1 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, 1995 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 2-29897 TRUSTMARK CORPORATION (Exact name of Registrant as specified in its charter) MISSISSIPPI 64-0471500 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 248 EAST CAPITOL STREET, JACKSON, MISSISSIPPI 39201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (601) 354-5111 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, NO PAR VALUE NASDAQ STOCK MARKET (Title of Class) (Name of Exchange on Which Registered) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Based on the closing sales price of March 1, 1996, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $517,802,469. As of March 1, 1996, there were issued and outstanding 34,910,683 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 1995 Annual Report to Shareholders (Parts I and II), and (2) Proxy Statement for Registrant's Annual Meeting of Shareholders dated February 16, 1996 (Part III). 1 of 21
2 TRUSTMARK CORPORATION FORM 10-K INDEX PART I Item 1. Business 3 Item 2. Properties 14 Item 3. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 15 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 8. Financial Statements and Supplementary Data 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15 PART III Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 15 Item 12. Security Ownership of Certain Beneficial Owners and Management 16 Item 13. Certain Relationships and Related Transactions 16 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16 SIGNATURES 18-21 EXHIBIT INDEX 22 2
3 TRUSTMARK CORPORATION 1995 FORM 10-K PART I ITEM 1. BUSINESS GENERAL Trustmark Corporation (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 (Trustmark) and Trustmark's wholly-owned subsidiary, Trustmark Financial Services, Inc. (TFSI). Trustmark accounts for substantially all of the assets and revenues of the Corporation. Trustmark, which was chartered by the State of Mississippi in 1889, is headquartered in Jackson and is the largest bank in the state. The Corporation also owns all of the stock of F. S. Corporation and First Building Corporation, both nonbank Mississippi corporations. F. S. Corporation and First Building Corporation are primarily dormant and are not considered significant subsidiaries. Trustmark Corporation's primary means of asset growth has been through mergers and acquisitions of financial institutions. The most recent acquisition involved the merger of First National Financial Corporation and its wholly-owned subsidiary, First National Bank of Vicksburg with the Corporation. The business combination was consummated on October 7, 1994 utilizing the pooling of interests method of accounting. The Corporation, through its bank subsidiary, Trustmark, offers a variety of deposit, investment and credit products to its customers through a branch network with facilities in 162 locations. Trustmark is well established as a provider of depository, credit and cash management services to middle-market and larger businesses. These services range from payroll checking, business checking accounts, corporate savings, secured and unsecured lines of credit and loans to direct deposit payroll, sweep accounts and letters of credit. Trustmark also offers MasterCard, VISA and VISA Gold credit card services to consumers and merchants throughout Mississippi. In addition, Trustmark has successfully introduced the Trustmark Express Check debit card, which allows customers to access their checking or savings account through any merchant that accepts MasterCard and at any Trustmark Express, Gulfnet or Cirrus automated teller machine (ATM). Trustmark's Trust Services business unit provides services in three areas: custody, investment management and ancillary services such as a third party fiscal agent. Trustmark's Investment Services unit provides both institutional and retail customers with quality investment opportunities through its Dealer Bank Department and TFSI. Full service brokerage was added as a service in 1994, and plans are being made for expansion of offices in Trustmark branch locations. As of January 31, 1996, the Corporation and its bank subsidiary employed 2,211 full-time equivalent employees. COMPETITION The Corporation's bank subsidiary, Trustmark, competes with national and state banks in its service areas for all types of depository, credit, investment and trust services. In addition, Trustmark 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, 3
4 investment companies, credit unions and financial service operations of major retailers. Trustmark competes with these financial institutions 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 Corporation's bank subsidiary, Trustmark, 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. Trustmark also is insured by, and therefore subject to the regulations of the Federal Deposit Insurance Corporation (FDIC). Consequently, Trustmark is subject to FDIC insurance assessments. Trustmark qualifies for the lowest assessment rate for deposits insured by the Bank Insurance Fund (BIF). In November 1995, the FDIC reduced this assessment rate from $.04 per $100 of deposits to zero, effective in 1996. Banks must still pay the mandatory minimum $2,000 fee to belong to the insurance fund. In addition, Trustmark has approximately $366 million of deposits insured by the Savings Association Insurance Fund (SAIF) as the result of assisted purchases made through transactions defined as "Oakar" by the FDIC. At the present time, this assessment rate remains at $.23 per $100 of SAIF deposits. In December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was enacted. FDICIA substantially revised the depository institution regulatory and funding provisions of the Federal Deposit Insurance Act and made revisions to several other federal banking statutes. Among other things, FDICIA requires banking regulators to take prompt corrective action whenever financial institutions do not meet minimum capital requirements. In addition, FDICIA has created restrictions on capital distributions that would leave a depository institution undercapitalized. In May of 1993, the FDIC adopted the final rule implementing Section 112 of FDICIA. This regulation includes requirements, procedures and interpretive guidelines that mandate new audit and reporting requirements for financial institutions. As a result of these new requirements, certain formal attestations, assertions and documentation must be imposed on existing control structures. This regulation became effective for fiscal years ending after December 31, 1992. 4
5 EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of Trustmark Corporation (the Registrant) and its bank subsidiary, Trustmark National Bank, including their ages, their positions and their principal occupations for the last five years are as follows: Frank R. Day, 64, Director, Chairman of the Board, President and Chief Executive Officer, Trustmark Corporation; Chairman of the Board and Chief Executive Officer, Trustmark National Bank since January 1988. Harry M. Walker, 45, Secretary, Trustmark Corporation since January 1995; President and Chief Operating Officer, Trustmark National Bank since March 1992. Gerard R. Host, 41, Treasurer, Trustmark Corporation since October 1995; Executive Vice President and Chief Financial Officer, Trustmark National Bank since October 1995. Charles Bailey, 64, Executive Vice President and Bank Operations Manager, Trustmark National Bank from October 1984 until retirement effective December 31, 1995. George R. Day, 60, Executive Vice President and Chief Credit Officer, Trustmark National Bank since January 1992. Richard E. Horne, 48, Executive Vice President and Chief Lending Officer, Trustmark National Bank since September 1992. Senior Vice President in Lending and Branch Administration, C & S National Bank, Fort Lauderdale, Florida from August 1988 to August 1992. Thomas W. Mullen, 53, Executive Vice President for Strategic Planning, Trustmark National Bank since November 1991. William O. Rainey, 56, Executive Vice President and Chief Banking Officer, Trustmark National Bank since November 1991. All executive officers, with the exception of Richard E. Horne, have held executive or senior management positions with the Corporation or Trustmark for more than five years. STATISTICAL DISCLOSURES The consolidated statistical disclosures for Trustmark Corporation and subsidiaries are contained in Tables 1 through 12. 5
6 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES The Average Assets and Liabilities table below shows the average balances for all assets and liabilities of the Corporation at year end and the interest income or expense associated with those assets and liabilities. The yields or rates have been computed based upon the interest income or expense for each of the last three years ended (tax equivalent basis - $ in thousands): <TABLE> <CAPTION> December 31, ----------------------------------------------------------------------------- 1995 1994 ---------------------------------- --------------------------------------- Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate ---------- --------- ------- ----------- --------- ------- <S> <C> <C> <C> <C> <C> <C> ASSETS Interest-earning assets: Federal funds sold and securities purchased under reverse repurchase agreements $113,594 $6,815 6.00% $156,650 $6,188 3.95% Trading securities 500 68 13.60% 964 68 7.05% Securities available for sale: Taxable 455,176 28,872 6.34% 628,073 40,599 6.46% Nontaxable Securities held to maturity: Taxable 1,291,136 81,052 6.28% 1,215,805 71,797 5.91% Nontaxable 99,933 9,060 9.07% 110,382 10,331 9.36% Loans, net of unearned income 2,481,030 227,322 9.16% 2,246,350 191,739 8.54% ----------- --------- ----------- --------- Total interest-earning assets 4,441,369 353,189 7.95% 4,358,224 320,722 7.36% Cash and due from banks 275,235 267,107 Other assets 223,468 224,336 Allowance for loan losses (62,547) (64,958) ----------- ----------- TOTAL ASSETS $4,877,525 $4,784,709 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits $1,080,817 31,712 2.93% $1,139,553 28,216 2.48% Savings deposits 235,223 6,109 2.60% 253,968 6,012 2.37% Time deposits 1,448,962 74,553 5.15% 1,349,727 56,926 4.22% Federal funds purchased and securities sold under repurchase agreements 898,439 49,171 5.47% 873,480 33,136 3.79% ----------- --------- ----------- --------- Total interest-bearing liabilities 3,663,441 161,545 4.41% 3,616,728 124,290 3.44% --------- --------- Noninterest-bearing demand deposits 701,357 695,289 Accrued expenses and other liabilities 60,891 62,876 Stockholders' equity 451,836 409,816 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,877,525 $4,784,709 =========== =========== NET INTEREST MARGIN 191,644 4.31% 196,432 4.51% Less tax equivalent adjustments: Investments 3,171 3,634 Loans 1,677 1,639 --------- --------- NET INTEREST MARGIN PER ANNUAL REPORT $186,796 $191,159 ========= ========= </TABLE>
7 <TABLE> <CAPTION> December 31, -------------------------------------------- 1993 -------------------------------------------- Average Yield/ Balance Interest Rate -------- -------- ------- <S> <C> <C> <C> ASSETS Interest-earning assets: Federal funds sold and securities purchased under reverse repurchase agreements $162,375 $5,079 3.13% Trading securities 1,445 111 7.68% Securities available for sale: Taxable 165,246 7,180 4.35% Nontaxable 11,113 734 6.60% Securities held to maturity: Taxable 1,626,459 112,920 6.94% Nontaxable 110,034 11,320 10.29% Loans, net of unearned income 2,108,314 178,872 8.48% ----------- ---------- Total interest-earning assets 4,184,986 316,216 7.56% Cash and due from banks 251,115 Other assets 202,789 Allowance for loan losses (58,221) ----------- TOTAL ASSETS $4,580,669 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits $1,151,466 28,244 2.45% Savings deposits 234,848 5,807 2.47% Time deposits 1,393,569 60,657 4.35% Federal funds purchased and securities sold under repurchase agreements 762,909 22,062 2.89% ----------- ---------- Total interest-bearing liabilities 3,542,792 116,770 3.30% ---------- Noninterest-bearing demand deposits 622,783 Accrued expenses and other liabilities 59,911 Stockholders' equity 355,183 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,580,669 =========== NET INTEREST MARGIN 199,446 4.77% Less tax equivalent adjustments: Investments 4,217 Loans 1,392 ----------- NET INTEREST MARGIN PER ANNUAL REPORT $193,837 =========== </TABLE> Nonaccruing loans have been included in the average loan balances and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average loan balances are immaterial. Interest income and average yield on tax-exempt assets have been calculated on a fully tax equivalent basis using a tax rate of 35% for each of the three years presented. Certain reclassifications have been made to the 1994 and 1993 statements to conform to the 1995 method of presentation. 6
8 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS The Volume and Yield/Rate Variance table below shows the change from year to year for each component of the tax equivalent net interest margin separated into the amount generated by volume changes and the amount generated by changes in the yield or rate (tax equivalent basis - $ in thousands): <TABLE> <CAPTION> 1995 Compared to 1994 1994 Compared to 1993 Increase (Decrease) Due To: Increase (Decrease) Due To: --------------------------- --------------------------- Yield/ Yield/ Volume Rate Net Volume Rate Net ------ ------ ------ ------ ------- ------ <S> <C> <C> <C> <C> <C> <C> Interest earned on: Federal funds sold and securities purchased under reverse repurchase agreements ($2,007) $2,634 $627 ($184) $1,293 $1,109 Trading securities (43) 43 0 (35) (8) (43) Securities available for sale: Taxable (10,985) (742) (11,727) 28,485 4,934 33,419 Nontaxable 0 0 0 (734) 0 (734) Securities held to maturity: Taxable 4,604 4,651 9,255 (25,899) (15,224) (41,123) Nontaxable (958) (313) (1,271) 36 (1,025) (989) Loans, net of unearned income 20,994 14,589 35,583 11,612 1,255 12,867 -------- -------- -------- -------- -------- -------- Total interest-earning assets 11,605 20,862 32,467 13,281 (8,775) 4,506 Interest paid on: Interest-bearing demand deposits (1,496) 4,992 3,496 (329) 301 (28) Savings deposits (463) 560 97 451 (246) 205 Time deposits 4,410 13,217 17,627 (1,913) (1,818) (3,731) Federal funds purchased and securities sold under repurchase agreements 971 15,064 16,035 3,517 7,557 11,074 -------- -------- -------- -------- -------- -------- Total interest-bearing liabilities 3,422 33,833 37,255 1,726 5,794 7,520 -------- -------- -------- -------- -------- -------- Change in net interest income on a tax equivalent basis $8,183 ($12,971) ($4,788) $11,555 ($14,569) ($3,014) ======== ======== ======== ======== ======== ======== </TABLE> The change in interest due to both volume and yield/rate has been allocated to change due to volume and change due to yield/rate in proportion to the absolute value of the change in each. Tax-exempt income has been adjusted to a tax equivalent basis using a tax rate of 35% for 1995, 1994 and 1993. The balances of nonaccrual loans and related income recognized have been included for purposes of these computations. 7
9 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 3 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY The table below indicates amortized costs of securities available for sale and held to maturity by type at year end for each of the last three years ($ in thousands): <TABLE> <CAPTION> DECEMBER 31, --------------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- <S> <C> <C> <C> SECURITIES AVAILABLE FOR SALE U. S. Treasury and U. S. Government agencies $413,385 $376,302 $97,484 Obligations of states and political subdivisions 8,420 Mortgage-backed securities 53,382 63,388 51,253 ---------- ---------- ---------- Total debt securities 466,767 439,690 157,157 Equity securities 13,080 12,909 ---------- ---------- ---------- Total securities available for sale $479,847 $452,599 $157,157 ========== ========== ========== SECURITIES HELD TO MATURITY U. S. Treasury and U. S. Government agencies $257,335 $316,109 $722,567 Obligations of states and political subdivisions 212,065 192,321 158,193 Mortgage-backed securities 884,132 914,130 927,625 Other securities 100 100 3,055 ---------- ---------- ---------- Total debt securities 1,353,632 1,422,660 1,811,440 Equity securities 11,969 ---------- ---------- ---------- Total securities held to maturity $1,353,632 $1,422,660 $1,823,409 ========== ========== ========== </TABLE> TABLE 4 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY The following table details the maturities of securities available for sale and held to maturity using amortized cost at Decmber 31, 1995 and the weighted average yield for each range of maturities (tax equivalent basis - $ in thousands): <TABLE> <CAPTION> MATURING --------------------------------------------------------------------------------------- AFTER ONE, AFTER FIVE, WITHIN BUT WITHIN BUT WITHIN AFTER ONE YEAR YIELD FIVE YEARS YIELD TEN YEARS YIELD TEN YEARS YIELD TOTAL --------- ------ ---------- ----- ----------- ------ --------- ----- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> SECURITIES AVAILABLE FOR SALE U. S. Treasury and U. S. Government agencies $122,351 5.47% $291,034 5.55% $413,385 Mortgage-backed securities $23,785 7.54% $29,597 7.33% 53,382 -------- -------- -------- -------- ---------- Total debt securities 122,351 291,034 23,785 29,597 466,767 Equity securities 13,080 -------- -------- -------- -------- ---------- Total securities available for sale $122,351 $291,034 $23,785 $29,597 $479,847 ======== ======== ======== ======== ========== SECURITIES HELD TO MATURITY U. S. Treasury and U. S. Government agencies $41,691 7.35% $215,644 6.18% $257,335 Obligations of states and political subdivisions 21,009 8.00% 62,317 7.18% $ 86,498 7.63% $ 42,241 8.91% $ 212,065 Mortgage-backed securities 1,863 6.52% 17,694 6.99% 209,181 6.61% 655,394 6.44% 884,132 Other securities 100 7.50% 100 -------- -------- -------- -------- ---------- Total securities held to maturity $64,563 7.54% $295,655 6.44% $295,779 6.91% $697,635 6.59% $1,353,632 ======== ======== ======== ======== ========== </TABLE> Due to the nature of mortgage related securities, the actual maturities of these investments can be substantially shorter than their contractual maturity. Management believes the actual weighted average maturity of the entire mortgage related portfolio to be approximately 2.95 years. As of December 31, 1995 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 $122,202,000 and an approximate fair value of $126,807,000 were held on December 31, 1995. Included in the aforementioned State of Mississippi holdings are bonds with an aggregate carrying value of $21,183,000 and an approximate fair value of $21,694,000 which are known to be prerefunded or escrowed to maturity by U. S. Government securities. 8
10 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO The table below shows the carrying value of the loan portfolio at the end of each of the last five years ($ in thousands): <TABLE> <CAPTION> DECEMBER 31, ------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> Real estate loans: Construction and land development $144,010 $123,364 $102,873 $86,164 $92,189 Secured by 1-4 family residential properties 553,997 504,078 569,411 485,378 436,540 Secured by nonfarm, nonresidential properties 380,734 345,130 340,058 308,755 325,029 Other real estate loans 69,422 63,169 52,295 50,550 39,935 Term federal funds sold 125,000 120,000 Loans to finance agricultural production 37,434 34,910 35,490 21,213 18,887 Commercial and industrial 616,949 594,836 531,054 487,322 505,370 Loans to individuals for personal expenditures 641,409 606,444 529,907 413,457 418,215 Obligations of states and political subdivisions 63,557 50,033 38,407 41,320 46,675 Loans for purchasing or carrying securities 11,626 1,840 3,995 6,490 6,549 Lease financing receivables 2,360 3,871 4,427 3,837 2,470 Other loans 50,593 19,890 23,101 30,014 34,108 ---------- ---------- ---------- ---------- ---------- Loans, net of unearned income $2,572,091 $2,347,565 $2,231,018 $2,059,500 $2,045,967 ========== ========== ========== ========== ========== </TABLE> TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES The table below shows the amounts of loans in certain categories outstanding as of December 31, 1995, which, based on the remaining scheduled repayments of principal, are due in the periods indicated ($ in thousands): <TABLE> <CAPTION> MATURING ------------------------------------------------- ONE YEAR WITHIN THROUGH AFTER ONE YEAR FIVE FIVE OR LESS YEARS YEARS TOTAL ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Construction and land development $123,156 $20,854 $144,010 Other loans secured by real estate (excluding loans secured by 1-4 family residential properties) 217,484 157,592 $75,080 450,156 Commercial and industrial 391,691 180,580 44,678 616,949 Other loans (excluding loans to individuals) 115,015 21,308 29,247 165,570 ---------- ---------- ---------- ---------- Total $847,346 $380,334 $149,005 $1,376,685 ========== ========== ========== ========== </TABLE> The following table shows all loans due after one year classified according to their sensitivity to changes in interest rates ($ in thousands): <TABLE> <CAPTION> MATURING ------------------------------------ ONE YEAR AFTER THROUGH FIVE FIVE YEARS YEARS TOTAL ---------- ---------- ---------- <S> <C> <C> <C> Above loans due after one year which have: $333,960 $134,598 $468,558 Predetermined interest rates 46,374 14,407 60,781 Floating interest rates ---------- ---------- ---------- Total $380,334 $149,005 $529,339 ========== ========== ========== </TABLE> 9
11 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS The table below shows the Corporation's nonperforming assets and past due loans at the end of each of the last five years ($ in thousands): <TABLE> <CAPTION> DECEMBER 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> Nonaccrual loans $10,055 $12,817 $13,730 $14,008 $20,023 Restructured loans 2,552 1,373 ------- ------- ------- ------- ------- Nonperforming loans 10,055 12,817 13,730 16,560 21,396 Other real estate 3,982 3,723 5,709 9,711 16,670 ------- ------- ------- ------- ------- Nonperforming assets 14,037 16,540 19,439 26,271 38,066 Accruing loans past due 90 days or more 1,810 2,252 1,816 2,396 3,133 ------- ------- ------- ------- ------- Total nonperforming assets and loans past due 90 days or more $15,847 $18,792 $21,255 $28,667 $41,199 ======= ======= ======= ======= ======= </TABLE> Generally, a loan is classified as nonaccrual and the accrual of interest on such loan is discontinued when the contractual payment of principal or interest has become 90 days past due or Management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on nonaccrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current and prior years is reversed against interest income. Interest received on nonaccrual loans is applied against principal. Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Interest which would have been accrued on nonaccrual and restructured loans if they had been in compliance with their original terms is immaterial. In addition, interest income on these loans that was included in net income for the periods presented was immaterial. At December 31, 1995 Management is not aware of any additional credits, other than those identified above, where serious doubts as to the repayment of principal and interest exist. There are no interest-earning assets which would be required to be disclosed above if those assets were loans. The Corporation had no loan concentrations greater than ten percent of total loans other than those loan categories shown in Table 5. 10
12 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES The table below summarizes the Corporation's loan loss experience for each of the last five years ($ in thousands): <TABLE> <CAPTION> Year Ended December 31, --------------------------------------------------------------------- 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> Balance at beginning of period $65,014 $65,014 $51,871 $41,542 $32,456 Loans charged off: Real estate loans (1,663) (1,034) (2,451) (6,728) (7,855) Loans to finance agricultural production (115) (21) (178) (131) (80) Commercial and industrial (764) (979) (4,278) (7,698) (6,778) Loans to individuals for personal expenditures (6,300) (4,780) (4,496) (5,499) (5,631) Lease financing receivables All other loans (648) (267) (162) (120) (272) --------- --------- --------- --------- --------- Total charge-offs (9,490) (7,081) (11,565) (20,176) (20,616) Recoveries on loans previously charged off: Real estate loans 981 732 590 890 787 Loans to finance agricultural production 10 8 11 Commercial and industrial 736 581 2,796 1,221 401 Loans to individuals for personal expenditures 1,848 2,703 2,226 1,495 1,222 Lease financing receivables All other loans 462 271 178 151 115 --------- --------- --------- --------- --------- Total recoveries 4,037 4,295 5,790 3,768 2,525 --------- --------- --------- --------- --------- Net charge-offs (5,453) (2,786) (5,775) (16,408) (18,091) Additions to allowance charged to operating expense 2,439 2,786 18,596 26,737 27,177 Other additions to allowance for loan losses 322 --------- --------- --------- --------- --------- Balance at end of period $62,000 $65,014 $65,014 $51,871 $41,542 ========= ========= ========= ========= ========= Percentage of net charge-offs during period to average loans outstanding during the period 0.22% 0.12% 0.27% 0.82% 0.93% ========= ========= ========= ========= ========= </TABLE> The allowance for loan losses is maintained at a level believed adequate by Management to absorb estimated probable loan losses. Management's periodic evaluation of the adequacy of the allowance is based on the Corporation's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. 11
13 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES The following table is a summary by allocation category of the Corporation's allowance for loan losses at December 31, 1995. These allocations were determined by internal formulas based upon Management's analyses of the various types of risk associated with the Corporation's loan portfolio. A discussion of Management's methodology for performing these analyses follows the table ($ in thousands): <TABLE> <S> <C> Allocation for pools of risk-rated loans $ 24,229 Additional allocation for risk-rated loans 923 Allocation for selected industries 1,187 General allocation for all other loans 8,935 Allocation for available lines of credit and letters of credit 1,816 Discretionary 24,910 --------- Total $ 62,000 ========= </TABLE> The allowance for loan losses is maintained at a level which Management and the Board of Directors believe is adequate to absorb estimated losses inherent in the loan portfolio, plus estimated losses associated with off-balance sheet credit instruments such as letters of credit and unfunded lines of credit. The adequacy of the allowance is reviewed quarterly utilizing the criteria specified in the Office of the Comptroller of the Currency's revised Banking Circular 201 as well as additional guidance provided in the Interagency Policy Statement. Loss percentages were uniformly applied to pools of risk-rated loans within the commercial portfolio. These percentages were determined based on migration analysis, previously established floors for each category and economic factors. In addition, relationships of $500,000 or more which were risk-rated Other Loans Especially Mentioned (OLEM) 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 1995, 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 $24,910,000 is discretionary and serves as added protection in the event that any of the above specific components are determined to be inadequate or for issues that cannot or have not been measured on a quantitative basis over a prolonged period of time. Because of the stability shown by the Corporation's level of nonperforming assets, Management estimates that the anticipated amount of net charge-offs for 1996 will be at approximately the same level as 1995. However, because of the imprecision inherent in most estimates of expected credit losses, Management will continue to take a prudent approach in the evaluation of the allowance for loan losses. 12
14 TRUSTMARK CORPORATION STATISTICAL DISCLOSURES (CONTINUED) TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE The table below shows maturities on outstanding time deposits of $100,000 or more at December 31, 1995 ($ in thousands): <TABLE> <S> <C> 3 months or less $163,518 Over 3 months through 6 months 69,689 Over 6 months through 12 months 66,957 Over 12 months 56,885 -------- Total $357,049 ======== </TABLE> TABLE 11 - SELECTED RATIOS The following ratios are presented for each of the last three years: <TABLE> <CAPTION> 1995 1994 1993 ============ ============ ============= <S> <C> <C> <C> Return on average assets 1.23% 1.15% 1.14% Return on average equity 13.23% 13.42% 14.71% Dividend payout ratio 25.73% 25.95% 23.87% Equity to assets ratio 9.26% 8.57% 7.75% </TABLE> TABLE 12 - SHORT-TERM BORROWINGS The table below presents certain information concerning the Corporation's short-term borrowings for each of the last three years ($ in thousands): <TABLE> <CAPTION> 1995 1994 1993 ============ ============ ============= <S> <C> <C> <C> Federal funds purchased and securities sold under repurchase agreements: Amount outstanding at end of period $932,983 $851,038 $842,733 Weighted average interest rate at end of period 5.13% 5.38% 2.92% Maximum amount outstanding at any month end during each period $945,207 $997,525 $911,888 Average amount outstanding during each period $898,439 $873,480 $762,909 Weighted average interest rate during each period 5.47% 3.79% 2.89% </TABLE> 13
15 ITEM 2. PROPERTIES The Corporation's principal offices are housed in a 14-floor combination office and bank building located in Jackson, Mississippi. This building, along with all other physical properties of the Corporation, are owned by its bank subsidiary, Trustmark. 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. Trustmark also operates 97 full-service branches, 28 limited-service branches and an ATM network which includes 71 ATMs at on-premise locations and 49 ATMs located at off-premise sites. Trustmark leases 36 of its 162 total locations with the remainder being owned. ITEM 3. LEGAL PROCEEDINGS In January 1995, a judgment was rendered in a Mississippi trial court against the Corporation's subsidiary, Trustmark National Bank, in a case related to the placement of collateral protection insurance (CPI) by Trustmark on a particular loan. The judgment awarded $500 thousand in actual damages (against Trustmark and the insurance agent, jointly and severally) and $38 million in punitive damages (against Trustmark only). Trustmark filed motions for entry of judgment in its favor, or for a new trial, or to reduce the verdicts. The judge took the motions under advisement in April 1995. On August 4, 1995, the court reduced the punitive damage award from $38 million to $5 million. The judge left the actual damage award intact. Notice of appeal has been filed by Trustmark appealing this case to the Mississippi Supreme Court. Notice of cross-appeal has been filed by the plaintiffs. There are 11 other CPI-related suits in state courts and ten suits in federal courts. On September 18, 1995, one of the federal court suits was certified as a class action, with the class broadly defined to include all persons who financed an automobile through Trustmark and whose loan accounts were charged for CPI premiums. One of the CPI insurers, the CPI underwriter and the insurance agent are also defendants to the class action. The court proceedings are matters of public record. The cases are being vigorously contested. Investigation is continuing. Similar, but not identical, cases in other states have had a variety of results, including settlements. Trustmark's program was consistent with those of numerous other banks, including banks in Mississippi which are in the process of defending similar suits. While the ultimate outcome of this legal matter cannot be predicted with reasonable certainty, Management believes that the resolution of this matter will not have a material adverse effect on the Corporation's consolidated financial position. However, Management cannot predict with reasonable certainty the impact it might have on the Corporation's consolidated results of operations during periods until the litigation is terminated. In addition, Trustmark is defendant in various other pending and threatened legal actions arising in the normal course of business. In the opinion of Management, and based on the advice of legal counsel, the ultimate resolution of these matters will not have a material effect on the Corporation's consolidated financial statements. 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 1995. 14
16 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 January 26, 1996 there were approximately 5,300 shareholders of record of the Corporation's common stock. Other information required by this item can be found in Note 12, "Stockholders' Equity," (page 33) and the table captioned "Principal Markets and Prices of the Corporation's Stock" (page 37) included in the Registrant's 1995 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 1995 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 37-43) included in the Registrant's 1995 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 1995 Annual Report to Shareholders (pages 19-43) and are incorporated herein by reference. The table captioned "Summary of Quarterly Results of Operations" (page 36) is also included in the Registrant's 1995 Annual Report to Shareholders and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There has been no change of accountants within the two-year period prior to December 31, 1995. 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 February 16, 1996 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 Officers and Directors," and Section VII, "Other Information Concerning Directors," contained in Trustmark 15
17 Corporation's Proxy Statement dated February 16, 1996 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 February 16, 1996 and is incorporated herein by reference. The Registrant knows of no arrangements which may at a subsequent date result in a change in control of the Registrant. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions can be found in Section VI, "Transactions with Management," contained in Trustmark Corporation's Proxy Statement dated February 16, 1996 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 1995 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, 1995 and 1994 Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 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. 16
18 A-3. Exhibits The exhibits listed in the Exhibit Index are filed herewith or are incorporated herein by reference. B. Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. C. Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. 17
19 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRUSTMARK CORPORATION BY: /s/ Frank R. Day BY: /s/ Gerard R. Host ------------------------- ------------------------- Frank R. Day Gerard R. Host Chairman of the Board, Treasurer President and Chief Executive Officer DATE: March 12, 1996 DATE: March 12, 1996 18
20 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 12, 1996 BY: /s/ J. Kelly Allgood ------------------------------ J. Kelly Allgood, Director DATE: March 12, 1996 BY: /s/ Reuben V. Anderson ------------------------------ Reuben V. Anderson, Director DATE: March 12, 1996 BY: ------------------------------ John L. Black, Jr., Director DATE: March 12, 1996 BY: /s/ Harry H. Bush ------------------------------ Harry H. Bush, Director DATE: March 12, 1996 BY: /s/ Robert P. Cooke III ------------------------------ Robert P. Cooke III, Director DATE: March 12, 1996 BY: /s/ Frank R. Day ------------------------------ Frank R. Day, Principal Executive Officer and Director DATE: March 12, 1996 BY: ------------------------------ William C. Deviney, Jr., Director DATE: March 12, 1996 BY: /s/ D. G. Fountain, Jr. ------------------------------ D. G. Fountain, Jr., Director DATE: March 12, 1996 BY: /s/ C. Gerald Garnett ------------------------------ C. Gerald Garnett, Director DATE: March 12, 1996 BY: /s/ Matthew L. Holleman III ------------------------------ Matthew L. Holleman III, Director DATE: March 12, 1996 BY: /s/ Fred A. Jones ------------------------------ Fred A. Jones, Director 19
21 DATE: March 12, 1996 BY: /s/ T. H. Kendall III ------------------------------ T. H. Kendall III, Director DATE: March 12, 1996 BY: ------------------------------ Larry L. Lambiotte, Director DATE: March 12, 1996 BY: /s/ Robert V. Massengill ------------------------------ Robert V. Massengill, Director DATE: March 12, 1996 BY: /s/ Donald E. Meiners ------------------------------ Donald E. Meiners, Director DATE: March 12, 1996 BY: /s/ William Neville III ------------------------------ William Neville III, Director DATE: March 12, 1996 BY: /s/ Richard H. Puckett ------------------------------ Richard H. Puckett, Director DATE: March 12, 1996 BY: /s/ Charles W. Renfrow ------------------------------ Charles W. Renfrow, Director DATE: March 12, 1996 BY: /s/ Clyda S. Rent ------------------------------ Clyda S. Rent, Director DATE: March 12, 1996 BY: /s/ William Thomas Shows ------------------------------ William Thomas Shows, Director DATE: March 12, 1996 BY: /s/ Harry M. Walker ------------------------------ Harry M. Walker, Director DATE: March 12, 1996 BY: /s/ LeRoy G. Walker, Jr. ------------------------------ LeRoy G. Walker, Jr., Director DATE: March 12, 1996 BY: /s/ Paul H. Watson, Jr. ------------------------------ Paul H. Watson, Jr., Director 20
22 DATE: March 12, 1996 BY: /s/ John C. Wheeless, Jr. ------------------------------ John C. Wheeless, Jr., Director DATE: March 12, 1996 BY: /s/ Allen Wood, Jr. ------------------------------ Allen Wood, Jr., Director 21
23 EXHIBIT INDEX <TABLE> <S> <C> 3-a Articles of Incorporation, as amended. Filed as Exhibit 3 to the Corporation's Form 10-K Annual Report for the year ended December 31, 1990, incorporated herein by reference. 3-b Bylaws, as amended. Filed as Exhibit 3-b to the Corporation's Form 10-K Annual Report for the year ended December 31, 1991, incorporated herein by reference. 3-c Articles of Incorporation, as amended. Filed as Exhibit 3-c to the Corporation's Form 10-K Annual Report for the year ended December 31, 1994. 10-a Deferred Compensation Plan for Directors of Trustmark Corporation, as amended. Filed as Exhibit 10 to the Corporation's Form 10-K Annual Report for the year ended December 31, 1991, incorporated herein by reference. 10-b Deferred Compensation Plan for Executive Officers of Trustmark National Bank. Filed as Exhibit 10-b to the Corporation's Form 10-K Annual Report for the year ended December 31, 1993. 10-c Deferred Compensation Plan for Directors of First National Financial Corporation, acquired October 7, 1994. Filed as Exhibit 10-c to the Corporation's Form 10-K Annual Report for the year ended December 31, 1994. 10-d Life Insurance Plan for Executive Officers of First National Financial Corporation, acquired October 7, 1994. Filed as Exhibit 10-d to the Corporation's Form 10-K Annual Report for the year ended December 31, 1994. 13 Only those portions of the Registrant's 1995 Annual Report to Shareholders expressly incorporated by reference herein are included in this exhibit and, therefore, are filed as a part of this report on Form 10-K. 27 Financial Data Schedule. All other exhibits are omitted as they are inapplicable or not required by the related instructions. </TABLE> 22