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, 2002
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)208-5111
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.( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No ____
Based on the closing sales price of January 31, 2003, the aggregate market value
of the voting stock held by nonaffiliates of the Registrant was $1,180,861,022.
As of February 21, 2003, there were issued and outstanding 59,814,619 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 2002 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated March 14, 2003 (Part III).
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
Shareholder 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 and
Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Controls and Procedures
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (Trustmark) is a multi-bank holding company headquartered
in Jackson, Mississippi, incorporated under the Mississippi Business Corporation
Act on August 5, 1968. Trustmark commenced doing business in November 1968.
Through its subsidiaries, Trustmark operates as a financial services
organization providing banking and financial solutions to corporate,
institutional and individual customers predominantly within the states of
Mississippi and Tennessee.
Trustmark National Bank (TNB), Trustmark's wholly-owned subsidiary, accounts for
substantially all of the assets and revenues of Trustmark. Chartered by the
State of Mississippi in 1889, TNB is also headquartered in Jackson, Mississippi.
In addition to banking activities, TNB provides investment and insurance
products and services to its customers through its three wholly-owned
subsidiaries, Trustmark Financial Services, Inc. (TFSI), Trustmark Investment
Advisors, Inc. (TIA) and The Bottrell Insurance Agency, Inc. (Bottrell).
Trustmark also engages in banking activities through its wholly-owned
subsidiary, Somerville Bank & Trust Company (Somerville), headquartered in
Somerville, Tennessee. Somerville was acquired in a business combination during
2001 and presently has five locations in Somerville, Hickory Withe and
Rossville, Tennessee. In addition to its banking subsidiaries, Trustmark also
owns all of the stock of F. S. Corporation and First Building Corporation, both
inactive nonbank Mississippi corporations. Neither Trustmark nor its
subsidiaries have any foreign activities. As of December 31, 2002, Trustmark and
its subsidiaries employed 2,443 full-time equivalent employees.
Trustmark engages in business through its four reportable segments: Retail
Banking, Commercial Banking, Financial Services and Treasury & Other. The Retail
Banking division provides banking services to individuals and small business
customers. The Commercial Banking division services corporate and middle-market
clients. Financial Services offers a full range of services to meet specialized
financial needs of both individuals and corporate clients. Treasury & Other
consists of internal operations, such as asset/liability management activities
including the investment portfolio and the related gains/losses on sales of
securities, as well as credit risk management, bank operations, human resources,
marketing and the controller's department.
Retail Banking
Retail Banking provides a full range of financial products and services to
individuals and small business customers through Trustmark's 138 offices in
Mississippi and Tennessee. During 2002, Trustmark continued to evaluate its
major retail markets in an effort to effectively position its branch network
within each market. During the year, four offices were renovated, eight offices
were closed and two new offices were opened.
During 2002, Trustmark continued to apply technology, innovation and expense
control to improve productivity and assist in managing profitability and
customer relationships. One primary example of the integration of these factors
was the Credit Process Redesign initiative used to evaluate and improve the
consumer and business credit processes. The goal of this process was to create
an environment that fosters greater customer satisfaction, generates loan growth
and improves efficiency while maintaining solid credit quality. This process,
facilitated by a nationally recognized management consulting firm, should
streamline workflow, eliminate processing delays and result in timely loan
decisions for Trustmark's customers.
Significant efforts were also devoted to developing a check image archive. This
archive, scheduled to be deployed during the second quarter of 2003, will
improve research efficiency and increase customer satisfaction. It will also
position Trustmark to provide additional revenue-generating services for
consumer and commercial relationships.
Customers may access automated teller machines (ATM) through Trustmark's network
of 179 ATMs in 155 locations in Mississippi and Tennessee, in addition to
worldwide access through other ATM networks such as Plus, Pulse and Cirrus.
TrustTouch services allow customers to access detailed account information, via
a toll free number 24 hours a day, and TrustTouchpc services offer customers the
flexibility to access account information as well as the ability to process
transactions 24 hours a day via computer. TrustTouchWeb allows customers to
access their bank accounts from any Internet-equipped computer. TrustTouchWeb
gives instant access to secured account information around-the-clock and
provides the ability to pay bills electronically and transfer funds between
accounts. TrustNetWeb, our Internet banking product for small to mid-sized
businesses, provides the same convenience and flexibility as TrustTouchWeb with
additional features tailored specifically for businesses.
Trustmark provides Retail Banking customers with various personal loan products
and small business loans. Trustmark also lends to moderate and lower income
homeowners through Community Reinvestment Act programs such as the Downpayment
Assistance Program and Farmers Home Multi-Family Home Program.
Trustmark continues to serve small businesses through the Business Banking
group, which provides banking, investment and insurance solutions to businesses
with annual sales of up to $3 million. The Bank at Work program serves as an
alternative delivery channel that provides banking services on-site to
businesses employing over 100 people.
Commercial Banking
Commercial Banking provides various financial products and services to corporate
and middle-market clients through TNB's Commercial Lending, Commercial Real
Estate, Indirect Lending and Private Banking groups. Business Advantage is
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. To better meet 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, as well as large regional and national firms. Trustmark
continues to be active in automobile financing directly through long-established
relationships with automobile dealers.
Financial Services
Financial Services includes trust and fiduciary services, brokerage services,
insurance services, as well as credit card and mortgage services. With $6.6
billion in assets under administration, Trustmark offers a full line of asset
management and custodial services through its Personal Trust, Employee Benefit
and Corporate Trust groups. The Wealth Management Group provides customized
solutions for affluent customers by integrating investment management, estate
planning, insurance products and private banking.
Trustmark's Correspondent Banking Department maintains relationships with
independent banks across the state, providing competitively priced cash
management, 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 governments and
school districts.
Included in Financial Services is Trustmark's proprietary mutual fund family,
The Performance Funds. The six mutual funds are designed and managed by
Trustmark Investment Advisors' investment professionals and are offered
throughout the financial services division, including Trustmark Financial
Services, Inc., TNB's full service brokerage subsidiary.
Through Bottrell, TNB's insurance subsidiary, Trustmark provides a full range of
commercial insurance products as well as personal life, health, property and
casualty insurance. During 2002, Bottrell was able expand its products to
include school, medical malpractice and mid-market business insurance through
the acquisition of Chandler-Sampson Insurance, Inc.
Treasury & Other
Treasury & Other consists of internal operations, such as asset/liability
management activities including TNB's investment portfolio and the related
gains/losses on sales of securities, as well as credit risk management, bank
operations, human resources, marketing and the controller's department.
Additional information on Trustmark's segments can be found in Note 18, "Segment
Information," (pages 39-41) included in Trustmark's 2002 Annual Report to
Shareholders and is incorporated herein by reference.
Available Information
Trustmark's internet address is www.trustmark.com. Trustmark makes available
through this address, free of charge, its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or (15)d of the Exchange
Act as soon as reasonably practicable after such material is electronically
filed, or furnished to, the Securities and Exchange Commission (SEC).
Business Combinations
In June 2002, The Bottrell Insurance Agency, Inc., a wholly-owned subsidiary of
TNB, acquired Chandler-Sampson Insurance, Inc. (CSI) located in Jackson,
Mississippi. CSI was a regional leader in school, medical malpractice and
mid-market business insurance and had total assets of approximately $2 million.
This business combination, which was not material to Trustmark, was accounted
for under the purchase method of accounting.
Forward-looking Statements
Certain statements contained in Trustmark's Management's Discussion and Analysis
of Financial Condition and Results of Operations are not statements of
historical fact and constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to anticipated future operating and financial performance
measures, including net interest margin, credit quality, business initiatives,
growth opportunities and growth rates, among other things. Words such as
"expects," "anticipates," "believes," "estimates" and other similar expressions
are intended to identify these forward-looking statements. 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. These
risks could cause actual results to differ materially from current expectations
of Management and include the following:
o The level of nonperforming assets, charge-offs and provision expense
can be affected by local, state and national economic and market
conditions as well as Management's judgments regarding collectability
of loans.
o Material changes in market interest rates can materially affect many
aspects of Trustmark's financial condition and results of operations.
Trustmark is exposed to the potential of losses arising from adverse
changes in market interest rates and prices which can adversely impact
the value of financial products, including securities, loans, deposits,
debt and derivative financial instruments. Factors that may affect the
market interest rates include local, regional and national economic
conditions; utilization and effectiveness of market interest rate
contracts; and the availability of wholesale and retail funding sources
to Trustmark. Many of these factors are outside Trustmark's control.
o Increases in prepayment speeds of mortgage loans resulting from a
declining interest rate environment will have an impact on the fair
value of the mortgage servicing portfolio which can materially affect
Trustmark's results of operations.
o The costs and effects of litigation and of unexpected or adverse
outcomes in such litigation can materially affect Trustmark's results
of operations.
o Competition in loan and deposit pricing, as well as the entry of new
competitors into our markets through de novo expansion and
acquisitions, among other means, could have an effect on Trustmark's
operations in our existing markets.
o Trustmark is subject to regulation by federal banking agencies and
authorities and the Securities and Exchange Commission. Changes in
existing regulations or the adoption of new regulations could make it
more costly for Trustmark to do business or could force changes in the
manner Trustmark does business, which could have an impact on
Trustmark's financial condition or results of operations.
Although Management 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. These statements are representative only
as of the date hereof, and Trustmark does not assume any obligation to update
these forward-looking statements or to update the reasons why actual results
could differ from those projected in the forward-looking statements.
COMPETITION
Changes in regulation, technology and product delivery systems have resulted in
an increasingly competitive environment. 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 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. The BHC Act requires every
bank holding company to obtain the prior approval of the Federal Reserve before:
(i) it may acquire direct or indirect ownership or control of any voting shares
of any bank if, after such acquisition, the bank holding company will directly
or indirectly own or control more than 5.0% of the voting shares of the bank;
(ii) it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any bank; or (iii) it may merge or
consolidate with any other bank holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977.
The BHC Act, as amended by the interstate banking provisions of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that Trustmark may now acquire a bank located in any other
state, regardless of state law to the contrary, subject to certain
deposit-percentage, aging requirements, and other restrictions. The Interstate
Bank Branching Act also generally provided that, after June 1, 1997, national
and state-chartered banks may branch interstate through acquisitions of banks in
other states.
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 general business
corporation laws. 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.
TNB is a national banking association and, as such, is subject to regulation by
the Office of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation (FDIC) and the Federal Reserve Board. Almost every area of
the operations and financial condition of TNB 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. Somerville is a
state-chartered commercial bank, subject to regulation primarily by the FDIC and
secondarily by the Tennessee Department of Financial Institutions.
TNB's nonbanking subsidiaries are subject to a variety of state and federal
laws. TFSI, TNB's full service brokerage subsidiary, is subject to supervision
and regulation by the SEC, the National Association of Securities Dealers, Inc.,
state securities regulators and the various exchanges through which it conducts
business. TIA, a registered investment advisor, is subject to supervision and
regulation by the SEC and the state of Mississippi. Bottrell is subject to the
insurance laws and regulations of the states in which it is active. The Federal
Reserve Board supervises Trustmark's nonbanking subsidiaries.
Trustmark is also under the jurisdiction of the 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.
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (Act) was
signed into law on November 12, 1999. As a result of the Act, banks are 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 have been able to commence new activities and
develop 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. The Act authorizes national
banks to own or control a "financial subsidiary" that engages in activities that
are not permissible for national banks to engage in directly. The Act contains a
number of provisions dealing with insurance activities by bank subsidiaries.
Generally, the Act affirms the role of the states in regulating insurance
activities, including the insurance activities of financial subsidiaries of
banks, but the Act also preempts certain state laws. As a result of the Act, in
2001 TNB elected for Bottrell to become a financial subsidiary. This enables TNB
to engage in insurance agency activities, through its financial subsidiary
Bottrell, at any location.
The Act also imposed new requirements related to the privacy of customer
financial information. The Act requires financial institutions to disclose their
information sharing policies and procedures, and if the institution shares
information with nonaffiliated third parties, the institution must provide
customers with the opportunity to "opt out" of the sharing arrangements. The Act
also prohibits financial institutions from disclosing a customer's account
number to nonaffiliated third parties for use in marketing programs, including
telemarketing and direct mail programs. Finally, the Act prohibits most persons
from obtaining customer information through the use of false, fictitious or
fraudulent statements or representations. Trustmark has complied with these
requirements and recognizes the need for its customers' privacy.
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 TNB. Somerville is not discussed in this section
as it is not a significant subsidiary as defined by the SEC. These capital
guidelines involve quantitative and qualitative measures of assets, liabilities
and certain off-balance sheet instruments.
Trustmark and TNB are required to maintain Tier 1 and total capital equal to at
least 4% and 8% of their total risk-weighted assets, respectively. At December
31, 2002, Trustmark exceeded both requirements with Tier 1 capital and total
capital equal to 12.74% and 13.99% of its total risk-weighted assets,
respectively. At December 31, 2002, TNB also exceeded both requirements with
Tier 1 capital and total capital equal to 12.61% and 13.86% of its total
risk-weighted assets, respectively.
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 banks and bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. At December 31, 2002, the
leverage ratios for Trustmark and TNB were 8.72% and 8.64%, respectively.
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, 2002, the
most recent notification from the OCC categorized TNB as well capitalized based
on the ratios and guidelines described above.
Payment of Dividends and Other Restrictions
There are various legal and regulatory provisions which limit the amount of
dividends TNB 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 from the preceding two years. During the fourth quarter of 2002, TNB
applied for and received approval from its regulators to pay an additional
$100.0 million in dividends to continue the capital management plan, as
discussed in Note 14, "Shareholders' Equity," included in Trustmark's 2002
Annual Report to Shareholders. TNB will have available in 2003 approximately
$33.7 million plus its net income for that year to pay as dividends. 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 TNB 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, 2002, TNB's annual BIF and
SAIF assessment rates and Somerville's BIF rate were $0.0168 per $100 of insured
deposits.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Trustmark Corporation (the Registrant) and its primary
bank subsidiary, Trustmark National Bank, including their ages, positions and
principal occupations for the last five years are as follows:
Richard G. Hickson, 58
Trustmark Corporation
Chairman, President and Chief Executive Officer since April 2002
President and Chief Executive Officer from May 1997 to April 2002
Trustmark National Bank
Chairman and Chief Executive Officer since April 2002
Vice Chairman and Chief Executive Officer from May 1997 to April 2002
Harry M. Walker, 52
Trustmark Corporation
Secretary from September 1995 to April 2002
Trustmark National Bank
President and Chief Operating Officer - Commercial Services Division
since September 2002
President - Commercial Bank from May 2002 to September 2002
President - General Bank from September 1999 to May 2002
President and Chief Operating Officer from March 1992 to September 1999
Gerard R. Host, 48
Trustmark Corporation
Treasurer from September 1995 to April 2002
Trustmark National Bank
President and Chief Operating Officer - Consumer Services Division since
September 2002
President - Financial Services Bank from September 1999 to September 2002
Executive Vice President and Chief Financial Officer from November 1995
to September 1999
Zach L. Wasson, Jr., 49
Trustmark Corporation
Treasurer since April 2002
Trustmark National Bank
Executive Vice President and Chief Financial Officer since September 1999
Senior Vice President and Chief Investment Officer from November 1995 to
September 1999
T. Harris Collier III, 54
Trustmark Corporation
Secretary since April 2002
Trustmark National Bank
General Counsel since January 1990
Louis E. Greer, 48
Trustmark Corporation
Chief Accounting Officer since January 2003
Trustmark National Bank
Senior Vice President and Controller since September 1998
Vice President and Controller from July 1987 to September 1998
William O. Rainey, 63
Trustmark National Bank
Executive Vice President and Chief Banking Officer since November 1991
James S. Lenoir, 60
Trustmark National Bank
Executive Vice President and Chief Risk Officer since March 1999
Deposit Guaranty Corp. and Deposit Guaranty National Bank
Executive Vice President and Chief Credit Officer from February 1983 to
April 1998
James M. Outlaw, Jr., 49
Trustmark National Bank
Executive Vice President and Chief Information Officer since September
1999
Senior Vice President and Operations Manager from February 1996 to
September 1999
STATISTICAL DISCLOSURES
The consolidated statistical disclosures for Trustmark Corporation and
subsidiaries are contained in the following Tables 1 through 13.
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):
Years Ended December 31,
----------------------------------------------------------
2002 2001
---------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- -------- ------ ---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 26,264 $ 424 1.61% $ 24,629 $ 921 3.74%
Securities available for sale:
Taxable (includes trading) 885,081 50,426 5.70% 1,078,588 68,174 6.32%
Nontaxable 81,883 6,522 7.96% 91,750 7,289 7.94%
Securities held to maturity:
Taxable 588,193 39,136 6.65% 835,946 55,797 6.67%
Nontaxable 89,698 7,120 7.94% 90,867 7,269 8.00%
Loans, net of unearned income 4,544,611 311,376 6.85% 4,302,485 346,571 8.06%
---------- -------- ---------- --------
Total interest-earning assets 6,215,730 415,004 6.68% 6,424,265 486,021 7.57%
Cash and due from banks 280,543 258,776
Other assets 421,037 376,469
Allowance for loan losses (75,518) (71,650)
---------- ----------
Total Assets $6,841,792 $6,987,860
========== ==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 957,410 $ 11,991 1.25% $ 795,890 $ 19,864 2.50%
Savings deposits 735,885 4,840 0.66% 637,973 7,759 1.22%
Time deposits 1,819,130 62,228 3.42% 1,895,677 98,733 5.21%
Federal funds purchased and securities
sold under repurchase agreements 788,618 12,652 1.60% 1,117,059 42,390 3.79%
Short-term borrowings 384,481 8,206 2.13% 495,607 22,167 4.47%
Long-term FHLB advances 327,054 13,849 4.23% 351,301 18,329 5.22%
---------- -------- ---------- --------
Total interest-bearing liabilities 5,012,578 113,766 2.27% 5,293,507 209,242 3.95%
---------- ----------
Noninterest-bearing demand deposits 1,086,487 966,437
Other liabilities 66,996 72,478
Shareholders' equity 675,731 655,438
---------- ----------
Total Liabilities and Shareholders' Equity $6,841,792 $6,987,860
========== ==========
Net Interest Margin 301,238 4.85% 276,779 4.31%
Less tax equivalent adjustments:
Investments 4,775 5,095
Loans 4,277 4,780
-------- --------
Net Interest Margin per Annual Report $292,186 $266,904
======== ========
Year Ended December 31,
----------------------------
2000
----------------------------
Average Yield/
Balance Interest Rate
---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 32,496 $ 2,155 6.63%
Securities available for sale:
Taxable (includes trading) 1,060,986 71,876 6.77%
Nontaxable 68,754 5,765 8.38%
Securities held to maturity:
Taxable 938,793 61,866 6.59%
Nontaxable 77,015 6,086 7.90%
Loans, net of unearned income 4,079,870 348,997 8.55%
---------- --------
Total interest-earning assets 6,257,914 496,745 7.94%
Cash and due from banks 268,544
Other assets 320,329
Allowance for loan losses (65,758)
----------
Total Assets $6,781,029
==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 661,889 $ 23,641 3.57%
Savings deposits 640,557 11,189 1.75%
Time deposits 1,745,591 91,499 5.24%
Federal funds purchased and securities
sold under repurchase agreements 1,212,016 68,618 5.66%
Short-term borrowings 878,275 56,837 6.47%
Long-term FHLB advances 51,230 3,412 6.66%
---------- --------
Total interest-bearing liabilities 5,189,558 255,196 4.92%
----------
Noninterest-bearing demand deposits 880,020
Other liabilities 62,429
Shareholders' equity 649,022
----------
Total Liabilities and Shareholders' Equity $6,781,029
==========
Net Interest Margin 241,549 3.86%
Less tax equivalent adjustments:
Investments 4,148
Loans 4,421
--------
Net Interest Margin per Annual Report $232,980
========
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 2001 and 2000 amounts to conform to the 2002 presentation.
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).
2002 Compared to 2001 2001 Compared to 2000
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 under reverse repurchase
agreements $ 58 $ (555) $ (497) $ (441) $ (793) $(1,234)
Securities available for sale:
Taxable (includes trading) (11,474) (6,274) (17,748) 1,168 (4,870) (3,702)
Nontaxable (785) 18 (767) 1,841 (317) 1,524
Securities held to maturity:
Taxable (16,494) (167) (16,661) (6,816) 747 (6,069)
Nontaxable (94) (55) (149) 1,105 78 1,183
Loans, net of unearned income 18,792 (53,987) (35,195) 18,318 (20,744) (2,426)
------- ------- ------- ------- ------- -------
Total interest-earning assets (9,997) (61,020) (71,017) 15,175 (25,899) (10,724)
Interest paid on:
Interest-bearing demand deposits 3,472 (11,345) (7,873) 4,188 (7,965) (3,777)
Savings deposits 1,059 (3,978) (2,919) (45) (3,385) (3,430)
Time deposits (3,839) (32,666) (36,505) 7,765 (531) 7,234
Federal funds purchased and securities
sold under repurchase agreements (10,029) (19,709) (29,738) (5,028) (21,200) (26,228)
Short-term borrowings (4,186) (9,775) (13,961) (20,281) (14,389) (34,670)
Long-term FHLB advances (1,196) (3,284) (4,480) 15,809 (892) 14,917
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities (14,719) (80,757) (95,476) 2,408 (48,362) (45,954)
------- ------- ------- ------- ------- -------
Change in net interest income on
a tax equivalent basis $ 4,722 $19,737 $24,459 $12,767 $22,463 $35,230
======= ======= ======= ======= ======= =======
The change in interest due to both volume and yield/rate has been allocated to
change due to volume and change due to yield/rate in proportion to the absolute
value of the change in each. Tax-exempt income has been adjusted to a tax
equivalent basis using a tax rate of 35% for 2002, 2001 and 2000. The balances
of nonaccrual loans and related income recognized have been included for
purposes of these computations.
TABLE 3 - SECURITIES PURCHASED UNDER REVERSE REPURCHASE AGREEMENTS
The table below presents certain information concerning Trustmark's securities
purchased under reverse repurchase agreements for each of the last three years
($ in thousands):
2002 2001 2000
-------- -------- -------
Securities purchased under reverse
repurchase agreements:
Maximum amount outstanding at any month
end during each period $125,000 $125,000 $27,639
Average amount outstanding at end of period 4,887 5,543 11,305
The securities underlying the reverse repurchase agreements were under
Trustmark's control during the periods presented.
TABLE 4 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY
The table below indicates amortized costs of securities available for sale and
held to maturity by type at year end for each of the last three years ($ in
thousands):
December 31,
------------------------------------
2002 2001 2000
---------- ---------- ----------
Securities available for sale
U.S. Treasury and U.S. Government agencies $ 182,219 $ 275,250 $ 398,930
Obligations of states and political subdivisions 71,544 94,271 65,529
Mortgage-backed securities 937,753 616,044 596,884
---------- ---------- ----------
Total debt securities 1,191,516 985,565 1,061,343
Other securities including equity 48,299 46,946 41,642
---------- ---------- ----------
Total securities available for sale $1,239,815 $1,032,511 $1,102,985
========== ========== ==========
Securities held to maturity
Obligations of states and political subdivisions $ 153,707 $ 184,368 $ 229,684
Mortgage-backed securities 395,390 607,584 775,671
Other securities 100 100 100
---------- ---------- ----------
Total securities held to maturity $ 549,197 $ 792,052 $1,005,455
========== ========== ==========
TABLE 5 - 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, 2002, and the weighted
average yield for each range of maturities (tax equivalent basis - $ in
thousands):
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.
Government agencies $ 28,126 6.76% $ 116,974 4.10% $ 37,119 3.24% $ - - $ 182,219
Obligations of states and
political subdivisions 6,035 7.11% 36,846 7.54% 26,652 8.39% 2,011 7.00% 71,544
Mortgage-backed securities 1,465 6.96% 245 7.81% 130,245 2.83% 805,798 3.16% 937,753
-------- ---------- ---------- --------- ----------
Total debt securities $ 35,626 6.83% $ 154,065 4.93% $ 194,016 3.67% $ 807,809 3.17% 1,191,516
======== ========== ========== =========
Other securities including equity 48,299
----------
Total securities available for sale $1,239,815
==========
Securities held to maturity
Obligations of states and
political subdivisions $ 12,185 6.57% $ 38,583 6.91% $ 55,873 7.22% $ 47,066 8.14% $ 153,707
Mortgage-backed securities - - 17,430 6.49% 52,468 6.84% 325,492 7.05% 395,390
Other securities - - 100 7.50% - - - - 100
-------- ---------- ---------- --------- ----------
Total securities held to maturity $ 12,185 6.57% $ 56,113 6.78% $ 108,341 7.04% $ 372,558 7.19% $ 549,197
======== ========== ========== ========= ==========
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 1.99 years.
As of December 31, 2002, Trustmark did not hold any securities of one issuer
with a carrying value exceeding ten percent of total shareholders' equity.
TABLE 6 - 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):
December 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
Real estate loans:
Construction and land development $ 286,500 $ 401,744 $ 309,532 $ 297,231 $ 251,654
Secured by 1-4 family residential properties 1,530,284 1,385,490 1,250,767 1,175,775 1,106,735
Secured by nonfarm, nonresidential properties 811,289 703,674 602,920 555,255 508,194
Other real estate loans 112,923 103,305 86,046 78,090 72,445
Loans to finance agricultural production 37,452 33,509 38,369 35,412 39,682
Commercial and industrial 776,510 788,982 819,948 824,017 721,483
Loans to individuals for personal expenditures 828,535 876,582 809,808 841,059 773,578
Obligations of states and political subdivisions 162,644 166,342 164,059 151,759 141,152
Loans for purchasing or carrying securities 4,849 10,691 11,127 16,160 24,854
Other loans 66,380 54,047 51,357 40,177 62,541
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $4,617,366 $4,524,366 $4,143,933 $4,014,935 $3,702,318
========== ========== ========== ========== ==========
TABLE 7 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories outstanding as
of December 31, 2002, which, based on the remaining scheduled repayments of
principal, are due in the periods indicated ($ in thousands):
Maturing
----------------------------------
One Year
Within Through After
One Year Five Five
or Less Years Years Total
---------- -------- -------- ----------
Construction and land development $ 216,594 $ 50,301 $ 19,605 $ 286,500
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 384,904 384,807 154,501 924,212
Commercial and industrial 489,965 256,095 30,450 776,510
Other loans (excluding loans to individuals) 124,256 40,666 106,403 271,325
---------- -------- -------- ----------
Total $1,215,719 $731,869 $310,959 $2,258,547
========== ======== ======== ==========
The following table shows all loans in certain categories due after one year
classified according to their sensitivity to changes in interest rates ($ in
thousands):
Maturing
--------------------
One Year
Through After
Five Five
Years Years Total
-------- -------- ----------
Above loans due after one year which have:
Predetermined interest rates $642,488 $240,284 $ 882,772
Floating interest rates 89,381 70,675 160,056
-------- -------- ----------
Total $731,869 $310,959 $1,042,828
======== ======== ==========
TABLE 8 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows Trustmark's nonperforming assets and past due loans at the
end of each of the last five years ($ in thousands):
December 31,
---------------------------------------------------
2002 2001 2000 1999 1998
------- ------- ------- ------- -------
Loans accounted for on a nonaccrual basis $31,642 $36,901 $15,958 $16,671 $13,253
Other real estate (ORE) 6,298 5,110 2,280 1,987 1,859
------- ------- ------- ------- -------
Total nonperforming assets $37,940 $42,011 $18,238 $18,658 $15,112
======= ======= ======= ======= =======
Accruing loans past due 90 days or more $ 2,946 $ 2,740 $ 2,494 $ 2,043 $ 2,431
======= ======= ======= ======= =======
Nonperforming assets/total loans and ORE 0.82% 0.93% 0.44% 0.46% 0.41%
======= ======= ======= ======= =======
A loan is classified as nonaccrual and the accrual of interest on such loan is
discontinued if: (1) the loan is maintained on a cash basis because of a
deterioration in the financial condition of the borrower, (2) payment in full of
the principal and interest is not expected or (3) principal or interest has been
in default for a period of 90 days or more unless the loan is both well secured
and in the process of collection. 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. Generally, loans may be restored to accrual status when (1)
none of the principal and interest is due and unpaid and the bank expects
repayment of the remaining contractual principal and interest or (2) when it
otherwise becomes well secured and in the process of collection. Loans are
generally measured for impairment based on the present value of the loan's
effective interest rate, except when foreclosure or liquidation is probable or
when the primary source of repayment is provided by real estate collateral. The
policy for recognizing income on impaired loans is consistent with the
nonaccrual policy.
As of December 31, 2002, 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 6.
Explanation of the changes in 2002 can be found in the table captioned
"Nonperforming Assets" and the related discussion (page 56) included in the
Registrant's 2002 Annual Report to Shareholders and is incorporated herein by
reference.
TABLE 9 - 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):
Years Ended December 31,
---------------------------------------------------
2002 2001 2000 1999 1998
------- ------- ------- ------- -------
Balance at beginning of period $75,534 $65,850 $65,850 $66,150 $64,100
Loans charged off:
Real estate loans (4,004) (4,609) (2,176) (1,953) (1,121)
Loans to finance agricultural production (84) (288) (107) (243) (73)
Commercial and industrial (6,224) (4,317) (3,228) (3,242) (2,561)
Loans to individuals for personal expenditures (11,207) (10,982) (9,470) (7,863) (6,698)
All other loans (2,516) (2,502) (2,417) (1,685) (1,819)
------- ------- ------- ------- -------
Total charge-offs (24,035) (22,698) (17,398) (14,986) (12,272)
Recoveries on loans previously charged off:
Real estate loans 64 6 145 156 72
Loans to finance agricultural production - - - - 2
Commercial and industrial 1,689 721 1,177 791 1,181
Loans to individuals for personal expenditures 5,156 4,774 3,967 3,319 2,960
All other loans 2,256 2,103 1,708 1,348 1,036
------- ------- ------- ------- -------
Total recoveries 9,165 7,604 6,997 5,614 5,251
------- ------- ------- ------- -------
Net charge-offs (14,870) (15,094) (10,401) (9,372) (7,021)
Additions to allowance charged to operating expense 14,107 13,200 10,401 9,072 7,771
Other additions to allowance for loan losses - 11,578 - - 1,300
------- ------- ------- ------- -------
Balance at end of period $74,771 $75,534 $65,850 $65,850 $66,150
======= ======= ======= ======= =======
Percentage of net charge-offs during period to
average loans outstanding during the period 0.33% 0.35% 0.25% 0.24% 0.21%
======= ======= ======= ======= =======
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb estimated probable loan losses. Management's periodic
evaluation of the adequacy of the allowance is based on identified loan
impairments, Trustmark's past loan loss expericence, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of any
underlying collateral, composition of the loan portfolio, current economic
conditions and other relevant factors. This evaluation is inherently subjective,
as it requires material estimates, including the amounts and timing of future
cash flows expected to be received on impaired loans, that may be susceptible to
significant change.
TABLE 10 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of Trustmark's allowance
for loan losses at December 31, 2002. These allocations were determined based
upon Management's analysis of the various types of risk associated with
Trustmark's loan portfolio. A discussion of Management's methodology for
performing the analysis follows the table ($ in thousands):
Allocation for pools of risk-rated loans $38,569
Additional allocation for risk-rated loans 1,468
Allocation for selected industries 5,027
General allocation for all other loans 17,717
Allocation for available lines of credit and letters of credit 2,146
Unallocated 9,844
-------
Total $74,771
=======
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb probable losses in the loan portfolio, in addition to
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
monthly utilizing the criteria specified in the Office of the Comptroller of the
Currency's Handbook "Allowance for Loan and Lease Losses", 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 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, credit
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 either the 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 $9.8 million
relates to issues that cannot be measured on a quantitative basis over a
prolonged period of time.
Management expects that net charge-offs for 2003 should be approximately 0.30%
to 0.35% of average loans as compared with 0.33% for 2002. Although Management
believes these expectations are reasonable, it can give no assurance that such
expectations will prove to be correct.
TABLE 11 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000 or
more at December 31, 2002 ($ in thousands):
3 months or less $126,490
Over 3 months through 6 months 101,398
Over 6 months through 12 months 123,241
Over 12 months 125,263
--------
Total $476,392
========
TABLE 12 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
2002 2001 2000
------ ------ ------
Return on average assets 1.77% 1.59% 1.50%
Return on average equity 17.93% 16.98% 15.68%
Dividend payout ratio 31.54% 32.27% 34.00%
Equity to assets ratio 9.88% 9.38% 9.57%
TABLE 13 - SHORT-TERM BORROWINGS
The table below presents certain information concerning Trustmark's short-term
borrowings for each of the last three years ($ in thousands):
2002 2001 2000
-------- ---------- ----------
Federal funds purchased and securities sold under
repurchase agreements:
Amount outstanding at end of period $954,978 $1,037,506 $1,255,013
Weighted average interest rate at end of period 1.16% 1.59% 5.70%
Maximum amount outstanding at any
month end during each period $973,261 $1,318,720 $1,466,362
Average amount outstanding during each period $788,618 $1,117,059 $1,212,016
Weighted average interest rate during each period 1.60% 3.79% 5.66%
2002 2001 2000
-------- ---------- ----------
Short-term borrowings:
Amount outstanding at end of period $275,959 $ 558,687 $ 632,964
Weighted average interest rate at end of period 2.02% 2.32% 6.55%
Maximum amount outstanding at any
month end during each period $494,475 $ 984,297 $1,138,874
Average amount outstanding during each period $384,481 $ 495,607 $ 878,275
Weighted average interest rate during each period 2.13% 4.47% 6.47%
ITEM 2. PROPERTIES
Trustmark's principal offices are housed in its complex located in downtown
Jackson, Mississippi and owned by TNB. Approximately 212,000 square feet, or
80%, of the available space in the main office building is allocated to bank use
with the remainder occupied by tenants on a lease basis. Trustmark, through its
two banking subsidiaries, also operates 114 full-service branches, 20
limited-service branches, 4 in-store branches and an ATM network which includes
98 ATMs at on-premise locations and 81 ATMs located at off-premise sites.
Trustmark leases 72 of its 195 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 2002.
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, 2003, there were approximately 4,600 registered shareholders of
Trustmark's common stock. Other information required by this item can be found
in Note 14, "Shareholders' Equity," (pages 35-36) and the table captioned
"Principal Markets and Prices of Trustmark's Stock" (page 44) included in the
Registrant's 2002 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 43) included in the Registrant's 2002 Annual
Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item can be found in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" (pages 45-60)
included in the Registrant's 2002 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 57-60)
included in the Registrant's 2002 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 2002 Annual
Report to Shareholders (pages 13-42) and are incorporated herein by reference.
The table captioned "Summary of Quarterly Results of Operations" (page 44) is
also included in the Registrant's 2002 Annual Report of Shareholders and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 9, 2002, the Board of Directors of Trustmark Corporation (Trustmark),
based on the recommendation of its Audit Committee, decided not to renew the
engagement of its independent public accountants, Arthur Andersen LLP
(Andersen). This determination followed Trustmark's decision to seek proposals
from other independent accountants to audit Trustmark's consolidated financial
statements for the year ending December 31, 2002. On April 29, 2002, the Board
of Directors of Trustmark, based on the recommendation of its Audit Committee,
announced the engagement of KPMG LLP as its independent public accountants to
replace Andersen. Subsequent to their engagement, KPMG LLP audited the
consolidated balance sheets of Trustmark and its subsidiaries as of December 31,
2002 and 2001, 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, 2002.
During Trustmark's two most recent fiscal years and all subsequent interim
periods prior to the date hereof, there were no disagreements between Trustmark
and Andersen on any matter of accounting principles, financial statement
disclosure or auditing scope or procedure which, if not resolved to Andersen's
satisfaction, would have caused Andersen to make reference to the matter of the
disagreement in connection with their reports. Andersen's reports on Trustmark's
consolidated financial statements for each of the years ended 2001 and 2000, did
not contain an adverse opinion or disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope or accounting principles.
Andersen's report on Trustmark's consolidated financial statements for the years
ended December 31, 2001 and 2000, dated January 8, 2002, was issued on an
unqualified basis in conjunction with the filing of Trustmark's Annual Report on
Form 10-K for the year ended December 31, 2001, filed on March 25, 2002.
None of the reportable events described under Item 304(a)(1)(v) of Regulation
S-K occurred within Trustmark's two most recent fiscal years and all subsequent
interim periods prior to the date hereof.
Prior to April 29, 2002, Trustmark did not consult with KPMG LLP regarding any
of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation
S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found in "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in Trustmark Corporation's Proxy Statement (pages 4-8 and 11,
respectively) dated March 14, 2003, and is incorporated herein by reference.
Information on the Registrant's executive officers is included in Part I, pages
8-9 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in "Directors' Compensation"
(page 4) and "Executive Compensation" (pages 12-16) contained in Trustmark
Corporation's Proxy Statement dated March 14, 2003, and is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
Information regarding security ownership of certain beneficial owners and
Management can be found in "Securities Ownership by Certain Beneficial Owners
and Management" contained in Trustmark Corporation's Proxy Statement (pages
10-11) dated March 14, 2003, and is incorporated herein by reference.
The table below represents compensation plans under which equity securities of
Trustmark are authorized as of December 31, 2002:
Number of securities
remaining available
Number of securities to Weighted average for future issuance
be issued upon exercise exercise price of under equity
of outstanding options, outstanding options, compensations plans
Plan Category warrants and rights (a) warrants and rights (excluding (a))
- ---------------------------- ----------------------- -------------------- --------------------
Approved by security holders 1,450,161 $21.85 5,350,061
Not approved by security
holders - - -
--------- ------ ---------
Total 1,450,161 $21.85 5,350,061
========= ====== =========
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions can be
found in "Transactions with Management" contained in Trustmark Corporation's
Proxy Statement (page 16) dated March 14, 2003, and is incorporated herein by
reference.
PART IV
ITEM 14. CONTROLS AND PROCEDURES
For the period ending December 31, 2002, Trustmark evaluated the effectiveness
of the design and operation of its disclosure controls and procedures pursuant
to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended
(Exchange Act), under the supervision and with the participation of its
management, including the Chief Executive Officer and the Treasurer (the
principal financial officer). Based upon this evaluation, the Chief Executive
Officer and the Treasurer concluded that, as of December 31, 2002, Trustmark's
disclosure controls and procedures were adequate to ensure that information
required to be disclosed by Trustmark in the reports filed or submitted by it
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A-1. Financial Statements
The report of KPMG LLP, independent auditors, and the following consolidated
financial statements of Trustmark Corporation and subsidiaries are included in
the Registrant's 2002 Annual Report to Shareholders and are incorporated into
Part II, Item 8 herein by reference:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2002 and 2001
Consolidated Statements of Income for the Years Ended December 31, 2002,
2001 and 2000
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the Years Ended December 31,
2002, 2001 and 2000
Notes to Consolidated Financial Statements (Notes 1 through 19)
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
On October 15, 2002, Trustmark filed a report on Form 8-K announcing its
financial results for the period ended September 30, 2002.
C. Exhibits
The exhibits listed in the Exhibit Index are filed herewith or are incorporated
herein by reference.
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/ Zach L. Wasson
---------------------- ------------------
Richard G. Hickson Zach L. Wasson
Chairman of the Board, President Treasurer (Principal
& Chief Executive Officer Financial Officer)
DATE: March 21, 2003 DATE: March 21, 2003
BY: /s/ Louis E. Greer
------------------
Louis E. Greer
Chief Accounting Officer
DATE: March 21, 2003
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 21, 2003 BY: /s/ J. Kelly Allgood
--------------------
J. Kelly Allgood, Director
DATE: March 21, 2003 BY: /s/ Reuben V. Anderson
----------------------
Reuben V. Anderson, Director
DATE: March 21, 2003 BY: /s/ John L. Black, Jr.
----------------------
John L. Black, Jr., Director
DATE: March 21, 2003 BY: /s/ William C. Deviney, Jr.
---------------------------
William C. Deviney, Jr., Director
DATE: March 21, 2003 BY: /s/ C. Gerald Garnett
---------------------
C. Gerald Garnett, Director
DATE: March 21, 2003 BY: /s/ Richard G. Hickson
----------------------
Richard G. Hickson, Chairman, President
& Chief Executive Officer and Director
DATE: March 21, 2003 BY: /s/ Matthew L. Holleman III
---------------------------
Matthew L. Holleman III, Director
DATE: March 21, 2003 BY: /s/ William Neville III
-----------------------
William Neville III, Director
DATE: March 21, 2003 BY: /s/ Richard H. Puckett
----------------------
Richard H. Puckett, Director
DATE: March 21, 2003 BY: /s/ Carolyn C. Shanks
---------------------
Carolyn C. Shanks, Director
DATE: March 21, 2003 BY: /s/ Kenneth W. Williams
-----------------------
Kenneth W. Williams, Director
DATE: March 21, 2003 BY: /s/ William G. Yates, Jr.
-------------------------
William G. Yates, Jr., Director
EXHIBIT INDEX
3-a Articles of Incorporation, as amended, effective April 9, 2002.
3-b Bylaws, as amended, effective January 21, 2003.
10-a 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-b 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-c 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-d 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-e Deferred Compensation Plan for Directors of Trustmark National Bank, as
amended. Filed as Exhibit 10-i to Trustmark's Form 10-K Annual Report
for the year ended December 31, 1999, incorporated herein by reference.
10-f Deferred Compensation Plan for Executives of Trustmark National Bank,
as amended. Filed as Exhibit 10-j to Trustmark's Form 10-K Annual
Report for the year ended December 31, 1999, incorporated herein by
reference.
10-g Trustmark Corporation Deferred Compensation Plan effective January 1,
2002. Filed as Exhibit 10-a to Trustmark's Form 10-Q Quarterly Report
for the quarterly period ended March 31, 2002, incorporated herein by
reference.
10-h Amended and Restated Employment Agreement between Trustmark Corporation
and Richard G. Hickson dated March 12, 2002. Filed as Exhibit 10-b to
Trustmark's Form 10-Q Quarterly Report for the quarterly period ended
March 31, 2002, incorporated herein by reference.
10-i Amended and Restated Change in Control Agreement between Trustmark
Corporation and Gerard R. Host dated March 12, 2002. Filed as Exhibit
10-c to Trustmark's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 2002, incorporated herein by reference.
10-j Amended and Restated Change in Control Agreement between Trustmark
Corporation and Harry M. Walker dated March 12, 2002. Filed as Exhibit
10-d to Trustmark's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 2002, incorporated herein by reference.
13 Only those portions of the Registrant's 2002 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.
21 List of Subsidiaries.
23 Consent of KPMG LLP.
99-a Certification by Chief Executive Officer pursuant to 18 U.S.C. ss.
1350.
99-b Certification by Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99-c Certification by Chief Financial Officer pursuant to 18 U.S.C. ss.
1350.
99-d Certification by Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
All other exhibits are omitted, as they are inapplicable or not required by the
related instructions.