday and has completed five (5) full years of
participation in the Plan.
(j) "Participant" shall mean an Employee who is selected and
elects to participate in the Plan through the execution of a
Plan Agreement in accordance with the provisions of Article
II.
(k) "Plan" shall mean the Executive Deferral Plan of Trustmark
National Bank, Jackson, Mississippi as amended from time to
time.
(l) "Plan Agreement" shall mean the form of written agreement,
attached hereto as Annex I, which is entered into from time to
time by and between the Bank and an Employee selected to
become a Participant as a condition to participation in the
Plan. Each Plan Agreement executed by a Participant shall
provide for the entire benefit to which such Participant is
entitled under the Plan, and the Plan Agreement bearing the
latest date shall govern such entitlement.
(m) "Retirement" and "Retire" shall mean severance of employment
with the Bank at or after the attainment of his or her Normal
Retirement Date or, with the consent of the Committee, at or
after attainment of his or her Early Retirement Date.
(n) "Just Cause" shall mean theft, fraud, embezzlement or willful
misconduct causing significant property damage to the Bank or
personal injury to another employee.
(o) "Disability" or "Disabled", as used herein, means permanent
and/or total Disability of the person referred to, as
determined by the Committee in its sole discretion.
<PAGE>
(p) "Actuarially Reduced" shall mean the present value of
Participant's Retirement Benefit as set forth in Item 3(a) of
his or her Plan Agreement at the time of Participant's Early
Retirement Date using a discount rate as determined by the
Committee in its sole and absolute discretion not to exceed
the Monthly Average of the Composite Yield on Seasoned
Corporate Bonds as published by Moody's Investors Services,
Inc. or its successor as stated for the month of October
preceding December 31 of the year immediately prior to the
date of Early Retirement.
(q) "Change in Control" shall mean a Buyout, Merger, or
Substantial Change in Ownership.
(r) "Buyout" shall mean a transaction or series of related
transactions by which the Bank or Holding Company is sold,
either through the sale of a Controlling Interest in the
Bank's or Holding Company's voting stock or through the sale
of substantially all of the Bank's or Holding Company's
assets, to a party not having a Controlling Interest in the
Bank's or Holding Company's voting stock.
(s) "Merger" shall mean a transaction or series of transactions
wherein the Bank or Holding Company is combined with another
business entity, and after which the persons or entities who
had owned, either directly or indirectly, a Controlling
Interest in the Bank's or Holding Company's voting stock own
less than a Controlling Interest in the voting stock of the
combined entity.
(t) "Substantial Change in Ownership" shall mean a transaction or
series of transactions in which a Controlling Interest in the
Bank or Holding Company is acquired by or for a person or
business entity, either of which did not own, either directly
or indirectly, a Controlling Interest in the Bank or Holding
Company. The above shall not apply to stock purchased by any
tax-qualified employee stock ownership plan or other such type
of benefit plan sponsored by the Bank or any company
affiliated with the Bank.
(u) "Controlling Interest" shall mean ownership, either directly
or indirectly, of more than twenty percent (20%) of the Bank's
or Holding Company's voting stock.
(v) "Good Reason" shall mean (1) a demotion in the executive's
functional position, or the assignment to the executive of
duties or responsibilities which are materially inconsistent
with his or her experience and skills; or (2) a material
breach of this Plan by the Bank, provided the Bank has not
remedied such breach within thirty (30) days of receipt of
written notice of such breach.
<PAGE>
(w) "Subsidiary" shall mean any business organization in which
Trustmark National Bank, Jackson, Mississippi, directly or
indirectly, owns an interest, excluding ownership interests
Trustmark National Bank, Jackson, Mississippi may hold in
their fiduciary capacities as trustee or otherwise, and any
other business organization that the Board of Directors
designates as a Subsidiary for purposes of this Plan.
(x) "Holding Company" shall mean Trustmark Corporation.
1.2 Construction. The masculine gender when used herein shall be deemed to
include the feminine gender, and the singular may include the plural
unless the context clearly indicates to the contrary. The words
"hereof", "herein," "hereunder", and other similar compounds of the
word "here" shall mean and refer to the entire Plan and not to any
particular provision or section. Whenever the words "Article" or
"Section" are used in this Plan, or a cross-reference to an "Article"
or "Section" is made, the Article or Section referred to shall be an
Article or Section of this Plan unless otherwise specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. In order to be eligible for participation in the Plan, an
Employee must be selected by the Committee in the year in which the
Employee is eligible to participate and in each succeeding year
thereafter as hereinafter provided. The Committee, in its sole and
absolute discretion, shall determine eligibility for participation in
accordance with the purposes of the Plan.
2.2 Participation. After being selected by the Committee to participate in
this Plan, an Employee shall, as a condition precedent to participation
herein, complete and return to the Committee a duly executed Plan
Agreement agreeing to the terms and conditions thereof. Such Plan
Agreement shall be completed and returned to the committee at the time
specified thereby and comply with such further conditions as may be
established and in the sole discretion of the Committee.
ARTICLE III
DEATH BENEFIT
3.1 Amount and Payment of Death Benefit. If a Participant dies before
Retirement and the Plan is in effect at that time, the Bank will pay or
cause to be paid a Death Benefit to such Participant's Beneficiary. The
said Death Benefit shall be one hundred percent (100%) of the
Participant's Covered Salary as set forth in the Plan Agreement paid
monthly for the next twelve (12) months after such death and seventy
five percent (75%) of said Participant's Covered Salary paid monthly
<PAGE>
for the next one hundred and eight (108) months or until the
Participant would have been age sixty-five (65), whichever is later.
Such payments shall commence effective the first day of the month
following the date of death.
Notwithstanding the immediately preceding paragraph of this Section
3.1, the Bank will pay or cause to be paid the Death Benefit specified
therein only if:
(a) At the time of the Participant's death prior to attaining his
or her Normal Retirement Date such Participant was an Employee
and had not Retired, or was totally Disabled or on authorized
leave of absence;
(b) The Participant's Plan Agreement had been kept in force
throughout the period commencing on the date of such Plan
Agreement and ending on the date of his or her death;
(c) The Participant's death was due to causes other than suicide
within two (2) years of the date of his or her original Plan
Agreement or within two (2) years of the date of any amendment
to his or her Plan Agreement or any subsequent Plan Agreement
resulting from additional benefits granted because of an
increase in the Participant's Covered Salary; but the
Participant's suicide shall relieve the Bank only of its
obligation to pay that portion of the Death Benefit that was
granted within two (2) years prior to the date of such
suicide;
(d) The Participant's death is determined not to be from a bodily
or mental cause or causes, information about which was
withheld, or knowingly concealed, or falsely provided by the
Participant when requested by the Bank to furnish evidence of
good health upon the Participant's enrolling in the Plan or
upon an application for an increase in benefits because of an
increase in Participant's Covered Salary; and
(e) Proof of death in such form as determined acceptable by the
Committee is furnished.
3.2 Total Disability. If a Participant becomes totally Disabled before
attaining Normal Retirement and subsequently dies before Retirement,
the Death Benefit provided in this Article III shall be paid. If a
Participant Retires after becoming Disabled, the Retirement Benefit
provided in Article IV shall be paid.
The determination of what constitutes total Disability and the removal
thereof for purposes of the Article III, shall be made by the
Committee, in its sole and absolute discretion, and such determination
<PAGE>
shall be conclusive. Among other factors that the Committee will
consider are:
(a) Such Disability was not either intentionally self-inflicted or
caused by illegal or criminal acts of the Participant;
(b) The Participant was an Employee at the time he or she became
totally Disabled (or was then on authorized leave of absence);
and
(c) The Participant's Plan Agreement has been kept in force until
the time of such total Disability.
ARTICLE IV
RETIREMENT BENEFIT
4.1 Normal Retirement. If a Participant has remained an Employee until his
or her Normal Retirement Date and shall then Retire, and if the Plan
and his or her Plan Agreement have been kept in force, the Bank shall
pay or cause to be paid to such Participant, as a Retirement Benefit
(herein so called), the amount per month specified in his or her Plan
Agreement as a Retirement Benefit. Payment of such monthly amount shall
commence on the Participant's Normal Retirement Date and shall continue
for the life of the Participant. If such Participant shall die before
receiving one hundred and twenty (120) monthly payments, the Retirement
Benefit will be continued to the Participant's Beneficiary as set forth
in the Beneficiary Designation until the balance of the one hundred and
twenty (120) monthly payments has been paid to the Participant and his
or her Beneficiary.
4.2 Early Retirement. The Committee, in its sole and absolute discretion,
may permit a Participant to receive an Early Retirement Benefit
commencing as of the first day of any month coincident with or
following the Participant's Early Retirement Date, but before the
attainment of his or her Normal Retirement Date. In such event, the
Participant's monthly Early Retirement Benefit shall be the Retirement
Benefit set forth in his or her Plan Agreement Actuarially Reduced to
the Participant's Early Retirement Date. The said reduced monthly
amount, payable for life shall be the only benefit to which such
Participant is entitled. If Participant shall die before receiving one
hundred and twenty (120) installments after commencement of the Early
Retirement Benefit, said amount will be continued to Participant's
Beneficiary as set forth in the Beneficiary Designation until a total
of one hundred and twenty (120) installments has been paid to the
Participant and his or her Beneficiary.
4.3 Post Retirement Death Benefit. If a Participant dies after Retirement
but before the applicable Retirement Benefit is paid in full, the
unpaid Retirement Benefit payments to which such Participant is
entitled shall continue and be paid to that Participant's Beneficiary.
<PAGE>
Such payments shall be made in accordance with the payment schedule to
that Participant pursuant to Sections 4.1 of the Plan.
4.4 Exclusivity of Post Retirement Death Benefit. No Death Benefit as
defined in Article III shall be paid to the Beneficiary of a
Participant who dies after Retirement.
4.5 Accrual of Retirement Benefit. A Participant who ceases to be an
Employee before completion of one (1) full year of participation in the
Plan, except as a result of death, Retirement, total Disability within
the meaning of Section 3.5, or Just Cause at any time shall not be
entitled to any benefits hereunder and the Bank shall have no
obligation hereunder to such Participant.
4.6 Deferred Termination Benefit. A Participant who ceases to be an
Employee after the completion of one (1) full year of
participation in the Plan shall receive a portion of his or her
monthly Retirement Benefit upon the earlier of (i) the
Participant's death or (ii) attainment of his or her Normal
Retirement Date. Said portion shall be the monthly amount of the
Retirement Benefit set forth in the Participant's Plan Agreement
multiplied by a fraction, not to exceed one (1), the numerator of
which is the number of whole years said Employee was a
Participant in the Plan and the denominator of which is ten (10).
The resulting reduced monthly amount shall be the only benefit to
which such Participant is entitled. The reduced monthly amount
will be payable for life, if Participant so survives, at the
attainment of the Participant's Normal Retirement Date. If such
Participant shall die before receiving one hundred and twenty
(120) monthly payments, the reduced amount will be continued to
the Participant's Beneficiary as set forth in the Beneficiary
Designation until the balance of the one hundred and twenty (120)
monthly payments has been paid to the Participant and his or her
Beneficiary.
If Participant dies before attainment of his or her Normal Retirement
Date, the reduced monthly amount will be paid to Participant's
Beneficiary as set forth in Participant's Beneficiary Designation for
one hundred and twenty (120) months. Such payments shall commence
effective the first day of the month following the date of death.
ARTICLE V
BENEFICIARY
A Participant shall designate his or her Beneficiary to receive
benefits under the Plan and his or her Plan Agreement by completing the
Beneficiary Designation. If more than one Beneficiary is named, the shares
and/or precedence of each Beneficiary shall be indicated. A Participant shall
have the right to change the Beneficiary by submitting to the Committee a new
Beneficiary Designation. The Beneficiary Designation must be approved in writing
<PAGE>
by the Bank; however, upon the Bank's acknowledgment of approval, the effective
date of the Beneficiary Designation shall be the date it was executed by the
Participant. If the Bank has any doubt as to the proper Beneficiary to receive
payments hereunder, it shall have the right to withhold such payments until the
matter is finally adjudicated. Any payment made by the Bank in good faith and in
accordance with the provisions of this Plan and a Participant's Plan Agreement
and Beneficiary Designation shall fully discharge the Bank from all further
obligations with respect to such payment.
ARTICLE VI
SOURCE OF BENEFITS
6.1 Benefits Payable from General Assets. Amounts payable hereunder shall
be paid exclusively from the general assets of the Bank, and no person
entitled to payment hereunder shall have any claim, right, security
interest, or other interest in any fund, trust, account, or other asset
of the Bank that may be looked to for such payment. The Bank's
liability for the payment of benefits hereunder shall be evidenced only
by this Plan and each Plan Agreement entered into between the Bank and
a Participant.
6.2 Investments to Facilitate Payment of Benefits. Although the Bank
is not obligated to invest in any specific asset or fund in order
to provide the means for the payment of any liabilities under
this Plan, the Bank may elect to do so and, in such event, no
Participant shall have any interest whatever in such asset or
fund. As a condition precedent to the Bank's obligation to
provide any benefits, including incremental increases in
benefits, under this Plan, the Participant shall, if so requested
by the Bank, provide evidence of insurability at standard and
other rates, in such amounts, and with such insurance carrier or
carriers as the Bank may require, including the results and
reports of previous Bank and other insurance carrier physical
examinations, taking such additional physical examinations as the
Bank may request, and taking any other action that the Bank may
request. If a Participant is requested to and does not or cannot
provide evidence of insurability as specified in the immediately
preceding sentence, then the Bank shall have no further
obligation to such Participant under this Plan, and such
Participant's Plan Agreement shall terminate, except as to
benefits previously granted. Notwithstanding the foregoing, if a
Participant cannot provide evidence of insurability at standard
rates or for the amounts initially contemplated in connection
with his or her participation in the Plan, the Bank may, at its
discretion, permit the Participant to participate herein for such
benefits and upon such deferral of his or her compensation as the
Bank may, in its sole discretion, deem appropriate.
The Participant also understands and agrees that his or her
participation, in any way, in the acquisition of any such insurance
<PAGE>
policy or any other general asset by the Bank shall not constitute a
representation to the Participant, his designated recipient, or any
person claiming through the Participant that any of them has a special
or beneficial interest in such general asset.
6.3 Bank Obligation. The Bank shall have no obligation of any nature
whatsoever to a Participant under this Plan or a Participant's Plan
Agreement, except otherwise expressly provided herein and in such Plan
Agreement.
6.4 Withholding of Information, Etc. If, in connection with a Participant's
enrolling in or applying for incremental benefit increases under the
Plan, the Bank requests the Participant to furnish evidence of
insurability, the Participant dies, and it is determined that the
Participant withheld, knowingly concealed, or knowingly provided false
information about the bodily or mental condition or conditions that
caused the Participant's death, the Bank shall have no obligation to
provide the benefits contracted for on the basis of such withholding,
concealment, or false information.
ARTICLE VII
TERMINATION OF EMPLOYMENT
Neither this Plan nor a Participant's Plan Agreement, either singly or
collectively, in any way obligate the Bank to continue the employment of a
Participant with the Bank nor does either limit the right of the Bank at any
time and for any reason to terminate the Participant's employment. Termination
of a Participant's employment with the Bank for any reason, whether by action of
the Bank, shall immediately terminate his or her participation in this Plan and
his or her Plan Agreement, and all further obligations of either party
thereunder, except as may be provided in Section 4.6 and/or Section 9.3. In no
event shall this Plan or a Plan Agreement, either singly or collectively, by
their terms or implications constitute an employment contract of any nature
whatsoever between the Bank and a Participant.
ARTICLE VIII
TERMINATION OF PARTICIPATION
8.1 Termination of Participation - General. A Participant reserves the
right to terminate his or her participation in this Plan and his or her
Plan Agreement at his or her election at any time by giving the
Committee written notice of such termination not less than 30 days
prior to an anniversary date of the date of execution of his or her
Plan Agreement. A Participant's termination shall be effective as soon
as administratively convenient after such anniversary date.
<PAGE>
8.2 Rights After Termination of Participation. Participants who elect to
terminate participation in the Plan after one (1) full year of
participation but before eligibility for Retirement will be entitled to
the same benefits as a Participant who ceases to be an Employee as
described in Section 4.6. Such Participants will not be entitled to a
Death Benefit under Article III.
ARTICLE IX
TERMINATIONS, AMENDMENTS, MODIFICATION OR
SUPPLEMENT OF PLAN
9.1 Termination Amendment, Etc. The Bank reserves the right to terminate,
amend, modify or supplement this Plan, wholly or partially, and from
time to time, at any time. The Bank likewise reserves the right to
terminate, amend, modify, or supplement any Plan Agreement, wholly or
partially, from time to time. Such right to terminate, amend, modify,
or supplement this Plan or any Plan Agreement shall be exercised for
the Bank by the Committee; provided, however, that:
(a) No action to terminate this Plan or a Plan Agreement shall be
taken except upon written notice to each Participant to be
affected thereby, which notice shall be given not less than
thirty (30) days prior to such action; and
(b) The Committee shall take no action to terminate this Plan or a
Plan Agreement with respect to a Participant or his or her
Beneficiary after the payment of any benefit has commenced in
accordance with Article III or Article IV but has not been
completed.
9.2 Rights and Obligations Upon Termination. Upon the termination of this
Plan or any Plan Agreements, by either the Committee or a Participant
in accordance with the provisions for such termination, neither this
Plan nor the Plan Agreement shall be of any further force and effect,
and no party shall have any further obligation under either this Plan
or any Plan Agreement so terminated except as may be provided for in
Section 4.6, Section 9.3, or the provisions of this Article IX.
9.3 Rights and Obligations Upon Termination as Result of "Change of
Control". In the event the Bank or Holding Company should undergo
a Change of Control to another corporation, firm or person and
within three (3) years of such Change of Control such
corporation, firm or person takes action to terminate this Plan
or a Participant in the Plan or if the executive resigns for Good
Reason such Participant will, nevertheless, be entitled to a
portion of his or her monthly Retirement Benefit upon the earlier
of (i) the Participant's death or (ii) attainment of his or her
Normal Retirement Date. Said portion shall be the monthly amount
<PAGE>
of the Retirement Benefit set forth in the Participant's Plan Agreement
multiplied by a fraction, not to exceed one (1), the numerator of which
is the number of whole years said Employee was a Participant in the
Plan plus five (5) additional years and the denominator of which is ten
(10). The resulting reduced monthly amount shall be the only benefit to
which such Participant is entitled. The reduced monthly amount will be
payable for life, if Participant so survives, at the attainment of the
Participant's Normal Retirement Date. If such Participant shall die
before receiving one hundred and twenty (120) monthly payments, the
reduced amount will be continued to the Participant's Beneficiary as
set forth in the Beneficiary Designation until the balance of the one
hundred and twenty (120) monthly payments has been paid to the
Participant and his or her Beneficiary. If Participant dies before
attainment of his or her Normal Retirement Date, the reduced monthly
amount will be paid to Participant's Beneficiary as set forth in
Participant's Beneficiary Designation for one hundred and twenty (120)
months. Such payments shall commence effective the first day of the
month following the date of death.
9.4 Revocation. In the event Participant is discharged for Just Cause at
any time, this Plan and his or her Plan Agreement shall be terminated
and considered null and void with neither the Participant nor
Participant's Beneficiary having any claim or right against Bank
thereafter.
ARTICLE X
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and his or her Beneficiary
hereunder and under such Participant's Plan Agreement are in addition to any
other benefits available to such Participant under any other program or plan of
the Bank for its Employees, and, except as may otherwise be expressly provided
for, this Plan and Plan Agreements entered into hereunder shall supplement and
shall not supersede, modify, or amend any other program or plan of the Bank or a
Participant. Moreover, benefits under this Plan and Plan Agreements entered into
hereunder shall not be considered compensation for the purpose of computing
deferrals or benefits under any plan maintained by the Bank that is qualified
under section 401 (a) of the Internal Revenue Code of 1954, as amended.
ARTICLE XI
RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Plan or a Plan Agreement shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber,
or charge the same shall be void. No right or benefit hereunder or under any
Plan Agreement shall in any manner be liable for or subject to the debts,
<PAGE>
contract, liabilities, or torts of the person entitled to such benefit. If any
Participant or Beneficiary under this Plan or a Plan Agreement should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge any right to a benefit hereunder or under any Plan Agreement, then such
right or benefit shall, in the discretion of the Committee, terminate, and, in
such event, the Committee shall hold or apply the same or any part thereof for
the benefit of such Participant or Beneficiary, his or her spouse, children, or
other dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion, may deem proper.
ARTICLE XII
ADMINISTRATION OF THIS PLAN
12.1 Appointment of Committee. The general administration of this Plan, and
any Plan Agreements executed hereunder, as well as construction and
interpretation thereof, shall be vested in the Committee, the number
and members of which shall be designated and appointed from time to
time by, and shall serve at the pleasure of, the Board of Directors.
Any such member of the Committee may resign by notice in writing filed
with the secretary of the Committee. Vacancies shall be filled promptly
by the Board of Directors but any vacancies remaining unfilled for
ninety days may be filled by a majority vote of the remaining members
of the Committee. Each person appointed a member of the Committee shall
signify his or her acceptance by filing a written acceptance with the
secretary of the Committee.
12.2 Committee Officials. The Board of Directors shall designate one of the
members of the Committee as chairman and shall appoint a secretary who
need not be a member of the Committee. The secretary shall keep minutes
of the Committee's proceedings and all data, records and documents
relating to the Committee's administration of this Plan and any Plan
Agreements executed hereunder. The Committee may appoint from its
number such subcommittees with such powers as the Committee shall
determine and may authorize one or more of its members or any agent to
execute or deliver any instrument or make any payment on behalf of the
Committee.
12.3 Committee Action. All resolutions or other actions taken by the
Committee shall be by the vote of a majority of those members present
at a meeting at which a majority of the members are present, or in
writing by all the members at the time in office if they act without a
meeting.
12.4 Committee Rules and Powers - General. Subject to the provisions of this
Plan, the Committee shall from time to time establish rules, forms, and
procedures for the administration of this Plan, including Plan
Agreements. The Committee shall have the exclusive right to determine,
among other matters, (i) total Disability with respect to a Participant
and (ii) the degree thereof, either or both determinations to be made
on the basis of such medical and/or other evidence that the Committee,
in its sole and absolute discretion, may require. Such decisions,
actions, and records of the Committee shall be conclusive and binding
upon the Bank and all person having or claiming to have any right or
interest in or under this Plan.
<PAGE>
12.5 Reliance on Certificate, etc. The members of the Committee and the
officers and directors of the Bank shall be entitled to rely on all
certificates and reports made by any duly appointed accountants, and on
all opinions given by any duly appointed legal counsel. Such legal
counsel may be counsel for the Bank.
12.6 Liability of Committee. No member of the Committee shall be
liable for any act or omission of any other member of the
Committee, or for any act or omission on his or her own part,
excepting only his or her own willful misconduct. The Bank shall
indemnify and save harmless each member of the Committee against
any and all expenses and liabilities arising out of his or her
membership on the Committee, excepting only expenses and
liabilities arising out of his or her own willful misconduct.
Expenses against which a member of the Committee shall be
indemnified hereunder shall include, without limitation, the
amount of any settlement or judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim
asserted, or a proceeding brought, or settlement thereof. The
foregoing right of indemnification shall be in addition to any
other rights to which any such member may be entitled as a matter
of law.
12.7 Determination of Benefits. In addition to the powers hereinabove
specified, the Committee shall have the power to compute and certify,
under this Plan and any Plan Agreement, the amount and kind of benefits
from time to time payable to Participants and their Beneficiaries, and
to authorize all disbursements for such purposes.
12.8 Information to Committee. To enable the Committee to perform its
functions, the Bank shall supply full and timely information to the
Committee on all matters relating to the compensation of all
Participants, their retirement, death or other cause for termination of
employment, and such other pertinent facts as the Committee may
require.
12.9 Manner and time of Payment of Benefits. The Committee shall have the
power, in its sole and absolute discretion, to change the manner and
time of payment of benefits to be made to a Participant or his or her
Beneficiary from that set forth in the Participant's Plan Agreement if
requested to do so by such Participant or Beneficiary.
ARTICLE XIII
NAMED FIDUCIARY AND CLAIMS PROCEDURE
13.1 Named Fiduciary. The named Fiduciary of the Plan for purposes of the
claims procedure under this Plan is the Chief Financial Officer.
13.2 Right to Change Named Fiduciary. The Bank shall have the right to
change the Named Fiduciary created under this Plan. The Bank shall also
have the right to change the address and telephone number of the Named
Fiduciary. The Bank shall give the Participant written notice of any
change of the Named Fiduciary, or any change in the address and
telephone number of the Named Fiduciary.
<PAGE>
13.3 Procedure for Claims. Benefits shall be paid in accordance with the
provisions of this Plan. The Participant, or a designated recipient, or
any other person claiming through the Participant (hereinafter
collectively referred to as the "Claimant") shall make a written
request for the benefits provided under this Plan. This written claim
shall be mailed or delivered to the Named Fiduciary.
13.4 Notification of Denial of Claim. If the claim is denied, either wholly
or partially, notice of the decision shall be mailed to the Claimant
within a reasonable time period. This time period shall not exceed more
than 90 days after the receipt of the claim by the Named Fiduciary.
13.5 Procedure if Claim Denied. The Named Fiduciary shall provide a written
notice to every Claimant who is denied a claim for benefits under this
Plan. The notice shall set forth the following information:
(a) the specific reasons for the denial;
(b) the specific reference to pertinent plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(d) appropriate information and explanation of the claims
procedure under this Agreement so to permit the Claimant to
submit his claim for review.
13.6 Procedure for Appeal by Claimant. The claims procedure under this Plan
shall allow the Claimant a reasonable opportunity to appeal a denied
claim and to get a full and fair review of that decision from the Named
Fiduciary.
(a) The Claimant shall exercise his right of appeal by submitting
a written request for a review of the denied claim to the
Named Fiduciary. This written request for review must be
submitted to the Named Fiduciary within sixty (60) days after
receipt by the Claimant of the written notice of denial.
(b) The Claimant shall have the following rights under this appeal
procedure:
(1) to request a review upon written application to the
Named Fiduciary;
(2) to review pertinent documents with regard to the
Participant's benefit plan created under this Plan;
(3) the right to submit issues and comments in writing;
(4) to request an extension of time to make a written
submission of issues and comments; and
<PAGE>
(5) to request that a hearing be held to consider
Claimant's appeal.
13.7 Procedure for Decision to Review Appeal. The decision on the review of
the denied claim shall promptly be made by the Named Fiduciary:
(a) within sixty (60) days after the receipt of the request for
review if no hearing is held; or
(b) within one hundred and twenty (120) days after the receipt of
the request for review, if an extension of time is necessary
in order to hold a hearing.
(1) If an extension of time is necessary in order to hold
a hearing, the Named Fiduciary shall give the
Claimant written notice of the extension of time and
of the hearing. This notice shall be given prior to
any extension.
(2) The written notice of extension shall indicate that
an extension of time will occur in order to hold a
hearing on Claimant's appeal. The notice shall also
specify the place, date, and time of that hearing and
the Claimant's opportunity to participate in the
hearing. It may also include any other information
the Named Fiduciary believes may be important or
useful to the Claimant in connection with the appeal.
13.8 Discretion of Fiduciary for Hearing. The decision to hold a hearing to
consider the Claimant's appeal of the denied claim shall be within the
sole discretion of the Named Fiduciary, whether or not the Claimant
requests such a hearing.
13.9 Procedure After Review. The Named Fiduciary's decision on review shall
be made in writing and provided to the Claimant within the specified
time periods in Section 13.7. This written decision on review shall
contain the following information:
(a) the decision(s);
(b) the reasons for the decision(s); and
(c) specific references to the Plan provisions of the Plan on
which the decision(s) is/are based.
ARTICLE XIV
ADOPTION OF PLAN BY SUBSIDIARY,
AFFILIATED OR ASSOCIATED COMPANIES
Any corporation that is a Subsidiary may, with the approval of the
Board of Directors, adopt this Plan and thereby come within the definition of
Bank in Article I hereof.
<PAGE>
ARTICLE XV
MISCELLANEOUS
15.1 Execution of Receipts and Releases. Any payment to any Participant, a
Participant's legal representative, or Beneficiary in accordance with
the provisions of this Plan or Plan Agreement executed hereunder shall,
to the extent thereof, be in full satisfaction of all claims hereunder
against the Bank. The Bank may require such Participant, legal
representative, or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release therefore in such form as it
may determine.
15.2 No Guarantee of Interests. Neither the Committee nor any of its members
guarantees the payment of any amounts which may be or become due to any
person or entity under this Plan or any Plan Agreement executed
hereunder. The liability of the Bank to make any payment under this
Plan or any Plan Agreement executed hereunder is limited to the then
available assets of the Bank.
15.3 Bank Records. Records of the Bank as to a Participant's employment,
termination of employment and the reason therefor authorized leaves of
absence, and compensation shall be conclusive on all persons and
entities, unless determined to be incorrect.
15.4 Evidence. Evidence required of anyone under this Plan and any Plan
Agreement executed hereunder may be by certificate, affidavit,
document, or other information which the person or entity acting on it
considers pertinent and reliable, and signed, made, or presented by the
proper party or parties.
15.5 Notice. Any notice which shall be or may be given under this Plan or a
Plan Agreement executed hereunder shall be in writing and shall be
mailed by United States mail, postage prepaid. If notice is to be given
to the Bank, such notice shall be addressed to the Bank at:
Trustmark National Bank, Jackson, Mississippi
Box 291
Jackson, Mississippi 39205
marked to the attention of the Secretary, Administrative Committee,
Executive Deferral Plan; or, if notice to a Participant, addressed to
the address shown on such Participant's Plan Agreement.
15.6 Change of Address. Any party may, from time to time, change the address
to which notices shall be mailed by giving written notice of such new
address.
<PAGE>
15.7 Effect of Provisions. The provisions of this Plan and of any Plan
Agreement executed hereunder shall be binding upon the Bank and its
successors and assigns, and upon a Participant, his or her Beneficiary,
assigns, heirs, executors, and administrators.
15.8 Headings. The titles and headings of Articles and Sections are included
for convenience of reference only and are not to be considered in the
construction of the provisions hereof or any Plan Agreement executed
hereunder.
15.9 Governing Law. All questions arising with respect to this Plan and any
Plan Agreement executed hereunder shall be determined by reference to
the laws of the State of Mississippi, as in effect at the time of their
adoption and execution, respectively.
<PAGE>
Exhibit 13
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Trustmark Corporation:
We have audited the accompanying consolidated balance sheets of Trustmark
Corporation (a Mississippi corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. These financial statements are the
responsibility of Trustmark'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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
Jackson, Mississippi,
January 10, 2000.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
---------- ----------
Assets
<S> <C> <C>
Cash and due from banks (noninterest-bearing) $ 279,957 $ 312,527
Federal funds sold and securities purchased
under reverse repurchase agreements 29,599 185,619
Trading account securities 1,053
Securities available for sale (at fair value) 783,220 774,996
Securities held to maturity (fair value: $1,374,631 - 1999;
$1,192,505 - 1998) 1,390,981 1,171,513
Loans 4,014,935 3,702,318
Less allowance for loan losses 65,850 66,150
---------- ----------
Net loans 3,949,085 3,636,168
Premises and equipment 80,575 70,750
Intangible assets 65,063 50,349
Other assets 164,924 152,215
---------- ----------
Total Assets $6,743,404 $6,355,190
========== ==========
Liabilities
Deposits:
Noninterest-bearing $ 860,650 $ 954,210
Interest-bearing 3,064,146 2,992,187
---------- ----------
Total deposits 3,924,796 3,946,397
Federal funds purchased 287,163 336,546
Securities sold under repurchase agreements 1,090,257 981,999
Short-term borrowings 733,024 389,543
Other liabilities 52,408 48,829
---------- ----------
Total Liabilities 6,087,648 5,703,314
Commitments and Contingencies
Shareholders' Equity
Common stock, no par value:
Authorized: 250,000,000 shares
Issued and outstanding: 70,423,993 shares - 1999;
72,531,636 shares - 1998 14,672 15,111
Surplus 193,721 241,155
Retained earnings 444,999 378,567
Accumulated other comprehensive income,
net of tax 2,364 17,043
---------- ----------
Total Shareholders' Equity 655,756 651,876
---------- ----------
Total Liabilities and Shareholders' Equity $6,743,404 $6,355,190
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Statements of Income
($ in thousands except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998 1997
--------- --------- ---------
Interest Income
<S> <C> <C> <C>
Interest and fees on loans $ 313,251 $ 290,454 $ 247,604
Interest on securities:
Taxable interest income 120,810 117,448 119,879
Interest income exempt from federal income taxes 6,531 6,120 5,834
Interest on federal funds sold and securities purchased
under reverse repurchase agreements 7,917 6,078 3,575
--------- --------- ---------
Total Interest Income 448,509 420,100 376,892
Interest Expense
Interest on deposits 106,751 123,569 120,873
Interest on federal funds purchased and securities
sold under repurchase agreements 70,847 58,894 47,236
Other interest expense 27,481 9,437 4,778
--------- --------- ---------
Total Interest Expense 205,079 191,900 172,887
--------- --------- ---------
Net Interest Income 243,430 228,200 204,005
Provision for loan losses 9,072 7,771 4,682
--------- --------- ---------
Net Interest Income After Provision
for Loan Losses 234,358 220,429 199,323
Noninterest Income
Service charges on deposit accounts 37,949 30,654 25,260
Other account charges, fees and commissions 32,209 23,248 18,554
Mortgage servicing fees 14,358 13,670 13,253
Trust service income 14,332 13,624 12,401
Securities (losses) gains (1,358) 865 549
Other income 4,453 4,929 3,407
--------- --------- ---------
Total Noninterest Income 101,943 86,990 73,424
Noninterest Expenses
Salaries and employee benefits 98,705 90,441 85,920
Net occupancy - premises 10,323 9,853 9,748
Equipment expenses 14,702 13,295 12,822
Services and fees 25,981 27,284 22,454
Amortization of intangible assets 10,222 10,280 9,341
Other expenses 27,138 27,168 25,499
--------- --------- ---------
Total Noninterest Expenses 187,071 178,321 165,784
--------- --------- ---------
Income Before Income Taxes 149,230 129,098 106,963
Income taxes 51,236 45,784 35,899
--------- --------- ---------
Net Income $ 97,994 $ 83,314 $ 71,064
========= ========= =========
Earnings Per Share
Basic and Diluted $ 1.36 $ 1.14 $ 0.98
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries Consolidated Statements of Changes in
Shareholders' Equity ($ in thousands except per share data)
<TABLE>
<CAPTION>
Common Stock Accumulated
----------------------- Other
Shares Retained Comprehensive
Outstanding Amount Surplus Earnings Income Total
----------- ----------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 69,821,366 $ 14,546 $ 244,578 $ 261,850 $ 3,210 $ 524,184
Comprehensive income:
Net income per consolidated statements of
income 71,064 71,064
Net change in unrealized gains on
securities available for sale, net of tax 7,592 7,592
-----------
Comprehensive income 78,656
Cash dividends paid ($0.29 per share) (21,286) (21,286)
Common stock issued in business combinations 3,363,742 701 8,826 9,273 18,800
Repurchase and retirement of common stock (444,400) (93) (6,636) (6,729)
----------- ----------- ---------- ----------- ------------- -----------
Balance, December 31, 1997 72,740,708 15,154 246,768 320,901 10,802 593,625
Comprehensive income:
Net income per consolidated statements
of income 83,314 83,314
Net change in unrealized gains on
securities available for sale, net of tax 6,241 6,241
-----------
Comprehensive income 89,555
Cash dividends paid ($0.35 per share) (25,648) (25,648)
Common stock issued in business combination 725,380 151 15,558 15,709
Repurchase and retirement of common stock (934,452) (194) (21,171) (21,365)
----------- ----------- ---------- ----------- ------------- -----------
Balance, December 31, 1998 72,531,636 15,111 241,155 378,567 17,043 651,876
Comprehensive income:
Net income per consolidated statements of income 97,994 97,994
Net change in unrealized gains on
securities available for sale, net of tax (14,679) (14,679)
-----------
Comprehensive income 83,315
Cash dividends paid ($0.44 per share) (31,562) (31,562)
Common stock issued in business combination 857,628 179 18,740 18,919
Common stock issued - long term incentive plan 17,379 4 (165) (161)
Repurchase and retirement of common stock (2,982,650) (622) (66,009) (66,631)
----------- ----------- ---------- ----------- ------------- -----------
Balance, December 31, 1999 70,423,993 $ 14,672 $ 193,721 $ 444,999 $ 2,364 $ 655,756
=========== =========== ========== =========== ============= ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Trustmark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
Operating Activities
<S> <C> <C> <C>
Net income $ 97,994 $ 83,314 $ 71,064
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 9,072 7,771 4,682
Depreciation and amortization 21,213 19,696 18,964
Net amortization (accretion) of securities 480 (730) (236)
Securities losses (gains) 1,358 (865) (549)
Net increase in intangible assets (11,485) (13,875) (8,309)
Net decrease (increase) in deferred income taxes 1,388 (1,851) 1,127
Net increase in other assets (4,366) (11,192) (16,606)
Net (decrease) increase in other liabilities (1,071) 4,494 5,358
Other operating activities, net (2,399) (3,799) 2,059
--------- --------- ---------
Net cash provided by operating activities 112,184 82,963 77,554
Investing Activities
Proceeds from calls and maturities of securities available for sale 82,029 71,265 90,184
Proceeds from calls and maturities of securities held to maturity 376,590 396,530 213,784
Proceeds from sales of securities available for sale 49,064 175,609 166,469
Purchases of securities available for sale (164,504) (370,799) (323,119)
Purchases of securities held to maturity (596,480) (162,201) (175,614)
Net decrease (increase) in federal funds sold and securities
purchased under reverse repurchase agreements 156,020 (114,833) 25,982
Net increase in loans (319,622) (677,328) (331,368)
Purchases of premises and equipment (19,229) (8,811) (14,690)
Proceeds from sales of premises and equipment 579 356 478
Proceeds from sales of other real estate 2,040 2,521 2,084
Net assets assumed in immaterial pooling of interests business combination 13,348
Cash received (paid) in business combinations 6,358 13,035 (1,319)
--------- --------- ---------
Net cash used by investing activities (427,155) (674,656) (333,781)
Financing Activities
Net (decrease) increase in deposits (21,601) 39,348 184,492
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements 58,875 369,845 (18,491)
Net increase in short-term borrowings 343,481 249,485 73,706
Cash dividends (31,562) (25,648) (21,286)
Common stock transactions, net (66,792) (21,365) (6,729)
--------- --------- ---------
Net cash provided by financing activities 282,401 611,665 211,692
--------- --------- ---------
(Decrease) increase in cash and cash equivalents (32,570) 19,972 (44,535)
Cash and cash equivalents at beginning of year 312,527 292,555 337,090
--------- --------- ---------
Cash and cash equivalents at end of year $ 279,957 $ 312,527 $ 292,555
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTE 1 - BUSINESS, BASIS OF FINANCIAL STATEMENT PRESENTATION,
ACCOUNTING POLICIES AND RECENT PRONOUNCEMENTS
BUSINESS
Trustmark Corporation (Trustmark) is a one-bank holding company
headquartered in Jackson, Mississippi. Trustmark provides a broad array of
banking, insurance and investment products and services through its wholly-owned
subsidiary, Trustmark National Bank (the Bank) and the Bank's wholly-owned
subsidiaries. Trustmark conducts its principal activities through its network of
133 branches and 155 ATMs located throughout Mississippi.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the amounts of Trustmark,
the Bank and its wholly-owned subsidiaries. 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. Certain reclassifications have been made to prior period
amounts to conform with current year presentation.
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 and Held to Maturity
Management determines the appropriate classification of securities at
the time of purchase. Securities are classified as held to maturity when
Trustmark has the intent and ability to hold the security to maturity.
Securities held to maturity are stated at amortized cost.
Securities not classified as held to maturity are classified as
available for sale and are stated at fair value. Unrealized gains and losses,
net of tax, on these securities are recorded in shareholders' equity as
accumulated other comprehensive income.
The amortized cost of securities available for sale and held to
maturity is adjusted for amortization of premiums and accretion of discounts to
maturity, determined using the interest method. Such amortization and accretion
is included in interest income on securities. The specific identification method
is used to determine realized gains and losses on sales of securities, which are
reported as securities (losses) gains in noninterest income.
Loans
Loans are stated at the amount of unpaid principal, adjusted for the
net amount of direct costs and nonrefundable loan fees associated with lending.
Mortgage loans held for sale are carried at the lower of cost or estimated fair
<PAGE>
value on an aggregate basis. Any decline in estimated fair value below the cost
basis of mortgages held for sale by Trustmark at the end of a financial
reporting period is recognized at that time. The net amount of nonrefundable
loan origination fees and direct costs associated with the lending process,
including commitment fees, are deferred and amortized to interest income over
the lives of the loans using a method that approximates the interest method.
Interest on loans is accrued and recorded as interest income based on the
outstanding principal balance.
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 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.
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 Trustmark'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.
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 using both
straight-line and accelerated methods. Trustmark continually evaluates whether
events and circumstances have occurred that indicate that such long-lived assets
have been impaired. Measurement of any impairment of such long-lived assets is
based on those assets' fair values and is recognized through a valuation
allowance with the resulting charge recorded as a loss. There were no impairment
losses recorded during 1999, 1998 or 1997.
<PAGE>
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 up to 15 years. At December 31, 1999 and 1998, net core
deposit intangibles totaled $14.0 million and $17.2 million, respectively.
Amortization expense related to core deposit intangibles was $3.5 million in
1999, $3.8 million in 1998 and $4.1 million in 1997.
Mortgage servicing rights are rights to service mortgage loans for
others whether the loans were acquired through the purchase or origination of
the loans. For purposes of measuring impairment, the rights are stratified based
on product type and interest rate bands. The cost of mortgage servicing rights
is being amortized in proportion to and over the period of estimated net
servicing income. The realization of these assets is periodically evaluated in
relation to net servicing revenues using a discounted cash flow basis and is
adjusted appropriately for any impairment of the underlying assets. At December
31, 1999 and 1998, net mortgage servicing right assets totaled $38.3 million and
$33.1 million, respectively, with estimated fair values of $56.0 million and
$46.6 million, respectively. Amortization expense related to these mortgage
servicing rights was $6.1 million in 1999, $6.5 million in 1998 and $5.2 million
in 1997.
Goodwill is the excess cost over the fair value of net assets of
acquired businesses and is amortized on a straight-line basis over a period of
fifteen years. At December 31, 1999, goodwill totaled $12.8 million, and the
related amortization expense totaled $674 thousand. There was no goodwill or
goodwill amortization in 1998 or 1997.
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
Trustmark accounts for deferred income taxes using the asset and
liability method. Deferred tax assets and liabilities are based on the temporary
differences between the financial statement carrying amounts and tax bases of
Trustmark's assets and liabilities. 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>
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks. Trustmark paid income taxes
approximating $52.3 million in 1999, $46.5 million in 1998 and $34.5 million in
1997. Interest paid on deposit liabilities and other borrowings approximated
$206.0 million in 1999, $195.0 million in 1998 and $166.2 million in 1997. For
the years ended December 31, 1999, 1998 and 1997, noncash transfers from loans
to foreclosed properties were $2.1 million, $1.9 million and $1.7 million,
respectively.
Per Share Data
Basic earnings per share (EPS) is computed by dividing net income by
the weighted average shares of common stock outstanding. Diluted EPS is computed
by dividing net income by the weighted average shares of common stock
outstanding, adjusted for the effect of stock options outstanding during the
period. The following table reflects weighted average shares used to calculate
Basic and Diluted EPS for the periods presented:
Years Ended December 31,
----------------------------------------------
1999 1998 1997
---------- ---------- ----------
Basic 71,876,261 72,881,323 72,768,926
Diluted 71,921,208 72,946,029 72,785,802
RECENT PRONOUNCEMENTS - DERIVATIVES
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. During 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133-an amendment of FASB Statement No.
133," which concluded that it was appropriate to defer the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000.
Trustmark uses derivatives to hedge interest rate exposures by
mitigating the interest rate risk of mortgage loans held for sale and mortgage
loans in process. Trustmark regularly enters into derivative financial
instruments in the form of forward contracts, as part of its normal
asset/liability management strategies. Trustmark's obligations under forward
contracts consist of commitments to deliver mortgage loans, originated and/or
purchased, in the secondary market at a future date into mortgage-backed
securities. Realized gains and losses on forward contracts and the sale of
mortgage loans in the secondary market are recorded upon the settlement of the
related forward contract and included in other income.
On January 1, 2000, Trustmark adopted SFAS No. 133 and transferred held
to maturity securities with an amortized cost of $237.5 million and an estimated
fair value of $237.8 million into the available for sale category. In addition,
Trustmark transferred held to maturity securities with an amortized cost of
$135.1 million and an estimated fair value of $131.2 million into the trading
category. The effect of adopting SFAS No. 133 will be shown as a charge to
Trustmark's results of operations in the first quarter of 2000 as a cumulative
effect of a change in accounting principle decreasing net income and other
comprehensive income by $2.5 million and $2.3 million, respectively.
<PAGE>
NOTE 2 - BUSINESS COMBINATIONS
On April 9, 1999, Trustmark completed its acquisition of the Dan
Bottrell Agency, Inc. (Bottrell), an independent insurance agency located in
Jackson, Mississippi with approximately $9 million in total assets. This
transaction has been accounted for as a purchase business combination. Trustmark
issued approximately 858 thousand shares of common stock in exchange for all of
the issued and outstanding common stock of Bottrell. Excess cost over net assets
acquired equaled $13.4 million and has been allocated to goodwill. The results
of operations, which are not material, have been included in the financial
statements from the merger date.
On March 13, 1998, Smith County Bank (SCB) in Taylorsville, Mississippi
was merged with Trustmark in a business combination accounted for by the
purchase method of accounting. At the merger date, SCB had $44 million in net
loans, $98 million in total assets and $88 million in total deposits. The
shareholders of SCB received 725 thousand shares of Trustmark's common stock in
connection with the merger. Excess cost over net assets acquired equaled $6.7
million and has been allocated to core deposit intangibles. SCB's results of
operations, which are not material, have been included in the financial
statements from the merger date.
On September 19, 1997, Perry County Bank (PCB) in New Augusta,
Mississippi was merged with Trustmark and accounted for as a purchase business
combination. The shareholders of PCB received 411 thousand shares of Trustmark's
common stock and $3.5 million in cash. Trustmark received assets of $43.3
million and assumed liabilities of $37 million. Excess cost over net assets
acquired equaled $2.7 million and has been allocated to core deposit
intangibles. The results of operations, which are not material, have been
included in the financial statements from the merger date.
On February 28, 1997, Trustmark completed its merger with First Corinth
Corporation (FCC) and its subsidiary, National Bank of Commerce of Corinth
(NBC). Trustmark issued 3 million shares of common stock in the merger which was
accounted for as a pooling of interests business combination. As a result of
this transaction, Trustmark restated its financial statements to include FCC and
NBC as of January 1, 1997. Prior years' financial statements were not restated
as the changes would have been immaterial.
NOTE 3 - CASH AND DUE FROM BANKS
Trustmark 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 years ended December 31, 1999 and 1998 was $9.4 million
and $15.6 million, respectively.
<PAGE>
NOTE 4 - SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
A summary of the amortized cost and estimated fair value of securities
available for sale and held to maturity at December 31, 1999 and 1998 follows ($
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
--------- ---------- ---------- --------- ---------- ---------- ---------- -----------
1999
- ----
U.S. Treasury and other U.S.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government agencies $ 387,465 $ 2,123 $ (26) $ 389,562 $ 188,792 $ 191 $ (1,804) $ 187,179
Obligations of states and political
subdivisions 270,566 2,782 (4,653) 268,695
Debt securities of foreign governments 100 100
Mortgage-backed securities 347,817 148 (9,396) 338,569 931,523 519 (13,385) 918,657
Other securities 44,109 11,058 (78) 55,089
--------- ---------- --------- --------- ---------- ---------- ----------- ----------
Total $ 779,391 $ 13,329 $ (9,500) $ 783,220 $1,390,981 $ 3,492 $ (19,842) $1,374,631
========= ========== ========= ========= ========== ========== =========== ==========
1998
- ----
U.S. Treasury and other U.S.
Government agencies $ 362,930 $ 12,597 $ (100) $ 375,427 $ 132,388 $ 4,039 $ $ 136,427
Obligations of states and political
subdivisions 239,441 10,637 (56) 250,022
Debt securities of foreign governments 100 100
Mortgage-backed securities 353,300 4,258 (167) 357,391 799,584 6,848 (476) 805,956
Other securities 31,166 11,197 (185) 42,178
--------- ---------- --------- --------- ---------- ---------- ----------- ----------
Total $ 747,396 $ 28,052 $ (452) $ 774,996 $1,171,513 $ 21,524 $ (532) $1,192,505
========= ========== ========= ========= ========== ========== =========== ==========
</TABLE>
The amortized cost and estimated fair value of securities available for
sale and held to maturity at December 31, 1999, by contractual maturity, are
shown below ($ in thousands). Expected maturities may differ from contractual
<PAGE>
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
Available for Sale Held to Maturity
----------------------- -----------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 90,748 $ 90,816 $ 30,732 $ 30,729
Due after one year through five years 248,465 249,786 280,648 279,142
Due after five years through ten years 6,344 6,435 108,778 108,003
Due after ten years 86,017 97,614 39,300 38,100
---------- ---------- ---------- ----------
431,574 444,651 459,458 455,974
Mortgage-backed securities 347,817 338,569 931,523 918,657
---------- ---------- ---------- ----------
Total $ 779,391 $ 783,220 $1,390,981 $1,374,631
========== ========== ========== ==========
</TABLE>
Gross gains and losses as a result of calls and dispositions of securities
available for sale were $40 thousand and $1.4 million, respectively, in 1999,
$755 thousand and $12 thousand, respectively, in 1998 and $640 thousand and $97
thousand, respectively, in 1997.
During 1999, 1998 and 1997, there were no sales of securities held to
maturity. Gross gains of $2 thousand, $122 thousand and $6 thousand were
realized on calls of these securities during 1999, 1998 and 1997, respectively.
Securities with a carrying value of $2.08 billion and $1.81 billion at
December 31, 1999 and 1998, respectively, were pledged to collateralize public
deposits, securities sold under agreements to repurchase, and for other purposes
as required or permitted by law.
NOTE 5 - LOANS
At December 31, 1999 and 1998, loans consisted of the following ($ in
thousands):
1999 1998
----------- ------------
Real estate loans:
Construction and land development $ 297,231 $ 251,654
Secured by 1-4 family residential properties 1,125,193 951,835
Secured by nonfarm, nonresidential properties 555,255 508,194
Loans held for sale 50,582 154,900
Other 78,090 72,445
Loans to finance agricultural production 35,412 39,682
Commercial and industrial 824,017 721,483
Consumer 857,219 798,432
Obligations of states and political subdivisions 151,759 141,152
Other loans 40,177 62,541
----------- -----------
Loans 4,014,935 3,702,318
Allowance for loan losses (65,850) (66,150)
----------- -----------
Net loans $ 3,949,085 $ 3,636,168
=========== ===========
<PAGE>
Changes in the allowance for loan losses were as follows ($ in thousands):
1999 1998 1997
-------- -------- --------
Balance at January 1 $ 66,150 $ 64,100 $ 63,000
Provision charged to expense 9,072 7,771 4,682
Loans charged off (14,986) (12,272) (8,960)
Recoveries 5,614 5,251 4,034
Allowance applicable to loans of acquired banks 1,300 1,344
-------- -------- --------
Balance at December 31 $ 65,850 $ 66,150 $ 64,100
======== ======== ========
Trustmark makes loans in the normal course of business to certain directors,
including their immediate families and companies in which they are principal
owners. Such loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons, and do not involve more than the normal
risk of collectibility at the time of the transaction. At December 31, 1999 and
1998, total loans to these persons were $84.5 million and $90.6 million,
respectively. During 1999, $369.1 million of new loan advances were made while
repayments were $375.2 million.
At December 31, 1999 and 1998, the carrying amounts of nonaccrual loans were
$16.7 million and $13.3 million, respectively. Included in these nonaccrual
loans at December 31, 1999 and 1998, are loans that are considered to be
impaired and totaled $13 million and $10.1 million, respectively. As a result of
direct write-downs, the specific allowance related to these impaired loans was
not material. The average carrying amounts of impaired loans during 1999 and
1998 were $11.6 million and $11 million, respectively. No material amounts of
interest income were recognized on impaired loans or nonaccrual loans for each
of the years in the three-year period ended December 31, 1999.
NOTE 6 - PREMISES AND EQUIPMENT
At December 31, 1999 and 1998, premises and equipment are summarized as
follows($in thousands):
1999 1998
-------- --------
Land $ 13,455 $ 12,664
Buildings and leasehold improvements 87,809 83,739
Furniture and equipment 89,537 77,343
-------- --------
190,801 173,746
Less accumulated depreciation and amortization 110,226 102,996
-------- --------
Premises and equipment $ 80,575 $ 70,750
======== ========
<PAGE>
NOTE 7 - INTEREST-BEARING DEPOSITS
The aggregate amount of time deposits of $100,000 or more at December 31,
1999 was $573.7 million. The maturities of interest-bearing deposits at December
31, 1999 are presented below ($ in thousands):
2000 $1,167,484
2001 431,043
2002 96,574
2003 23,219
Thereafter 17,006
----------
Total time deposits 1,735,326
Interest-bearing deposits with no stated maturity 1,328,820
----------
Total interest-bearing deposits $3,064,146
==========
NOTE 8 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1999 and 1998, the carrying values of securities sold under
repurchase agreements, by contractual maturity, are shown below ($ in
thousands):
Carrying Value
-----------------------
1999 1998
---------- ----------
Demand $ 388,326 $ 377,241
In one day 209,016 245,445
Term up to 30 days 252,423 39,979
Term of 30 to 90 days 50,501 52,436
Term of 90 days and over 189,991 266,898
---------- ----------
Total $1,090,257 $ 981,999
========== ==========
The weighted average interest rate for these repurchase agreements was
4.33% and 4.39% at December 31, 1999 and 1998, respectively. The repurchase
agreements are collateralized by specific U. S. Treasury and other U. S.
Government agencies securities with carrying values of $1.17 billion at December
31, 1999 and $994.9 million at December 31, 1998. Fair values at December 31,
1999 and 1998, approximated $1.16 billion and $1 billion, respectively.
NOTE 9 - SHORT-TERM BORROWINGS
Trustmark's short-term borrowings at December 31, 1999 and 1998 are
presented below ($ in thousands):
1999 1998
-------- --------
Federal Home Loan Bank $590,000 $340,000
Term federal funds purchased 75,000
Treasury tax and loan note option account 50,000 33,056
Other 18,024 16,487
-------- --------
Total $733,024 $389,543
======== ========
<PAGE>
Short-term borrowings serve as an alternate source of funding for
Trustmark. Trustmark's short-term borrowings primarily consist of advances from
the Federal Home Loan Bank (FHLB). As a member of the FHLB, Trustmark has
received advances of $590 million. These advances are collateralized by a
blanket lien on the Corporation's 1-4 family mortgage loans. These advances
mature from January 2000 to October 2000 and have fixed and floating rates
ranging from 5.38% to 5.85%.
At December 31, 1999, term federal funds purchased have been classified as
short- term borrowings because they have a maturity greater than one day.
The treasury tax and loan note option account, which is collateralized by a
pledge of U. S. Treasury, U. S. Government agencies and state, county and
municipal securities as required by the Department of the Treasury, is an
open-ended interest bearing note maintained at the Federal Reserve Bank.
Interest is charged at the weekly Federal Funds rate minus 25 basis points.
NOTE 10 - INCOME TAXES
The income tax provision included in the statements of income is as follows
($ in thousands):
1999 1998 1997
-------- -------- --------
Current:
Federal $ 44,463 $ 43,151 $ 32,076
State 5,385 4,484 2,696
Deferred:
Federal 1,318 (1,575) 1,038
State 70 (276) 89
-------- -------- --------
Income tax provision $ 51,236 $ 45,784 $ 35,899
======== ======== ========
The income tax provision differs from the amount computed by applying the
statutory federal income tax rate of 35% to income before income taxes as a
result of the following ($ in thousands):
1999 1998 1997
-------- -------- --------
Income tax computed at statutory tax rate $ 52,231 $ 45,184 $ 37,437
Tax exempt interest (4,810) (4,339) (3,702)
Nondeductible interest expense 632 555 536
State income taxes, net 5,455 4,208 2,785
Other (2,272) 176 (1,157)
-------- -------- --------
Income tax provision $ 51,236 $ 45,784 $ 35,899
======== ======== ========
<PAGE>
Temporary differences between the financial statement carrying amounts and
the tax bases of assets and liabilities give rise to the following net deferred
tax assets at December 31,1999 and 1998, which are included in other assets ($
in thousands):
1999 1998
-------- --------
Deferred tax assets:
Allowance for loan losses $ 24,833 $ 24,856
Deferred compensation 5,277 4,690
Capitalized mortgage servicing rights 764
Core deposit intangibles 1,821 1,896
Other 3,293 3,652
-------- --------
Total gross deferred tax asset 35,224 35,858
Deferred tax liabilities:
Unrealized securities gains (1,465) (10,557)
Pension plan (1,080) (1,585)
Discount accretion on securities (931) (879)
Accelerated depreciation and amortization (938) (759)
Capitalized mortgage servicing rights (197)
Other (1,303) (727)
-------- --------
Total gross deferred tax liability (5,914) (14,507)
-------- --------
Net deferred tax asset $ 29,310 $ 21,351
======== ========
Trustmark 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 be realized. The income tax provision
included $(519) thousand in 1999, $331 thousand in 1998 and $210 thousand in
1997 resulting from securities transactions.
NOTE 11 - EMPLOYEE BENEFIT PLANS
Pension Plan
Trustmark maintains a defined noncontributory pension plan which covers
substantially all employees with more than one year of service. The plan
provides pension benefits that are based on the length of credited service and
final average compensation as defined in the plan. Trustmark's policy is to fund
amounts allowable for federal income tax purposes. The following table
represents reconciliations of beginning and ending balances of the benefit
<PAGE>
obligation and fair value of plan assets as well as the funded status of the
plan for December 31, 1999 and 1998 ($ in thousands):
1999 1998
-------- --------
Change in benefit obligation
Projected benefit obligation, beginning of year $ 48,446 $ 42,650
Service cost 3,383 3,038
Interest cost 3,456 3,137
Actuarial (gain) loss (4,044) 1,316
Benefit payments (2,577) (1,695)
-------- --------
Projected benefit obligation, end of year 48,664 48,446
Change in plan assets
Fair value of plan assets, beginning of year 59,597 57,749
Actual return on plan assets 4,456 3,563
Benefit payments (2,577) (1,695)
Expenses (18) (20)
-------- --------
Fair value of plan assets, end of year 61,458 59,597
-------- --------
Funded status
Plan assets in excess of projected benefit obligation 12,794 11,151
Remaining unrecognized transition asset (940) (1,304)
Unrecognized prior service cost 1,569 1,831
Unrecognized net gain (10,599) (7,533)
-------- --------
Prepaid pension assets recorded in balance sheet $ 2,824 $ 4,145
======== ========
Net pension costs included the following components ($ in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 3,383 $ 3,038 $ 2,892
Interest cost on projected benefit obligation 3,456 3,137 2,860
Actual return on assets (4,456) (3,562) (12,299)
Net amortization and deferral (1,063) (1,747) 8,474
-------- -------- --------
Net pension costs $ 1,320 $ 866 $ 1,927
======== ======== ========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.75% in 1999, 7.25% in
1998 and 7.50% in 1997. The rate of increase in future compensation was 4.0% for
all years presented. The expected long-term rate of return on plan assets was
9.0% in 1999 and 1998 and 8.5% in 1997.
<PAGE>
Trustmark does not provide any significant post-retirement or
post-employment benefits to its employees other than pension benefits.
Defined Contribution Plans
Trustmark provides its employees with a self directed 401(k) retirement
plan which allows employees to contribute a percentage of base pay, within
limits provided by the Internal Revenue Code and accompanying regulations, into
the plan. During 1999 and 1998, employer contributions were made to this plan
totaling $2.7 million and $2.5 million, respectively. These contibutions
exceeded the minimum 3% safe harbor contribution elected by the Board of
Directors in each year.
In 1997, a $2.2 million discretionary employer contribution was made to an
Employee Stock Ownership Plan (ESOP). In 1998, the Board of Directors elected to
merge the ESOP into the self directed 401(k) retirement plan. In April 1999, all
employee balances in the ESOP were transferred to their 401(k) plan accounts.
Deferred Compensation Plan
Trustmark provides a deferred compensation plan covering its directors, key
executives and senior officers. Participants in 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. Net expenses related to this plan were $1.0 million in 1999, $446
thousand in 1998 and $747 thousand in 1997.
Long-Term Incentive Plan
Trustmark's incentive stock plan provides for the granting of incentive
stock options and nonqualified stock options. Stock options are granted at a
price equal to the market value of the stock at the date of grant and are
exercisable for a period not to exceed ten years from the date of grant. The
maximum number of shares that can be granted under this plan is 7.0 million
shares.
The following tables summarize Trustmark's option activities for 1999, 1998
and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------- ------------------
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Outstanding, beginning of year 380,500 $ 18.32 172,000 $ 13.18 $
Granted 259,500 22.78 208,500 22.56 172,000 13.18
Exercised (56,000) 12.44
Forfeited (27,750) 22.61
------- ------- ------- ------- ------- -------
Outstanding, end of year 556,250 $ 20.78 380,500 $ 18.32 172,000 $ 13.18
======= ======= ======= ======= ======= =======
Exercisable, end of year 101,426 $ 17.40 85,000 $ 12.81 56,000 $ 12.44
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------- -----------------------
Weighted Weighted
Weighted Average Average Exercisable Average
Range of Outstanding Remaining Years Exercise as of Exercise
Exercise Prices at 12/31/99 To Expiration Price 12/31/99 Price
- --------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$11.39 - $13.67 116,000 7.4 $ 13.53 58,000 $ 13.53
$20.50 - $22.78 440,250 8.9 22.69 43,426 22.56
----------- -------- --------- --------
556,250 8.6 $ 20.78 101,426 $ 17.40
=========== ======== ========= ========
</TABLE>
Trustmark accounts for the incentive stock plan under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," in which no
compensation cost has been recognized. Had compensation expense been recognized
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation, " pro
forma net income would have been $97.3 million, $83.0 million and $70.8 million
for 1999, 1998 and 1997, respectively, while pro forma basic and diluted EPS
would have decreased from $1.36 to $1.35 in 1999, with no change in 1998 and
1997. The weighted average fair value of options granted during the years 1999,
1998 and 1997 was $10.88, $10.56 and $11.52, respectively.
For pro forma calculations, the fair value of each grant was estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for grants in 1999, 1998 and 1997,
respectively: risk-free investment rate of 4.58%, 5.12% and 7.07%, expected
volatility of 25.64%, 34.46% and 23.60%, and an expected life of 10 years for
all three years.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
Trustmark currently has lease commitments for banking premises and
general offices and equipment which expire from 2000 to 2026. The majority of
these commitments contain renewal options which extend the base lease from 5 to
20 years. Rental expense approximated $3.8 million in 1999, $3.4 million in 1998
and $3.0 million in 1997.
Minimum rental commitments at December 31, 1999, under noncancellable
leases for banking premises and general offices and equipment, were as follows
($ in thousands):
Years Ended Minimum Rental
December 31, Commitment
------------ -----------------
2000 $ 927
2001 784
2002 564
2003 456
2004 265
Thereafter 1,450
<PAGE>
Legal Proceedings
Trustmark and its subsidiaries are parties to lawsuits and other claims
that arise in the ordinary course of business. Some of the lawsuits assert
claims related to the lending, collection, servicing, investment, trust and
other business activities; and some of the lawsuits allege substantial claims
for damages. The cases are being vigorously contested. In the regular course of
business, Management evaluates estimated losses or costs related to litigation,
and provision is made for anticipated losses whenever Management believes that
such losses are probable and can be reasonably estimated. At the present time,
Management believes, based on the advice of legal counsel, that the final
resolution of pending legal proceedings will not have a material impact on
Trustmark's consolidated financial position or results of operations.
NOTE 13 - OFF-BALANCE SHEET INSTRUMENTS
Trustmark 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. Trustmark 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. Trustmark 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 Trustmark 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, a type of derivative financial instrument, are
agreements to purchase or sell securities or other money market instruments at a
future specified date at a specified price or yield. As of December 31, 1999,
Trustmark's exposure under forward contracts represents commitments to deliver
mortgage loans into mortgage-backed securities in the future and is immaterial.
Trustmark'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
Trustmark's actual exposure to credit loss at December 31, 1999 and 1998, as
represented below ($ in thousands):
Contractual or
Notional Amount
-----------------------
1999 1998
-------- ----------
Financial instruments whose contractual
amounts represent credit risk:
Loan commitments $931,961 $1,031,682
Standby and commercial letters
of credit written 37,400 36,904
Financial instruments whose contractual or
notional amounts exceed the amount of
credit risk:
Forward contracts 56,000 207,450
<PAGE>
NOTE 14 - SHAREHOLDERS' EQUITY
Common Stock Repurchase Program
In November 1998, Trustmark implemented a capital management plan which
authorized the repurchase of up to 7.5%, or 5.46 million shares of common stock.
Since implementation of the plan, Trustmark has purchased approximately 3.22
million shares. The repurchase program, which is subject to market conditions
and management discretion, has been implemented through open market purchases
and privately negotiated transactions.
Regulatory Capital
Trustmark 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
Trustmark and the Bank.
Management believes, as of December 31, 1999, that Trustmark and the Bank
meet all capital adequacy requirements to which they are subject. At December
31, 1999, the most recent notification from the Office of the Comptroller of the
Currency (OCC) 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 (defined in applicable regulations) as set
forth in the table below. There are no significant conditions or events that
have occurred since the OCC's notification that Management believes has affected
the Bank's present classification.
Trustmark's 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
-------- ------ -------- ----- -------- ------
At December 31, 1999:
Total Capital (to Risk Weighted Assets)
<S> <C> <C> <C> <C>
Trustmark Corporation $683,335 16.76% $326,096 8.00% N/A
Trustmark National Bank 667,782 16.43 325,148 8.00 $406,435 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $627,258 15.39% $163,048 4.00% N/A
Trustmark National Bank 616,792 15.18 162,574 4.00 $243,861 6.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $627,258 9.37% $267,645 4.00% N/A
Trustmark National Bank 616,792 9.23 267,353 4.00 $334,192 5.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Minimum Regulatory
Actual Minimum Regulatory Provision to be
Regulatory Capital Capital Required Well Capitalized
------------------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------ -------- ----- -------- ------
At December 31, 1998:
Total Capital (to Risk Weighted Assets)
<S> <C> <C> <C> <C>
Trustmark Corporation $667,621 17.47% $305,761 8.00% N/A
Trustmark National Bank 654,302 17.16 305,078 8.00 $381,348 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $619,619 16.21% $152,881 4.00% N/A
Trustmark National Bank 606,405 15.90 152,539 4.00 $228,809 6.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $619,619 9.88% $250,749 4.00% N/A
Trustmark National Bank 606,405 9.69 250,373 4.00 $312,966 5.00%
</TABLE>
Dividends paid by Trustmark are substantially funded from dividends
received from the Bank. Approval of the Bank's regulators is required if the
total of all dividends declared in any calendar year exceeds the total of its
net income for that year combined with its retained net income of the preceeding
two years. Without prior regulatory approvals, the Bank will have available in
2000 an amount equal to approximately $46.5 million plus its net income for that
year to pay as dividends.
Comprehensive Income
Comprehensive income is the change in equity during a period from
transactions and other events and circumstances from nonowner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners.
In addition to net income, Trustmark has identified changes related to
other nonowner transactions in the Consolidated Statement of Changes in
Shareholders' Equity. Changes in other nonowner transactions consist entirely of
changes in unrealized holding gains and losses on securities available for sale.
In the calculation of comprehensive income, certain reclassification
adjustments are made to avoid double counting items that are displayed as part
of net income and other comprehensive income in that period or earlier periods.
The following table reflects the reclassification amounts and the related tax
effects of changes in unrealized holding gains and losses on securities
<PAGE>
available for sale for the three years ended December 31, 1999, 1998 and 1997
($ in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------------------- ------------------------------------
Before Tax Tax (Expense) After Tax Before Tax Tax (Expense) After Tax
Amount or Benefit Amount Amount or Benefit Amount
---------- ------------ ---------- ---------- ------------ ---------
Net unrealized holding (losses) gains
<S> <C> <C> <C> <C> <C> <C>
arising during the period $ (25,130) $ 9,612 $(15,518) $ 10,972 $ (4,197) $ 6,775
Reclassification adjustment for
losses (gains) included in net income 1,358 (519) 839 (865) 331 (534)
---------- -------- -------- ---------- -------- ---------
Net change in unrealized (losses) gains on securities $ (23,772) $ 9,093 $(14,679) $ 10,107 $ (3,866) $ 6,241
========== ======== ======== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
1997
-------------------------------------
Before Tax Tax (Expense) After Tax
Amount or Benefit Amount
---------- ------------ ---------
Net unrealized holding (losses) gains
<S> <C> <C> <C>
arising during the period $ 12,844 $ (4,913) $ 7,931
Reclassification adjustment for
losses (gains) included in net income (549) 210 (339)
---------- -------- ---------
Net change in unrealized (losses) gains on securities $ 12,295 $ (4,703) $ 7,592
========== ======== =========
</TABLE>
NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of financial instruments at
December 31,1999 and 1998, are as follows ($ in thousands):
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------- ---------- ---------- ----------
Financial Assets
<S> <C> <C> <C> <C>
Cash and short-term investments $ 309,556 $ 309,556 $ 498,146 $ 498,146
Trading account securities 1,053 1,053
Securities available for sale 783,220 783,220 774,996 774,996
Securities held to maturity 1,390,981 1,374,631 1,171,513 1,192,505
Net loans 3,949,085 3,924,877 3,636,168 3,721,336
Financial Liabilities:
Deposits 3,924,796 3,925,742 3,946,397 3,953,467
Short-term liabilities 2,110,444 2,110,444 1,708,088 1,708,088
</TABLE>
<PAGE>
The methodology and significant assumptions used in estimating the fair
values presented above are as follows:
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 do not represent the
underlying value of Trustmark.
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 their 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 with no significant change in credit risk, fair values are based on
carrying values. The fair values of certain mortgage loans, such as 1-4 family
residential properties, are based on quoted market prices of similar loans sold
in conjunction with securitization transactions, adjusted for differences in
loan characteristics. The fair values of other types of loans are estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.
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 which is 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.
<PAGE>
Short-Term Liabilities
The carrying amounts for federal funds purchased, securities sold under
repurchase agreements, short-term borrowings 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.
NOTE 16 - SEGMENT INFORMATION
In 1999, Trustmark completed its implementation of its business unit
profitability reporting system. Trustmark has three reportable segments: Retail
Banking, Commercial Banking and Financial Services. Retail Banking delivers a
full range of financial products and services to individuals and small
businesses through Trustmark's extensive branch network. Commercial Banking
provides various financial products and services to corporate and middle market
clients. Included among these products and services are specialized services for
commercial and residential real estate development lending, indirect auto
financing and other specialized lending services. Financial Services includes
trust and fiduciary services, discount brokerage services, insurance services,
as well as credit card and mortgage services. Also included in this segment is a
selection of investment management services including Trustmark's proprietary
mutual fund family. Treasury & Other consists of asset/liability management
activities that includes the investment portfolio and the related gains(losses)
on sales of securities. Treasury & Other also includes expenses such as
corporate overhead and amortization of intangible assets.
Trustmark evaluates performance and allocates resources based on the
profit or loss of the individual segments. The accounting policies of reportable
segments are the same as those described in Note 1. Trustmark uses matched
maturity transfer pricing to assign funds costs to assets and earnings credits
to liabilities with a corresponding offset to Treasury & Other. Trustmark
allocates noninterest expenses based on various activity-based costing
statistics. Excluding internal funding, Trustmark does not have intercompany
revenues or expenses. Additionally, segment income tax expense is calculated
using the marginal tax rate. The difference between the marginal and effective
tax rate is included in Treasury & Other.
The following table discloses financial information by segment for the
years ended December 31, 1999 and 1998 ($ in thousands):
<PAGE>
<TABLE>
<CAPTION>
Retail Commercial Financial Treasury
Banking Banking Services & Other Total
----------- ----------- ----------- ----------- -----------
1999
- ----
<S> <C> <C> <C> <C> <C>
Net interest income from external customers $ 34,069 $ 107,536 $ 16,067 $ 85,758 $ 243,430
Internal funding 93,371 (71,239) 14,206 (36,338) 0
----------- ----------- ----------- ----------- -----------
Net interest income 127,440 36,297 30,273 49,420 243,430
Provision for loan losses 5,894 1,383 1,795 9,072
----------- ----------- ----------- ----------- -----------
Net interest income after provision for loan losses 121,546 34,914 28,478 49,420 234,358
Noninterest income 45,182 566 52,319 3,876 101,943
Noninterest expenses 113,045 14,567 45,465 13,994 187,071
----------- ----------- ----------- ----------- -----------
Income before income taxes 53,683 20,913 35,332 39,302 149,230
Income taxes 18,528 7,215 12,485 13,008 51,236
----------- ----------- ----------- ----------- -----------
Segment net income $ 35,155 $ 13,698 $ 22,847 $ 26,294 $ 97,994
=========== =========== =========== =========== ===========
Selected Financial Information
Average assets $ 2,116,222 $ 1,325,159 $ 815,282 $ 2,321,688 $ 6,578,351
Depreciation and amortization $ 3,797 $ 215 $ 6,744 $ 10,457 $ 21,213
1998
- ----
Net interest income from external customers $ 10,830 $ 96,070 $ 14,621 $ 106,679 $ 228,200
Internal funding 118,915 (65,351) 14,061 (67,625) 0
----------- ----------- ----------- ----------- -----------
Net interest income 129,745 30,719 28,682 39,054 228,200
Provision for loan losses 3,339 2,022 1,656 754 7,771
----------- ----------- ----------- ----------- -----------
Net interest income after provision for loan losses 126,406 28,697 27,026 38,300 220,429
Noninterest income 35,718 300 43,800 7,172 86,990
Noninterest expenses 109,982 12,405 39,550 16,384 178,321
----------- ----------- ----------- ----------- -----------
Income before income taxes 52,142 16,592 31,276 29,088 129,098
Income taxes 17,828 5,707 10,708 11,541 45,784
----------- ----------- ----------- ----------- -----------
Segment net income $ 34,314 $ 10,885 $ 20,568 $ 17,547 $ 83,314
=========== =========== =========== =========== ===========
Selected Financial Information
Average assets $ 1,989,416 $ 1,122,829 $ 638,042 $ 2,161,462 $ 5,911,749
Depreciation and amortization $ 3,652 $ 106 $ 6,976 $ 8,962 $ 19,696
</TABLE>
<PAGE>
NOTE 17 - TRUSTMARK CORPORATION (Parent Company Only) FINANCIAL INFORMATION ($
in thousands)
BALANCE SHEETS
December 31,
-------------------
1999 1998
-------- --------
Assets
Investment in bank $639,699 $634,618
Other assets 16,099 17,516
-------- --------
Total Assets $655,798 $652,134
======== ========
Liabilities and Shareholders' Equity
Accrued expenses $ 42 $ 258
Shareholders' equity 655,756 651,876
-------- --------
Total Liabilities and Shareholders' Equity $655,798 $652,134
======== ========
STATEMENTS OF INCOME
Years Ended December 31,
---------------------------
1999 1998 1997
------- ------- -------
Revenue
Dividends received from bank $96,707 $44,522 $31,739
Equity in undistributed earnings of subsidiaries 822 37,823 38,438
Other income 695 1,424 1,358
------- ------- -------
98,224 83,769 71,535
Expenses 230 455 471
------- ------- -------
Net Income $97,994 $83,314 $71,064
======= ======= =======
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Operating Activities
<S> <C> <C> <C>
Net income $ 97,994 $ 83,314 $ 71,064
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in investment in subsidiaries (822) (37,823) (38,438)
Other (326) 376 410
-------- -------- --------
Net cash provided by operating activities 96,846 45,867 33,036
Investing Activities
Net cash paid in connection with business combinations (1,319)
Purchases of securities available for sale (167)
Proceeds from sales of securities available for sale 50 1,179
-------- -------- --------
Net cash provided (used) by investing activities 50 1,179 (1,486)
Financing Activities
Cash dividends (31,562) (25,648) (21,286)
Common stock transactions, net (66,630) (21,365) (6,729)
-------- -------- --------
Net cash provided by financing activities (98,192) (47,013) (28,015)
-------- -------- --------
(Decrease) increase in cash and cash equivalents (1,296) 33 3,535
Cash and cash equivalents at beginning of year 4,953 4,920 1,385
-------- -------- --------
Cash and cash equivalents at end of year $ 3,657 $ 4,953 $ 4,920
======== ======== ========
</TABLE>
Trustmark paid income taxes of approximately $52.3 million in 1999, $46.5
million in 1998 and $34.5 million in 1997. No interest was paid during 1999 and
1997. Interest paid by the parent company was $12 thousand in 1998.
<PAGE>
SELECTED FINANCIAL DATA
(unaudited)
($ in thousands except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Consolidated Statements of Income
<S> <C> <C> <C> <C> <C>
Total interest income $448,509 $420,100 $376,892 $358,063 $348,341
Total interest expense 205,079 191,900 172,887 164,006 162,741
-------- -------- -------- -------- --------
Net interest income 243,430 228,200 204,005 194,057 185,600
Provision for loan losses 9,072 7,771 4,682 5,783 2,439
Noninterest income 101,943 86,990 73,424 66,974 59,467
Noninterest expenses 187,071 178,321 165,784 157,818 151,288
-------- -------- -------- -------- --------
Income before income taxes 149,230 129,098 106,963 97,430 91,340
Income taxes 51,236 45,784 35,899 32,291 31,582
-------- -------- -------- -------- --------
Net income $ 97,994 $ 83,314 $ 71,064 $ 65,139 $ 59,758
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Per Share Data
Earnings per share
<S> <C> <C> <C> <C> <C>
Basic and Diluted $1.36 $1.14 $0.98 $0.93 $0.86
===== ===== ===== ===== =====
Cash dividends per share $0.44 $0.35 $0.29 $0.25 $0.22
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Consolidated Balance Sheets
<S> <C> <C> <C> <C> <C>
Total assets $6,743,404 $6,355,190 $5,545,158 $5,193,684 $4,992,592
Securities 2,174,201 1,946,509 2,007,399 1,953,202 1,842,325
Loans 4,014,935 3,702,318 2,983,655 2,634,573 2,572,091
Deposits 3,924,796 3,946,397 3,818,949 3,597,436 3,530,045
</TABLE>
<PAGE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
(unaudited)
($ in thousands except per share data)
1999
-----------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
Interest income $109,462 $110,140 $112,510 $116,397
Net interest income 60,993 61,152 60,882 60,403
Provision for loan losses 1,966 2,503 1,593 3,010
Income before income taxes 37,442 38,045 37,381 36,362
Net income 24,126 24,923 24,942 24,003
Earnings per share
Basic and Diluted 0.33 0.34 0.35 0.34
1998
-----------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
Interest income $ 98,865 $103,561 $107,179 $110,495
Net interest income 54,001 56,716 57,019 60,464
Provision for loan losses 799 2,168 2,221 2,583
Income before income taxes 30,605 32,197 32,678 33,618
Net income 19,625 20,506 21,177 22,006
Earnings per share
Basic and Diluted 0.27 0.28 0.29 0.30
PRINCIPAL MARKETS AND PRICES OF THE CORPORATION'S STOCK
Stock Prices
Dividends ------------------
Per Share High Low
--------- -------- ------
1999
- ----
1st Quarter $ 0.1050 22 11/16 19 5/8
2nd Quarter 0.1050 23 3/4 18
3rd Quarter 0.1050 24 1/2 22 1/8
4th Quarter 0.1250 23 1/2 21 1/8
1998
- ----
1st Quarter $ 0.0825 25 7/8 19 1/4
2nd Quarter 0.0825 24 3/4 19 3/4
3rd Quarter 0.0825 22 9/16 15 3/8
4th Quarter 0.1050 22 7/8 15 1/8
Trustmark'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 provides a narrative discussion and analysis of
significant changes in Trustmark Corporation's (Trustmark) results of operations
and financial condition. This discussion should be read in conjunction with the
consolidated financial statements and the supplemental financial data included
elsewhere in this report.
The Private Securities Litigation Reform Act evidences Congress'
determination that the disclosure of forward-looking information is desirable
for investors and encourages such disclosure by providing a safe harbor for
forward-looking statements by Management. Specifically, Management's Discussion
and Analysis of Financial Condition and Results of Operations contains
forward-looking statements with respect to the adequacy of the allowance for
loan losses; the effect of legal proceedings on Trustmark's financial condition,
results of operations and liquidity; Year 2000 compliance issues and market risk
disclosures. Although Management of Trustmark believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such forward-looking
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks materialize, or should any such underlying
assumptions prove to be significantly different, actual results may vary
significantly from those anticipated, estimated, projected or expected.
FINANCIAL SUMMARY
For the year ended December 31, 1999, Trustmark's net income totaled
$98.0 million compared with $83.3 million for 1998 and $71.1 million for 1997.
Basic and diluted earnings per share were $1.36 for 1999, an increase of 19.3%
when compared with $1.14 for 1998. Basic and diluted earnings per share for 1997
were $0.98. For the year ended December 31, 1999, Trustmark achieved a return on
average assets of 1.49%, a return on average equity of 14.93% and an efficiency
ratio of 52.82%. These compared with 1998 ratios of 1.41% for return on average
assets, 13.53% for return on average equity and 55.55% for the efficiency ratio.
For 1997, the return on average assets was 1.34%, the return on average equity
was 12.67% and the efficiency ratio was 58.68%.
At December 31, 1999, total loans were $4.015 billion, an increase of
8.4% from levels one year earlier. Total assets were $6.743 billion at December
31, 1999, a 6.1% increase from December 31, 1998. Total deposits at December 31,
1999 were $3.925 billion, a 0.6% decrease from levels a year earlier.
Stockholders' equity was $656 million at December 31, 1999.
BUSINESS COMBINATIONS
Trustmark seeks to increase shareholder value and diversify products
and services through selective acquisitions of other financial services
companies, including banks, insurance agencies and asset management companies.
On April 9, 1999, Trustmark completed its acquisition of the Dan
Bottrell Agency, Inc. (Bottrell), an independent insurance agency located in
Jackson, Mississippi, with approximately $9 million in total assets. This
transaction has been accounted for as a purchase business combination. The
results of operations, which are not material, have been included in the
financial statements from the merger date.
In March 1998, Smith County Bank in Taylorsville, Mississippi, was
merged with Trustmark. This purchase business combination added $98 million in
total assets, including $45 million in loans, and $88 million in total deposits
at the merger date.
<PAGE>
In 1997, Trustmark completed two mergers with Mississippi financial
institutions. In February, Trustmark completed its merger with First Corinth
Corporation (FCC) and its subsidiary, National Bank of Commerce, in a business
combination accounted for as a pooling of interests. At the merger date, FCC and
its subsidiary had $65 million in loans, $134 million in total assets and $113
million in total deposits. In September, Perry County Bank (PCB) of New Augusta
was merged with Trustmark in a purchase business combination. At the merger
date, PCB had $24 million in loans, $46 million in total assets and $37 million
in total deposits.
ASSET/LIABILITY MANAGEMENT
Overview
Market risk is the risk of loss arising from adverse changes in market
prices and rates. Trustmark has risk management policies to monitor and limit
exposure to market risk. Trustmark's market risk is comprised primarily of
interest rate risk created by core banking activities. Management continually
develops and applies cost-effective strategies to manage these risks. The
Asset/Liability Committee sets the day-to-day operating guidelines, approves
strategies affecting net interest income and coordinates activities within
policy limits established by the Board of Directors. A key objective of the
asset/liability management program is to quantify, monitor and manage interest
rate risk and to assist Management in maintaining stability in the net interest
margin under varying interest rate environments.
Market/Interest Rate Risk Management
The primary purpose in managing interest rate risk is to effectively
invest capital and preserve the value created by the core banking business.
Trustmark utilizes an investment portfolio as well as off-balance sheet
instruments to manage the interest rate risk naturally created through its
business activities. The primary tool utilized by the Asset/Liability Committee
is a modeling system that provides information used to evaluate exposure to
interest rate risk, project earnings and manage balance sheet growth. This
modeling system utilizes the following scenarios in order to give Management a
<PAGE>
method of evaluating Trustmark's interest rate, basis and prepayment risk under
different conditions:
Rate shocked scenarios of up-and-down 100, 200 and 300 basis points.
Yield curve twist of +/- 2 standard deviations of the change in spread
of the three-month treasury bill and the 10-year treasury note yields.
Basis risk scenarios where federal funds/prime spread widens and
tightens 50 and 100 basis points.
Prepayment risk scenarios where projected prepayment speeds in
up-and-down 200 basis point rate scenarios are compared to current
projected prepayment speeds.
Static gap analysis is an additional tool that can be utilized for
interest rate risk measurement. Management feels that this method for analyzing
interest sensitivity does not provide a complete picture of Trustmark's exposure
to interest rate changes since it illustrates a point-in-time measurement and,
therefore, does not incorporate the effects of future balance sheet trends,
changes in prepayment speeds or varying interest rate scenarios. This analysis
is a relatively straightforward tool which is useful mainly in highlighting
significant short-term repricing volume mismatches. Utilized in the table below
are Management's assumptions relating to prepayments of certain loans and
securities as well as the maturity for rate sensitive assets and liabilities.
The following table presents Trustmark's rate sensitivity static gap analysis at
December 31, 1999 ($ in thousands):
Interest Sensitive Within
--------------------------
90 days One Year
----------- -----------
Total rate sensitive assets $ 1,638,453 $ 2,580,706
Total rate sensitive liabilities 2,805,966 3,788,244
----------- -----------
Net gap ($1,167,513) ($1,207,538)
=========== ===========
The analysis indicates a negative gap position over the next three- and
twelve-month periods which indicates that Trustmark would benefit somewhat from
a decrease in market interest rates. Although rates have increased, Management
believes there is adequate flexibility to alter the overall rate sensitivity
structure as necessary to minimize exposure to these changes.
The static gap analysis does not fully capture the impact of interest
rate movements on interest sensitive assets and liabilities. The interest rate
sensitivity tables that follow provide additional information about Trustmark's
financial instruments that are sensitive to changes in interest rates. The
quantitative information about market risk is necessarily limited because it
does not take into account operating transactions or anticipated hedging
instruments. The tabular disclosure of Trustmark's market risk is also limited
by its failure to depict accurately the effect on assumptions of significant
changes in the economy or interest rates as well as changes in Management's
<PAGE>
expectations or intentions. The information in the interest rate sensitivity
tables below reflect contractual interest rate repricing dates and contractual
maturity (including principal amortization) dates except where altered by the
following assumptions:
The scheduled maturities of mortgage-backed securities and CMOs are
adjusted by the industry dealer prepayment speed for various coupon
segments of the portfolio.
Principal repayments of loans (other than residential mortgages) and
early withdrawals of deposits include assumptions based on Management's
experience and judgement.
Changes in prepayment behavior of the residential mortgage portfolio
are based on the current patterns of comparable mortgage-backed
securities.
For indeterminate maturity deposit products (money market, NOW and
savings accounts), the tables present principal cash flows based on
Trustmark's historical experience, Management's judgement and
statistical analysis, as applicable, concerning their most likely
withdrawal behaviors.
Weighted average floating rates are based on the rate for that product
as of December 31, 1999 and 1998.
The tables below present principal amounts and related weighted average
interest rates by year of maturity for Trustmark's financial assets and
liabilities at December 31, 1999 and 1998 ($ in thousands):
INTEREST RATE SENSITIVITY
December 31, 1999
<TABLE>
<CAPTION>
Estimated
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---------- -------- -------- -------- -------- ---------- ---------- ----------
Loans, Net
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $1,025,875 $553,845 $404,397 $277,108 $223,853 $ 462,327 $2,947,405 $2,923,391
Average Int Rate 8.19% 8.16% 8.29% 7.68% 7.66% 7.27% 7.97%
Floating Rate $ 502,952 $ 72,419 $ 60,911 $ 49,210 $ 44,334 $ 271,854 $1,001,680 $1,001,486
Average Int Rate 8.30% 8.62% 8.31% 7.64% 7.80% 7.59% 8.10%
Investment securities
Fixed Rate $ 296,591 $487,489 $341,812 $178,894 $197,500 $ 569,652 $2,071,938 $2,055,588
Average Int Rate 6.04% 6.36% 6.35% 6.39% 6.57% 6.59% 6.40%
Floating Rate $ 50,374 $ 336 $ 2,677 $ 11,827 $ 12,420 $ 24,629 $ 102,263 $ 102,263
Average Int Rate 5.97% 5.91% 6.75% 6.88% 6.89% 6.88% 6.43%
Other earning assets
Floating Rate $ 29,599 $ 29,599 $ 29,599
Average Int Rate 5.54% 5.54%
Interest-bearing
deposits
Fixed Rate $1,241,393 $367,737 $ 91,699 $ 17,052 $ 15,001 $ 314 $1,733,196 $1,734,142
Average Int Rate 4.95% 5.12% 5.76% 5.22% 5.49% 6.90% 5.04%
Floating Rate $ 464,630 $235,405 $235,405 $147,154 $147,154 $ 101,202 $1,330,950 $1,330,950
Average Int Rate 2.68% 1.95% 1.95% 1.96% 1.96% 1.35% 2.16%
Other int-bearing
liabilities
Fixed Rate $ 368,024 $ 368,024 $ 368,024
Average Int Rate 5.66% 5.66%
Floating Rate $1,668,745 $ 73,675 $1,742,420 $1,742,420
Average Int Rate 5.22% 4.61% 5.19%
</TABLE>
<PAGE>
INTEREST RATE SENSITIVITY
December 31, 1998
<TABLE>
<CAPTION>
Estimated
1999 2000 2001 2002 2003 Thereafter Total Fair Value
---------- -------- -------- -------- -------- ---------- ---------- ----------
Loans, Net
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $ 956,598 $477,453 $345,481 $244,316 $177,240 $ 386,682 $2,587,770 $2,669,558
Average Int Rate 8.28% 8.19% 8.21% 7.77% 7.66% 7.00% 7.97%
Floating Rate $ 468,727 $137,022 $ 80,007 $ 66,648 $ 59,193 $ 236,801 $1,048,398 $1,051,778
Average Int Rate 8.69% 9.54% 9.94% 8.16% 8.15% 7.90% 8.65%
Investment securities
Fixed Rate $ 523,275 $345,356 $483,318 $295,677 $ 67,738 $ 179,459 $1,894,823 $1,915,815
Average Int Rate 5.90% 6.20% 6.43% 6.38% 6.11% 6.02% 6.19%
Floating Rate $ 947 $ 589 $ 709 $ 2,123 $ 10,194 $ 38,177 $ 52,739 $ 52,739
Average Int Rate 6.21% 6.25% 6.01% 6.54% 5.97% 5.90% 5.80%
Other earning assets
Floating Rate $ 185,619 $ 185,619 $ 185,619
Average Int Rate 7.95% 7.95%
Interest-bearing
deposits
Fixed Rate $1,296,600 $162,773 $ 41,003 $ 20,714 $ 16,562 $ 406 $1,538,058 $1,545,128
Average Int Rate 5.07% 5.31% 5.19% 5.54% 5.22% 6.60% 5.10%
Floating Rate $ 508,156 $257,471 $257,471 $160,526 $160,526 $ 109,979 $1,454,129 $1,454,129
Average Int Rate 2.68% 2.11% 2.11% 2.12% 2.12% 1.64% 2.28%
Other int-bearing
liabilities
Fixed Rate $ 149,543 $ 149,543 $ 149,543
Average Int Rate 5.93% 5.93%
Floating Rate $1,397,644 $ 85,941 $ 74,960 $1,558,545 $1,558,545
Average Int Rate 6.91% 4.91% 4.67% 6.69%
</TABLE>
<PAGE>
Liquidity
Trustmark's goal is to maintain an adequate liquidity position to
compensate for balance sheet fluctuations and to provide funds for growth. The
Asset/Liability Committee establishes guidelines by which the current liquidity
position is monitored to ensure adequate funding capacity. 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 Trustmark's liquidity.
EARNING ASSETS
Earning assets are composed of loans, securities, federal funds sold,
securities purchased under resale agreements and trading account assets. These
assets are the primary revenue streams for Trustmark. 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. At December
31, 1999, earning assets were $6.219 billion, or 92.22% of total assets,
compared with $5.835 billion, or 91.82% of total assets at December 31, 1998, an
increase of $383.2 million, or 6.6%, due primarily to growth in the loan and
securities portfolios.
Loans
Loans are the largest group of earning assets of Trustmark and
represented 64.6% of earning assets at December 31, 1999 compared with 63.4% at
December 31, 1998. At December 31, 1999, loans totaled $4.015 billion compared
to $3.702 billion at year end 1998, an increase of $312.6 million, or 8.4%. Loan
growth remained well diversified with the most significant increases coming from
commercial and industrial loans and loans secured by residential properties.
Trustmark's lending policies have produced consistently strong asset
quality. One measure of asset quality in the financial services industry is the
level of nonperforming assets. Trustmark's nonperforming assets at December 31,
1999 and 1998 are shown in the following table ($ in thousands):
December 31,
------------------
1999 1998
------- -------
Nonaccrual and restructured loans $16,671 $13,253
Other real estate (ORE) 1,987 1,859
======= =======
Total nonperforming assets $18,658 $15,112
======= =======
Accruing loans past due 90 days or more $ 2,043 $ 2,431
======= =======
Nonperforming assets/total loans and ORE 0.46% 0.41%
======= =======
<PAGE>
While the volume of nonperforming assets at December 31, 1999, reflects
a slight increase from year end 1998, as indicated in the preceding table, it
remains at a manageable level. This level of nonperforming assets continues to
compare favorably to those of peer banks as a result of sound lending practices
and consistent collection efforts. 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 allowance for loan losses is maintained at a level that Management
and the Board of Directors believe is adequate to absorb probable losses within
the loan portfolio, plus losses associated with off-balance sheet credit
instruments such as letters of credit and unfunded lines of credit. A formal
analysis is prepared quarterly to assess the risk in the loan portfolio and to
determine the adequacy of the allowance for loan losses. Specifically, the
analysis is based on factors such as historical loss experience in relation to
volume and types of loans, volume and trends in delinquencies and nonaccruals,
national and local economic conditions and other pertinent information. This
analysis is presented to the Credit Policy Committee with subsequent review and
approval by the Board of Directors. At December 31, 1999, the allowance for loan
losses was $65.9 million, representing 1.64% of total loans outstanding compared
with an allowance for loan losses of $66.2 million at December 31, 1998,
representing 1.79% of total loans outstanding.
Net charge-offs were $9.4 million or 0.24% of average loans for the year
ended December 31, 1999, compared with $7.0 million or 0.21% of average loans
for the year ended December 31, 1998. Trustmark's level of net charge-offs to
average loans continues to compare favorably to those of peer banks.
Securities
The securities portfolio is utilized to provide a quality investment
alternative for available funds, a stable source of interest income and
collateral on pledges for public deposits and securities sold under agreements
to repurchase. At December 31, 1999, Trustmark's securities portfolio totaled
$2.174 billion, an increase of $227.7 million or 11.7% from December 31, 1998.
As a percentage of earning assets, the securities portfolio increased from 33.4%
at December 31, 1998 to 35.0% at December 31, 1999 as Trustmark utilized the
liquidity from federal funds sold and securities purchased under reverse
repurchase agreements to grow the securities portfolio.
Management continues to stress asset quality as one of the strategic
goals of the securities portfolio which is evidenced by the investment of over
85% of the portfolio in U. S. Treasury and U. S. Government agency obligations.
The REMIC and CMO issues held in the securities portfolio are entirely U. S.
Government agency issues. In order to avoid excessive yield volatility from
unexpected prepayments, Trustmark's normal practice is to purchase investment
securities at or near par value to reduce the risk of premium write-offs.
Held to maturity (HTM) securities are carried at amortized cost and
represent those securities that Trustmark both positively intends and has the
ability to hold to maturity. At December 31, 1999, HTM securities totaled $1.391
billion and continued to constitute the bulk of the portfolio. HTM securities
represented 64.0% of the total portfolio at the end of 1999, compared with 60.2%
at the end of 1998.
Available for sale (AFS) securities are reported at their estimated
fair value with unrealized gains or losses recognized, net of tax, in
accumulated other comprehensive income, a separate component of shareholders'
equity. At December 31, 1999, securities available for sale totaled $783.2
million which represented 36.0% of the securities portfolio, a decrease from
39.8% at year end 1998. The valuation adjustments to increase fair value at the
end of 1999 and 1998 were $3.8 million and $27.6 million, respectively.
<PAGE>
As seen in Note 1 of Notes to Consolidated Financial Statements, on
January 1, 2000, Trustmark adopted Statement of Financial Accounting Standards
(SFAS) No. 133. As allowed by SFAS No. 133, at the date of initial application
of this statement, Trustmark transferred held to maturity securities with an
amortized cost of $237.5 million and a market value of $237.8 million into the
available for sale category. In addition, Trustmark transferred held to maturity
securities with an amortized cost of $135.1 million and a market value of $131.2
million into the trading category. These transfers were made to allow Trustmark
to reposition the investment portfolio into a potentially higher yielding market
environment. The effect of adopting SFAS No. 133, as it relates to securities,
will be shown as a charge to Trustmark's results of operations in the first
quarter of 2000 as a cumulative effect of a change in accounting principle
decreasing net income and other comprehensive income by $2.4 million and $2.2
million, respectively.
Other Earning Assets
Federal funds sold and securities purchased under reverse repurchase
agreements were $29.6 million at December 31, 1999, a decrease of $156.0 million
when compared with year end 1998. When average balances are compared, federal
funds sold and securities purchased under reverse repurchase agreements
increased from $113.0 million for 1998 to $159.6 million for 1999. Trustmark
utilizes these products as a short-term investment alternative whenever it has
excess liquidity.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Trustmark's deposit base is its primary source of funding and consists
of core deposits from the communities served by Trustmark. During 1999, the mix
of deposits has remained relatively constant with a slight decrease in time
deposits, which is attributable to consumers seeking higher yielding investment
opportunities.
Total deposits were $3.925 billion at December 31, 1999 and averaged
$3.844 billion for the year. This compares to period end and average deposits
for 1998 of $3.946 billion and $3.913 billion, respectively.
As a component of average deposits, average noninterest-bearing deposits
increased to 22.9% in 1999 compared with 22.1% during 1998. For the same time
period, average interest-bearing demand deposits decreased to 18.7% of average
deposits from 18.8%, average savings deposits increased to 17.8% from 16.9% and
average time deposits decreased to 40.5% in 1999 from 42.2% the prior year.
Although the deposit base has remained relatively stable, Trustmark has
increased its reliance on short-term borrowings as funds used for earning assets
outpaced funds provided by core deposits. Short-term borrowings consist of
federal funds purchased, securities sold under repurchase agreements, Federal
Home Loan Bank borrowings and the treasury tax and loan note option account.
Short-term borrowings totaled $2.110 billion at December 31, 1999 and averaged
$2.014 billion for the year. For 1998, period end short-term borrowings were
$1.708 billion and averaged $1.324 billion for the year. FHLB borrowings and
securities sold under repurchase agreements were primarily responsible for the
growth achieved during 1999.
<PAGE>
CONTINGENCIES
Trustmark and its subsidiaries are parties to lawsuits and other claims
that arise in the ordinary course of business; some of the lawsuits assert
claims related to the lending, collection, servicing, investment, trust and
other business activities; and some of the lawsuits allege substantial claims
for damages. The cases are being vigorously contested. In the regular course of
business, Management evaluates estimated losses or costs related to litigation,
and provision is made for anticipated losses whenever Management believes that
such losses are probable and can be reasonably estimated. At the present time,
Management believes, based on the advice of legal counsel, that the final
resolution of pending legal proceedings will not have a material impact on
Trustmark's consolidated financial position or results of operations.
SHAREHOLDERS' EQUITY
At December 31, 1999, Trustmark had shareholders' equity of $655.8
million compared with $651.9 million at year end 1998, an increase of $3.9
million or 0.6%. The shareholders' equity to assets ratio was 9.72% at December
31, 1999 compared with 10.26% at December 31, 1998. Trustmark's book value at
December 31, 1999 was $9.31, an increase of 3.6% from $8.99 one year earlier.
Regulatory Capital
Trustmark and Trustmark National Bank (Bank) are subject to minimum
capital requirements which are administered by various Federal regulatory
agencies. These capital requirements, as defined by Federal guidelines, involve
quantitative and qualitative measures of assets, liabilities and certain
off-balance sheet instruments. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
financial statements of both Trustmark and the Bank.
Management believes, as of December 31, 1999, that Trustmark and the
Bank meet all capital adequacy requirements to which they are subject. At
December 31, 1999, the most recent notification from the Office of the
Comptroller of the Currency (OCC) categorized the Bank as well-capitalized. To
be categorized in this manner, the Bank must maintain minimum total risk-based,
Tier 1 risk-based and Tier 1 leverage ratios (defined in applicable regulations)
as set forth in the table below. There are no significant conditions or events
that have occurred since the OCC's notification that Management believes have
affected the Bank's present classification.
<PAGE>
Actual and minimum regulatory capital amounts and ratios at December 31,
1999, for Trustmark and the Bank are as follows ($ in thousands):
<TABLE>
<CAPTION>
Actual Minimum Regulatory
Regulatory Capital Capital Required
------------------ ------------------
Amount Ratio Amount Ratio
-------- ------ -------- -----
Total Capital (to Risk Weighted Assets)
<S> <C> <C> <C> <C>
Trustmark Corporation $683,335 16.76% $326,096 8.00%
Trustmark National Bank $667,782 16.43% $325,148 8.00%
Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation $627,258 15.39% $163,048 4.00%
Trustmark National Bank $616,792 15.18% $162,574 4.00%
Tier 1 Capital (to Average Assets)
Trustmark Corporation $627,258 9.37% $267,645 4.00%
Trustmark National Bank $616,792 9.23% $267,353 4.00%
</TABLE>
Common Stock Repurchase Program
In November 1998, Trustmark implemented a capital management plan which
authorized the repurchase of up to 7.5%, or 5.46 million shares of common stock.
Since implementation of the plan, Trustmark has purchased approximately 3.22
million shares of common stock in the open market at a cost of $72.0 million.
This program has allowed Trustmark to increase the return on equity to
shareholders while maintaining sufficient capital levels and related ratios to
satisfy regulatory requirements.
Dividends
Cash dividends paid in 1999 totaled $31.6 million, an increase of $5.9
million or 23.1%, from $25.6 million paid in 1998. The payout ratio of cash
dividends paid to net income was 32.35% in 1999 and 30.92% in 1998. Dividends
for 1999 were $0.44 per share compared with $0.35 per share for 1998 and $0.29
for 1997. The fourth quarter dividend of $0.125 per share was 19.0% higher than
the $0.105 per share paid in the third quarter of 1999.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (NII) is interest income generated by
interest-earning assets reduced by the interest expense of funding those assets
and is Trustmark's principal source of income. Consequently, changes in the mix
and volume of interest-earning assets and interest-bearing liabilities, and
their related yields and interest rates, can impact earnings. The net interest
margin (NIM) is computed by dividing fully taxable equivalent NII by average
interest-earning assets and measures how effectively Trustmark utilizes its
interest-earning assets in relationship to the interest cost of funding them.
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 table below
<PAGE>
illustrates the net interest margin as a percentage of average interest-earning
assets for the periods shown:
Years Ended December 31,
------------------------
1999 1998 1997
----- ----- -----
Yield on interest-earning assets-FTE 7.55% 7.87% 7.88%
Rate on interest-bearing liabilities 3.40% 3.54% 3.56%
===== ===== =====
Net interest margin-FTE 4.15% 4.33% 4.32%
===== ===== =====
For the year ended December 31, 1999, NII increased $15.2 million, or
6.7%, when compared with 1998. The increase was attributable to a higher level
of average interest-earning assets in 1999. Average interest-earning assets in
1999 were $6.043 billion compared to $5.423 billion, an increase of $620 million
or 11.4%. The average interest-earning asset growth is attributable to a 14.6%
increase in average loans and a 4.3% increase in average securities during 1999.
However, growth in NII was partially offset by an increase in funding costs that
resulted from a change in the mix of interest-bearing liabilities. Faced with a
decreasing base of core deposits, Trustmark utilized higher priced federal funds
purchased, securities sold under repurchase agreements and short-term borrowings
as sources of funds.
Partially offsetting the growth in NII during 1999 was a decline in the
NIM of 18 basis points to 4.15%. The downward pressure on the NIM in 1999
resulted from the narrowing of the net interest spread or the difference between
the average yield earned on interest-earning assets (FTE) and average rate paid
for interest-bearing liabilities. The net interest spread in 1999 was 3.43%
versus 3.48% in 1998, a decrease of five basis points. The decrease was the
result of a 32 basis point decline in the yield on average interest-earning
assets to 7.55%, primarily resulting from a lower interest rate environment for
loans. In spite of three increases to the prime rate during the last half of
1999, the average prime rate was 37 basis points lower than the 1998 average.
While the rate paid on interest-bearing liabilities declined during 1999, the
change in product mix helped to partially offset the impact of a lower interest
rate environment.
During 1998, the level of NII grew by $24.2 million, or 11.9%, when
compared with 1997, and the net interest margin increased from 4.32% at year end
1997 to 4.33%. For 1998, the interest rate spread between interest-earning
assets and interest-bearing liabilities was 3.48%, an increase of three basis
points from the 1997 spread of 3.45%. Average interest-earning assets increased
11.8% during 1998 primarily from a 20.7% increase in average loans. However,
because the interest rate environment was generally declining during 1998, the
yield on average interest-earning assets decreased by one basis point when
compared to 1997. The composition of average interest-bearing liabilities
changed dramatically during 1998 as Trustmark sought additional funding sources
to support the substantial growth of interest-earning assets. Average
interest-bearing liabilities increased by 12.0% during 1998 primarily from
growth in federal funds purchased, securities sold under repurchase agreements
and short-term borrowings; however, the average yield on these categories was
slightly lower when comparing 1998 to 1997.
Provision for Loan Losses
The provision for loan losses reflects Management's assessment of the
adequacy of the allowance for loan losses to absorb inherent 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
<PAGE>
positions. During 1999, Trustmark's provision for loan losses was $9.1 million
compared with $7.8 million in 1998 and $4.7 million in 1997. The provision to
average loans was 0.24% for 1999 compared with 0.23% for 1998 and 0.17% for
1997. Trustmark's ratio of the provision for loan losses to average loans
continues to compare favorably with those of peer banks.
Noninterest Income
For each of the years in the three-year period ended December 31, 1999,
noninterest income increased by double digit percentages, realizing one of
Trustmark's long-term initiatives. In 1998 and 1997, noninterest income,
excluding securities gains/losses, totaled $86.1 million and $72.9 million,
respectively. By comparison, noninterest income for 1999, excluding securities
gains/losses, totaled $103.3 million, increasing $17.2 million, or 19.9%, from
1998. Noninterest income has grown by a total of $30.4 million, or 41.8%, for
the three-year period ended December 31, 1999.
Service charges for deposit products and services has been the single
largest component of noninterest income and totaled $37.9 million in 1999, $30.7
million in 1998, and $25.3 million in 1997. In 1999 and 1998, service charges
increased $7.3 million, or 23.8%, and $5.4 million, or 21.4%, respectively, from
the previous years. Overall, growth since 1997 totaled $12.7 million, an
increase of 50.2%. Service charges for 1999 and 1998 have been positively
impacted by Trustmark's implementation of the new customer-focused sales process
called Pinnacle during the third quarter of 1998. As a result of Pinnacle and a
focused marketing effort on Trustmark's Umbrella Plan, the Bank's full service
consumer checking product, over 15 thousand new Umbrella accounts were opened
during 1998. In 1998 alone, the Bank's deposit base grew by 26 thousand
accounts. In addition, based on increased costs and competitive factors, a
review of Trustmark's fee structure was performed in late 1998, leading to the
implementation of changes to the fee structure for deposit accounts.
The second largest component of noninterest income has been other
account charges, fees and commissions, totaling $32.2 million in 1999, $23.2
million in 1998, and $18.6 million in 1997. In 1999 and 1998, growth in these
areas totaled $9.0 million, or 38.6%, and $4.7 million, or 25.3%, respectively.
Total growth in other account charges, fees and commissions since 1997 was $13.7
million, or 73.6%. In 1999, Trustmark expanded its insurance line of business by
acquiring Bottrell and introducing annuity products into Trustmark's market.
This combination of new products and services contributed $6.8 million, or
76.3%, to the growth of other account charges, fees and commissions during 1999.
The remaining growth in 1999 and the growth in 1998 came primarily from fees on
various investment services products and card services products.
Mortgage servicing fees have grown $1.1 million, or 8.3%, since 1997 and
totaled $14.4 million in 1999, $13.7 million in 1998, and $13.3 million in 1997.
Trustmark serviced $3.7 billion in mortgage loans at December 31, 1999.
Trust service income totaled $14.3 million in 1999, $13.6 million in
1998, and $12.4 million in 1997. The growth in trust services has come primarily
from advisory fees derived from Trustmark's proprietary mutual funds. At
December 31, 1999, Trustmark, which continues to be one of the largest providers
of asset management services in Mississippi, held assets under administration of
$6.2 billion, an increase of over $700 million when compared to year end 1998.
Other income totaled $4.5 million, $4.9 million, and $3.4 million in
1999, 1998 and 1997, respectively. Changes in other income have occurred due to
variations in gains recognized on the sale of loans in the secondary market.
During 1998's decreasing interest rate environment, Trustmark originated or
purchased an increased volume of mortgage loans, thus generating a larger volume
of gains in 1998 on the sale of such loans.
<PAGE>
Gross securities gains of $40 thousand and securities losses of $1.4
million were realized during 1999 from the calls and dispositions of securities
classified as available for sale. In 1999, no held to maturity securities were
sold, and no realized gains or losses were recognized for held to maturity
securities.
Noninterest Expenses
Total noninterest expenses increased $8.8 million, or 4.9%, in 1999 to
$187.1 million compared with $178.3 million in 1998 and $165.8 million in 1997.
The Bottrell business combination completed during 1999 contributed $4.1
million, or 47.4%, to the increase in noninterest expenses for 1999.
The efficiency ratio, which is total noninterest expenses as a
percentage of tax equivalent net interest income plus noninterest income, is a
primary measure of the effectiveness of noninterest expense control. During
1999, Trustmark exceeded its corporate goal of an efficiency ratio of 55% or
less when it achieved an efficiency ratio of 52.82%. This compared with
efficiency ratios of 55.55% and 58.68% for 1998 and 1997, respectively .
Salaries and employee benefits, which represent the largest category of
noninterest expenses, were $98.7 million in 1999, an increase of $8.3 million,
or 9.1%, from 1998. For 1998, salaries and employee benefits increased $4.5
million, or 5.3%, when compared to 1997. At December 31, 1999, Trustmark had
2,320 full-time equivalent employees compared to 2,258 and 2,309, respectively,
at December 31, 1998 and December 31, 1997. The increase in salaries and
employee benefits is attributable to merit salary increases, incentive
compensation and business combinations.
Net occupancy-premises expense for 1999 remained well controlled and
increased $470 thousand, or 4.8%, when compared to 1998. When compared to 1997,
1998 growth was $105 thousand, or 1.1%. Equipment expenses increased $1.4
million in 1999 to $14.7 million, compared to $13.3 million in 1998 and $12.8
million in 1997. The increase for all years relates primarily to technology
upgrades and initiatives, including upgrades related to the Year 2000, within
the organization.
Services and fees for 1999 totaled $26.0 million compared to $27.3
million for 1998 and $22.5 million for 1997. Decreases in legal expenses and
professional fees were the primary factors contributing to the $1.3 million
decline during 1999. During 1998, increased costs related to the Year 2000 were
incurred and were the primary contributors to the $4.9 million increase over
1997.
During the past three years, the amortization expense associated with
intangible assets, which includes mortgage servicing rights, core deposit
intangibles and goodwill, remained relatively stable and totaled $10.2 million
in 1999, $10.3 million in 1998 and $9.3 million in 1997. Decreases in the
amortization of both mortgage servicing rights and core deposit intangibles
during 1999 more than offset the initial amortization of goodwill related to the
Bottrell business combination. Other expenses also remained well controlled and
totaled $27.1 million in 1999 compared with $27.2 million for 1998 and $25.5
million in 1997. Increased expenses related to the mortgage servicing portfolio
and home equity loans comprised the major portion of the $1.7 million increase
in other expenses during 1998.
Management will continue to closely monitor the level of noninterest
expenses as part of its effort to improve the profitability of Trustmark.
<PAGE>
Income Taxes
For the year ended December 31, 1999, Trustmark's combined effective tax
rate was 34.3% compared with 35.5% for 1998 and 33.6% for 1997. The decrease in
Trustmark's effective tax rate for 1999 is due to small changes in various
permanent items as a percentage of pre-tax income.
RECENT PRONOUNCEMENTS - DERIVATIVES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. During 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133-an amendment of FASB Statement No. 133," which deferred
the effective date of SFAS No. 133 to fiscal years beginning after June 15,
2000.
Trustmark uses derivatives to hedge interest rate exposures by
mitigating the interest rate risk of mortgage loans held for sale and mortgage
loans in process. Trustmark regularly enters into certain derivative financial
instruments in the form of forward contracts as part of its normal
asset/liability management strategies. Trustmark's obligations under forward
contracts consist of commitments to deliver mortgage loans, originated and/or
purchased, in the secondary market at a future date into mortgage-backed
securities. Realized gains and losses on forward contracts and the sale of
mortgage loans in the secondary market are recorded upon the settlement of the
related forward contract and included in other income.
The effect of adopting SFAS No. 133 will be shown as a charge to
Trustmark's results of operations in the first quarter of 2000 as a cumulative
effect of a change in accounting principle, decreasing net income and other
comprehensive income by $2.5 million and $2.3 million, respectively.
YEAR 2000 COMPLIANCE
All of Trustmark's internal technical systems successfully rolled over
from 1999 to 2000. There were no Year 2000 related issues or problems created by
this event. In addition, all of Trustmark's service providers had a successful
rollover to 2000. Because of these successes, Trustmark did not have to
implement any of its business resumption contingency plans. Trustmark remains
confident that all of its internal technical systems and those of its service
providers will continue to perform satisfactorily.
To date, Trustmark has incurred and expensed approximately $7.7 million
related to the assessment of the Year 2000 compliance plan.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in an exhibit in this Form 10-K, into Trustmark Corporation's
previously filed Registration Statements on Forms S-8 (File Numbers 333-35889
and 333-07141).
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Jackson, Missisisppi,
March 24, 2000.
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