<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, 1995
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 0-4491
--------
FIRST TENNESSEE NATIONAL CORPORATION
-------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0803242
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 Madison Avenue, Memphis, Tennessee 38103
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(901) 523-4027
---------------------------------------------------
(Registrant's telephone number, including area code)
None
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $2.50 par value 34,574,938
- ----------------------------- -------------------------------
Class Outstanding at October 31, 1995
<PAGE> 2
FIRST TENNESSEE NATIONAL CORPORATION
INDEX
Part I. Financial Information
Part II. Other Information
Signatures
Exhibit Index
Exhibit 11
Exhibit 27
<PAGE> 3
PART I.
-------
FINANCIAL INFORMATION
Item 1. Financial Statements.
- ------------------------------
The Consolidated Statements of Condition
The Consolidated Statements of Income
The Statements of Cash Flows
The Notes to Consolidated Financial Statements
This financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the interim periods presented.
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED First Tennessee
STATEMENTS OF National
CONDITION Corporation
- ----------------------------------------------------------------------------------------------------------------------
September 30 December 31
---------------------------- -----------------
(Dollars in thousands)(Unaudited) 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 709,133 $ 713,525 $ 724,828
Federal funds sold and securities purchased under
agreements to resell 102,219 185,515 253,124
- ----------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 811,352 899,040 977,952
- ----------------------------------------------------------------------------------------------------------------------
Investment in bank time deposits 1,033 2,745 2,534
Trading securities inventory 224,917 223,227 170,031
Mortgage warehouse loans held for sale 714,856 559,308 515,407
Securities available for sale 1,012,534 1,242,901 1,166,738
Securities held to maturity (market value of $969,651
at September 30, 1995; $969,546 at September 30, 1994;
and $951,444 at December 31, 1994) 976,923 1,004,164 1,004,177
Loans, net of unearned income 7,022,704 6,262,818 6,498,042
Less: Allowance for loan losses 110,882 110,178 109,859
- ----------------------------------------------------------------------------------------------------------------------
Total net loans 6,911,822 6,152,640 6,388,183
- ----------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 168,094 154,968 159,036
Real estate acquired by foreclosure 13,714 23,085 19,215
Intangible assets 103,389 88,012 91,725
Mortgage servicing rights 121,873 73,125 72,722
Bond division receivables and other assets 520,561 408,268 365,229
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 11,581,068 $ 10,831,483 $ 10,932,949
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 1,809,031 $ 1,723,653 $ 1,733,336
Checking/Interest 482,891 510,448 508,741
Savings 578,496 676,413 605,388
Money market account 1,906,330 1,732,449 1,819,825
Certificates of deposit under $100,000 and other time 2,853,894 2,652,243 2,771,012
Certificates of deposit $100,000 and more 443,641 498,758 442,004
- ----------------------------------------------------------------------------------------------------------------------
Total deposits 8,074,283 7,793,964 7,880,306
Federal funds purchased and securities sold under
agreements to repurchase 1,403,090 1,158,835 1,457,517
Commercial paper and other short-term borrowings 477,802 607,693 352,522
Bond division payables and other liabilities 600,156 376,386 353,928
Term borrowings 201,057 111,701 113,771
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 10,756,388 10,048,579 10,158,044
- ----------------------------------------------------------------------------------------------------------------------
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 - 33,282,284 at September 30, 1995; 34,400,749
at September 30, 1994; and 34,073,958 at December 31, 1994) 83,206 86,002 85,185
Capital surplus 53,009 106,907 91,558
Undivided profits 688,742 607,294 625,231
Unrealized market adjustment on available for sale securities 1,797 (14,241) (24,273)
Deferred compensation on restricted stock incentive plan (2,074) (3,058) (2,796)
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 824,680 782,904 774,905
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,581,068 $ 10,831,483 $ 10,932,949
======================================================================================================================
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED First Tennessee
STATEMENTS OF National
INCOME Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------------- --------------------------
(Dollars in thousands except per share data)(Unaudited) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 174,154 $ 139,503 $ 485,994 $ 402,239
Interest on investment securities:
Taxable 32,318 32,122 99,155 94,297
Tax-exempt 1,024 1,203 3,264 3,949
Interest on trading securities inventory 2,627 3,803 9,601 9,449
Interest on other earning assets 1,408 2,344 7,653 5,475
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 211,531 178,975 605,667 515,409
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits:
Checking/Interest 1,759 2,278 5,968 6,971
Savings 2,482 3,434 8,149 10,173
Money market account 21,654 14,990 64,801 38,205
Certificates of deposit under $100,000 and other time 43,481 32,196 124,735 86,524
Certificates of deposit $100,000 and more 7,128 4,650 21,606 13,115
Interest on short-term borrowings 32,054 19,651 81,217 54,585
Interest on term borrowings 4,366 2,498 12,913 7,021
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 112,924 79,697 319,389 216,594
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 98,607 99,278 286,278 298,815
Provision for loan losses 5,921 4,231 13,285 12,918
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 92,686 95,047 272,993 285,897
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage banking 55,276 42,767 144,941 146,719
Bond division 20,341 17,562 61,362 63,759
Deposit transactions and cash management 17,888 16,530 53,300 47,600
Trust services 8,562 6,877 27,097 20,738
Bank card 9,978 8,505 27,385 22,619
Equity securities gains/(losses) 1,441 34 1,533 23,217
Debt securities gains/(losses) (1,416) 204 (1,021) (637)
All other 14,327 13,207 40,750 35,323
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 126,397 105,686 355,347 359,338
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 219,083 200,733 628,340 645,235
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Employee compensation, incentives, and benefits 86,889 79,652 247,850 268,748
Operations services 9,479 8,523 27,587 25,086
Occupancy 9,264 8,993 27,053 25,253
Equipment rentals, depreciation, and maintenance 7,613 7,205 23,226 21,170
Communications and courier 7,694 7,394 22,184 23,320
Advertising and public relations 3,255 2,247 10,145 8,642
Amortization of mortgage servicing rights 3,888 3,104 9,657 12,064
Legal and professional fees 1,904 3,194 9,494 11,411
Deposit insurance premium 43 4,309 8,794 12,627
Amortization of intangible assets 1,980 1,578 5,717 4,774
All other 19,043 19,266 52,763 67,242
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 151,052 145,465 444,470 480,337
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 68,031 55,268 183,870 164,898
Applicable income taxes 24,201 17,669 64,680 50,744
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 43,830 $ 37,599 $ 119,190 $ 114,154
====================================================================================================================================
NET INCOME PER COMMON SHARE $ 1.30 $ 1.11 $ 3.51 $ 3.34
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 33,465,059 34,002,397 33,935,982 34,206,231
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
CONSOLIDATED First Tennessee
STATEMENTS National
OF CASH FLOWS Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30
-----------------------------------
(Dollars in thousands)(Unaudited) 1995 1994
- --------------------------------- -----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 119,190 $ 114,154
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 13,285 12,918
Depreciation and amortization of premises and equipment 18,085 15,349
Amortization of intangibles 5,717 4,774
Amortization of mortgage servicing rights 9,657 12,064
Net amortization of premiums and accretion of discounts 14,736 11,143
Market value adjustment on foreclosed property 2,700 974
Securities contributed to charitable trust - 8,338
Equity securities gains (1,533) (23,217)
Debt securities losses 1,021 637
Net loss on disposal of fixed assets 1,132 195
Deferred income tax provision 22,809 3,326
Net (increase) decrease in:
Trading securities inventory (54,886) (44,564)
Mortgage warehouse loans held for sale (199,449) 703,910
Bond division receivables (60,502) (11,900)
Interest receivable (3,414) (2,475)
Other assets (193,215) (22,017)
Net increase (decrease) in:
Bond division payables 84,872 (20,843)
Interest payable 16,553 7,349
Other liabilities 124,782 (54,569)
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments (197,650) 601,392
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (78,460) 715,546
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of:
Held to maturity securities 71,001 332,793
Available for sale securities 124,016 242,918
Proceeds from sale of:
Available for sale securities 226,897 317,540
Premises and equipment 2,563 931
Payments for purchase of:
Held to maturity securities (29,587) (446,224)
Available for sale securities (124,842) (308,874)
Premises and equipment (28,185) (30,641)
Net increase in loans (490,611) (703,920)
Decrease in investment in bank time deposits 1,501 4,892
Acquisitions, net of cash and cash equivalents acquired 12,691 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (234,556) (590,585)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 3,682 2,232
Proceeds from the issuance of term borrowings 90,000 14,000
Payments for:
Capital lease obligations (110) (110)
Term borrowings (2,781) (439)
Cash dividends (47,048) (40,314)
Equity distributions related to acquisitions (20) (600)
Stock repurchase (63,296) (1,300)
Net increase (decrease) in:
Deposits 95,136 191,246
Short-term borrowings 70,853 (185,269)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 146,416 (20,554)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (166,600) 104,407
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 977,952 794,633
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 811,352 $ 899,040
====================================================================================================================================
Total interest paid $ 302,132 $ 209,248
Total income taxes paid 33,474 54,071
</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 1994 Annual Report to shareholders. Effective
January 1, 1995, First Tennessee changed the method of
recognition of Trust services income from cash basis to accrual
basis. Also effective January 1, 1995, as discussed in Note 5,
"Capitalized Mortgage Servicing Rights," First Tennessee adopted
SFAS No. 122, "Accounting for Mortgage Servicing Rights an amend-
ment of FASB Statement No. 65." Term borrowings on the financial
statements consist of borrowings with maturities greater than one
year.
<PAGE> 8
NOTE 2 -- BUSINESS COMBINATIONS
The following acquisitions have occurred since the third quarter of 1994 and
were accounted for as poolings of interests; therefore, the financial
statements for all periods presented reflect the combined companies.
On January 3, 1995, First Tennessee acquired for approximately 863,000 shares
of its common stock all of the outstanding capital stock of Carl I. Brown and
Company (Carl I. Brown) of Kansas City, Missouri. Carl I. Brown became a
wholly owned subsidiary of First Tennessee Bank National Association (FTBNA).
On February 24, 1995, First Tennessee acquired for approximately 1,421,000
shares of its common stock all of the outstanding capital stock of Community
Bancshares, Inc. (CBI), of Germantown, Tennessee. CBI, the parent company of
Community First Bank, merged into First Tennessee, and Community First Bank
merged into FTBNA.
The following presents certain financial data pertaining to the combination
of First Tennessee with Planters, Carl I. Brown, and CBI for the third quarter
of 1994 and for the nine months ended September 30, 1994:
<TABLE>
<CAPTION>
Three Months Nine Months
(Dollars in thousands, Ended Ended
except per share data) Sept. 30, 1994 Sept. 30, 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL REVENUE:*
First Tennessee, as originally reported $186,360 $587,693
Carl I. Brown 15,106 60,822
CBI 3,526 9,704
Eliminations (28) (66)
- ---------------------------------------------------------------------------------------------
First Tennessee $204,964 $658,153
=============================================================================================
NET INCOME:
First Tennessee, as originally reported $36,758 $109,248
Carl I. Brown (67) 2,687
CBI 908 2,219
- ---------------------------------------------------------------------------------------------
First Tennessee $37,599 $114,154
=============================================================================================
NET INCOME PER SHARE:
First Tennessee, as originally reported $1.14 $3.40
Carl I. Brown (.39) 15.55
CBI .28 .69
First Tennessee 1.11 3.34
- ---------------------------------------------------------------------------------------------
</TABLE>
* Total revenue is net interest income and noninterest income.
The following acquisitions occurred during 1995 and were accounted for as
purchases; therefore, the financial statements are reflected on a combined
basis from the date of acquisition.
On April 1, 1995, First Tennessee acquired for approximately 421,000 shares
of its common stock all of the outstanding shares of Peoples Commercial
Services Corporation (Peoples), parent company of Peoples Bank, headquartered
in Senatobia, Mississippi. Peoples Bank became a wholly owned subsidiary of
First Tennessee. On October 1, 1995, First Tennessee acquired for
approximately 1,283,000 shares of its common stock all of the outstanding
shares of Financial Investment Corp. (FIC), parent company of First National
Bank of Springdale (FNB), headquartered in Springdale, Arkansas. As approved
by the First Tennessee Board of Directors, the shares issued in this
transaction were repurchased in the open market. FNB became a wholly owned
subsidiary of First Tennessee.
The following presents, on a proforma basis, certain financial data
pertaining to the Peoples and FIC transactions as if they had been acquired at
the beginning of the period. The proforma results presented are not
necessarily indicative of the future results of operations of the combined
company or the results of operations that would have actually occurred had the
merger been in effect for the period presented.
<PAGE> 9
<TABLE>
<CAPTION>
Nine Months
(Dollars in thousands, Ended
except per share data) September 30, 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C>
TOTAL REVENUE:*
First Tennessee, as originally reported $ 641,625
Peoples 1,232
FIC 10,312
Purchase accounting adjustments (1,674)
- ----------------------------------------------------------------------------------------------------------
First Tennessee proforma $ 651,495
==========================================================================================================
NET INCOME:
First Tennessee, as originally reported $ 119,190
Peoples 430
FIC 2,158
Purchase accounting adjustments (1,896)
- ----------------------------------------------------------------------------------------------------------
First Tennessee proforma $ 119,882
==========================================================================================================
NET INCOME PER SHARE:
First Tennessee, as originally reported $ 3.51
Peoples 3.23
FIC 1.21
First Tennessee proforma 3.39
- ----------------------------------------------------------------------------------------------------------
* Total revenue is net interest income and noninterest income.
</TABLE>
<PAGE> 10
NOTE 3 -- OTHER INCOME AND OTHER EXPENSE
Following is detail concerning "Other income" and "Other expense" as
presented in the Consolidated Statements of Income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
(Dollars in thousands) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALL OTHER INCOME:
Check clearing fees $ 4,766 $ 3,951 $ 13,161 $ 11,846
Other service charges 1,893 1,832 5,757 5,783
Other 7,668 7,424 21,832 17,694
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 14,327 $ 13,207 $ 40,750 $ 35,323
====================================================================================================================================
ALL OTHER EXPENSE:
Supplies $ 2,770 $ 2,618 $ 8,359 $ 8,743
Contribution to charitable foundation - - - 8,338
Fed service fees 2,259 2,244 7,094 6,304
Travel and entertainment 1,891 2,299 5,657 7,487
Foreclosed real estate 1,474 1,105 3,255 2,395
Other 10,649 11,000 28,398 33,975
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 19,043 $ 19,266 $ 52,763 $ 67,242
====================================================================================================================================
</TABLE>
<PAGE> 11
NOTE 4 - INTANGIBLE ASSETS
Following is a summary of intangible assets, net of accumulated
amortization, included in the Consolidated Statements of Condition:
<TABLE>
<CAPTION>
Premium on
Purchased
Deposits
(Dollars in thousands) Goodwill and Assets
- ---------------------------------------------------------
<S> <C> <C>
December 31, 1993 $ 62,565 $ 28,972
Amortization expense (2,252) (2,522)
Acquisitions/Divestitures 1,249 -
- --------------------------------------------------------
September 30, 1994 $ 61,562 $ 26,450
========================================================
December 31, 1994 $ 66,086 $ 25,639
Amortization expense (2,589) (3,128)
Acquisitions/Divestitures 11,352 6,029
- --------------------------------------------------------
September 30, 1995 $ 74,849 $ 28,540
========================================================
</TABLE>
<PAGE> 12
NOTE 5: CAPITALIZED MORTGAGE SERVICING RIGHTS
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights," which is an amendment to SFAS No.
65, "Accounting for Certain Mortgage Banking Activities." First Tennessee
elected in the second quarter to adopt this statement as of January 1, 1995.
Accordingly, first quarter results of operations have been restated for an
increase of approximately $5 million pre-tax. SFAS No. 122 prohibits
retroactive application to 1994; therefore, First Tennessee's financial
statement reporting for the first, second, and third quarters of 1994 were
accounted for under the original SFAS No. 65.
The primary difference between SFAS No. 122 and SFAS No. 65, as they relate to
First Tennessee, is the accounting treatment for in-house originated mortgage
servicing rights (OMSRs). Substantially all of First Tennessee's originations
are in-house, whereby the underlying loans are funded and closed by First
Tennessee. SFAS No. 122, among other provisions, requires the recognition of
OMSRs, as well as purchased mortgage servicing rights (PMSRs), as assets by
allocating the total cost incurred between the loan and the servicing rights
based on their relative fair values. Under SFAS No. 65, the cost of OMSRs was
included with the cost of the related loans and written off against income when
the loans were sold. PMSRs were previously recorded as assets under SFAS No.
65.
Also under the new Statement, all capitalized mortgage servicing rights are
evaluated for impairment based on the excess of the carrying amount of the
mortgage servicing rights over their fair value. In measuring impairment, the
carrying amount must be stratified based on one or more predominant risk
characteristics of the underlying loans. Impairment is recognized through a
valuation allowance for each individual stratum. Under SFAS No. 65, the
impairment evaluation could be made using either discounted or undiscounted
cash flows with no required level of disaggregation specified. Any impairment
was recorded directly against the asset. Following is a summary of capitalized
mortgage servicing rights, net of accumulated amortization, included in the
Consolidated Statements of Condition:
<TABLE>
<CAPTION>
Capitalized
Mortgage
Servicing
(Dollars in thousands) Rights
- ---------------------------------------------------------------
<S> <C>
December 31, 1993 $ 85,983
Amortization expense (5,302)
Acquisitions/Divestitures (495)
- ---------------------------------------------------------------
March 31, 1994 $ 80,186
Amortization expense (3,658)
Acquisitions/Divestitures (126)
- ---------------------------------------------------------------
June 30, 1994 $ 76,402
Amortization expense (3,104)
Acquisitions/Divestitures (173)
- ---------------------------------------------------------------
September 30, 1994 $ 73,125
===============================================================
December 31, 1994 $ 72,722
Amortization expense (2,818)
Acquisitions/Divestitures 7,638
- ---------------------------------------------------------------
March 31, 1995 $ 77,542
Amortization expense (2,951)
Acquisitions/Divestitures 19,846
- ---------------------------------------------------------------
June 30, 1995 $ 94,437
Amortization expense (3,888)
Acquisition/Divestitures 31,324
- ---------------------------------------------------------------
September 30, 1995 $ 121,873
===============================================================
Fair value at September 30, 1995 $ 165,085
- ---------------------------------------------------------------
</TABLE>
The value of pre-SFAS No.122 PMSRs is established using the lesser of: a
discounted cashflow analysis; current market value; or the unamortized cost
basis. These PMSRs are being amortized using an accelerated method over the
estimated life of the servicing income. A quarterly value impairment analysis
is performed using a discounted methodology that is disaggregated by purchase
transaction. No reserve was required as of any quarter end in 1995.
The value of post-SFAS No. 122 PMSRs and OMSRs is established by allocating the
total costs incurred between the loan and the servicing rights based on their
relative fair values. To determine the fair value of the servicing rights
created, First Tennessee uses the market prices under current sales contracts
which are tested against prices obtained from flow and bulk purchasers of
servicing and prices determined using a valuation model that calculates the
present value of future cash flows. Post-SFAS No. 122 implementation PMSRs and
OMSRs are being amortized using an accelerated method over the estimated life
of the servicing income. A quarterly value impairment analysis is performed
using a discounted methodology that is disaggregated by predominant risk
characteristics. First Tennessee has determined those risk characteristics to
include: multi-family, residential fixed rate, and residential adjustable rate
loans. No reserve was required as of any quarter end in 1995.
<PAGE> 13
NOTE 6 -- LOANS
The composition of the loan portfolio at September 30 is summarized below:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial $3,167,155 $2,882,671
Consumer 2,434,438 2,193,887
Permanent mortgage 678,789 573,466
Credit card receivables 497,794 448,248
Real estate construction 227,889 146,669
Nonaccrual 16,639 17,877
- ---------------------------------------------------------------------------------------------------
Loans, net of unearned income 7,022,704 6,262,818
Allowance for loan losses 110,882 110,178
- ---------------------------------------------------------------------------------------------------
Total net loans $6,911,822 $6,152,640
===================================================================================================
</TABLE>
On January 1, 1995, First Tennessee adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." On that date,
impaired loans totaling $9,742,000 were identified. All impaired loans had a
related allowance that totaled $2,542,000.
The following table presents information concerning nonperforming loans at
September 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995
- -------------------------------------------------------------
<S> <C>
Impaired loans $ 9,167
Other nonaccrual loans 7,472
- -------------------------------------------------------------
Total $16,639
=============================================================
</TABLE>
Impaired loans are generally carried on a nonaccrual status. Management
may elect to continue the accrual of interest when the estimated net realizable
value of collateral is sufficient to recover the principal balance and accrued
interest. Generally, interest payments received on impaired loans are applied to
principal. Once all principal has been received , additional interest payments
are recognized as interest income on a cash basis. Total interest income
recognized on impaired loans was $373,000 for the three months ended September
30, 1995 and $1,303,000 for the nine months ended September 30, 1995. The
average balance of impaired loans for the three months ended September 30, 1995
was approximately $8,777,000 and was approximately $10,117,000 for the nine
months ended September 30, 1995. Total restructured impaired loans at
September 30, 1995, were $365,000.
An allowance for loan losses is maintained for all impaired loans.
Activity in the allowance for loan losses related to non-impaired loans,
impaired loans, and for the total allowance for the nine months ended September
30, 1995, is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Non-impaired Impaired Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995 $ 109,859 $ -- $109,859
Transfer of allowance (2,542) 2,542 --
Allowance from acquisitions 1,028 -- 1,028
Provision for loan losses 9,294 3,991 13,285
Charge-offs 21,572 3,126 24,698
Less loan recoveries 11,339 69 11,408
- ------------------------------------------------------------------------------------------------------------------
Net charge-offs 10,233 3,057 13,290
- ------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 $ 107,406 $ 3,476 $110,882
==================================================================================================================
</TABLE>
<PAGE> 14
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CONSOLIDATED FINANCIAL REVIEW
The following discussion provides management's analysis of the consolidated
financial condition and results of operations of First Tennessee National
Corporation (First Tennessee). It is intended that this discussion be read in
conjunction with the accompanying consolidated financial statements and the
notes, as well as the 1994 financial statements, the notes thereto, and the
accompanying management's discussion and analysis contained in the 1994 annual
report.
OVERVIEW OF OPERATIONS
Record net income of $43.8 million was achieved for the third quarter
of 1995, a 17 percent increase from the $37.6 million for the third quarter of
1994. Earnings per share for the third quarter of 1995 increased to $1.30 from
$1.11 for the third quarter of 1994. Double-digit growth in all loans,
improving performance in the bond division and mortgage banking, as well as the
reduction in Federal Deposit Insurance Corporation (FDIC) premiums and the FDIC
refund were drivers of this increase in net income. For the first nine months
of 1995, net income was $119.2 million or $3.51 per share compared with $114.2
million or $3.34 per share for the same period in 1994. Noninterest income
accounted for approximately 56 percent of total revenues during the third
quarter and 55 percent of total revenues for the first nine months of 1995.
Total assets were $11.6 billion at September 30, 1995. Additional performance
measurements are shown in the table below.
EARNINGS PERFORMANCE
<TABLE>
<CAPTION>
- ------------------------------------------------------------
For the Third Quarter Ended
---------------------------
1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Net income (millions) $ 43.8 $ 37.6
Net income per share 1.30 1.11
Return on equity 21.32% 19.41%
Return on assets 1.50 1.42
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Net income (millions) $119.2 $114.2
Net income per share 3.51 3.34
Return on equity 19.84% 20.21%
Return on assets 1.43 1.45
- ------------------------------------------------------------
</TABLE>
During the first nine months of 1994 and the first quarter of 1995, a
number of one-time items were recognized. In the first quarter of 1995, First
Tennessee acquired Carl I. Brown and Company, headquartered in Kansas City, and
Community Bancshares Inc., of Germantown, Tennessee. During the first nine
months of 1994, First Tennessee acquired SNMC Management Corporation, parent of
Sunbelt National Mortgage Corporation, Cleveland Bank and Trust Company,
Highland Capital Management Corp., and Planters Bank. All acquisitions closed
during the first quarter of 1995 and the first nine months of 1994 were
accounted for as poolings of interests; therefore, the financial position and
results of operations of all companies are reflected on a combined basis from
the earliest period presented. On April 1, 1995, First Tennessee acquired
Peoples Commercial Services Corporation of Senatobia, Mississippi. This
acquisition was accounted for as a purchase; therefore, the consolidated
statements do not reflect the results of its operations prior to that date.
One-time expenses were recognized in several of these acquisitions. In
addition, during the second quarter of 1994, First Tennessee utilized equity
securities gains to establish a charitable foundation that resulted in
additional one-time income and expense. A discussion of First Tennessee's
performance is provided below.
INCOME STATEMENT ANALYSIS
Net Interest Income and Earning Assets
For purposes of this discussion, net interest income 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.
<PAGE> 15
NET INTEREST INCOME AND EARNING ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
For the Third Quarter Ended
---------------------------
(Dollars in millions) 1995 1994 Change
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Investment securities $ 2,144.2 $2,197.6 (2)%
Loans 7,945.4 6,712.7 18
Other earning assets 264.9 437.0 (39)
- ------------------------------------------------------------------------
Total earning assets $10,354.5 $9,347.3 11%
- ------------------------------------------------------------------------
Net interest income $ 99.8 $ 100.6 (1)%
Net interest spread 3.04% 3.62%
Net interest margin 3.85 4.29
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
1995 1994 Change
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Investment securities $2,174.5 $2,230.1 (2)%
Loans 7,399.0 6,707.0 10
Other earning assets 367.7 416.3 (12)
- ------------------------------------------------------------------------
Total earning assets $9,941.2 $9,353.4 6%
- ------------------------------------------------------------------------
Net interest income $ 289.8 $ 302.5 (4)%
Net interest spread 3.09% 3.67%
Net interest margin 3.89 4.32
- ------------------------------------------------------------------------
</TABLE>
Earning assets increased 11 percent as total loans grew 18 percent and
investment securities declined 2 percent from the third quarter of 1994.
Commercial loans grew 14 percent and consumer loans rose 11 percent. The
mortgage warehouse grew $363 million, or 59 percent, over the previous year and
the permanent mortgage portfolio increased 18 percent. For the nine months
ending September 30, 1995, earning assets increased 6 percent with total loan
growth of 10 percent and a decline in the investment portfolio of approximately
2 percent from the same period in 1994. For this same nine-month comparison,
commercial loans grew 13 percent, consumer loans increased 14 percent and the
permanent mortgage portfolio rose 18 percent. The 24 percent year-to-date
decrease in mortgage warehouse loans reflected lower origination volumes in the
beginning of 1995, compared to the same nine-month period in 1994, when
stronger refinancing activity occurred.
For the third quarter of 1995, commercial loans represented 40
percent, and consumer loans and credit card receivables were 36 percent, with
mortgage loans (the permanent portfolio and warehouse) accounting for 21
percent of total loans. The increase in loans was partially funded by a 29
percent increase in purchased funds and 4 percent growth in interest-bearing
core deposits, including money market accounts and certificates of deposit less
than $100,000.
Net interest income was relatively flat from the previous year with a
44 basis point compression in the net interest margin (margin). This decrease
in margin reflected the extreme interest rate movements during the past year
and its impact on First Tennessee's balance sheet and off-balance sheet
positions. Several strategies have been implemented throughout 1995 to realign
and neutralize the balance sheet. As shown in the Rate Sensitivity Analysis
Table, at September 30, 1995, the balance sheet was rate sensitive $205 million
more assets than liabilities scheduled to reprice within one year, which is 2.0
percent of earning assets and within First Tennessee guideline limits.
The margin has remained relatively stable in 1995 with first quarter
margin of 3.92 percent, second quarter margin of 3.91 percent, and third
quarter margin of 3.85 percent. Fluctuations in activity levels in First
Tennessee's specialty lines of business directly impact the margin as these
nonbank business lines typically produce different margins than traditional
banking activities. Because of First Tennessee's unique business mix, a
comparison of First Tennessee's consolidated margin to that of other bank
holding companies is less relevant. The 6 basis point decline between the
second and third quarter's margins reflect the impact of the $444 million
increase in the mortgage warehouse from the second quarter to the third quarter
of 1995, as mortgage banking negatively impacted the margin 12 basis points.
However, improvement in the traditional retail/commercial bank partially
mitigated this compression. The margin continued to be negatively impacted
approximately 19 basis points in the third quarter from costs associated with
terminating the basis swap earlier in the year. This negative impact will
continue through May 1996 when the amortization period for the swap ends.
<PAGE> 16
For the nine-month period, net interest income decreased 4 percent, and
the margin was 3.89 percent. Going forward, the traditional retail/commercial
bank's margin should continue to improve based on current interest rates and
First Tennessee's existing balance sheet mix. However, the consolidated margin
will be influenced by the activity levels in the specialty lines of business,
especially from the bond division and mortgage banking.
NONINTEREST INCOME
<TABLE>
<CAPTION>
- ------------------------------------------------------------
For the Third Quarter Ended
---------------------------
(Dollars in millions) 1995 1994 Change
- ------------------------------------------------------------
<S> <C> <C> <C>
Mortgage banking $ 55.3 $ 42.8 29%
Bond division 20.3 17.6 16
Deposit transactions and
cash management 17.9 16.5 8
Bank card 10.0 8.5 17
Trust services 8.6 6.9 25
Other 14.3 13.2 8
- ------------------------------------------------------------
Total fee revenue $126.4 $105.5 20%
Gains on securities - .2 (89)
- ------------------------------------------------------------
Total noninterest income $126.4 $105.7 20%
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
1995 1994 Change
- ------------------------------------------------------------
<S> <C> <C> <C>
Mortgage banking $144.9 $146.7 (1)%
Bond division 61.4 63.8 (4)
Deposit transactions and
cash management 53.3 47.6 12
Bank card 27.4 22.6 21
Trust services 27.1 20.7 31
Other 40.8 35.3 15
- ------------------------------------------------------------
Total fee revenue $354.9 $336.7 5%
Gains on securities .5 22.6 (98)
- ------------------------------------------------------------
Total noninterest income $355.4 $359.3 (1)%
- ------------------------------------------------------------
</TABLE>
Noninterest income (fee income), excluding securities transactions in
both periods, grew 20 percent compared with the third quarter of 1994. Fee
income in the mortgage banking entities grew 29 percent compared with the third
quarter of 1994, as a result of increased originations and the benefit of a new
accounting rule (SFAS No. 122, "Accounting for Mortgage Servicing Rights an
amendment of FASB Statement No. 65"(SFAS No. 122)) related to originated
servicing rights. The mortgage banking entities originated $2.5 billion of
mortgage loans during the third quarter of 1995 compared with $1.4 billion
during the third quarter of 1994. Year-to-date mortgage loan originations in
1995 were $5.0 billion compared with $5.8 billion in 1994. The decline in
origination volume from the previous year reflected the high level of
refinancing activity during the first quarter of 1994. The mortgage servicing
portfolio, which includes servicing for ourselves and others, totaled $15.4
billion at September 30, 1995, compared with $14.5 billion at September 30,
1994. For the first nine months of 1995, mortgage banking noninterest income
was relatively flat compared to the same period in 1994.
The bond division experienced 16 percent growth in fee income during
the third quarter of 1995 compared with the same period in 1994. This growth
demonstrates the results of increased penetration among nonbanking customers.
The bond division acts primarily as a broker for its customers and does not
speculate. The inventory is highly liquid, turning over several times a day,
and overnight positions are hedged against movements in interest rates. For
the first nine months of 1995, the bond division's noninterest income declined
4 percent. However, this comparison includes record revenue during the first
quarter of 1994 as a result of a very active bond market.
Quarter-over-quarter growth in deposit transactions and cash
management noninterest income was primarily driven by an increase in existing
customer transactions, and was partially offset by less fees collected due to
the reduction in the FDIC premium. For the first nine months of 1995, deposit
transactions and cash management noninterest income grew 12 percent, with a
portion of the growth resulting from an accounting methodology change from
<PAGE> 17
cash basis to accrual basis in the first quarter of 1995. Bank card
noninterest income includes both cardholder and merchant processing fees. The
$1.5 million increase between the third quarter of 1995 and third quarter of
1994 was primarily due to an increase in merchant processing as the customer
base expanded. For the first nine months of 1995, bank card noninterest income
grew 21 percent. Trust services noninterest income grew 25 percent from the
third quarter of 1994 to the third quarter of 1995 due to the growth in managed
assets and the benefit of an accounting change earlier in 1995. Managed assets
at September 30, 1995, for First Tennessee Bank National Association (FTBNA)
were $4.9 billion compared with $4.4 billion at September 30, 1994. This
increase was a result of both growth in the number of new accounts and
increases in the market value of existing portfolios. For the first nine
months of 1995, trust services noninterest income increased 31 percent for the
same reasons previously noted. There were no material gains or losses on
securities during the third quarter of either 1995 or 1994. During the first
nine months of 1994, the securities gains were the result of transactions in
the venture capital subsidiary and gains realized on equity securities utilized
in the establishment of the charitable foundation.
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Third Quarter Ended
---------------------------
(Dollars in millions) 1995 1994 Change
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Staff expense $ 86.9 $ 79.7 9%
Occupancy 9.3 9.0 3
Amortization of intangibles
and mortgage servicing rights 5.9 4.7 25
Equipment expense 7.6 7.2 6
Other 41.4 44.9 (8)
- --------------------------------------------------------------------------
Total operating expense $151.1 $145.5 4%
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
1995 1994 Change
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Staff expense $247.8 $268.7 (8)%
Occupancy 27.1 25.3 7
Amortization of intangibles
and mortgage servicing rights 15.4 16.8 (9)
Equipment expense 23.2 21.2 10
Other 131.0 148.3 (12)
- --------------------------------------------------------------------------
Total operating expense $444.5 $480.3 (7)%
- --------------------------------------------------------------------------
</TABLE>
Total noninterest expense (also called operating expense) increased 4
percent from the third quarter of 1994. Staff expense, the largest component
of operating expense, increased 9 percent over the third quarter of 1994,
resulting from the additional commissions paid due to increased commission-based
revenue. Amortization expense increased 25 percent in the third quarter,
primarily related to the new accounting rules for originated servicing rights
(SFAS No. 122). The effect of the lower FDIC premiums and the refund from the
FDIC reduced deposit insurance expense $4.3 million in the third quarter of
1995 from the third quarter of 1994, which is included in the "Other" expense
category in the table above.
For the first nine months of 1995 compared with the first nine months
of 1994, noninterest expense declined 7 percent. First Tennessee recognized
one-time acquisition expenses of $5.8 million and $4.2 million in the first
nine months of 1995 and 1994, respectively. During the first quarter of 1994,
First Tennessee adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" with the recognition of $2.3 million of postemployment benefits
related to prior service rendered and rights vested. Additionally, during the
second quarter of 1994, First Tennessee established a charitable foundation
that increased operating expenses $8.5 million for the quarter. Excluding all
of these one-time expenses, noninterest expense for the nine-month period,
declined 6 percent. The largest dollar decrease for the nine-month
year-to-date periods was in staff expense, which decreased 8 percent. This
decrease reflected the reduction in variable expenses paid on commission-based
revenue.
<PAGE> 18
<TABLE>
<CAPTION>
INCOME TAXES
- -------------------------------------------------------------
Effective tax rates 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
For the quarter ended 35.6% 32.0%
For the nine months ended 35.2 30.8
- -------------------------------------------------------------
</TABLE>
The effective tax rate increase was primarily due to a $1.9 million
tax reduction in each quarter of 1994 for the elimination of a portion of a
deferred tax valuation allowance related to the acquisition of SNMC Management
Corporation. In addition, the lower tax rate in 1994 resulted from a reduction
in taxes in the amount of $2.7 million related to the establishment of the
charitable foundation.
CAPITAL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
For the Third Quarter Ended
---------------------------
1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Equity/assets ratio 7.02% 7.32%
Equity/loans 10.26 11.45
Tangible equity/tangible assets* 6.18 6.54
Book value per share $24.78 $22.76
- ------------------------------------------------------------------------
</TABLE>
* Mortgage servicing rights are included as tangible assets.
Average shareholders' equity, through the retention of net income,
increased 6 percent from the third quarter of 1994. For an institution to
qualify as well-capitalized as set forth in the banking regulations, Tier 1
capital, Total capital, and leverage capital ratios must be at least 6 percent,
10 percent, and 5 percent, respectively. On September 30, 1995, First
Tennessee's bank subsidiaries had sufficient capital to qualify as
well-capitalized institutions under the regulatory capital standards as shown
in the Regulatory Capital table.
During the second quarter of 1995, First Tennessee repurchased $30.6
million of its stock, and in the third quarter of 1995, repurchased $32.7
million of its stock in anticipation of acquiring Financial Investment Corp.
(FIC), a bank holding company in Springdale, Arkansas. This acquisition was
completed after quarter-end (see Subsequent Events), and $70 million of First
Tennessee stock was issued to FIC shareholders at the close.
Liquidity
During the third quarter of 1995, average core deposits, the most
stable source of liquidity, funded 65 percent of total average assets while
funding from short-term purchased funds was 23 percent. Average
interest-bearing core deposits grew 4 percent from the third quarter of 1994.
Short-term purchased funds include: certificates of deposit greater than
$100,000; federal funds purchased; securities sold under agreements to
repurchase; commercial paper; and other borrowed funds. Short-term purchased
funds remained flat at $2.3 billion for September 30, 1995 and 1994, while term
borrowings increased $89.4 million for the same period as loan growth,
especially in the mortgage warehouse, outpaced deposit growth.
ASSET QUALITY AND CREDIT RISK MANAGEMENT
First Tennessee manages asset quality and credit risk by maintaining
diversification in its loan portfolio and through adherence to its credit
policy. First Tennessee's goal is not to avoid risk, but to manage it.
Barring any major changes in the economy, asset quality is expected to remain
relatively stable in the fourth quarter based on the current mix in the
commercial and consumer loan portfolios. At September 30, 1995, First
Tennessee had no concentrations of 10 percent or more of total loans in any
single industry.
Commercial loans are internally assigned a credit rating, ranging from
A to F. Loans graded C and above were 96 percent of total graded loans at
September 30, 1995, compared with 94 percent at September 30, 1994. Commercial
real estate loans were $566.1 million at September 30, 1995, compared with
$529.4 million at September 30, 1994, as originally reported. Construction and
development loans were $197.2 million at the end of the third quarter of 1995,
an increase of $73.0 million from the amounts originally reported for the third
quarter of 1994, due to a favorable real estate market which has grown
consistently since the first quarter of 1994. The Loans Secured by Real Estate
table reflects the diversity in real estate loans by project type.
The Net Loans and Foreclosed Real Estate table provides a breakdown of
the commercial loan portfolio of FTBNA by grades and major loan types as of
September 30, 1995 and 1994, and year-end 1994. This table also presents
<PAGE> 19
information on consumer loans, credit card receivables, mortgages, and other
First Tennessee bank subsidiaries.
The allowance for loan losses reflects management's judgment of the
risks inherent in the loan portfolio. The allowance for loan losses is
increased by the provision for loan losses and recoveries and is decreased by
charged-off loans. 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
loan loss provision changes.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
For the Third Quarter Ended
---------------------------
(Dollars in millions) 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $110.7 $110.4
Provision for loan losses 5.9 4.2
Allowance of acquired bank .2 -
Net charge-offs (5.9) (4.4)
- ------------------------------------------------------------------------
Ending balance $110.9 $110.2
- ------------------------------------------------------------------------
Ratios:
Allowance to loans* 1.43% 1.62%
Net charge-offs to average loans* .30 .26
Net charge-offs to allowance 21.4 16.0
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $109.9 $110.7
Provision for loan losses 13.3 12.9
Allowance of acquired bank 1.0 -
Net charge-offs (13.3) (13.4)
- ------------------------------------------------------------------------
Ending balance $110.9 $110.2
- ------------------------------------------------------------------------
Ratios:
Allowance to loans* 1.43% 1.62%
Net charge-offs to average loans* .24 .27
Net charge-offs to allowance 16.0 16.3
- ------------------------------------------------------------------------
</TABLE>
* Net of unearned income; includes mortgage warehouse loans held
for sale reported on the Consolidated Statements of Condition.
Excluding mortgage warehouse loans, the ratio of allowance for loan
losses to loans would have been 1.58 percent at September 30, 1995, and 1.76
percent at September 30, 1994. Net charge-offs increased to $5.9 million or
.30 percent of average loans for the quarter ended September 30, 1995. For the
nine-month period, net charge-offs were relatively flat at $13.3 million or .24
percent of average loans. Commercial and real estate loan net charge-offs were
$.4 million for the third quarter of 1995 or .05 percent of average commercial
and real estate loans compared with $.5 million or .07 percent for the same
period in 1994. For the nine-month period, commercial and real estate loan net
recoveries were $1.7 million, compared with $2.1 million net charge-offs for
the same period in 1994. Consumer loan net charge-offs were $4.0 million for
the nine months of 1995 compared with $3.5 million for the nine months of 1994.
In both periods this represented .23 percent of average consumer loans net of
unearned income. Credit card receivable net charge-offs were $10.8 million for
the nine months of 1995 or 3.07 percent of credit card receivables compared
with $7.8 million or 2.44 percent for the same period in 1994. As shown in the
Nonperforming Assets table, nonperforming assets decreased 28 percent from
September 30, 1994. Nonperforming loans decreased 9 percent and foreclosed
real estate decreased 41 percent for the same time period. The Changes in
Nonperforming Assets table provides additional detail regarding nonperforming
assets since September 30, 1994.
<PAGE> 20
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
September 30 December 31
------------ -----------
(Dollars in thousands) 1995 1994 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Amounts:
Impaired loans* $ 9,167
Other nonaccrual loans 7,472
- ------------------------------------------------------------------------
Total nonaccrual loans 16,639 $17,877 $16,853
Restructured loans - 459 158
- ------------------------------------------------------------------------
Total nonperforming loans 16,639 18,336 17,011
Foreclosed real estate 13,714 23,085 19,215
Other assets 1,094 2,087 2,055
- ------------------------------------------------------------------------
Total nonperforming assets $31,447 $43,508 $38,281
========================================================================
Past due loans:**
Non-government guaranteed $16,542 $12,589 $13,297
Government guaranteed 9,984 10,827 10,030
- ------------------------------------------------------------------------
Ratios:
Nonperforming loans to total
loans*** .22% .27% .24%
Nonperforming assets to total
loans, plus foreclosed real
estate and other assets*** .41 .64 .54
Nonperforming assets and non-
government guaranteed past
due loans to total loans, plus
foreclosed real estate and
other assets*** .62 .82 .73
- ------------------------------------------------------------------------
</TABLE>
All loans shown net of unearned income.
* Includes $365,000 restructured loans.
** Loans that are 90 days or more past due as to principal and/or interest and
not yet impaired or on nonaccrual status.
***Total loans includes mortgage warehouse loans held for sale reported on the
Consolidated Statements of Condition.
CHANGES IN NONPERFORMING ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
For the Quarters Ended
-------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------
(Dollars in millions) 9/30 6/30 3/31 12/31 9/30
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $31.3 $36.0 $38.3 $43.5 $54.1
New nonperformers 4.3 9.8 2.3 6.5 3.0
Return to accrual - - (.2) - -
Payments (3.3) (12.8) (4.0) (10.3) (12.6)
Charge-offs (.9) (1.7) (.4) (1.4) (1.0)
- ----------------------------------------------------------------------------------
Ending balance $31.4 $31.3 $36.0 $38.3 $43.5
- ----------------------------------------------------------------------------------
</TABLE>
Past due loans were $26.5 million at September 30, 1995, a $3.1
million increase from the $23.4 million reported at September 30, 1994.
Potential problem assets, which are not included in nonperforming assets, were
$68.4 million at September 30, 1995, which remained approximately 1 percent of
total loans.
OFF-BALANCE SHEET ACTIVITY
In the normal course of business, First Tennessee is a party to
financial instruments that are not required to be reflected on a balance sheet.
First Tennessee enters into transactions involving these instruments in order
to meet the financial needs of its customers and manage its own exposure to
fluctuations in interest rates. These instruments are categorized into: those
Held or Issued for Purposes other than bond division and those Held or Issued
for bond division as noted in the Off-Balance Sheet Financial Instruments
table.
The Held or Issued for Purposes other than bond division category
includes such instruments as loan commitments and customer requests, as well as
tools used for interest rate risk management. Commitments to extend credit are
agreements to lend to a customer at a future date. Since many of the
commitments are expected to expire without being drawn upon fully, the total
commitment amounts do not necessarily represent future cash requirements.
Interest rate risk management instruments may include interest rate swaps,
caps, floors, and forward contracts. During the first quarter of 1995, First
Tennessee terminated $500 million of a $1 billion basis swap. This swap was
executed as a tool to manage interest rate risk. The remaining $500 million of
the basis swap was terminated during the second quarter of 1995. As of
September 30, 1995, deferred losses from terminated swap transactions were
<PAGE> 21
$11.3 million and will be amortized through May 1996. The mortgage banking
entities use forward sales and options to hedge interest rates between the time
a mortgage note rate is locked to the customer and the time the loan is funded
and securitized.
In the normal course of business, the bond division buys and sells
mortgage securities, municipal bonds, and other securities that settle on a
delayed basis. Under generally accepted accounting principles, these
instruments are considered forward contracts as shown in the table.
SUBSEQUENT EVENTS
Acquisitions
On October 1, 1995, First Tennessee acquired Financial Investment
Corporation (FIC), parent company of the First National Bank of Springdale in
Springdale, Arkansas. First National Bank, which became a subsidiary of First
Tennessee, had $349.3 million in total assets, $291.7 million in total
deposits, and $48.0 million in shareholders' equity at September 30, 1995. The
purchase price was $70 million and FIC's shareholders exchanged each share of
FIC stock for .7181 shares of First Tennessee's stock. This acquisition was
accounted for as a purchase.
FDIC Premiums
The FDIC increased deposit insurance to $.23 per $100 of deposits
in 1991. When this increase occurred, First Tennessee assessed only a portion
of this cost to its customers. In August of 1995, the FDIC voted to lower FDIC
premiums paid by well-capitalized banks to $.04 per $100 of deposits. First
Tennessee will benefit approximately $3.3 million per quarter from this
reduction in premiums. Fees received from customers, that have partially
offset the overall cost of the deposit insurance premium, will no longer be
assessed; thus reducing revenues approximately $1.2 million per quarter going
forward.
Proposed Banking Changes
Congress is currently discussing various proposals to fully capitalize
the Savings Association Insurance Fund (SAIF). A one-time assessment could
potentially be charged to all institutions that have SAIF-insured deposits.
The timing of the assessment could be as early as the fourth quarter of 1995.
In management's opinion, the maximum pre-tax cost to First Tennessee is
estimated to be approximately $6.5 million. A decrease in this assessment is
being considered for Oakar banks. Oakar banks are banks that bought thrift
deposits insured by SAIF, such as First Tennessee through the acquisition of
Home Financial Corporation in 1992.
<PAGE> 22
RATE SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1995
<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 $ 3,849 $ 409 $ 867 $ 2,613 $ 7,738
Investment securities 140 96 231 1,522 1,989
Other earning assets 328 -- -- -- 328
- -------------------------------------------------------------------------------------------------------------------------------
Total earning assets $ 4,317 $ 505 $ 1,098 $ 4,135 $ 10,055
===============================================================================================================================
EARNING ASSET FUNDING:
Interest-bearing deposits $ 2,277 $ 501 $ 642 $ 2,845 $ 6,265
Short-term purchased funds 1,881 -- -- -- 1,881
Term borrowings 22 1 3 175 201
Noninterest-bearing funds 152 (6) (72) 1,634 1,708
- ------------------------------------------------------------------------------------------------------------------------------
Total earning asset funding $ 4,332 $ 496 $ 573 $ 4,654 $ 10,055
===============================================================================================================================
RATE SENSITIVITY GAP:
Period $ (15) $ 9 $ 525 $ (519)
Cumulative (15) (6) 519 --
- -------------------------------------------------------------------------------------------------------------------------------
RATE SENSITIVITY GAP ADJUSTED FOR INTEREST
RATE FUTURES AND INTEREST RATE SWAPS:
Period $ (428) $ 30 $ 603 $ (205)
Cumulative (428) (398) 205 --
- -------------------------------------------------------------------------------------------------------------------------------
ADJUSTED GAP AS A PERCENT OF EARNING ASSETS:
Period (4.3)% .3 % 6.0 % (2.0)%
Cumulative (4.3) (4.0) 2.0 --
- -------------------------------------------------------------------------------------------------------------------------------
</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> 23
REGULATORY CAPITAL AT SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Peoples
(Dollars in thousands) First Tennessee (1) FTBNA (2) CBT (3) and Union (4)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL:
Tier 1 capital:
Shareholders' common equity $ 824,680 $ 762,068 $ 24,579 $ 15,102
Disallowed intangibles (75,386) (70,060) -- --
Adjust for unrealized holding (gains)/losses on
available for sale securities (1,797) (462) (449) (21)
- -----------------------------------------------------------------------------------------------------------------------
Total Tier 1 capital 747,497 691,546 24,130 15,081
- -----------------------------------------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt 79,829 75,000 -- --
Qualifying allowance for loan losses 106,427 101,391 1,870 827
- -----------------------------------------------------------------------------------------------------------------------
Total Tier 2 capital 186,256 176,391 1,870 827
- -----------------------------------------------------------------------------------------------------------------------
Total capital $ 933,753 $ 867,937 $ 26,000 $ 15,908
=======================================================================================================================
Risk-adjusted assets $ 8,514,179 $ 8,108,097 $ 148,426 $ 66,072
Quarterly average assets 11,616,075 11,036,987 238,786 117,746
- -----------------------------------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 8.78 % 8.53 % 16.26 % 22.83 %
Tier 2 capital to risk-adjusted assets 2.19 2.17 1.26 1.25
- -----------------------------------------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 10.97 % 10.70 % 17.52 % 24.08 %
=======================================================================================================================
Leverage - Tier 1 capital to
adjusted quarterly average assets 6.48 % 6.31 % 10.11 % 12.81 %
less disallowed intangibles
</TABLE>
<TABLE>
<CAPTION>
Peoples
(Dollars in thousands) Planters (5) FTBNA-MS (6) Bank (7)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL:
Tier 1 capital:
Shareholders' common equity $ 6,389 $ 6,802 $ 17,700
Disallowed intangibles (697) (9,065)
Adjust for unrealized holding (gains)/losses on
available for sale securities 79 -- (312)
- ---------------------------------------------------------------------------------------------------------
Total Tier 1 capital 6,468 6,105 8,323
- ---------------------------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt -- -- --
Qualifying allowance for loan losses 416 500 583
- ---------------------------------------------------------------------------------------------------------
Total Tier 2 capital 416 500 583
- ---------------------------------------------------------------------------------------------------------
Total capital $ 6,884 $ 6,605 $ 8,906
=========================================================================================================
Risk-adjusted assets $ 32,757 $ 39,881 $ 46,319
Quarterly average assets 59,671 61,988 103,365
- ---------------------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 19.75 % 15.31 % 17.97 %
Tier 2 capital to risk-adjusted assets 1.27 1.25 1.26
- ---------------------------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 21.02 % 16.56 % 19.23 %
=========================================================================================================
Leverage - Tier 1 capital to
adjusted quarterly average assets 10.84 % 9.96 % 8.83 %
less disallowed intangibles
</TABLE>
(1) First Tennessee National Corporation (2) First Tennessee Bank National
Association
(3) Cleveland Bank and Trust Company (4) Peoples and Union Bank (5) Planters
Bank
(6) First Tennessee Bank National Association Mississippi (7) Peoples Bank of
Senatobia
Based on regulatory guidelines
<PAGE> 24
LOANS AND FORECLOSED REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
September 30, 1995
--------------------------------------------------------------------------
Construction Allowance
and Commercial For Loan
(Dollars in millions) Commercial Development Real Estate Total Losses
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Internal grades:
A $ 180 $ - $ 3 $ 183 $ -
B 407 15 56 478 1
C 1,799 176 478 2,453 23
D 55 3 11 69 5
E 24 1 9 34 3
F 19 1 8 28 7
- -----------------------------------------------------------------------------------------------------------------------------
2,484 196 565 3,245 39
Impaired loans:
Contractually past due 6 1 1 8 4
Contractually current 1 - - 1 -
Nonaccrual loans:
Contractually past due 1 - - 1 -
Contractually current - - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total commercial &
commercial real estate loans $2,492 $197 $566 $3,255 $ 43
- -----------------------------------------------------------------------------------------------------------------------------
Retail:
Consumer 2,355 20
Credit card 498 19
Permanent mortgages 664 4
Mortgage warehouse loans held for sale 715 -
Mortgage banking nonaccrual loans 7 1
- -----------------------------------------------------------------------------------------------------------------------------
Total retail loans 4,239 44
- -----------------------------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 148 3
Planters Bank 27 1
Peoples Bank 45 1
Other/Unfunded commitments 24 3
General reserve - 16
- -----------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $7,738 $111
=============================================================================================================================
Foreclosed real estate:
Foreclosed property $ 1 $ 8 $ 2 $ 11
Foreclosed property - mortgage banking 3
- -----------------------------------------------------------------------------------------------------------------------------
Total foreclosed real estate $ 14
=============================================================================================================================
<CAPTION>
September 30, 1994 December 31, 1994
----------------------------- --------------------------
Allowance Allowance
For Loan For Loan
(Dollars in millions) Total Losses Total Losses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Internal grades:
A $ 172 $ - $ 207 $ -
B 403 1 399 1
C 2,179 23 2,284 23
D 83 6 74 7
E 47 4 26 4
F 27 9 39 9
- ---------------------------------------------------------------------------------------------------------------------------
2,911 43 3,029 44
Impaired loans:
Contractually past due - - - -
Contractually current - - - -
Nonaccrual loans:
Contractually past due 7 4 6 2
Contractually current 5 3 4 2
- ---------------------------------------------------------------------------------------------------------------------------
Total commercial &
commercial real estate loans $2,923 $ 50 $3,039 $ 48
- ---------------------------------------------------------------------------------------------------------------------------
Retail:
Consumer 2,126 20 2,191 20
Credit card 448 18 475 19
Permanent mortgages 570 2 586 2
Mortgage warehouse loans held for sale 559 - 515 0
Mortgage banking nonaccrual loans 4 1 6 1
- ---------------------------------------------------------------------------------------------------------------------------
Total retail loans 3,707 41 3,773 42
- ---------------------------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 138 3 139 3
Planters Bank 28 1 25 1
Peoples Bank - - - -
Other/Unfunded commitments 26 2 37 3
General reserve - 13 - 13
- ---------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $6,822 $110 $7,013 $110
===========================================================================================================================
Foreclosed real estate:
Foreclosed property $ 10 $ 14
Foreclosed property - mortgage banking 13 5
- ---------------------------------------------------------------------------------------------------------------------------
Total foreclosed real estate $ 23 $ 19
===========================================================================================================================
</TABLE>
All amounts in the Allowance for Loan Losses columns have been rounded to the
nearest million dollars. Grade A loans have reserve amounts of less than
$500,000.
Definitions of each credit grade are provided below:
*GRADE A -- Established, stable companies with excellent earnings, liquidity,
and capital. Possess many of the same characteristics as Standard & Poor's
(S&P) AA rated companies.
*GRADE B -- Established, stable companies with good earnings, liquidity, and
capital. Possess many of the same characteristics as S&P A rated companies.
*GRADE C -- Established, stable companies with satisfactory earnings,
liquidity, and capital and with consistent, positive trends relative to
industry norms.
*GRADE D -- Financial condition adversely affected by temporary lack of
earnings or liquidity or changes in the operating environment. An action
plan is required to rehabilitate the credit or have it refinanced elsewhere.
*GRADE E -- Significant developing weaknesses or adverse trends in earnings,
liquidity, capital, or operating environment. No discernable market for
refinancing is available.
*GRADE F -- Significantly higher than normal probability that: (1) legal
action or liquidation of collateral is required; (2) there will be a loss;
or (3) both will occur. This grade is believed to be substantially
equivalent to the regulators' classifications of substandard and doubtful.
*NONACCRUAL -- A loan that is placed on nonaccrual status is not included in
any of these six grades, but is placed in a separate nonaccrual category.
Commercial and real estate loans are placed on nonaccrual status
automatically once they become 90 days or more past due.
Based on internal loan classifications.
<PAGE> 25
LOANS SECURED BY REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
September 30, 1995
------------------------------------------------
Construction Commercial
(Dollars in millions) & Development Real Estate Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK CATEGORIES:
Real estate collateral serves as only source of repayment $ 120 $ 168 $ 288
Real estate collateral is primary source of
repayment with a substantial secondary source 77 398 475
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 197 $ 566 $ 763
====================================================================================================================================
PROJECT TYPE:
Apartments $ 15 $ 100 $ 115
Hotels/Motels 6 64 70
Office buildings - multi-tenant 1 49 50
Single family builder 83 5 88
Shopping centers 40 106 146
Commercial/Special purpose units 11 83 94
All other 41 159 200
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 197 $ 566 $ 763
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------------
Construction Commercial
(Dollars in millions) & Development Real Estate Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK CATEGORIES:
Real estate collateral serves as only source of repayment $ 79 $ 170 $ 249
Real estate collateral is primary source of
repayment with a substantial secondary source 60 366 426
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 139 $ 536 $ 675
====================================================================================================================================
PROJECT TYPE:
Apartments $ 6 $ 74 $ 80
Hotels/Motels 8 48 56
Office buildings - multi-tenant 2 56 58
Single family builder 53 4 57
Shopping centers 23 136 159
Commercial/Special purpose units 8 75 83
All other 39 143 182
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 139 $ 536 $ 675
====================================================================================================================================
</TABLE>
Based on internal loan classifications for graded loans.
Excludes Cleveland Bank & Trust, Planters Bank, and Peoples Bank.
<PAGE> 26
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Notional Notional
(Dollars in millions) Value Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HELD OR ISSUED FOR PURPOSES OTHER THAN BOND DIVISION HELD OR ISSUED FOR BOND DIVISION
Commitments to extend credit: Forward contracts:
Consumer credit card lines $1,593.4 Commitments to purchase $1,030.3
Consumer home equity 239.1 Commitments to sell 1,142.7
Commercial real estate and
construction and land development 293.2 Futures contracts:
Mortgage banking 568.9 Commitment to purchase 10.0
Other 1,303.1
Interest rate swap receive fixed/ pay floating 75.0
Commercial and standby letters of credit 243.2
Securities underwriting commitments .3
Foreign exchange contracts, net position .6
Interest rate risk management activities:
Interest rate swap receive fixed/
pay floating - amortizing 552.8
Mortgage banking
Commitments to sell loans, net position 893.9
Put options purchased 40.5
Eurodollar placement futures -
</TABLE>
<PAGE> 27
Part II.
--------
OTHER INFORMATION
Items 1, 2, 3, 4 and 5.
- -----------------------
As of the end of the third quarter, 1995, 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 1995.
<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: 11/13/95 By: Elbert L. Thomas Jr.
-------------------- ------------------------------
Elbert L. Thomas Jr.
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- --------
<S> <C> <C>
4 The Corporation and certain of its consolidated subsidiaries have
outstanding certain long-term debt. See Note 12 in the Corporation's
1994 Annual Report to Shareholders. In addition, the Corporation
entered into a Credit Agreement dated as of July 25, 1995 with Bank
of America National Trust and Savings Association, as agent, and other
financial institutions. None of such debt exceeds 10% of the total
assets of the Corporation and its consolidated subsidiaries. Thus,
copies of constituent instruments defining the rights of the holders
of such debt are not required to be included as exhibits. The
Corporation agrees to furnish copies of such instruments to the
Securities and Exchange Commission upon request.
11 Statement re Computation of Per Share Earnings Filed Herewith
27 Financial Data Schedule (for SEC use only) Filed Herewith
</TABLE>
<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: 1995 1994 1995 1994
- -------------------------------------- ------------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Per statements of income (Thousands):
Net income $43,830 $37,599 $119,190 $114,154
=================== =============== ================= ===============
Per statements of income:
Weighted average shares outstanding 33,465,059 34,002,397 33,935,982 34,206,231
=================== =============== ================= ===============
Primary earnings per share (a):
Net income $ 1.30 $ 1.11 $ 3.51 $ 3.34
=================== =============== ================= ===============
Additional Primary computation
- ------------------------------
Adjustment to weighted average shares
outstanding:
Weighted average shares outstanding
per primary computation above 33,465,059 34,002,397 33,935,982 34,206,231
Add dilutive effect of outstanding
options (as determined by the
application of the treasury stock
method) 687,878 612,235 551,034 552,298
------------------- --------------- ----------------- ---------------
Weighted average shares outstanding,
as adjusted 34,152,937 34,614,632 34,487,016 34,758,529
=================== =============== ================= ===============
Primary earnings per share, as adjusted (b):
Net income $1.28 $1.09 $3.46 $3.28
=================== =============== ================= ===============
Additional Fully Diluted Computation
- --------------------------------------
Adjustment to weighted average share
outstanding:
Weighted average shares outstanding
per primary computation above 34,152,937 34,614,632 34,487,016 34,758,529
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 96,235 284 69,902 17,359
------------------- --------------- ----------------- ---------------
Weighted average shares outstanding,
as adjusted 34,249,172 34,614,916 34,556,918 34,775,888
=================== =============== ================= ===============
Fully diluted earnings per share, as adjusted (b):
Net income $ 1.28 $ 1.09 $ 3.45 $ 3.28
=================== =============== ================= ===============
</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, 1995, FINANCIAL STATEMENTS FILED
IN ITS 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 709,133
<INT-BEARING-DEPOSITS> 1,033
<FED-FUNDS-SOLD> 102,219
<TRADING-ASSETS> 224,917
<INVESTMENTS-HELD-FOR-SALE> 1,012,534
<INVESTMENTS-CARRYING> 976,923
<INVESTMENTS-MARKET> 969,651
<LOANS> 7,737,560
<ALLOWANCE> 110,882
<TOTAL-ASSETS> 11,581,068
<DEPOSITS> 8,074,283
<SHORT-TERM> 1,880,892
<LIABILITIES-OTHER> 600,156
<LONG-TERM> 201,057
<COMMON> 0
0
83,206
<OTHER-SE> 741,474
<TOTAL-LIABILITIES-AND-EQUITY> 11,581,068
<INTEREST-LOAN> 485,994
<INTEREST-INVEST> 102,419
<INTEREST-OTHER> 17,254
<INTEREST-TOTAL> 605,667
<INTEREST-DEPOSIT> 225,259
<INTEREST-EXPENSE> 319,389
<INTEREST-INCOME-NET> 286,278
<LOAN-LOSSES> 13,285
<SECURITIES-GAINS> 512
<EXPENSE-OTHER> 444,470
<INCOME-PRETAX> 183,870
<INCOME-PRE-EXTRAORDINARY> 119,190
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,190
<EPS-PRIMARY> 3.51
<EPS-DILUTED> 3.45
<YIELD-ACTUAL> 3.89
<LOANS-NON> 16,639
<LOANS-PAST> 26,526
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 68,279
<ALLOWANCE-OPEN> 109,859
<CHARGE-OFFS> 24,698
<RECOVERIES> 11,408
<ALLOWANCE-CLOSE> 96,569
<ALLOWANCE-DOMESTIC> 96,569
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
