<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 September 30, 1994
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4491
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FIRST TENNESSEE NATIONAL CORPORATION
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(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
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(Registrant's telephone number, including area code)
None
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(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
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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 32,360,346
- ----------------------------- -------------------------------
Class Outstanding at October 31, 1994
<PAGE> 2
FIRST TENNESSEE NATIONAL CORPORATION
INDEX
Part I. Financial Information
Part II. Other Information
Signatures
Exhibit Index
Exhibit 3(ii)
Exhibit 11
Exhibit 27
<PAGE> 3
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Condition
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The financial information included reflects all adjustments which are, in the
opinion of management, necessary to fair representation of the results of the
periods covered.
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
First Tennessee
National
Corporation
September 30 December 31
(Dollars in thousands) (Unaudited) 1994 1993 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 695,048 $ 525,634 $ 623,084
Federal funds sold and securities purchased under
agreements to resell 195,680 135,856 137,663
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Total cash and cash equivalents 890,728 661,490 760,747
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Investment in bank time deposits 2,745 4,535 7,637
Trading securities inventory 223,227 224,885 178,663
Mortgage warehouse loans held for sale 441,412 475,014 1,099,686
Securities held for sale -- 58,211 53,035
Securities available for sale 1,214,414 -- --
Investment securities:
Mortgage-backed securities and collateralized
mortgage obligations -- 2,097,511 1,643,246
U.S. Treasury and other U.S. government agencies -- 427,674 397,252
States and municipalities -- 107,675 91,915
Other -- 141,691 87,674
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Total investment securities (market value of $2,827,184
at September 30, 1993, and $2,263,256 at December 31, 1993) -- 2,774,551 2,220,087
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Securities held to maturity:
Mortgage-backed securities and collateralized
mortgage obligations -- -- --
U.S. Treasury and other U.S. government agencies 867,166 -- --
States and municipalities 60,060 -- --
Other 9,995 -- --
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Total securities held to maturity (market value of $904,100
at September 30, 1994) 937,221 -- --
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Loans:
Commercial:
Taxable 2,720,693 2,355,501 2,541,339
Tax-exempt 70,060 82,473 78,271
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Total commercial loans 2,790,753 2,437,974 2,619,610
Consumer 2,167,836 1,624,903 1,801,821
Permanent mortgage 554,635 463,400 498,008
Credit card receivables 448,231 401,766 428,075
Real estate construction 146,669 128,479 75,844
Nonaccrual 17,344 22,556 25,966
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Total gross loans 6,125,468 5,079,078 5,449,324
Less: Unearned income 6,953 12,564 12,352
Allowance for loan losses 107,331 106,776 107,723
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Total net loans 6,011,184 4,959,738 5,329,249
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Premises and equipment, net 148,492 124,352 136,230
Real estate acquired by foreclosure 21,609 17,282 31,658
Customers' acceptances 3,562 2,948 4,871
Intangible assets 158,447 105,125 174,095
Bond division receivables and other assets 393,825 750,766 370,739
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TOTAL ASSETS $10,446,866 $ 10,158,897 $ 10,366,697
==================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 1,693,279 $ 1,535,691 $ 1,925,298
Checking/Interest 489,807 518,120 548,224
Savings 651,754 536,882 537,252
Money market account 1,694,194 1,605,027 1,697,270
Certificates of deposit under $100,000 and other time 2,590,796 2,330,178 2,280,644
Certificates of deposits $100,000 and more 474,053 397,438 413,893
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Total deposits 7,593,883 6,923,336 7,402,581
Federal funds purchased and securities sold under
agreements to repurchase 1,155,809 1,191,075 1,014,644
Commercial paper and other short-term borrowings 492,930 792,038 746,561
Acceptances outstanding 3,562 2,948 4,871
Bond division payables and other liabilities 356,984 477,308 412,413
Long-term debt 91,701 92,955 92,043
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Total liabilities 9,694,869 9,479,660 9,673,113
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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 - 32,202,722 at September 30, 1994; 31,873,170
at September 30, 1993; and 32,031,683 at December 31, 1993) 80,507 79,683 80,079
Capital surplus 94,397 87,303 90,198
Undivided profits 594,083 515,081 525,682
Unrealized market adjustment on available for sale securities (13,931) -- --
Deferred compensation on restricted stock incentive plan (3,059) (2,830) (2,375)
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Total shareholders' equity 751,997 679,237 693,584
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,446,866 $ 10,158,897 $ 10,366,697
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</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
First Tennessee
National
Corporation
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
(Dollars in thousands except per share data) (Unaudited) 1994 1993 1994 1993
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<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 132,909 $ 108,175 $ 381,904 $ 310,879
Interest on investment securities:
Taxable 30,551 42,691 89,714 135,174
Tax-exempt 1,173 1,783 3,869 5,614
Interest on trading securities inventory 3,804 2,853 9,449 6,708
Interest on other earning assets 2,407 1,104 5,619 2,932
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Total interest income 170,844 156,606 490,555 461,307
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INTEREST EXPENSE:
Interest on deposits:
Checking/Interest 2,192 2,541 6,705 7,697
Savings 3,243 3,525 9,603 11,253
Money market account 14,692 10,457 37,325 31,928
Certificates of deposit under $100,000
and other time 31,186 27,690 83,797 87,358
Certificates of deposit $100,000 and more 4,650 3,603 13,115 11,314
Interest on short-term borrowings 17,101 15,931 45,278 37,487
Interest on long-term debt 2,264 2,282 6,787 7,033
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Total interest expense 75,328 66,029 202,610 194,070
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NET INTEREST INCOME 95,516 90,577 287,945 267,237
Provision for loan losses 4,143 9,097 12,558 27,572
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 91,373 81,480 275,387 239,665
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NONINTEREST INCOME:
Mortgage banking 28,373 20,365 88,102 49,576
Bond division 17,562 24,314 63,759 69,243
Service charges on deposit accounts 16,287 14,777 46,853 42,203
Bank card 8,506 7,262 22,620 20,650
Trust service 6,877 6,315 20,738 18,230
Equity securities gains 34 -- 23,217 594
Debt securities gains (losses) 204 (81) (637) 966
All other 13,001 11,281 35,096 32,294
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Total noninterest income 90,844 84,233 299,748 233,756
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ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 182,217 165,713 575,135 473,421
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NONINTEREST EXPENSE:
Employee compensation, incentive, and benefits 68,797 66,879 226,735 184,716
Operations services 8,397 7,209 24,702 21,046
Occupancy 7,878 6,073 22,110 17,356
Communications and courier 6,361 5,512 19,699 15,298
Equipment rentals, depreciation, and maintenance 6,109 4,512 17,709 13,707
Amortization of intangible assets 4,532 7,752 16,326 20,451
Deposit insurance premium 4,182 3,971 12,250 11,971
All other 21,849 19,557 78,089 57,800
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Total noninterest expense 128,105 121,465 417,620 342,345
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INCOME BEFORE INCOME TAXES 54,112 44,248 157,515 131,076
Applicable income taxes 17,354 16,901 48,267 47,845
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NET INCOME $ 36,758 $ 27,347 $ 109,248 $ 83,231
======================================================================================================================
NET INCOME PER COMMON SHARE $ 1.14 $ 0.86 $ 3.40 $ 2.61
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WEIGHTED AVERAGE SHARES OUTSTANDING 32,179,689 31,858,573 32,131,560 31,884,086
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TAX EQUIVALENT ADJUSTMENT TO TOTAL INTEREST INCOME $ 1,295 $ 1,628 $ 3,655 $ 4,913
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</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
CONSOLIDATED
STATEMENTS
OF CASH FLOWS
First Tennessee
National
Corporation
Nine Months Ended
September 30
(Dollars in thousands) (Unaudited) 1994 1993
-------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 109,248 $ 83,231
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 12,558 27,572
Depreciation and amortization of premises and equipment 14,646 11,740
Amortization of intangibles 16,326 20,451
Net amortization of premiums and accretion of discounts 10,810 22,014
Market value adjustment on foreclosed property 974 194
Market value adjustment on securities held for sale -- (269)
Securities contributed to charitable trust 8,338 --
Equity securities gains (23,217) (594)
Debt securities losses (gains) 637 (697)
Net loss on disposal of fixed assets 195 35
Net gain on disposal of branch -- (672)
Deferred income tax provision (benefit) 2,523 (850)
Net (increase) decrease in:
Trading securities inventory (44,564) (36,278)
Mortgage warehouse loans held for sale 658,274 (265,711)
Bond division receivables (11,900) (158,980)
Interest receivable (2,102) 424
Other assets (22,611) (82,273)
Net increase (decrease) in:
Bond division payables (20,843) 154,452
Interest payable 7,946 909
Other liabilities (62,528) 50,483
-------------------------------------------------------------------------------------------------
Total adjustments 545,462 (258,050)
-------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities 654,710 (174,819)
-------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of:
Investment securities -- 1,127,109
Held to maturity securities 321,348 --
Available for sale securities 237,918 --
Proceeds from sale of:
Debt securities -- 47,666
Equity securities -- 4,802
Available for sale securities 317,540 --
Premises and equipment 931 911
Payments for purchase of:
Debt securities -- (1,210,147)
Equity securites -- (7,451)
Held to maturity securities (435,398) --
Available for sale securities (298,240) --
Premises and equipment (28,673) (22,490)
Net increase in loans (684,578) (400,586)
Decrease (increase) in investment in bank time deposits 4,892 (2,355)
Branch sale, including cash and cash equivalents sold -- (18,339)
-------------------------------------------------------------------------------------------------
Net cash used by investing activities (564,260) (480,880)
-------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,129 1,831
Payments for:
Capital lease obligations (110) (112)
Long-term debt (410) (36,409)
Cash dividends (40,314) (29,685)
Equity distributions related to acquisitions (600) --
Stock repurchase -- (4,797)
Net increase (decrease) in:
Deposits 191,302 (217,306)
Short-term borrowings (112,466) 795,743
-------------------------------------------------------------------------------------------------
Net cash provided by financing activities 39,531 509,265
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Net increase (decrease) in cash and cash equivalents 129,981 (146,434)
-------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 760,747 807,924
-------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 890,728 $ 661,490
-------------------------------------------------------------------------------------------------
Total interest paid $ 194,395 $ 192,263
Total income taxes paid 52,859 55,321
</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 (FTBNA), 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. First Tennessee completed the
acquisition of Cleveland Bank and Trust Company (CBT) of Cleveland,
Tennessee, on March 16, 1994, and completed the acquisition of Planters
Bank (Planters) of Tunica, Mississippi, on August 9, 1994. Both of these
banks became wholly owned subsidiaries of First Tennessee. The
consolidated financial statements of First Tennessee give effect to these
four 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, except for dividends. Certain
reclassifications of the historical results of these companies have been
made to conform to the current presentation.
On October 1, 1994, First Tennessee acquired Emerald Mortgage Company
(Emerald) of Lynnwood, Washington for approximately $7 million in FTNC
common stock. Emerald was merged into SNMC. At September 30, 1994,
Emerald had a servicing portfolio of $353 million and had originated $160
million in mortgages in the first nine months of 1994.
On September 6, 1994, First Tennessee and Carl I. Brown and Company
(CIB) of Kansas City, Missouri, announced the execution of a definitive
agreement pursuant to which CIB will become a separate subsidiary of FTBNA.
The purchase price will be approximately $53 million in First Tennessee
common stock subject to adjustment as provided in the agreement. At
September 30, 1994, CIB had a servicing portfolio of $2.5 billion and had
originated $1.8 billion in mortgages in the first nine months of 1994.
The acquisition will be accounted for as a pooling of interests and is
subject to regulatory and shareholder approvals. The transaction is
expected to close in the first quarter of 1995.
On September 22, 1994, First Tennessee and Community Bancshares, Inc.
of Germantown, Tennessee, announced the execution of a definitive agreement
pursuant to which First Tennessee will acquire Community Bancshares, the
parent company of Community First Bank, for approximately $61 million in
First Tennessee common stock. Pursuant to the agreement, Community
Bancshares will merge into First Tennessee and Community First Bank will
merge into FTBNA. At September 30, 1994, Community Bancshares had
approximately $257 million in assets, $200 million in deposits, and $21
million in capital. The acquisition will be accounted for as a pooling
of interests and is subject to regulatory and shareholder approvals. The
transaction is expected to be completed in the first quarter of 1995.
On October 19, 1994, First Tennessee and Peoples Commercial Services
Corp. (PCS) of Senatobia, Mississippi, announced the execution of a
definitive agreement pursuant to which First Tennessee will acquire PCS,
the parent company of Peoples Bank, for approximately 420,000 shares of
First Tennessee common stock. This acquistion will be accounted for as a
purchase, and the First Tennessee Board of Directors has approved the
repurchase of the shares to be issued in this transaction. Following the
acquisition, Peoples Bank will be a wholly owned subsidiary of First
Tennessee. At September 30, 1994, Peoples Bank had approximately $97
million in assets, $85 million in deposits, and $11 million in capital.
The acquisition is expected to be completed in the first half of 1995
following approval by regulators and PCS shareholders.
<PAGE> 9
NOTE 3 -- OTHER INCOME AND OTHER EXPENSE
Following is detail concerning "All other income" and "All other expense"
as presented in the Consolidated Statements of Income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
(Dollars in thousands) 1994 1993 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALL OTHER INCOME:
Check clearing fees $ 3,951 $ 3,701 $ 11,846 $ 10,709
Other service charges 1,693 2,113 5,589 7,093
Other 7,357 5,467 17,661 14,492
----------------------------------------------------------------------------------------
Total $ 13,001 $ 11,281 $ 35,096 $ 32,294
========================================================================================
ALL OTHER EXPENSE:
Legal and professional fees $ 2,940 $ 2,426 $ 10,699 $ 7,462
Contribution to charitable foundation -- -- 8,338 --
Advertising and public relations 2,034 2,120 7,783 5,782
Supplies 2,289 2,215 7,403 6,138
Fed service fees 2,244 1,930 6,304 5,707
Travel and entertainment 1,858 1,691 5,988 4,907
Foreclosed real estate 976 447 2,193 1,644
Other 9,508 8,728 29,381 26,160
----------------------------------------------------------------------------------------
Total $ 21,849 $ 19,557 $ 78,089 $ 57,800
========================================================================================
</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:
<TABLE>
<CAPTION>
September 30 December 31
------------------------- -----------
(Dollars in thousands) 1994 1993 1993
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased mortgage servicing rights $ 70,436 $ 54,476 $ 82,625
Goodwill 61,561 21,334 62,565
Premium on purchased deposits and assets 26,450 29,315 28,905
-------------------------------------------------------------------------------------
Total intangible assets $ 158,447 $105,125 $ 174,095
=====================================================================================
</TABLE>
During 1993, goodwill and purchased mortgage servicing rights
increased approximately $42.0 million and $31.9 million, respectively,
due to the acquisition of MNC Mortgage Corporation.
<PAGE> 11
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
CONSOLIDATED FINANCIAL REVIEW
Net income per share for the third quarter of 1994 was $1.14, an increase of 33
percent from $.86 per share for the third quarter of 1993. Net income for the
third quarter of 1994 totaled $36.8 million compared to $27.3 million for the
same period last year, an increase of 34 percent. The improvement in earnings
demonstrated continued growth in commercial and consumer lending while
maintaining lower credit quality costs.
Return on average equity was 19.77 percent for the quarter ended September 30,
1994, compared to 16.25 percent for the same period last year. The 19.77
percent return on equity 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, return on average
equity would have been 19.53 percent for the third quarter of 1994. Return on
average assets increased to 1.45 percent for the quarter ended September 30,
1994, from 1.11 percent for the third quarter of 1993.
For the nine months ended September 30, 1994, net income increased 31 percent
and earnings per share increased 30 percent to $109.2 million and $3.40 per
share, respectively, compared to $83.2 million, and $2.61 per share,
respectively, for the first nine months of 1993. Return on average assets for
the first nine months of 1994 increased to 1.45 percent from 1.19 percent for
the same period in 1993. Return on average equity rose to 20.12 percent from
17.04 percent for the comparable period last year. Excluding the adjustment to
equity due to SFAS No. 115, return on average equity would have been 20.14
percent for the first nine months of 1994. The improvement in year-to-date
financial performance reflects the large first quarter refinance volume in the
mortgage entities and overall growth in consumer and commercial lending.
The following analysis discusses First Tennessee's financial condition and
results of operations for the third quarter and first nine months of 1994
compared to the same periods in 1993. Maryland National Mortgage Corporation,
recently renamed MNC Mortgage Corporation (MNC Mortgage) was acquired on
October 1, 1993, and was accounted for as a purchase. Therefore, the
consolidated statements do not reflect the results of MNC Mortgage operations
prior to October 1, 1993. During the first nine months of 1994, First
Tennessee acquired SNMC Management Corporation, parent company of Sunbelt
National Mortgage Corporation (Sunbelt); Highland Capital Management Corp.;
Cleveland Bank & Trust Company; and Planters Bank. 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 approximately 50
percent of net revenues for First Tennessee in the third quarter. NII is the
difference between interest earned on assets and interest paid on 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, the related yields, and overall
interest rates have a major impact on earnings.
NII increased 5 percent for the quarter ended September 30, 1994, to $96.8
million from $92.2 million for the same period last year. Over this same
period net interest margin (the ratio of tax-equivalent net interest income
divided by average earning assets) increased from 4.19 percent for the third
quarter of 1993 to 4.30 percent for the third quarter of 1994. For the nine
months, net interest margin grew from 4.29 percent in 1993 to 4.36 in 1994.
NII grew 7 percent to $291.6 million compared to $272.2 million in 1993. NII
has been relatively flat for the first three quarters of 1994. Growth in
higher-yielding first and second mortgages, as well as increased commercial,
warehouse, and consumer credits, aided both net interest income and net
interest margin over the prior year's levels. This growth was partially offset
by a decline in the investment portfolio and thus earning assets increased only
2 percent for the quarter compared to the same period last year. Earning
assets provided 46 percent of the increase in NII over this period on a quarter
over quarter basis. The mix of earning assets changed significantly with loans
representing 72 percent of earning assets for third quarter 1994, compared to
61 percent for third quarter 1993, and investments representing 23 percent of
earning assets for third quarter 1994, compared to 35 percent for third quarter
1993.
Total loans grew 21 percent to $6.4 billion for the third quarter of 1994, from
$5.3 billion for the same quarter of 1993. Excluding growth in mortgage
warehouse loans, total loans also grew 21 percent to $6.0 billion from the same
period in 1993. This growth was led by a 37 percent increase in consumer loans
and a 14 percent increase in commercial loans. For the nine months ended
September 30, 1994, total loans grew 25 percent from the same period in 1993.
Excluding growth in mortgage warehouse loans, average loans, net of unearned
income, grew 20 percent to $5.7 billion from the nine month period in 1993.
Commercial loans, the single largest loan category, comprised 30 percent of
earning assets for the quarter ended September 30, 1994. The balance of $2.7
billion represented a 14 percent increase from the same
<PAGE> 12
period in 1993, and was primarily due to continued strong economic growth.
Consumer loans increased 37 percent from third quarter 1993 with expanded
cross-selling efforts, an increase in indirect auto loans, and growth at Gulf
Pacific Mortgage, a second mortgage lender and a division of First Tennessee
Bank National Association (FTBNA). Mortgage loans recorded in the permanent
portfolio increased 19 percent as more of the mortgages originated were retained
on the balance sheet rather than sold in the secondary market. Credit card
outstandings increased 12 percent over the third quarter of 1993, reflecting
consumer confidence and growth in the economy.
Mortgage warehouse loans, increased from $429.4 million in the third quarter of
1993 to $486.2 million in the third quarter of 1994. These warehouse loans,
also called "pipeline," are 1-4 family residential mortgages originated by
First Tennessee. The loans are warehoused together, then securitized and sold
to investors. The increase in the pipeline was primarily due to mortgage loans
originated by MNC Mortgage not included in the previous year's numbers.
Excluding the impact of MNC Mortgage results in a decline in the mortgage loan
warehouse of 32 percent from the previous year's level, which reflects the
impact of higher interest rates and lower origination volumes.
The growth in earning assets was primarily funded with a 9 percent increase in
average core deposits from the third quarter of 1993. Average core deposits
continue to be First Tennessee's largest source of funding, providing 79
percent of the required earning asset funding for the quarter ended September
30, 1994.
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. Provision increases loan
allowance while loan charge-offs, net of recoveries, decreases loan allowance.
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 $9.1 million for the third quarter of 1993 to $4.1
million for the third quarter of 1994. Year-to-date, the 1994 provision for
loan losses, relative to the comparable period in 1993, declined from $27.6
million to $12.6 million, which approximates the 1994 year-to-date net
charge-offs of $13.0 million.
NONINTEREST INCOME Noninterest income or fee income provided approximately
one-half of net revenues for the third quarter of 1994. Excluding securities
transactions in both periods, non-interest income grew 7 percent relative to
the same period last year. The increase in fee income from third quarter 1993
to third quarter 1994 was led by a 39 percent increase in mortgage banking
noninterest income attributable to MNC Mortgage, which was not included in the
prior year's numbers; a 9 percent increase in trust income to $6.9 million,
reflecting overall business growth; and a 10 percent increase in income from
service charges on deposit accounts to $16.3 million due to overall growth in
deposit accounts. If securities transactions and MNC Mortgage are excluded,
noninterest income declined 6 percent, with mortgage banking noninterest income
decreasing 15 percent from third quarter 1993 to third quarter 1994, consistent
with the decrease in mortgage warehouse loans. Bond division revenues
decreased 28 percent relative to the same period one year ago due to changes in
market conditions. Securities gains during the third quarter were $.2 million.
The securities held for sale balance at period-end was $1.2 billion. At
September 30, 1994, these securities had approximately $22.7 million of
aggregate holding losses that resulted in a decrease in equity for unrealized
holding losses of approximately $13.9 million, net of $8.8 million of deferred
income taxes.
For the first nine months of 1994, excluding securities transactions in both
periods, total noninterest income grew 19 percent compared to the same period
in 1993. Mortgage banking revenues, the primary contributor to this increase,
grew 78 percent to $88.1 million. Trust income increased 14 percent to $20.7
million, and income from service charges on deposit accounts increased 11
percent to $46.9 million for the nine month period. Bond division revenues
decreased 8 percent while the number of transactions remained relatively flat
compared to the same nine month period one year ago. Excluding MNC Mortgage and
securities transactions, total noninterest income grew 4 percent with mortgage
banking revenue growing 8 percent over the same nine month period in 1993.
NONINTEREST OPERATING EXPENSE For the third quarter of 1994, noninterest
operating expense was below the levels experienced in the first two quarters of
1994, and represented a 5 percent increase from the third quarter of 1993 to
$128.1 million on September 30, 1994. Excluding the impact of MNC Mortgage,
noninterest operating expense decreased 6 percent from the third quarter of
1993. This decrease reflects the lower revenue levels and subsequent lower
variable commission costs for both the bond and mortgage banking divisions.
For the first nine months of 1994, total noninterest operating expense grew 22
percent over the same period one year ago. Employee compensation, incentives,
and benefits, comprised 56 percent of the increase in noninterest expense and
grew 23 percent for the first nine months of 1994 compared to the same period
in 1993. Approximately 65 percent of the increase was attributable to MNC
Mortgage. 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. The all other noninterest expense category increased 35 percent from
the level experienced one year ago. This increase reflects the costs related
to the establishment of a charitable foundation in the second
<PAGE> 13
quarter as well as first quarter items of one-time acquisition costs, adoption
of SFAS No. 112, and incentive expenses related to the Hickory Venture Capital
gains. Excluding those items mentioned above and MNC Mortgage, total
noninterest operating expense increased 4 percent and the all other noninterest
expense category increased 7 percent for the first nine months of 1994.
INCOME TAXES The effective tax rate, or taxes as a percentage of pre-tax
income for the third quarter 1994 was 32 percent compared with 38 percent for
the comparable period last year. The effective tax rate for the nine months
ended September 30, 1994, was 31 percent, compared with 37 percent for the same
period last year. The effective tax rate was reduced as a result of the
establishment of the charitable foundation in the second quarter and reduction
of $5.8 million from Sunbelt's $7.7 million deferred tax asset valuation
allowance, reflecting tax operating losses realized during 1992 and 1993.
ASSET AND LIABILITY MANAGEMENT
The goal of the asset and liability management process is to manage the balance
sheet and provide the maximum level of net interest income commensurate with
acceptable levels of interest sensitivity risk and liquidity. 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 Measurement of interest rate risk has traditionally taken
the form of the gap report, which details the repricing differences for assets
and liabilities for given periods. At September 30, 1994, the balance sheet
was modestly rate sensitive by $126 million more liabilities than assets
repricing within one year. At 1.4 percent of earning assets, this position was
within management guideline limits, which are 5 percent of earning assets. A
liability sensitive gap indicates that an upward movement in rates will
negatively impact net interest margin since liabilities will reprice faster
than assets. The gap report has some limitations, including the fact that it
is a static (i.e. point-in-time) measurement, it does not capture basis risk,
and it does not capture risk that varies non proportionally with rate movements.
Because of the limitations of gap reports, First Tennessee uses a simulation
model as its primary method of measuring interest rate risk. The simulation
model, because of its dynamic nature, forecasts the effects of future balance
sheet trends, changing slopes of the yield curve, different patterns of rate
movements, and changing relationships between rates. Based upon the September
30, 1994, rate sensitivity position, were rates to rise 300 basis points during
the next 12 months, and if management were to take no actions, the net interest
margin would be negatively affected approximately 25 basis points. Under First
Tennessee's ALCO process, management would take corrective actions intended to
reduce the negative impact to margin if this high rate scenario occurred.
In the normal course of business, First Tennessee uses investment securities
and off-balance sheet financial instruments (sometimes referred to as
derivatives) as tools to rebalance the repricing or maturity characteristics of
assets and liabilities and achieve the desired rate sensitivity. Treasuries,
Agencies, Collateralized Mortgage Obligations (CMO's), interest rate swaps,
forwards, and options are all financial instruments that have been used by
First Tennessee. These financial instruments are intended by First Tennessee
to hedge potential fluctuations in income and are not used to generate
speculative earnings. As a result of interest rate fluctuations, these
financial instruments will, from time to time, develop unrealized appreciation
or depreciation in market values compared with their cost. Depending on the
effectiveness of the hedge, there will be generally offsetting unrealized
appreciation or depreciation in the hedged portion of the balance sheet. These
financial instruments are designed to moderate the impact on earnings as
interest rates move up or down.
The traditional investment portfolio and off-balance sheet instruments are used
interchangeably to alter the natural asset sensitive position of a banking
institution. This is accomplished by holding fixed rate debt instruments in
the securities portfolio or by holding off-balance sheet derivatives. These
financial instruments include index amortizing swaps, swaps on which First
Tennessee receives a fixed interest rate and pays a floating rate applied to an
amortizing principal amount. The notional total of the index amortizing swaps
held by First Tennessee is $550 million. Approximately 73 percent of these
mature in the fourth quarter of 1996 and the remainder mature by May 1997. As
a result of recent increases in interest rates, at September 30, 1994, these
swaps had a depreciated value or termination cost of approximately $23 million.
The rising rate environment has increased the value of savings and demand
deposits, which are the underlying instruments hedged by the swap, and this
positive cash position generally offsets the negative value of the swap.
First Tennessee also has a $1 billion swap on which the fed funds rate, limited
to an increase of 25 basis points each quarter (the "cap"), is received, and
the prime rate less a fixed spread is paid. This swap hedges money market
deposits and serves to minimize the impact of a potential narrowing in the
spread between prime rate loans and short-term market rates. This swap was
executed in mid-1993 and matures May 1996. The notional amount approximates
one-half of First Tennessee's loans indexed to the prime rate. Since the
spread between the prime rate and the fed funds rate has not narrowed as
expected, and since the increase in the funds received has been limited by the
cap, this swap currently has a depreciated value or termination cost of
approximately $28 million. Management anticipates the actual negative impact,
which would be realized over the remaining maturity, to be a fractional amount
of the termination cost. In addition, management believes that whatever the
actual cost is should be principally offset by the wide spreads between the
prime rate loans and their funding costs.
<PAGE> 14
The forward contracts utilized by the bond division primarily represent pending
customer transactions for non-regular settlements (these forward contracts
normally settle within 30 days). The mortgage banking companies use forwards
to hedge interest rates between the time the mortgage loan is committed to the
customer and the time it is funded and securitized. Unlike the interest rate
swaps discussed above, changes in the value of the forward contracts used by
the bond division and the mortgage banking companies are reflected in the
income statement, as appropriate.
Although off-balance sheet financial instruments do not expose the corporation
to credit risk equal to the notional amount, First Tennessee is exposed to
credit risk equal to the fair value appreciation in an off-balance sheet
financial instrument if the counterparty fails to perform. The interest rate
swaps discussed above currently represent no credit risk, due to their
depreciation at September 30, 1994.
<TABLE>
<CAPTION>
OFF-BALANCE FINANCIAL INSTRUMENTS: SEPTEMBER 30, 1994
(Financial instruments notional or
contractual amounts are in millions:)
<S> <C>
TRANSACTIONS ENTERED INTO TO MANAGE INTEREST RATE RISK:
Interest Rate Swaps:
Receive floating/pay fixed - conventional $ 10
Receive fixed/pay floating - indexed amortizing $ 550
Basis swap $1,000
------
Total portfolio swaps $1,560
CUSTOMER RELATED TRANSACTIONS:
Forward and Future Contracts:
Bond division interest rate futures $ 300
Bond division commitments to purchase $ 493
Bond division commitments to sell $ 486
Mortgage banking commitments to sell $ 372
-------
Subtotal $1,651
Foreign exchange rate contracts: $ 1
Interest Rate Options:
Written options $ 9
Purchased options $ 279
-------
Subtotal $ 288
Interest Swaps:
Bond division swap $ 75
</TABLE>
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
marketble 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 third 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 decreased 11 percent from $2.4 billion at September 30, 1993,
to $2.1 billion at September 30, 1994.
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. 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.
Management's long-term goal is to maintain an average equity to average assets
ratio between 6.75 percent and 7.50 percent, maintain a minimum ratio of
average equity to average net loans equal to or above 10.50 percent, and meet
the well-capitalized FDIC standards which allows First Tennessee to pay the
lowest deposit premium. All of these goals are currently being met. The
average equity to average assets ratio was 7.31 percent in the third quarter of
1994 compared to 6.84 percent in the third quarter of 1993. For third quarter
1994, average equity to average net loans was 11.65 percent compared to 12.77
percent for the same period last year.
For the first nine months of 1994, average equity to average assets was 7.21
percent compared to 6.96 percent for the first nine months of 1993. Average
equity to average net loans was 11.58 percent relative to the 13.12 percent for
the same nine 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 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,
risk-weights of 0 percent to 100 percent, depending on the regulatory assigned
levels of risk, are assigned to all 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 that 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
<PAGE> 15
well-capitalized institutions to 31 cents for the weakest undercapitalized
institutions. On September 30, 1994, First Tennessee's bank subsidiaries had
sufficient capital to qualify as well-capitalized institutions.
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, they
are brought 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 42
percent of average total loans, net of unearned income, for the quarter ended
September 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 graded commercial and commercial
real estate loans, improved to 94.5 percent at September 30, 1994, from 91.9
percent at September 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 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 September 30, 1994, were $529.4 million
compared to $527.1 million at December 31, 1993. Construction and development
loans increased 58 percent from $78.8 million at December 31, 1993, to $124.2
million at September 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
<PAGE> 16
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 that do not meet the standards are rejected and
moved to a higher level of lending authority that 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 are
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 that 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 September 30, 1994, and 1993. For each of the period-ends
presented, the general portion of the allowance account is between $11 million
and $13 million. At the same time, the specific allocations have changed among
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 September 30, 1994, the
total allowance for loan losses was $107.3 million compared to $106.8 million
for the same period last year. The allowance for loan losses to loans, net of
unearned income, was 1.64 percent at September 30, 1994 compared to 1.93
percent at September 30, 1993. Excluding the mortgage warehouse loans, these
ratios would have been 1.75 percent and 2.11 percent at September 30, 1994 and
1993, respectively.
Net charge-offs for third quarter 1994 decreased to $4.5 million or .28 percent
of average loans, net of unearned income, compared to $7.3 million or .54
percent for the same period last year due to improvement in asset quality. For
the nine month period, net charge-offs to average loans, net of unearned
income, decreased to $13.0 million or .27 percent from $20.6 million or .54
percent from the comparable period last year.
Commercial and real estate loan net charge-offs approximated recoveries for the
third quarter of 1994. Consumer loan net charge-offs as a percentage of
average consumer loans, net of unearned income, were .25 percent, while credit
card receivable net charge-offs as a percentage of credit card receivables
were 2.49 percent.
For the nine month period, commercial and real estate loan net charge-offs
decreased $6.7 million to $1.6 million compared to last year. Consumer loan
net charge-offs were $3.3 million compared to $3.7 million for the first nine
months of last year. Credit card net charge-offs decreased to $7.8 million
from $8.7 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, slightly decreased
to $41.4 million at September 30, 1994. This compares to $41.8 million at
September 30, 1993. Excluding MNC Mortgage, nonperforming assets would have
been $30.1 million. Nonperforming loans are those loans where, in the opinion
of management, the full collection of principal or interest is unlikely.
Nonperforming loans decreased 24 percent to $17.7 million at September 30,
1994, from the $23.2 million at September 30, 1993. This decrease was 42
percent with MNC Mortgage excluded. The ratio of nonperforming loans to total
loans decreased to .27 percent at the end of the third quarter of 1994 compared
to .42 percent for the same period in 1993. Excluding MNC Mortgage, this ratio
was .21 percent. Nonperforming assets included $21.6 million of foreclosed
real estate as of September 30, 1994. Excluding MNC Mortgage, foreclosed real
estate was $14.6 million, and this amount has been written down to 51 percent
of the original loan values, net of payments. The Nonperforming Assets table
<PAGE> 17
details the activity in nonperforming assets between September 30, 1994, and
September 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 AND 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 $22.5 million at September 30, 1994, a $3.0 million
decrease from $25.5 million at September 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 September 30,
1994, potential problem assets declined 37 percent to $57.4 million compared to
$91.6 million at September 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 September 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 SEPTEMBER 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 $ 3,114 $ 311 $ 717 $ 2,418 $ 6,560
Investment securities 163 110 222 1,657 2,152
Other earning assets 421 -- -- -- 421
--------------------------------------------------------------------------------------------------------------------
Total earning assets $ 3,698 $ 421 $ 939 $ 4,075 $ 9,133
------------------------------------------------------------------------------------------------------------ =======
EARNING ASSET FUNDING:
Interest-bearing deposits $ 1,794 $ 497 $ 501 $ 3,109 $ 5,901
Short-term purchased funds 1,649 -- -- -- 1,649
Long-term debt 1 1 -- 90 92
Noninterest-bearing funds 214 (4) (7) 1,288 1,491
--------------------------------------------------------------------------------------------------------------------
Earning asset funding $ 3,658 $ 494 $ 494 $ 4,487 $ 9,133
------------------------------------------------------------------------------------------------------------ =======
RATE SENSITIVITY GAP:
Period $ 40 $ (73) $ 445 $ (412)
Cumulative 40 (33) 412 --
------------------------------------------------------------------------------------------------------------
RATE SENSITIVITY GAP ADJUSTED FOR INTEREST
RATE FUTURES AND INTEREST RATE SWAPS:
Period $ (510) $ (73) $ 457 $ 126
Cumulative (510) (583) (126) --
------------------------------------------------------------------------------------------------------------
ADJUSTED GAP AS A PERCENT OF EARNING ASSETS:
Period (5.6)% (0.8)% 5.0 % 1.4 %
Cumulative (5.6) (6.4) (1.4) --
------------------------------------------------------------------------------------------------------------
</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
<TABLE>
<CAPTION>
REGULATORY CAPITAL
Well-
First Tennessee* FTBNA** Capitalized
------------------ ------------------ Regulatory
(Dollars in thousands) SEPTEMBER 30, 1994 SEPTEMBER 30, 1994 Minimums
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL:
Tier 1 capital:
Shareholders' common equity $ 751,997 $ 658,928
Less disallowed intangibles 62,455 63,777
Add unrealized holding losses on
available for sale securities 13,931 13,778
--------------------------------------------------------------------------------------------------------
Total Tier 1 capital 703,473 608,929
--------------------------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt 82,554 75,000
Qualifying allowance for loan losses 88,702 85,089
--------------------------------------------------------------------------------------------------------
Total Tier 2 capital 171,256 160,089
--------------------------------------------------------------------------------------------------------
Total capital $ 874,729 $ 769,018
========================================================================================================
Risk-adjusted assets $ 7,077,540 $ 6,790,387
Quarterly average assets adjusted
for holding losses on securities 10,098,689 9,647,016
--------------------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 9.94 % 8.97 % 6.00 %
Tier 2 capital to risk-adjusted assets 2.42 2.36 --
--------------------------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 12.36 % 11.33 % 10.00 %
========================================================================================================
Leverage - Tier 1 capital to quarterly
average assets less disallowed
intangibles 7.01 % 6.35 % 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>
September 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 $ 169 $ - $ 3 $ 172 $ -
B 377 7 14 398 1
C 1,521 116 462 2,099 23
D 55 1 23 79 5
E 29 - 14 43 4
F 13 - 9 22 8
---------------------------------------------------------------------------------------------------------------
2,164 124 525 2,813 41
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 $ 2,172 $124 $529 $ 2,825 $ 48
---------------------------------------------------------------------------------------------------------------
Retail:
Consumer 2,100 19
Credit card 448 18
Permanent mortgages 550 2
Mortgage warehouse loans held for sale 441 -
Mortgage banking nonaccrual loans 4 1
---------------------------------------------------------------------------------------------------------------
Total retail loans 3,543 40
---------------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 138 3
Planters Bank 28 1
Other/unfunded commitments 26 2
General reserve - 13
---------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 6,560 $107
===============================================================================================================
Foreclosed real estate:
Foreclosed property $ 2 $ 11 $ 2 $ 15
Foreclosed property - mortgage banking - - - 7
Insubstance foreclosure - - - -
---------------------------------------------------------------------------------------------------------------
Total foreclosed real estate $ 22
---------------------------------------------------------------------------------------------------------------
<CAPTION>
September 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 $ 108 $ - $ 111 $ -
B 303 1 370 1
C 1,834 23 1,916 23
D 79 4 65 5
E 47 4 58 5
F 51 11 36 11
-----------------------------------------------------------------------------------------------
2,422 43 2,556 45
Nonaccrual loans:
Contractually past due with:
Substantial performance - - - -
Limited performance 6 2 7 4
No performance 9 6 2 1
Contractually current 7 2 7 2
-----------------------------------------------------------------------------------------------
Total commercial and commercial
real estate loans $ 2,444 $ 53 $ 2,572 $ 52
-----------------------------------------------------------------------------------------------
Retail:
Consumer 1,560 16 1,733 15
Credit card 402 16 428 17
Permanent mortgages 461 4 495 4
Mortgage warehouse loans held for sale 475 - 1,100 -
Mortgage banking nonaccrual loans - - 9 1
-----------------------------------------------------------------------------------------------
Total retail loans 2,898 36 3,765 37
-----------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 140 3 144 3
Planters Bank 26 1 25 1
Other/unfunded commitments 33 3 31 3
General reserve - 11 - 12
-----------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 5,541 $ 107 $ 6,537 $ 108
===============================================================================================
Foreclosed real estate:
Foreclosed property $ 17 $ 18
Foreclosed property - mortgage banking - 14
Insubstance foreclosure - -
-----------------------------------------------------------------------------------------------
Total foreclosed real estate $ 17 $ 32
===============================================================================================
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
FTBNA LOANS SECURED BY REAL ESTATE, PERIOD-END AMOUNTS
September 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 $ 69 $ 185 $ 254 $ 55 $ 171 $ 226
Real estate collateral is primary
source of repayment with a
substantial secondary source 55 344 399 24 356 380
------------------------------------------------------------------------------------------------------------------------
Total $ 124 $ 529 $ 653 $ 79 $ 527 $ 606
========================================================================================================================
PROJECT TYPE:
Apartments $ 4 $ 70 $ 74 $ 1 $ 77 $ 78
Hotels/Motels 4 57 61 - 62 62
Office buildings - multi-tenant 5 54 59 3 58 61
Single family builder 55 2 57 46 2 48
Shopping centers 21 133 154 7 99 106
Commercial/Special purpose units 6 72 78 2 73 75
All Other 29 141 170 20 156 176
------------------------------------------------------------------------------------------------------------------------
Total $ 124 $ 529 $ 653 $ 79 $ 527 $ 606
========================================================================================================================
</TABLE>
Based on internal loan classifications. Certain previously reported
amounts have been reclassified to agree with current presentation.
<PAGE> 22
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
(Dollars in thousands) 1994 1993 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for loan losses:
Beginning balance $ 107,719 $ 104,929 $ 107,723 $ 99,827
Provision for loan losses 4,143 9,097 12,558 27,572
Net charge-offs (4,531) (7,250) (12,950) (20,623)
---------------------------------------------------------------------------------
Ending balance $ 107,331 $ 106,776 $ 107,331 $ 106,776
=================================================================================
RATIOS:
Allowance to loans (net of
unearned income)* 1.64 % 1.93 %
Net charge-offs to average loans
(net of unearned income)* 0.28 % 0.54 % 0.27 0.54
Net charge-offs to allowance 16.9 27.2 16.1 25.8
---------------------------------------------------------------------------------
</TABLE>
*Includes loans held for sale reported in "Mortgage warehouse
loans held for sale" on the Consolidated Statements of
Condition
<PAGE> 23
NONPERFORMING ASSETS ACTIVITY
<TABLE>
<CAPTION>
Quarters Ended
(Dollars in millions) 9/30/94 6/30/94 3/31/94 12/31/93 9/30/93
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 50.3 $ 55.3 $ 59.5 $ 41.8 $ 47.2
New nonperformers 2.8 1.5 7.0 4.6 2.4
Acquisitions -- -- -- 22.8 --
Return to accrual -- -- (2.0) -- --
Payments (10.7) (6.0) (6.8) (4.1) (7.2)
Charge-offs (1.0) (0.5) (2.4) (5.6) (0.6)
Market writedowns -- -- -- -- --
---------------------------------------------------------------------------------------
Ending balance $ 41.4 $ 50.3 $ 55.3 $ 59.5 $ 41.8
=======================================================================================
</TABLE>
<PAGE> 24
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
September 30 December 31
--------------------- --------------
(Dollars in thousands) 1994 1993 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNTS:
Nonaccrual loans $ 17,344 $ 22,556 $ 25,966
Restructured loans 323 670 579
---------------------------------------------------------------------------------
Total nonperforming loans 17,667 23,226 26,545
Foreclosed real estate 21,609 17,282 31,658
Other assets 2,087 1,292 1,292
---------------------------------------------------------------------------------
Total nonperforming assets $ 41,363 $ 41,800 $ 59,495
=================================================================================
Past due loans:*
Non-government guaranteed $ 11,708 $ 14,852 $ 12,873
Government guaranteed 10,827 10,689 11,560
---------------------------------------------------------------------------------
RATIOS:
Nonperforming loans to total loans
(net of unearned income)** 0.27 % 0.42 % 0.41 %
Nonperforming assets to total loans
(net of unearned income) plus foreclosed
real estate and other assets** 0.63 0.75 0.91
Nonperforming assets and non-government
guaranteed past due loans to total loans
(net of unearned income) plus foreclosed
real estate and other assets** 0.81 1.02 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> 25
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 third 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 $(6)
million at September 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 135
million by the third 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 Nonaccrual
(Millions of Charge-Offs Loans and
$) and OREO
Adjustments
<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
3Q94 -6 135
</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> 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 third 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 $(30)
million in the third 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, then rises
to $136 million in the first quarter of 1994, and
decreases to $113 million in the third 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
(Millions of Charge-Offs Classified
$) and Assets
Adjustments
<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
3Q94 -30 113
</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
Part II.
OTHER INFORMATION
Items 1, 2, 3, 4 and 5.
As of the end of the third quarter, 1994, the answers to Items 1, 2, 3, 4
and 5 were either inapplicable or negative, and therefore, these items are
omitted.
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 third quarter of 1994.
<PAGE> 28
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: 11/14/94 By: James F. Keen
----------------- ---------------------------------
James F. Keen
Senior Vice President and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
<PAGE> 29
EXHIBIT INDEX
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- --------
3(ii) Bylaws of FTNC, as amended Filed Herewith
11 Statement re Computation of Per Share Earnings Filed Herewith
27 Financial Data Schedule (for the SEC use only) Filed Herewith
<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
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<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.
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<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 Nine Months Ended
September 30 September 30
-------------------------- ------------------------
Computation for Statements of Income: 1994 1993 1994 1993
- ------------------------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C>
Per statements of income (Thousands):
Net income $ 36,758 $ 27,347 $ 109,248 $ 83,231
========================== ========================
Per statements of income:
Weighted average shares outstanding 32,179,689 31,858,573 32,131,560 31,884,086
========================== ========================
Primary earnings per share (a):
Net income $ 1.14 $ 0.86 $ 3.40 $ 2.61
========================== ========================
Additional Primary computation
- -------------------------------------
Adjustment to weighted average shares
outstanding:
Weighted average shares outstanding
per primary computation above 32,179,689 31,858,573 32,131,560 31,884,086
Add dilutive effect of outstanding
options (as determined by the
application of the treasury stock
method) 556,012 499,016 499,094 522,990
Weighted average share outstanding, -------------------------- ------------------------
as adjusted 32,735,701 32,357,589 32,630,654 32,407,076
========================== ========================
Primary earnings per share, as adjusted (b):
Net income $ 1.12 $ 0.85 $ 3.35 $ 2.57
========================== ========================
Additional Fully Diluted Computation
- -------------------------------------
Adjustment to weighted average shares
outstanding:
Weighted average shares outstanding
per primary computation above 32,735,701 32,357,589 32,630,654 32,407,076
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 284 32 16,884 12,751
Weighted average shares outstanding, ------------------------- ------------------------
as adjusted 32,735,985 32,357,621 32,647,538 32,419,827
========================= ========================
Fully diluted earnings per share,
as adjusted (b):
Net income $ 1.12 $ 0.85 $ 3.35 $ 2.57
========================= ========================
</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%.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
TENNESSEE NATIONAL CORPORATION'S SEPTEMBER 30, 1994, FINANCIAL STATEMENTS FILED
IN ITS 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 695,048
<INT-BEARING-DEPOSITS> 2,745
<FED-FUNDS-SOLD> 195,680
<TRADING-ASSETS> 223,227
<INVESTMENTS-HELD-FOR-SALE> 1,214,414
<INVESTMENTS-CARRYING> 937,221
<INVESTMENTS-MARKET> 904,100
<LOANS> 6,559,927
<ALLOWANCE> 107,331
<TOTAL-ASSETS> 10,446,866
<DEPOSITS> 7,593,883
<SHORT-TERM> 1,648,739
<LIABILITIES-OTHER> 360,546
<LONG-TERM> 91,701
<COMMON> 80,507
0
0
<OTHER-SE> 671,490
<TOTAL-LIABILITIES-AND-EQUITY> 10,446,866
<INTEREST-LOAN> 381,904
<INTEREST-INVEST> 93,583
<INTEREST-OTHER> 15,068
<INTEREST-TOTAL> 490,555
<INTEREST-DEPOSIT> 150,545
<INTEREST-EXPENSE> 202,610
<INTEREST-INCOME-NET> 287,945
<LOAN-LOSSES> 12,558
<SECURITIES-GAINS> 22,580
<EXPENSE-OTHER> 417,620
<INCOME-PRETAX> 157,515
<INCOME-PRE-EXTRAORDINARY> 109,248
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,248
<EPS-PRIMARY> 3.40
<EPS-DILUTED> 3.35
<YIELD-ACTUAL> 4.36
<LOANS-NON> 17,344
<LOANS-PAST> 22,535
<LOANS-TROUBLED> 323
<LOANS-PROBLEM> 57,379
<ALLOWANCE-OPEN> 107,723
<CHARGE-OFFS> 20,322
<RECOVERIES> 7,372
<ALLOWANCE-CLOSE> 107,331
<ALLOWANCE-DOMESTIC> 107,331
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
