<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, 1999
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4491
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FIRST TENNESSEE NATIONAL CORPORATION
----------------------------------------
(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, $.625 par value 130,254,126
- ----------------------------- -----------------------------
Class Outstanding at April 30, 1999
<PAGE> 2
FIRST TENNESSEE NATIONAL CORPORATION
INDEX
Part I. Financial Information
Part II. Other Information
Signatures
Exhibit Index
<PAGE> 3
PART I.
-------
FINANCIAL INFORMATION
Item 1. Financial Statements.
- ------------------------------
The Consolidated Statements of Condition
The Consolidated Statements of Income
The Consolidated Statements of Shareholders' Equity
The Consolidated 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>
CONSOLIDATED STATEMENTS OF CONDITION
<CAPTION>
First Tennessee National Corporation
- --------------------------------------------------------------------------------------------------------------------
March 31 December 31
------------------------------- ------------
(Dollars in thousands)(Unaudited) 1999 1998 1998
- ------------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 589,789 $ 758,601 $ 811,881
Federal funds sold and securities
purchased under agreements to resell 91,701 89,850 124,239
- ------------------------------------------------------------------------------------------------- ------------
Total cash and cash equivalents 681,490 848,451 936,120
- ------------------------------------------------------------------------------------------------- ------------
Investment in bank time deposits 1,416 12,711 1,211
Capital markets inventory 420,133 368,727 358,304
Mortgage loans held for sale 3,201,792 2,248,053 4,227,443
Securities available for sale 1,882,113 1,914,152 1,816,485
Securities held to maturity (market value of
$544,529 at March 31, 1999; $53,203 at
March 31, 1998; and $610,364 at December 31, 1998) 546,844 52,127 609,804
Loans, net of unearned income 8,782,802 8,488,358 8,557,064
Less: Allowance for loan losses 139,387 130,026 136,013
- ------------------------------------------------------------------------------------------------- ------------
Total net loans 8,643,415 8,358,332 8,421,051
- ------------------------------------------------------------------------------------------------- ------------
Premise`s and equipment, net 272,736 207,634 254,292
Real estate acquired by foreclosure 16,870 11,575 16,242
Mortgage servicing rights, net 814,827 456,837 664,438
Intangible assets, net 130,925 127,925 132,845
Capital markets receivables and other assets 1,712,443 1,291,038 1,295,726
- ------------------------------------------------------------------------------------------------- ------------
TOTAL ASSETS $18,325,004 $15,897,562 $18,733,961
================================================================================================= ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Interest-bearing $ 9,381,365 $ 8,041,821 $ 8,665,175
Noninterest-bearing 2,816,442 2,772,951 3,057,864
- ------------------------------------------------------------------------------------------------- ------------
Total deposits 12,197,807 10,814,772 11,723,039
- ------------------------------------------------------------------------------------------------- ------------
Federal funds purchased and securities
sold under agreements to repurchase 1,615,831 1,685,000 2,912,018
Commercial paper and other short-term borrowings 1,318,451 802,122 1,427,274
Capital markets payables and other liabilities 1,535,425 1,251,451 1,057,646
Term borrowings 400,501 266,577 414,450
- ------------------------------------------------------------------------------------------------- ------------
Total liabilities 17,068,015 14,819,922 17,534,427
- ------------------------------------------------------------------------------------------------- ------------
Guaranteed preferred beneficial interests in
First Tennessee's junior subordinated debentures 100,000 100,000 100,000
- ------------------------------------------------------------------------------------------------- ------------
SHAREHOLDERS' EQUITY:
Preferred stock - no par value (5,000,000 shares authorized,
but unissued) -- -- --
Common stock - $.625 par value (shares authorized -
400,000,000; shares issued - 129,908,808 at
March 31, 1999; 128,197,715 at March 31, 1998;
and 128,974,362 at December 31, 1998) 81,193 80,123 80,609
Capital surplus 133,857 53,975 96,778
Undivided profits 937,339 830,453 908,977
Accumulated other comprehensive income 9,604 15,093 12,872
Deferred compensation on restricted stock incentive plans (7,441) (2,004) (1,209)
Deferred compensation obligation 2,437 -- 1,507
- ------------------------------------------------------------------------------------------------- ------------
Total shareholders' equity 1,156,989 977,640 1,099,534
- ------------------------------------------------------------------------------------------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,325,004 $15,897,562 $18,733,961
================================================================================================= ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
First Tennessee National Corporation
- --------------------------------------------------------------------------------------
Three Months Ended
March 31
-----------------------------
(Dollars in thousands except per share data) (Unaudited) 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 181,248 $ 182,831
Interest on investment securities:
Taxable 38,228 33,209
Tax-exempt 754 991
Interest on mortgage loans held for sale 68,735 30,850
Interest on capital markets inventory 8,697 6,242
Interest on other earning assets 2,604 2,918
- --------------------------------------------------------------------------------------
Total interest income 300,266 257,041
- --------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits:
Savings 1,428 1,821
Checking interest and money market account 26,569 29,015
Certificates of deposit under $100,000 and other time 32,379 37,709
Certificates of deposit $100,000 and more 42,309 17,653
Interest on short-term borrowings 42,621 40,045
Interest on term borrowings 6,793 3,658
- --------------------------------------------------------------------------------------
Total interest expense 152,099 129,901
- --------------------------------------------------------------------------------------
NET INTEREST INCOME 148,167 127,140
Provision for loan losses 14,826 13,515
- --------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 133,341 113,625
- --------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage banking 168,778 92,557
Capital markets 44,388 37,997
Deposit transactions and cash management 22,964 20,035
Trust services and investment management 14,591 12,121
Merchant processing 10,709 7,209
Cardholder fees 4,962 4,512
Equity securities gains/(losses) (8) 7
Debt securities gains/(losses) (26) 22
All other income and commissions 20,205 15,517
- --------------------------------------------------------------------------------------
Total noninterest income 286,563 189,977
- --------------------------------------------------------------------------------------
ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 419,904 303,602
- --------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Employee compensation, incentives, and benefits 173,895 113,643
Amortization of mortgage servicing rights 30,898 17,300
Operations services 15,702 14,035
Occupancy 15,651 11,395
Equipment rentals, depreciation, and maintenance 13,469 9,736
Communications and courier 12,367 9,331
Advertising and public relations 6,416 5,689
Amortization of intangible assets 2,576 2,640
All other 65,823 47,139
- --------------------------------------------------------------------------------------
Total noninterest expense 336,797 230,908
- --------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 83,107 72,694
Applicable income taxes 30,078 26,339
- --------------------------------------------------------------------------------------
NET INCOME $ 53,029 $ 46,355
======================================================================================
EARNINGS PER SHARE $ .41 $ .36
- --------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $ .40 $ .35
- --------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 129,787,078 128,148,972
- --------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<CAPTION>
First Tennessee National Corporation
- -------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, JANUARY 1 $ 1,099,534 $ 954,096
Net income 53,029 46,355
Other comprehensive income:
Unrealized market adjustments, net of tax and
reclassification adjustment (3,267) (240)
- -------------------------------------------------------------------------------------
Comprehensive income 49,762 46,115
- -------------------------------------------------------------------------------------
Cash dividends declared (24,668) (21,158)
Common stock issued:
Cambridge Mortgage Company acquisition 421 --
For exercise of stock options 13,995 3,900
Tax benefit from non-qualified stock options 7,850 1,245
Common stock repurchased -- (12,117)
Amortization on restricted stock incentive plans 382 295
Other 9,713 5,264
- -------------------------------------------------------------------------------------
BALANCE, MARCH 31 $ 1,156,989 $ 977,640
=====================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
First Tennessee National Corporation
- ---------------------------------------------------------------------------------------------
Three Months Ended March 31
---------------------------
(Dollars in thousands)(Unaudited) 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 53,029 $ 46,355
Adjustments to reconcile net income to net cash
provided/(used) by operating activities:
Provision for loan losses 14,826 13,515
Provision for deferred income tax 32,927 8,976
Depreciation and amortization of premises
and equipment 11,801 8,634
Amortization of mortgage servicing rights 30,898 17,300
Amortization of intangible assets 2,576 2,640
Net other amortization and accretion 11,649 2,325
Market value adjustment on foreclosed property 2,400 5,700
Equity securities (gains)/losses 8 (7)
Debt securities (gains)/losses 26 (22)
Net (gains)/losses on disposal of fixed assets 219 (309)
Net (increase)/decrease in:
Capital markets securities inventory (61,829) (115,487)
Mortgage loans held for sale 1,025,651 (1,007,405)
Capital markets receivables (401,084) (379,449)
Interest receivable 1,029 (16,211)
Other assets (210,960) (195,578)
Net increase in:
Capital markets payables 446,833 345,208
Interest payable 8,612 19,138
Other liabilities 8,538 180,056
- ---------------------------------------------------------------------------------------------
Total adjustments 924,120 (1,110,976)
- ---------------------------------------------------------------------------------------------
Net cash (used)/provided by operating activities 977,149 (1,064,621)
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Held to maturity securities:
Maturities 62,436 1,101
Purchases -- --
Available for sale securities:
Sales 5,504 4,775
Maturities 238,034 226,701
Purchases (313,098) (11,753)
Premises and equipment:
Sales 96 891
Purchases (28,931) (9,060)
Net decrease in loans (241,096) (191,686)
Increase in investment in bank time deposits (205) (10,189)
Acquisitions, net of cash and cash equivalents acquired (1,755) (9,719)
- ---------------------------------------------------------------------------------------------
Net cash (used)/provided by investing activities (279,015) 1,061
- ---------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Common stock:
Exercise of stock options 15,950 3,994
Cash dividends (24,411) (21,165)
Repurchase shares -- (12,127)
Term Borrowings:
Issuance 1,099 99,218
Payments (15,150) (1,578)
Net increase in:
Deposits 474,768 1,142,993
Short-term borrowings (1,405,020) (300,945)
- ---------------------------------------------------------------------------------------------
Net cash (used)/provided by financing activities (952,764) 910,390
- ---------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (254,630) (153,170)
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 936,120 1,001,621
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 681,490 $ 848,451
=============================================================================================
Total interest paid $ 143,342 $ 110,679
Total income taxes paid 17,460 2,500
- ---------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 8
NOTE 1 - FINANCIAL INFORMATION
The unaudited interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. In the opinion of
management, all necessary adjustments have been made for a fair presentation of
financial position and results of operations for the periods presented. The
operating results for the three month period ended March 31, 1999, are not
necessarily indicative of the results that may be expected going forward. For
further information, refer to the audited consolidated financial statements and
footnotes included in the 1999 Proxy Statement & 1998 Financial Information.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
condition and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. This Statement is effective for all
quarters of fiscal years beginning after June 15, 1999; which for First
Tennessee will mean the first quarter of 2000. Earlier adoption is allowed.
Because of the complexity of this standard and uncertainties associated with
predicting future derivative usage and related fair values, it is not
practicable at this time to predict what the impact of adopting this Statement
will be to First Tennessee's financial position and results of operations.
On January 1, 1999, First Tennessee adopted SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after Securitization of Mortgage Loans Held
for Sale by a Mortgage Banking Enterprise." This Statement amends SFAS No. 65,
which required that retained securities be classified as trading securities.
SFAS No. 134 allows these securities to be classified as trading, held to
maturity or available for sale based on the intent and ability of the
enterprise.
On January 1, 1999, First Tennessee adopted Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities." This Statement requires that
the costs of start-up activities, including organization costs, be expensed as
incurred. The impact of adopting this standard was immaterial to First
Tennessee.
NOTE 2 - BUSINESS COMBINATIONS
On March 31, 1999, First Tennessee acquired Cambridge Mortgage Company of
Seattle, Washington, for approximately 21,000 shares of its common stock.
Cambridge was merged into FT Mortgage Companies, an indirect wholly owned
subsidiary of First Tennessee. This acquisition was accounted for as a purchase
and was immaterial to First Tennessee.
<PAGE> 9
NOTE 3 - EARNINGS PER SHARE
The following table shows a reconciliation of earnings per share to diluted
earnings per share.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------
(Dollars in thousands, except per share data) 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
EARNINGS PER SHARE COMPUTATION: Net income
$ 53,029 $ 46,355
Weighted average shares outstanding 129,453,871 128,148,972
Shares attributable to deferred compensation 333,207 --
- --------------------------------------------------------------------------------------------------------
Total weighted average shares per income statement 129,787,078 128,148,972
Earnings per share $ .41 $ .36
- --------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE COMPUTATION:
Net income $ 53,029 $ 46,355
Weighted average shares outstanding 129,787,078 128,148,972
Dilutive effect due to stock options 3,976,333 4,052,867
- --------------------------------------------------------------------------------------------------------
Weighted average shares outstanding, as adjusted 133,763,411 132,201,839
Diluted earnings per share $ .40 $ .35
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
NOTE 4 -- LOANS
The composition of the loan portfolio at March 31 is detailed below:
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial $4,212,886 $3,900,827
Consumer* 3,163,967 2,912,412
Permanent mortgage* 444,666 676,584
Credit card receivables 560,674 551,059
Real estate construction 369,814 407,279
Nonaccrual - Regional banking group 12,629 10,914
Nonaccrual - Mortgage banking 18,166 29,283
- ----------------------------------------------------------------------------------------------
Loans, net of unearned income 8,782,802 8,488,358
Allowance for loan losses 139,387 130,026
- ----------------------------------------------------------------------------------------------
Total net loans $8,643,415 $8,358,332
==============================================================================================
<FN>
*As a result of the Real Estate Mortgage Investment Conduit (REMIC) certain
securitized consumer and permanent mortgage loans are now classified as REMIC
securities.
</FN>
</TABLE>
The following table presents information concerning nonperforming loans
at March 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Impaired loans $13,169 $10,405
Other nonaccrual loans 17,626 29,792
- --------------------------------------------------------------------------------------------
Total nonperforming loans $30,795 $40,197
============================================================================================
<FN>
At March 31, 1998, there were $117,000 of restructured impaired loans.
</FN>
</TABLE>
Nonperforming loans consist of impaired loans, other nonaccrual loans and
certain restructured loans. An impaired loan is a loan that management believes
the contractual amount due probably will not be collected. Impaired loans are
generally carried on a nonaccrual status. Nonaccrual loans are loans on which
interest accruals have been discontinued due to the borrower's financial
difficulties. 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 payments are
recognized as interest income on a cash basis. The following table presents
information concerning impaired loans:
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Total interest on impaired loans $ 283 $ 132
Average balance of impaired loans 13,000 9,384
- --------------------------------------------------------------------------------------------
</TABLE>
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, 1999 and 1998, is
summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Non-impaired Impaired Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1997 $122,107 $3,752 $125,859
Provision for loan losses 12,896 619 13,515
Charge-offs 11,776 600 12,376
Less loan recoveries 2,579 449 3,028
- ---------------------------------------------------------------------------------------------
Net charge-offs 9,197 151 9,348
- ---------------------------------------------------------------------------------------------
Balance at March 31, 1998 $125,806 $4,220 $130,026
=============================================================================================
Balance at December 31, 1998 $133,572 $2,441 $136,013
Provision for loan losses 11,799 3,027 14,826
Charge-offs 11,768 1,773 13,541
Less loan recoveries 1,669 420 2,089
- ---------------------------------------------------------------------------------------------
Net charge-offs 10,099 1,353 11,452
- ---------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 $135,272 $4,115 $139,387
=============================================================================================
</TABLE>
<PAGE> 11
NOTE 5 -- BUSINESS SEGMENT INFORMATION
First Tennessee provides traditional retail/commercial banking and other
financial services to its customers. These products and services are categorized
into two broad groups: a regional banking group and national lines of business.
The national lines of business include mortgage banking, capital markets and
transaction processing. The other segment is used to isolate corporate items.
Total revenue, expense and asset levels reflect those which are specifically
identifiable or which are allocated based on an internal allocation method.
Because the allocations are based on internally developed assignments and
allocations, they are to an extent subjective. This assignment and allocation
has been consistently applied for all periods presented. The following table
reflects the approximate amounts of consolidated revenue, expense, tax, and
assets for the quarters ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Regional
Banking Mortgage Capital Transaction
(Dollars in thousands) Group Banking Markets Processing Other Consolidated
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999
Interest income $ 208,864 $ 76,029 $ 10,513 $ 4,860 $ -- $ 300,266
Interest expense 86,674 56,082 8,693 650 -- 152,099
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income 122,190 19,947 1,820 4,210 -- 148,167
Other revenues 54,558 170,065 44,387 17,587 (34) 286,563
Other expenses* 120,320 181,024 32,604 15,645 2,030 351,623
- -------------------------------------------------------------------------------------------------------------------------------
Pre-tax income 56,428 8,988 13,603 6,152 (2,064) 83,107
Income taxes 19,761 3,626 5,137 2,338 (784) 30,078
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 36,667 $ 5,362 $ 8,466 $ 3,814 $(1,280) $ 53,029
===============================================================================================================================
Average assets $11,549,590 $5,728,237 $845,929 $499,387 $ -- $18,623,143
- -------------------------------------------------------------------------------------------------------------------------------
1998
Interest income $ 208,268 $ 35,748 $ 8,113 $ 4,912 $ -- $ 257,041
Interest expense 95,827 26,212 6,797 1,065 -- 129,901
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income 112,441 9,536 1,316 3,847 -- 127,140
Other revenues 45,364 93,417 37,997 13,170 29 189,977
Other expenses* 104,197 96,413 27,832 13,951 2,030 244,423
- -------------------------------------------------------------------------------------------------------------------------------
Pre-tax income 53,608 6,540 11,481 3,066 (2,001) 72,694
Income taxes 19,265 2,334 4,335 1,165 (760) 26,339
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 34,343 $ 4,206 $ 7,146 $ 1,901 $(1,241) $ 46,355
===============================================================================================================================
Average assets $10,981,344 $2,830,500 $603,116 $510,935 $ -- $14,925,895
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
*Includes loan loss provision.
</FN>
</TABLE>
<PAGE> 12
Item 2. FIRST TENNESSEE NATIONAL CORPORATION MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
DESCRIPTION
First Tennessee National Corporation (First Tennessee) is headquartered in
Memphis, Tennessee, and is a nationwide, diversified financial services
institution which provides banking and other financial services to its customers
through various national and regional business lines. The Regional Banking Group
includes the retail/commercial bank, the credit card division and trust
services. The National Lines of Business include FT Mortgage Companies and
affiliates (also referred to as mortgage banking), First Tennessee Capital
Markets (also referred to as capital markets) and transaction processing (credit
card merchant processing, automated teller machine network and check clearing
operations).
INTRODUCTION
Certain revenues and expenses are allocated and equity is assigned to the
various business lines to reflect the inherent risk in each business line, based
on management's best estimates. These allocations are periodically reviewed and
may be revised from time to time to more accurately reflect current business
conditions and risks. In addition, certain reclassifications of accounts may
occur to reflect current reporting standards within the industry. In each case
the previous history is restated to ensure comparability.
For purposes of this management discussion and analysis (MD&A), noninterest
income (also called fee income) and total revenues exclude securities gains and
losses. Net interest income has been adjusted to a fully taxable equivalent
(FTE) 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.
The following is a discussion and analysis of the financial condition and
results of operations of First Tennessee for the three month period ended March
31, 1999, compared to the three month period ended March 31, 1998. To assist the
reader in obtaining a better understanding of First Tennessee and its
performance, this discussion should be read in conjunction with First
Tennessee's unaudited consolidated financial statements and accompanying notes
appearing in this report. Additional information including the 1998 financial
statements, notes, and management's discussion and analysis is provided as an
appendix to the 1999 proxy statement.
Management's discussion and analysis may contain forward-looking statements with
respect to First Tennessee's beliefs, plans, goals, expectations, and estimates.
These statements are contained in certain sections that follow such as Year
2000. Forward-looking statements are statements that are not based on historical
information but rather are related to future operations, strategies, financial
results or other developments. Forward-looking statements are necessarily based
upon estimates and assumptions that are inherently subject to significant
business, economic and competitive uncertainties and contingencies many of which
are beyond a company's control, and many of which, with respect to future
business decisions, are subject to change. Examples of uncertainties and
contingencies include, among other important factors, general and local economic
<PAGE> 13
and business conditions; interest rate, market and monetary fluctuations;
inflation; competition within and without the financial services industry; and
new products and services in the industries in which First Tennessee operates.
Other factors are those inherent in originating loans, including prepayment
risks and fluctuating collateral values and changes in customer profiles.
Uncertainties regarding changes in technology within First Tennessee and by
third-party vendors of First Tennessee, and future acquisitions can also
affect results. Additionally, the policies of the Office of the Comptroller of
the Currency and the Board of Governors of the Federal Reserve System,
unanticipated regulatory and judicial proceedings, and changes in laws and
regulations applicable to First Tennessee and First Tennessee's success in
managing the risks involved in the foregoing, could cause actual results to
differ. First Tennessee assumes no obligation to update any forward-looking
statements that are made from time to time.
SECURITIZATION ACTIVITY
First Tennessee Bank National Association (FTBNA) securitized approximately $73
million of direct automobile loan receivables during the second quarter of 1998.
Also during 1998, FTBNA securitized $711 million of its consumer real estate
loans from the consumer loan and permanent mortgage portfolios through the use
of a Real Estate Mortgage Investment Conduit (REMIC). All of the interests in
the REMIC are owned by subsidiaries of First Tennessee, including FTBNA. This
transaction affects categorization of individual line items on the balance
sheet. Consequently, loans have been reduced and investment securities have been
increased.
For a more complete understanding, where significant, these transactions are
discussed and identified as "Managed" information, which adds data on these
securitized loans to "Reported" data for loans. "Reported" information has been
prepared in conformity with generally accepted accounting principles. "Managed"
information treats loans securitized and sold with servicing retained and loans
securitized through the REMIC as if they had not been securitized and/or sold.
"Managed" information does not include the mortgage banking servicing portfolio.
FINANCIAL HIGHLIGHTS (COMPARISON OF FIRST QUARTER 1999 TO FIRST QUARTER 1998)
* Earnings for the first quarter of 1999 were $53.0 million, up 14
percent from last year's first quarter earnings of $46.4 million.
* Diluted earnings per share were $.40 in 1999, up 14 percent over the
$.35 earned in 1998. Basic earnings per share were $.41 in 1999 and
$.36 in 1998, an increase of 14 percent.
* Total revenues grew 37 percent with growth in fee income of
approximately 51 percent and growth in net interest income of 17
percent. Mortgage banking and capital markets led the increase in fee
income with growth of 82 percent and 17 percent, respectively. Fee
income contributed 66 percent to total revenues in 1999 compared with
60 percent in 1998.
* Return on average shareholders' equity was 19.1 percent in 1999
compared with a return of 19.6 percent in 1998. Strong internal
<PAGE> 14
equity generation caused the decline in this ratio. Return on average
assets was 1.15 percent in 1999 compared with 1.26 percent in 1998. The
decline in the return on average assets was due to growth in assets,
primarily from an extraordinary rise in the mortgage warehouse.
* The consolidated net interest margin was 3.76 percent in 1999 compared
with 4.03 percent in 1998. The lower margin was primarily related to
the increased volume in the mortgage warehouse which produces a
narrower spread. The consolidated net interest margin compression was
partially offset by the 14 basis points improvement in the regional
banking group's margin.
* Asset quality remained stable with the nonperforming assets ratio
decreasing to .54 percent for the first quarter of 1999 compared with
.61 percent in 1998.
* At March 31, 1999, First Tennessee was ranked as one of the top 50 bank
holding companies nationally in market capitalization ($4.8 billion)
and assets ($18.3 billion). FT Mortgage Companies continued to rank as
one of the top retail mortgage originators in the nation, and First
Tennessee Capital Markets continued to rank as one of the largest U.S.
agency underwriters in the nation during the quarter.
INCOME STATEMENT ANALYSIS
NONINTEREST INCOME
- ------------------
Fee income (noninterest income excluding securities gains and losses) provides
the majority of First Tennessee's revenue. During the first quarter of 1999, fee
income increased 51 percent (from $189.9 million to $286.6 million) and
contributed 66 percent to total revenue. Fee income contributed 60 percent to
total revenue in the first quarter of 1998. Fee income increased in all of the
major categories with mortgage banking experiencing 82 percent growth and
capital markets experiencing 17 percent growth.
MORTGAGE BANKING
Mortgage banking fee income, First Tennessee's largest contributing business
line to noninterest income, grew 82 percent (from $92.6 million to $168.8
million) from the first quarter of 1998 as shown in Table 1. The increase came
primarily from the mortgage origination function (loan origination fees and
secondary marketing activities).
<TABLE>
TABLE 1 - MORTGAGE BANKING
<CAPTION>
First Quarter
----------------------- Growth
(Dollars in millions) 1999 1998 Rate (%)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONINTEREST INCOME:
Secondary marketing activities $ 72.3 $ 40.7 77.5
Loan origination fees 53.6 22.5 138.6
Servicing fees 39.3 25.3 55.2
Miscellaneous 3.6 4.1 (11.4)
- -----------------------------------------------------------------------------------------------
Total noninterest income 168.8 92.6 82.4
===============================================================================================
Mortgage loan originations $ 5,968.5 $ 4,676.7 27.6
Servicing portfolio $42,883.5 $29,452.0 45.6
- -----------------------------------------------------------------------------------------------
<FN>
NM = not meaningful
</FN>
</TABLE>
<PAGE> 15
Income derived from the mortgage origination function increased 99 percent from
the first quarter of 1998 (from $63.2 million to $125.9 million). FT Mortgage
Companies originated a first-quarter record $6.0 billion of mortgage loans and
ranked as one of the largest retail mortgage loan originators in the nation.
This origination volume, consisting of refinances and home purchases,
represented an increase of 28 percent over the $4.7 billion in mortgage loans
originated in the first quarter of 1998. The strong real estate market and
expansion of FT Mortgage's market share led to a 38 percent increase in home
purchase-related mortgages for the first quarter of 1999. Refinance activity
increased 22 percent and accounted for 58 percent of total origination volume
during the first quarter of 1999, compared to 60 percent in 1998. The increased
volume of originations, coupled with more profitable execution of loan sales
into the secondary market resulted in the increase in income from secondary
marketing activities.
Mortgage servicing fee income increased 55 percent from the first quarter of
1998 (from $25.3 million to $39.3 million). The mortgage servicing portfolio
(which includes servicing for ourselves and others) totaled $42.9 billion at
March 31, 1999, up 46 percent from $29.5 billion at March 31, 1998. This growth
was generated through FT Mortgage's loan origination network. The change in the
portfolio since first-quarter 1998 resulted from originations of $24.5 billion,
less $1.3 billion in sales of servicing released originations and principal
reductions of $9.8 billion from payments and payoffs received in the normal
course of business.
CAPITAL MARKETS
First Tennessee Capital Markets generates fee income primarily from the purchase
and sale of securities as both principal and agent. Inventory positions are
limited to the procurement of securities solely for distribution to customers by
the sales staff. Inventory is hedged to protect against movements in interest
rates. During the first quarter of 1999, capital markets achieved a record level
of fee income, a 17 percent increase over the first quarter of 1998 (from $38.0
million to $44.4 million). Total securities bought and sold increased 72 percent
over the same period in 1998 (from $84.7 billion to $145.9 billion). The
increase in volume and revenues came from continued customer base expansion,
additional product penetration, and strong performance in all of the offices.
Total underwritings during the first quarter of 1999 were $18.4 billion compared
with $11.3 billion for the same period in 1998. Capital markets continued to
rank as one of the largest U.S. agency underwriters in the nation during the
quarter.
OTHER FEE INCOME
Noninterest income from deposit transactions and cash management increased 15
percent from the first quarter of 1998 (from $20.0 million to $23.0 million) due
to increased fees from business and consumer deposit accounts and growth in cash
<PAGE> 16
management from ACH processing and retail and wholesale lockbox processing.
Since the first quarter of 1998, trust and investment management fees grew 20
percent (from $12.1 million to $14.6 million). This growth was primarily due to
growth in assets under management related to a strong stock market and customer
base expansion. Assets under management grew from $8.3 billion in the first
quarter of 1998 to $9.1 billion in the first quarter of 1999. Fee income from
merchant processing grew 49 percent from the first quarter of 1998 (from $7.2
million to $10.7 million) due to growth in transaction volume which increased 21
percent (from 33 million transactions processed in the first quarter of 1998 to
40 million transactions in 1999) and a special assessment received from a large
customer. Cardholder fees increased 10 percent (from $4.5 million to $5.0
million) during this same period, as strong consumer purchasing activity led to
higher interchange collections, reduced by the collection of fewer late fees due
to lower delinquencies.
All other income and commissions increased 30 percent from the first quarter of
1998 (from $15.5 million to $20.2 million). This growth was spread over a number
of categories, with other service charges increasing 53 percent (from $2.9
million to $4.5 million) which included growth in investment/mutual fund sales
and servicing fees from the securitized transactions completed in the second
quarter of 1998. Insurance premiums and commissions increased 37 percent (from
$1.7 million to $2.3 million). The other category increased 21 percent (from
$8.7 million to $10.6 million) with the growth being spread over several
categories.
NET INTEREST INCOME
- -------------------
Net interest income increased 16 percent (from $128.2 million to $148.9 million)
from the first quarter of 1998, primarily due to the 24 percent increase in
earning assets (from $12.8 billion to $15.9 billion). The consolidated net
interest margin (margin) declined from 4.03 percent in the first quarter of 1998
to 3.76 percent in the first quarter of 1999, primarily from the build-up of the
mortgage warehouse which produced 72 percent of the increase in earning assets.
Table 2 details the computation of the net interest margin for the regional
banking group and the impact that the other business lines had on the
consolidated margin for the first quarters of 1999 and 1998.
<PAGE> 17
<TABLE>
TABLE 2 - NET INTEREST MARGIN
<CAPTION>
First Quarter
--------------------
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
REGIONAL BANKING GROUP:
Yields on earning assets 7.84% 8.25%
Rates paid on interest-bearing liabilities 3.89 4.51
- -------------------------------------------------------------------------------------
Net interest spread 3.95 3.74
- -------------------------------------------------------------------------------------
Effect of interest-free sources .80 .90
Loan fees .15 .13
FRB interest and penalties .01 --
- -------------------------------------------------------------------------------------
Net interest margin - Regional banking group 4.91% 4.77%
MORTGAGE BANKING (1.03) (.61)
CAPITAL MARKETS (.13) (.13)
TRANSACTION PROCESSING .01 --
- -------------------------------------------------------------------------------------
Net interest margin 3.76% 4.03%
=====================================================================================
</TABLE>
As shown in Table 2, the margin is affected by the activity levels and related
funding for First Tennessee's specialty lines of business, as these nonbank
business lines typically produce different margins than traditional banking
activities. For example, in mortgage banking because the spread between the
rates on mortgage loans temporarily in the warehouse and the related short-term
funding rates is less than the comparable spread earned in the regional banking
group, the overall margin is compressed. Consequently, as the warehouse volume
increases, the margin also compresses. Capital markets tends to compress the
margin because of its strategy to reduce market risk by hedging its inventory in
the cash markets which effectively eliminates net interest income on these
positions. As a result, First Tennessee's consolidated margin cannot be readily
compared to that of other bank holding companies.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense (operating expense) for the first quarter of 1999
increased 46 percent (from $230.9 million to $336.8 million) over the same
period in 1998 primarily from increased costs to support the higher levels of
activity in mortgage banking and capital markets. Table 4 provides a breakdown
of total expenses by business line.
<TABLE>
TABLE 3 - OPERATING EXPENSE COMPOSITION
<CAPTION>
First Quarter
----------------------- Growth
(Dollars in millions) 1999 1998 Rate (%)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Regional banking group $107.4 $ 91.7 17.0
Mortgage banking 179.1 95.4 87.9
Capital markets 32.6 27.8 17.1
Transaction processing 15.6 13.9 12.1
Other 2.1 2.1 --
- -------------------------------------------------------------------------------------
Total operating expense $336.8 $230.9 45.9
=====================================================================================
</TABLE>
Mortgage banking accounted for 79 percent of the overall expense growth and grew
88 percent from the previous year. Expense growth for this business line varies
with the volume and type of activity. The increase was mainly in personnel
expense from increased loan production and amortization expense due to the
larger servicing portfolio and faster prepayments. During this period,
amortization of capitalized mortgage servicing rights increased 79 percent (from
$17.3 million to $30.9 million). Increased activity in mortgage banking
represented the majority of the growth in other expenses (such as contract
employment, amortization of hedge instruments, legal and professional fees,
etc.).
The regional banking group accounted for 15 percent of the overall expense
<PAGE> 18
growth and increased 17 percent from the previous year. This increase was due
to investments in our nationwide expansion strategy for consumer lending, growth
in the insurance business, costs related to the implementation of our branding
strategy, and increased technology expenses.
Capital markets accounted for 5 percent of the overall expense growth and grew
17 percent from the previous year. Expenses for this business line are primarily
variable in nature, and the increase reflects the growth in volume as well as
costs from business expansion due to opening a new office and hiring additional
salespeople and traders.
PROVISION FOR LOAN LOSSES/ASSET QUALITY
The provision for loan losses increased 10 percent (from $13.5 million to $14.8
million) from March 31, 1998, due to increased inherent risk in the loan
portfolio from loan growth and a change in the loan mix partially due to
securitizations. The provision for loan losses is the charge to operating
earnings that management determines to be necessary to maintain the allowance
for loan losses at an adequate level reflecting management's estimate of the
risk of loss inherent in the loan portfolio. Additional asset quality
information is provided in Table 4 - Asset Quality Information and Table 5 -
Charge-off Ratios.
<TABLE>
TABLE 4 - ASSET QUALITY INFORMATION
<CAPTION>
March 31
------------------------
(Dollars in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming loans $ 12,629 $ 10,914
Foreclosed real estate 6,121 4,294
Other assets 189 225
- -----------------------------------------------------------------------------------------------------
Total Regional Banking Group 18,939 15,433
- -----------------------------------------------------------------------------------------------------
Mortgage Banking nonperforming loans 18,166 29,283
Mortgage Banking foreclosed real estate 10,749 7,281
- -----------------------------------------------------------------------------------------------------
Total nonperforming assets $ 47,854 $ 51,997
=====================================================================================================
Loans and leases 90 days past due $ 28,006 $ 29,062
Potential problem assets* $ 64,974 $ 70,652
<CAPTION>
First Quarter
-------------------------
1999 1998
-------------------------
<S> <C> <C>
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance at December 31 $136,013 $125,859
Provision for loan losses 14,826 13,515
Charge-offs (13,541) (12,376)
Loan recoveries 2,089 3,028
- -----------------------------------------------------------------------------------------------------
Ending balance at March 31 $139,387 $130,026
=====================================================================================================
<CAPTION>
March 31
-------------------------
1999 1998
-------------------------
<S> <C> <C>
Allowance to total loans 1.59% 1.53%
Nonperforming loans to total loans .35 .47
Nonperforming assets to total loans, foreclosed
real estate and other assets .54 .61
Allowance to nonperforming assets 291 250
- -----------------------------------------------------------------------------------------------------
<FN>
* Includes loans and leases 90 days past due.
</FN>
</TABLE>
The ratio of net charge-offs to average loans increased from .45 percent for the
first quarter of 1998 to .53 percent for the first quarter of 1999; however, the
credit card receivables charge-off ratio improved from 4.29 percent at March
31, 1998, to 3.65 percent at March 31, 1999. In the first quarter of 1998,
<PAGE> 19
commercial and commercial real estate net charge-offs were in a net recovery
position. This position changed to a more normal level in 1999, thus causing the
overall charge-off ratio to increase.
The ratio of nonperforming loans to total loans decreased to .35 percent for the
first quarter of 1999 compared with .47 percent for the same period in 1998,
primarily from improvement in nonperforming loans in mortgage banking. At March
31, 1999, First Tennessee had no concentrations of 10 percent or more of total
loans in any single industry.
<TABLE>
TABLE 5 - CHARGE-OFF RATIOS
<CAPTION>
First Quarter
-----------------
1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
Commercial and commercial real estate .12% (.03)%
Consumer .53 .39
Credit card receivables 3.65 4.29
Permanent mortgage* .03 (.02)
==================================================================================
Total net charge-offs excluding repurchased mortgages .51% .41%
Impact of repurchased mortgages .02 .04
- ----------------------------------------------------------------------------------
Total net charge-offs .53% .45%
==================================================================================
<FN>
* Excludes impact of repurchased mortgages.
</FN>
</TABLE>
BALANCE SHEET
LOANS AND DEPOSITS
- ------------------
As previously discussed, for a more complete understanding of loan growth trends
it is helpful to analyze information on a "reported" as well as a "managed"
basis. "Reported" information is derived from consolidated financial statements
that have been prepared in conformity with generally accepted accounting
principles. "Managed" information treats consumer loans securitized and sold
with servicing retained and loans securitized through the REMIC and held by
First Tennessee as if they had not been securitized and/or sold. "Managed"
information does not include the mortgage banking servicing portfolio. Table 6 -
Selected Loans includes information for reported and managed assets and Table 7
- - Investment Securities includes reported information and information excluding
the REMIC.
At March 31, 1999, First Tennessee reported total assets of $18.3 billion
compared with $15.9 billion at March 31, 1998. Mortgage loans held for sale
(mortgage warehouse) increased 42 percent (from $2.2 billion to $3.2 billion).
The growth in the period end balance sheet was funded by a 44 percent increase
in short-term purchased funds (from $4.1 billion to $5.9 billion).
<PAGE> 20
<TABLE>
TABLE 6 - SELECTED LOANS
<CAPTION>
1999
AS Growth 1999 Growth
(Dollars in millions) REPORTED 1998 Rate (%) MANAGED* Rate (%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 31 PERIOD-END
Consumer loans $ 3,164.0 $ 2,912.4 8.6 $ 3,446.4 18.3
Permanent mortgages 444.7 676.6 (34.3) 683.2 1.0
Total loans 8,782.8 8,488.4 3.5 9,303.8 9.6
- -----------------------------------------------------------------------------------------------------------------------
YEAR-TO-DATE AVERAGES
Consumer loans $ 3,090.3 $ 2,879.2 7.3 $ 3,392.4 17.8
Permanent mortgages 424.3 668.9 (36.6) 677.2 1.2
Total loans 8,653.2 8,368.7 3.4 9,208.2 10.0
- -----------------------------------------------------------------------------------------------------------------------
<FN>
* Excludes managed loans in the mortgage banking servicing portfolio.
</FN>
</TABLE>
<TABLE>
TABLE 7 - INVESTMENT SECURITIES
<CAPTION>
1999
1999 EXCLUDING
AS Growth SECURITIZATION Growth
(Dollars in millions) REPORTED 1998 Rate (%) ACTIVITY Rate (%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 31 period-end $ 2,429.0 $ 1,966.3 23.5 $ 1,920.2 (2.3)
Year-to-date averages 2,429.9 2,099.1 15.8 1,888.3 (10.0)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Average total assets grew 25 percent (from $14.9 billion to $18.6 billion) from
the first quarter of 1998. Due to strong origination volume, the mortgage
warehouse increased 131 percent (from $1.7 billion to $3.9 billion) and
accounted for 60 percent of the increase in total assets. The continuation of
favorable economic conditions led to 10 percent growth in total managed loans
for the first quarter of 1999 (from $8.4 billion to $9.2 billion). Average
commercial loans increased 9 percent (from $3.8 billion to $4.2 billion) and
represented 45 percent of total managed loans. The 18 percent increase in
managed consumer loans (from $2.9 billion to $3.4 billion) came primarily from
real estate-related lending, and these loans represented 37 percent of total
managed loans. First Horizon Equity Lending (previously known as Gulf Pacific
Mortgage) which is active in originating home equity loans and second mortgages,
experienced strong growth in 1999. Average investment securities increased 16
percent from first quarter 1998 (from $2.1 billion to $2.4 billion). Table 7 -
Investment Securities shows the impact the securitization activity had on this
growth rate.
Since the first quarter of 1998, average core deposits grew 4 percent (from $8.9
billion to $9.3 billion) while interest-bearing core deposits remained
relatively flat. Noninterest-bearing deposits grew 14 percent (from $2.5 billion
to $2.8 billion) over this same period with growth in mortgage escrow balances
accounting for 37 percent of this increase. Short-term purchased funds were up
64 percent (from $4.3 billion to $7.0 billion) from the previous year, and were
primarily used to fund the growth in the mortgage warehouse.
CAPITAL
- -------
Total capital (shareholders' equity plus qualifying capital securities) at March
31, 1999, was $1.3 billion, up 17 percent from $1.1 billion at March 31, 1998.
Shareholders' equity (excluding the qualifying capital securities) was $1.2
billion at March 31, 1999, an increase of 18 percent from $1.0 billion at March
31, 1998.
Average shareholders' equity increased 18 percent (from $1.0 billion to $1.1
<PAGE> 21
billion) since the first quarter of 1998, reflecting strong internal capital
generation. The average total capital to average assets ratio was 6.58 percent
and the average shareholders' equity to average assets ratio was 6.05 percent
for the first quarter of 1999. This compares with 7.08 percent and 6.41 percent,
respectively for the first quarter of 1998. The capital ratios have been
adversely impacted by the effect of assets, primarily the mortgage warehouse,
increasing faster than equity. Excluding the effects of unrealized market
valuations the average total capital to average assets ratio would have been
6.53 percent and the average shareholders' equity to average assets ratio would
have been 5.99 percent for the first quarter of 1999.
At March 31, 1999, the corporation's Tier 1 capital ratio was 8.25 percent, the
total capital ratio was 11.78 percent and the leverage ratio was 5.91 percent.
On March 31, 1999, First Tennessee's bank affiliates had sufficient capital to
qualify as well-capitalized institutions.
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 to meet the
financial needs of its customers and manage its own exposure to fluctuations in
interest rates. These instruments are categorized into "Lending related,"
"Mortgage banking," Interest rate risk management and "Capital markets" as noted
in Table 8.
<TABLE>
TABLE 8 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AT MARCH 31, 1999
<CAPTION>
(Dollars in millions) Notional value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LENDING Commitments to extend credit:
RELATED: Consumer credit card lines $ 2,270.2
Consumer home equity 547.0
Commercial real estate and construction and land development 348.5
Mortgage banking 1,978.0
Other 1,440.7
Other commitments:
Standby letters of credit 425.0
Commercial letters of credit 4.6
- -----------------------------------------------------------------------------------------------------------------------
MORTGAGE Mortgage pipeline and warehouse hedging:
BANKING: Interest rate contracts:
Forward contracts - commitments to sell $ 4,317.8
Option contracts:
Put options purchased* 8.0
Call options written 25.0
Servicing portfolio hedging:
Interest rate contracts:
Caps - purchased* 1,250.0
Caps - written 1,250.0
Floors - purchased* 20,750.0
Floors - written 5,400.0
Swaption - purchased* 4,300.0
Swaption - written 1,000.0
- -----------------------------------------------------------------------------------------------------------------------
INTEREST Interest rate contracts:
RATE RISK Swaps - receive fixed/pay floating $ 602.0
MANAGEMENT: Swaps - receive floating/pay floating 200.0
Caps - purchased 20.0
Caps - written 20.0
Equity contracts:
Purchased options 1.9
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL Forward contracts:
MARKETS: Commitments to buy $ 2,916.1
Commitments to sell 3,074.0
Option contracts:
Written 5.0
Purchased 5.0
Securities underwriting commitments 3.2
- -----------------------------------------------------------------------------------------------------------------------
<FN>
* Mortgage banking option contracts in total had a book value of $156.4 million at March 31, 1999.
</FN>
</TABLE>
<PAGE> 22
OTHER
YEAR 2000
- ---------
Many computer programs were originally designed to store and process data using
two digits rather than four to define a calendar year. This could cause programs
that have date sensitive software to recognize a date using "00" as the year
1900 rather than the year 2000. The "Year 2000 computer issue" can create risk
for a company from unforeseen problems in its own computer systems and from the
company's vendors and customers.
First Tennessee began planning its Year 2000 remediation strategy to fix this
computer issue in 1995. Among other things, the process included the formation
of a company-wide project team that meets regularly to coordinate and review the
status of conversion initiatives. The main phases involved in the Year 2000
project are assessment, renovation, validation, and implementation. A
comprehensive review to assess the systems affected by this issue has been
completed, estimated cost projections have been determined and an implementation
plan has been compiled. As a result of the assessment review, First Tennessee is
in the process of modifying or replacing certain existing systems. New systems
being acquired will provide new functionality to meet the expanding needs of
customers and will be Year 2000 compliant.
Modifications to systems are made in the renovation phase. These modifications
are then subjected to current and future date testing during the next phase, the
validation phase. Finally, after systems are thoroughly tested, the
implementation phase begins. Training and product integration occur during this
final phase to aid in assuring a smooth transition to the normal day-to-day
operations. The substantial completion of these phases is expected to occur by
the end of the second quarter of 1999. As of March 31, 1999, for mission
critical systems, First Tennessee had completed over 99 percent of renovation
and 95 percent was validated and implemented, of which 3 percent are pending
vendor testing with external vendors. For all systems, the completion status was
approximately 97 percent renovated, 86 percent validated and implemented.
Management believes the efforts described above will provide reasonable
assurance that its systems will be adequately prepared for the Year 2000.
Costs of new systems will be capitalized and amortized, and spending for
maintenance and modification associated with Year 2000 will be expensed as
incurred. The total gross cost of Year 2000 compliance is estimated to range
from $40 million to $45 million, of which approximately $30 million had been
incurred as of March 31, 1999, with approximately 55 percent of this being
capitalized. Consistent with current corporate accounting policy, the
capitalized costs will be amortized on a straight-line basis over a maximum
period of five years once the systems project is substantially complete and
ready for its intended use.
As part of our Year 2000 preparedness, First Tennessee is also assessing
business risks that potentially could arise from customers, business partners,
vendors, and government agencies that may fail to successfully complete
renovation of their systems before January 1, 2000. The processes include
periodic assessments of Year 2000 readiness of material credit customers, funds
providers, financial market counterparties, and mission critical vendors. During
1998, First Tennessee initiated a review with its large commercial customers
<PAGE> 23
to identify, assess and mitigate potential risks, including credit risk,
associated with customers' failure to adequately address their Year 2000 issues.
We will continue to assess these external sources for Year 2000 readiness. While
First Tennessee continues, when it deems appropriate, to discuss these matters
with, obtain written certification from, and test the systems of other companies
as to their Year 2000 compliance, there can be no assurance that any potential
impact associated with Year 2000 issues after December 31, 1999, would not have
a material adverse effect on First Tennessee's business, financial condition or
results of operations. However, our regular contingency planning processes are
being adapted to aid us in preparing for the most significant potential risks
from these external sources. The Office of the Comptroller of the Currency,
which is our primary bank regulator, includes a review of the risk assessments
and contingency plans in its quarterly examination of Year 2000 preparedness.
Our contingency plans are being adapted to include such items as outsourcing
options, business resumption plans for all of the business units, identification
of alternative sources of liquidity, and evaluation of alternative manual
processes. The adaptation and testing of these contingency plans should be
finalized by the third quarter of 1999.
The foregoing statements are forward looking. Actual results could differ
because of several factors, including those presented at the beginning of this
MD&A discussion.
The Year 2000 disclosures contained in this report are designated as Year 2000
Readiness Disclosures related to the Year 2000 Information and Readiness
Disclosure Act.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is incorporated herein by reference to
Management's Discussion and Analysis included as Item 2 of Part I of this report
and to Note 1 of the Consolidated Financial Statements and the "Risk
Management-Interest Rate Risk Management" Subsection of the Management's
Discussion and Analysis section contained in the Financial Information Appendix
to the Corporation's proxy statement furnished to shareholders in connection
with the Annual Meeting of Shareholders held on April 20, 1999, filed March 17,
1999.
<PAGE> 24
Part II.
OTHER INFORMATION
Items 1, 3, 4 and 5
- -------------------
As of the end of the first quarter, 1999, the answers to Items 1, 3, 4 and 5
were either inapplicable or negative, and therefore, these items are omitted.
Item 2 - Changes in Securities.
- -------------------------------
On March 31, 1999, the Corporation acquired Cambridge Mortgage, Inc.
("Cambridge"), Seattle, Washington, and merged Cambridge with and into FT
Mortgage Companies, an indirect, wholly-owned subsidiary of the Corporation. At
closing, the Corporation acquired from the three shareholders of Cambridge all
38,250 shares of Cambridge's common stock, $1.00 par value, in exchange for an
initial closing payment of 20,914 shares of Corporation's common stock, $0.625
par value. It is estimated that approximately 800 additional shares of the
Corporation's common stock will be issued to the shareholders of Cambridge
during the second quarter of 1999 in payment of the balance of the acquisition
price. No underwriter was involved in the transaction. The shares were sold in a
private offering pursuant to an exemption from registration under Section 4(2)
of the Securities Act of 1933, based on the limited number of shareholders
receiving the Corporation's common stock.
Item 6 - Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C> <C>
3(b) Bylaws, as amended. Filed Herewith
4 Instruments defining the rights of security holders,
including indentures.*
**10(d) 1992 Restricted Stock Incentive Plan, as amended and
restated. Filed Herewith
**10(i) Amended and Restated Pension Restoration Plan, as
amended and restated, attached as Exhibit 10(i) to
the Corporation's 1998 Form 10-K and incorporated
herein by reference.
27 Financial Data Schedule (for SEC use only). Filed Herewith
</TABLE>
*The Corporation agrees to furnish copies of the instruments, including
indentures, defining the rights of the holders of the long-term debt of
the Corporation and its consolidated subsidiaries to the Securities and
Exchange Commission upon request.
**This is a management contract or compensatory plan or arrangement
required to be filed as an exhibit.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter of 1999.
<PAGE> 25
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: 5/14/99 By: Elbert L. Thomas Jr.
--------------------- ---------------------------
Elbert L. Thomas Jr.
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3(b) Bylaws, as amended. Filed Herewith
4 Instruments defining the rights of security holders,
including indentures.*
**10(d) 1992 Restricted Stock Incentive Plan, as amended and
restated. Filed Herewith
**10(i) Amended and Restated Pension Restoration Plan, as amended
and restated, attached as Exhibit 10(i) to the Corporation's
1998 Form 10-K and incorporated herein by reference.
27 Financial Data Schedule (for SEC use only). Filed Herewith
</TABLE>
*The Corporation agrees to furnish copies of the instruments, including
indentures, defining the rights of the holders of the long-term debt of the
Corporation and its consolidated subsidiaries to the Securities and Exchange
Commission upon request.
**This is a management contract or compensatory plan or arrangement required to
be filed as an exhibit.
<PAGE> 1
EXHIBIT 3(b)
BYLAWS OF
FIRST TENNESSEE NATIONAL CORPORATION
(AS AMENDED AND RESTATED APRIL 20, 1999)
ARTICLE ONE
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of First Tennessee National
Corporation (the "Corporation") shall be 165 Madison Avenue, Memphis, Tennessee.
1.2 OTHER OFFICES. The Corporation may have offices at such other
places, either within or without the State of Tennessee, as the Board of
Directors may from time to time designate or as the business of the Corporation
may from time to time require.
1.3 REGISTERED OFFICE. The registered office of the Corporation
required to be maintained in the State of Tennessee shall be the same as its
principal office and may be changed from time to time as provided by law.
ARTICLE TWO
SHAREHOLDERS
2.1 PLACE OF MEETINGS. Meetings of the shareholders of the Corporation
may be held either in the State of Tennessee or elsewhere; but in the absence of
notice to the contrary, shareholders' meetings shall be held at the principal
office of the Corporation in Memphis, Tennessee.
2.2 QUORUM AND ADJOURNMENTS. The holders of a majority of the shares
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite, and shall constitute a quorum at all
meetings of the shareholders, for the transaction of business, except as
otherwise provided by law, the Restated Charter of the Corporation, as amended
from time to time (the "Charter), or these Bylaws. In the event a quorum is not
obtained at the meeting, the holders of a majority of the shares entitled to
vote thereat, present in person or by proxy, shall have power to adjourn the
meeting from time to time and, whether or not a quorum is obtained at the
meeting, the Chairman of the meeting shall have the power to adjourn the meeting
from time to time, in either case without notice, except as otherwise provided
by law, other than announcement at the meeting. At such adjourned meeting at
which the requisite amount of voting shares shall be represented, any business
may be transacted which might have been transacted at the meeting as originally
notified.
2.3 NOTICE OF MEETINGS. Unless otherwise required by applicable law,
written notice of the annual and each special meeting stating the date, time and
place of the meeting shall be mailed, postage prepaid, or otherwise delivered to
each shareholder entitled to vote thereat at such address as appears on the
records of shareholders of the Corporation, at least ten (10) days, but not more
than two (2) months, prior to the meeting date. In addition, notice of any
special meeting shall state the purpose or purposes for which the meeting is
called and the person or persons calling the meeting. In the event of an
adjournment of a meeting to a date more than four months after the date fixed
for the original meeting or the Board of Directors fixes a new record date for
the adjourned meeting, a new notice of the adjourned meeting must be given to
shareholders as of the new record date. Any previously scheduled meeting may be
postponed, and any special meeting may be canceled, by resolution of the Board
of Directors upon public notice given prior to the date scheduled for such
meeting.
2.4 ANNUAL MEETINGS. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third Tuesday in
April, or if that day is a legal holiday, on the next succeeding business day
not a legal holiday, at 10:00 a.m. Memphis time or on such other date and/or at
such other time as the Board of Directors may fix by resolution by vote
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of a majority of the entire Board of Directors. At the meeting, the shareholders
shall elect by ballot, by plurality vote, directors to succeed directors in the
class of directors whose term expires at the meeting and directors elected by
the Board of Directors to fill vacancies in other classes of directors and may
transact such other business as may properly come before the meeting.
2.5 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
Chairman of the Board and shall be called by the Chairman of the Board or the
Secretary at the request in writing of a majority of the Board of Directors.
Only such business within the purpose or purposes described in the notice of the
meeting may be conducted at the meeting.
2.6 WAIVER OF NOTICE. Any shareholder may waive in writing notice of
any meeting either before, at or after the meeting. Attendance by a shareholder
in person or by proxy at a meeting shall constitute a waiver of objection to
lack of notice or defective notice and a waiver of objection to consideration of
a matter that was not described in the meeting notice unless the shareholder
objects in the manner required by law.
2.7 VOTING. Unless otherwise required by the Charter, at each meeting
of shareholders, each shareholder shall have one vote for each share of stock
having voting power registered in the shareholder's name on the records of the
Corporation on the record date for that meeting, and every shareholder having
the right to vote shall be entitled to vote in person or by proxy appointed by
instrument in writing or any other method permitted by law.
2.8 PROCEDURES FOR BRINGING BUSINESS BEFORE SHAREHOLDER MEETING. At an
annual or special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before an annual or special meeting of shareholders. To be
properly brought before an annual or special meeting of shareholders, business
must be (i) in the case of a special meeting called by the Chairman of the Board
or at the request of the Board of Directors, specified in the notice of the
special meeting (or any supplement thereto), or (ii) in the case of an annual
meeting properly brought before the meeting by or at the direction of the Board
of Directors or (iii) otherwise properly brought before the annual or special
meeting by a shareholder. For business to be properly brought before such a
meeting of shareholders by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 90 days nor more
than 120 days prior to the date of the meeting; provided, however, that if fewer
than 100 days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholders to be timely must be
so delivered or received not later than the close of business on the 10th day
following the earlier of (i) the day on which such notice of the date of such
meeting was mailed or (ii) the day on which such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before a meeting of shareholders (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the Corporation's books, of the shareholder proposing such
business and any other shareholders known by such shareholder to be supporting
such proposal, (iii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder on the date of such shareholder's notice
and by any other shareholders known by such shareholder to be supporting such
proposal on the date of such shareholder's notice, and (iv) any material
interest of the shareholder in such proposal. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at a meeting of
shareholders except in accordance with the procedures set forth in this Section
2.8. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the procedures prescribed by these Bylaws, and if the
Chairman should so determine, the Chairman shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
2.9 SEC PROXY RULES. In addition to complying with the provisions of
Section 2.8, a shareholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934 and the rules and regulations thereunder
with respect to the matters set forth in Section 2.8. Nothing in Section 2.8
shall be deemed to affect any rights of shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to rules of the
Securities and Exchange Commission. For such proposals to be acted upon at a
meeting, however, compliance with the notice provisions of Section 2.8 is also
required.
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<PAGE> 3
ARTICLE THREE
DIRECTORS
3.1 POWERS OF DIRECTORS. The business and affairs of the Corporation
shall be managed under the direction of and all corporate powers shall be
exercised by or under the authority of the Board of Directors.
3.2 NUMBER AND QUALIFICATIONS. The Board of Directors shall consist of
12 members. The Board of Directors has the power to change from time to time the
number of directors specified in the preceding sentence. Any such change in the
number of directors constituting the Corporation's Board Directors must be made
exclusively by means of an amendment to these Bylaws adopted by a majority of
the entire Board of Directors then in office. Directors need not be shareholders
of the Corporation nor residents of the State of Tennessee.
3.3 TERM OF OFFICE. Except as otherwise provided by law or by the
Charter, the term of each director hereafter elected shall be from the time of
his or her election and qualification until the third annual meeting next
following such election and until a successor shall have been duly elected and
qualified; subject, however, to the right of the removal of any director as
provided by law, by the Charter or by these Bylaws.
3.4 COMPENSATION. The directors shall be paid for their services on the
Board of Directors and on any Committee thereof such compensation (which may
include cash, shares of stock of the Corporation and options thereon) and
benefits together with reasonable expenses, if any, at such times as may, from
time to time, be determined by resolution adopted by a majority of the entire
Board of Directors; provided that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
being compensated therefor.
3.5 COMMITTEES. The directors, by resolution adopted by a majority of
the entire Board of Directors, may designate an executive committee and other
committees, consisting of two or more directors, and may delegate to such
committee or committees all such authority of the Board of Directors that it
deems desirable, including, without limitation, authority to appoint corporate
officers, fix their salaries, and, to the extent such is not provided by law,
the Charter or these Bylaws, to establish their authority and responsibility,
except that no such committee or committees shall have and exercise the
authority of the Board of Directors to:
(a) authorize distributions (which include dividend declarations),
except according to a formula or method prescribed by the
Board of Directors,
(b) fill vacancies on the Board of Directors or on any of its
committees,
(c) adopt, amend or repeal bylaws,
(d) authorize or approve the reacquisition of shares, except
according to a formula or method prescribed by the Board of
Directors, or
(e) authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares,
except that the Board of Directors may authorize a committee
to do so within limits specifically prescribed by the Board of
Directors.
3.6 PROCEDURES FOR DIRECTOR NOMINATIONS. Except as provided in Section
3.7 with respect to vacancies on the Board of Directors, only persons nominated
in accordance with the procedures set forth in this Section 3.6 shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of shareholders (i) by or at the
direction of the Board of Directors, or (ii) by any shareholder of the
Corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Section 3.6. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be
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<PAGE> 4
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 90 days nor more than 120 days prior to the date of a
meeting; provided, however, that if fewer than 100 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be so delivered or received not later than
the close of business on the 10th day following the earlier of (i) the day on
which such notice of the date of such meeting was mailed or (ii) the day on
which such public disclosure was made. A shareholder's notice to the Secretary
shall set forth (i) as to each person whom the shareholder proposes to nominate
for election or reelection as a director (a) the name, age, business address and
residence address of such person, (b) the principal occupation or employment of
such person, (c) the class and number of shares of the Corporation which are
beneficially owned by such person on the date of such shareholder's notice and
(d) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors or, is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including, without limitation, such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); and (ii) as to the shareholder giving the notice (a) the
name and address, as they appear on the Corporation's books, of such shareholder
and any other shareholders known by such shareholder to be supporting such
nominees and (b) the class and number of shares of the Corporation which are
beneficially owned by such shareholder on the date of such shareholder's notice
and by any other shareholders known by such shareholder to be supporting such
nominees on the date of such shareholder's notice. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 3.6. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if the Chairman should so determine, the Chairman shall so declare
to the meeting and the defective nomination shall be disregarded.
3.7 VACANCIES; REMOVAL FROM OFFICE. Except as otherwise provided by law
or by the Charter, newly created directorships resulting from any increase in
the authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification or any other
cause (except removal from office) shall be filled only by the Board of
Directors, provided that a quorum is then in office and present, or only by a
majority of the directors then in office, if less than a quorum is then in
office or by the sole remaining director. Any vacancies on the Board of
Directors resulting from removal from office may be filled by the affirmative
vote of the holders of at least a majority of the voting power of all
outstanding voting stock or, if the shareholders do not so fill such a vacancy,
by a majority of the directors then in office. Directors elected to fill a newly
created directorship or other vacancy shall hold office for a term expiring at
the next shareholders' meeting at which directors are elected and until such
director's successor has been duly elected and qualified. The directors of any
class of directors of the Corporation may be removed by the shareholders only
for cause by the affirmative vote of the holders of at least a majority of the
voting power of all outstanding voting stock.
3.8 PLACE OF MEETINGS. The directors may hold meetings of the Board of
Directors or of a committee thereof at the principal office of the Corporation
in Memphis, Tennessee, or at such other place or places, either in the State of
Tennessee or elsewhere, as the Board of Directors or the members of the
committee, as applicable, may from time to time determine by resolution or by
written consent or as may be specified in the notice of the meeting.
3.9 QUORUM. A majority of the directors shall constitute a quorum for
the transaction of business, but a smaller number may adjourn from time to time,
without further notice, if the time and place to which the meeting is adjourned
are fixed at the meeting at which the adjournment is taken and if the period of
adjournment does not exceed thirty (30) days in any one (1) adjournment. The
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless the vote of a greater
number is required by law, the Charter, or these Bylaws.
3.10 REGULAR MEETINGS. Following each annual meeting of shareholders,
the newly elected directors, together with the incumbent directors whose terms
do not expire at such meeting, shall meet for the purpose of organization, the
appointment of officers and the transaction of other business, and, if a
majority of the directors be present at such place, day and hour, no prior
notice of such meeting shall be required to be given to the directors. The
place, day and hour of such meeting may also be fixed by resolution or by
written consent of the directors. In addition, the Board of Directors may
approve an annual schedule for additional regular meetings of the Board of
Directors and
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of committees thereof.
3.11 SPECIAL MEETINGS. Special meetings of the directors may be called
by the Chairman of the Board, the Chief Executive Officer, or the President (or
as to any committee of the Board of Directors, by the person or persons
specified in the resolution of the Board of Directors establishing the
committee) on two days' notice by mail or on one day's notice by telegram or
cablegram, or on two hours' notice given personally or by telephone or facsimile
transmission to each director (or member of the committee, as appropriate), and
shall be called by the Chairman of the Board or Secretary in like manner on the
written request of a majority of directors then in office. The notice shall
state the day and hour of the meeting and the place where the meeting is to be
held. Special meetings of the directors may be held at any time on written
waiver of notice or by consent of all the directors, either of which may be
given either before, at or after the meeting.
3.12 ACTION WITHOUT A MEETING. The directors may (whether acting in
lieu of a meeting of the Board of Directors or of a committee thereof) take
action which they are required or permitted to take, without a meeting, on
written consent setting forth the action so taken, signed by all of the
directors entitled to vote thereon. If all the directors entitled to vote
consent to taking such action without a meeting, the affirmative vote of the
number of directors necessary to authorize or take such action at a meeting is
the act of the Board of Directors or committee, as appropriate.
3.13 TELEPHONE MEETINGS. Directors may participate in a meeting of the
Board of Directors or of a committee thereof by, or conduct a meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director so participating
is deemed to be present in person at such meeting.
ARTICLE FOUR
OFFICERS
4.1 DESIGNATED OFFICERS. The officers of the Corporation shall consist
of a Chairman of the Board, a Chief Executive Officer, a President, such number
of Vice Chairmen as the Board may from time to time determine and appoint, an
Auditor, a Chief Credit Officer, a Chief Financial Officer, a Controller, a
General Counsel, a Manager of Risk Management, an Executive Vice President --
Employee Services, a Secretary, and a Treasurer, and such number of Executive
Vice Presidents, Senior Vice Presidents and Vice Presidents and such other
Officers and assistant Officers as may be from time to time determined and
appointed in accordance with the provisions of this Article Four. The title of
any officer may include any additional descriptive designation determined to be
appropriate. Any person may hold two or more offices, except that the President
shall not also be the Secretary or an Assistant Secretary. The officers, other
than the Chairman of the Board, need not be directors, and officers need not be
shareholders.
4.2 APPOINTMENT OF OFFICERS. Except as otherwise provided in this
Section 4.2, the officers of the Corporation shall be appointed by the Board of
Directors at the annual organizational meeting of the Board of Directors
following the annual meeting of shareholders. The Board of Directors may
delegate to a committee of the Board of Directors the power to create corporate
offices, define the authority and responsibility of such offices, except to the
extent such authority or responsibility would not be consistent with the law or
the Charter, and to appoint persons to any office of the Corporation except the
offices of the Chairman of the Board, Chief Executive Officer, and President,
any office the incumbent in which is designated by the Board as an Executive
Officer (as defined in Section 4.5 hereof), and, upon the recommendation of the
Audit Committee, the Auditor. In addition, the Board of Directors may delegate
to the officers appointed to the Corporation's personnel committee, acting as a
committee, the authority to appoint persons to any offices of the Corporation of
the level of Vice President and below annually at the personnel committee
meeting following the annual meeting of shareholders and to appoint persons to
any office of the Corporation of the level of Senior Vice President and below
during the period of time between the annual appointment of officers by the
Board of Directors or pursuant to this section 4.2 of the Bylaws.
Notwithstanding the delegation of authority pursuant to this section 4.2 of the
Bylaws, the Board of Directors retains the authority to appoint all officers and
such other officers and agents as it shall deem necessary, who shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors.
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4.3 TERM. The officers of the Corporation shall be appointed for a term
of one (1) year and until their successors are appointed and qualified, subject
to the right of removal specified in Section 4.4 of these Bylaws. The
designation of a specified term does not grant to any officer any contract
rights.
4.4 VACANCIES, RESIGNATIONS AND REMOVAL. If the office of any officer
or officers becomes vacant for any reason, the vacancy may be filled by the
Board of Directors or, if such officer was appointed by a committee, by the
committee appointing such officer. Any officer may resign at any time by
delivering a written notice to the Chairman of the Board, Chief Executive
Officer, President, Secretary, or Executive Vice President -- Employee Services
of the Corporation, or the designee of any of them, which shall be effective
upon delivery unless it specifies a later date acceptable to the Corporation.
Any officer designated by the Board as an Executive Officer shall be subject to
removal at any time with or without cause only by the affirmative vote of a
majority of the Board of Directors. The Auditor shall be subject to removal at
any time with or without cause only by the affirmative vote of a majority of the
Board of Directors, upon the recommendation of the Audit Committee. Any other
officer shall be subject to removal at any time with or without cause by the
affirmative vote of a majority of the Board of Directors, and in the event the
officer was, or could have been, appointed by a committee, then by the
affirmative vote of a majority of either such committee or the Board of
Directors.
4.5 COMPENSATION. The Board of Directors, or a committee thereof, shall
fix the compensation of Executive Officers (as defined herein) of the
Corporation. "Executive Officers" shall be those officers of the Corporation
identified as such from time to time in a resolution or resolutions of the Board
of Directors. The compensation of officers who are not Executive Officers shall
be fixed by the Board of Directors, by a committee thereof, or by management
under such policies and procedures as shall be established by the Board of
Directors or a committee thereof.
4.6 DELEGATION OF OFFICER DUTIES. In case of the absence of any officer
of the Corporation, or for any reason that the Board of Directors (or, in
addition, in the case of any officer appointed by a committee, such committee or
any other committee which could appoint such officer pursuant to Section 4.2 of
these Bylaws) may deem sufficient, the Board of Directors (or committee, as
applicable) may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer, or to any director.
4.7 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors and shall have
such powers and perform such duties as may be provided for herein and as are
normally incident to the office and as may be assigned by the Board of
Directors. If and at such times as the Board of Directors so determines, the
Chairman of the Board may also serve as the Chief Executive Officer of the
Corporation.
4.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, in the
absence of the Chairman of the Board, shall preside at all meetings of the
shareholders and of the Board of Directors. The Chief Executive Officer shall be
responsible for carrying out the orders of and the resolutions and policies
adopted by the Board of Directors and shall have general management of the
business of the Corporation and shall exercise general supervision over all of
its affairs. In addition, the Chief Executive Officer shall have such powers and
perform such duties as may be provided for herein and as are normally incident
to the office and as may be prescribed by the Board of Directors. If and at such
time as the Board of Directors so determines, the Chief Executive Officer may
also serve as the President of the Corporation.
4.9 PRESIDENT. The President, in the absence of the Chairman of the
Board and the Chief Executive Officer, shall preside at all meetings of the
shareholders and of the Board of Directors. The President shall be the Chief
Executive Officer of the Corporation unless the Board of Directors has appointed
another person to such office, in which case the President shall be the Chief
Operating Officer of the Corporation and shall have such powers and perform such
duties as may be provided for herein and as are normally incident to the office
and as may be prescribed by the Board of Directors, the Chairman of the Board,
or the Chief Executive Officer.
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4.10 VICE CHAIRMEN. Vice Chairmen shall perform such duties and
exercise such powers as may be prescribed by the Board of Directors, the
Chairman of the Board, or the Chief Executive Officer.
4.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the
principal financial officer of the Corporation. The Chief Financial Officer is
authorized to sign any document filed with the Securities and Exchange
Commission or any state securities commission on behalf of the Corporation and
shall perform such duties and exercise such powers as are normally incident to
the office and as may be prescribed by the Board of Directors, the Chairman of
the Board, or the Chief Executive Officer.
4.12 CHIEF CREDIT OFFICER. The Chief Credit Officer shall perform such
duties and exercise such powers as are normally incident to the office and as
may be prescribed by the Board of Directors, the Chairman of the Board, or the
Chief Executive Officer.
4.13 GENERAL COUNSEL. The General Counsel shall perform such duties and
exercise such powers as are normally incident to the office and as may be
prescribed by the Board of Directors, the Chairman of the Board, or the Chief
Executive Officer.
4.14 EXECUTIVE VICE PRESIDENT -- EMPLOYEE SERVICES. The Executive Vice
President -- Employee Services shall perform such duties and exercise such
powers as are normally incident to the office and as may be prescribed by the
Board of Directors, the Chairman of the Board, or the Chief Executive Officer.
4.15 MANAGER OF RISK MANAGEMENT. The Manager of Risk Management shall
perform such duties and exercise such powers as are normally incident to the
office and as may be prescribed by the Board of Directors, the Chairman of the
Board, or the Chief Executive Officer.
4.16 EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE
PRESIDENTS. Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents shall perform such duties and exercise such powers as may be
prescribed by the Board of Directors, a committee thereof, the personnel
committee, the Chairman of the Board, or the Chief Executive Officer.
4.17 SECRETARY. The Secretary shall attend all sessions of the Board of
Directors and of the shareholders and record all votes and the minutes of all
proceedings in books to be kept for that purpose. The Secretary shall give or
cause to be given notice of all meetings of the shareholders and of the Board of
Directors, shall authenticate records of the Corporation, and shall perform such
other duties as are incident to the office or as may be prescribed by the Board
of Directors, the Chairman of the Board or the Chief Executive Officer. In the
absence or disability of the Secretary, the Assistant Secretary or such other
officer or officers as may be authorized by the Board of Directors or Executive
Committee thereof shall perform all the duties and exercise all of the powers of
the Secretary and shall perform such other duties as the Board of Directors,
Chairman of the Board or the Chief Executive Officer shall prescribe.
4.18 TREASURER. The Treasurer shall have the custody of the funds and
securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer, or the President, taking proper
vouchers for such disbursements, and shall render to the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer,
or the President, whenever they may require it, an account of all of his or her
transactions as Treasurer and of the financial condition of the Corporation, and
at a regular meeting of the Board of Directors preceding the annual
shareholders' meeting, a like report for the preceding year. The Treasurer shall
keep or cause to be kept an account of stock registered and transferred in such
manner and subject to such regulations as the Board of Directors may prescribe.
The Treasurer shall give the Corporation a bond, if required by the Board of
Directors, in such a sum and in form and with security satisfactory to the Board
of Directors for the faithful performance of the duties of the office and the
restoration to the Corporation,
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in case of his or her death, resignation or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his or her
possession, belonging to the Corporation. The Treasurer shall perform such other
duties as the Board of Directors may from time to time prescribe or require. In
the absence or disability of the Treasurer, the Assistant Treasurer shall
perform all the duties and exercise all of the powers of the Treasurer and shall
perform such other duties as the Board of Directors, the Chairman of the Board,
or the Chief Executive Officer shall prescribe.
4.19 AUDITOR. The Auditor shall perform such duties and exercise such
powers as are normally incident to the office and as may be prescribed by the
Board of Directors or the Chairman of the Audit Committee.
4.20 CONTROLLER. The Controller shall be the principal accounting
officer of the Corporation. The Controller is authorized to sign any document
filed with the Securities and Exchange Commission or any state securities
commission on behalf of the Corporation and shall assist the management of the
Corporation in setting the financial goals and policies of the Corporation,
shall provide financial and statistical information to the shareholders and to
the management of the Corporation and shall perform such other duties and
exercise such other powers as may be prescribed by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President. In the
absence or disability of the Controller, the Assistant Controller shall perform
all the duties and exercise all powers of the Controller and shall perform such
duties as the Board of Directors or the Chairman of the Board or the Chief
Executive Officer shall prescribe.
4.21 OTHER OFFICERS. Officers holding such other offices as may be
created pursuant to Sections 4.1 and 4.2 of these Bylaws shall have such
authority and perform such duties and exercise such powers as may be prescribed
by the Board of Directors, a committee thereof, the personnel committee, the
Chairman of the Board or the Chief Executive Officer.
4.22 OFFICER COMMITTEES. The directors, by resolution adopted by a
majority of the entire Board of Directors, may designate one or more committees,
consisting of two or more officers, and may delegate to such committee or
committees all such authority that the Board of Directors deems desirable that
is permitted by law. Members of such committees may take action without a
meeting and may participate in meetings to the same extent and in the same
manner that directors may take action and may participate pursuant to Sections
3.12 and 3.13 of these Bylaws.
ARTICLE FIVE
SHARES OF STOCK
5.1 CERTIFICATES. The certificates representing shares of stock of the
Corporation shall be numbered, shall be entered in the books or records of the
Corporation as they are issued, and shall be signed by the Chairman of the Board
or the Chief Executive Officer and any one of the following: the President, the
Treasurer, or the Secretary. Either or both of the signatures upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar other than an officer or employee of the Corporation.
Each certificate shall include the following upon the face thereof:
(a) A statement that the Corporation is organized under the laws
of the State of Tennessee;
(b) The name of the Corporation;
(c) The name of the person to whom issued;
(d) The number and class of shares, and the designation of the
series, if any, which such certificate represents;
(e) The par value of each share represented by such certificate;
or a statement that the shares are without par value; and
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(f) Such other provisions as the Board of Directors may from time to
time require.
5.2 SHARES NOT REPRESENTED BY CERTIFICATES. Notwithstanding the
provisions of Section 5.1 of these Bylaws, the Board of Directors may authorize
the issuance of some or all of the shares of any class without certificates. The
Corporation shall send to each shareholder to whom such shares have been issued
or transferred at the appropriate time any written statement providing
information about such shares, which is required by law.
5.3 STOCK TRANSFERS AND RECORD DATES. Transfers of shares of stock
shall be made upon the books of the Corporation by the record owner or by an
attorney, lawfully constituted in writing, and upon surrender of any certificate
therefor. The Board of Directors may appoint suitable agents in Memphis,
Tennessee, and elsewhere to facilitate transfers by shareholders under such
regulations as the Board of Directors may from time to time prescribe. The
transfer books may be closed by the Board of Directors for such period, not to
exceed 40 days, as may be deemed advisable for dividend or other purposes, or in
lieu of closing the books, the Board of Directors may fix in advance a date as
the record date for determining shareholders entitled notice of and to vote at a
meeting of shareholders, or entitled to payment of any dividend or other
distribution. The record date for voting or taking other action as shareholders
shall not be less than 10 days nor more than 70 days prior to the meeting date
or action requiring such determination of shareholders. The record date for
dividends and other distributions shall not be less than 10 days prior to the
payment date of the dividend or other distribution. All certificates surrendered
to the Corporation for transfer shall be canceled, and no new certificate shall
be issued until the former certificate for like number of shares shall have been
surrendered and canceled, except that in case of a lost or destroyed certificate
a new one may be issued on the terms prescribed by Section 5.5 of these Bylaws.
5.4 RECORD OWNERS. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof;
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, except as required by applicable
law.
5.5 LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES. The agent for
transfer of the Corporation's stock may issue new share certificates in place of
certificates represented to have been lost, destroyed, stolen or mutilated upon
receiving an indemnity satisfactory to the agent and the Secretary or Treasurer
of the Corporation, without further action of the Board of Directors.
ARTICLE SIX
INDEMNIFICATION
6.1 INDEMNIFICATION OF OFFICERS WHEN WHOLLY SUCCESSFUL. If any current
or former officer of the Corporation [including for purposes of this Article an
individual who, while an officer, is or was serving another corporation or other
enterprise (including an employee benefit plan and a political action committee,
which serves the interests of the employees of the Corporation or any of its
subsidiaries) in any capacity at the request of the Corporation and unless the
context requires otherwise the estate or personal representative of such
officer] is wholly successful, on the merits or otherwise, in the defense of any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative and whether formal or informal
("Proceeding"), to which the officer was a party because he or she is or was an
officer of the Corporation, the officer shall be indemnified by the Corporation
against all reasonable expenses, including attorney fees, incurred in connection
with such Proceeding, or any appeal therein.
6.2 INDEMNIFICATION OF OFFICERS WHEN NOT WHOLLY SUCCESSFUL. If any
current or former officer of the Corporation has not been wholly successful on
the merits or otherwise, in the defense of a Proceeding, to which the officer
was or was threatened to be made a party because he or she was or is an officer,
the officer shall be indemnified by the Corporation against any judgment,
settlement, penalty, fine (including any excise tax assessed with respect to an
employee benefit plan), or other liability and any reasonable expenses,
including attorney fees, incurred as a result of such Proceeding, or any appeal
therein, if authorized in the specific case after a determination has been made
that indemnification is permissible because the following standard of conduct
has been met:
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(a) The officer conducted himself or herself in good faith, and
(b) The officer reasonably believed: (i) in the case of conduct in
the officer's official capacity as an officer of the
Corporation that the officer's conduct was in the
Corporation's best interest; and (ii) in all other cases that
the officer's conduct was at least not opposed to its best
interests; and
(c) In the case of any criminal proceeding, the officer had no
reasonable cause to believe his or her conduct was unlawful;
provided, however, the Corporation may not indemnify an officer in connection
with a Proceeding by or in the right of the Corporation in which the officer was
adjudged liable to the Corporation or in connection with any other proceeding
charging improper benefit to the officer, whether or not involving action in his
or her official capacity, in which the officer was adjudged liable on the basis
that personal benefit was improperly received by the officer.
6.3 PROCEDURES FOR INDEMNIFICATION DETERMINATIONS. The
determination required by Section 6.2 herein shall be made as follows:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to the
Proceeding;
(b) If a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors (in which
designation directors who are parties may participate)
consisting solely of two or more directors not at the time
parties to the Proceeding;
(c) By independent special legal counsel: (i) selected by the
Board of Directors or its committee in the manner prescribed
in subsection (a) or (b); or (ii) if a quorum of the Board of
Directors cannot be obtained under subsection (a) and a
committee cannot be designated under subsection (b), selected
by majority vote of the full Board of Directors (in which
selection directors who are parties may participate); or, if a
determination pursuant to subsections (a), (b), or (c) of this
Section 6.3 cannot be obtained, then
(d) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the
Proceeding may not be voted on the determination.
6.4 SERVING AT THE REQUEST OF THE CORPORATION. An officer of the
Corporation shall be deemed to be serving another corporation or other
enterprise or employee benefit plan or political action committee at the request
of the Corporation only if such request is reflected in the records of the Board
of Directors or a committee appointed by the Board of Directors for the purpose
of making such requests. Approval by the Board of Directors, or a committee
thereof, may occur before or after commencement of such service by the officer.
6.5 ADVANCEMENT OF EXPENSES. The Corporation shall pay for or reimburse
reasonable expenses, including attorney fees, incurred by an officer who is a
party to a Proceeding in advance of the final disposition of the Proceeding if:
(a) The officer furnishes to the Corporation a written affirmation
of the officer's good faith belief that the officer has met
the standard of conduct described in Section 6.2 herein;
(b) The officer furnishes to the Corporation a written
undertaking, executed personally or on behalf of the officer,
to repay the advance if it is ultimately determined that the
officer is not entitled to indemnification; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification
under this bylaw.
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6.6 UNDERTAKING REQUIRED FOR EXPENSES. The undertaking required by
Section 6.5 herein must be an unlimited general obligation of the officer but
need not be secured and may be accepted without reference to financial ability
to make repayment.
6.7 PROCEDURES FOR EXPENSE DETERMINATIONS. Determinations and
authorizations of payments under Section 6.5 herein shall be made in the same
manner as is specified in Section 6.3 herein.
6.8 INDEMNIFICATION OF EMPLOYEES AND FORMER DIRECTORS. Every employee
and every former director of the Corporation shall be indemnified by the
Corporation to the same extent as officers of the Corporation.
6.9 NONEXCLUSIVITY OF RIGHT OF INDEMNIFICATION. The right of
indemnification set forth above shall not be deemed exclusive of any other
rights, including, but not limited to, rights created pursuant to Section 6.11
of these Bylaws, to which an officer, employee, or former director seeking
indemnification may be entitled. No combination of rights shall permit any
officer, employee or former director of the Corporation to receive a double or
greater recovery.
6.10 MANDATORY INDEMNIFICATION OF DIRECTORS AND DESIGNATED OFFICERS.
The Corporation shall indemnify each of its directors and such of the
non-director officers of the Corporation or any of its subsidiaries as the Board
of Directors may designate, and shall advance expenses, including attorney's
fees, to each director and such designated officers, to the maximum extent
permitted (or not prohibited) by law, and in accordance with the foregoing, the
Board of Directors is expressly authorized to enter into individual indemnity
agreements on behalf of the Corporation with each director and such designated
officers which provide for such indemnification and expense advancement and to
adopt resolutions which provide for such indemnification and expense
advancement.
6.11 INSURANCE. Notwithstanding anything in this Article Six to the
contrary, the Corporation shall have the additional power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, political action committee, or other enterprise, against
liability asserted against or incurred by the person in that capacity or arising
from the person's status as a director, officer, employee, or agent, whether or
not the Corporation would have the power to indemnify the person against the
same liability.
ARTICLE SEVEN
RETIREMENT
7.1 NON-EMPLOYEE DIRECTORS. Directors who are not also officers of the
Corporation or its affiliates shall be retired from the Board of Directors as
follows:
(a) Any director who shall attain the age of sixty-five (65) on or
before the last day of the term for which he or she was
elected shall not be nominated for re-election and shall be
retired from the Board of Directors at the expiration of such
term; provided, however, any director first elected to the
Board of Directors prior to April 17, 1996, may serve a
minimum of two three-year terms.
(b) For the purpose of maintaining boards of active business and
professional persons, directors leaving the occupation or the
position held at their last election (by retirement or
otherwise) will be expected to tender their resignation from
the Board of Directors upon such occasion. A resignation will
ordinarily be accepted unless (i) the director assumes another
management position deemed appropriate by the Board of
Directors for continuation, or (ii) the director is so engaged
in some specific project for the Board of Directors as to make
his or her resignation detrimental to the Corporation. Under
this circumstance, the Board of Directors may elect to set a
subsequent date for his or her retirement to coincide with the
completion of the project.
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Directors who are also officers of the Corporation or any of its affiliates will
be retired from the Board of Directors on the date of the annual meeting
coincident with or next following the date of the director's retirement from or
other discontinuation of active service with the Corporation and its affiliates.
7.2 OFFICERS AND EMPLOYEES. Except as provided in the following
sentence, the Corporation has no compulsory retirement age for its officers or
employees. Each officer or employee who has attained 65 years of age and who,
for the two-year period immediately before attaining such age, has been employed
in a "bona fide executive" or a "high policy-making" position as those terms are
used and defined in the Age Discrimination in Employment Act, Section 12(c), and
the regulations relating to that section prescribed by the Equal Employment
Opportunity Commission, all as amended from time to time (collectively, the
"ADEA"), shall automatically be terminated by way of compulsory retirement and
his or her salary discontinued on the first day of the month coincident with or
immediately following the 65th birthday, provided such employee is entitled to
an immediate nonforfeitable annual retirement benefit, as specified in the ADEA,
in the aggregate amount of at least $44,000. Notwithstanding the prior sentence,
the Board of Directors, in its discretion, may continue any such officer or
employee in service and designate the capacity in which he or she shall serve,
and shall fix the remuneration he or she shall receive. The Board of Directors
may also re-employ any former officer who had theretofore been retired.
ARTICLE EIGHT
EXECUTION OF DOCUMENTS
8.1 DEFINITION OF "DOCUMENT." For purposes of this Article Eight of the
Bylaws, the term "document" shall mean a document of any type, including, but
not limited to, an agreement, contract, instrument, power of attorney,
endorsement, assignment, transfer, stock or bond power, deed, mortgage, deed of
trust, lease, indenture, conveyance, proxy, waiver, consent, certificate,
declaration, receipt, discharge, release, satisfaction, settlement, schedule,
account, affidavit, security, bill, acceptance, bond, undertaking, check, note
or other evidence of indebtedness, draft, guaranty, letter of credit, and order.
8.2 EXECUTION OF DOCUMENTS. Except as expressly provided in Section 5.1
of these Bylaws (with respect to signatures on certificates representing shares
of stock of the Corporation), the Chairman of the Board, the Chief Executive
Officer, the President, any Vice Chairman, any Executive Vice President, any
Senior Vice President, any Vice President, the Chief Financial Officer, the
Chief Credit Officer, the General Counsel, the Executive Vice President -
Employee Services, the Manager of Risk Management, the Controller, the
Treasurer, the Secretary, and any other officer, or any of them acting
individually, may (i) execute and deliver in the name and on behalf of the
Corporation or in the name and on behalf of any division or department of the
Corporation any document pertaining to the business, affairs, or property of the
Corporation or any division or department of the Corporation, and (ii) delegate
to any other officer, employee or agent of the Corporation the power to execute
and deliver any such document. In addition, the President - Retail Financial
Services, the President - Business Financial Services/Memphis Financial
Services, and the Group Manager - Money Management of First Tennessee Bank
National Association (the "Bank"), the principal subsidiary of the Corporation,
or any of them acting individually, may, as agent of the Corporation, execute
and deliver in the name and on behalf of the Corporation any such document.
8.3 METHOD OF EXECUTION BY SECRETARY. Unless otherwise required by law,
the signature of the Secretary on any document may be a facsimile.
ARTICLE NINE
EMERGENCY BYLAWS
9.1 DEFINITION OF EMERGENCY. The provisions of this Article Nine shall
be effective only during an "emergency." An "emergency" shall be deemed to exist
whenever any two of the officers identified in Section 9.2 of these Bylaws in
good faith determine that a quorum of the directors cannot readily be assembled
because of a catastrophic event.
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9.2 NOTICE OF MEETING. A meeting of the Board of Directors may be
called by any one director or by any one of the following officers: Chairman of
the Board, Chief Executive Officer, President, any Vice Chairman, any Executive
Vice President, Chief Credit Officer, Chief Financial Officer, Controller,
General Counsel, Manager of Risk Management, Executive Vice President - Employee
Services, or Secretary. Notice of such meeting need be given only to those
directors whom it is practical to reach by any means the person calling the
meeting deems feasible, including, but not limited to, by publication and radio.
Such notice shall be given at least two hours prior to commencement of the
meeting.
9.3 QUORUM AND SUBSTITUTE DIRECTORS.. If a quorum has not been
obtained, then one or more officers of the Corporation or the Bank present at
the emergency meeting of the Board of Directors, as are necessary to achieve a
quorum, shall be considered to be substitute directors for purposes of the
meeting, and shall serve in order of rank, and within the same rank in order of
seniority determined by hire date by the Corporation, the Bank or any of their
subsidiaries. In the event that less than a quorum of the directors (including
any officers who serve as substitute directors for the meeting) are present,
those directors present (including such officers serving as substitute
directors) shall constitute a quorum.
9.4 ACTION AT MEETING. The Board as constituted pursuant to Section 9.3
and after notice has been provided pursuant to Section 9.2 may take any of the
following actions: (i) prescribe emergency powers of the Corporation, (ii)
delegate to any officer or director any of the powers of the Board of Directors,
(iii) designate lines of succession of officers and agents in the event that any
of them are unable to discharge their duties, (iv) relocate the principal office
or designate alternative or multiple principal offices, and (v) take any other
action that is convenient, helpful, or necessary to carry on the business of the
Corporation.
9.5 EFFECTIVENESS OF NON-EMERGENCY BYLAWS. All provisions of these
Bylaws not contained in this Article Nine, which are consistent with the
emergency bylaws contained in Article Nine, shall remain effective during the
emergency.
9.6 TERMINATION OF EMERGENCY. Any emergency causing this Article Nine
to become operative shall be deemed to be terminated whenever either of the
following conditions is met: (i) the directors and any substitute directors
determine by a majority vote at a meeting that the emergency is over or (ii) a
majority of the directors elected pursuant to the provisions of these Bylaws
other than this Article Nine hold a meeting and determine that the emergency is
over.
9.7 ACTION TAKEN IN GOOD FAITH. Any corporate action taken in good
faith in accordance with the provisions of this Article Nine binds the
Corporation and may not be used to impose liability on any director, substitute
director, officer, employee or agent of the Corporation.
ARTICLE TEN
MISCELLANEOUS PROVISIONS
10.1 FISCAL YEAR. The Board of Directors of the Corporation shall have
authority from time to time to determine whether the Corporation shall operate
upon a calendar year basis or upon a fiscal year basis, and if the latter, said
Board of Directors shall have power to determine when the said fiscal year shall
begin and end.
10.2 DIVIDENDS. Dividends on the capital stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting pursuant
to law. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends or for repairing or
maintaining any property of the Corporation, or for such other purposes as the
directors shall think conducive to the interest of the Corporation.
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10.3 SEAL. This Corporation shall have a Corporate Seal which shall
consist of an imprint of the name of the Corporation, the state of its
incorporation, the year of incorporation and the words "Corporate Seal." The
Corporate Seal shall not be required to establish the validity or authenticity
of any document executed in the name and on behalf of the Corporation.
10.4 NOTICES. Whenever notice is required to be given to any director,
officer or shareholder under any of the provisions of the law, the Charter, or
these Bylaws (except for notice required by Sections 2.8 and 3.6 of these
Bylaws), it shall not be construed to require personal notice, but such notice
may be given in writing by depositing the same in the United States mail,
postage prepaid, or by telegram, teletype, facsimile transmission or other form
of wire, wireless, or other electronic communication or by private carrier
addressed to such shareholder at such address as appears on the Corporation's
current record of shareholders, and addressed to such director or officer at
such address as appears on the records of the Corporation. If mailed as provided
above, notice to a shareholder shall be deemed to be effective at the time when
it is deposited in the mail.
10.5 BYLAW AMENDMENTS. The Board of Directors shall have power to make,
amend and repeal the Bylaws or any Bylaw of the Corporation by vote of not less
than a majority of the directors then in office, at any regular or special
meeting of the Board of Directors. The shareholders may make, amend and repeal
the Bylaws or any Bylaw of this Corporation at any annual meeting or at a
special meeting called for that purpose only by the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all outstanding
voting stock, and all Bylaws made by the directors may be amended or repealed by
the shareholders only by the vote of the holders of at least eighty percent
(80%) of the voting power of all outstanding voting stock. Without further
authorization, at any time the Bylaws are amended, the Secretary is authorized
to restate the Bylaws to reflect such amendment, and the Bylaws, as so restated,
shall be the Bylaws of the Corporation.
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EXHIBIT 10(d)
FIRST TENNESSEE NATIONAL CORPORATION
1992 RESTRICTED STOCK INCENTIVE PLAN
(As Amended and Restated 4-20-99)
1. Purpose. The purpose of the First Tennessee National Corporation
1992 Restricted Stock Incentive Plan (the "Plan") is to advance the interests of
First Tennessee National Corporation and any successor thereto (the "Company")
by awarding restricted shares of the common capital stock of First Tennessee
National Corporation, par value $0.625 per share ("Common Stock"), to certain
officers and other key executives of the Company and its subsidiaries who make
exceptional contributions to the Company by their ability, loyalty, industry,
and innovativeness and by making automatic, nondiscretionary grants of
restricted shares to non-employee Directors. The Company intends that the Plan
will closely associate the interests of officers and key executives and
Directors with those of the Company's shareholders and will facilitate securing,
retaining, and motivating officers and key executives and Directors of high
caliber and potential.
2. Administration. The Plan shall be administered by the Human
Resources Committee (the "Committee") of the Board of Directors (the "Board") of
the Company. No person shall be appointed to the Committee (a) who is (or has
been during the one year period prior to such appointment) eligible to receive
an award under the Plan (except as specifically provided under Section 4(b) for
non-employee Directors) or any other similar plan of the Company; or (b) who has
received an award under the Plan (except for an award under section 4(b)) if, at
the time of such appointment, any restriction on the transferability of the
shares so awarded remains in effect or remained in effect at any time during the
one-year period immediately prior to such appointment. The Committee shall have
full and final authority in its discretion to interpret conclusively the
provisions of the Plan; to decide all questions of fact arising in its
application; to determine the employees to whom awards shall be made under the
Plan; to determine the award to be made and the amount, size, terms and
restrictions of each such award; to determine the time when awards will be
granted; and to make all other determinations necessary or advisable for the
administration of the Plan other than determinations required in connection with
awards granted under Section 4(b), except to the extent permitted under Rule
16b-3 of the Securities and Exchange Commission ("SEC").
3. Shares Subject to Plan. The shares issued under the Plan shall not
exceed in the aggregate 1,320,000 shares of Common Stock. Such shares shall be
authorized and unissued shares. Any shares which are awarded hereunder and
subsequently forfeited shall again be available under the Plan.
4. Participants.
(a) Persons eligible to participate in the Plan and receive awards
under Section 5 shall be limited to those officers and other key
executives of the Company or any of its subsidiaries who, in the
judgment of the Committee, make a significant impact upon the
profitability of the Company through their decisions, actions and
counsel. Members of the Board who are not also officers or employees of
the Company or its subsidiaries shall not be eligible for
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selection or awards, except as specifically provided in Section 4(b).
(b) Each current Director of the Company on the effective date of the
Plan who is not a salaried officer or employee of the Company or any of
its subsidiaries ("non-employee Director") shall receive an award of
6,000 shares of restricted Common Stock ("restricted shares") on May 1,
1992 or the date required by Section 14 of the Plan, if later. Each new
non-employee Director who becomes a Director after the effective date
of the Plan shall receive an award of 6,000 restricted shares on the
later of the date specified in the prior sentence or the first business
day of the month following the date such person becomes a Director.
Restricted shares granted under this Section 4(b) shall be evidenced by
a written agreement in such form as the Committee shall from time to
time approve, which agreement shall comply with and be subject to the
following terms and conditions:
(1) Restrictions. Share awarded, and the right to vote such shares and
to receive dividends thereon, may not be sold, assigned, transferred,
exchanged, pledged, hypothecated, or otherwise encumbered during the
restriction period specified herein. During the restriction period the
non-employee Director shall have all other rights of a shareholder,
including, but not limited to, the right to vote and receive dividends
on such shares.
(2) Certificates. Each certificate evidencing restricted shares shall
be deposited with the Company Treasurer, accompanied by a stock power
in blank executed by the non-employee Director, and shall bear an
appropriate restrictive legend.
(3) Forfeiture. In the event that the non-employee Director's
directorship terminates for any reason other than death, disability
(defined as a total and permanent disability), retirement (which is
defined as any termination not caused by death or disability, after the
attainment of age 65 or ten years of service as a director of the
Company), or a Change in Control (defined below) of the Company, all
shares which at the time are restricted shares shall be forfeited to
the Company. If a non-employee Director's directorship ends as a result
of death, disability, retirement, or a Change in Control, all
restrictions shall lapse. A "Change in Control" of the Company shall
have occurred when a person (other than the Company, a subsidiary of
the Company, or an employee benefit or stock plan of the Company) or
other entity, alone or together with its Affiliates and Associates (as
those terms are used in the regulations under the Securities Exchange
Act of 1934), becomes the beneficial owner of 20% or more of the
general voting power of the Company.
(4) Lapse of Restrictions. Subject to the provisions of Section
4(b)(3), all restrictions shall lapse at the rate of ten percent (10%)
per year on the month and day in each year following the year of grant
corresponding to the day before the month and day on which the grant
was made.
(5) Fair market value. Fair market value as of any date shall be the
mean between the high and low sales prices at which shares of Company
Common Stock were sold on the valuation
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day as quoted by NASDAQ or, if there were no sales on that date, then
on the last day prior to the valuation day during which there were
sales.
(6) Tax Election. The non-employee Director will enter into an
agreement with the Company not to make an election under Section 83(b)
of the Internal Revenue Code of 1986, as amended.
(7) Nontransferability. If required by the then current SEC Rule 16b-3
or any successor provision, then notwithstanding anything herein to the
contrary, restricted shares acquired under this Section 4(b) of the
Plan may not be sold for at least six months after acquisition, except
in the case of the non-employee Director's death or disability.
5. Awards. The Committee shall make awards of shares of Common Stock to
persons eligible under Section 4(a) in accordance with terms and conditions set
forth in restricted stock agreements (the "Agreements") executed by participants
in such form and containing such terms and conditions (including those set forth
below) consistent with the Plan as the Committee shall determine.
(a) Restriction Period. At the time of each award, the Committee shall
determine the period during which the shares awarded shall be subject
to the risks of forfeiture and other terms and conditions in the
Agreements. The Committee may at any time accelerate the date of lapse
of restrictions with respect to all or any part of the shares awarded
to a participant.
(b) Certificates. Each certificate issued in respect of shares awarded
to a participant shall be deposited with the Company, or its designee,
together with a stock power executed in blank by the participant, and
shall bear an appropriate legend disclosing the restrictions on
transferability imposed on such shares by the Plan and the Agreements.
(c) Restrictions Upon Transfer. Shares awarded, and the right to vote
such shares and to receive dividends thereon, may not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered during the restriction period applicable to such shares.
During the restriction period the participant shall have all other
rights of a stockholder, including, but not limited to, the right to
vote and receive dividends on such shares. If as a result of a stock
dividend, stock split, recapitalization, or other adjustment in the
stated capital of First Tennessee National Corporation, or as the
result of a merger, consolidation, or other reorganization, the Common
Stock is increased, reduced, or otherwise changed and by virtue thereof
the recipient shall be entitled to new or additional or different
shares, such shares shall be subject to the same terms, conditions, and
restrictions as the original shares.
(d) Lapse of Restrictions. The Agreements shall specify the terms and
conditions upon which any restrictions upon any shares awarded under
the Plan shall lapse. Upon the lapse of such restrictions, certificates
evidencing such shares of common stock without the foregoing
restrictive legend shall be issued to the participant or his legal
representative unless a valid deferral election has been made pursuant
to Section 16 hereof, in which case certificates shall
Page 3 of 11
<PAGE> 4
be issued as provided in Section 16. Each such new certificate shall
bear such alternative legend as the Committee shall specify.
(e) Termination Prior to Lapse of Restrictions. In the event of the
termination of a participant's employment for any reason (except (i)
death or (ii), if the Committee approves, retirement or total and
permanent disability) prior to the lapse of Plan or Agreement
restrictions, all shares subject to unlapsed restrictions shall be
forfeited by such participant to the Company without payment of any
consideration by the Company, and neither the participant nor any
successors, heirs, assigns or personal representatives of such
participant shall thereafter have any further rights or interest in
such shares or certificates.
(f) Death, Disability or Retirement of Participant. Unless the
Agreements provided otherwise, all restrictions imposed by this Plan
and the Agreement shall lapse upon the death of the participant, or, if
such lapsing is approved by the Committee. upon the total and permanent
disability or retirement of the participant.
(g) Change in Control. Notwithstanding anything herein to the contrary
(except for Section 4(b)(3), which is applicable solely to non-employee
directors), all restrictions imposed by this Plan or any Agreement
shall lapse immediately upon a Change in Control (as such term is
defined in the following sentence). A "Change in Control" means the
occurrence of any one of the following events:
(i) individuals who, on January 21, 1997, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to January 21, 1997, whose election or nomination for
election was approved by a vote of at least three-fourths (3/4) of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual elected or nominated as a director of the Company initially
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board shall be deemed to be an Incumbent Director;
(ii) any "Person" (as defined under Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as
used in Section 13(d) or Section 14(d) of the Exchange Act) is or
becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's
then outstanding securities eligible to vote for the election of the
Board (the "Company Voting Securities"); provided, however, that the
event described in this paragraph (ii) shall not be deemed to be a
change in control by virtue of any of the following acquisitions: (A)
by the Company or any entity in which the Company directly or
indirectly beneficially owns more than 50% of the voting securities or
interests (a
Page 4 of 11
<PAGE> 5
"Subsidiary"), (B) by an employee stock ownership or employee benefit
plan or trust sponsored or maintained by the Company or any Subsidiary,
(C) by any underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) pursuant to a Non-Qualifying
Transaction (as defined in paragraph (iii));
(iii) the shareholders of the Company approve a merger,
consolidation, share exchange or similar form of corporate transaction
involving the Company or any of its Subsidiaries that requires the
approval of the Company's shareholders, whether for such transaction or
the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination:
(A) more than 50% of the total voting power of (x) the corporation
resulting from such Business Combination (the "Surviving Corporation"),
or (y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were
outstanding immediately prior to the consummation of such Business
Combination (or, if applicable, is represented by shares into which
such Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit
plan sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) and
(C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) were Incumbent Directors at the time of the
Board's approval of the execution of the initial agreement providing
for such Business Combination (any Business Combination which satisfies
all of the criteria specified in (A), (B) and (C) above shall be deemed
to be a "Non-Qualifying Transaction"); or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Computations required by paragraph (iii) shall be made on and as of the
date of shareholder approval and shall be based on reasonable assumptions that
will result in the lowest percentage obtainable.
Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such
Page 5 of 11
<PAGE> 6
person, a change in control of the Company shall then occur.
6. Supplemental Cash Payments. Agreements entered into in connection
with awards under Section 5 may provide for the payment by the Company of
supplemental cash payments to a participant at the end of the restriction period
or periods relating to such restricted stock award. Supplemental cash payments
shall be in such amounts and subject to such terms and conditions as shall be
provided by the Committee at the time of grant; provided, however, in no event
shall the amount of each payment exceed the fair market value of the shares with
respect to which restrictions lapse at the time of such payment.
7. Loans. The Committee may, in its discretion to further the purposes
of the Plan, provide for cash loans to participants who receive awards under
Section 5 in connection with all or part of any restricted stock award under the
Plan. Any such loan shall be evidenced by loan agreements or other instruments
in such form and containing such terms and conditions (including, without
limitation, provisions for the forgiveness or acceleration of such loans or
parts thereof) as the Committee shall prescribe from time to time.
8. Rights to Terminate Employment. Nothing in the Plan or in any
Agreement entered into pursuant to the Plan shall confer upon any participant
the right to continue in the employment or to continue as a Director of the
Company or affect any right which the Company may have to terminate the
employment or directorship of such participant.
9. Withholding. Whenever the Company proposes or is required to issue
or transfer shares of Common Stock under the Plan, the Company shall have the
right to withhold from sums due the recipient, or to require the recipient to
remit to the Company, any amount sufficient to satisfy any federal, state and/or
local withholding tax requirements prior to the delivery of any certificate for
such shares. Whenever payments are to be made in cash, such payments shall be
net of an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements imposed with respect to such payments.
10. Non-Uniform Determinations. The Committee's determinations under
Sections 4(a) and 5 of the Plan (including, without limitation, determinations
of the persons to receive awards, the form, amount and the timing of such
awards, and the terms and provisions of such awards and the Agreements) need not
be uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, regardless of whether such persons
are similarly situated.
11. Adjustments. In the event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the
Committee shall appropriately adjust the number and class of shares which may be
issued under the Plan and shall provide for corresponding equitable adjustments
in shares previously awarded and still subject to restrictions hereunder.
Notwithstanding anything herein to the contrary, if Committee action under this
Section 11 with respect to awards under
Page 6 of 11
<PAGE> 7
Section 4(b) of the Plan to non-employee Directors would affect the status of a
Director as a "disinterested person" under Rule 16b-3, then the first sentence
of this Section 11 shall not apply to awards to non-Employee Directors under
Section 4(b). For such awards under Section 4(b), any increase in the number of
outstanding shares of common stock of the Company occurring through stock splits
or stock dividends after the adoption of the Plan shall automatically be
reflected proportionately (1) in the number and class of shares which may be
issued under the Plan and (2) in shares previously awarded and still subject to
restrictions hereunder. Any fractional shares resulting from such adjustments
shall be eliminated.
12. Amendment. The Committee may discontinue, suspend or amend the Plan
at any time, except that without shareholder approval, the Committee may not
materially (a) increase the maximum number of shares which may be issued under
the Plan (other than increases pursuant to paragraph 11 hereof); (b) increase
the benefits accruing to participants under the Plan; or (c) modify the
requirements as to eligibility for participation in the Plan. Also, if required
by the then current Rule 16b-3 or any successor provision, the Plan provisions
contained in Section 4(b) regarding the automatic, non-discretionary grants to
non-employee Directors shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, ERISA, or the
rules thereunder. The termination, suspension or any modification or amendment
of the Plan shall not, without the consent of a participant, affect a
participant's rights under an award granted prior thereto.
13. Effect on Other Plans. Participation in the Plan shall not affect
an employee's eligibility to participate in any other benefit or incentive plan
of the Company, and any awards made pursuant to the Plan shall not be used in
determining the benefits provided under any other plan of the Company, unless
specifically provided in such other plan.
14. Duration of the Plan. The Plan shall become effective when it is
approved by the shareholders of the Company. The Plan shall remain in effect
until all shares awarded under the Plan are free of all restrictions imposed by
the Plan and Agreements, but no award shall be made more than ten years after
the date the Plan is approved by the shareholders of the Company.
Notwithstanding anything herein to the contrary, Section 4(b) of the Plan shall
not become effective until the first business day of the month following receipt
by the Company of a no-action or interpretive letter from the staff of the SEC
confirming that participation and an award under Section 4(b) will no affect the
status of a director as a "disinterested person" under Rule 16b-3 or an opinion
of counsel, which may be in-house counsel, to that effect.
15. Successors. This Plan shall bind any successor of the Company, its
assets or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that the
Company would be obligated under this Plan if no succession had taken place. In
the case of any transaction in which a successor would not by the foregoing
provision or by operation of law be bound by this Plan, the Company shall
require such successor expressly and unconditionally to assume and agree to
perform the Company's obligations under this Plan, in the same manner and to the
same extent that the Company would be required to perform if no such succession
had taken place. The term "Company," as used in the Plan, shall mean the
Page 7 of 11
<PAGE> 8
Company as hereinbefore defined and any successor or assignee to the business or
assets which by reason hereof becomes bound by this Plan.
16. Deferrals. Notwithstanding anything in this Plan to the contrary,
the provisions of this Section 16 shall apply to all deferral elections made in
compliance with this section. All participants who have received awards under
Section 5 of the Plan, some or all of the restrictions on which have not lapsed
as of December 15, 1998, and all persons who receive an award under Section 5 of
the Plan after December 15, 1998 whose Agreement provides that the participant
may elect to defer under the Plan with respect to such award are permitted to
make deferral elections with respect to such awards of restricted stock by
following the provisions of this Section 16.
(a) Participants who elect to defer must enter into an irrevocable
deferral agreement, in the form approved by the Committee, which
provides for the exchange of shares of restricted stock for restricted
stock units ("RSU's"), and the effective date (as defined below) of
such deferral election must occur before restrictions are scheduled to
lapse with respect to such shares of restricted stock, assuming
accelerated performance criteria are met, and must be at least any
minimum number of days before restrictions are scheduled to lapse that
is required by the Committee.
(b) Participants must tender certificates for the shares of restricted
stock with respect to which the deferral agreement is being entered
into at the time the deferral agreement is tendered, if the shares are
not held in book-entry format by the Corporation's transfer agent.
Participants agree to execute any form that may be required by the
transfer agent with respect to book-entry or certificated shares.
(c) The effective date of the deferral election is the close of
business on the business day on which the Manager of the Personnel
Division, or her designee, receives the deferral election and, if the
shares of restricted stock are not held in book-entry format,
certificates for the shares of restricted stock with any properly
completed and executed stock powers that may be requested by the
Personnel Division.
(d) The participant must select a deferral period, which is a period of
time that ends on any future date, not in any event to exceed actual
retirement (whether normal or early) plus five years.
(e) Until the accelerated lapse date approved by the Committee, or if
accelerated performance criteria are not met, until the date specified
in the participant's Agreement as the date on which restrictions on the
Restricted Shares will lapse, RSU's will remain subject to forfeiture
in the same manner as Restricted Shares would have remained subject to
forfeiture under the provisions of the Plan and related Agreement,
except as is provided below in the event of death, disability,
retirement, or other termination of employment, or Change in Control.
In other words, RSU's will be subject to restrictions identical to the
restrictions on Restricted Shares, and restrictions on RSU's will
lapse, if at all, at the same time that restrictions on
Page 8 of 11
<PAGE> 9
Restricted Shares would have lapsed had the participant not made a
deferral election. If accelerated performance criteria have been met,
then RSU's will be fully vested and not subject to forfeiture.
(f) A participant's deferral election must be for 100% percent of the
shares of restricted stock with respect to which restrictions are
scheduled to lapse if performance criteria are met for a performance
period (generally 1/3 of the shares originally awarded). A participant
may make a separate election for each of the three different
accelerated performance criteria performance periods applicable to an
award under the Plan, but any election must be for 100 percent of the
shares with respect to which restrictions may lapse if performance
criteria are met.
(g) For each participant electing to defer, upon the effective date of
the deferral a deferral account will be established by the Corporation,
consisting of a subaccount reflecting RSU's and, unless a participant
has elected to receive earnings attributable to RSU's currently, and
not on a deferred basis, pursuant to subsection 16(l), a subaccount
representing cash equal to the earnings credited to the account with
respect to the dividend equivalents and interest thereon. The
participant's RSU subaccount will be credited with RSU's, based on the
number of shares of restricted stock exchanged by the participant
pursuant to the participant's deferral election, with each RSU being
equivalent to one share of the Corporation's common stock. Additional
RSU's will be credited to the participant's RSU subaccount at the time
of the payment of any stock split or stock dividend on the
Corporation's common stock in accordance with subsection (h) herein.
(h) Any stock split and stock dividend that is declared with respect to
the Corporation's common stock having a payment date that occurs on or
after the Effective Date and before the deferral period has terminated
will result in a corresponding stock split or stock dividend being made
with respect to the RSU's in Participant's deferral account with the
result that Participant will be issued that number of shares of the
Corporation's common stock at the termination of the deferral period
that Participant would have owned had he or she received shares of
restricted stock, without restriction, at the time of the lapsing of
restrictions on the restricted stock had Participant not entered into
this Agreement and had Participant then maintained ownership of such
common stock through the payment date of the stock dividend or stock
split.
(i) Earnings will be credited to the participant's cash subaccount and
accrued on the RSU's as follows: on each date on which the Corporation
pays a dividend on its shares of common stock, an amount equal to such
dividend will be credited to the participant's account with respect to
each RSU. Then, as of January 1st of each year, an additional amount
will be credited to the participant's account to reflect earnings on
the dividend equivalents from the time they were credited to the
account for the prior plan year. The rate of earnings credited for the
year will be the rate disclosed under the caption "Annualized Ten Year
Treasury Rate" in the Federal Reserve Statistical Release in January of
the year following the year with
Page 9 of 11
<PAGE> 10
respect to which earnings are to be credited, and the amount will be
computed by multiplying the dividend equivalent by the rate by a factor
representing the fraction of the year (e.g., 100% for a January 1st
dividend equivalent, 75% for an April 1st dividend equivalent, 50% for
a July 1st dividend equivalent, and 25% for a October 1 dividend
equivalent) remaining after the dividend equivalent was credited to the
participant's account. Interest will compound as follows: for any cash
credited to the account that existed on the first day of the prior plan
year (excluding any dividend equivalent that is credited to the account
on such day), earnings will be credited in an amount equal to the
amount of such cash multiplied by the applicable ten year treasury rate
factor. For the portion of the year in which a distribution from the
deferral account is made to the participant, earnings will be credited
on any cash credited to the account during such year from the time such
cash is credited through the date of distribution at the rate employed
for the previous year.
(j) Payment from the participant's deferral account will be made in a
single lump sum, computed as follows: with respect to the participant's
RSU subaccount, one share of the Corporation's common stock will be
paid to the participant for each RSU credited to such subaccount, and
with respect to the participant's cash subaccount, cash in the amount
credited to such subaccount will be paid to the participant.
(k) Payment from the participant's deferral account will be made to the
participant (or, in the event of the participant's death, his or her
beneficiary) only at the following times: (1) if restrictions on the
RSU's have already lapsed at the time payment is scheduled to be made,
then on the earliest to occur of the following dates: the date selected
by the participant, the date of a Change in Control as defined in the
Plan, or a date selected by the Corporation following the participant's
death, disability, or termination of employment for any reason other
than normal or early retirement that is no later than the last day of
the month following the month in which there occurs the death,
disability, or termination of employment of the participant for any
reason other than normal or early retirement, or (2) if restrictions on
the RSU's have not lapsed at the time payment is otherwise scheduled to
be made and subject to the last two sentences of this subsection 16(k),
then on the earliest to occur of the following dates: (i) the later of
the date selected by the participant or the date restrictions on the
RSU's lapse, if the shares have not been forfeited before such lapse
date, (ii) the date of a Change in Control as defined in the Plan, or
(iii) a date selected by the Corporation following the participant's
death, or if the Committee approves, the participant's retirement or
disability that is no later than the last day of the month following
the month in which there occurs the death or, if the Committee has
approved, the disability or retirement of the participant. The RSU's
and any right to receive Restricted Shares without restrictions will be
forfeited by the participant if there occurs a termination of the
participant's employment prior to the lapsing of restrictions on RSU's
or if the participant becomes disabled or retires prior to a lapsing of
restrictions on RSU's and the Committee has not acted to approve
payment to the participant in the event of disability or retirement.
Notwithstanding a forfeiture of RSU's, the balance in participant's
cash subaccount within participant's deferral account will be paid to
participant immediately following the occurrence of such a forfeiture.
Page 10 of 11
<PAGE> 11
(l) A participant is permitted to elect to receive earnings
attributable to the participant's RSU subaccount currently, and not on
a deferred basis, by indicating such an election on the participant's
irrevocable deferred agreement. If such an election is made, the
participant will receive in cash on each date on which the Corporation
pays a dividend on its shares of common stock an amount equal to such
dividend with respect to each RSU in the participant's RSU account.
Such payment will be made in lieu of crediting any amount to
participant's cash subaccount pursuant to subsection 16(i) and such
participant's cash subaccount will be deemed to be "zero" for all
purposes of the Plan.
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
TENNESSEE NATIONAL CORPORATION'S MARCH 31, 1999, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 589,789
<INT-BEARING-DEPOSITS> 1,416
<FED-FUNDS-SOLD> 91,701
<TRADING-ASSETS> 420,133
<INVESTMENTS-HELD-FOR-SALE> 1,882,113
<INVESTMENTS-CARRYING> 546,844
<INVESTMENTS-MARKET> 544,529
<LOANS> 11,984,594
<ALLOWANCE> 139,387
<TOTAL-ASSETS> 18,325,004
<DEPOSITS> 12,197,807
<SHORT-TERM> 2,934,282
<LIABILITIES-OTHER> 1,535,425
<LONG-TERM> 400,501
100,000
0
<COMMON> 81,193
<OTHER-SE> 1,075,796
<TOTAL-LIABILITIES-AND-EQUITY> 18,325,004
<INTEREST-LOAN> 249,983
<INTEREST-INVEST> 38,982
<INTEREST-OTHER> 11,301
<INTEREST-TOTAL> 300,266
<INTEREST-DEPOSIT> 102,685
<INTEREST-EXPENSE> 152,099
<INTEREST-INCOME-NET> 148,167
<LOAN-LOSSES> 14,826
<SECURITIES-GAINS> (34)
<EXPENSE-OTHER> 336,797
<INCOME-PRETAX> 83,107
<INCOME-PRE-EXTRAORDINARY> 53,029
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,029
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
<YIELD-ACTUAL> 3.76
<LOANS-NON> 30,795
<LOANS-PAST> 30,452
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 36,969
<ALLOWANCE-OPEN> 136,013
<CHARGE-OFFS> 13,541
<RECOVERIES> 2,089
<ALLOWANCE-CLOSE> 139,387
<ALLOWANCE-DOMESTIC> 139,387
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
