<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 March 31, 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
----------------------------------------------------
88
(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 34,582,057
----------------------------- -----------------------------
Class Outstanding at April 30, 1995
<PAGE> 2
FIRST TENNESSEE NATIONAL CORPORATION
INDEX
Part I. Financial Information
Part II. Other Information
Signatures
Exhibit Index
Exhibit 11
Exhibit 27 (for SEC use only)
<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
financial position and results of operations for the interim
periods presented.
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION First Tennessee
National
Corporation
----------------------------------------------------------------------------------------------------------
March 31
-------------------------- December 31
(Dollars in thousands)(Unaudited) 1995 1994 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 562,465 $ 644,280 $ 724,828
Federal funds sold and securities purchased under
agreements to resell 260,800 315,674 253,124
----------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 823,265 959,954 977,952
----------------------------------------------------------------------------------------------------------
Investment in bank time deposits 3,673 4,552 2,534
Trading securities inventory 166,373 526,018 170,031
Mortgage warehouse loans held for sale 415,917 941,827 515,407
Securities available for sale 1,167,269 1,414,706 1,166,738
Securities held to maturity (market value of $961,960
at March 31, 1995, $730,172 at March 31,1994 and
$951,444 at Decemeber 31, 1994) 988,386 742,516 1,004,177
Loans, net of unearned income 6,638,666 5,741,340 6,498,042
Less: Allowance for loan losses 109,862 112,168 109,859
----------------------------------------------------------------------------------------------------------
Total net loans 6,528,804 5,629,172 6,388,183
----------------------------------------------------------------------------------------------------------
Premises and equipment, net 159,458 143,587 159,036
Real estate acquired by foreclosure 18,455 34,007 19,215
Intangible assets 163,056 170,302 164,447
Bond division receivables and other assets 477,132 633,275 365,229
----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 10,911,788 $ 11,199,916 $ 10,932,949
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 1,664,689 $ 1,802,703 $ 1,733,336
Checking/Interest 495,494 564,778 508,741
Savings 593,972 740,649 605,388
Money market account 1,804,214 1,776,379 1,819,825
Certificates of deposit under $100,000 and other time 2,877,951 2,365,828 2,771,012
Certificates of deposit $100,000 and more 498,336 520,282 442,004
----------------------------------------------------------------------------------------------------------
Total deposits 7,934,656 7,770,619 7,880,306
Federal funds purchased and securities sold under
agreements to repurchase 1,353,036 1,052,706 1,457,517
Commercial paper and other short-term borrowings 162,298 618,862 352,522
Bond division payables and other liabilities 458,103 910,272 353,928
Term borrowings 203,553 96,829 113,771
----------------------------------------------------------------------------------------------------------
Total liabilities 10,111,646 10,449,288 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 - 34,152,067 at March 31, 1995; 34,307,970
at March 31, 1994; and 34,073,958 at December 31, 1994) 85,380 85,770 85,185
Capital surplus 93,382 104,993 91,558
Undivided profits 633,045 559,816 625,231
Unrealized market adjustment on available for sale securities (9,039) 3,854 (24,273)
Deferred compensation on restricted stock incentive plan (2,626) (3,805) (2,796)
----------------------------------------------------------------------------------------------------------
Total shareholders' equity 800,142 750,628 774,905
----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,911,788 $ 11,199,916 $ 10,932,949
==========================================================================================================
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME First Tennessee
National
Corporation
------------------------------------------------------------------------------------------
Three Months Ended
March 31
-----------------------------
(Dollars in thousands except per share data)(Unaudited) 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 149,655 $ 129,522
Interest on investment securities:
Taxable 33,671 31,107
Tax-exempt 1,088 1,362
Interest on trading securities inventory 3,497 2,626
Interest on other earning assets 3,473 1,621
------------------------------------------------------------------------------------------
Total interest income 191,384 166,238
------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits:
Checking/Interest 2,146 2,353
Savings 2,928 3,378
Money market account 21,324 10,441
Certificates of deposit under $100,000 and other time 38,507 26,315
Certificates of deposit $100,000 and more 6,777 4,075
Interest on short-term borrowings 23,221 17,344
Interest on term borrowings 4,163 2,259
------------------------------------------------------------------------------------------
Total interest expense 99,066 66,165
------------------------------------------------------------------------------------------
NET INTEREST INCOME 92,318 100,073
Provision for loan losses 4,148 5,759
------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 88,170 94,314
------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage banking 41,842 56,172
Bond division 18,419 26,230
Deposit transactions and cash management 17,836 14,836
Trust services 10,323 5,898
Bank card 8,105 6,644
Equity securities gains/(losses) 198 14,989
Debt securities gains/(losses) 264 (321)
All other 12,241 11,077
------------------------------------------------------------------------------------------
Total noninterest income 109,228 135,525
------------------------------------------------------------------------------------------
ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 197,398 229,839
------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Employee compensation, incentives, and benefits 79,324 97,529
Occupancy 9,110 7,873
Operations services 9,011 8,222
Equipment rentals, depreciation, and maintenance 8,188 6,765
Communications and courier 7,334 7,778
Legal and professional fees 5,196 4,987
Amortization of intangible assets 4,519 6,901
Deposit insurance premium 4,358 4,151
All other 20,768 25,276
------------------------------------------------------------------------------------------
Total noninterest expense 147,808 169,482
------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 49,590 60,357
Applicable income taxes 17,976 20,553
------------------------------------------------------------------------------------------
NET INCOME $ 31,614 $ 39,804
==========================================================================================
NET INCOME PER COMMON SHARE $ 0.93 $ 1.16
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 34,108,647 34,289,291
------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS First Tennessee
National
Corporation
Three Months Ended March 31
(Dollars in thousands)(Unaudited) 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 31,614 $ 39,804
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 4,148 5,759
Depreciation and amortization of premises and equipment 5,840 4,792
Amortization of intangibles 4,519 6,901
Net amortization of premiums and accretion of discounts 4,056 4,108
Market value adjustment on foreclosed property 651 414
Equity securities gains (198) (14,989)
Debt securities losses (gains) (264) 321
Net loss (gain) on disposal of fixed assets 1,621 (93)
Deferred income tax provision (benefit) 11,964 2,855
Net (increase) decrease in:
Trading securities inventory 3,658 (347,355)
Mortgage warehouse loans held for sale 99,490 321,636
Bond division receivables (127,738) (221,784)
Interest receivable 1,621 (3,106)
Other assets (19,641) (30,088)
Net increase (decrease) in:
Bond division payables 97,086 438,846
Interest payable 6,795 3,484
Other liabilities (1,629) (3,590)
--------------------------------------------------------------------------------------
Total adjustments 91,979 168,111
--------------------------------------------------------------------------------------
Net cash provided by operating activities 123,593 207,915
--------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of:
Held to maturity securities 17,494 265,141
Available for sale securities 27,571 67,068
Proceeds from sale of:
Available for sale securities 62,889 164,065
Premises and equipment 29 349
Payments for purchase of:
Held to maturity securities (1,343) (111,346)
Available for sale securities (65,217) (124,627)
Premises and equipment (7,306) (7,899)
Net increase in loans (144,198) (183,282)
Decrease (increase) in investment in bank time deposits (1,139) 3,085
--------------------------------------------------------------------------------------
Net cash provided/(used) by investing activities (111,220) 72,554
--------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,221 481
Proceeds from the issuance of long-term debt 90,000 --
Payments for:
Capital lease obligations (37) (37)
Term borrowings (236) (237)
Cash dividends (15,054) (187)
Equity distributions related to acquisitions (14) (600)
Stock repurchase -- (1,300)
Net increase (decrease) in:
Deposits 51,765 167,962
Short-term borrowings (294,705) (281,230)
--------------------------------------------------------------------------------------
Net cash used by financing activities (167,060) (115,148)
--------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (154,687) 165,321
--------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 977,952 794,633
--------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 823,265 $ 959,954
======================================================================================
Total interest paid $ 89,591 $ 59,839
Total income taxes paid 2,906 8,877
</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. 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 first quarter of 1994 and
were accounted for as poolings of interests; therefore, the financial
statements for all periods presented reflect the combined companies.
On August 9, 1994, First Tennessee acquired for approximately 334,000
shares of its common stock all of the outstanding shares of Planters Bank
(Planters) of Tunica, Mississippi. Planters became a wholly owned
subsidiary of First Tennessee. 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 first quarter of 1994:
<TABLE>
<CAPTION>
(Dollars in thousands, First Quarter
except per share data) 1994
---------------------------------------------------------
<S> <C>
TOTAL REVENUE:*
First Tennessee, as originally reported $ 208,514
Planters 679
Carl I. Brown 23,477
CBI 2,943
Eliminations (15)
---------------------------------------------------------
First Tennessee $ 235,598
=========================================================
NET INCOME:
First Tennessee, as originally reported $ 36,630
Planters 158
Carl I. Brown 2,408
CBI 608
---------------------------------------------------------
First Tennessee $ 39,804
=========================================================
NET INCOME PER SHARE:
First Tennessee, as originally reported $ 1.15
Planters 2.62
Carl I. Brown 13.94
CBI 0.19
First Tennessee 1.16
---------------------------------------------------------
</TABLE>
*Total revenue is net interest income and noninterest income.
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, and the acquisition was
accounted for as a purchase.
The following presents on a proforma basis certain financial data
pertaining to the Peoples transaction as if it 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>
(Dollars in thousands, First Quarter
except per share data) 1994
---------------------------------------------------------
<S> <C>
TOTAL REVENUE:*
First Tennessee, as originally reported $ 201,546
Peoples 1,232
---------------------------------------------------------
First Tennessee proforma $ 202,778
=========================================================
NET INCOME:
First Tennessee, as originally reported $ 31,614
Peoples 430
Purchase accounting adjustments (97)
---------------------------------------------------------
First Tennessee proforma $ 31,947
=========================================================
NET INCOME PER SHARE:
First Tennessee, as originally reported $ 0.93
Peoples 3.23
First Tennessee proforma 0.93
---------------------------------------------------------
</TABLE>
*Total revenue is net interest income and noninterest income.
On February 21, 1995, First Tennessee and Financial Investment Corp.
(FIC) signed a definitive agreement for First Tennessee to acquire FIC,
parent company of First National Bank of Springdale (FNB), headquartered
in Springdale, Arkansas. Pursuant to the agreement, First Tennessee will
acquire for approximately $70,000,000 in its common stock all of the
outstanding shares of FIC. The acquisition 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, FNB will become a wholly owned subsidiary of First
Tennessee. The acquisition is expected to be completed before the end of
1995 following approval by regulators and FIC shareholders.
<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
March 31
------------------
(Dollars in thousands) 1995 1994
---------------------------------------------------------------
<S> <C> <C>
ALL OTHER INCOME:
Check clearing fees $ 4,247 $ 3,966
Other service charges 1,872 2,117
Other 6,122 4,994
---------------------------------------------------------------
Total $ 12,241 $ 11,077
===============================================================
ALL OTHER EXPENSE:
Advertising and public relations $ 3,900 $ 3,357
Supplies 2,879 2,972
Fed service fees 2,590 1,997
Travel and entertainment 1,817 2,399
Foreclosed real estate 941 692
Other 8,641 13,859
---------------------------------------------------------------
Total $ 20,768 $ 25,276
===============================================================
</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 Purchased
Mortgage Deposits
(Dollars in thousands) Goodwill Servicing Rights and Assets
-------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1993 $ 62,565 $ 85,983 $ 28,972
Amortization expense (750) (5,302) (849)
Acquisitions/divestitures 178 (495) 0
-------------------------------------------------------------------------------
March 31, 1994 $ 61,993 $ 80,186 $ 28,123
===============================================================================
December 31, 1994 $ 66,086 $ 72,722 $ 25,639
Amortization expense (804) (2,722) (993)
Acquisitions/divestitures 546 (568) 3,150
-------------------------------------------------------------------------------
March 31, 1995 $ 65,828 $ 69,432 $ 27,796
===============================================================================
</TABLE>
<PAGE> 12
NOTE 5 -- LOANS
The composition of the loan portfolio at March 31 is summarized below:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
----------------------------------------------------------------------
<S> <C> <C>
Commercial $3,055,676 $2,676,618
Consumer 2,283,324 1,994,108
Permanent mortgage 641,687 531,696
Credit card receivables 448,004 412,348
Real estate construction 194,438 105,225
Nonaccrual 15,537 21,345
----------------------------------------------------------------------
Loans, net of unearned income 6,638,666 5,741,340
Allowance for loan losses 109,862 112,168
----------------------------------------------------------------------
Total net loans $6,528,804 $5,629,172
======================================================================
</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 totalled $2,542,000.
The following table presents information concerning nonperforming loans
at March 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995
----------------------------------------------------------
<S> <C>
Impaired loans $ 9,820
Other nonaccrual loans 5,717
Restructured loans 102
----------------------------------------------------------
Total $15,639
==========================================================
</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
$343,000 for the three months ended March 31, 1995. The average balance of
impaired loans for the same period was approximately $9,781,000. There are
no restructured impaired loans.
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 three months ended
March 31, 1995, is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Non-impaired Impaired Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at 1/1/95 $109,859 $ -- $109,859
Transfer of allowance (2,542) 2,542 --
Provision for loan losses 3,691 457 4,148
Charge-offs 6,884 407 7,291
Less loan recoveries 3,146 -- 3,146
-------------------------------------------------------------------------------------
Net charge-offs 3,738 407 4,145
-------------------------------------------------------------------------------------
Balance at 3/31/95 $107,270 $2,592 $109,862
-------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
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
Net income for the first quarter of 1995 was $31.6 million or $.93 per
share compared with $39.8 million or $1.16 per share for the first quarter of
1994. The decrease in net income from the first quarter of 1994 was due to a
decrease in security gains, a decrease in net interest income, lower bond
division contribution to net income, and acquisition costs. One-time
acquisition expenses had a negative impact of $.15 and the compression in the
net interest margin since the first quarter of 1994 had a negative impact of
$.17 to earnings per share in the first quarter of 1995. Noninterest income
accounted for approximately 54 percent of total revenues during the first
quarter of 1995. Total assets were $10.9 billion at March 31, 1995, as First
Tennessee continued to experience double-digit loan growth in commercial and
consumer loans since the first quarter of 1994. Additional performance
measurements are shown in the table below.
<TABLE>
<CAPTION>
EARNINGS PERFORMANCE
- ------------------------------------------------------
1Q95 1Q94
- ------------------------------------------------------
<S> <C> <C>
Net income (millions) $ 31.6 $ 39.8
Net income per share $ .93 $ 1.16
Return on equity 16.50% 21.68%
Return on assets 1.19% 1.52%
- ------------------------------------------------------
</TABLE>
On January 3, 1995, First Tennessee acquired Carl I. Brown and Company
(Carl I. Brown), a mortgage company located in Kansas City. During 1994, Carl
I. Brown originated $2.1 billion in mortgage loans, and at December 31, 1994,
had a servicing portfolio of $2.2 billion. On February 24, 1995, First
Tennessee acquired Community Bancshares, Inc. (CBI) of Germantown, Tennessee,
which had $255.6 million in assets, $191.9 million in deposits, and $22.4
million in shareholders' equity at December 31, 1994. At closing, CBI's
subsidiary, Community First Bank, was merged with and into First Tennessee Bank
National Association (FTBNA). Acquisitions closed during the first quarters of
both 1995 and 1994 were accounted for as poolings of interests and therefore
the financial position and results of operations of all companies are reflected
on a combined basis from the earliest period presented. A detailed 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.
<TABLE>
<CAPTION>
NET INTEREST INCOME AND EARNING ASSETS
- -----------------------------------------------------------
Percent
(Dollars in millions) 1Q95 1Q94 Change
- -----------------------------------------------------------
<S> <C> <C> <C>
Investment securities $2,201.5 $2,293.5 (4)%
Loans 6,921.5 6,705.9 3
Other earning assets 457.2 431.4 6
- -----------------------------------------------------------
Total earning assets $9,580.2 $9,430.8 2
- -----------------------------------------------------------
Net interest income $ 93.5 $ 101.2 (8)%
Net interest spread 3.12% 3.70%
Net interest margin 3.92% 4.31%
- -----------------------------------------------------------
</TABLE>
Earning assets increased 2 percent as total loans grew 3 percent and
investment securities declined 4 percent from the first quarter of 1994.
Commercial loans and consumer loans grew 11 percent and 19 percent,
respectively, coupled with a 64 percent reduction in mortgage warehouse loans.
Commercial loans represented 43 percent and consumer loans represented 33
percent of total loans for the first quarter of 1995. The increase in loans
was funded by 7 percent growth in interest-bearing deposits, largely
certificates of deposit less than $100,000.
<PAGE> 14
Despite the increase in earning assets, net interest income decreased
8 percent from the level in the first quarter of 1994. The decrease in net
interest income resulted from the 39 basis point compression in the net
interest margin since March 31, 1994. The compression in the net interest
margin was due to a number of factors which included the impact of rising
interest rates on First Tennessee's short-term liability sensitive position and
the $1 billion basis swap; and asset/liability restructuring transactions that
occurred in the first quarter of 1995.
At March 31, 1994, First Tennessee's six-month gap position was
liability sensitive approximately 3 percent of earning assets. A liability
sensitive position indicates that over the course of a given time period, in
this case 6 months, an upward movement in interest rates will negatively impact
the net interest margin since liabilities will reprice faster than assets.
Since the first quarter of 1994, First Tennessee has remained liability
sensitive, and by the end of the third quarter of 1994, the six-month liability
sensitive position increased to approximately 6 percent of earning assets. Due
to recent sharp rises in interest rates, this short-term liability sensitive
position has negatively impacted the net interest margin during the past two
quarters. In the first quarter of 1995, this impact approximated 11 basis
points. However, as interest rates stabilize, this impact will begin to lessen
as assets mature and reprice to current interest rate levels.
In order to modify the balance sheet and become more neutral to
interest rate movements, First Tennessee, beginning in the fourth quarter of
1994, completed several asset/liability management transactions. These
included the sale of $100 million in Treasury bonds, and the extension of
liabilities by reducing overnight borrowings and replacing them with
intermediate Federal Home Loan Bank (FHLB) borrowings and certificates of
deposit with two- and three-year maturities. These restructuring transactions
have improved the six-month liability sensitive position to $261 million, or 3
percent of earning assets at March 31, 1995, as shown in the Rate Sensitivity
Analysis table. In addition, during the first quarter of 1995, First Tennessee
terminated $500 million of a $1 billion basis swap at a cost of $16.5 million,
which was deferred and is being amortized through May 1996. The basis swap had
a negative impact on the net interest margin of 21 basis points in the first
quarter of 1995. Subsequent to quarter-end, First Tennessee terminated the
remaining $500 million of the basis swap (see Subsequent Events). These
restructuring transactions, combined with the short-term nature of the
liability sensitive position, and a slower rise in interest rates should
minimize First Tennessee's future exposure to rising interest rates. Going
forward, the net interest margin should begin to stabilize and improve as the
interest rate environment stabilizes and the amortization period for the basis
swap ends.
<TABLE>
<CAPTION>
NONINTEREST INCOME
- ------------------------------------------------------------
Percent
(Dollars in millions) 1Q95 1Q94 Change
- ------------------------------------------------------------
<S> <C> <C> <C>
Mortgage banking $ 41.9 $ 56.2 (26)%
Bond division 18.4 26.2 (30)
Deposit transactions and
cash management 17.8 14.8 20
Bank card 8.1 6.6 22
Trust services 10.3 5.9 75
Other 12.2 11.1 11
- -----------------------------------------------------------
Total fee revenue $108.7 $120.8 (10)%
- -----------------------------------------------------------
Gains/(losses) on securities .5 14.7 (97)
- -----------------------------------------------------------
Total noninterest income $109.2 $135.5 (19)%
- -----------------------------------------------------------
</TABLE>
The mortgage banking entities originated $.9 billion during the first
quarter of 1995 compared to $2.5 billion during the first quarter of 1994. The
decline in originations reflected a lower percentage of refinance business due
to a higher rate environment. The mortgage servicing portfolio, which includes
servicing for ourselves and others, totaled $13.2 billion at March 31, 1995,
compared to $15.3 billion at March 31, 1994. The mortgage banking entities
standardized their accounting methods for recognition of servicing income to an
accrual basis during the first quarter of 1995. This standardization had
minimal impact on total mortgage banking revenues.
The decline in bond division revenue for the first quarter of 1995
reflected a change in customer investment preferences due to sharply rising
interest rates, and strong loan growth in community banks, one of the principal
customer segments of the bond division. The first quarter of 1994 included
record revenue for the bond division as a result of a very active bond market
and new office expansion. Bond division revenue is obtained from the sale of
securities as both principal and
<PAGE> 15
agent. Inventory is acquired solely for distribution, and is hedged for the
purpose of protecting against movements in interest rates.
Growth in deposit transactions and cash management revenue included a
change in accounting methodology from cash basis to accrual basis as well as
growth in the customer base and increased sales. Bank card revenue includes
both cardholder and merchant processing fees, and the comparison between the
first quarter of 1995 and the first quarter of 1994 reflected an overall
increase in the number of transactions processed. Trust services revenue
included $3.7 million in revenues as a result of a change from cash basis to
accrual basis accounting. Growth in revenues came from additional penetration
into the affluent market segment, as well as growth in managed assets. Net
gains/losses on securities included $15.0 million in venture capital gains for
the first quarter of 1994.
<TABLE>
<CAPTION>
NONINTEREST EXPENSE
- --------------------------------------------------------
Percent
(Dollars in millions) 1Q95 1Q94 Change
- --------------------------------------------------------
<S> <C> <C> <C>
Staff expense $ 79.3 $ 97.5 (19)%
Occupancy 9.1 7.9 16
Amortization of
intangibles 4.5 6.9 (35)
Equipment expense 8.2 6.8 21
Other 46.7 50.4 (7)
- -------------------------------------------------------
Total operating expense $147.8 $169.5 (13)
- -------------------------------------------------------
</TABLE>
Noninterest expense (also called operating expense) decreased 13
percent year-over-year. Both first quarters included one-time acquisition
costs. First Tennessee recognized $5.8 million in acquisition costs in 1995,
and $4.1 million in acquisition costs in 1994. Operating expense, excluding
one-time acquisition costs in both quarters, decreased 14 percent from the
first quarter of 1994. Excluding one-time acquisition costs, the most
significant change from the first quarter of 1994 was in expense for employee
compensation, incentives and benefits (staff expense), which decreased 20
percent. Most of this year-over-year decrease was due to the reduction in
commissions paid in the first quarter of 1995 as a result of lower
commission-based revenue, which would include the bond division, the mortgage
banking entities, and the venture capital company. 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.
<TABLE>
<CAPTION>
INCOME TAXES
- ----------------------------------------
1Q95 1Q94
- ----------------------------------------
<S> <C> <C>
Effective tax rates 36.2% 34.1%
- ----------------------------------------
</TABLE>
The tax rate increase was primarily due to a $1.9 million tax
reduction in the first quarter of 1994 for the elimination of a portion of a
deferred tax valuation allowance related to the acquisition of SNMC Management
Corporation.
<TABLE>
<CAPTION>
CAPITAL
- -------------------------------------------
1Q95 1Q94
- -------------------------------------------
<S> <C> <C>
Equity/assets ratio 7.24% 7.00%
Equity/loans 11.23 11.11
Tangible equity/tangible
assets 5.79 5.47
Book value per share $23.43 $21.88
- -------------------------------------------
</TABLE>
Average shareholders' equity increased 4 percent since the first
quarter of 1994. The primary source of growth in shareholders' equity was the
retention of net income. All capital ratios improved from first quarter 1994
as shown in the Capital table. First Tennessee establishes capital guidelines
based on industry standards, regulatory requirements, perceived risks of the
various businesses, and future growth opportunities. 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 March 31, 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.
<PAGE> 16
LIQUIDITY
During the first quarter of 1995, average core deposits, the most
stable source of liquidity, funded 69 percent of total average assets while
short-term purchased funds represented 20 percent. Average interest-bearing
core deposits grew 7 percent from the first 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 decreased from
$2.2 billion at March 31, 1994, to $2.0 billion at March 31, 1995.
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 1995 based on the current mix in the commercial and
consumer loan portfolios. At March 31, 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 95 percent of total graded loans at
March 31, 1995, compared with 94 percent at March 31, 1994. Commercial real
estate loans were $586.0 million at March 31, 1995, compared with $497.0
million at March 31, 1994. Construction and development loans increased to
$174.4 million at the end of the first quarter of 1995 from $93.1 million at
the end of the first quarter of 1994. The FTBNA Loans Secured by Real Estate
table reflects the diversity in real estate loans by project type.
The Net Loans and Foreclosed Real Estate table gives a breakdown of
the commercial loan portfolio of FTBNA by grades and major loan types at March
31, 1995, compared with year-end 1994 and the first quarter of 1994. This table
also presents information on consumer loans, credit card, mortgages and First
Tennessee's other bank subsidiaries.
The allowance for loan losses reflects management's judgment of the
risk 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.
<TABLE>
<CAPTION>
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------
(Dollars in thousands) 1Q95 1Q94
- ---------------------------------------------------------------
<S> <C> <C>
Beginning balance $109,859 $110,720
Provision for loan losses 4,148 5,759
Net charge-offs (4,145) (4,311)
- ---------------------------------------------------------------
Ending balance $109,862 $112,168
- ---------------------------------------------------------------
RATIOS:
Allowance to loans* 1.56% 1.68%
Net charge-offs to average loans* .24 .26
Net charge-offs to allowance 15.1 15.4
- ---------------------------------------------------------------
</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 1.65 percent at March 31, 1995, and 1.95
percent at March 31, 1994. Net charge-offs decreased 4 percent since March 31,
1994. Commercial and real estate loan charge-offs approximated recoveries for
the first quarter of 1995. Consumer loan net charge-offs as a percent of
average consumer loans, net of unearned income, were .22 percent while credit
card receivable net charge-offs as a percentage of credit card receivables were
3.01 percent.
As shown in the Nonperforming Assets table, nonperforming assets
decreased 39 percent from March 31, 1994. Nonperforming loans decreased 30
percent and foreclosed real estate decreased 46 percent for the same time
period. The Changes in Nonperforming Assets table provides additional detail
regarding nonperforming assets since March 31, 1994.
<TABLE>
<CAPTION>
CHANGES IN NONPERFORMING ASSETS
- ----------------------------------------------------------------------
Quarter Ended
(Dollars in thousands) 3/31/95 12/31/94 9/30/94 6/30/94 3/31/94
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning balance $38.3 $43.5 $54.1 $59.5 $62.4
New nonperformers 2.3 6.5 3.0 1.5 8.1
Return to accrual (.2) -- -- -- (2.0)
Payments (4.0) (10.3) (12.6) (6.4) (6.6)
Charge-offs (.4) (1.4) (1.0) (.5) (2.4)
- ----------------------------------------------------------------------
Ending balance $36.0 $38.3 $43.5 $54.1 $59.5
- ----------------------------------------------------------------------
</TABLE>
<PAGE> 17
Past due loans amounted to $24.5 million at March 31, 1995, a $1.1
million increase from the $23.4 million reported at March 31, 1994. Potential
problem assets, which are not included in nonperforming assets, were $67.2
million at March 31, 1995, which was approximately 1 percent of total loans.
SUBSEQUENT EVENTS
Significant First Quarter Events
On April 1, 1995, First Tennessee acquired Peoples Commercial
Services Corporation, parent company of Peoples Bank, headquartered in
Senatobia, Mississippi. Peoples Bank had $99.8 million in total assets, $87.4
million in total deposits and $11.2 million in shareholders' equity at March
31, 1995.
On April 18, 1995, the First Tennessee Board of Directors declared the
regular quarterly dividend of 47 cents per share payable on July 1, 1995, to
shareholders of record on June 16, 1995. The Board of Directors also approved
the repurchase of approximately 360,000 shares for a dividend reinvestment
program, 225,000 shares for a nonemployee directors stock option plan, and
1,500,000 shares for an employee stock option plan. These shares will be
purchased under a systematic buyback program, which for the plans will
generally be over their 10-year term.
Subsequent to March 31, 1995, First Tennessee terminated the remaining
$500 million of its basis swap. The termination reflected a decision to modify
balance sheet management strategies, as a result of a change in First
Tennessee's overall interest rate risk tolerance. The termination cost of the
swap was $5.8 million, and was deferred and will be amortized over the
remaining 12 months of the swap. The swap was scheduled to mature May 18,
1996.
Originated Mortgage Servicing Rights Proposal
The Financial Accounting Standards Board (FASB) has proposed a change
to SFAS No. 65 - "Accounting for Certain Banking Activities" that would treat
originated and purchased mortgage servicing rights equally. Previously, when a
company purchased mortgage servicing rights, the value was recorded on the
financial statements as an asset. However, the value of the servicing rights
created by the origination of mortgage loans was not recognized. Based on the
latest proposal, it is the opinion of management that the change will have a
positive impact on First Tennessee's mortgage banking operations. The new
standard is expected to be issued in the second quarter of 1995.
<PAGE> 18
<TABLE>
<CAPTION>
RATE SENSITIVITY ANALYSIS AT MARCH 31, 1995
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 $ 3,437 $ 546 $ 602 $ 2,469 $ 7,054
Investment securities 150 93 141 1,772 2,156
Other earning assets 431 -- -- -- 431
---------------------------------------------------------------------------------------------------------------------
Total earning assets $ 4,018 $ 639 $ 743 $ 4,241 $ 9,641
=====================================================================================================================
EARNING ASSET FUNDING:
Interest-bearing deposits $ 2,137 $ 548 $ 580 $ 3,005 $ 6,270
Short-term purchased funds 1,515 -- -- -- 1,515
Term borrowings 21 2 4 177 204
Noninterest-bearing funds 149 (4) (7) 1,514 1,652
---------------------------------------------------------------------------------------------------------------------
Earning asset funding $ 3,822 $ 546 $ 577 $ 4,696 $ 9,641
=====================================================================================================================
RATE SENSITIVITY GAP:
Period $ 196 $ 93 $ 166 $ (455)
Cumulative 196 289 455 --
---------------------------------------------------------------------------------------------------------------------
RATE SENSITIVITY GAP ADJUSTED FOR INTEREST
RATE FUTURES AND INTEREST RATE SWAPS:
Period $ (154) $ (107) $ 244 $ 17
Cumulative (154) (261) (17) --
---------------------------------------------------------------------------------------------------------------------
ADJUSTED GAP AS A PERCENT OF EARNING ASSETS:
Period (1.6)% (1.1)% 2.5 % 0.2 %
Cumulative (1.6) (2.7) (0.2) --
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest-sensitive categories represent ranges in which assets and liabilities
can be repriced, not necessarily their actual maturities. Other amounts include
assets and liabilities with interest sensitivity of more than 12 months or with
indefinite repricing schedules.
<PAGE> 19
REGULATORY CAPITAL AT MARCH 31, 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 $ 800,142 $ 698,410 $ 24,055 $ 14,704
Disallowed intangibles (69,601) (69,888) 0 0
Adjust for unrealized holding (gains)/losses on
available for sale securities 9,039 9,118 (195) 292
-------------------------------------------------------------------------------------------------------------------
Total Tier 1 capital 739,580 637,640 23,860 14,996
-------------------------------------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt 79,793 75,000 0 0
Qualifying allowance for loan losses 96,454 92,891 1,810 811
-------------------------------------------------------------------------------------------------------------------
Total Tier 2 capital 176,247 167,891 1,810 811
-------------------------------------------------------------------------------------------------------------------
Total capital $ 915,827 $ 805,531 $ 25,670 $ 15,807
===================================================================================================================
Risk-adjusted assets $ 7,702,917 $ 7,419,582 $ 143,704 $ 64,828
Quarterly average assets 10,759,098 10,259,237 234,360 117,439
-------------------------------------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 9.60 % 8.59 % 16.60 % 23.13 %
Tier 2 capital to risk-adjusted assets 2.29 2.27 1.26 1.25
-------------------------------------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 11.89 % 10.86 % 17.86 % 24.38 %
===================================================================================================================
Leverage - Tier 1 capital to
adjusted quarterly average assets
less disallowed intangibles 6.92 % 6.26 % 10.18 % 12.77 %
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands) Planters (5) FTBNA-MS (6)
-----------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL:
Tier 1 capital:
Shareholders' common equity $ 5,607 $ 6,373
Disallowed intangibles 0 (760)
Adjust for unrealized holding (gains)/losses on
available for sale securities 394 0
-----------------------------------------------------------------------------------------
Total Tier 1 capital 6,001 5,613
-----------------------------------------------------------------------------------------
Tier 2 capital:
Qualifying debt 0 0
Qualifying allowance for loan losses 421 438
-----------------------------------------------------------------------------------------
Total Tier 2 capital 421 438
-----------------------------------------------------------------------------------------
Total capital $ 6,422 $ 6,051
=========================================================================================
Risk-adjusted assets $ 33,203 $ 34,926
Quarterly average assets 60,500 58,790
-----------------------------------------------------------------------------------------
RATIOS:
Tier 1 capital to risk-adjusted assets 18.07 % 16.07 %
Tier 2 capital to risk-adjusted assets 1.27 1.26
-----------------------------------------------------------------------------------------
Total capital to risk-adjusted assets 19.34 % 17.33 %
=========================================================================================
Leverage - Tier 1 capital to
adjusted quarterly average assets
less disallowed intangibles 9.92 % 9.67 %
-----------------------------------------------------------------------------------------
</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
Based on regulatory guidelines
<PAGE> 20
LOANS AND FORECLOSED REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
March 31, 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 359 3 49 411 1
C 1,748 162 489 2,399 23
D 48 4 22 74 7
E 24 1 8 33 4
F 13 4 11 28 8
---------------------------------------------------------------------------------------------------------------
2,372 174 582 3,128 43
Impaired loans:
Contractually past due 4 - 1 5 2
Contractually current 1 - 3 4 1
Nonaccrual loans:
Contractually past due 1 - - 1 -
Contractually current - - - - -
---------------------------------------------------------------------------------------------------------------
Total commercial &
commercial real estate loans $ 2,378 $174 $ 586 $ 3,138 $ 46
---------------------------------------------------------------------------------------------------------------
Retail:
Consumer 2,209 20
Credit card 448 19
Permanent mortgages 638 3
Mortgage warehouse loans held for sale 416 -
Mortgage banking nonaccrual loans 5 1
---------------------------------------------------------------------------------------------------------------
Total retail loans 3,716 43
---------------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 141 3
Planters Bank 24 1
Other/Unfunded commitments 36 3
General reserve - 14
---------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 7,055 $110
===============================================================================================================
Foreclosed real estate:
Foreclosed property $ 2 $ 9 $ 2 $ 13
Foreclosed property - mortgage banking 5
Insubstance foreclosure -
---------------------------------------------------------------------------------------------------------------
Total foreclosed real estate $ 18
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
March 31, 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 $ 146 $ - $ 207 $ -
B 317 1 399 1
C 2,049 23 2,284 23
D 67 6 74 7
E 48 5 26 4
F 34 12 39 9
-------------------------------------------------------------------------------------------------------
2,661 47 3,029 44
Impaired loans:
Contractually past due - - - -
Contractually current - - - -
Nonaccrual loans:
Contractually past due 6 4 6 2
Contractually current 8 4 4 2
-------------------------------------------------------------------------------------------------------
Total commercial &
commercial real estate loans $ 2,675 $ 55 $3,039 $ 48
-------------------------------------------------------------------------------------------------------
Retail:
Consumer 1,930 16 2,191 20
Credit card 412 17 475 19
Permanent mortgages 528 4 586 2
Mortgage warehouse loans held for sale 942 - 515 -
Mortgage banking nonaccrual loans 6 1 6 1
-------------------------------------------------------------------------------------------------------
Total retail loans 3,818 38 3,773 42
-------------------------------------------------------------------------------------------------------
Cleveland Bank & Trust Company 143 3 139 3
Planters Bank 26 1 25 1
Other/Unfunded commitments 21 3 37 3
General reserve - 12 - 13
-------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $ 6,683 $112 $7,013 $ 110
=======================================================================================================
Foreclosed real estate:
Foreclosed property $ 19 $ 14
Foreclosed property - mortgage banking 15 5
Insubstance foreclosure - -
-------------------------------------------------------------------------------------
Total foreclosed real estate $ 34 $ 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> 21
FTBNA LOANS SECURED BY REAL ESTATE, PERIOD-END AMOUNTS
<TABLE>
<CAPTION>
March 31, 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 $ 104 $ 178 $ 282
Real estate collateral is primary source of
repayment with a substantial secondary source 70 405 475
------------------------------------------------------------------------------------------------------
Total $ 174 $ 583 $ 757
======================================================================================================
PROJECT TYPE:
Apartments $ 4 $ 96 $ 100
Hotels/Motels 3 65 68
Office buildings - multi-tenant -- 55 55
Single family builder 80 4 84
Shopping centers 42 126 168
Commercial/Special purpose units 5 83 88
All other 40 157 197
------------------------------------------------------------------------------------------------------
Total $ 174 $ 586 $ 760
======================================================================================================
</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.
<PAGE> 22
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
March 31 December 31
--------------------- ---------------
(Dollars in thousands) 1995 1994 1994
---------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNTS:
Impaired loans $ 9,820
Other nonaccrual loans 5,717
---------------------------------------------------------------------------------
Total nonaccrual loans 15,537 $ 21,345 $ 16,853
Restructured loans 102 1,048 158
---------------------------------------------------------------------------------
Total nonperforming loans 15,639 22,393 17,011
Foreclosed real estate 18,455 34,007 19,215
Other assets 1,922 3,117 2,055
---------------------------------------------------------------------------------
Total nonperforming assets $ 36,016 $ 59,517 $ 38,281
=================================================================================
Past due loans:*
Non-government guaranteed $ 13,409 $ 12,719 $ 13,297
Government guaranteed 11,071 10,696 10,030
---------------------------------------------------------------------------------
RATIOS:
Nonperforming loans to total loans,
net of unearned income** 0.22 % 0.34 % 0.24 %
Nonperforming assets to total loans,
net of unearned income, plus foreclosed
real estate and other assets** 0.51 0.89 0.54
Nonperforming assets and non-government
guaranteed past due loans to total loans,
net of unearned income, plus foreclosed
real estate and other assets** 0.70 1.07 0.73
---------------------------------------------------------------------------------
</TABLE>
*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.
<PAGE> 23
Part II.
OTHER INFORMATION
Items 1 through 5.
As of the end of the first quarter, 1995 the answers to Items 1 through 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 first quarter of 1995
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to its quarterly report on Form 10-Q
for the quarter ended March 31, 1995 to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST TENNESSEE NATIONAL CORPORATION
------------------------------------
(Registrant)
DATE: 5/15/95 By: James F. Keen
---------------------------- ----------------------------------
James F. Keen
Senior Vice President and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- --------
<S> <C> <C>
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
March 31
---------------------------------
Computation for Statements of Income: 1995 1994
----------------------------------------------- ------------- -------------
<S> <C> <C>
Per statements of income (Thousands):
Net income $ 31,614 $ 39,804
=========== ===========
Per statements of income:
Weighted average shares outstanding 34,108,647 34,289,291
=========== ===========
Primary earnings per share (a):
Net income $ .93 $ 1.16
=========== ===========
Additional Primary computation
-----------------------------------------------
Adjustment to weighted average shares
outstanding:
Weighted average shares outstanding
per primary computation above 34,108,647 34,289,291
Add dilutive effect of outstanding
options (as determined by the
application of the treasury stock
method) 459,090 500,150
----------- -----------
Weighted average shares outstanding,
as adjusted 34,567,737 34,789,441
=========== ===========
Primary earnings per share, as adjusted (b):
Net income $ .91 $ 1.14
=========== ===========
Additional Fully Diluted Computation
-----------------------------------------------
Adjustment to weighted average share
outstanding:
Weighted average shares outstanding
per primary computation above 34,567,737 34,789,441
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 20,322 132
Weighted average shares outstanding, ----------- -----------
as adjusted 34,588,059 34,789,573
=========== ===========
Fully diluted earnings per share, as adjusted (b):
Net income $ .91 $ 1.14
=========== ===========
</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 MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 562,465
<INT-BEARING-DEPOSITS> 3,673
<FED-FUNDS-SOLD> 260,800
<TRADING-ASSETS> 166,373
<INVESTMENTS-HELD-FOR-SALE> 1,167,269
<INVESTMENTS-CARRYING> 988,386
<INVESTMENTS-MARKET> 961,960
<LOANS> 7,054,583
<ALLOWANCE> 109,862
<TOTAL-ASSETS> 10,911,788
<DEPOSITS> 7,934,656
<SHORT-TERM> 1,515,334
<LIABILITIES-OTHER> 458,103
<LONG-TERM> 203,553
<COMMON> 85,380
0
0
<OTHER-SE> 714,762
<TOTAL-LIABILITIES-AND-EQUITY> 10,911,788
<INTEREST-LOAN> 149,655
<INTEREST-INVEST> 34,759
<INTEREST-OTHER> 6,970
<INTEREST-TOTAL> 191,384
<INTEREST-DEPOSIT> 71,682
<INTEREST-EXPENSE> 99,066
<INTEREST-INCOME-NET> 92,318
<LOAN-LOSSES> 4,148
<SECURITIES-GAINS> 462
<EXPENSE-OTHER> 147,808
<INCOME-PRETAX> 49,590
<INCOME-PRE-EXTRAORDINARY> 31,614
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,614
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.91
<YIELD-ACTUAL> 3.92
<LOANS-NON> 15,537
<LOANS-PAST> 24,480
<LOANS-TROUBLED> 102
<LOANS-PROBLEM> 67,189
<ALLOWANCE-OPEN> 109,859
<CHARGE-OFFS> 7,291
<RECOVERIES> 3,146
<ALLOWANCE-CLOSE> 109,862
<ALLOWANCE-DOMESTIC> 109,862
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
