<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark one)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
Commission file number 0-4491
FIRST TENNESSEE NATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0803242
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 Madison Avenue, Memphis, Tennessee 38103
- - --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(901) 523-4027
----------------------------------------------------
(Registrant's telephone number, including area code)
None
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $2.50 par value 31,884,333
- - ----------------------------- ----------------------------
Class Outstanding at July 31, 1994
<PAGE> 2
FIRST TENNESSEE NATIONAL CORPORATION
INDEX
Page No .
---------
Part I. Financial Information 2
Part II. Other Information
Signatures
Exhibit Index
Exhibit 3(ii)
Exhibit 11
-1-
<PAGE> 3
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements.
The Consolidated Statements of Condition are presented on page 3.
The Consolidated Statements of Income are presented on page 4.
The Statements of Cash Flows are presented on page 5.
The Notes to Consolidated Financial Statements are presented on pages
6 through 9.
The financial information included on pages 3 through 9 reflects all
adjustments which are, in the opinion of management, necessary to fair
representation of the results of the periods covered.
-2-
<PAGE> 4
CONSOLIDATED STATEMENTS OF CONDITION First Tennessee
National
Corporation
<TABLE>
<CAPTION>
June 30 December 31
(Dollars in thousands)(Unaudited) 1994 1993 1993
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 648,667 $ 456,430 $ 618,214
Federal funds sold and securities purchased under
agreements to resell 203,456 165,177 137,663
- - ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 852,123 621,607 755,877
- - ------------------------------------------------------------------------------------------------------------------------------
Investment in bank time deposits 5,978 5,562 7,637
Trading securities inventory 227,447 184,326 178,663
Mortgage warehouse loans held for sale 469,234 397,022 1,099,686
Securities held for sale -- 63,572 53,035
Securities available for sale 1,252,093 -- 0
Investment securities:
Mortgage-backed securities and collateralized
mortgage obligations -- 2,279,530 1,637,531
U.S. Treasury and other U.S. government agencies -- 370,627 377,491
States and municipalities -- 103,365 83,351
Other -- 210,739 87,674
- - ------------------------------------------------------------------------------------------------------------------------------
Total investment securities (market value of $3,027,870
at June 30, 1993, and $2,228,565 at December 31, 1993) -- 2,964,261 2,186,047
- - ------------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
Mortgage-backed securities and collateralized
mortgage obligations 761,416 -- --
U.S. Treasury and other U.S. government agencies 12,563 -- --
States and municipalities 58,005 -- --
Other 11,019 -- --
- - ------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity (market value of $835,417
at June 30, 1994) 843,003 -- 0
- - ------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial:
Taxable 2,570,132 2,246,118 2,520,955
Tax-exempt 74,238 83,745 78,271
- - ------------------------------------------------------------------------------------------------------------------------------
Total commercial loans 2,644,370 2,329,863 2,599,226
Consumer 2,078,243 1,494,925 1,799,455
Real estate mortgage 541,630 474,273 495,855
Credit card receivables 434,055 391,709 428,074
Real estate construction 129,716 79,852 75,844
Nonaccrual 17,858 24,911 25,738
- - ------------------------------------------------------------------------------------------------------------------------------
Total gross loans 5,845,872 4,795,533 5,424,192
Less: Unearned income 9,358 14,151 12,082
Allowance for loan losses 106,758 104,164 106,764
- - ------------------------------------------------------------------------------------------------------------------------------
Total net loans 5,729,756 4,677,218 5,305,346
- - ------------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 140,179 119,157 134,792
Real estate acquired by foreclosure 29,468 20,107 31,650
Customers' acceptances 4,972 3,617 4,871
Intangible assets 162,141 110,460 174,095
Bond division receivables and other assets 512,339 433,814 369,320
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 10,228,733 $ 9,600,723 $ 10,301,019
==============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 1,638,806 $ 1,529,977 $ 1,914,132
Checking/Interest 486,761 506,493 542,462
Savings 683,274 552,981 534,211
Money market account 1,689,976 1,587,542 1,682,996
Certificates of deposit under $100,000 and other time 2,472,288 2,361,366 2,270,728
Certificates of deposits $100,000 and more 386,113 373,200 402,528
- - ------------------------------------------------------------------------------------------------------------------------------
Total deposits 7,357,218 6,911,559 7,347,057
Federal funds purchased and securities sold under
agreements to repurchase 1,066,687 935,676 1,010,473
Commercial paper and other short-term borrowings 513,514 496,377 746,561
Acceptances outstanding 4,972 3,617 4,871
Bond division payables and other liabilities 468,840 505,601 412,105
Long-term debt 91,765 93,020 92,043
- - ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,502,996 8,945,850 9,613,110
- - ------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock - no par value (5,000,000 shares authorized, but unissued) -- -- --
Common stock - $2.50 par value (shares authorized - 100,000,000;
shares issued - 31,876,357 at June 30, 1994; 31,556,079
at June 30, 1993; and 31,745,521 at December 31, 1993) 79,691 78,890 79,364
Capital surplus 88,798 82,456 85,413
Undivided profits 570,442 496,680 525,507
Unrealized market adjustment on available for sale securities (9,803) -- --
Deferred compensation on restricted stock incentive plan (3,391) (3,153) (2,375)
- - ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 725,737 654,873 687,909
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,228,733 $ 9,600,723 $ 10,301,019
==============================================================================================================================
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME First Tennessee
National
Corporation
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- --------------------------
(Dollars in thousands except per share data)(Unaudited) 1994 1993 1994 1993
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 126,010 $ 102,258 $ 247,950 $ 201,782
Interest on investment securities:
Taxable 29,235 45,106 58,597 91,929
Tax-exempt 1,240 1,818 2,464 3,651
Interest on trading securities inventory 3,020 1,642 5,646 3,855
Interest on other earning assets 1,568 741 3,210 1,798
- - -------------------------------------------------------------------------------------------------------------------
Total interest income 161,073 151,565 317,867 303,015
- - -------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits:
Checking/Interest 2,223 2,544 4,456 5,078
Savings 3,145 3,887 6,318 7,689
Money market account 12,400 10,583 22,461 21,258
Certificates of deposit under $100,000
and other time 27,046 28,884 52,428 59,460
Certificates of deposit $100,000 and more 4,282 3,726 8,280 7,607
Interest on short-term borrowings 14,181 11,538 28,139 21,550
Interest on long-term debt 2,264 2,275 4,523 4,751
- - -------------------------------------------------------------------------------------------------------------------
Total interest expense 65,541 63,437 126,605 127,393
- - -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME: 95,532 88,128 191,262 175,622
Provision for loan losses 2,744 9,171 8,415 18,418
- - -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 92,788 78,957 182,847 157,204
- - -------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage banking 26,011 15,687 59,725 29,211
Bond division 19,966 21,344 46,197 44,929
Service charges on deposit accounts 15,826 14,048 30,327 27,342
Bank card 7,470 7,011 14,114 13,388
Trust service 7,963 6,401 13,861 11,915
Equity securities gains 8,194 -- 23,183 594
Debt securities gains (losses) (520) 678 (841) 1,042
Other 10,952 10,333 22,080 20,962
- - -------------------------------------------------------------------------------------------------------------------
Total noninterest income 95,862 75,502 208,646 149,383
- - -------------------------------------------------------------------------------------------------------------------
ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 188,650 154,459 391,493 306,587
- - -------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Employee compensation, incentives, and benefits 74,504 60,185 157,465 117,511
Operations services 8,175 6,911 16,232 13,796
Occupancy 7,301 5,622 14,198 11,268
Amortization of intangible assets 5,075 7,133 11,794 12,699
Communications and courier 6,726 5,160 13,301 9,786
Equipment rentals, depreciation, and maintenance 6,023 4,730 11,523 9,115
Deposit insurance premium 4,003 3,754 8,005 7,948
Other 29,110 19,761 55,874 38,060
- - -------------------------------------------------------------------------------------------------------------------
Total noninterest expense 140,917 113,256 288,392 220,183
- - -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 47,733 41,203 103,101 86,404
Applicable income taxes 12,145 15,394 30,883 30,863
- - -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 35,588 $ 25,809 $ 72,218 $ 55,541
===================================================================================================================
NET INCOME PER COMMON SHARE $ 1.12 $ 0.82 $ 2.27 $ 1.76
- - -------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 31,848,904 31,609,777 31,820,934 31,610,892
- - -------------------------------------------------------------------------------------------------------------------
TAX EQUIVALENT ADJUSTMENT TO TOTAL INTEREST INCOME $ 1,208 $ 1,295 $ 2,360 $ 3,212
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
CONSOLIDATED First Tennessee
STATEMENTS National
OF CASH FLOWS Corporation
<TABLE>
<CAPTION>
Six Months Ended
June 30
(Dollars in thousands)(Unaudited) 1994 1993
- - ------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 72,218 $ 55,541
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 8,415 18,418
Depreciation and amortization of premises and equipment 9,351 7,662
Amortization of intangibles 11,794 12,699
Net amortization of premiums and accretion of discounts 6,928 13,442
Market value adjustment on foreclosed property 1,080 189
Market value adjustment on securities held for sale -- (314)
Securities contributed to charitable trust 8,338 --
Equity securities gains (23,183) (594)
Debt securities losses (gains) 841 (728)
Net gain on disposal of fixed assets 261 1
Net gain on disposal of branch -- (672)
Deferred income tax provision (benefit) (10,068) 4,258
Net (increase) decrease in:
Trading securities inventory (48,784) 4,281
Mortgage warehouse loans held for sale 630,452 (127,568)
Bond division receivables (159,990) (133,464)
Interest receivable 634 (799)
Other assets 5,147 (69,034)
Net increase (decrease) in:
Bond division payables 111,948 139,595
Interest payable 1,551 (2,790)
Other liabilities (53,588) 23,004
- - ------------------------------------------------------------------------------------
Total adjustments 501,127 (112,414)
- - ------------------------------------------------------------------------------------
Net cash provided by operating activities 573,345 (56,873)
- - ------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of:
Investment securities -- 692,201
Held to maturity securities 303,784 --
Available for sale securities 176,626 --
Proceeds from sale of:
Debt securities -- 46,861
Equity securities -- 3,532
Available for sale securities 289,928 --
Premises and equipment 725 1
Payments for purchase of:
Debt securities -- (634,824)
Equity securites -- (4,645)
Held to maturity securities (354,791) --
Available for sale securities (267,288) --
Premises and equipment (16,599) (12,725)
Net increase in loans (431,341) (194,811)
Decrease (increase) in investment in bank time deposits 1,659 (3,380)
Branch sale, including cash and cash equivalents sold -- (18,339)
- - ------------------------------------------------------------------------------------
Net cash used by investing activities (297,297) (126,129)
- - ------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,368 1,269
Payments for:
Capital lease obligations (73) (73)
Long-term debt (323) (36,322)
Cash dividends (13,502) (19,066)
Equity distributions related to acquisitions (600) --
Stock repurchase -- (4,797)
Net increase (decrease) in:
Deposits 10,161 (182,524)
Short-term borrowings (176,833) 244,670
- - ------------------------------------------------------------------------------------
Net cash used by financing activities (179,802) 3,157
- - ------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents 96,246 (179,845)
- - ------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 755,877 801,452
- - ------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 852,123 $ 621,607
====================================================================================
Total interest paid $ 124,873 $ 130,633
Total income taxes paid 49,883 33,030
</TABLE>
<PAGE> 7
NOTE 1 -- FINANCIAL INFORMATION
The accounting and reporting policies of First Tennessee National Corporation
(First Tennessee) and its subsidiaries conform to generally accepted accounting
principles and, as to its banking subsidiaries, with general practice within
the banking industry. These unaudited interim consolidated financial
statements reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of financial position and results of
operations for the interim periods presented. These unaudited interim
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes included in First Tennessee's 1993
Annual Report to shareholders.
<PAGE> 8
NOTE 2 -- BUSINESS COMBINATIONS
On January 4, 1994, First Tennessee completed the acquisition of SNMC
Management Corporation (SNMC). SNMC, the parent of Sunbelt National Mortgage
Corporation headquartered in Dallas, Texas, became a wholly owned subsidiary of
First Tennessee Bank National Association, the principal subsidiary of First
Tennessee. On March 1, 1994, Highland Capital Management Corp. merged with
First Tennessee Investment Management, Inc., a wholly owned subsidiary of First
Tennessee. The combined organization became a wholly owned subsidiary of First
Tennessee with the name Highland Capital Management Corp. On March 16, 1994,
First Tennessee completed the acquisition of Cleveland Bank and Trust Company
(CBT). CBT became a wholly owned subsidiary of First Tennessee. The
consolidated financial statements of First Tennessee give effect to these
mergers which have been accounted for as poolings of interests. Accordingly,
the accounts of the acquired companies have been combined with those of First
Tennessee for all periods presented to reflect the results of these companies
on a combined basis for all periods presented, except for dividends. Certain
reclassifications of the historical results of these companies have been made
to conform to the current presentation.
On March 29, 1994, First Tennessee and Planters Bank of Tunica,
Mississippi (Planters), announced the execution of a definitive agreement
pursuant to which a wholly owned subsidiary of First Tennessee would be merged
with and into Planters for approximately $14 million in First Tennessee common
stock. The acquisition price is based on First Tennessee's common stock per
share price being within a range of $34 per share and $42 per share, inclusive.
Based on the purchase price and the range of the per share price, First
Tennessee will issue between 334,286 and 412,941 shares of its common stock.
At June 30, 1994, Planters had approximately $63 million in assets and $5
million in capital. The acquisition will be accounted for as a pooling of
interests and is subject to regulatory and Planters shareholder approvals. The
transaction is expected to close in the third quarter of 1994.
<PAGE> 9
NOTE 3 -- OTHER INCOME AND OTHER EXPENSE
Following is detail concerning "Other income" and "Other expense" as presented
in the Consolidated Statements of Income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
(Dollars in thousands) 1994 1993 1994 1993
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER INCOME:
Check clearing fees $ 3,929 $ 3,505 $ 7,895 $ 7,008
Other service charges 1,802 2,616 3,891 4,980
All other 5,221 4,212 10,294 8,974
- - ----------------------------------------------------------------------------------
Total $ 10,952 $ 10,333 $ 22,080 $ 20,962
==================================================================================
OTHER EXPENSE:
Contribution to charitable foundation $ 8,338 $ -- $ 8,338 $ --
Legal and professional fees 2,843 2,809 7,561 4,994
Advertising and public relations 2,654 1,731 5,737 3,625
Supplies 2,632 2,136 5,058 3,888
Fed service fees 2,063 1,900 4,060 3,777
Travel and entertainment 2,367 1,844 4,108 3,216
Foreclosed real estate 523 647 1,217 1,197
All other 7,690 8,694 19,795 17,363
- - ----------------------------------------------------------------------------------
Total $ 29,110 $ 19,761 $ 55,874 $ 38,060
==================================================================================
</TABLE>
<PAGE> 10
NOTE 4 -- INTANGIBLE ASSETS
Following is a summary of intangible assets (net of accumulated amortization)
included in the Consolidated Statements of Condition:
June 30 December 31
----------------------- -----------
(Dollars in thousands) 1994 1993 1993
- - ------------------------------------------------------------------------------
Purchased mortgage servicing rights $ 73,631 $ 58,694 $ 82,625
Goodwill 61,244 21,632 62,565
Premium on purchased deposits and assets 27,266 30,134 28,905
- - ------------------------------------------------------------------------------
Total intangible assets $ 162,141 $ 110,460 $ 174,095
==============================================================================
During 1993, goodwill and purchased mortgage servicing rights
increased approximately $42.0 million and $31.9 million, respectively, due to
the acquisition of Maryland National Mortgage Corporation.
<PAGE> 11
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
CONSOLIDATED FINANCIAL REVIEW
Net income for the second quarter of 1994 was $1.12 per share, an increase of
37 percent from $.82 per share for the second quarter of 1993. Net income for
the second quarter of 1994 totaled $35.6 million compared to $25.8 million for
the same period last year, an increase of 38 percent. The improvement in
earnings was primarily attributable to the continued growth in commercial and
consumer lending, lower credit quality costs, and growth in noninterest income
from mortgage banking expansion.
Return on equity (ROE) was 19.89 percent for the quarter ended June 30, 1994,
compared to 15.97 percent for the same period last year. The 19.89 percent ROE
reflects the adoption of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," on January 1, 1994. Excluding the adjustment to
equity due to SFAS No. 115, ROE would have been 19.85 percent for the second
quarter of 1994. Return on average assets (ROA) increased to 1.44 percent for
the quarter ended June 30, 1994, from 1.12 percent for the second quarter of
1993.
For the six months ended June 30, 1994, net income increased 30 percent to
$72.2 million, and earnings per share increased 29 percent to $2.27 per share,
compared to $55.5 million, and $1.76 per share, respectively, for the first six
months of 1993. ROA for the first half of 1994 increased to 1.46 percent from
1.23 percent for the same period in 1993. ROE rose to 20.38 percent from
17.49 percent for the comparable period last year. Excluding the adjustment to
equity due to SFAS No. 115, ROE would have been 20.56 percent for the first six
months of 1994. The same primary factors that contributed to the increase in
the second quarter also contributed to the year-to-date increase.
During the second quarter, First Tennessee utilized equity securities gains to
create a charitable foundation which will be used to fund a substantial portion
of the charitable donations by the corporation in the future. Second quarter
results include $7.6 million of equity securities gains, $8.5 million of
noninterest expense, and $3.1 million of income tax benefits, which were
recognized upon the creation of the foundation.
The following analysis discusses First Tennessee's financial condition and
results of operations for the second quarter and first six months of 1994
compared to the same period in 1993. Maryland National Mortgage Corporation
(Maryland) was acquired on October 1, 1993, and was accounted for as a
purchase. Therefore, results of Maryland operations prior to October 1, 1993,
are not reflected in the consolidated statements. During 1994, First Tennessee
acquired SNMC Management Corporation, parent company of Sunbelt National
Mortgage Corporation (Sunbelt); Highland Capital Management Corp.; and
Cleveland Bank & Trust Company. Each of these acquisitions was accounted for
as a pooling of interests and accordingly the financial position and results of
operations of all companies are reflected on a combined basis from the earliest
period presented. All accompanying financial statements, tables, and notes to
the statements should be read in conjunction with the narrative and be
considered an integral part of the analysis.
EARNINGS ANALYSIS
NET INTEREST INCOME Net interest income (NII) provided 50 percent of net
revenues for First Tennessee in the second quarter. NII is the difference
between interest and fees earned on earning assets and the interest expense
incurred on interest-bearing liabilities. For purposes of this discussion, NII
has been adjusted to a fully taxable equivalent basis for certain tax-exempt
loans and investments included in earning assets. Earning assets, including
loans, have been expressed as averages, net of unearned income. Changes in the
mix and volume of earning assets and interest-bearing liabilities, their
related yields, and overall interest rates have a major impact on earnings.
NII rose to $96.7 million for the quarter ended June 30, 1994, from $89.4
million for the same period last year, an increase of 8 percent. For the six
months, NII grew to $193.6 million compared to $178.8 million in 1993, an
increase of 8 percent. Both increases are the result of the growth in earning
assets as well as a change in the mix of earning assets.
Earning assets increased 6 percent for the quarter compared to the same period
last year, and provided 71 percent of the increase in NII over this period.
For the six months ending June 30, 1994, earning assets increased 7 percent and
contributed approximately 91 percent to the increase in NII over the six month
period.
<PAGE> 12
Total loans grew 26 percent for the second quarter of 1994 to $6.3 billion,
compared to $5.0 billion for the same quarter of 1993, and represented 72
percent of earning assets for the second quarter of 1994, up significantly from
61 percent for the comparable period last year. Excluding Maryland, loans
increased 21 percent to $6.1 million from the same period in 1994. For the six
months ended June 30, 1994, loans grew 28 percent and represented 71 percent of
earning assets in 1994, compared to 60 percent in 1993. Excluding Maryland,
loan growth for the six months ended June 30, 1994, was 22 percent compared to
1993.
Commercial loans, the single largest loan category, comprised 30 percent of
earning assets for the quarter ended June 30, 1994. The balance of $2.6 billion
represented a 14 percent increase from the same period in 1993, and was
primarily due to the strong economic recovery realized over the past year.
Consumer loans increased 42 percent from second quarter 1993 as a result of
expanded cross-selling of loan products to current deposit customers, enhanced
promotional campaigns to attract real estate refinancing, and market growth by
Gulf Pacific Mortgage, a division of First Tennessee Bank National Association
(FTBNA). Credit card activity increased 9 percent over the second quarter of
1993, reflecting consumer confidence and growth in the economy.
Mortgage loans, which include 1-4 family residential mortgage loans originated
by First Tennessee, increased from $.8 billion in the second quarter of 1993 to
$1.1 billion in the second quarter of 1994. This increase was primarily due to
mortgage loans originated by Maryland which were not included in the previous
year's numbers. As a result of strong loan growth and the acquisitions of the
mortgage companies, total investment securities dropped 32 percent to an
average of $2.1 billion for second quarter 1994, significantly changing the
earning asset mix. Investment securities represented 24 percent of earning
assets for second quarter 1994 compared to 37 percent for the same period last
year.
A 7 percent increase in average core deposits from the second quarter of 1994
supported much of the growth in earning assets. Average core deposits
continued to be First Tennessee's largest source of funding, providing 79
percent of the required earning asset funding.
PROVISION FOR LOAN LOSSES The provision for loan losses is the periodic charge
to earnings for potential losses in the loan portfolio. Management's policy is
to maintain the allowance for loan losses at a level sufficient to absorb all
estimated losses inherent in the loan portfolio. The allowance is increased by
the provision and decreased by loan charge-offs, net of recoveries. The
evaluation process to determine potential losses includes consideration of the
industry, specific conditions of the individual borrower, and the general
economic environment. As these factors change, the level of loan loss provision
changes. Reflecting continued improvement in asset quality, the loan loss
provision dropped from $9.2 million for the second quarter of 1993 to $2.7
million for the second quarter of 1994. Year-to-date, the 1994 provision for
loan losses, relative to the comparable period in 1993, declined $10.0 million
to $8.4 million, which approximates the 1994 year-to-date charge-offs of $8.4
million.
NONINTEREST INCOME Noninterest income provided approximately 50 percent of net
revenues for the second quarter of 1994, compared with 46 percent for the
second quarter of 1993. Excluding securities transactions in both periods,
non-interest income grew 18 percent relative to the same period last year. The
increase in fee income from second quarter 1993 to second quarter 1994 was led
by a 66 percent increase in mortgage banking noninterest income attributable to
Maryland, which was not included in the prior year s numbers; a 24 percent
increase in trust income to $8.0 million, reflecting overall business growth;
and a 13 percent increase in income from service charges on deposit accounts to
$15.8 million due to overall growth in deposit accounts. If securities
transactions and Maryland are excluded, noninterest income grew 3 percent, and
mortgage banking noninterest income decreased 5 percent from second quarter
1993 to second quarter 1994. Bond division revenues decreased 6 percent
relative to the same period one year ago due to the changes in market
conditions. Securities gains during the second quarter were $7.7 million of
which $7.6 million related to the formation of the charitable foundation. The
securities held for sale balance at period end was $1.3 billion. At June 30,
1994, these securities had approximately $16.1 million of aggregate holding
losses that resulted in a decrease in equity for unrealized holding losses of
approximately $9.8 million net of $6.3 million of deferred income taxes.
For the first six months of 1994, excluding securities transactions in both
periods, total noninterest income grew 26 percent compared to the same period
in 1993. Mortgage banking revenues, the primary contributor to this increase,
grew 104 percent to $59.7 million. Trust income increased 16 percent to $13.9
million, and income from service charges on deposit accounts increased 11
<PAGE> 13
percent to $30.3 million for the six month period. Bond division revenues
increased slightly compared to the results reported a year ago. Excluding
Maryland and securities transactions, total noninterest income grew 10 percent
and mortgage banking revenue grew 24 percent over the same six month period in
1993.
NONINTEREST EXPENSE Noninterest operating expense grew 24 percent in the
second quarter of 1994 compared with the second quarter of 1993. An increase
of 24 percent in employee compensation, incentives, and benefits, the single
largest category of noninterest expense, was the major contributor to expense
growth. Approximately 65 percent of the increase in the compensation category
was attributable to Maryland. Expenses related to the establishment of the
charitable foundation were the largest component of the other noninterest
expense category which increased 47 percent over the same period in 1993.
Excluding expenses related to Maryland and expenses related to the
establishment of the charitable foundation, total noninterest operating expense
rose 4 percent in second quarter 1994 compared with second quarter 1993.
For the first six months of 1994, total noninterest expense grew 31 percent
over the same period one year ago. Employee compensation, incentive, and
benefits, comprised 59 percent of the increase in noninterest expense and grew
34 percent for the first six months of 1994 compared to the same period in
1993. Approximately 48 percent of the increase was attributable to Maryland.
The remaining increase in employee compensation, incentives, and benefits was
primarily the result of a higher number of employees, regular salary increases,
and higher commissions and incentives expense in mortgage banking. Excluding
Maryland; first quarter costs which include onetime acquisition costs,
incentive expenses related to the Hickory Venture Capital gains and adoption of
SFAS No. 112; and the establishment of the charitable foundation, total
noninterest expense grew 9 percent, and employee compensation, incentive, and
benefits grew 13 percent.
The other noninterest expense category rose 47 percent, due largely to the
establishment of the charitable foundation. Excluding the same factors
discussed above, other noninterest expense increased 12 percent. This 12
percent increase included a 6 percent increase in legal and professional fees
and a 50 percent increase in advertising and public relations expense for the
first six months of 1994 compared to 1993.
INCOME TAXES The effective tax rate, or taxes as a percentage of pre-tax
income for the second quarter 1994 was 25 percent compared with 37 percent for
the comparable period last year. The effective tax rate for the six months
ended June 30, 1994, was 30 percent, compared with 36 percent for the same
period last year. The effective tax rate was reduced as a result of the
establishment of the charitable foundation and elimination of $3.8 million from
Sunbelt's $7.7 million deferred tax asset valuation allowance, reflecting tax
operating losses realized during 1992 and 1993.
ASSET/LIABILITY MANAGEMENT
Two factors affecting efficient asset/liability management are interest rate
risks and liquidity needs. The primary objective of interest rate sensitivity
management is to maintain net interest income growth while reducing exposure to
the risks inherent in interest rate movements. Liquidity is provided by a
well-structured balance sheet. Management's Asset/Liability Committee (ALCO),
an executive-level management committee, meets regularly to review both the
interest rate sensitivity and liquidity positions of First Tennessee.
INTEREST RATE RISKS First Tennessee's ALCO subjects earnings projections to a
variety of interest rate scenarios as well as pricing, maturity, growth, and
mix strategies to make informed decisions to increase income and limit interest
rate risk.
First Tennessee's goal is to stabilize the net interest margin by limiting the
size of the rate sensitivity position. One ALCO guideline is to maintain an
interest sensitivity gap position between the volume of assets and the volume
of liabilities repricing within one year below 5 percent of earning assets. At
June 30, 1994, the balance sheet was rate sensitive by $35 million more
liabilities than assets scheduled to reprice within one year. At .4 percent of
earning assets, this position was within guideline limits and represented a
relatively neutral position.
In addition, ALCO monitors the impact of changes in the level of interest
rates, the steepness of the yield curve, and market spreads on NII. Results
from recent NII simulations estimated that NII was relatively unchanged given a
200 basis point parallel shift in the level of interest rates. In addition,
management periodically analyzes the effect on NII of severe stress test
scenarios in which the current steepness of the yield curve is reduced
significantly and loan and deposit spreads narrow sharply.
<PAGE> 14
Off-balance sheet transactions such as interest rate swaps, forwards,
and options are used to manage rate sensitivity and to increase flexibility and
profitability in an increasingly competitive environment. These transactions
are only used to hedge potential fluctuations in income or market values and
are not used to generate speculative earnings. Total forward and futures
contracts at June 30, 1994, amounted to $1.6 billion compared to $1.9 billion
at June 30, 1993. Of the $1.6 billion, $1.1 billion were outstanding forward
contracts of the bond division. Forward contracts at the bond division
represent pending customer transactions that are non-regular way settlements,
and these forward contracts normally settle within 30 days. Mortgage banking
forwards totaled $.5 billion at June 30, 1994. The purpose of mortgage banking
forwards are to hedge the interest rate risk from the time the mortgage loan is
committed until it is funded and securitized. The notional value of interest
rate swaps at June 30, 1994, was $1.6 billion compared to $1.0 billion at June
30, 1993. These instruments increased as First Tennessee recognized several
opportunities to hedge potential NII risks. This included a $1 billion prime
rate versus fed funds rate swap that was added during 1993 in order to minimize
the impact of a potential narrowing in the spread between base rate loans and
short-term market rates. The notional amount of this swap, which matures in
1996, approximates one-half of First Tennessee's loans indexed to this rate.
Since the rate spread between prime and fed funds has not narrowed as expected,
this swap currently has a negative value compared with the positive spread
which it hedges between loan yields and our funding cost.
LIQUIDITY First Tennessee's goal is to maintain adequate liquidity to meet
potential funding needs of loan and deposit customers. This is achieved by
maintaining a stable base of core deposits and other interest-bearing funds;
accessibility to local, regional, and national funding sources; readily
marketable assets; and diversity in customers, products, and market areas. The
ability to maintain liquidity also is enhanced by adequate earnings power and
adequate capital. ALCO establishes guidelines to monitor the current liquidity
position and ensure adequate funding capacity.
Long-term liquidity needs are provided by a large core deposit base and a
strong capital position. Average core deposits, the most stable source of
liquidity, funded 70 percent of total average assets in the second quarter of
1994, while short-term purchased funds funded 19 percent. Short-term purchased
funds includes certificates of deposit greater than $100,000, federal funds
purchased, securities sold under agreements to repurchase, commercial paper,
and other borrowed funds, including term federal funds purchased. Short-term
purchased funds increased 9 percent from $1.8 billion at June 30, 1993, to $2.0
billion at June 30, 1994. First Tennessee's commercial paper is rated TBW-1 by
Thomson BankWatch, its highest rating category for short-term debt.
CAPITAL ADEQUACY
Capital adequacy refers to the level of capital required to sustain asset
growth over time and to absorb losses. Management's objective is to maintain a
level of capitalization that is sufficient to take advantage of profitable
growth opportunities while meeting regulatory requirements. This is achieved by
improving profitability through effectively allocating resources to more
profitable businesses, improving asset quality, strengthening service quality,
and streamlining costs. The primary measures used by management to monitor the
results of these efforts are the ratios of average equity to average assets and
average equity to average net loans. For each of these ratios, a long-term goal
is established. At least once a year the goals are re-evaluated to ensure that
they continue to meet management's objectives and reflect changes in market
conditions and the regulatory environment. The First Tennessee Board of
Directors, at the July 1994 meeting, completed its annual review of the capital
policy, and approved the capital goals discussed in this section.
Management's long-term goal is to maintain an average equity to average assets
ratio between 6.75 percent and 7.50 percent and a minimum ratio of average
equity to average net loans equal to or above 10.50 percent. Both of these
goals are currently being met. The average equity to average assets ratio was
7.24 percent in the second quarter of 1994 compared to 7.02 percent in the
second quarter of 1993. For second quarter 1994, average equity to average net
loans was 11.54 percent compared to 13.15 percent for the same period last
year.
For the first six months of 1994, average equity to average assets was 7.15
percent compared to 7.01 percent for the first half of 1993. Average equity to
average net loans was 11.50 percent relative to the 13.25 percent for the same
six month period in 1993.
The Federal Reserve, Office of the Comptroller of the Currency, and the Federal
Deposit Insurance Corporation (FDIC) require the maintenance of an
<PAGE> 15
amount of capital based on risk-adjusted assets so that categories of
assets with potentially higher credit risk will have more capital backing than
assets with lower risk. In addition, banks and bank holding companies are
required to maintain capital to support, on a risk-adjusted basis, certain
off-balance sheet activities such as loan commitments.
The capital guidelines classify capital into two tiers referred to as Tier 1
and Tier 2. Total capital consists of Tier 1 capital, which for First
Tennessee is common shareholders equity (excluding SFAS No. 115 adjustment)
less goodwill and certain other intangible assets, and Tier 2 capital, which
for First Tennessee is qualifying subordinated debt and a limited amount of
loan loss reserves. In determining risk-based capital requirements, assets are
assigned risk-weights of 0 percent to 100 percent, depending on the regulatory
assigned levels of risk associated with such assets. Off-balance sheet items
are considered in the calculation of risk-adjusted assets through conversion
factors established by the regulators. Furthermore, regulators monitor a
leverage ratio which compares Tier 1 capital to total average assets less
goodwill and certain other intangible assets. The risk-based regulatory capital
ratios are shown for First Tennessee and FTBNA in the Regulatory Capital table.
The FDIC also monitors risk-based capital guidelines and requires weaker banks
to pay higher premium rates while allowing healthy, well-capitalized banks to
pay less. Assessments for banks range from 23 cents for well-capitalized
institutions to 31 cents for the weakest undercapitalized institutions. On June
30, 1994, First Tennessee s bank subsidiaries had sufficient capital to qualify
as well-capitalized institutions. The well-capitalized standard is another
capital goal included in First Tennessee s capital policy,
CREDIT RISK MANAGEMENT
AND ASSET QUALITY
First Tennessee manages risk in the loan portfolio through its credit policy,
diversity in the mix of loans in the portfolio, intensive analysis of credit
requests, a continuous process of monitoring existing loans, and the credit
judgment of experienced credit officers. As acquisitions are completed, we
transition them into this centralized credit process as soon as practical.
Management believes the objective of a sound credit policy is to extend quality
loans to customers while managing risk affecting shareholders and depositors.
First Tennessee's goal is not to avoid risk, but rather to manage it.
COMMERCIAL LENDING The average commercial loan portfolio represented 41
percent of average total loans, net of unearned income, at June 30, 1994. To
assess the quality of individual commercial loans, all commercial loans are
internally assigned a credit rating, ranging from A to F, to assist in the
credit risk management of these loans. The credit rating assigned to a
particular loan is based on the financial condition of the borrower and
collateral on the loan. Grades are assigned at the inception of the loan,
reviewed regularly and revised as needed. The majority of commercial loans at
First Tennessee are graded C at inception. This reflects a commercial customer
base of smaller businesses, defined as companies with annual sales of $50
million or less. Due to increased business activity and generally improving
economic conditions throughout 1993 and the first half of 1994, loans graded C
and above, expressed as a percentage of total commercial and commercial real
estate loans, improved to 93.7 percent at June 30, 1994, from 91.1 percent at
June 30, 1993.
COMMERCIAL REAL ESTATE First Tennessee has two principal types of commercial
real estate lending. The first category, construction and development lending,
involves the extension of credit to build or otherwise develop real estate
properties which are later sold, operated for income-producing purposes, or
occupied by the owner for other business reasons. The real property and
improvements serve as collateral for the loan. The second category consists of
commercial real estate loans and loans to businesses secured by real estate
collateral. Commercial real estate loans generally have intermediate or
long-term maturities with payment schedules designed to amortize the loans over
their terms. Business loans in this category are made to finance real estate
used in business operations or for general business purposes. Construction and
development loans are moved to the commercial real estate loan category when
the construction is completed.
As a part of the commercial loan portfolio all commercial real estate loans are
assigned a risk grade. In addition to the grading process, one of the tools
management employs in monitoring the risk of loss in commercial real estate
lending activities is to assign all commercial real estate loans to either of
two risk categories. The higher risk loan category contains loans where the
primary source of repayment comes from either the sale of the real estate
property or the cash flow from the project, and a substantial secondary
<PAGE> 16
source of repayment is not available. Consequently, the risk potential
for loss on these loans is subject to the fluctuations in the market value of
the real estate collateral. For this reason, more stringent underwriting
standards, including equity requirements and loan to value ratios, debt service
coverage ratios, capitalization rates, discount rates and hold periods, are
applied to these loans. The other risk category contains loans which have a
substantial secondary source in addition to having real estate as the primary
source of repayment. These loans are generally considered to have less risk of
loss due to the additional source of repayment.
Commercial real estate loans at June 30, 1994, were $502.4 million compared to
$527.1 million at December 31, 1993. Construction and development loans
increased 44 percent from $78.8 million at December 31, 1993 to $113.2 million
at June 30, 1994, as additional funding for construction projects increased.
To monitor the risk of loss on commercial real estate loans, an annual review
of collateral values is required on all loans where real estate is the sole or
primary repayment source. An independent appraisal review department reviews
the appraisal assumptions to ensure they reflect current economic conditions.
Also, loan review personnel in their regularly scheduled examinations verify
that First Tennessee's appraisal policy and procedures are being followed.
Maintaining a diverse commercial real estate portfolio by project type is
another important way commercial real estate lending risk is managed. The
Loans Secured by Real Estate table reflects the diversity in real estate by
project type.
CONSUMER LENDING First Tennessee manages credit risk in consumer loans through
standardized products, uniform underwriting guidelines, and centralized process
controls. Credit underwriting guidelines are established for loan maturities,
collateral, and credit qualifications including credit scores, bankruptcy
scores, and debt to income levels.
These underwriting guidelines are developed and monitored centrally to ensure
consistent application across First Tennessee. The application and approval
processes are controlled through an enhanced computer system. The borrower's
application is programmatically compared to the credit underwriting guidelines.
The system informs the lender if the loan does or does not meet the credit
standard established for that type of loan. For loans that meet the credit
standards the system automatically produces the loan documents and records the
loan. Loans which do not meet the standards are rejected and moved to a higher
level of lending authority which has the ability to make exceptions. Exceptions
are monitored by the senior management of consumer lending. The application and
the data used in making the loan decision is stored in an electronic format for
further analysis.
Collections and loan operations are two important centralized process controls
for risk in the consumer portfolio. Collections is centralized to capitalize on
the collection specialization and economies of scale as well as consistent
application of collection procedures. The collection process is automated to
ensure timely collection of accounts and consistent management of risk
associated with delinquent accounts. Loan operations is centralized and
provides a final independent document review and notifies the loan officer of
any document exception.
COUNTERPARTY CREDIT RISK MANAGEMENT Counterparty credit risk includes First
Tennessee's exposure to other financial institutions. These risks arise from
the extension of direct credit or from agreements that require some exchange of
future payments or securities. As a financial intermediary, First Tennessee
continuously has exposure to these types of transactions. In order to limit its
concentration to any individual financial institution, ALCO, in conjunction
with the chief credit officer and senior credit officers, employs a
corporate-wide process to monitor, manage, and limit the risk to financial
counterparties. Also, formal policies have been approved by the board of
directors which quantify potential exposure and create corporate-wide risk
limits based on the creditworthiness of financial institution counterparties.
ALLOWANCE FOR LOAN LOSSES AND NET CHARGE-OFFS Management's policy is to
maintain the allowance for loan losses at a level sufficient to absorb all
estimated losses inherent in the loan portfolio. The allowance amount consists
of two principal components: amounts specifically provided for loans reviewed
on an individual or pool basis and a general portion designed to supplement the
specific allocations. The Net Loans and Foreclosed Real Estate table shows the
allowance account allocations by internal grades for the commercial loan
portfolio and by loan type for those loans not graded. The data is presented
for periods ended June 30, 1994 and 1993. For each of the period-ends
presented, the general portion of the allowance account is between $10 million
and $12 million. At the same time, the specific allocations have changed among
<PAGE> 17
the loan types or grades in each period, reflecting the changing circumstances
of individual credits or groups of loans.
The allowance for loan losses is increased by the provision for loan losses and
decreased by charged-off loans, net of recoveries. On June 30, 1994, the total
allowance for loan losses was $106.8 million compared to $104.2 million for the
same period last year. The allowance for loan losses to loans, net of unearned
income, was 1.69 percent at June 30, 1994, compared to 2.01 percent at June 30,
1993. Excluding the mortgage warehouse loans, these ratios would have been
1.83 percent and 2.18 percent at June 30, 1994 and 1993, respectively.
Net charge-offs for the second quarter 1994 decreased to $3.9 million or .24
percent of average loans, net of unearned income, compared to $6.9 million or
.54 percent for the same period last year due to improvement in asset quality.
For the six month period, net charge-offs to average loans, net of unearned
income, decreased to $8.4 million or .27 percent from $13.3 million or .54
percent from the comparable period last year.
Commercial and real estate loan net charge-offs approximated recoveries for the
second quarter of 1994. Consumer loan net charge-offs as a percent of average
consumer loans, net of unearned income, were .24 percent, while credit card
receivable net charge-offs as a percentage of credit card receivables were 2.51
percent.
For the six month period, commercial and real estate loan net charge-offs
decreased $3.3 million to $1.2 million compared to last year. Consumer loan
net charge-offs were $2.0 million compared to $2.7 million for the first half
of last year. Credit card net charge-offs decreased to $5.1 million from $6.2
million year-to-date last year. In management's opinion, the amount of total
net charge-offs for 1994 are expected to be below the level of net charge-offs
incurred in 1993, provided the economy continues to grow.
NONPERFORMING ASSETS Nonperforming assets, consisting of nonaccrual and
restructured loans, foreclosed real estate and other assets, increased 6
percent to $50.1 million at June 30, 1994. This compares to $47.2 million at
June 30, 1993. Excluding Maryland, nonperforming assets would have been $32.0
million. Nonperforming loans are those loans where, in the opinion of
management, the full collection of principal or interest is unlikely.
Nonperforming loans decreased 30 percent to $18.2 million at June 30, 1994,
from the $25.8 million at June 30, 1993. This decrease would have been 49
percent if Maryland was excluded. The ratio of nonperforming loans to total
loans decreased to .29 percent at the end of the second quarter of 1994
compared to .50 percent for the same period in 1993. Excluding Maryland, this
ratio would have been .22 percent. Nonperforming assets included $29.5 million
of foreclosed real estate as of June 30, 1994. Excluding Maryland, foreclosed
real estate would have been $16.5 million, and this amount has been written
down to 52 percent of the original loan values, net of payments. The
Nonperforming Assets table details the activity in nonperforming assets between
June 30, 1994, and June 30, 1993. In management's opinion, the level of
nonperforming assets in 1994 should be slightly below the 1993 level, provided
the economy continues to grow.
PAST DUE LOANS AMD POTENTIAL PROBLEM ASSETS Past due loans are loans that are
90 days or more past due as to principal or interest but have not been placed
on nonaccrual status. First Tennessee continues accruing interest on these
loans if they are currently in the process of collection and are well-secured.
Past due loans amounted to $22.7 million at June 30, 1994, a $.7 million
increase from $22.0 million at June 30, 1993.
Potential problem assets are not included in nonperforming assets, and
represent those assets where information about possible credit problems of
borrowers has caused management to have serious doubts about the borrower's
ability to comply with present repayment terms. This definition is believed to
be substantially consistent with the standards established by the Office of the
Comptroller of the Currency for assets classified substandard and doubtful. At
June 30, 1994, potential problem assets declined 24 percent to $64.6 million
compared to $84.5 million at June 30, 1993.
LOAN CONCENTRATIONS Loan industry concentrations are a measure of the
diversification of the commercial loan portfolio. Diversification is an
important means of reducing the investment risks associated with fluctuations
in economic conditions. At June 30, 1994, First Tennessee had no concentrations
of 10 percent or more of total loans in any single industry.
<PAGE> 18
RATE SENSITIVITY ANALYSIS AT JUNE 30, 1994
<TABLE>
<CAPTION>
Interest Sensitivity Period
-----------------------------------------------------------------------------
Within 3 After 3 months After 6 months
(Dollars in millions) Months Within 6 months Within 12 months Other Total
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans $ 3,210 $ 285 $ 508 $ 2,303 $ 6,306
Investment securities 122 154 251 1,568 2,095
Other earning assets 437 -- -- -- 437
- - ----------------------------------------------------------------------------------------------------------------------------
Total earning assets $ 3,769 $ 439 $ 759 $ 3,871 $ 8,838
- - ---------------------------------------------------------------------------------------------------------------------=======
EARNING ASSET FUNDING:
Interest-bearing deposits $ 1,817 $ 432 $ 458 $ 3,011 $ 5,718
Short-term purchased funds 1,579 1 -- -- 1,580
Long-term debt -- 2 -- 90 92
Noninterest-bearing funds 163 -- -- 1,285 1,448
- - ----------------------------------------------------------------------------------------------------------------------------
Earning asset funding $ 3,559 $ 435 $ 458 $ 4,386 $ 8,838
- - ---------------------------------------------------------------------------------------------------------------------=======
RATE SENSITIVITY GAP:
Period $ 210 $ 4 $ 301 $ (515)
Cumulative 210 214 515 --
- - ---------------------------------------------------------------------------------------------------------
RATE SENSITIVITY GAP ADJUSTED FOR INTEREST
RATE FUTURES AND INTEREST RATE SWAPS:
Period $ (330) $ (6) $ 301 $ 35
Cumulative (330) (336) (35) --
- - ---------------------------------------------------------------------------------------------------------
ADJUSTED GAP AS A PERCENT OF EARNING ASSETS:
Period (3.7)% (0.1)% 3.4 % 0.4 %
Cumulative (3.7) (3.8) (0.4) --
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
Interest-sensitive categories represent ranges in which assets and liabilities
can be repriced, not necessarily their actual maturities. Other amounts include
assets and liabilities with interest sensitivity of more than 12 months or with
indefinite repricing schedules.
<PAGE> 19
REGULATORY CAPITAL
<TABLE>
<CAPTION>
Well-
First Tennessee* FTBNA** Capitalized
---------------- ------------- Regulatory
(Dollars in thousands) JUNE 30, 1994 JUNE 30, 1994 Minimums
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL:
Tier 1 capital:
Shareholders' common equity $ 725,737 $ 642,038
Less disallowed intangibles 62,176 64,422
Add unrealized holding losses on
available for sale securities 9,803 10,520
- - ---------------------------------------------------------------------------------------------
Total Tier 1 capital 673,364 588,136
- - ---------------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt 82,537 75,000
Qualifying allowance for loan losses 86,637 83,295
- - ---------------------------------------------------------------------------------------------
Total Tier 2 capital 169,174 158,295
- - ---------------------------------------------------------------------------------------------
Total capital $ 842,538 $ 746,431
=============================================================================================
Risk-adjusted assets $ 6,910,878 $ 6,644,546
Quarterly average assets adjusted
for holding losses on securities 9,912,812 9,526,226
- - ---------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 9.74 % 8.85 % 6.00 %
Tier 2 capital to risk-adjusted assets 2.45 2.38 --
- - ---------------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 12.19 % 11.23 % 10.00 %
=============================================================================================
Leverage - Tier 1 capital to quarterly
average assets less disallowed
intangibles 6.84 % 6.22 % 5.00 %
- - ---------------------------------------------------------------------------------------------
* First Tennessee National Corporation **First Tennessee Bank National Association
Based on regulatory guidelines
</TABLE>
<PAGE> 20
LOANS AND FORECLOSED REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
June 30, 1994
-----------------------------------------------------------------
Construction Allowance
and Commercial For Loan
(Dollars in millions) Commercial Development Real Estate Total Losses
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Internal grades:
A $ 143 $ - $ 3 $ 146 $ -
B 331 - 8 339 1
C 1,474 112 440 2,026 23
D 68 1 19 88 6
E 19 - 19 38 4
F 22 - 9 31 8
- - -------------------------------------------------------------------------------------------------------------------
2,057 113 498 2,668 42
Nonaccrual loans:
Contractually past due with:
Substantial performance - - - - -
Limited performance 4 - 1 5 3
No performance 2 - - 2 1
Contractually current 2 - 3 5 3
- - -------------------------------------------------------------------------------------------------------------------
Total commercial and commercial
real estate loans $ 2,065 $113 $502 $ 2,680 $ 49
- - -------------------------------------------------------------------------------------------------------------------
Retail:
Consumer 2,012 19
Credit card 434 18
Permanent mortgages 541 2
Mortgage warehouse loans held for sale 469 -
Mortgage banking nonaccrual loans 5 1
- - -------------------------------------------------------------------------------------------------------------------
Total retail loans 3,461 40
- - -------------------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 138 3
Other/unfunded commitments 27 3
General reserve - 12
- - -------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 6,306 $107
===================================================================================================================
Foreclosed real estate:
Foreclosed property $ 1 $ 12 $ 3 $ 16
Foreclosed property - mortgage - - - 13
Insubstance foreclosure - - - -
- - -------------------------------------------------------------------------------------------------------------------
Total foreclosed real estate $ 29
===================================================================================================================
<CAPTION>
June 30, 1993 December 31, 1993
------------------ --------------------
Allowance Allowance
For Loan For Loan
(Dollars in millions) Total Losses Total Losses
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Internal grades:
A $ 118 $ - $ 111 $ -
B 268 1 370 1
C 1,737 23 1,916 23
D 80 2 65 5
E 53 3 58 5
F 50 11 36 11
- - ----------------------------------------------------------------------------------------------
2,306 40 2,556 45
Nonaccrual loans:
Contractually past due with:
Substantial performance - - - -
Limited performance 7 4 7 4
No performance 11 4 2 1
Contractually current 7 2 7 2
- - ----------------------------------------------------------------------------------------------
Total commercial and commercial
real estate loans $ 2,331 $ 50 $ 2,572 $ 52
- - ----------------------------------------------------------------------------------------------
Retail:
Consumer 1,429 16 1,733 15
Credit card 392 17 428 17
Permanent mortgages 474 5 495 4
Mortgage warehouse loans held for sale 397 - 1,100 -
Mortgage banking nonaccrual loans - - 9 1
- - ----------------------------------------------------------------------------------------------
Total retail loans 2,692 38 3,765 37
- - ----------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 140 3 144 3
Other/unfunded commitments 15 3 31 3
General reserve - 10 - 12
- - ----------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 5,178 $ 104 $ 6,512 $ 107
==============================================================================================
Foreclosed real estate:
Foreclosed property $ 16 $ 18
Foreclosed property - mortgage - 14
Insubstance foreclosure 4 -
- - ----------------------------------------------------------------------------------------------
Total foreclosed real estate $ 20 $ 32
==============================================================================================
</TABLE>
<PAGE> 21
All amounts in the Allowance for Loan Losses columns have been rounded to the
nearest million dollars. Grade A loans have reserve amounts of less than
$500,000.
Definitions of each credit grade are provided below:
*GRADE A -- Established, stable companies with excellent earnings, liquidity,
and capital. Possess many of the same characteristics as Standard & Poor's
(S&P) AA rated companies.
*GRADE B -- Established, stable companies with good earnings, liquidity, and
capital. Possess many of the same characteristics as S&P A rated companies.
*GRADE C -- Established, stable companies with satisfactory earnings,
liquidity, and capital and with consistent, positive trends relative to
industry norms.
*GRADE D -- Financial condition adversely affected by temporary lack of
earnings or liquidity or changes in the operating environment. An action
plan is required to rehabilitate the credit or have it refinanced elsewhere.
*GRADE E -- Significant developing weaknesses or adverse trends in earnings,
liquidity, capital, or operating environment. No discernable market for
refinancing is available.
*GRADE F -- Significantly higher than normal probability that: (1) legal
action or liquidation of collateral is required; (2) there will be a loss; or
(3) both will occur. This grade is believed to be substantially equivalent to
the regulators' classifications of substandard and doubtful.
*NONACCRUAL -- A loan that is placed on nonaccrual status is not included in
any of these six grades, but is placed in a separate nonaccrual category.
Commercial and real estate loans are placed on nonaccrual status
automatically once they become 90 days or more past due. For internal
management purposes, nonaccrual loans are divided into four sub-categories:
(1) contractually current, or payments are less than 90 days past due;
(2) contractually past due 90 days or more with substantial performance (more
than 85 percent of contractual payments being received);
(3) contractually past due with limited performance (between 1 percent and 85
percent of contractual payments being received); and
(4) contractually past due with no performance.
<PAGE> 22
FTBNA LOANS SECURED BY REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
--------------------------------------- -------------------------------------
Construction Commercial Construction Commercial
(Dollars in millions) & Development Real Estate Total & Development Real Estate Total
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RISK CATEGORIES:
Real estate collateral serves as
only source of repayment $ 67 $ 186 $ 253 $ 55 $ 171 $ 226
Real estate collateral is primary
source of repayment with a
substantial secondary source 46 316 362 24 356 380
- - --------------------------------------------------------------------------------------------------------------------------------
Total $ 113 $ 502 $ 615 $ 79 $ 527 $ 606
================================================================================================================================
PROJECT TYPE:
Apartments $ 3 $ 62 $ 65 $ 1 $ 77 $ 78
Hotels/Motels 2 54 56 - 62 62
Office buildings - multi-tenant 3 58 61 3 58 61
Single family builder 50 2 52 46 2 48
Shopping centers 17 128 145 7 99 106
Commercial/Special purpose units 2 69 71 2 73 75
All Other 36 129 165 20 156 176
- - --------------------------------------------------------------------------------------------------------------------------------
Total $ 113 $ 502 $ 615 $ 79 $ 527 $ 606
================================================================================================================================
</TABLE>
Based on internal loan classifications. Certain previously reported amounts
have been reclassified to agree with current presentation.
<PAGE> 23
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Second Quarter Year-to-Date
(Dollars in thousands) 1994 1993 1994 1993
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for loan losses:
Beginning balance $ 107,877 $ 101,848 $ 106,764 $ 99,077
Provision for loan losses 2,744 9,171 8,415 18,418
Net charge-offs (3,863) (6,855) (8,421) (13,331)
- - ---------------------------------------------------------------------------------------
Ending balance $ 106,758 $ 104,164 $ 106,758 $ 104,164
=======================================================================================
RATIOS:
Allowance to loans (net of
unearned income)* 1.69 2.01 %
Net charge-offs to average loans
(net of unearned income)* .24 .54 .27 .54
Net charge-offs to allowance 14.5 26.3 15.8 25.6
- - ---------------------------------------------------------------------------------------
</TABLE>
*Includes loans held for sale reported in "Mortgage warehouse
loans held for sale" on the Consolidated Statements of
Condition
<PAGE> 24
NONPERFORMING ASSETS ACTIVITY
<TABLE>
<CAPTION>
Quarters Ended
(Dollars in millions) 6/30/94 3/31/94 12/31/93 9/30/93 6/30/93
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 55.1 $ 59.3 $ 41.5 $ 47.2 $ 51.3
New nonperformers 1.5 7.0 4.6 2.1 11.4
Acquisitions -- -- 22.8 -- --
Return to accrual -- (2.0) -- -- (3.4)
Payments (6.0) (6.8) (4.0) (7.2) (7.8)
Charge-offs (0.5) (2.4) (5.6) (0.6) (4.2)
Market writedowns -- -- -- -- (0.1)
- - ---------------------------------------------------------------------------------
Ending balance $ 50.1 $ 55.1 $ 59.3 $ 41.5 $ 47.2
=================================================================================
</TABLE>
<PAGE> 25
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
June 30 December 31
-------------------- -----------
(Dollars in thousands) 1994 1993 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNTS:
Nonaccrual loans $ 17,858 $ 24,911 $ 25,738
Restructured loans 323 911 579
- - -------------------------------------------------------------------------------
Total nonperforming loans 18,181 25,822 26,317
Foreclosed real estate 29,468 20,107 31,650
Other assets 2,468 1,285 1,285
- - -------------------------------------------------------------------------------
Total nonperforming assets $ 50,117 $ 47,214 $ 59,252
===============================================================================
Past due loans:*
Non-government guaranteed $ 11,866 $ 11,256 $ 12,817
Government guaranteed 10,879 10,747 11,560
- - -------------------------------------------------------------------------------
RATIOS:
Nonperforming loans to total loans
(net of unearned income)** .29 % .50 % .40 %
Nonperforming assets to total loans
(net of unearned income) plus foreclosed
real estate and other assets** .79 .91 .91
Nonperforming assets and non-government
guaranteed past due loans to total loans
(net of unearned income) plus foreclosed
real estate and other assets** .98 1.12 1.10
- - -------------------------------------------------------------------------------
</TABLE>
*Loans that are 90 days or more past due as to principal and/or interest and
not yet on nonaccrual status.
**Total loans includes loans held for sale reported in "Mortgage warehouse
loans held for sale" on the Consolidated Statements of Condition.
<PAGE> 26
GRAPH TITLE: Cumulative Changes in Classified
Assets Since Year-End 1988
(Quarterly)
NARRATIVE DESCRIPTION: This is a line graph with the x-axis
representing quarterly periods from
1988 to second quarter 1994, and
the y-axis ranges from $0 to $220
million. There are two lines:
classified assets net of charge-offs
and adjustments and classified
assets. The classified assets net
of charge-offs and adjustments line
begins at $0 at December 31, 1988,
generally increases until it
reaches $99 million in the third
quarter of 1991, then decreases
steadily to $(14) million in the
second quarter of 1994. The
classified assets line begins at $0
at December 31, 1988, generally
increases until it reaches $202
million in the third quarter of
1991, then decreases steadily to
$128 million in the third quarter of
1993, and then rises to $136 million
in the first quarter of 1994, and
decreases to $128 million in the
second quarter of 1994. The
area between the two lines is shaded
and represents the impact to
nonaccrual loans and OREO from net
charge-offs and adjustments.
DATA POINTS:
<TABLE>
<CAPTION>
Classified Assets
Net of Charge-Offs and
(Millions of $) Adjustments Classified Assets
<S> <C> <C>
12/31/88 0 0
1Q89 17 19
2Q89 59 67
3Q89 46 68
12/31/89 30 68
1Q90 74 115
2Q90 83 131
3Q90 83 141
12/31/90 80 154
1Q91 95 173
2Q91 95 186
3Q91 99 202
12/31/91 78 190
1Q92 73 189
2Q92 59 179
3Q92 51 175
12/31/92 24 151
1Q93 17 147
2Q93 -4 130
3Q93 -6 128
12/31/93 -5 134
1Q94 -6 136
2Q94 -14 128
</TABLE>
NOTE: These graphs are used by management
to monitor classified assets and
nonperforming assets trends. They
compare the level of classified
assets and nonperforming assets
before and after charge-offs and
market adjustments. The data is as
originally reported and includes
acquisitions from the date of the
acquisitions.
REFERENCE: Credit Risk Management and Asset
Quality Sections
<PAGE> 27
GRAPH TITLE: Cumulative Changes in Nonaccrual
Loans and Other Real Estate Since
Year-End 1988 (Quarterly)
NARRATIVE DESCRIPTION: This is a line graph with the x-axis
representing quarterly periods from
1988 to second quarter 1994, and the
y-axis ranges from $0 to $220
million. There are two lines:
nonaccrual loans and OREO net of
charge-offs and adjustments and
nonaccrual loans and OREO. The
nonaccrual loans and OREO net of
charge-offs and adjustments line
begins at $0 at December 31, 1988,
generally increases until it reaches
$59 million in the first quarter of
1991, then decreases steadily to
$(6) million in the third quarter of
1993, and then rises to $11 million
in the fourth quarter of 1993, and
decreases again to $3 million at
June 30, 1994. The nonaccrual loans
and OREO line begins at $0 at
December 31, 1988, generally
increases until it reaches $144
million in the fourth quarter
of 1991, then decreases steadily to
$127 million in the third quarter of
1993, and then rises to $149 million
in the fourth quarter of 1993, at
which point it begins to decrease
again to $143 million by the second
quarter of 1994. The area between
the two lines is shaded and
represents the impact to
nonaccrual loans and OREO from net
charge-offs and adjustments.
DATA POINTS:
<TABLE>
<CAPTION>
Nonaccrual Loans and
OREO
Net of Charge-Offs and Nonaccrual Loans and
(Millions of $) Adjustments OREO
<S> <C> <C>
12/31/88 0 0
1Q89 13 15
2Q89 45 49
3Q89 35 57
12/31/89 27 63
1Q90 37 77
2Q90 35 82
3Q90 35 91
12/31/90 56 123
1Q91 59 134
2Q91 50 137
3Q91 43 142
12/31/91 35 144
1Q92 32 144
2Q92 24 142
3Q92 20 142
12/31/92 7 134
1Q93 3 133
2Q93 0 133
3Q93 -6 127
12/31/93 11 149
1Q94 8 148
2Q94 3 143
</TABLE>
NOTE: These graphs are used by management
to monitor classified assets and
nonperforming assets trends. They
compare the level of classified
assets and nonperforming assets
before and after charge-offs and
market adjustments. The data is as
originally reported and includes
acquisitions from the date of the
acquisitions.
REFERENCE: Credit Risk Management and Asset
Quality Sections
<PAGE> 28
Part II.
OTHER INFORMATION
Items 1, 3, and 5.
As of the end of the second quarter, 1994, the answers to Items 1, 3, and 5
were either inapplicable or negative, and therefore, these items are omitted.
Item 2. Changes in Securities
The restated Charter, as amended, has been amended as described in Part II,
Item 4 herein. Articles of Amendment were filed on April 22, 1994, with the
Tennessee Secretary of State. The effect of the change on the holders of the
Corporation's common stock, $2.50 par value, is described at Item No. 2 on, and
incorporated herein by reference to, pages 18 - 21 of the proxy statement dated
March 14, 1994, mailed to shareholders in connection with the Corporation's
annual meeting of shareholders held on April 19, 1994, and filed with the
Commission on March 17, 1994.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's Annual Meeting of Shareholders was held on April 19,
1994.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation
14 under the Securities Exchange Act of 1934. There were no
solicitations in opposition to management's nominees for election to
Class I (Mr. Orgill, Ms. Roman and Mr. Sansom). The nominees for
Class I were elected for a three-year term or until their respective
successors are duly elected and qualified. Directors continuing in
office are Messrs. Belz, Blattberg, Horn, Hyde, Ray, Rose, Street and
Terry.
(c) At the Annual Meeting, the shareholders approved an amendment to the
Corporation's restated charter increasing the number of authorized
shares of common stock from 50 million to 100 million shares and
ratified the appointment of Arthur Andersen & Co. as independent
auditors for the year 1994. The following table discloses the vote
with respect to each nominee, the charter amendment, and the
ratification of auditors:
For Withheld
--- --------
Joseph Orgill, III 23,681,488 154,984
Vicki G. Roman 23,618,850 217,622
William B. Sansom 23,683,408 153,064
<PAGE> 29
For Against Abstain
--- ------- -------
Approval of an amendment to the
Corporation's restated charter 22,951,042 683,097 202,333
For Against Abstain
--- ------- -------
Ratification of auditors 23,338,689 390,442 107,341
There were no "broker non-votes" with respect to any of the vote items
and no abstentions with respect to any of the nominees.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with the provisions of the Exhibit
Table of Item 601 of Regulation S-K are included as described in the
Exhibit Index which is a part of this report. Exhibits not listed in
the Exhibit Index are omitted because they are inapplicable.
(b) No reports on Form 8-K were filed during the second quarter of 1994.
<PAGE> 30
SIGNATURES
Pursuant to the requirements 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.
FIRST TENNESSEE NATIONAL CORPORATION
(Registrant)
DATE: 8/12/94 By: James F. Keen
--------------------------------
James F. Keen
Senior Vice President and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page No.
- - ----------- ------------------- --------
<S> <C> <C>
3(i) Restated Charter of FTNC, as amended, incorporated
herein by reference to Exhibit 3(i) to FTNC's registration
statement on Form S-4 (No. 33-53331) filed April 28, 1994.
3(ii) Bylaws of FTNC, as amended Filed Herewith
11 Statement re Computation of Per Share Earnings Filed Herewith
99 Item No. 2 on pages 18 - 21 of the Corporation's proxy
statement dated March 14, 1994, mailed to shareholders in
connection with the annual meeting held on April 19, 1994,
filed on March 17, 1994 and incorporated herein by
reference.
</TABLE>
<PAGE> 1
EXHIBIT 3 (ii)
BY LAWS
OF
FIRST TENNESSEE NATIONAL CORPORATION
(As Amended and Restated March 15, 1977)
ARTICLE I.
OFFICES
1. The principal office shall be in Memphis, Tennessee.
2. The Corporation may also have offices in such other
places as the Board of Directors may from time to time appoint, or
the business of the Corporation may require.
ARTICLE II.
SHAREHOLDERS' MEETINGS
1. Meetings of the shareholders of the Corporation may be
held either in the State of Tennessee or elsewhere: but in the
absence of notice to the contrary, shareholders' meetings shall be
held at the office of the Corporation in Memphis, Tennessee.
2. The annual meeting of shareholders for the election of
directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the
Third Tuesday in April, or if that day is a legal holiday, on the
next succeeding day not a legal holiday, at a time to be fixed by
resolution of the Board of Directors; at which meeting they shall
elect by ballot, by plurality vote, a Board of Directors and may
transact such other business as may properly come before the
meeting.
3. The holders of a majority of the shares issued and out-
standing and entitled to vote thereat, present in person or repre-
sented by proxy, shall be requisite, and shall constitute a quorum
at all meetings of the shareholders, for the transaction of busi-
ness, except as otherwise provided by law, by the Charter of
Incorporation, and these Bylaws. If, however, such majority shall
not be present or represented at the meeting of the shareholders,
the shareholders entitled to vote thereat, present in person or by
Proxy, shall have power to adjourn the meeting from time to time
<PAGE> 2
without notice other than announcement at the meeting until the
requisite amount of voting shares shall be present. At such ad-
journed meeting at which the requisite amount of voting shares shall
be represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
4. Written notice of the annual meeting stating the place,
day and hour of the meeting shall be mailed to each shareholder
entitled to vote thereat at such address as appears on the stock
records of the Corporation, at least ten (10), but not more than
sixty (60), days prior to the meeting.
5. Special meetings of the shareholders for any purpose or
purposes, unless otherwise prescribe by statute, may be called (i)
by the Chairman of the Board of Directors, and shall be called by
the Chairman of the Board of Directors or the Secretary at the
request in writing of a majority of the Board of Directors, or (ii).
by the holders of not less than one-tenth (1/10) of all the shares
entitled to vote at such meeting. Such call shall state the purpose
or purposes of the proposed meeting.
6. Written notice of a special meeting of shareholders,
stating the place, day and hour and the purpose or purposes for
which the meeting is called and the person or persons calling the
meeting, shall be mailed, postage prepaid, at least ten (10) days
before the date of such meeting, to each shareholder entitled to
vote thereat at such address as appears on the stock transfer
records of the Corporation.
7. Special meetings of the shareholders may be held at any
time on written waiver of notice or by consent of all of the share-
holders.
8. Any shareholder may waive notice of any meeting either
before, at or after the meeting.
9. At each meeting of shareholders, each shareholder shall
have one vote for each share of stock having voting power registered
in his name on the records of the Corporation on the record date for
that meeting, and every shareholder having the right to vote shall
be entitled to vote in person or by proxy appointed by instrument in
writing.
-2-
<PAGE> 3
10. Any director may be removed by the shareholders with or
without cause, at any time by the affirmative vote of the holders of
a majority of the stock entitled to vote, by resolution adopted at
any meeting of shareholders, whether an annual or a special meeting.
ARTICLE III
DIRECTORS
1. The business and affairs of the Corporation shall be
directed by a Board of Directors, which shall consist of 19 members.
Directors need not be shareholders.
2. Each director shall serve for the term of one year and
until his successor shall have been duly elected and qualified:
subject, however, to the right of the removal of any director at any
time by the affirmative vote of the majority of the shares entitled
to vote by resolution adopted at any meeting of shareholders,
whether an annual or a special meeting.
3. The directors may hold their meetings at the office of the
Corporation in Memphis, Tennessee, or at such other place or places,
either in the State of Tennessee or elsewhere, as they may from time
to time determine.
4. A majority of the Board of Directors at a meeting duly
assembled shall be necessary to constitute a quorum for the trans-
action of business, and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the vote of a greater number is
required by law, by the Charter, or these Bylaws.
5. As compensation, the directors, for their services, shall
be paid such amounts at such time as may, from tine to time, be
determined by resolution of the entire Board of Directors; provide
that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and
being compensated therefor.
6. The directors, by resolution adopted by a majority of the
entire Board, may designate any executive committee, consisting of
three or more directors, and other committees, consisting of three
or more directors, officers or employees, and may delegate to such
-3-
<PAGE> 4
committee or committees all such authority of the Board that it
deems desirable, including, without limitation, authority to elect
corporate officers, fix their salaries and, to the extent such is
not provided by law, the Charter or these Bylaws, to establish their
authority and responsibility, except that no such committee or
committees, unless specifically so authorized by the Board, shall
have and exercise the authority of the Board to:
(a) Adopt, amend or repeal the Bylaws;
(b) Submit to shareholders any action that needs
shareholders' authorization under Chapters 1
through 14, Title 48, Tennessee Code Annotated,
and any and all amendments and supplements
thereto;
(c) Fill vacancies in the Board or in any committee; and
(d) Declare dividends or make other corporate distributions.
Regular and special meetings of committees may be held with or with-
out notice as prescribed by resolution of the directors.
ARTICLE IV.
POWERS OF DIRECTORS
1. The Board of Directors shall have, in addition to such
powers as are hereinafter expressly conferred on it and all such
powers as may be conferred on it by law, all such powers as may be
exercised by the Corporation, subject to the provisions of the law,
the Charter and these Bylaws.
2. The Corporation shall be managed by the Board of Directors,
which shall exercise all powers conferred under the laws of the
State of Tennessee, including without limitation the powers speci-
fied in the Charter of the Corporation, as amended, and the power:
(a) To purchase or otherwise acquire property, rights
or privileges for the Corporation which the Corpora-
tion has power to take, at such prices and on such
terms as the Board of Directors may deem proper;
(b) To pay for such property, rights or privileges in
whole or in part with money, stocks, bonds, deben-
tures or other securities of the Corporation, or
-4-
<PAGE> 5
by the delivery of other property of the
Corporation;
(c) To create, make and issue mortgages, bonds, deeds
of trust, trust agreements and negotiable or trans-
ferable instruments end securities, secured by
mortgage or otherwise, and to do every act and thing
necessary to effectuate the same;
(d) To elect the corporate officers and fix their salaries;
to appoint employees and trustees; and to dismiss them
at its discretion; to fix their duties and emoluments,
and to change them from time to time; and to require
security as it may deem proper;
(e) To confer on any Officer of the Corporation the power
of selecting, discharging or suspending such employees;
and
(f) To determine by whom and in what manner the Corporation's
bills, notes, receipts, acceptances, guaranties, endorse-
ments, checks, releases, contracts or other documents
shall be signed.
ARTICLE V.
MEETINGS OF DIRECTORS
1. Following each annual election of directors, the newly
elected directors shall meet for the purpose of organization, the
election of officers and the transaction of other business, and,
if a majority of the directors be present at such place, day and
hour, no prior notice of such meeting shall be required to be
given to the directors. The place, day and hour of such meeting
may also be fixed by written consent of the directors.
2. Meetings of the directors shall be held at least once each
calendar quarter at such time and place as the Board of Directors
may by resolution determine. Notice of the time and place of the
meetings shall be given as specified for a special meeting.
3. Special meetings of the directors may be called by the
Chairman or the Board of Directors or the President on two days'
-5-
<PAGE> 6
notice in writing or on one day's notice by telegram to each direc-
tor, and shall be called by the Chairman in like manner on the
written request of two directors. The notice shall state thou
place, day and hour where it is to be held.
4. Special meetings of the directors may be held at any time
on written waiver of notice or by consent of all the directors.
5. A majority of the directors shall constitute a quorum, but
a smaller number may adjourn from time to time, without further
notice, if the time and place to which the meeting is adjourned are
fixed at the meeting at which the adjournment is taken and if the
period of adjournment does not exceed thirty (30) days in any one
(1) adjournment.
6. The directors may take action which they are required or
permitted to take, without a meeting, on written consent setting
forth the action so taken, signed by all of the directors entitled
to vote thereon.
ARTICLE VI.
OFFICERS
1. The officers of the Corporation shall be chosen at the
annual organizational meeting following the annual meeting of share-
holders, for a term of one (1) year and until their successors are
elected and qualified. The officers of the Corporation shall con-
sist of a Chairman of the Board of Directors, a President, such
number of Vice Chairmen as the Board may from time to time determine
and appoint, a Financial Vice President, a Secretary, a Treasurer, a
Controller and an Auditor, and such number of Executive Vice Presidents.
Senior Vice Presidents and Vice Presidents, Assistant Secretaries,
Assistant Controllers, Assistant Auditors, and Corporate Officers as
the Board may from time to time determine and appoint. Any person
may hold two or more offices, except that the President shall not
also be the Secretary or an Assistant Secretary. The officers,
other than the Chairman of the Board of Directors, need not be
directors or shareholders.
-6-
<PAGE> 7
2. The Board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
3. If the office of any officer or officers appointed by the
Board of Directors becomes vacant for any reason, the vacancy may
be filled by the Board of Directors.
4. The officers of the Corporation shall hold office until
their successors are elected and qualified. Any officer shall be
subject to removal at any time with or without cause by the affirma-
tive vote of a majority of the Board of Directors.
5. The salaries and compensation of all officers of the
Corporation shall be fixed by the Board.
ARTICLE VII.
CHAIRMAN OF THE BOARD OF DIRECTORS
1. The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation; he shall preside at all
meetings of the shareholders; he shall have general management of
the business of the Corporation and shall exercise general super-
vision over all of its affairs and shall see that all orders and
resolutions of the Board are carried into effect.
2. He shall have the general powers and duties of supervision.
and management usually vested in the office of Chairman of the Board
of Directors and Chief Executive Officer of a Corporation.
ARTICLE VIII.
THE PRESIDENT
1. The President, in the absence of the Chairman of the
Board, shall preside at all meetings of shareholders, and he shall
be charged with the active management and administration of the
business of the Corporation with power to make all contracts in the
conduct of the regular and ordinary business of the Corporation; and
he may appoint and discharge agents and employees of the Corporation
and fix their compensation, subject to the general supervisory powers
-7-
<PAGE> 8
of the Chairman of the Board of Directors and of the Board of
Directors, and do and perform such other duties as from time to time
may be assigned to him by the Board of Directors and as may be
authorized by law.
ARTICLE IX.
VICE CHAIRMAN
1. Vice Chairmen shall perform such of the duties and exer-
cise such of the powers as may be prescribed by the Board of Direc-
tors or the Chairman of the Board of Directors.
ARTICLE X.
CHAIRMAN OF THE CREDIT POLICY COMMITTEE
1. The Chairman of the Credit Policy Committee shall perform
such of the duties and exercise such of the powers as may be pre-
scribed by the Board of Directors or the Chairman of the Board of
Directors.
ARTICLE XI.
FINANCIAL VICE PRESIDENT
1. The Financial Vice President shall perform such of the
duties and exercise such of the powers as may be prescribed by the
Board of Directors or the Chairman of the Board of Directors.
ARTICLE XII.
VICE PRESIDENT
1. Vice Presidents shall perform such of the duties and
exercise such of the powers as may be prescribed by the Board of
Directors, the Chairman of the Board of Directors or the President.
ARTICLE XIII.
SECRETARY
1. The Secretary shall attend all sessions of the Board and
of the shareholders and record all votes and the minutes of all
-8-
<PAGE> 9
proceedings in a book to be kept for that purpose. He shall give or
cause to be given notice of all meetings or the shareholders and of
the Board of Directors and shall perform such other duties as are
incident to his office or as may be prescribed by the Board of
Directors or the Chairman of the Board of Directors.
2. In the absence or disability of the Secretary, the Assistant
Secretary shall perform all the duties and exercise all of the
powers of the Secretary and shall perform such other duties as the
Board of Directors or the Chairman of the Board of Directors shall
prescribe.
ARTICLE XIV.
TREASURER
1. The Treasurer shall have custody of the funds and securi-
ties of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation such depositories as may be
designated by the Board of Directors.
2. He shall disburse the funds of the Corporation as may be
ordered by the Board, or by the Chairman of the Board of Directors,
or by the President, taking proper vouchers for such disbursements,
and shall render to the Board, the Chairman of the Board, or the
President, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation, and at a regular meeting of the Board preceding the
annual shareholders' meeting, a like report for the preceding year.
3. He shall keep or cause to be kept an account of stock
registered and transferred in such manner and subject to such
regulations as the Board of Directors may prescribe
4. He shall give the Corporation a bond, if required by the
Board of Directors, in such sum and in form and with security satis-
factory to the Board of Directors for the faithful performance of
the duties of his office end the restoration to the Corporation, in
case of his death, resignation or removal from office, of all books,
-9-
<PAGE> 10
papers, vouchers, money and other property of whatever kind in his
possession, belonging to the corporation. He shall perform such
other duties as the Board of Directors may from time to time pre-
scribe or require.
5. In the absence or disability of the Treasurer, the Assis-
tant Treasurer shall perform all the duties and exercise all of the
powers of the Treasurer and shall perform such other duties as the
Board of Directors or the Chairman of the Board of Directors shall
prescribe.
ARTICLE XV.
AUDITOR
1. The Auditor shall perform such of the duties and exercise
such of the powers as may be prescribed by the Board of Directors.
2. In the absence or disability of the Auditor, the Assistant
Auditor shall perform all the duties and exercise all the powers of
the Auditor and shall perform such other duties as the Board of
Directors shall prescribe.
ARTICLE XVI.
CONTROLLER
1. The Controller shall assist the management of the Corpora-
tion in setting the financial goals and policies of the Corporation;
shall provide financial and statistical information to the share-
holders and to the management of the Corporation and shall perform
such other duties and exercise such other powers as may be pre-
scribed by the Board of Directors, the Chairman of the Board of
Directors or the President.
2. In the absence or disability of the Controller, the Assis-
tant Controller shall perform all duties and exercise all Powers of
the Controller and shall perform such other duties as the Board of
Directors or the Chairman of the Board of Directors shall prescribe.
-10-
<PAGE> 11
ARTICLE XVII
CORPORATE OFFICER
1. Corporate Officers shall have such authority and perform
such of the duties and exercise such of the powers as may be pre-
scribed by the Board of Directors, the President or any Vice Chair-
man.
ARTICLE XVIII.
DUTIES OF OFFICERS MAY BE DELEGATED
1. In case of the absence of any officer of the Corporation,
or for any other reason that the Board may deem sufficient, the
Board may delegate, for the time being, the powers or duties, or any
of them, of such officer to any other officer, or to any director,
provided a majority of the entire Board concur therein.
ARTICLE XIX.
CERTIFICATES OF STOCK
1. The certificates of stock of the Corporation shall be
numbered, shall be entered in the book or records of the Corpora-
tion as they are issued, and shall be signed by the Chairman of the
Board and any one of the following: the President, the Treasurer or
the Secretary. Each certificate shall include the following upon
the face thereof:
(a) That the Corporation is organized under the laws of this
state;
(b) The name of the Corporation;
(c) The name of the person to whom issued;
(d) The number and class of shares, and the designation of
the series, if any, which such certificate represents;
(e) The par value of each share represented by such certifi-
cate: or a statement that the shares are without par
value; and
(f) Such other provisions as the Board may from time to
time require.
-11-
<PAGE> 12
Either or both of the signatures upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent, or regis-
tered by a registrar other than an officer or employee of the
Corporation.
ARTICLE XX.
TRANSFERS OF STOCK AND RECORD DATE
1. Transfers of shares of stock shall be made upon the books
of the Corporation by the person named in the certificate or by an
attorney, lawfully constituted in writing, and upon surrender of the
certificate therefor.
The Board of Directors may appoint suitable agents in Memphis,
Tennessee, and elsewhere to facilitate transfers by shareholders
under such regulations as the Board may from time to time prescribe.
The transfer books may be closed by the Board for such period, not
to exceed 40 days, as may be deemed advisable for dividend or other
purposes, or in lieu of closing the books, the Board may fix in
advance a date as the record date for determining shareholders
entitled notice of and to vote at a meeting of shareholders, or
entitled to payment of any dividend. The record date shall not be
less than 10 days prior to the date on which the particular action
requiring such determination is to be taken. All certificates
surrendered the the Corporation for transfer shall be canceled, and
no new certificate shall be issued until the former certificate for
like number of shares shall have been surrendered and canceled,
except that in case of a lost or destroyed certificate a new one may
be issued on the terms prescribe by Article XXII of these Bylaws.
ARTICLE XXI
REGISTERED SHAREHOLDERS
1. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact there-
of; and, accordingly shall not be bound to recognize any equitable
or other claim to or interest in such share on the part of any other
-12-
<PAGE> 13
person, whether or not it shall have express or other notice thereof,
save as expressly provided by the laws of Tennessee.
ARTICLE XXII.
LOST CERTIFICATE
1. The agent for transfer of the Corporation's stock may
issue new share certificates in place of certificates represented to
have been lost, destroyed, stolen or mutilated upon receiving an
indemnity satisfactory to the agent and the Secretary or Treasurer
of the Corporation, without further action of the Board of Directors.
ARTICLE XXIII.
FISCAL YEAR.
1. The Board of Directors of the Corporation shall have
authority from time to time to determine whether the Corporation
shall operate upon a calendar year basis or upon a fiscal year
basis, and if the latter, said Board shall have power to determine
when the said fiscal year shall begin and end.
ARTICLE XXIV.
DIVIDENDS
1. Dividends on the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting
pursuant to law.
2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discre-
tion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends or for repairing or maintaining any property of
the Corporation, or for such other purposes as the directors shall
think conducive to the interest of the Corporation.
-13-
<PAGE> 14
ARTICLE XXV
SEAL
1. This Corporation shall have a Corporate Seal which shall
consist of an imprint of the name of the Corporation, the state of
its incorporation, the year of incorporation and the words "Corporate
Seal."
ARTICLE XXVI.
NOTICES
1. Whenever under the provisions of these Bylaws notice is
required to be given to any director, officer or shareholder, it
shall not be construed to mean personal notice, but such notice may
be given in writing by depositing the same in the United States
Mail, or by telegram addressed to such shareholder, at such address
as appears on the stock transfer books of the Corporation, and
addressed to such director or officer at such address as appears on
the records of the Corporation, and such notice shall be deemed to
be given at the time when the same shall be thus deposited, or the
telegram sent.
2. Any director, officer or shareholder may waive any notice
of any meeting required to be given under these Bylaws either be-
fore, at or after the meeting.
ARTICLE XXVII.
AMENDMENTS
1. The Board of Directors shall have power to make, amend and
repeal the Bylaws of the Corporation by vote of a majority of all
the directors, at any regular or special meeting of the Board.
2. The shareholders may make, alter, amend and repeal the
Bylaws of this Corporation at any annual meeting or at a special
meeting called for that purpose, and all Bylaws made by the direc-
tors may be altered or repealed by vote of the majority of the
shareholders.
-14-
<PAGE> 15
ARTICLE XXVIII
INDEMNIFICATION
1. If any current or former director or officer of First
Tennessee National Corporation ("First Tennessee") shall be wholly
successful, on the merits or otherwise, in any threatened or actual
criminal or civil suit or proceeding other than by or in the right
of First Tennessee to procure a judgement in its favor, including
any suit or proceeding instituted as a result of such director or
officer serving another corporation or other business entity in any
capacity at the request of First Tennessee, which was commenced by
reason of the fact that he is or was a director or officer of First
Tennessee or served such other corporation or other business entity
in any capacity, he shall be indemnified by First Tennessee against
all reasonable expenses, including attorney fees, actually and
necessarily incurred as a result of such threatened or actual suit
or proceeding, or any appeal therein.
2. If any current or former director or officer of First
Tennessee shall be wholly successful, on the merits or otherwise, in
any actual suit by or in the right of First Tennessee to procure a
judgment in its favor, which was commenced by reason of the fact
that he is or was a director or officer of First Tennessee, he shall
be indemnified by First Tennessee against all reasonable expenses;
including attorney fees, actually and necessarily incurred as a
result of such suit or proceeding, or any appeal therein.
3. If any current or former director or officer of First
Tennessee has not been wholly successful, on the merits or other-
wise, in defense of a threatened or actual suit or proceeding of the
character described in Section 1 of this bylaw or a civil action of
the character described in Section 2, unless ordered by the Court
under Section 48-410 of the Tennessee Code Annotated ("T.C.A."), he
shall be indemnified by First Tennessee (1) in a suit or proceeding
of the character described in Section 1, against judgments and
fines; and (2) in a suit or proceeding of the character described in
Sections 1 or 2, against amounts paid in settlement and reasonable
expenses, including attorney fees, actually and necessarily incurred
as a result of such suit or proceeding, or any appeal therein, only
if authorized in the specific case:
-15-
<PAGE> 16
a. By the Board of First Tennessee acting by a quorum consisting
of Directors who are not parties to such action or proceeding
upon a finding that:
(1) In a suit or proceeding other than by or in the right
of First Tennessee, the director or officer has acted
in good faith for a purpose which he has reasonably
believed to be in the best interest of First Tennessee,
and, in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his conduct
was unlawful; or
(2) In a suit or proceeding by or in the right of First
Tennessee, the director or officer has not breached
his duty to First Tennessee under T.C.A. 48-813; and
(3) In the case of any settlement, in addition to the
appropriate standard of conduct under 3.a. (1) or (2),
the settlement is in the best interest of First Tennes-
ee; and if the settlement has been approved by a court,
that the indemnification would not be inconsistent with
any condition with respect to indemnification imposed
by the court in approving the settlement.
b. If a quorum under 3.a. is not available with due diligence:
(1) By the Board of First Tennessee upon the opinion in
writing of independent legal counsel that indemnification
is proper in the circumstances because the applicable
standard of conduct set forth in 3.a.(1), (2) or (3)
has been met by such director or officer; or
(2) By the shareholders of First Tennessee upon finding that
the director or officer has met the applicable standard
of conduct set forth in 3.a.(1), (2) or (3).
4. A director or officer of First Tennessee shall be deemed
to be serving another corporation or other business entity at the
request of First Tennessee only if such request is reflected in the
records of a committee appointed by the Board of first Tennessee for
the purpose of making such requests.
5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by first Tennessee in advance of the
-16-
<PAGE> 17
final disposition of such action, suit or proceeding if authorized
by the procedure established under 3.a. or b. of this bylaw.
6. If any expenses or other amounts are paid by way of in-
demnification otherwise than by court order under T.C.A. 48-410 or
action by the shareholders, First Tennessee shall give notice to the
shareholders as provided in T.C.A. 48-411(3).
7. Every employee of First Tennessee shall be indemnified by
First Tennessee to the same extent as directors or officers of First
Tennessee.
8. a. The right of indemnification set forth above shall
not be deemed to restrict any right of indemnifica-
tion provided to any director, officer or employee of
First Tennessee or any of its subsidiaries
pursuant to a contract, agreement or resolution
executed upon the approval or ratification of the
Board of First Tennessee acting by a quorum of dis-
interested directors, provided that any such con-
tract shall not enlarge the rights of indemnification
permitted under the Tennessee Central Corporation Act.
b. This bylaw shall not be construed to affect or re-
strict in any manner any right of indemnification
granted by First Tennessee to persons other than
directors, officers and employees of First Tennessee
or any of its subsidiaries.
9. a. No combination of rights shall permit any current or
former director, officer or employee of First Tennes-
see to receive a double recovery.
b. The right of indemnification provided in this bylaw
shall inure to the benefit of the heirs, executors or
administrators of each such current or former direc-
tor, officer of employee of First Tennessee and shall or
in no event be construed to enlarge the rights of
indemnification permitted under the Tennessee General
Corporation Act.
-17-
<PAGE> 18
ARTICLE XXIX
RETIREMENT
1. Directors. Any director who shall attain the age of
seventy (70) shall be automatically retired from the Board at
time of the next succeeding annual meeting of shareholders. How-
ever, a director may be retired before age seventy (70) as herein-
after provided.
Effective December 31, 1978, directors shall be retired from
the Board as follows:
(1) The retirement age for Directors will be sixty-five (65).
Any Director who becomes sixty-five prior to December 31;
1978 or any December 31 thereafter will be retired as of
the December 31 following his sixty-fifth birthday.
(2) For the purpose of maintaining Boards of active business
and professional men, Directors leaving their present
occupation or the position held at their last election (by
retirement or otherwise), will be expected to tender their
resignation from the Board upon such occasion. The resig-
nation will ordinarily be accepted unless (a) the Director
assumes another management position deemed appropriate by
the Board for continuation, or (b) the Director is so en-
gaged in some specific project for the Board as to make
his resignation detrimental to the Corporation. Under
this circumstance, the Board may elect to set a subsequent
date for his retirement timed to coincide with the comple-
tion of the project.
(3) Directors who are also Officers of the Corporation shall
be retired from the Board on the date they retire from or
otherwise discontinue active service with the Corporation
or its affiliates.
Any director of the Corporation who has retired from the Board
is eligible for election to a position on the Honorary Advisory
Board, the duties of which shall be as specified by such resolutions
as the Board of Directors may from time to time adopt. Membership
on the Honorary Advisory Board shall continue at the discretion of
the Board of Directors.
-18-
<PAGE> 19
2. Officers and Employees. As each officer or employee
attains the age of sixty-five years, his employment by the Corpora-
tion shall automatically be terminated and his salary discontinued
on the first day of the month coincident with or immediately following
his sixty-fifth birthday; however, the Board of Directors, in its
discretion, may continue any such officer or employee in service and
designate the capacity in which he shall serve, and shall fix the
remuneration he shall receive. The Board may also re-employ any
former officer who had theretofore been retired.
ARTICLE XXX.
CONVEYANCES
1. All transfers and conveyances of real estate made by the
Corporation shall be executed by any officer of the Corporation, ex-
cept the Auditor and Assistant Auditor, with seal attested by any
other officer of the Corporation.
2. Any officer of the Corporation, except the Auditor and
Assistant Auditor, is authorized and empowered to sell, assign,
transfer, and deliver any and all bonds, stocks, or other indicia of
ownership of personal property which may now or hereafter be assigned
to it, or owned or held by it, and to execute releases of assignments
and conveyances made to the Corporation or instruments in which the
Corporation is named beneficiary.
-19-
<PAGE> 20
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 17, 1978
RESOLVED, that Article III, Section 1, of the Bylaws of
the Company be, and hereby is, amended to provide for a board of
directors to consist of 18, rather than 19, members effective
as of April 18, 1978, by deleting the number 19 from said section
of the Bylaws and substituting therefor the number 18.
RESOLVED, that Article XXIX, Section 1, of the Bylaws of the
Company be, and hereby is, amended and restated so as to read as
follows:
"1. Directors. Any director who shall attain the age of
seventy (70) shall be automatically retired from the Board at the
time of the next succeeding annual meeting of shareholders.
However, a director may be retired before age seventy (70) as
hereinafter provided.
Effective December 31, 1978, directors who are not also
officers of the Corporation or its affiliates shall be retired-
from the Board as follows:
(1) Any director who shall attain the age of sixty-
five (65) shall be automatically retired from
the Board at the time of the next succeeding
annual meeting of shareholders.
(2) For the purpose of maintaining Boards of active
business and professional men, directors leaving
their present occupation or the position held at
their last election (by retirement or otherwise),
will be expected to tender their resignation from
the Board upon such occasion. The resignation will
ordinarily be accepted unless (a) the director
assumes another management position deemed appro-
priate by the Board for continuation, or (b) the
director is so engaged in some specific project
for the Board as to make his resignation detri-
mental to the Corporation. Under this circumstance,
the Board may elect to set a subsequent date for his
retirement timed to coincide with the completion
of the project.
Effective January 17, 1978, directors who are also officers
of the Corporation or its affiliates shall be retired from the
Board on the date they retire from or otherwise discontinue active
service with the Corporation or its affiliates.
Any director of the Corporation who has retired from the
Board is eligible for election to a position on the Honorary
Advisory Board, the duties of which shall be as specified by
such resolutions as the Board of Directors may from time to time
adopt. Membership on the Honorary Advisory Board shall continue
at the discretion of the Board of Directors."
A-1, p.1
<PAGE> 21
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
MAY 16, 1978
RESOLVED, that Article XXIX, Section 1 of the Bylaws of
the Company be, and in hereby, amended to delete the word
"Advisory" from the phrase "Honorary Advisory Board" where-
ever that phrase appears in said section.
A-1, p.3
<PAGE> 22
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
DECEMBER 19, 1978
RESOLVED, that as a result of the Age Discrimination
in Employment Act Amendments of 1978, Article XXIX, Section 2,
of the Bylaws of the Company be, and hereby is, amended and
restated as of January 1, 1979, so as to read as follows:
"2. Officers and Employees. As each officer or
employee attains the age of 70 years, his or
her employment by the Corporation shall auto-
matically be terminated and his or her salary
discontinued on the first day of the month
coincident with or immediately following the
70th birthday. Provided, however, each officer
or employee who meets the exclusion for execu-
tives and top policy makers under the Age
Discrimination in Employment Act; as amended
from time to time, shall automatically be ter-
minated and his or salary discontinued on the
first day of the month coincident with or
immediately following the 65th birthday.
The Board of Directors, in its discretion,
may continue any such officer or employee in
service and designate the capacity in which he or
she shall serve, and shall fix the remuneration
he or she shall receive. The Board of Directors
may also re-employ any former officer who had
theretofore been retired."
A-1, p.5
<PAGE> 23
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
APRIL 15, 1980
RESOLVED, that Article III, Section 6 of the Bylaws be, and hereby is,
amended to provide for committees to consist of two, rather than three,
members by deleting the number three, wherever it appears, from said section
of Bylaws and substituting therefor the number two.
<PAGE> 24
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
OCTOBER 21, 1980
RESOLVED, that Article VI, Section 5, of the Bylaws of the Company be,
and hereby is, amended and restated to read as follows:
"5. The Board, or a committee thereof, shall fix the
remuneration of executive officers. The renumeration
of non-executive officers shall be fixed by the Board
or by management under such policies and procedures as
shall be established by the Board or a committee there-
of."
<PAGE> 25
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 19, 1982
RESOLVED, that Article V, Section 2, of the Bylaws of
the Company be, and hereby is, amended by deleting the
words "at least once each calendar quarter" from said
section of Bylaws.
<PAGE> 26
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
January 20, 1987
A new section 11 of Article II of the Bylaws of the
Company is adopted as follows:
"11. At an annual or special meeting of shareholders,
only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly
brought before an annual or special meeting of
shareholders. To be properly brought before an annual or
special meeting of shareholders, business must be (i) in
the case of a special meeting called by or at the direction
of the Board of Directors, specified in the notice of the
special meeting (or any supplement thereto), or (ii) in the
case of an annual meeting properly brought before the
meeting by or at the direction of the Board of Directors or
otherwise properly brought before the annual meeting by a
shareholder. For business to be properly brought before
such a meeting of shareholders by a shareholder, the
shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely,
a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the
Corporation not less than 30 days nor more than 60 days
prior to the date of the meeting; provided, however, that
if less than 40 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so delivered
or received not later than the close of business on the
10th day following the earlier of (i) the day on which such
notice of the date of the meeting was mailed or (ii) the
day on which such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before a
meeting of shareholders (i) a brief description of the
business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii)
the name and address, as they appear on the Corporation's
books, of the shareholder proposing such business and any
other shareholders known by such shareholder to be
supporting such proposal, (iii) the class and number of
shares of the Corporation which are beneficially owned by
such shareholder on the date of such shareholder's notice
and by any other shareholders known by such shareholder to
be supporting such proposal on the date of such
shareholder's notice, and (iv) any material interest of the
shareholder in such proposal. Notwithstanding anything in
these Bylaws to the contrary, no business shall be
<PAGE> 27
conducted at a meeting of shareholders except in accordance
with the procedures set forth in this Section 11. The
Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that the business was
not properly brought before the meeting in accordance with
the procedures prescribed by these Bylaws, and if he should
so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall
not be transacted."
<PAGE> 28
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
January 20, 1987
A new Section 7 of Article III of the Bylaws of the
Company is adopted as follows:
"7. Only persons nominated in accordance with the
procedures set forth in this Section 7 shall be eligible
for election as directors. Nominations of persons for
election to the Board may be made at a meeting of
shareholders (i) by or at the direction of the Board, or
(ii) by any shareholder of the Corporation entitled to vote
for the election of directors at such meeting who complies
with the notice procedures set forth in this Section 7.
Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of
the Corporation not less than 30 days nor more than 60 days
prior to the date of a meeting; provided, however, that if
fewer than 40 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so delivered
or received not later than the close of business on the
10th day following the earlier of (i) the day on which such
notice of the date of such meeting was mailed or (ii) the
day on which such public disclosure was made. A
shareholder's notice to the Secretary shall set forth (i)
as to each person whom the shareholder proposes to nominate
for election or reelection as a director (a) the name, age,
business address and residence address of such person. (b)
the principal occupation or employment of such person, (c)
the class and number of shares of the Corporation which are
beneficially owned by such person on the date of such
shareholder's notice and (d) any other information relating
to such person that is required to be disclosed in
solicitations of proxies for election of directors or, is
otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written
consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to
the shareholder giving the notice (a) the name and address,
as they appear on the Corporation's books; of such
shareholder and any other shareholders known by such
shareholder to be supporting such nominees and (b) the
class and number of shares of the Corporation which are
beneficially owned by such shareholder on the date of such
<PAGE> 29
shareholder's notice and by any other shareholders known by
such shareholder to be supporting such nominees on the date
of such shareholder's notice. No person shall be eligible
for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in
this Section 7. The Chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he should so determine,
he shall so declare to the meeting and the defective
nomination shall be disregarded."
<PAGE> 30
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
January 20, 1987
Article V, Section 3 of the Bylaws of the Company is
amended to read as follows:
"3. Special meetings of the directors may be called
by the Chairman of the Board of Directors or the President
on two days' notice by mail, or on one day's notice by
telegram or cablegram, or on two hours' notice given
personally or by telephone to each director, and shall be
called by the Chairman in like manner on the written
request of a majority of directors then in office. The
notice shall state the place, day and hour where the
meeting is to be held."
<PAGE> 31
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 20, 1987
ADOPTED SUBJECT TO
APPROVAL OF PROPOSAL 3
BY THE SHAREHOLDERS
APRIL 21, 1987
RESOLVED, that Article III, Section 2 of the Bylaws of
First Tennessee National Corporation ("Company") is amended to
read as follows:
"2. Except as otherwise provided by law or by the Charter,
the term of each director hereafter elected shall be
from the time of his election and qualification until
the third annual meeting next following his election
and until his successor shall have been duly elected
and qualified; subject, however, to the right of the
removal of any director as provided by law, by the
Charter or by these Bylaws."
<PAGE> 32
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 20, 1987
ADOPTED SUBJECT TO
APPROVAL OF PROPOSAL 3
BY THE SHAREHOLDERS
APRIL 21, 1987
RESOLVED, that a new Section 8 of Article III of the Bylaws
of the Company is adopted as follows:
"8. Except as otherwise provided by law or by the Charter,
newly created directorships resulting from any
increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from
death, resignation, retirement, disqualification or
any other cause (except removal from office) shall be
filled only by the Board of Directors, provided that a
quorum is then in office and present, or only by a
majority of the directors then in office, if less than
a quorum is then in office or by the sole remaining
director. Any vacancies on the Board of Directors
resulting from removal from office may be filled by
the affirmative vote of the holders of at least a
majority of the voting power of all outstanding voting
stock or, if the shareholders do not so fill such a
vacancy, by a majority of the directors then in
office. Directors elected to fill a newly created
directorship or other vacancy shall hold office for
the remainder of the full term of the class of
directors in which the new directorship was created or
the vacancy occurred and until such director's
successor has been duly elected and qualified. The
directors of any class of directors of the Corporation
may be removed by the shareholders only for cause by
the affirmative vote of the holders of at least a
majority of the voting power of all outstanding voting
stock."
<PAGE> 33
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 20, 1987
ADOPTED SUBJECT TO
APPROVAL OF PROPOSAL 3
BY THE SHAREHOLDERS
APRIL 21, 1987
RESOLVED, that Article 11, Section 10 of the Bylaws of the
Company is repealed, and Section 11 of Article II of the Bylaws
of the Company is renumbered to become Section 10.
<PAGE> 34
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JANUARY 20, 1987
ADOPTED SUBJECT TO
APPROVAL OF PROPOSAL 3
BY THE SHAREHOLDERS
APRIL 21, 1987
RESOLVED, that Article XXVII, Section 2 of the Bylaws of
the Company is amended to read as follows:
"2. The shareholders may make, alter, amend and repeal the
Bylaws of this Corporation at any annual meeting or at
a special meeting called for that purpose only by the
affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all outstanding
voting stock, and all Bylaws made by the directors may
be altered or repealed only by the vote of the holders
of at least eighty percent (80%) of the voting power
of all outstanding voting stock."
<PAGE> 35
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
October 16, 1990
RESOLVED, that Article XXIX, Section 1, of the Bylaws of
the Company be, and it hereby is, amended to read as follows:
Directors who are not also officers of the Corporation
or its affiliates shall be retired from the Board of
Directors as follows:
(1) Any director who shall attain the age of
sixty-five (65) shall not thereafter be nominated for
a directorship and shall be automatically retired from
the Board at the expiration of the term for which he
or she was elected.
(2) For the purpose of maintaining boards of
active business and professional persons, directors
leaving the occupation or the position held at their
last election (by retirement or otherwise) will be
expected to tender their resignation from the Board
upon such occasion. A resignation will ordinarily be
accepted unless (a) the director assumes another
management position deemed appropriate by the Board
for continuation, or (b) the director is so engaged in
some specific project for the Board as to make his or
her resignation detrimental to the Corporation. Under
this circumstance, the Board may elect to set a
subsequent date for his or her retirement to coincide
with the completion of the project.
Directors who are also officers of the Corporation or
any of its affiliates will be retired from the Board on the
date they retire from or otherwise discontinue active
Service with the Corporation and its affiliates.
All directors of the Corporation who have served until
retirement, as specified herein, will be asked to serve on
the Honorary Board of Directors. Those directors who do
not serve until retirement but who have served for a
minimum of 10 years as an active member of the Board and
who retire in good standing will also be asked to serve.
Members of the Honorary Board shall have no authority to
bind the Corporation. They shall not attend Board meetings
of the Corporation and Shall not have any authority to vote
on any matter being considered by the Board.
<PAGE> 36
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
January 22, 1991
RESOLVED, that Article III, Section 1 of the Bylaws of First
Tennessee National Corporation be, and hereby is, amended to provide
for a Board of Directors to consist of 13, rather than 15 members,
effective as of the Annual Meeting of Shareholders, April 16, 1991,
by deleting the number 15 from said section of the Bylaws and
substituting therefor the number 13.
<PAGE> 37
Amendment to Bylaws of First Tennessee
National Corporation, adopted 4-16-91
ARTICLE XXVIII
INDEMNIFICATION
1. If any current or former officer of the Corporation
[including for purposes of this Article an individual who, while an
officer, is or was serving another corporation or other enterprise
(including an employee benefit plan) in any capacity at the request
of the Corporation and unless the context requires otherwise the
estate or personal representative of such officer] is wholly
successful, on the merits or otherwise, in the defense of any
threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and
whether formal or informal ("Proceeding"), to which he was a party
because he is or was an officer of the Corporation, he shall be
indemnified by the Corporation against all reasonable expenses,
including attorney fees, incurred in connection with such
Proceeding, or any appeal therein.
2. If any current or former officer of the Corporation has not
been wholly successful on the merits or otherwise, in the defense of
a Proceeding, to which he was or was threatened to be made a party
because he was or is an officer, he shall be indemnified by the
Corporation against any judgment, settlement, penalty, fine
(including any excise tax assessed with respect to an employee
benefit plan), or other liability and any reasonable expenses,
including attorney fees, incurred as a result of such Proceeding, or
any appeal therein, if authorized in the specific case after a
determination has been made that indemnification is permissible
because the following standard of conduct has been met:
(1) He conducted himself in good faith, and
(2) He reasonably believed:
(A) In the case of conduct in his official capacity
as an officer of the Corporation that his conduct
was in the Corporation's best interest; and
(B) In all other cases that his conduct was at least
not opposed to its best interests; and
(3) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful;
provided, however, the Corporation may not indemnify an officer in
connection with a Proceeding by or in the right of the Corporation
in which the officer was adjudged liable to the Corporation or in
connection with any other proceeding charging improper benefit to
him, whether or not involving action in his official capacity, in
which he was adjudged liable on the basis that personal benefit was
improperly received by him.
-31-
<PAGE> 38
3. The determination required by Section 2 herein shall be
made as follows:
(1) By the Board of Directors by a majority vote of a
quorum consisting of directors not at the time parties
to the Proceeding;
(2) If a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors
(in which designation directors who are parties may
participate) consisting solely of two or more
directors not at the time parties to the Proceeding;
(3) By independent special legal counsel;
(A) Selected by the Board of Directors or its
committee in the manner prescribed in subsection
(1) or (2); or
(B) If a quorum of the Board of Directors cannot be
obtained under Subsection (1) and a committee
cannot be designated under subsection (2),
selected by majority vote of the full Board of
Directors (in which selection directors who are
parties may participate); or, if a determination
pursuant to Subsections 1, 2, or 3 of this
Section 3 cannot be obtained, then
(4) By the shareholders, but Shares owned by or voted
under the control of directors who are at the time
parties to the Proceeding may not be voted on the
determination.
4. An officer of the Corporation shall be deemed to be serving
another corporation or other enterprise or employee benefit plan at
the request of the Corporation only if such request is reflected in
the records of the Board of Directors or a committee appointed by
the Board of Directors for the purpose of making such requests.
5. The Corporation shall pay for or reimburse reasonable
expenses, including attorney fees, incurred by an officer who is a
party to a Proceeding in advance of the final disposition of the
Proceeding if:
(1) The officer furnishes to the Corporation a written
affirmation of his good faith belief that he has met
the standard of conduct described in Section 2 herein;
(2) The officer furnishes to the Corporation a written
undertaking, executed personally or on his behalf, to
repay the advance if it is ultimately determined that
he is not entitle to indemnification; and
-32-
<PAGE> 39
(3) A determination is made that the facts then known to
those making the determination would not preclude
indemnification under this bylaw.
6. The undertaking required by Section 5 herein must be an
unlimited general obligation of the officer but need not be secured
and may be accepted without reference to financial ability to make
repayment.
7. Determinations and authorizations of payments under Section
5 herein shall be made in the same manner as is specified in
Section 3 herein.
8. Every employee and every former director of the Corporation
shall be indemnified by the Corporation to the same extent as
officers of the Corporation.
9. The right of indemnification set forth above shall not be
deemed exclusive of any other rights to which an officer, employee,
or former director seeking indemnification may be entitled. No
combination of rights shall permit any officer, employee or former
director of the Corporation to receive a double or greater recovery.
10. The Corporation shall indemnify each of its directors and
such of the non-director officers of the Corporation or any of its
subsidiaries as the Board of Directors may designate, and shall
advance expenses, including attorney's fees, to each director and
such designated officers, to the maximum extent permitted (or not
prohibited) by law, and in accordance with the foregoing, the Board
of Directors is expressly authorized to enter into individual
indemnity agreements on behalf of the Corporation with each director
and such designated officers which provide for such indemnification
and expense advancement and to adopt resolutions, which provide for
such indemnification and expense advancement.
-33-
<PAGE> 40
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
July 16, 1991
RESOLVED, that Article III, Section 1 of the Bylaws of First
Tennessee National Corporation be, and hereby is, amended to provide
for a Board Of Directors to consist of 14, rather than 13 members,
effective as of August 1, 1991, by deleting the number 13 from said
section of the Bylaws and substituting therefor the number 14.
January 19, 1993
RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National
Corporation be, and hereby is, amended to provide for a Board of Directors to
consist of 13, rather than 14 members, effective as of January 31, 1993, by
deleting the number 14 from said section of the Bylaws and substituting
therefor the number 13.
<PAGE> 41
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
October 20, 1993
RESOLVED, that Article XXIX, Section 1, of the Bylaws of the Company
be, and it hereby is, amended be deleting it in its entirety and amending it to
read as follows:
Directors who are not also officers of the Corporation or its
affiliates shall be retired from the Board of Directors as follows:
(1) Any director who shall attain the age of
sixty-five (65) on or before the last day of the term for
which he or she was elected shall not be nominated for
re-election and shall be retired from the Board at the
expiration of such term.
(2) For the purpose of maintaining boards of active
business and professional persons, directors leaving the
occupation or the position held at their last election (by
retirement or otherwise) will be expected to tender their
resignation from the Board upon such occasion. A resignation
will ordinarily be accepted unless (a) the director assumes
another management position deemed appropriate by the Board
for continuation, or (b) the director is so engaged in some
specific project for the Board as to make his or her
resignation detrimental to the Corporation. Under this
circumstance, the Board may elect to set a subsequent date for
his or her retirement to coincide with the completion of the
project.
Directors who are also officers of the Corporation or any of
its affiliates will be retired from the Board on the date they retire
from or otherwise discontinue active service with the Corporation and
its affiliates.
All directors of the Corporation who have served until
retirement, as specified herein, will be asked to serve on the
Honorary Board of Directors. Those directors who do not serve until
retirement but who have served for a minimum of 10 years as an active
member of the Board and who retire in good standing will also be asked
to serve. Members of the Honorary Board shall have no authority to
bind the Bank. They shall not attend Board meetings of the
Corporation and shall not have any authority to vote on any matter
being considered by the Board.
<PAGE> 42
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
December 21, 1993
RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National
Corporation be, and hereby is, amended to provide for a Board of Directors to
consist of 14, rather than 13 members, effective as of December 21, 1993, by
deleting the number 13 from said section of the Bylaws and substituting
therefor the number 14.
RESOLUTION OF BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
March 2, 1994
RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National
Corporation be, and hereby is, amended to provide for a Board of Directors to
consist of 11, rather than 14 members, effective as of April 19, 1994, by
deleting the number 14 from said section of the Bylaws and substituting
therefor the number 11.
<PAGE> 43
RESOLUTIONS OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
April 19, 1994
RESOLVED, that Article VII of the Bylaws of First Tennessee National
Corporation be, and it hereby is, amended by deleting it in its entirety and
substituting therefor the following:
ARTICLE VII.
The Chairman of the Board of Directors and
The Chief Executive Officer
1. The Chairman of the Board of Directors shall preside
at all meetings of the shareholders and of the Board of Directors and
shall have such powers and perform such duties as may be provided for
herein and as may be incident to the office and as may be assigned by
the Board of Directors. If and at such times as the Board of
Directors so determines, the Chairman of the Board may also serve as
the Chief Executive Officer of the Corporation.
2. The Chief Executive Officer, in the absence of the
Chairman of the Board of Directors, shall preside at all meetings of
the shareholders and of the Board of Directors. The Chief Executive
Officer shall be responsible for carrying out the orders of and the
resolutions and policies adopted by the Board of Directors and shall
have general management of the business of the Corporation and shall
exercise general supervision over all of its affairs. In addition,
the Chief Executive Officer shall have such powers and perform such
duties as may be provided for herein and as may be incident to the
office and as may be assigned by the Board of Directors.
FURTHER RESOLVED, that Article VIII of the Bylaws be, and it hereby
is, amended by deleting it in its entirety and substituting therefore the
following:
ARTICLE VIII
The President.
1. The President, in the absence of the Chairman of the
Board of Directors and the Chief Executive Officer, shall preside at
all meetings of the shareholders and of the Board of Directors and
shall be charged with the active management and administration of the
business of the Corporation with the power to make all contracts in
the conduct of the regular and ordinary business of the Corporation,
and he may appoint and discharge agents and employees of the
Corporation and fix their compensation, subject to the general
supervisory powers of the Chairman of the Board of Directors and of
the Chief Executive Officer and of the Board of Directors. In
addition, he shall have such powers and perform such duties as may be
provided for herein and as may be incident to the office and as may be
assigned by the Board of Directors or the chairman of the Board of
Directors or the Chief Executive Officer.
FURTHER RESOLVED, that Articles IX, X, XI, XII, XIII, XIV, XVI and XIX
be, and they hereby are, amended by substituting the phrase "the Chairman of
the Board of Directors or the Chief Executive Officer" for the phrase "the
Chairman of the Board of Directors" or the phrase "the Chairman of the Board"
wherever either of such phrases appears in such Articles.
<PAGE> 44
RESOLUTION OF
BOARD OF DIRECTORS OF
FIRST TENNESSEE NATIONAL CORPORATION
JULY 19, 1994
------------------------------------
RESOLVED, that Article XXIX, Section 2, of the Bylaws of the Company
be, and it hereby is, amended by deleting it in its entirety and amending it to
read as follows:
"2. Officers and Employees. Except as provided in the
following sentence, the Corporation has no compulsory
retirement age for its officers or employees. Each officer or
employee who has attained 65 years of age and who, for the
two-year period immediately before attaining such age, has been
employeed in a "bona fide executive" or a "high policy-making"
position as those terms are used and defined in the Age
Discrimination in Employment Act, Section 12(c), and the
regulations relating to that section prescribed by the Equal
Employment Opportunity Commission, all as amended from time to
time (collectively, the "ADEA"), shall automatically be terminated
by way of compulsory retirement and his or her salary discontinued
on the first day of the month coincident with or immediately
following the 65th birthday, provided such employee is entitled to
an immediate nonforfeitable annual retirement benefit, as
specified in the ADEA, in the aggregate amount of at least
$44,000. Notwithstanding the prior sentence, the Board of
Directors, in its discretion, may continue any such officer or
employee in service and designate the capacity in which he or she
shall serve, and shall fix the remuneration he or she shall
receive. The Board of Directors may also reemploy any former
officer who had theretofor been retired."
<PAGE> 1
EXHIBIT 11
FIRST TENNESSEE NATIONAL CORPORATION
PRIMARY EARNINGS PER SHARE
AND FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
Computation for Statements of Income: 1994 1993 1994 1993
- - -------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Per statements of income (Thousands):
Net income $ 35,588 $ 25,809 $ 72,218 $ 55,541
============================= =============================
Per statements of income:
Weighted average shares outstanding 31,848,904 31,609,777 31,820,934 31,610,892
============================= =============================
Primary earnings per share (a):
Net income $ 1.12 $ 0.82 $ 2.27 $ 1.76
============================= =============================
Additional Primary computation
- - --------------------------------------------
Adjustment to weighted average shares
outstanding:
Weighted average shares outstanding
per primary computation above 31,848,904 31,609,777 31,820,934 31,610,892
Add dilutive effect of outstanding
options (as determined by the
application of the treasury stock
method) 489,681 526,432 470,164 507,156
----------------------------- -----------------------------
Weighted average shares outstanding,
as adjusted 32,338,585 32,136,209 32,291,098 32,118,048
============================= =============================
Primary earnings per share, as adjusted (b):
Net income $ 1.10 $ 0.80 $ 2.24 $ 1.73
============================= =============================
Additional Fully Diluted Computation
- - --------------------------------------------
Adjustment to weighted average share
outstanding:
Weighted average shares outstanding
per primary computation above 32,338,585 32,136,209 32,291,098 32,118,048
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 50,238 2 25,320 18,178
----------------------------- -----------------------------
Weighted average shares outstanding,
as adjusted 32,388,823 32,136,211 32,316,418 32,136,226
============================= =============================
Fully diluted earnings per share, as adjusted (b):
Net income $ 1.10 $ 0.80 $ 2.23 $ 1.73
============================= =============================
</TABLE>
(a) These figures agree with the related amounts in the statements of income.
(b) This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 paragraph
14 of APB Opinion No. 15 because it results in dilution of less than
3%.
