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, 1998
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 19, 1999, the aggregate market
value of the voting stock held by nonaffiliates of the Registrant was
$1,117,189,595.
As of March 11, 1999, there were issued and outstanding 71,899,616 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 1998 Annual Report to
Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual
Meeting of Shareholders dated March 15, 1999 (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
1998 FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
Trustmark Corporation (Trustmark) 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. Trustmark's primary
business activities are conducted through its wholly-owned subsidiary, Trustmark
National Bank (the Bank) and the Bank's wholly-owned subsidiaries, Trustmark
Financial Services, Inc. (TFSI) and Trustmark Insurance Agency, Inc. The Bank
accounts for substantially all of the assets and revenues of Trustmark.
Chartered by the State of Mississippi in 1889, the Bank is headquartered in
Jackson, Mississippi and is the largest bank in the state. Trustmark 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.
Trustmark provides a broad array of traditional banking products and
services primarily to customers in Mississippi through its network of 140
branches and 147 ATMs. In order to service Retail clients' needs more
effectively, Pinnacle, a proactive client-focused sales process, was implemented
during 1998. As a result of Pinnacle, Trustmark associates have a higher level
of client knowledge and understand the financial alternatives best suited to the
client's needs. In addition, improvements to Trustmark's delivery channels have
expedited communication and information flow to the point of sale thus providing
faster and more convenient transactions for clients. In order to allow customers
to do their banking around the clock from their homes or offices, Trustmark
offers the TrustTouch automated response system. Customers may also obtain
information about Trustmark's services via the Internet by accessing its web
site (www.trustmark.com). Trustmark's Card Services offer MasterCard, VISA, VISA
Gold and VISA Business credit card services to consumers and merchants
throughout Mississippi. Trustmark's ExpressCheck debit card allows clients to
conveniently pay for purchases from merchants, withdraw cash from
automated teller machines and receive account balance information or transfer
funds between their accounts at their convenience. For many years, Trustmark has
been active in automobile finance directly throughout its extensive branch
network as well as through a long-established indirect network of automobile
dealers. Home mortgage lending increased significantly during 1998 and has
strengthened Trustmark's position as a premier home lender. In addition,
Trustmark's home mortgage department services more than $3.4 billion in home
loans throughout the Southeast.
Trustmark provides loans, deposit services and cash management for
Mississippi businesses. Cash management services offers new technology and
services for businesses to monitor cash flow through the utilization of TrustNet
computer banking, automated clearing services which facilitates electronic bill
payment and direct deposit of employee pay and Trustmark's Mutual Fund Sweep
account. Trustmark offers commercial real estate loans targeting the residential
real estate development and construction markets. Trustmark also lends to
moderate and lower income homeowners in several markets through Community
Reinvestment Act programs such as the Downpayment Assistance Program and Farmers
Home Multi-Family Home Program. Trustmark's Correspondent Banking Department
maintains relationships with independent banks across the state, providing
competitively priced cash management services, financing and clearing services.
Trustmark's public services bankers offer cash management products, loans and
investment services tailored for the needs of public entities such as state
agencies, municipal government and school districts.
Trustmark offers a broad line of banking, investment and insurance
products designed to meet the objectives of retail and commercial clients. These
products include the Performance Funds, a family of six mutual funds designed
and managed by Trustmark investment professionals, as well as personal trust and
asset management, employee benefits and corporate trust. With $5.4 billion in
trust assets under administration, Trustmark's Trust Department offers a full
line of asset management and custodial services through its Personal Trust,
Employee Benefit and Corporate Trust groups. TFSI, Trustmark's investment
brokerage subsidiary, expanded its product offering and delivery network in
1998. TFSI currently has 16 locations across the state of Mississippi and offers
a comprehensive range of brokerage services. In 1999, Trustmark will address the
insurance needs of clients by broadening the products and services offered by
its insurance subsidiary, Trustmark Insurance Agency, Inc.
As of March 11, 1999, Trustmark and the Bank employed approximately
2,250 full-time equivalent employees.
COMPETITION
Trustmark 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, consumer finance companies, mortgage
companies, insurance companies, brokerage firms, 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
Trustmark is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended. As such, Trustmark 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, Trustmark 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
Trustmark'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:
Richard G. Hickson, 54, 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.
Frank R. Day, 67, Chairman of the Board, Trustmark Corporation since January
1982. Chairman of the Board, Trustmark National Bank from 1982 to February 1999.
T. H. Kendall III, 62, Chairman of the Board, Trustmark National Bank since
February 1999.
Harry M. Walker, 48, Secretary, Trustmark Corporation since January 1995;
President and Chief Operating Officer, Trustmark National Bank since March 1992.
Gerard R. Host, 44, Treasurer, Trustmark Corporation since September 1995;
Executive Vice President and Chief Financial Officer, Trustmark National Bank
since November 1995.
George R. Day, 63, Executive Vice President and Chief Credit Officer, Trustmark
National Bank since November 1991.
William O. Rainey, 59, Executive Vice President and Chief Banking Officer,
Trustmark National Bank since November 1991.
Thomas W. Mullen, 56, Executive Vice President and Chief Retail Administration
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 Trustmark 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 1998, Trustmark completed one business combination. On March 13,
1998, Smith County Bank (SCB) in Taylorsville, Mississippi was merged with the
Corporation in a business combination accounted for by the purchase method of
accounting. At the merger date, SCB had $44 million in net loans, $98 million in
total assets and $88 million in total deposits. SCB's results of operations,
which are not material, have been included in the financial statements 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,
-------------------------------------------------------------
1998 1997
----------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------- -------- ------ ---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 112,986 $ 6,078 5.38% $ 64,096 $ 3,575 5.58%
Securities available for sale:
Taxable 670,249 41,765 6.23% 612,745 36,671 5.98%
Nontaxable 25 2 8.00% 320 37 11.56%
Securities held to maturity:
Taxable 1,184,223 75,683 6.39% 1,301,175 83,208 6.39%
Nontaxable 111,415 9,413 8.45% 103,212 8,938 8.66%
Loans, net of unearned income 3,344,381 293,855 8.79% 2,771,662 250,108 9.02%
--------- -------- ---------- --------
Total interest-earning assets 5,423,279 426,796 7.87% 4,853,210 382,537 7.88%
Cash and due from banks 282,487 269,665
Other assets 271,215 252,260
Allowance for loan losses (65,232) (63,897)
---------- ----------
Total Assets $5,911,749 $5,311,238
========== ==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 734,682 $ 21,623 2.94% $ 726,812 $ 21,736 2.99%
Savings deposits 660,222 14,006 2.12% 573,528 12,333 2.15%
Time deposits 1,652,252 87,940 5.32% 1,623,384 86,804 5.35%
Federal funds purchased and securities sold
under repurchase agreements 1,151,920 58,894 5.11% 912,089 47,236 5.18%
Short-term borrowings 172,168 9,437 5.48% 67,708 4,778 7.06%
---------- -------- ---------- --------
Total interest-bearing liabilities 4,371,244 191,900 4.39% 3,903,521 172,887 4.43%
-------- --------
Noninterest-bearing demand deposits 865,484 789,041
Other liabilities 59,080 57,786
Shareholders' equity 615,941 560,890
---------- ----------
Total Liabilities and Shareholders' Equity $5,911,749 $5,311,238
========== ==========
Net Interest Margin 234,896 4.33% 209,650 4.32%
Less tax equivalent adjustments:
Investments 3,295 3,141
Loans 3,401 2,504
-------- --------
Net Interest Margin per Annual Report $228,200 $204,005
======== ========
December 31,
------------------------------
1996
------------------------------
Average Yield/
Balance Interest Rate
---------- -------- ------
Assets
Interest-earning assets:
Federal funds sold and securities purchased
under reverse repurchase agreements $ 76,203 $ 4,223 5.54%
Securities available for sale:
Taxable 605,467 34,754 5.74%
Nontaxable
Securities held to maturity:
Taxable 1,324,724 84,354 6.37%
Nontaxable 92,160 8,245 8.95%
Loans, net of unearned income 2,556,811 231,339 9.05%
---------- --------
Total interest-earning assets 4,655,365 362,915 7.80%
Cash and due from banks 282,165
Other assets 234,758
Allowance for loan losses (62,785)
----------
Total Assets $5,109,503
==========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 978,165 $ 26,472 2.71%
Savings deposits 334,925 7,520 2.25%
Time deposits 1,493,721 78,622 5.26%
Federal funds purchased and securities sold
under repurchase agreements 969,413 48,653 5.02%
Short-term borrowings 41,274 2,739 6.64%
---------- --------
Total interest-bearing liabilities 3,817,498 164,006 4.30%
--------
Noninterest-bearing demand deposits 741,324
Other liabilities 52,168
Shareholders' equity 498,513
----------
Total Liabilities and Shareholders' Equity $5,109,503
==========
Net Interest Margin 198,909 4.27%
Less tax equivalent adjustments:
Investments 2,886
Loans 1,966
--------
Net Interest Margin per Annual Report $194,057
========
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 1997 and 1996 statements to conform to the 1998 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):
1998 Compared to 1997 1997 Compared to 1996
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 $ 2,635 ($ 132) $ 2,503 ($ 678) $ 30 ($ 648)
Securities available for sale:
Taxable 3,524 1,570 5,094 428 1,489 1,917
Nontaxable (26) (9) (35) 0 37 37
Securities held to maturity:
Taxable (7,525) 0 (7,525) (1,424) 278 (1,146)
Nontaxable 696 (221) 475 966 (273) 693
Loans, net of unearned income 50,291 (6,544) 43,747 19,533 (764) 18,769
-------- -------- -------- -------- -------- --------
Total interest-earning assets 49,595 (5,336) 44,259 18,825 797 19,622
Interest paid on:
Interest-bearing demand deposits 241 (354) (113) (7,285) 2,549 (4,736)
Savings deposits 1,847 (174) 1,673 5,161 (348) 4,813
Time deposits 1,604 (468) 1,136 6,835 1,347 8,182
Federal funds purchased and securities sold
under repurchase agreements 12,302 (644) 11,658 (2,936) 1,519 (1,417)
Short-term borrowings 5,938 (1,279) 4,659 1,856 183 2,039
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 21,932 (2,919) 19,013 3,631 5,250 8,881
-------- -------- -------- -------- -------- --------
Change in net interest income on a
tax equivalent basis $ 27,663 ($ 2,417) $ 25,246 $ 15,194 ($ 4,453) $ 10,741
======== ======== ======== ======== ======== ========
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 1998, 1997 and 1996 . 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,
-------------------------------------
1998 1997 1996
----------- ---------- ----------
Securities available for sale
U. S. Treasury and U. S. Government agencies $ 362,930 $ 480,965 $ 469,396
Mortgage-backed securities 353,300 97,853 39,536
---------- ---------- ----------
Total debt securities 716,230 578,818 508,932
Equity securities 31,166 14,159 13,813
---------- ---------- ----------
Total securities available for sale $ 747,396 $ 592,977 $ 522,745
========== ========== ==========
Securities held to maturity
U. S. Treasury and U. S. Government agencies $ 132,388 $ 221,929 $ 267,636
Obligations of states and political subdivisions 239,441 230,642 220,073
Mortgage-backed securities 799,584 944,257 937,451
Other securities 100 100 100
---------- ---------- ----------
Total securities held to maturity $1,171,513 $1,396,928 $1,425,260
========== ========== ==========
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, 1998 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 $ 25,848 6.16% $ 288,973 6.46% $ 48,109 5.68% $ 362,930
Mortgage-backed securities 2,392 7.58% $ 11,581 6.52% 339,327 6.42% 353,300
-------- ---------- ----------- --------- ----------
Total debt securities 25,848 291,365 11,581 387,436 716,230
Equity securities 31,166
-------- ---------- ----------- --------- ----------
Total securities available for sale $ 25,848 $ 291,365 $ 11,581 $ 387,436 $ 747,396
======== ========== =========== ========= ==========
Securities held to maturity
U. S. Treasury and U. S.
Government agencies $ 6,499 6.15% $ 124,899 6.32% $ 990 6.87% $ 132,388
Obligations of states and
political subdivisions 21,361 7.66% 99,537 7.11% 95,406 7.76% $ 23,137 7.35% 239,441
Mortgage-backed securities 700 7.14% 40,867 6.85% 150,645 6.27% 607,372 6.36% 799,584
Other securities 100 7.50% 100
-------- ---------- ----------- --------- ----------
Total securities held to maturity $ 28,560 $ 265,303 $ 247,141 $ 630,509 $1,171,513
======== ========== =========== ========= ==========
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 2.24 years.
As of December 31, 1998, the Corporation held securities of one issuer
with a carrying value exceeding ten percent of total shareholders' equity.
General obligations of the State of Mississippi with a carrying value of
$109,378,000 and an approximate fair value of $115,435,000 were held on December
31, 1998. Included in the aforementioned State of Mississippi holdings are bonds
with an aggregate carrying value of $17,028,000 and an approximate fair value of
$19,429,000 which are known to be prerefunded or escrowed to maturity by U. S.
Government securities.
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at the
end of each of the last five years ($ in thousands):
December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Real estate loans:
Construction and land development $ 251,654 $ 195,728 $ 168,650 $ 144,010 $ 123,364
Secured by 1-4 family residential properties 1,106,735 699,486 543,661 553,997 504,078
Secured by nonfarm, nonresidential properties 508,194 446,492 398,350 380,734 345,130
Other real estate loans 72,445 70,592 73,229 69,422 63,169
Loans to finance agricultural production 39,682 38,466 33,950 37,434 34,910
Commercial and industrial 721,483 702,361 642,758 616,949 594,836
Loans to individuals for personal expenditures 773,578 701,132 645,829 641,409 606,444
Obligations of states and political subdivisions 141,152 79,178 84,918 63,557 50,033
Loans for purchasing or carrying securities 24,854 17,622 20,469 11,626 1,840
Other loans 62,541 32,598 22,759 52,953 23,761
---------- ---------- ---------- ---------- ----------
Loans, net of unearned income $3,702,318 $2,983,655 $2,634,573 $2,572,091 $2,347,565
========== ========== ========== ========== ==========
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The table below shows the amounts of loans in certain categories
outstanding as of December 31, 1998, which, based on the remaining scheduled
repayments of principal, are due in the periods indicated ($ in thousands):
Maturing
-------------------------------------------
One Year
Within Through After
One Year Five Five
or Less Years Years Total
-------- -------- -------- ----------
Construction and land development $185,995 $ 65,659 $ 251,654
Other loans secured by real estate (excluding
loans secured by 1-4 family residential
properties) 228,320 205,278 $147,041 580,639
Commercial and industrial 419,005 239,817 62,661 721,483
Other loans (excluding loans to individuals) 120,703 37,926 109,600 268,229
-------- -------- -------- ----------
Total $954,023 $548,680 $319,302 $1,822,005
======== ======== ======== ==========
The following table shows all loans due after one year classified
according to their sensitivity to changes in interest rates ($ in thousands):
Maturing
------------------------------
One Year
Through After
Five Five
Years Years Total
--------- -------- --------
Above loans due after one year which have:
Predetermined interest rates $ 482,182 $283,796 $765,978
Floating interest rates 66,498 35,506 102,004
--------- -------- --------
Total $ 548,680 $319,302 $867,982
========= ======== ========
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Corporation's nonperforming assets and past
due loans at the end of each of the last five years ($ in thousands):
December 31,
------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
Loans accounted for on a nonaccrual basis $13,253 $14,242 $ 8,390 $10,055 $12,817
Other real estate 1,859 2,340 2,734 3,982 3,723
Accruing loans past due 90 days or more 2,431 2,570 2,407 1,810 2,252
------- ------- ------- ------- -------
Total nonperforming assets and loans past due
90 days or more $17,543 $19,152 $13,531 $15,847 $18,792
======= ======= ======= ======= =======
Generally, a loan is classified as nonaccrual and the accrual of
interest on such loan is discontinued when a contractual payment of principal or
interest has become 90 days past due or Management has serious doubts about
collectibility of principal or interest even though the loan is currently
performing. A delinquent loan may remain in an accruing status if it is either
guaranteed or well secured and in process of collection. When a loan is placed
in nonaccrual status, unpaid interest credited to income in the current and
prior years is reversed against interest income. Interest received on nonaccrual
loans is applied against principal. Loans are restored to accrual status when
the obligation is brought current or has performed in accordance with the
contractual terms for a reasonable period of time, and the ultimate
collectibility of all contractual principal and interest is no longer in doubt.
Interest which would have accrued on nonaccrual and restructured loans if they
had been in compliance with their original terms is immaterial. In addition,
interest income on these loans that was included in net income for the periods
presented was immaterial.
At December 31, 1998 Management is not aware of any additional credits,
other than those identified above, where serious doubts as to the repayment of
principal and interest exist. There are no interest-earning assets which would
be required to be disclosed above if those assets were loans. The Corporation
had no loan concentrations greater than ten percent of total loans other than
those loan categories shown in Table 5.
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Corporation's loan loss experience for
each of the last five years ($ in thousands):
Year Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Balance at beginning of period $ 64,100 $ 63,000 $ 62,000 $ 65,014 $ 65,014
Loans charged off:
Real estate loans (1,121) (503) (1,507) (1,663) (1,034)
Loans to finance agricultural production (73) (79) (177) (115) (21)
Commercial and industrial (2,561) (1,406) (1,334) (764) (979)
Loans to individuals for personal expenditures (6,698) (6,353) (5,651) (6,300) (4,780)
All other loans (1,819) (619) (603) (648) (267)
-------- -------- -------- -------- --------
Total charge-offs (12,272) (8,960) (9,272) (9,490) (7,081)
Recoveries on loans previously charged off:
Real estate loans 72 92 325 981 732
Loans to finance agricultural production 2 7 3 10 8
Commercial and industrial 1,181 877 1,334 736 581
Loans to individuals for personal expenditures 2,960 2,283 2,087 1,848 2,703
All other loans 1,036 775 740 462 271
-------- -------- -------- -------- --------
Total recoveries 5,251 4,034 4,489 4,037 4,295
-------- -------- -------- -------- --------
Net charge-offs (7,021) (4,926) (4,783) (5,453) (2,786)
Additions to allowance charged to operating expense 7,771 4,682 5,783 2,439 2,786
Other additions to allowance for loan losses 1,300 1,344
-------- -------- -------- -------- --------
Balance at end of period $ 66,150 $ 64,100 $ 63,000 $ 62,000 $ 65,014
======== ======== ======== ======== ========
Percentage of net charge-offs during period to average
loans outstanding during the period 0.21% 0.18% 0.19% 0.22% 0.12%
======== ======== ======== ======== ========
The allowance for loan losses is maintained at a level believed
adequate by Management to absorb losses inherent in the loan portfolio. The
level of the allowance is based on Management's periodic evaluation of the
portfolio, the Corporation's past loan loss experience, known and inherent risks
in the portfolio, composition of the portfolio, current economic conditions,
review of specific criticized credits and other relevant factors. This
evaluation is inherently subjective as it requires 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, 1998. These allocations
were determined 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 $ 34,223
Additional allocation for
risk-rated loans 1,621
Allocation for selected
industries 4,096
General allocation for
all other loans 11,235
Allocation for available lines
of credit and letters of credit 3,214
Unallocated 11,761
-------
Total $66,150
=======
The allowance for loan losses is maintained at a level which Management
and the Board of Directors believe is adequate to absorb 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 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 Other Loans
Especially Mentioned or Substandard and all which are risk-rated Doubtful are
reviewed by the Corporation's Internal Asset Review staff to determine if
standard percentages appear to be sufficient to cover inherent loss on each
line. In the event that the percentages on any particular lines were determined
to be insufficient, additional allocations are made based upon recommendations
of lending and asset review 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 inherent
losses within portions of the loan portfolio not addressed in the preceeding
allocations. The types of loans included in the general allocation are
residential mortgage loans, direct and indirect consumer loans, credit card
loans and overdrafts. The actual allocation amount is based upon the more
conservative of: loss experience within these categories during the year, the
historical 5-year moving average for each category, or previously established
floors.
The amount included in the allocation for lines of credit and letters
of credit consists of a percentage of the unused portion of those lines and the
amount outstanding in letters of credit. Arbitrary 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.
The remaining $11.8 million is unallocated 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.
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities on outstanding time deposits of
$100,000 or more at December 31, 1998 ($ in thousands):
3 months or less $178,083
Over 3 months through 6 months 74,363
Over 6 months through 12 months 80,559
Over 12 months 42,908
--------
Total $375,913
========
TABLE 11 - SELECTED RATIOS
The following ratios are presented for each of the last three years:
1998 1997 1996
------ ------ ------
Return on average assets 1.41% 1.34% 1.27%
Return on average equity 13.53% 12.67% 13.07%
Dividend payout ratio 30.92% 30.26% 26.74%
Equity to assets ratio 10.42% 10.56% 9.76%
TABLE 12 - SHORT-TERM BORROWINGS
The table below presents certain information concerning the
Corporation's short-term borrowings for each of the last three years ($ in
thousands):
1998 1997 1996
---------- ---------- ----------
Federal funds purchased and securities
sold under repurchase agreements:
Amount outstanding at end of period $1,318,545 $ 948,700 $ 967,191
Weighted average interest rate at end of period 4.48% 5.72% 5.46%
Maximum amount outstanding at any
month end during each period $1,544,385 $1,003,907 $1,036,564
Average amount outstanding during each period $1,151,920 $ 912,089 $ 969,413
Weighted average interest rate during each period 5.11% 5.18% 5.02%
No other category of short-term borrowings is required to be disclosed
because the average balance was less than 30% of shareholders' equity at the end
of 1998.
ITEM 2. PROPERTIES
Trustmark's principal offices are housed in a 14-floor combination
office and bank building located in Jackson, Mississippi and owned by the Bank.
Approximately 174,000 square feet (61%) 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 108 full-service branches, 21
limited-service branches, 11 in-store branches and an ATM network which includes
84 ATMs at on-premise locations and 63 ATMs located at off-premise sites. The
Bank leases 68 of its 184 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 1998.
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, 1999, there were approximately 5,300 shareholders of record
of Trustmark's common stock. Other information required by this item can be
found in Note 13, "Shareholders' Equity," (page 31) and the table captioned
"Principal Markets and Prices of Trustmark's Stock" (page 37) included in the
Registrant's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item can be found in the table
captioned "Selected Financial Data" (page 36) included in the Registrant's 1998
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item can be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (pages
38-46) included in the Registrant's 1998 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
38-40) included in the Registrant's 1998 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
1998 Annual Report to Shareholders (pages 17-35) and are incorporated herein by
reference. The table captioned "Summary of Quarterly Results of Operations"
(page 36) is also included in the Registrant's 1998 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, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found in Section
II, "Election of Directors," and Section VII, "Other Information Concerning
Directors," contained in Trustmark Corporation's Proxy Statement dated March 15,
1999, and is incorporated herein by reference. Information on the Registrant's
executive officers is included in Part I, page 5 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in Section V,
"Compensation of Executive Officer and Directors," and Section VII, "Other
Information Concerning Directors," contained in Trustmark Corporation's Proxy
Statement dated March 15, 1999, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners
and Management can be found in Section III, "Voting Securities and Principal
Holders Thereof," and Section IV, "Ownership of Equity Securities by
Management," contained in Trustmark Corporation's Proxy Statement dated March
15, 1999, 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 VI, "Transactions with Management," contained in
Trustmark Corporation's Proxy Statement dated March 15, 1999, 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 1998 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, 1998 and
1997
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements (Notes 1
through 15)
Selected Financial Data, Summary of Quarterly Results of
Operations, and Principal Markets and Prices of
Trustmark's Stock
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set forth by
Article 9 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
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
On November 13, 1998, Trustmark filed a Form 8-K announcing that its
Board of Directors had authorized the purchase of up to 7.5%, or approximately
5.46 million shares, of the Corporation's common stock. In addition, Trustmark
also announced a 27% increase in its regular quarterly dividend from 8.25 cents
to 10.5 cents per share. This action raised the annual dividend rate from 33
cents to 42 cents per share.
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/ Richard G. Hickson BY: /s/ Gerard R. Host
---------------------- ------------------
Richard G. Hickson Gerard R. Host
President & Chief Treasurer
Executive Officer (Chief Financial
Accounting Officer
DATE: March 9, 1999 DATE: March 9, 1999
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 9, 1999 BY: /s/ J. Kelly Allgood
---------------------------------
J. Kelly Allgood, Director
DATE: March 9, 1999 BY: /s/ Reuben V. Anderson
---------------------------------
Reuben V. Anderson, Director
DATE: March 9, 1999 BY: /s/ John L. Black, Jr.
---------------------------------
John L. Black, Jr., Director
DATE: March 9, 1999 BY: /s/ Robert P. Cooke III
---------------------------------
Robert P. Cooke III, Director
DATE: BY:
---------------------------------
Frank R. Day, Chairman of the
Board and Director
DATE: March 9, 1999 BY: /s/ William C. Deviney, Jr.
---------------------------------
William C. Deviney, Jr., Director
DATE: BY:
---------------------------------
D. G. Fountain, Jr., Director
DATE: March 9, 1999 BY: /s/ C. Gerald Garnett
---------------------------------
C. Gerald Garnett, Director
DATE: March 9, 1999 BY: /s/ Richard G. Hickson
---------------------------------
Richard G. Hickson, President &
Chief Executive Officer and Director
DATE: March 9, 1999 BY: /s/ Matthew L. Holleman III
---------------------------------
Matthew L. Holleman III, Director
DATE: March 9, 1999 BY: /s/ Fred A. Jones
---------------------------------
Fred A. Jones, Director
DATE: March 9, 1999 BY: /s/ T.H. Kendall III
---------------------------------
T. H. Kendall III, Director
DATE: BY:
---------------------------------
Larry L. Lambiotte, Director
DATE: March 9, 1999 BY: /s/ Donald E. Meiners
---------------------------------
Donald E. Meiners, Director
DATE: March 9, 1999 BY: /s/ William Neville III
---------------------------------
William Neville III, Director
DATE: BY:
---------------------------------
Richard H. Puckett, Director
DATE: BY:
---------------------------------
William K. Ray, Director
DATE: March 9, 1999 BY: /s/ Harry M. Walker
---------------------------------
Harry M. Walker, Director
DATE: March 9, 1999 BY: /s/ LeRoy G. Walker, Jr.
---------------------------------
LeRoy G. Walker, Jr., Director
DATE: March 9, 1999 BY: /s/ Paul H. Watson
---------------------------------
Paul H. Watson, Jr., Director
DATE: March 9, 1999 BY: /s/ Kenneth W. Williams
---------------------------------
Kenneth W. Williams, Director
DATE: March 9, 1999 BY: /s/ Allen Wood, Jr.
---------------------------------
Allen Wood, Jr., Director
EXHIBIT INDEX
3-a Articles of Incorporation, as amended. Filed as Exhibit 3 to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1990, incorporated herein by reference.
3-b Bylaws, as amended. Filed as Exhibit 3-b to Trustmark's Form 10-K
Annual Report for the year ended December 31, 1991, incorporated herein
by reference.
3-c Articles of Incorporation, as amended. Filed as Exhibit 3-c to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
3-d Bylaws, as amended. Filed as Exhibit 3-d to Trustmark's Form 10-K
Annual Report for the year ended December 31, 1997.
3-e Articles of Incorporation, as amended. Filed as Exhibit 3-e to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1998.
10-a Deferred Compensation Plan for Directors of Trustmark Corporation, as
amended. Filed as Exhibit 10 to Trustmark's Form 10-K Annual Report for
the year ended December 31, 1991, incorporated herein by reference.
10-b Deferred Compensation Plan for Executive Officers of Trustmark National
Bank. Filed as Exhibit 10-b to Trustmark's Form 10-K Annual Report for
the year ended December 31, 1993, incorporated herein by reference.
10-c Deferred Compensation Plan for Directors of First National Financial
Corporation, acquired October 7, 1994. Filed as Exhibit 10-c to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
10-d Life Insurance Plan for Executive Officers of First National Financial
Corporation, acquired October 7, 1994. Filed as Exhibit 10-d to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1994, incorporated herein by reference.
10-e Long Term Incentive Plan for key employees of Trustmark Corporation and
its subsidiaries, approved March 11, 1997. Filed as Exhibit 10-e to
Trustmark's Form 10-K Annual Report for the year ended December 31,
1996, incorporated herein by reference.
10-f Employment Agreement between Trustmark Corporation and Richard G.
Hickson dated May 13, 1997. Filed as Exhibit 10-f to Trustmark's Form
10-K Annual Report for the year ended December 31, 1997.
10-g Change in Control Agreement between Trustmark Corporation and Harry M.
Walker dated December 22, 1997. Filed as Exhibit 10-g to Trustmark's
Form 10-K Annual Report for the year ended December 31, 1997.
10-h Change in Control Agreement between Trustmark Corporation and Gerard R.
Host dated December 22, 1997. Filed as Exhibit 10-h to Trustmark's Form
10-K Annual Report for the year ended December 31, 1997.
13 Only those portions of the Registrant's 1998 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.