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, 1997
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 charger)
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 20, 1998, the aggregate market
value of the voting stock held by nonaffiliates of the Registrant was
$1,132,940,138.
As of March 16, 1998, there were issued and outstanding 36,733,044 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 1997 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated March 13, 1998 (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 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
TRUSTMARK CORPORATION
1997 FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (the Corporation) is a one-bank holding company which
was incorporated under the Mississippi Business Corporation Act on August 5,
1968, and commenced doing business in November 1968. The Corporation's primary
business activities are conducted through its wholly-owned subsidiary, Trustmark
National Bank (the Bank) and the Bank's wholly-owned subsidiary, Trustmark
Financial Services, Inc. (TFSI). The Bank accounts for substantially all of the
assets and revenues of the Corporation. Chartered by the State of Mississippi in
1889, the Bank is headquartered in Jackson, Mississippi and is the largest bank
in the state. The Corporation also owns all of the stock of F.S. Corporation and
First Building Corporation, both nonbank Mississippi corporations. F.S.
Corporation and First Building Corporation are primarily dormant and are not
considered significant subsidiaries.
The Bank offers a variety of deposit, investment and credit products to its
customers through strategic business units serving 185 locations in the State of
Mississippi. During 1997, the Bank's existing strategic business units were
realigned into new groups which included the Retail Banking Group, the
Commercial Banking Group and the Financial Services Group.
The Retail Banking Group includes the Community Banking Network,
Residential Mortgage, Retail and Small Business Services. Both the Community
Bank Network, which manages 19 community banks with over 100 branches and the
Retail Unit, which administers Card Services, Indirect Lending and all Metro
Jackson branches, provide traditional banking products primarily to individuals
and small businesses. In order to provide customers with services that are
convenient and meet their demanding schedules, both Community Banking and Retail
branches have been opened inside Wal-Mart stores, Kroger supermarkets and
Albertson's supermarkets. In order to allow customers to do their banking around
the clock from their homes or offices, the Bank now offers TrustTouch pc, an
on-line banking service. Customers may also obtain information about the Bank's
services via the Internet by accessing its web site (www.trustmark.com). Through
the Retail Unit, the Bank's Card Services offer MasterCard, VISA, VISA Gold and
VISA Business credit card services to consumers and merchants throughout
Mississippi. In addition, the Bank now has more than 100,000 debits cards in
use. The Indirect Lending area is affiliated with over 100 automobile
dealerships across the region and has enabled the Bank to become the second
largest financier of automobiles in Mississippi and the largest among financial
institutions. A natural extension of Retail Services, the Bank's Residential
Mortgage Unit offers first time and repeat home borrowers financing
opportunities at several convenient locations throughout the state.
The Commercial Banking Group provides loans, deposit services and cash
management to businesses and banks statewide. The Deposit/Cash Management
department offers new technology and services for businesses to monitor cash
flows through the utilization of TrustNet computer banking, automated clearing
services which facilitates electronic bill payment and direct deposit of
employee pay and the Bank's Mutual Fund Sweep account. The Bank offers real
estate loans targeting residential construction builders and developers in
addition to commercial real estate construction and financing. The Bank 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. The Bank's Correspondent Banking
Department maintains relationships with more than 100 independent banks across
the state, providing competitively priced cash management services, financing
and clearing services.
The Financial Services Group offers trust and investment services to
individuals, corporations and public entities. With $5.6 billion under
administration, the Bank's Trust Department offers a full line of asset
management and custodial services. In early 1997, Trustmark Financial Services,
Inc. (TFSI), a subsidiary of the Bank began offering full-service brokerage
services at discount prices. TFSI offers mutual funds, equities, corporate and
municipal bonds, and self-directed Individual Retirement Accounts. The Public
Services Department specializes in serving the financial needs of public
entities such as state agencies, municipal government and school districts.
As of March 16, 1998, the Corporation and the Bank employed approximately
2,300 full-time equivalent employees.
COMPETITION
The Bank competes with national and state banks in its service areas for
all types of depository, credit, investment and trust services. In addition, it
competes in its respective service areas with other financial institutions
including savings and loan associations, personal loan companies, consumer
finance companies, mortgage companies, insurance companies, brokerage firms,
investment companies, credit unions and financial service operations of major
retailers. All these institutions compete in the areas of interest rates, the
availability and quality of services and products, and the pricing of these
services and products.
SUPERVISION AND REGULATION
The Corporation is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended. As such, the Corporation is required to file an
annual report and such additional information as the Board of Governors of the
Federal Reserve System may require. The Act requires every bank holding company
to obtain the prior approval of the Board of Governors
before it may acquire substantially all of the assets of any bank, or ownership
or control of any voting shares of any bank, if, after the acquisition, it would
own or control, directly or indirectly, more than five percent of the voting
shares of the bank. In addition, a bank holding company is generally prohibited
from engaging in or acquiring direct or indirect control of voting shares of any
company engaged in nonbanking activities. One of the principal exceptions to
this prohibition is for activities found by the Board of Governors, by order or
regulation, to be closely related to banking or managing or controlling banks
"as to be a proper incident thereto." The Board has by regulation determined
that a number of activities are closely related to banking within the meaning of
the Act. In addition, the Corporation is subject to regulation by the State of
Mississippi under its laws of incorporation.
The Bank is subject to various requirements and restrictions by federal and
state banking authorities, including the Office of the Comptroller of the
Currency (OCC) and the Mississippi Department of Banking. Areas subject to
regulation include loans, reserves, investments, issuance of securities,
establishment of branches, loans to directors, executive officers and their
related interests, relationships with correspondent banks, consumer protection
and other aspects of operations. In addition, national banks are subject to
legal limitations on the amount of earnings they may pay as dividends.
The Bank also is insured by, and therefore subject to, the regulations of
the Federal Deposit Insurance Corporation (FDIC). In December 1991, the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was enacted.
FDICIA substantially revised the depository institution regulatory and funding
provisions of the Federal Deposit Insurance Act and made revisions to several
other federal banking statutes. Among other things, FDICIA requires banking
regulators to take prompt corrective action whenever financial institutions do
not meet minimum capital requirements. In addition, FDICIA has created
restrictions on capital distributions that would leave a depository institution
undercapitalized. FDICIA regulations also include procedures and interpretive
guidelines that mandate certain audit and reporting requirements for financial
institutions. Management is responsible for not only preparing the Corporation's
annual financial statements, but also establishing and maintaining adequate
internal controls over financial reporting. In addition, Management must comply
with certain laws and regulations designated by the FDIC as well as assess the
effectiveness of the controls that have been established to comply with these
laws and regulations.
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:
Frank R. Day, 66, Director, Chairman of the Board, Trustmark Corporation;
Chairman of the Board, Trustmark National Bank since January 1982.
Richard G. Hickson, 53, President and Chief Executive Officer, Trustmark
Corporation; 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; President, Texas Commerce Bank, Dallas from
1993 to 1995.
Harry M. Walker, 47, Secretary, Trustmark Corporation since January 1995;
President and Chief Operating Officer, Trustmark National Bank since March 1992.
Gerard R. Host, 43, Treasurer, Trustmark Corporation since September 1995;
Executive Vice President and Chief Financial Officer, Trustmark National Bank
since November 1995.
George R. Day, 62, Executive Vice President and Chief Credit Officer, Trustmark
National Bank since November 1991.
Thomas W. Mullen, 55, Executive Vice President for Strategic Planning, Trustmark
National Bank since November 1991.
William O. Rainey, 58, Executive Vice President and Chief Banking Officer,
Trustmark National Bank since November 1991.
All executive officers, with the exception of Richard G. Hickson, have held
executive or senior management positions with the Corporation or the Bank for
more than five years.
STATISTICAL DISCLOSURES
The consolidated statistical disclosures for Trustmark Corporation and
subsidiaries are contained in the following Tables 1 through 12.
During 1997, the Corporation completed two business combinations. On
February 28, 1997, the Corporation completed its merger with First Corinth
Corporation (FCC) and its subsidiary, National Bank of Commerce of Corinth,
Mississippi (NBC) in a business combination accounted for as a pooling of
interests. At the merger date, FCC and NBC had approximatgely $134 million in
total assets. As a result of this transaction, the Corporation has restated its
financial statements to include FCC and NBC as of January 1, 1997. Prior years'
statistical disclosures were not restated as the changes would have been
immaterial. On September 19, 1997, Perry County Bank (PCB) in New Augusta,
Mississippi was merged with the Corporation in a business combination accounted
for by the purchase method of accounting. At the merger date, PCB has
approximately $43 million in total assets. PCB's results of operations, which
are not material, have been included in the statistical disclosures from the
merger date.
TRUSTMARK CORPORATION
STATISTICAL DISCLOSURES
TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
The Average Assets and Liabilities table below shows the average balances
for all assets and liabilities of the Corporation at year end and the interest
income or expense associated with those assets and liabilities. The yields or
rates have been computed based upon the interest income or expense for each of
the last three years ended (tax equivalent basis - $ in thousands):
December 31,
-------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 64,096 $ 3,575 5.58% $ 76,203 $ 4,223 5.54%
Trading securities 1,387 107 7.71% 340 69 20.29%
Securities available for sale:
Taxable 612,745 36,671 5.98% 605,467 34,754 5.74%
Nontaxable 320 37 11.56%
Securities held to maturity:
Taxable 1,299,788 83,101 6.39% 1,324,384 84,285 6.36%
Nontaxable 103,212 8,938 8.66% 92,160 8,245 8.95%
Loans, net of unearned income 2,771,662 250,108 9.02% 2,556,811 231,339 9.05%
---------- -------- ---------- --------
Total interest-earning assets 4,853,210 382,537 7.88% 4,655,365 362,915 7.80%
Cash and due from banks 269,665 282,165
Other assets 252,260 234,758
Allowance for loan losses (63,897) (62,785)
---------- ----------
Total Assets $5,311,238 $5,109,503
========== ==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 726,812 21,736 2.99% $ 978,165 26,472 2.71%
Savings deposits 573,528 12,333 2.15% 334,925 7,520 2.25%
Time deposits 1,623,384 86,804 5.35% 1,493,721 78,622 5.26%
Federal funds purchased and securities sold
under repurchase agreements 912,089 47,236 5.18% 969,413 48,653 5.02%
Short term borrowing 67,708 4,778 7.06% 41,274 2,739 6.64%
---------- -------- ---------- --------
Total interest-bearing liabilities 3,903,521 172,887 4.43% 3,817,498 164,006 4.30%
-------- --------
Noninterest-bearing demand deposits 789,041 741,324
Other liabilities 57,786 52,168
Stockholders' equity 560,890 498,513
---------- ==========
Total Liabilities and Stockholders' Equity $5,311,238 $5,109,503
========== ==========
Net Interest Margin 209,650 4.32% 198,909 4.27%
Less tax equivalent adjustments:
Investments 3,141 2,886
Loans 2,504 1,966
-------- --------
Net Interest Margin per Annual Report $204,005 $194,057
======== ========
December 31,
-----------------------------
1995
-----------------------------
Average Yield/
Balance Interest Rate
========== ======== ======
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 113,594 $ 6,815 6.00%
Trading securities 500 68 13.60%
Securities available for sale:
Taxable 455,176 28,872 6.34%
Nontaxable
Securities held to maturity:
Taxable 1,291,136 81,052 6.28%
Nontaxable 99,933 9,060 9.07%
Loans, net of unearned income 2,481,030 227,322 9.16%
---------- --------
Total interest-earning assets 4,441,369 353,189 7.95%
Cash and due from banks 275,235
Other assets 223,468
Allowance for loan losses (62,547)
----------
Total Assets $4,877,525
==========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $1,080,817 31,712 2.93%
Savings deposits 235,223 6,109 2.60%
Time deposits 1,448,962 74,553 5.15%
Federal funds purchased and securities sold
under repurchase agreements 898,439 49,171 5.47%
Short term borrowing 12,907 1,196 9.27%
---------- --------
Total interest-bearing liabilities 3,676,348 162,741 4.43%
--------
Noninterest-bearing demand deposits 701,357
Other liabilities 47,984
Stockholders' equity 451,836
==========
Total Liabilities and Stockholders' Equity $4,877,525
==========
Net Interest Margin 190,448 4.29%
Less tax equivalent adjustments:
Investments 3,171
Loans 1,677
--------
Net Interest Margin per Annual Report $185,600
========
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 1996 and 1995 statements to conform to the 1997 method of
presentation.
TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS
The Volume and Yield/Rate Variance table below shows the change from year
to year for each component of the tax equivalent net interest margin separated
into the amount generated by volume changes and the amount generated by changes
in the yield or rate (tax equivalent basis - $ in thousands):
1997 Compared to 1996 1996 Compared to 1995
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 ($ 678) $ 30 ($ 648) ($ 2,102) ($ 490) ($ 2,592)
Trading securities 103 (65) 38 (26) 27 1
Securities available for sale:
Taxable 428 1,489 1,917 8,817 (2,935) 5,882
Nontaxable 0 37 37 0 0 0
Securities held to maturity:
Taxable (1,578) 394 (1,184) 2,163 1,070 3,233
Nontaxable 966 (273) 693 (696) (119) (815)
Loans, net of unearned income 19,533 (764) 18,769 6,801 (2,784) 4,017
-------- -------- -------- -------- -------- --------
Total interest-earning assets 18,774 848 19,622 14,957 (5,231) 9,726
Interest paid on:
Interest-bearing demand deposits (7,285) 2,549 (4,736) (2,926) (2,314) (5,240)
Savings deposits 5,161 (348) 4,813 2,320 (909) 1,411
Time deposits 6,835 1,347 8,182 2,406 1,663 4,069
Federal funds purchased and securities sold
under repurchase agreements (2,936) 1,519 (1,417) 3,707 (4,225) (518)
Short term borrowings 1,856 183 2,039 1,967 (424) 1,543
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 3,631 5,250 8,881 7,474 (6,209) 1,265
-------- -------- -------- -------- -------- --------
Change in net interest income on a
tax equivalent basis $ 15,143 ($ 4,402) $ 10,741 $ 7,483 $ 978 $ 8,461
======== ======== ======== ======== ======== ========
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 1997, 1996 and 1995 . The
balances of nonaccrual loans and related income recognized have been included
for purposes of these computations.
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):
December 31,
====================================
1997 1996 1995
========== ========== ==========
Securities available for sale
U. S. Treasury and U. S. Government agencies $ 480,965 $ 469,396 $ 413,385
Mortgage-backed securities 97,853 39,536 53,382
---------- ---------- ----------
Total debt securities 578,818 508,932 466,767
Equity securities 14,159 13,813 13,080
---------- ---------- ----------
Total securities available for sale $ 592,977 $ 522,745 $ 479,847
========== ========== ==========
Securities held to maturity
U. S. Treasury and U. S. Government agencies $ 221,929 $ 267,636 $ 257,335
Obligations of states and political subdivisions 230,642 220,073 212,065
Mortgage-backed securities 944,257 937,451 884,132
Other securities 100 100 100
---------- ---------- ----------
Total securities held to maturity $1,396,928 $1,425,260 $1,353,632
========== ========== ==========
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, 1997 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 $84,504 5.24% $396,461 6.20% $ 480,965
Mortgage-backed securities 9,658 7.05% $ 219 8.87% $ 87,976 6.55% 97,853
------- -------- -------- -------- ----------
Total debt securities 84,504 406,119 219 87,976 578,818
Equity securities 14,159
------- -------- -------- -------- ----------
Total securities available for sale $84,504 $406,119 $ 219 $ 87,976 $ 592,977
======= ======== ======== ======== ==========
Securities held to maturity
U. S. Treasury and U. S
Government agencies $77,305 5.61% $144,624 6.33% $ 221,929
Obligations of states and
political subdivisions 17,932 7.33% 93,403 7.43% $ 86,228 7.61% $ 33,079 8.81% 230,642
Mortgage-backed securities 628 6.67% 24,086 7.18% 210,139 6.47% 709,404 6.47% 944,257
Other securities 100 7.50% 100
------- -------- -------- -------- ----------
Total securities held to maturity $95,865 $262,113 $296,467 $742,483 $1,396,928
======= ======== ======== ======== ==========
Due to the nature of mortgage related securities, the actual maturities of
these investments can be substantially shorter than their contractual maturity.
Management believes the actual weighted average maturity of the entire mortgage
related portfolio to be approximately 2.33 years.
As of December 31, 1997 the Corporation held securities of one issuer with
a carrying value exceeding ten percent of total stockholders' equity. General
obligations of the State of Mississippi with a carrying value of $124,979,000
and an approximate fair value of $128,820,000 were held on December 31, 1997.
Included in the aforementioned State of Mississippi holdings are bonds with an
aggregate carrying value of $17,087,000 and an approximate fair value of
$18,827,000 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the end
of each of the last five years ($ in thousands):
December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
Real estate loans:
Construction and land development $ 195,728 $ 168,650 $ 144,010 $ 123,364 $ 102,873
Secured by 1-4 family residential properties 699,486 543,661 553,997 504,078 569,411
Secured by nonfarm, nonresidential properties 446,492 398,350 380,734 345,130 340,058
Other real estate loans 70,592 73,229 69,422 63,169 52,295
Loans to finance agricultural production 38,466 33,950 37,434 34,910 35,490
Commercial and industrial 702,361 642,758 616,949 594,836 531,054
Loans to individuals for personal expenditures 701,132 645,829 641,409 606,444 529,907
Obligations of states and political subdivisions 79,178 84,918 63,557 50,033 38,407
Loans for purchasing or carrying securities 17,622 20,469 11,626 1,840 3,995
Other loans 32,598 22,759 52,953 23,761 27,528
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $2,983,655 $2,634,573 $2,572,091 $2,347,565 $2,231,018
========== ========== ========== ========== ==========
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories
outstanding as of December 31, 1997, which, based on the remaining scheduled
repayments of principal, are due in the periods indicated ($ in thousands):
Maturing
-------------------------------------------------
One Year
Within Through After
One Year Five Five
or Less Years Years Total
---------- ---------- ---------- ----------
Construction and land development $ 151,351 $ 44,377 $ 195,728
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 271,228 154,509 $ 91,347 517,084
Commercial and industrial 466,225 192,740 43,396 702,361
Other loans (excluding loans to individuals) 71,090 26,325 70,449 167,864
---------- ---------- ---------- ----------
Total $ 959,894 $ 417,951 $ 205,192 $1,583,037
========== ========== ========== ==========
The following table shows all loans due after one year classified according
to their sensitivity to changes in interest rates ($ in thousands):
Maturing
------------------------------------
One Year
Through After
Five Five
Years Years Total
---------- ---------- ----------
Above loans due after one year which have:
Predetermined interest rates $ 379,323 $ 182,659 $ 561,982
Floating interest rates 38,628 22,533 61,161
---------- -------- ----------
Total $ 417,951 $205,192 $ 623,143
========== ======== ==========
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Corporation's nonperforming assets and past due
loans at the end of each of the last five years ($ in thousands):
December 31,
-----------------------------------------------
1997 1996 1995 1994 1993
======= ======= ======= ======= =======
Loans accounted for on a nonaccrual basis $14,242 $ 8,390 $10,055 $12,817 $13,730
Other real estate 2,340 2,734 3,982 3,723 5,709
Accruing loans past due 90 days or more 2,570 2,407 1,810 2,252 1,816
------- ------- ------- ------- -------
Total nonperforming assets and loans past due
90 days or more $19,152 $13,531 $15,847 $18,792 $21,255
======= ======= ======= ======= =======
Generally, a loan is classified as nonaccrual and the accrual of interest
on such loan is discontinued when a contractual payment of principal or interest
has become 90 days past due or Management has serious doubts about
collectibility of principal or interest even though the loan is currently
performing. A delinquent loan may remain in an accruing status if it is well
secured and in process of collection. When a loan is placed in nonaccrual
status, unpaid interest credited to income in the current and prior years is
reversed against interest income. Interest received on nonaccrual loans is
applied against principal. Loans are restored to accrual status when the
obligation is brought current or has performed in accordance with the
contractual terms for a reasonable period of time, and the ultimate
collectibility of all contractual principal and interest is no longer in doubt.
Interest which would have accrued on nonaccrual and restructured loans if they
had been in compliance with their original terms is immaterial. In addition,
interest income on these loans that was included in net income for the periods
presented was immaterial.
At December 31, 1997 Management is not aware of any additional credits,
other than those identified above, where serious doubts as to the repayment of
principal and interest exist. There are no interest-earning assets which would
be required to be disclosed above if those assets were loans. The Corporation
had no loan concentrations greater than ten percent of total loans other than
those loan categories shown in Table 5.
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Corporation's loan loss experience for each
of the last five years ($ in thousands):
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Balance at beginning of period $ 63,000 $ 62,000 $ 65,014 $ 65,014 $ 51,871
Loans charged off:
Real estate loans (503) (1,507) (1,663) (1,034) (2,451)
Loans to finance agricultural production (79) (177) (115) (21) (178)
Commercial and industrial (1,406) (1,334) (764) (979) (4,278)
Loans to individuals for personal expenditures (6,353) (5,651) (6,300) (4,780) (4,496)
All other loans (619) (603) (648) (267) (162)
-------- -------- -------- -------- --------
Total charge-offs (8,960) (9,272) (9,490) (7,081) (11,565)
Recoveries on loans previously charged off:
Real estate loans 92 325 981 732 590
Loans to finance agricultural production 7 3 10 8
Commercial and industrial 877 1,334 736 581 2,796
Loans to individuals for personal expenditures 2,283 2,087 1,848 2,703 2,226
All other loans 775 740 462 271 178
-------- -------- -------- -------- --------
Total recoveries 4,034 4,489 4,037 4,295 5,790
-------- -------- -------- -------- --------
Net charge-offs (4,926) (4,783) (5,453) (2,786) (5,775)
Additions to allowance charged to operating expense 4,682 5,783 2,439 2,786 18,596
Other additions to allowance for loan losses 1,344 322
-------- -------- -------- -------- --------
Balance at end of period $ 64,100 $ 63,000 $ 62,000 $ 65,014 $ 65,014
======== ======== ======== ======== ========
Percentage of net charge-offs during period to average
loans outstanding during the period 0.18% 0.19% 0.22% 0.12% 0.27%
======== ======== ======== ======== ========
The allowance for loan losses is maintained at a level believed adequate by
Management to absorb estimated possible loan losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Corporation's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay (including the timing
of future payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and other
relevant factors. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change.
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table is a summary by allocation category of the
Corporation's allowance for loan losses at December 31, 1997. These allocations
were determined by internal formulas based upon Management's analysis of the
various types of risk associated with the Corporation'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 $29,048
Additional allocation for risk-rated loans 2,488
Allocation for selected industries 3,592
General allocation for all other loans 9,687
Allocation for available lines of credit and letters of credit 2,560
Discretionary 16,725
-------
Total $64,100
=======
The allowance for loan losses is maintained at a level which Management and
the Board of Directors believe is adequate to absorb estimated possible losses
inherent in the loan portfolio, plus estimated losses associated with
off-balance sheet credit instruments such as letters of credit and unfunded
lines of credit. The adequacy of the allowance is reviewed quarterly utilizing
the criteria specified in the Office of the Comptroller of the Currency's
revised Banking Circular 201 as well as additional guidance provided in the
Interagency Policy Statement. Loss percentages were uniformly applied to pools
of risk-rated loans within the commercial portfolio. These percentages were
determined based on migration analysis, previously established floors for each
category and economic factors. In addition, relationships of $500,000 or more
which were risk-rated Other Loans Especially Mentioned or Substandard and all
which were risk-rated Doubtful were reviewed by the Corporation's Internal Asset
Review staff to determine if the standard percentages appeared to be sufficient
to cover potential loss on each line. In the event that the percentages on any
particular lines were determined to be insufficient, additional allocations were
made based upon recommendations of lending and asset review personnel.
Industry allocations were made based on concentrations of credit within the
portfolio as well as arbitrary designation of certain other industries by
Management.
The general allocation is included in the allowance to cover potential loan
losses within portions of the loan portfolio not addressed in the preceeding
allocations. The types of loans included in the general allocation were
residential mortgage loans, direct and indirect consumer loans, credit card
loans and overdrafts. The actual allocation amount was based upon the more
conservative estimate of loss experience within these categories during 1997,
the historical 5-year moving average for each category, or previously
established floors.
The amount included in the allocation for lines of credit and letters of
credit consists of a percentage of the unused portion of those lines and the
amount outstanding in letters of credit. Arbitrary percentages, which were the
same as those applied to the funded portions of the commercial and retail loan
portfolios, were applied to cover any potential losses in these off-balance
sheet categories.
The remaining $16,725,000 is discretionary and serves as added protection
in the event that any of the above specific components are determined to be
inadequate or for issues that cannot or have not been measured on a quantitative
basis over a prolonged period of time.
Because of the present stability shown by the Corporation's level of
nonperforming assets, Management does not anticipate that the percentage of 1998
net charge-offs to total loans to be significantly higher than that experienced
in 1997. However, because of the imprecision inherent in most estimates of
expected credit losses, Management will continue to take a prudent approach in
the evaluation of the allowance for loan losses.
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of $100,000
or more at December 31, 1997 ($ in thousands):
3 months or less $203,673
Over 3 months through 6 months 84,035
Over 6 months through 12 months 74,521
Over 12 months 89,224
---------
Total $451,453
=========
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
1997 1996 1995
====== ====== ======
Return on average assets 1.34% 1.27% 1.23%
Return on average equity 12.67% 13.07% 13.23%
Dividend payout ratio 30.26% 26.74% 25.73%
Equity to assets ratio 10.56% 9.76% 9.26%
TABLE 12 - SHORT TERM BORROWINGS
The table below presents certain information concerning the Corporation's
short term borrowings for each of the last three years ($ in thousands):
1997 1996 1995
========== ========== ==========
Federal funds purchased and securities sold under repurchase agreements:
Amount outstanding at end of period $ 948,700 $ 967,191 $ 932,983
Weighted average interest rate at end of period 5.72% 5.46% 5.13%
Maximum amount outstanding at any
month end during each period $1,003,907 $1,036,564 $ 945,207
Average amount outstanding during each period $ 912,089 $ 969,413 $ 898,439
Weighted average interest rate during each period 5.18% 5.02% 5.47%
Disclosure of other short term borrowings is not required because the
average balance for 1997 was less than 30% of stockholders' equity at the end of
1997.
ITEM 2. PROPERTIES
The Corporation's principal offices are housed in a 14-floor combination
office and bank building located in Jackson, Mississippi. This building, along
with all other physical properties of the Corporation, are owned by the Bank.
Approximately 155,000 square feet (55%) of the available space in the main
office building is allocated to bank use with the remainder occupied by tenants
on a lease basis. The Bank also operates 109 full-service branches, 22
limited-service branches, 11 in-store branches and an ATM network which includes
83 ATMs at on- premise locations and 60 ATMs located at off-premise sites. The
Bank leases 77 of its 185 locations with the remainder being owned.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and its subsidiaries are parties to lawsuits and other
claims that arise in the ordinary course of business; some of the lawsuits
assert claims to the lending, collection, servicing, investment, trust and other
business activities of the Bank; 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 the Corporation'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 the Corporation's shareholders during
the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Corporation's common stock is listed for trading on the Nasdaq Stock
Market. At March 2, 1998, there were approximately 5,200 shareholders of record
of the Corporation's common stock. Other information required by this item can
be found in Note 12, "Stockholders' Equity," (page 29) and the table captioned
"Principal Markets and Prices of the Corporation's Stock" (page 34) included in
the Registrant's 1997 Annual Report to Shareholders and is incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item can be found in the table captioned
"Selected Financial Data" (page 33) included in the
Registrant's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (pages
35-42) included in the Registrant's 1997 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
35-37) included in the Registrant's 1997 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
1997 Annual Report to Shareholders (pages 17-32) and are incorporated herein by
reference. The table captioned "Summary of Quarterly Results of Operations"
(page 33) is also included in the Registrant's 1997 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, 1997.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found in Section II,
"Election of Directors," and Section VIII, "Other Information Concerning
Directors," contained in Trustmark Corporation's Proxy Statement dated March 13,
1998, and is incorporated herein by reference. Information on the Registrant's
executive officers is included in Part I, page 6 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in Section VI, "Compensation
of Executive Officer and Directors," and Section VIII, "Other Information
Concerning Directors," contained in
Trustmark Corporation's Proxy Statement dated March 13, 1998, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners and
Management can be found in Section IV, "Voting Securities and Principal Holders
Thereof," and Section V, "Ownership of Equity Securities by Management,"
contained in Trustmark Corporation's Proxy Statement dated March 13, 1998, and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions can be
found in Section VII, "Transactions with Management," contained in Trustmark
Corporation's Proxy Statement dated March 13, 1998, 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 1997 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, 1997 and 1996
Consolidated Statements of Income for the Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements (Notes 1 through 14)
Selected Financial Data, Summary of Quarterly Results of Operations, and
Principal Markets and Prices of the Corporation's Stock
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set forth by Article
9 of Regulation S-X are not required under the related instructions or are
inapplicable and therefore have been omitted.
A-3. Exhibits
The exhibits listed in the Exhibit Index are filed herewith or are
incorporated herein by reference.
B. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
C. Exhibits
The response to this portion of Item 14 is submitted as a separate section
of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRUSTMARK CORPORATION
BY: /s/ Frank R. Day BY: /s/ Richard G. Hickson
----------------------------- -----------------------
Frank R. Day Richard G. Hickson
Chairman of the Board President & Chief
Executive Officer
DATE: March 20, 1998 DATE: March 20, 1998
BY: /s/ Gerard R. Host
-----------------------------
Gerard R. Host
Treasurer
(Chief Financial and
Accounting Officer)
DATE: March 20, 1998
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 20, 1998 BY: /s/ J. Kelly Allgood
-------------------------------
J. Kelly Allgood, Director
DATE: March 20, 1998 BY: /s/ Reuben V. Anderson
-------------------------------
Reuben V. Anderson, Director
DATE: March 20, 1998 BY: /s/ John L. Black, Jr.
-------------------------------
John L. Black, Jr., Director
DATE: March 20, 1998 BY: /s/ Harry H. Bush
-------------------------------
Harry H. Bush, Director
DATE: March 20, 1998 BY: /s/ Robert P. Cooke III
-------------------------------
Robert P. Cooke III, Director
DATE: March 20, 1998 BY: /s/ Frank R. Day
---------------------------------
Frank R. Day, Chairman of the
Board and Director
DATE: March 20, 1998 BY:
---------------------------------
William C. Deviney, Jr., Director
DATE: March 20, 1998 BY: /s/ D.G. Fountain, Jr.
--------------------------------
D. G. Fountain, Jr., Director
DATE: March 20, 1998 BY: /s/ C. Gerald Garnett
--------------------------------
C. Gerald Garnett, Director
DATE: March 20, 1998 BY: /s/ Richard G. Hickson
--------------------------------
Richard G. Hickson, President &
Chief Executive Officer and Director
DATE: March 20, 1998 BY: /s/ Matthew L. Holleman III
--------------------------------
Matthew L. Holleman III, Director
DATE: March 20, 1998 BY: /s/ Fred A. Jones
--------------------------------
Fred A. Jones, Director
DATE: March 20, 1998 BY: /s/ T.H. Kendall III
--------------------------------
T. H. Kendall III, Director
DATE: March 20, 1998 BY: /s/ Larry L. Lambiotte
--------------------------------
Larry L. Lambiotte, Director
DATE: March 20, 1998 BY: /s/ Robert V. Massengill
--------------------------------
Robert V. Massengill, Director
DATE: March 20, 1998 BY: /s/ Donald E. Meiners
--------------------------------
Donald E. Meiners, Director
DATE: March 20, 1998 BY: /s/ William Neville III
--------------------------------
William Neville III, Director
DATE: March 20, 1998 BY:
--------------------------------
Richard H. Puckett, Director
DATE: March 20, 1998 BY: /s/ Charles W. Renfrow
--------------------------------
Charles W. Renfrow, Director
DATE: March 20, 1998 BY:
--------------------------------
William Thomas Shows, Director
DATE: March 20, 1998 BY: /s/ Harry M. Walker
--------------------------------
Harry M. Walker, Director
DATE: March 20, 1998 BY: /s/ LeRoy G. Walker, Jr.
--------------------------------
LeRoy G. Walker, Jr., Director
DATE: March 20, 1998 BY: /s/ Paul H. Watson
--------------------------------
Paul H. Watson, Jr., Director
DATE: March 20, 1998 BY:
--------------------------------
John C. Wheeless, Jr., Director
DATE: March 20, 1998 BY: /s/ Allen Wood, Jr.
--------------------------------
Allen Wood, Jr., Director
EXHIBIT INDEX
3-a Articles of Incorporation, as amended. Filed as Exhibit 3 to the
Corporation's Form 10-K Annual Report for the year ended December 31,
1990, incorporated herein by reference.
3-b Bylaws, as amended. Filed as Exhibit 3-b to the Corporation's Form 10-K
Annual Report for the year ended December 31, 1991, incorporated herein
by reference.
3-c Articles of Incorporation, as amended. Filed as Exhibit 3-c to the
Corporation's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
3-d Bylaws, as amended. Filed as Exhibit 3-d to the Corporation's Form
10-K Annual Report for the year ended December 31, 1997.
10-a Deferred Compensation Plan for Directors of Trustmark Corporation, as
amended. Filed as Exhibit 10 to the Corporation's Form 10-K Annual
Report for the year ended December 31, 1991, incorporated herein by
reference.
10-b Deferred Compensation Plan for Executive Officers of Trustmark National
Bank. Filed as Exhibit 10-b to the Corporation's Form 10-K Annual
Report for the year ended December 31, 1993, 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 the
Corporation'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 the
Corporation'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 the
Corporation'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 the Corporation's
Form 10-K Annual Report for the year ended December 31, 1997.
10-g Change in Control Agreement between Trustmark Corporation and Harry M.
Walker dated December 22, 1997. Filed as Exhibit 10-g to the
Corporation's Form 10-K Annual Report for the year ended December 31,
1997.
10-h Change in Control Agreement between Trustmark Corporation and Gerard R.
Host dated December 22, 1997. Filed as Exhibit 10-h to the
Corporation's Form 10-K Annual Report for the year ended December 31,
1997.
13 Only those portions of the Registrant's 1997 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.