8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

April 17, 2003

National Commerce Financial Corporation

(Exact name of registrant as specified in its charter)

Tennessee	0-6094	62-0784645
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One Commerce Square, Memphis, Tennessee 38150

(Address of principal executive offices)

Registrant’s telephone number, including area code

(901) 523-3434

             N/A             

(Former name or former address, if changed since last report)

Item 7. Financial Statements and Exhibits.

The following exhibits are furnished pursuant to Items 9 and 12 (reported herein under the Item 9 caption in accordance with the guidance provided in SEC Release Nos. 33-8216 and 34-47583), is not to be considered “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any previous or future filing by the Registrant under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act:

Exhibit No. 99.1 News Release.

Exhibit No. 99.2 Supplemental Financial Tables.

Item 9. Regulation FD Disclosure (Furnished under Items 9 and 12 Pursuant to SEC Release Nos. 33-8216 and 34-47583)

On April 17, 2003, the Registrant issued an earnings release for the quarter ended March 31, 2003, a copy of which is furnished as Exhibit 99.1 to this Current Report.

After filing this Current Report, the Registrant will hold an investor conference call and webcast to discuss financial results for the first quarter ended March 31, 2003. Furnished with this Current Report as Exhibit 99.2 pursuant to Regulation FD and Item 9 of Form 8-K are Supplemental Financial Tables. The contents of these Supplemental Financial Tables will be discussed by the Registrant’s management and otherwise disclosed during the conference call and webcast. All information in the Supplemental Financial Tables is presented as of March 31, 2003 and the Registrant does not assume any obligation to correct or update said information in the future.

All of the foregoing information is furnished by the Registrant pursuant to Items 9 and 12 of Form 8-K in accordance with the guidance provided in SEC Release Nos. 33-8216 and 34-47583 and is not to be considered “filed” under the Exchange Act, and shall not be incorporated by reference into any previous or future filing by the Registrant under the Securities Act or the Exchange Act.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NATIONAL COMMERCE FINANCIAL CORPORATION Registrant
By:	/s/    RICHARD W. EDWARDS
	Richard W. Edwards Chief Accounting Officer

Date: April 17, 2003

3

EX-99.1

Exhibit 99.1

National Commerce Financial Reports First Quarter Earnings

MEMPHIS, Tennessee, (April 17, 2003)—National Commerce Financial Corporation (NYSE: NCF) today announced first quarter 2003 net income of $64.1 million, compared to $74.9 million reported for the first quarter of 2002, a decline of 14.4 percent. Earnings per diluted share was $.31 compared to $.36 per share for the first quarter of 2002, a decline of 13.9 percent. Net income and earnings per diluted share in the first quarter of 2003 were reduced by $12.8 million after-tax, or $.06 per diluted share, from a charge related to the proposed settlement of a class action lawsuit against its First Mercantile business unit. First quarter 2002 net income was reduced by $3.2 million after-tax, or $.02 per diluted share, from conversion/merger expenses. The Company’s return on average assets and return on average shareholders’ equity were 1.22 percent and 9.64 percent, respectively in the first quarter of 2003, compared to 1.55 percent and 12.21 percent, respectively for the first quarter of 2002.

Operating cash earnings, defined as GAAP net income adjusted for core deposit amortization, the First Mercantile charge and conversion/merger expenses, net of tax, were $86.8 million in the first quarter of 2003, down 2.2 percent from $88.7 million in first quarter 2002. Operating cash earnings per diluted share was $.42, down 2.3 percent from $.43 in first quarter 2002. The Company’s operating cash return on average tangible assets and return on average tangible shareholders’ equity were 1.76 percent and 25.33 percent, respectively in the first quarter of 2003 versus 1.97 percent and 29.83 percent in the same period of 2002.

“First quarter 2003 presented numerous challenges to our net interest income. Nevertheless, the non-interest income, non-interest expense, and asset quality of the Company remain very solid,” said Ernest C. Roessler, chairman, president and chief executive officer of NCF. “During 2002, the Company managed its interest rate sensitivity to an asset sensitive position in the expectation of rising rates in the latter part of 2003. The unprecedented rate environment has increased prepayments in our securities and mortgage loan portfolios and caused a change in mix of our loan portfolio as borrowers continue to opt for lower yielding variable rate products. While these factors have compressed the net interest margin in the short-term, we are confident the Company’s asset quality and balance sheet strength will lead to strong long-term results. Throughout the remainder of 2003, interest rate sensitivity will be managed to a more neutral position and prudent expense savings will be implemented throughout the organization to fund our continued expansion commitment in the dynamic Atlanta market and to offset the decline in the net interest margin. National Commerce’s long-term prospects remain very favorable.”

NET INTEREST INCOME

For the first quarter of 2003, taxable equivalent net interest income was $184.4 million, down .9 percent from $186.1 in the first quarter 2002 and 4.4 percent from $192.8 percent in the fourth quarter of 2002, primarily as the result of a lower net interest margin. The Company’s net interest margin declined 41 basis points from 4.39 percent in the first quarter of 2002 and 22 basis points from 4.20 percent in the fourth quarter of 2002. The decline from the fourth quarter of 2002 is attributed primarily to prepayments of collateralized mortgage obligations which resulted in increased premium amortization on the investments and lower overall portfolio yields as higher rate investments were replaced with securities at lower rates. In addition, the Company experienced lower commercial loan yields as a result of fixed rate borrowers opting to refinance into variable rate products and was unable to reduce its deposit costs to the same extent.

The declines in securities and loan yields caused the Company’s average earning asset yield to decline 38 basis points from 6.23 percent in fourth quarter 2002 to 5.85 percent in first quarter 2003. The Company’s average cost of interest-bearing liabilities declined 18 basis points over the same period from 2.36 percent in fourth quarter 2002 to 2.18 percent in first quarter 2003. The Company has taken steps to reduce its asset sensitivity by lowering the risk of prepayments in the investment portfolio while at the same time shortening its maturities of certificates of deposit and other borrowings.

In late March 2003, the Company consummated a securitization transaction which resulted in classifying “one-to-four family” mortgages as available for sale investment securities. The average and period end loan balances were reduced by $50 million and $646 million, respectively, as a result of this transaction. Excluding the impact of the securitization and the December 2002 acquisition of BancMortgage, average first quarter loans outstanding were essentially flat at $12.7 billion compared to $12.8 billion in fourth quarter 2002. Commercial loans and home equity lines of credit continue to experience strong growth, growing at annualized rates of 12.9 percent and 31.8 percent, respectively, over fourth quarter, but were offset by declines in installment and mortgage loans. End of period total loans at March 31, 2002 were $12.3 billion.

ASSET QUALITY

Industry leading asset quality remains a hallmark of the Company. Net charge-offs declined to $7.7 million or .24 percent of average loans in the first quarter of 2003 from $7.8 million or .26 percent of average loans in the first quarter of 2002.

Non-performing assets have remained stable over the last four quarters. At March 31, 2003, non-performing assets totaled $67.8 million or .55 percent of loans, foreclosed real estate, and other repossessed assets, up slightly from $65.6 or .51 percent at December 31, 2002. Non-performing assets at March 31, 2003 included $32.8 million of non-performing loans, $23.0 million of foreclosed real estate, and $12.0 million of other repossessed assets.

The allowance for loan losses at March 31, 2003 was $162.8 million, increasing to 1.33 percent of total loans from 1.26 percent of total loans at December 31, 2002. The current allowance provides a coverage level of 5.23 times first quarter annualized net charge-offs, 4.96 times non-performing loans, and 2.40 times non-performing assets, each significantly above industry levels.

Asset quality ratios for the first quarter of 2003 are impacted by the reduction of average and period end loan balances attributable to the securitization transaction described previously.

NON-INTEREST INCOME

First quarter 2003 non-interest income increased 29.4% percent, excluding investment securities gains, over the year ago quarter. The increase was driven by increases in bank service charges on deposits, mortgage banking revenues, earnings at First Market Bank (the Company’s 49 percent owned, Richmond, Virginia based savings bank) and continued strong performance in the capital markets business of the Company’s Financial Enterprises unit.

The Company’s mortgage banking and capital markets businesses continue to operate at record levels. Mortgage banking, including the December 2002 BancMortgage acquisition, contributed $13.9 million in non-interest income, up from $3.3 million in first quarter 2002, on over $1 billion of residential mortgage loan originations. Similarly, sales of fixed income securities remain strong as financial institution customers are faced with excess liquidity. Capital markets contribution to non-interest income increased $4.7 million in first quarter 2003 to $15.4 million from $10.7 million in first quarter 2002.

First Market Bank, which is accounted for using the equity method of accounting, continues to perform very well, contributing $.9 million in non-interest income for the first quarter, up 79.5 percent from first quarter 2002. During the quarter, average loans at First Market increased to $495.5 million, up 18.4 percent from the year ago quarter. First Market’s average deposits for the first quarter of 2003 increased to $797.1 million, up 16.1 percent from the year ago quarter.

EFFICIENCY

The Company’s operating cash efficiency ratio (which the Company defines as total non-interest expense, less core deposit amortization, the First Mercantile charge and conversion/merger expenses, divided by fully-taxable equivalent net interest income and non-interest income) was 50.69 percent in first quarter 2003, compared to 46.54 percent in first quarter 2002.

The banking cash efficiency ratio for first quarter 2003 was 47.03 percent compared to 42.31 percent in first quarter 2002. The increase in the Company’s cash efficiency ratio and the banking cash efficiency ratio in the first quarter is primarily because of the reduction in net interest income and continued growth in the Company’s mortgage and capital markets businesses, which operate at higher efficiency ratios.

ATLANTA EXPANSION

The Company’s largest and most ambitious expansion remains ahead of schedule. Total deposits for the 32 Atlanta metro branch locations were $452.5 million at March 31, 2003. Average balances within newly opened branches remain ahead of levels experienced in previous de novo expansions with the twenty-three Kroger locations, with an average life of 7 months, having generated average annualized deposit balances of $16.2 million, with a high of $54.0 million. Commercial and private banking offerings began in the first quarter of 2003 and were rewarded with the win of a large cash management/deposit processing relationship of a major national retailer. Twelve additional Kroger locations, as well as four-to-five “hub” locations from the package recently acquired from Wachovia, are scheduled to open throughout the rest of 2003. The remaining Wachovia locations will open throughout the course of 2004.

Supplemental financial tables are available on the Company’s website at www.ncfcorp.com/releases.cfm.

ABOUT NCF

National Commerce Financial Corporation is a diversified financial services company with $22 billion in assets. NCF, headquartered in Memphis, TN, with its operations headquarters in Durham, NC, is a sales and marketing organization that delivers select financial and consulting services through a national network of banking affiliates, operating in 14 of the nation’s fastest growing metropolitan areas, and non-banking affiliates.

NON-GAAP FINANCIAL INFORMATION

This press release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles (“GAAP”). NCF’s management uses these non-GAAP measures in their analysis of the Company’s performance. These measures adjust GAAP performance measures to exclude the effects of unusual litigation related charges and conversion/merger expenses, as well as the amortization of core deposit intangibles. These non-GAAP measures may also exclude other significant gains or losses that are unusual in nature. Since these items and their impact on NCF’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of NCF’s core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

FORWARD-LOOKING STATEMENTS

These statements constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. A variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. NCF does not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to competition from both financial and non-financial institutions; changes in interest rates, deposit flows, loan demand and real estate values; changes in legislation or regulation; changes in accounting principles, policies or guidelines; the timing and occurrence (or non-occurrence) of transactions and events that may be subject to circumstances beyond the control of NCF; and other economic, competitive, governmental, regulatory and technological factors affecting NCF specifically or the banking industry or economy generally.

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Financial Highlights

(In Thousands Except Share and Per Share Data)

	Three Months Ended				% Change Fav/(Unfav)		Three Months Ended			% Change Fav/(Unfav)
Earnings and Earnings Per Share	03/31/2003			12/31/2002			03/31/2003		03/31/2002
Revenues (TE)	$	293,671		300,137	(2.2	)	293,671		271,354	8.2
GAAP net income	$	64,090		84,866	(24.5	)	64,090		74,899	(14.4	)
Conversion/merger expenses, net of tax		—		—	—		—		3,211	(100.0	)
First Mercantile litigation, net of tax		12,775		—	—		12,775		—	—
Amortization of core deposit, net of tax		9,933		10,306	(3.6	)	9,933		10,620	(6.5	)
Operating cash earnings	$	86,798		95,172	(8.8	)	86,798		88,730	(2.2	)
Average basic shares outstanding		205,270,721		205,360,814			205,270,721		205,745,885
Average diluted shares outstanding		206,755,698		206,994,530			206,755,698		208,287,199
Basic EPS—GAAP	$	.31		.41	(24.4	)	.31		.36	(13.9	)
Diluted EPS—GAAP		.31		.41	(24.4	)	.31		.36	(13.9	)
Basic EPS—Operating Cash		.42		.46	(8.7	)	.42		.43	(2.3	)
Diluted EPS—Operating Cash		.42		.46	(8.7	)	.42		.43	(2.3	)
Key Performance Ratios
Net interest margin		3.98	%	4.20			3.98		4.39
GAAP efficiency ratio		64.45		55.25			64.45		56.31
Return on average assets		1.22		1.60			1.22		1.55
Return on average equity		9.64		12.70			9.64		12.21
Operating cash efficiency ratio		50.69		48.34			50.69		46.54
Banking operating cash efficiency ratio		47.03		43.73			47.03		42.31
Cash return on average tangible assets		1.76		1.92			1.76		1.97
Cash return on average tangible equity		25.33		28.37			25.33		29.83
Asset Quality Ratios
Loan loss allowance to total loans		1.33	%	1.26			1.33		1.31
Net loans charged-off (annualized) to average loans		.24		.22			.24		.26
Nonperforming assets to loans plus foreclosed real estate and other repossessed assets		.55		.51			.55		.39
Loan loss allowance to net charge-offs (annualized)		5.23	x	5.78			5.23		5.05
Loan loss allowance to nonperforming loans		4.96		5.30			4.96		4.89
Selected Average Balances
Assets	$	21,292,442		20,981,013	1.5		21,292,442		19,547,879	8.9
Tangible assets		19,986,277		19,661,833	1.7		19,986,277		18,266,619	9.4
Loans (1)		12,789,028		12,803,821	(.1	)	12,789,028		12,108,855	5.6
Core deposits		12,734,843		12,586,572	1.2		12,734,843		11,733,235	8.5
Stockholders’ equity		2,695,846		2,650,155	1.7		2,695,846		2,487,581	8.4
Tangible stockholders’ equity		1,389,681		1,330,975	4.4		1,389,681		1,206,321	15.2
Selected Period End Balances
Assets	$	21,721,985		21,472,116	1.2		21,721,985		20,086,505	8.1
Tangible assets		20,424,021		20,158,082	1.3		20,424,021		18,726,573	9.1
Loans (1)		12,288,866		12,923,940	(4.9	)	12,288,866		12,264,784	.2
Core deposits		13,121,371		12,771,186	2.7		13,121,371		12,568,334	4.4
Stockholders’ equity		2,696,014		2,682,432	.5		2,696,014		2,502,225	7.7
Tangible stockholders’ equity		1,398,050		1,368,398	2.2		1,398,050		1,142,293	22.4
Shares outstanding		205,009,566		205,408,183			205,009,566		206,163,422
Number of banking offices		483		479			483		445
Number of ATMs		559		554			559		533
Number of full-time equivalent employees (FTE)		5,564		5,490			5,564		5,278
Capital Ratios
Average equity to average assets		12.66	%	12.63			12.66		12.73
Average tangible equity to average tangible assets		6.95		6.77			6.95		6.60
Period-end tangible equity to period-end tangible assets		6.85		6.79			6.85		6.10
Risk-based capital ratios:
Tier 1 capital		11.40	E	10.87			11.40	E	10.10
Total capital		12.56	E	12.00			12.56	E	11.30
Leverage ratio		7.99	E	7.91			7.99	E	7.68

E—Estimated

(1) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

EX-99.2

Exhibit 99.2

NATIONAL COMMERCE FINANCIAL CORPORATION

Quarterly Financial Results

First Quarter 2003

	Page
Highlights	2	Current Quarter Financial Highlights
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	3	Five Quarter Financial Highlights
Income Statement	4	Current Quarter Consolidated Statement of Income
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	5	Five Quarter Consolidated Statements of Income
	6	Current Quarter Operating Segment Statement of Income
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	7	Five Quarter Operating Segment Statements of Income
Balance Sheet	8	Current Quarter Average Balance Sheet
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	9	Five Quarter Average Balance Sheets
	10	Current Quarter End of Period Balance Sheet
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	11	Five Quarter End of Period Balance Sheets
	12	Rollforward of Stockholders’ Equity
Asset Quality	13	Current Quarter Asset Quality Analysis
		—  First Quarter 2003 vs Fourth Quarter 2002
		—  First Quarter 2003 vs First Quarter 2002
	14	Five Quarter Asset Quality Analysis
Net Interest Margin	15	Five Quarter Average Balance Sheets and Net Interest Income Analysis

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Financial Highlights

(In Thousands Except Share and Per Share Data)

	Three Months Ended				% Change Fav/(Unfav)		Three Months Ended		% Change Fav/(Unfav)
Earnings and Earnings Per Share	03/31/2003			12/31/2002			03/31/2003	03/31/2002
Revenues (TE)	$	293,671		300,137	(2.2	)	293,671	271,354	8.2
GAAP net income	$	64,090		84,866	(24.5	)	64,090	74,899	(14.4	)
Conversion/merger expenses, net of tax		—		—	—		—	3,211	(100.0	)
First Mercantile litigation, net of tax		12,775		—	—		12,775	—	—
Amortization of core deposit, net of tax		9,933		10,306	(3.6	)	9,933	10,620	(6.5	)
Operating cash earnings	$	86,798		95,172	(8.8	)	86,798	88,730	(2.2	)
Average basic shares outstanding		205,270,721		205,360,814			205,270,721	205,745,885
Average diluted shares outstanding		206,755,698		206,994,530			206,755,698	208,287,199
Basic EPS—GAAP	$	.31		.41	(24.4	)	.31	.36	(13.9	)
Diluted EPS—GAAP		.31		.41	(24.4	)	.31	.36	(13.9	)
Basic EPS—  Operating Cash		.42		.46	(8.7	)	.42	.43	(2.3	)
Diluted EPS—Operating Cash		.42		.46	(8.7	)	.42	.43	(2.3	)
Key Performance Ratios
Net interest margin		3.98	%	4.20			3.98	4.39
GAAP efficiency ratio		64.45		55.25			64.45	56.31
Return on average assets		1.22		1.60			1.22	1.55
Return on average equity		9.64		12.70			9.64	12.21
Operating cash efficiency ratio		50.69		48.34			50.69	46.54
Banking operating cash efficiency ratio		47.03		43.73			47.03	42.31
Cash return on average tangible assets		1.76		1.92			1.76	1.97
Cash return on average tangible equity		25.33		28.37			25.33	29.83
Asset Quality Ratios
Loan loss allowance to total loans		1.33	%	1.26			1.33	1.31
Net loans charged-off (annualized) to average loans		.24		.22			.24	.26
Nonperforming assets to loans plus foreclosed real
estate and other repossessed assets		.55		.51			.55	.39
Loan loss allowance to net charge-offs (annualized)		5.23	x	5.78			5.23	5.05
Loan loss allowance to nonperforming loans		4.96		5.30			4.96	4.89
Selected Average Balances
Assets	$	21,292,442		20,981,013	1.5		21,292,442	19,547,879	8.9
Tangible assets		19,986,277		19,661,833	1.7		19,986,277	18,266,619	9.4
Loans (1)		12,789,028		12,803,821	(.1	)	12,789,028	12,108,855	5.6
Core deposits		12,734,843		12,586,572	1.2		12,734,843	11,733,235	8.5
Stockholders' equity		2,695,846		2,650,155	1.7		2,695,846	2,487,581	8.4
Tangible stockholders' equity		1,389,681		1,330,975	4.4		1,389,681	1,206,321	15.2
Selected Period End Balances
Assets	$	21,721,985		21,472,116	1.2		21,721,985	20,086,505	8.1
Tangible assets		20,424,021		20,158,082	1.3		20,424,021	18,726,573	9.1
Loans (1)		12,288,866		12,923,940	(4.9	)	12,288,866	12,264,784	.2
Core deposits		13,121,371		12,771,186	2.7		13,121,371	12,568,334	4.4
Stockholders' equity		2,696,014		2,682,432	.5		2,696,014	2,502,225	7.7
Tangible stockholders' equity		1,398,050		1,368,398	2.2		1,398,050	1,142,293	22.4
Shares outstanding		205,009,566		205,408,183			205,009,566	206,163,422
Number of banking offices		483		479			483	445
Number of ATMs		559		554			559	533
Number of full-time equivalent employees (FTE)		5,564		5,490			5,564	5,278
Capital Ratios
Average equity to average assets		12.66	%	12.63			12.66	12.73
Average tangible equity to average tangible assets		6.95		6.77			6.95	6.60
Period-end tangible equity to period-end tangible assets		6.85		6.79			6.85	6.10
Risk-based capital ratios:
Tier 1 capital		11.40E		10.87			11.40E	10.10
Total capital		12.56E		12.00			12.56E	11.30
Leverage ratio		7.99E		7.91			7.99E	7.68

E—Estimated

(1) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

2

NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Financial Highlights

(In Thousands Except Share and Per Share Data)

	Three Months Ended
Earnings and Earnings Per Share	03/31/2003			12/31/2002	09/30/2002	06/30/2002	03/31/2002
Revenues	$	293,671		300,137	296,670	285,892	271,354
GAAP net income	$	64,090		84,866	82,977	80,868	74,899
Conversion/merger expenses, net of tax		—		—	—	—	3,211
First Mercantile litigation, net of tax		12,775		—	—	—	—
Amortization of core deposit, net of tax		9,933		10,306	10,679	11,052	10,620
Operating cash earnings	$	86,798		95,172	93,656	91,920	88,730
Average Basic Shares Outstanding		205,270,721		205,360,814	206,258,720	206,368,053	205,745,885
Average Diluted Shares Outstanding		206,755,698		206,994,530	208,328,301	208,978,097	208,287,199
Basic EPS—GAAP	$	.31		.41	.40	.39	.36
Diluted EPS—GAAP		.31		.41	.40	.39	.36
Basic EPS—  Operating Cash		.42		.46	.45	.45	.43
Diluted EPS—Operating Cash		.42		.46	.45	.44	.43
Key Performance Ratios
Net interest margin		3.98	%	4.20	4.27	4.33	4.39
GAAP efficiency ratio		64.45		55.25	54.16	54.25	56.31
Return on average assets		1.22		1.60	1.59	1.60	1.55
Return on average equity		9.64		12.70	12.63	12.82	12.21
Operating cash efficiency ratio		50.69		48.34	46.90	46.47	46.54
Banking operating cash efficiency ratio		47.03		43.73	42.60	42.64	42.31
Cash return on average tangible assets		1.76		1.92	1.92	1.95	1.97
Cash return on average tangible equity		25.33		28.37	29.22	31.28	29.83
Asset Quality Ratios
Loan loss allowance to total loans		1.33	%	1.26	1.28	1.30	1.31
Net loans charged-off (annualized) to average loans		.24		.22	.29	.24	.26
Nonperforming assets to loans plus foreclosed real
estate and other repossessed assets		.55		.51	.50	.53	.39
Loan loss allowance to net charge-offs (annualized)		5.23x		5.78	4.44	5.53	5.05
Loan loss allowance to nonperforming loans		4.96		5.30	5.51	5.30	4.89
Selected Average Balances
Assets	$	21,292,442		20,981,013	20,639,674	20,233,304	19,547,879
Tangible assets		19,986,277		19,661,833	19,304,887	18,881,879	18,266,619
Loans (1)		12,789,028		12,803,821	12,600,075	12,335,537	12,108,855
Core deposits		12,734,843		12,586,572	12,358,788	12,405,823	11,733,235
Stockholders' equity		2,695,846		2,650,155	2,606,497	2,529,919	2,487,581
Tangible stockholders' equity		1,389,681		1,330,975	1,271,710	1,178,494	1,206,321
Selected Period End Balances
Assets	$	21,721,985		21,472,116	20,943,731	20,812,168	20,086,505
Tangible assets		20,424,021		20,158,082	19,617,548	19,469,081	18,726,573
Loans (1)		12,288,866		12,923,940	12,740,563	12,470,030	12,264,784
Core deposits		13,121,371		12,771,186	12,566,599	12,487,536	12,568,334
Stockholders' equity		2,696,014		2,682,432	2,639,513	2,596,386	2,502,225
Tangible stockholders' equity		1,398,050		1,368,398	1,313,330	1,253,299	1,142,293
Shares outstanding		205,009,566		205,408,183	205,767,938	206,417,264	206,163,422
Number of banking offices		483		479	472	466	445
Number of ATMs		559		554	550	554	533
Number of full-time equivalent employees (FTE)		5,564		5,490	5,402	5,469	5,278
Capital Ratios
Average equity to average assets		12.66	%	12.63	12.63	12.50	12.73
Average tangible equity to average tangible assets		6.95		6.77	6.59	6.24	6.60
Period-end tangible equity to period-end tangible assets		6.85		6.79	6.69	6.44	6.10
Risk-based capital ratios:
Tier 1 capital		11.40E		10.87	10.55	10.49	10.10
Total capital		12.56E		12.00	11.74	11.69	11.30
Leverage ratio		7.99E		7.91	7.85	7.76	7.68

E—Estimated

(1)     In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

3

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Consolidated Statements of Income

(In Thousands Except Share and Per Share Data)

	Three Months Ended			% Change Fav/(Unfav)		Three Months Ended		% Change Fav/(Unfav)
Income Statement	03/31/2003		12/31/2002			03/31/2003	03/31/2002
Loan income (TE)	$	199,861	214,799	(7.0	)	199,861	220,821	(9.5	)
Securities income (TE)		70,263	71,601	(1.9	)	70,263	68,943	1.9
Other interest income (TE)		192	199	(3.5	)	192	317	(39.4	)
Total interest income (TE)		270,316	286,599	(5.7	)	270,316	290,081	(6.8	)
Savings/NOW and money market expense		11,957	14,036	14.8		11,957	17,402	31.3
Jumbo and brokered CD expense		7,189	8,281	13.2		7,189	8,818	18.5
Consumer time deposit expense		38,142	40,878	6.7		38,142	48,614	21.5
Interest expense on deposits		57,288	63,195	9.3		57,288	74,834	23.4
Short-term borrowed funds expense		4,368	4,463	2.1		4,368	3,500	(24.8	)
FHLB advances expense		22,118	23,667	6.5		22,118	23,189	4.6
Trust preferred securities and long-term debt expense		2,160	2,458	12.1		2,160	2,481	12.9
Total interest expense		85,934	93,783	8.4		85,934	104,004	17.4
Net interest income (TE)		184,382	192,816	(4.4	)	184,382	186,077	(.9	)
Taxable equivalent adjustment		6,940	6,993	(.8	)	6,940	7,396	(6.2	)
Net interest income		177,442	185,823	(4.5	)	177,442	178,681	(.7	)
Provision for loan losses		7,684	7,127	(7.8	)	7,684	5,514	(39.4	)
Net interest income after provision		169,758	178,696	(5.0	)	169,758	173,167	(2.0	)
Service charges on deposits		41,250	43,884	(6.0	)	41,250	33,826	21.9
Other service charges and fees		9,341	9,736	(4.1	)	9,341	8,978	4.0
Broker/dealer revenue		21,081	22,982	(8.3	)	21,081	15,413	36.8
Asset management		12,382	11,743	5.4		12,382	12,900	(4.0	)
Mortgage banking income		13,880	6,896	101.3		13,880	3,276	323.7
Equity earnings from First Market Bank		926	1,084	(14.6	)	926	516	79.5
Other		7,965	8,968	(11.2	)	7,965	7,648	4.1
Investment securities gains, net		2,464	2,028	21.5		2,464	2,720	(9.4	)
Total noninterest income		109,289	107,321	1.8		109,289	85,277	28.2
Personnel		81,679	75,630	(8.0	)	81,679	68,878	(18.6	)
Occupancy		12,904	12,866	(.3	)	12,904	10,977	(17.6	)
Equipment		7,405	7,707	3.9		7,405	6,227	(18.9	)
Core deposit amortization		16,284	16,895	3.6		16,284	17,410	6.5
Other		46,872	48,873	4.1		46,872	40,205	(16.6	)
First Mercantile litigation		19,654	—	—		19,654	—	—
Conversion/merger expenses		—	—	—		—	4,940	100.0
Total noninterest expense		184,798	161,971	(14.1	)	184,798	148,637	(24.3	)
Income before income taxes		94,249	124,046	(24.0	)	94,249	109,807	(14.2	)
Income taxes		30,159	39,180	23.0		30,159	34,908	13.6
GAAP net income		64,090	84,866	(24.5	)	64,090	74,899	(14.4	)
Conversion/merger expenses, net of tax		—	—	—		—	3,211	(100.0	)
First Mercantile litigation, net of tax		12,775	—	—		12,775	—	—
Amortization of core deposit, net of tax		9,933	10,306	(3.6	)	9,933	10,620	(6.5	)
Operating cash earnings	$	86,798	95,172	(8.8	)	86,798	88,730	(2.2	)
Average Common Shares Outstanding
Basic		205,270,721	205,360,814			205,270,721	205,745,885
Diluted		206,755,698	206,994,530			206,755,698	208,287,199
Earnings and Dividends Per Share
Basic GAAP	$	.31	.41	(24.4	)	.31	.36	(13.9	)
Diluted GAAP		.31	.41	(24.4	)	.31	.36	(13.9	)
Basic operating cash		.42	.46	(8.7	)	.42	.43	(2.3	)
Diluted operating cash		.42	.46	(8.7	)	.42	.43	(2.3	)
Cash dividends		.17	.17	—		.17	.15	13.3

4

NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Consolidated Statements of Income

(In Thousands Except Share and Per Share Data)

	Three Months Ended
Income Statement	03/31/2003		12/31/2002	09/30/2002	06/30/2002	03/31/2002
Loan income (TE)	$	199,861	214,799	217,482	218,856	220,821
Securities income (TE)		70,263	71,601	73,283	73,168	68,943
Other interest income (TE)		192	199	217	270	317
Total interest income (TE)		270,316	286,599	290,982	292,294	290,081
Savings/NOW and money market expense		11,957	14,036	15,605	18,527	17,402
Jumbo and brokered CD expense		7,189	8,281	8,611	8,290	8,818
Consumer time deposit expense		38,142	40,878	41,651	45,046	48,614
Interest expense on deposits		57,288	63,195	65,867	71,863	74,834
Short-term borrowed funds expense		4,368	4,463	5,393	4,461	3,500
FHLB advances expense		22,118	23,667	24,010	22,626	23,189
Trust preferred securities and long-term debt expense		2,160	2,458	2,410	2,474	2,481
Total interest expense		85,934	93,783	97,680	101,424	104,004
Net interest income (TE)		184,382	192,816	193,302	190,870	186,077
Taxable equivalent adjustment		6,940	6,993	7,442	7,628	7,396
Net interest income		177,442	185,823	185,860	183,242	178,681
Provision for loan losses		7,684	7,127	10,990	8,713	5,514
Net interest income after provision		169,758	178,696	174,870	174,529	173,167
Service charges on deposits		41,250	43,884	41,391	40,301	33,826
Other service charges and fees		9,341	9,736	9,971	9,696	8,978
Broker/dealer revenue		21,081	22,982	19,600	17,650	15,413
Asset management		12,382	11,743	12,785	13,488	12,900
Mortgage banking income		13,880	6,896	5,350	2,972	3,276
Equity earnings from First Market Bank		926	1,084	1,074	773	516
Other		7,965	8,968	8,137	8,448	7,648
Investment securities gains, net		2,464	2,028	5,060	1,694	2,720
Total noninterest income		109,289	107,321	103,368	95,022	85,277
Personnel		81,679	75,630	71,149	68,373	68,878
Occupancy		12,904	12,866	12,434	12,209	10,977
Equipment		7,405	7,707	7,454	6,800	6,227
Core deposit amortization		16,284	16,895	17,507	18,118	17,410
Other		46,872	48,873	48,114	45,462	40,205
First Mercantile litigation		19,654	—	—	—	—
Conversion/merger expenses		—	—	—	—	4,940
Total noninterest expense		184,798	161,971	156,658	150,962	148,637
Income before income taxes		94,249	124,046	121,580	118,589	109,807
Income taxes		30,159	39,180	38,603	37,721	34,908
GAAP net income		64,090	84,866	82,977	80,868	74,899
Conversion/merger expenses, net of tax		—	—	—	—	3,211
First Mercantile litigation, net of tax		12,775	—	—	—	—
Amortization of core deposit, net of tax		9,933	10,306	10,679	11,052	10,620
Operating cash earnings	$	86,798	95,172	93,656	91,920	88,730
Average Common Shares Outstanding
Basic		205,270,721	205,360,814	206,258,720	206,368,053	205,745,885
Diluted		206,755,698	206,994,530	208,328,301	208,978,097	208,287,199
Earnings and Dividends Per Share
Basic GAAP	$	.31	.41	.40	.39	.36
Diluted GAAP		.31	.41	.40	.39	.36
Basic operating cash		.42	.46	.45	.45	.43
Diluted operating cash		.42	.46	.45	.44	.43
Cash dividends		.17	.17	.17	.15	.15

5

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Operating Segment Statement of Income

(In Thousands)

	Three Months Ended					% Change Fav/(Unfav)		Three Months Ended				% Change Fav/(Unfav)
	3/31/03			12/31/02				3/31/03		3/31/02
Traditional Banking
Net interest income (TE)	$	179,151		186,706		(4.0	)	179,151		181,636		(1.4	)
Provision for loan losses		(7,684	)	(7,127	)	(7.8	)	(7,684	)	(5,514	)	(39.4	)
Noninterest income		65,795		64,623		1.8		65,795		47,886		37.4
Intangibles amortization		(16,284	)	(16,895	)	3.6		(16,284	)	(17,410	)	6.5
First Mercantile litigation		—		—		—		—		—		—
Conversion/merger expenses		—		—		—		—		(4,940	)	100.0
Noninterest expense		(115,201	)	(109,897	)	(4.8	)	(115,201	)	(97,102	)	(18.6	)
Income before income taxes (TE)		105,777		117,410		(9.9	)	105,777		104,556		1.2
Income taxes		38,888		40,858		4.8		38,888		37,372		(4.1	)
GAAP net income		66,889		76,552		(12.6	)	66,889		67,184		(.4	)
Conversion/merger expenses, net of tax		—		—		—		—		3,211		(100.0	)
First Mercantile litigation, net of tax		—		—		—		—		—		—
Amortization of core deposit, net of tax		9,933		10,306		(3.6	)	9,933		10,620		(6.5	)
Operating cash earnings	$	76,822		86,858		(11.6	)	76,822		81,015		(5.2	)
Financial Enterprises (2)
Net interest income (TE)	$	5,231		6,110		(14.4	)	5,231		4,441		17.8
Provision for loan losses		—		—		—		—		—		—
Noninterest income		44,644		44,304		.8		44,644		38,543		15.8
Intangibles amortization		—		—		—		—		—		—
First Mercantile litigation		(19,654	)	—		(100.0	)	(19,654	)	—		(100.0	)
Conversion/merger expenses		—		—		—		—		—		—
Noninterest expense		(34,809	)	(36,785	)	5.4		(34,809	)	(30,337	)	(14.7	)
Income before income taxes (TE)		(4,588	)	13,629		(133.7	)	(4,588	)	12,647		(136.3	)
Income tax expense (benefit)		(1,789	)	5,315		133.7		(1,789	)	4,932		136.3
GAAP net income		(2,799	)	8,314		(133.7	)	(2,799	)	7,715		(136.3	)
Conversion/merger expenses, net of tax		—		—		—		—		—		—
First Mercantile litigation, net of tax		12,775		—		100.0		12,775		—		100.0
Amortization of core deposit, net of tax		—		—		—		—		—		—
Operating cash earnings	$	9,976		8,314		20.0		9,976		7,715		29.3
Fully Consolidated
Net interest income (TE)	$	184,382		192,816		(4.4	)	184,382		186,077		(.9	)
Provision for loan losses		(7,684	)	(7,127	)	(7.8	)	(7,684	)	(5,514	)	(39.4	)
Noninterest income		109,289		107,321		1.8		109,289		85,277		28.2
Intangibles amortization		(16,284	)	(16,895	)	3.6		(16,284	)	(17,410	)	6.5
First Mercantile litigation		(19,654	)	—		(100.0	)	(19,654	)	—		(100.0	)
Conversion/merger expenses		—		—		—		—		(4,940	)	100.0
Noninterest expense		(148,860	)	(145,076	)	(2.6	)	(148,860	)	(126,287	)	(17.9	)
Income before income taxes (TE)		101,189		131,039		(22.8	)	101,189		117,203		(13.7	)
Income taxes		37,099		46,173		19.7		37,099		42,304		12.3
GAAP net income		64,090		84,866		(24.5	)	64,090		74,899		(14.4	)
Conversion/merger expenses, net of tax		—		—		—		—		3,211		(100.0	)
First Mercantile litigation, net of tax		12,775		—		100.0		12,775		—		100.0
Amortization of core deposit, net of tax		9,933		10,306		(3.6	)	9,933		10,620		(6.5	)
Operating cash earnings	$	86,798		95,172		(8.8	)	86,798		88,730		(2.2	)

(1) Inter-segment eliminations are not separately presented.

(2) Revenues and expenses of NCF's correspondent mortgage business have been reclassified from Financial Enterprises to Traditional Banking for all periods presented.

6

NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Operating Segment Statements of Income

(In Thousands)

	Three Months Ended
	03/31/2003			12/31/2002		09/30/2002		06/30/2002		03/31/2002
Traditional Banking
Net interest income (TE)	$	179,151		186,706		187,990		186,041		181,636
Provision for loan losses		(7,684	)	(7,127	)	(10,990	)	(8,713	)	(5,514	)
Noninterest income		65,795		64,623		62,402		55,090		47,886
Intangibles amortization		(16,284	)	(16,895	)	(17,507	)	(18,118	)	(17,410	)
First Mercantile litigation		—		—		—		—		—
Conversion/merger expenses		—		—		—		—		(4,940	)
Noninterest expense		(115,201	)	(109,897	)	(106,668	)	(102,812	)	(97,102	)
Income before income taxes (TE)		105,777		117,410		115,227		111,488		104,556
Income taxes		38,888		40,858		40,665		39,604		37,372
GAAP net income		66,889		76,552		74,562		71,884		67,184
Conversion/merger expenses, net of tax		—		—		—		—		3,211
First Mercantile litigation, net of tax		—		—		—		—		—
Amortization of core deposit, net of tax		9,933		10,306		10,679		11,052		10,620
Operating cash earnings	$	76,822		86,858		85,241		82,936		81,015
Financial Enterprises (2)
Net interest income (TE)	$	5,231		6,110		5,312		4,829		4,441
Provision for loan losses		—		—		—		—		—
Noninterest income		44,644		44,304		42,732		42,341		38,543
Intangibles amortization		—		—		—		—		—
First Mercantile litigation		(19,654	)	—		—		—		—
Conversion/merger expenses		—		—		—		—		—
Noninterest expense		(34,809	)	(36,785	)	(34,249	)	(32,441	)	(30,337	)
Income before income taxes (TE)		(4,588	)	13,629		13,795		14,729		12,647
Income tax expense (benefit)		(1,789	)	5,315		5,380		5,745		4,932
GAAP net income		(2,799	)	8,314		8,415		8,984		7,715
Conversion/merger expenses, net of tax		—		—		—		—		—
First Mercantile litigation, net of tax		12,775		—		—		—		—
Amortization of core deposit, net of tax		—		—		—		—		—
Operating cash earnings	$	9,976		8,314		8,415		8,984		7,715
Fully Consolidated
Net interest income (TE)	$	184,382		192,816		193,302		190,870		186,077
Provision for loan losses		(7,684	)	(7,127	)	(10,990	)	(8,713	)	(5,514	)
Noninterest income		109,289		107,321		103,368		95,022		85,277
Intangibles amortization		(16,284	)	(16,895	)	(17,507	)	(18,118	)	(17,410	)
First Mercantile litigation		(19,654	)	—		—		—		—
Conversion/merger expenses		—		—		—		—		(4,940	)
Noninterest expense		(148,860	)	(145,076	)	(139,151	)	(132,844	)	(126,287	)
Income before income taxes (TE)		101,189		131,039		129,022		126,217		117,203
Income taxes		37,099		46,173		46,045		45,349		42,304
GAAP net income		64,090		84,866		82,977		80,868		74,899
Conversion/merger expenses, net of tax		—		—		—		—		3,211
First Mercantile litigation, net of tax		12,775		—		—		—		—
Amortization of core deposit, net of tax		9,933		10,306		10,679		11,052		10,620
Operating cash earnings	$	86,798		95,172		93,656		91,920		88,730

(1) Inter-segment eliminations are not separately presented.

(2) Revenues and expenses of NCF's correspondent mortgage business have been reclassified from Financial Enterprises to Traditional Banking for all periods presented.

7

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Average Balance Sheet

(In Thousands)

	Three Months Ended			% Inc/(Decr)		Three Months Ended		% Inc/(Decr)
	03/31/2003		12/31/2002			03/31/2003	03/31/2002
Assets
Cash and due from banks	$	398,564	419,601	(5.0	)	398,564	472,661	(15.7	)
Time deposits in other banks		9,575	8,491	12.8		9,575	28,133	(66.0	)
Federal funds sold and other short-term investments		51,187	35,083	45.9		51,187	28,898	77.1
Investment securities (1)		5,706,704	5,382,247	6.0		5,706,704	4,829,779	18.2
Trading securities		87,496	70,464	24.2		87,496	75,722	15.5
Loans:
Commercial		3,350,959	3,246,050	3.2		3,350,959	2,987,844	12.2
Construction and commercial real estate		3,677,697	3,666,631	.3		3,677,697	3,411,639	7.8
Mortgage (including loans held for sale) (2)		1,601,618	1,734,853	(7.7	)	1,601,618	1,790,963	(10.6	)
Consumer		3,945,287	3,950,658	(.1	)	3,945,287	3,717,714	6.1
Revolving credit		76,939	73,195	5.1		76,939	65,489	17.5
Lease financing		136,528	132,434	3.1		136,528	135,206	1.0
Total loans		12,789,028	12,803,821	(.1	)	12,789,028	12,108,855	5.6
Allowance for loan losses		163,203	163,012	.1		163,203	157,676	3.5
Net loans		12,625,825	12,640,809	(.1	)	12,625,825	11,951,179	5.6
Bank owned life insurance		228,214	224,742	1.5		228,214	213,996	6.6
Investment in First Market Bank		28,353	27,265	4.0		28,353	24,722	14.7
Premises and equipment		258,614	257,005	.6		258,614	230,541	12.2
Goodwill		1,077,121	1,073,597	.3		1,077,121	1,010,192	6.6
Core deposit intangibles		229,044	245,583	(6.7	)	229,044	271,068	(15.5	)
Other assets		591,745	596,126	(.7	)	591,745	410,988	44.0
Total assets	$	21,292,442	20,981,013	1.5		21,292,442	19,547,879	8.9
Liabilities
Deposits:
Demand deposits (noninterest-bearing)	$	2,140,299	2,120,154	1.0		2,140,299	1,746,302	22.6
Savings, NOW and money market accounts		5,684,696	5,601,106	1.5		5,684,696	5,484,307	3.7
Jumbo and brokered certificates of deposit		1,796,198	1,740,695	3.2		1,796,198	1,571,856	14.3
Time deposits		4,909,848	4,865,312	.9		4,909,848	4,502,626	9.0
Total deposits		14,531,041	14,327,267	1.4		14,531,041	13,305,091	9.2
Short-term borrowings		1,249,458	1,134,553	10.1		1,249,458	971,252	28.6
FHLB advances		2,056,896	2,132,665	(3.6	)	2,056,896	2,093,957	(1.8	)
Trust preferred securities and long-term debt		296,745	285,003	4.1		296,745	282,050	5.2
Other liabilities		462,456	451,370	2.5		462,456	407,948	13.4
Total liabilities		18,596,596	18,330,858	1.4		18,596,596	17,060,298	9.0
Stockholders’ Equity
Common stock		410,541	410,722	(.0	)	410,541	411,492	(.2	)
Additional paid-in capital		1,749,408	1,752,110	(.2	)	1,749,408	1,765,703	(.9	)
Retained earnings		485,214	439,535	10.4		485,214	297,896	62.9
Accumulated other comprehensive income		50,683	47,788	6.1		50,683	12,490	305.8
Total stockholders’ equity		2,695,846	2,650,155	1.7		2,695,846	2,487,581	8.4
Total liabilities and stockholders’ equity	$	21,292,442	20,981,013	1.5		21,292,442	19,547,879	8.9

(1) Average balances exclude the mark-to-market adjustment for Statement of Financial Accounting Standards No. 115.

(2) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

8

NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Average Balance Sheets

(In Thousands)

	Three Months Ended
	03/31/2003		12/31/2002	09/30/2002	06/30/2002		03/31/2002
Assets
Cash and due from banks	$	398,564	419,601	418,062	436,473		472,661
Time deposits in other banks		9,575	8,491	5,475	22,411		28,133
Federal funds sold and other short-term investments		51,187	35,083	39,867	21,187		28,898
Investment securities(1)		5,706,704	5,382,247	5,310,350	5,197,443		4,829,779
Trading securities		87,496	70,464	75,782	89,229		75,722
Loans:
Commercial		3,350,959	3,246,050	3,164,303	3,062,154		2,987,844
Construction and commercial real estate		3,677,697	3,666,631	3,621,559	3,526,901		3,411,639
Mortgage (including loans held for sale) (2)		1,601,618	1,734,853	1,670,716	1,663,703		1,790,963
Consumer		3,945,287	3,950,658	3,940,340	3,880,490		3,717,714
Revolving credit		76,939	73,195	70,419	68,573		65,489
Lease financing		136,528	132,434	132,738	133,716		135,206
Total loans		12,789,028	12,803,821	12,600,075	12,335,537		12,108,855
Allowance for loan losses		163,203	163,012	162,243	160,711		157,676
Net loans		12,625,825	12,640,809	12,437,832	12,174,826		11,951,179
Bank owned life insurance		228,214	224,742	221,185	217,458		213,996
Investment in First Market Bank		28,353	27,265	26,221	25,317		24,722
Premises and equipment		258,614	257,005	251,228	247,739		230,541
Goodwill		1,077,121	1,073,597	1,071,943	1,070,724		1,010,192
Core deposit intangibles		229,044	245,583	262,844	280,701		271,068
Other assets		591,745	596,126	518,885	449,796		410,988
Total assets	$	21,292,442	20,981,013	20,639,674	20,233,304		19,547,879
Liabilities
Deposits:
Demand deposits (noninterest-bearing)	$	2,140,299	2,120,154	1,989,040	1,923,408		1,746,302
Savings, NOW and money market accounts		5,684,696	5,601,106	5,591,451	5,800,664		5,484,307
Jumbo and brokered certificates of deposit		1,796,198	1,740,695	1,683,886	1,533,119		1,571,856
Time deposits		4,909,848	4,865,312	4,778,297	4,681,751		4,502,626
Total deposits		14,531,041	14,327,267	14,042,674	13,938,942		13,305,091
Short-term borrowings		1,249,458	1,134,553	1,192,955	1,124,318		971,252
FHLB advances		2,056,896	2,132,665	2,133,208	1,949,166		2,093,957
Trust preferred securities and long-term debt		296,745	285,003	281,684	282,053		282,050
Other liabilities		462,456	451,370	382,656	408,906		407,948
Total liabilities		18,596,596	18,330,858	18,033,177	17,703,385		17,060,298
Stockholders’ Equity
Common stock		410,541	410,722	412,517	412,736		411,492
Additional paid-in capital		1,749,408	1,752,110	1,773,722	1,780,106		1,765,703
Retained earnings		485,214	439,535	386,072	344,678		297,896
Accumulated other comprehensive income		50,683	47,788	34,186	(7,601	)	12,490
Total stockholders’ equity		2,695,846	2,650,155	2,606,497	2,529,919		2,487,581
Total liabilities and stockholders’ equity	$	21,292,442	20,981,013	20,639,674	20,233,304		19,547,879

(1) Average balances exclude the mark-to-market adjustment for Statement of Financial Accounting Standards No. 115.

(2) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

9

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter End of Period Balance Sheet

(In Thousands)

	As of			% Inc/(Decr)		As of			% Inc/(Decr)
	03/31/2003		12/31/2002			03/31/2003	03/31/2002
Assets
Cash and due from banks	$	522,814	517,295	1.1		522,814	455,126		14.9
Time deposits in other banks		4,328	12,276	(64.7	)	4,328	27,657		(84.4	)
Federal funds sold and other short-term investments		42,899	73,186	(41.4	)	42,899	11,871		261.4
Investment securities:
Available for sale		5,299,253	4,777,009	10.9		5,299,253	4,366,436		21.4
Held to maturity		1,295,609	925,652	40.0		1,295,609	719,841		80.0
Trading securities		80,842	116,954	(30.9	)	80,842	96,583		(16.3	)
Loans:
Commercial		3,403,217	3,329,451	2.2		3,403,217	3,044,614		11.8
Construction and commercial real estate		3,689,692	3,655,671	.9		3,689,692	3,455,569		6.8
Mortgage (including loans held for sale) (1)		1,017,221	1,798,326	(43.4	)	1,017,221	1,717,904		(40.8	)
Consumer		3,966,994	3,933,482	.9		3,966,994	3,845,195		3.2
Revolving credit		76,616	74,463	2.9		76,616	68,060		12.6
Lease financing		135,126	132,547	1.9		135,126	133,442		1.3
Total loans		12,288,866	12,923,940	(4.9	)	12,288,866	12,264,784		.2
Allowance for loan losses		162,842	163,424	(.4	)	162,842	160,194		1.7
Net loans		12,126,024	12,760,516	(5.0	)	12,126,024	12,104,590		.2
Bank owned life insurance		230,228	227,051	1.4		230,228	216,212		6.5
Investment in First Market Bank		28,923	27,997	3.3		28,923	25,067		15.4
Premises and equipment		274,433	257,676	6.5		274,433	245,037		12.0
Goodwill		1,077,332	1,077,118	.0		1,077,332	1,070,496		.6
Core deposit intangibles		220,632	236,916	(6.9	)	220,632	289,436		(23.8	)
Other assets		518,668	462,470	12.2		518,668	458,153		13.2
Total assets	$	21,721,985	21,472,116	1.2		21,721,985	20,086,505		8.1
Liabilities
Deposits:
Demand deposits (noninterest-bearing)	$	2,383,806	2,241,833	6.3		2,383,806	1,995,028		19.5
Savings, NOW and money market accounts		5,795,400	5,666,407	2.3		5,795,400	5,846,894		(.9	)
Jumbo and brokered certificates of deposit		1,804,492	1,723,548	4.7		1,804,492	1,583,986		13.9
Time deposits		4,942,165	4,862,946	1.6		4,942,165	4,726,412		4.6
Total deposits		14,925,863	14,494,734	3.0		14,925,863	14,152,320		5.5
Short-term borrowings		1,351,105	1,452,764	(7.0	)	1,351,105	853,227		58.4
FHLB advances		1,951,912	2,106,474	(7.3	)	1,951,912	1,878,220		3.9
Trust preferred securities and long-term debt		300,127	296,707	1.2		300,127	282,032		6.4
Other liabilities		496,964	439,005	13.2		496,964	418,481		18.8
Total liabilities		19,025,971	18,789,684	1.3		19,025,971	17,584,280		8.2
Stockholders’ Equity
Common stock		410,019	410,816	(.2	)	410,019	412,327		(.6	)
Additional paid-in capital		1,743,146	1,753,241	(.6	)	1,743,146	1,777,898		(2.0	)
Retained earnings		496,783	467,641	6.2		496,783	320,064		55.2
Accumulated other comprehensive income		46,066	50,734	(9.2	)	46,066	(8,064	)	(671.3	)
Total stockholders’ equity		2,696,014	2,682,432	.5		2,696,014	2,502,225		7.7
Total liabilities and stockholders’ equity	$	21,721,985	21,472,116	1.2		21,721,985	20,086,505		8.1

(1) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

10

NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter End of Period Balance Sheets

(In Thousands Except Share and Per Share Data)

	As of
	03/31/2003		12/31/2002	09/30/2002	06/30/2002	03/31/2002
Assets
Cash and due from banks	$	522,814	517,295	484,879	481,326	455,126
Time deposits in other banks		4,328	12,276	2,984	6,544	27,657
Federal funds sold and other short-term investments		42,899	73,186	10,722	105,932	11,871
Investment securities:
Available for sale		5,299,253	4,777,009	4,512,627	4,632,713	4,366,436
Held to maturity		1,295,609	925,652	934,506	839,542	719,841
Trading securities		80,842	116,954	102,892	110,427	96,583
Loans:
Commercial		3,403,217	3,329,451	3,219,205	3,114,754	3,044,614
Construction and commercial real estate		3,689,692	3,655,671	3,668,588	3,582,421	3,455,569
Mortgage (including loans held for sale) (1)		1,017,221	1,798,326	1,685,122	1,658,905	1,717,904
Consumer		3,966,994	3,933,482	3,962,914	3,910,081	3,845,195
Revolving credit		76,616	74,463	71,805	69,388	68,060
Lease financing		135,126	132,547	132,929	134,481	133,442
Total loans		12,288,866	12,923,940	12,740,563	12,470,030	12,264,784
Allowance for loan losses		162,842	163,424	163,336	161,616	160,194
Net loans		12,126,024	12,760,516	12,577,227	12,308,414	12,104,590
Bank owned life insurance		230,228	227,051	223,425	219,542	216,212
Investment in First Market Bank		28,923	27,997	26,913	25,839	25,067
Premises and equipment		274,433	257,676	253,739	248,567	245,037
Goodwill		1,077,332	1,077,118	1,072,371	1,071,769	1,070,496
Core deposit intangibles		220,632	236,916	253,812	271,318	289,436
Other assets		518,668	462,470	487,634	490,235	458,153
Total assets	$	21,721,985	21,472,116	20,943,731	20,812,168	20,086,505
Liabilities
Deposits:
Demand deposits (noninterest-bearing)	$	2,383,806	2,241,833	2,185,954	2,051,963	1,995,028
Savings, NOW and money market accounts		5,795,400	5,666,407	5,558,221	5,732,415	5,846,894
Jumbo and brokered certificates of deposit		1,804,492	1,723,548	1,856,527	1,652,279	1,583,986
Time deposits		4,942,165	4,862,946	4,822,424	4,703,158	4,726,412
Total deposits		14,925,863	14,494,734	14,423,126	14,139,815	14,152,320
Short-term borrowings		1,351,105	1,452,764	1,012,128	1,352,416	853,227
FHLB advances		1,951,912	2,106,474	2,218,750	2,026,082	1,878,220
Trust preferred securities and long-term debt		300,127	296,707	279,112	282,108	282,032
Other liabilities		496,964	439,005	371,102	415,361	418,481
Total liabilities		19,025,971	18,789,684	18,304,218	18,215,782	17,584,280
Stockholders’ Equity
Common stock		410,019	410,816	411,536	412,835	412,327
Additional paid-in-capital		1,743,146	1,753,241	1,762,453	1,779,603	1,777,898
Retained earnings		496,783	467,641	417,769	369,912	320,064
Accumulated other comprehensive income (loss)		46,066	50,734	47,755	34,036	(8,064	)
Total stockholders’ equity		2,696,014	2,682,432	2,639,513	2,596,386	2,502,225
Total liabilities and stockholders’ equity	$	21,721,985	21,472,116	20,943,731	20,812,168	20,086,505

(1) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

11

NATIONAL COMMERCE FINANCIAL CORPORATION

Rollforward of Stockholders' Equity

Three Months ended March 31, 2003 and 2002

(In Thousands Except for Share Data)

	Shares of Common Stock		Common Stock			Additional Paid-In Capital		Retained Earnings		Other Comp. Income		Total Stockholders' Equity
Balance January 1, 2002	205,058,713		$	410,117		1,756,128		276,342		12,744		2,455,331
Net income	—			—		—		74,899		—		74,899
Restricted stock transactions, net	3,497			7		583		—		—		590
Options exercised, net of shares tendered	1,143,789			2,288		22,664		—		—		24,952
Shares repurchased and retired	—			—		—		—		—		—
Common stock issued in acquisitions	—			—		—		—		—		—
Cash dividends ($.15 per share)	—			—		—		(31,177	)	—		(31,177	)
Change in minimum pension liability, net of applicable income taxes	—			—		—		—		98		98
Change in unrealized losses on investment securities available for sale, net of applicable income taxes	—			—		—		—		(20,906	)	(20,906	)
Other transactions, net	(42,577	)		(85	)	(1,477	)	—		—		(1,562	)
Total equity, March 31, 2002	206,163,422		$	412,327		1,777,898		320,064		(8,064	)	2,502,225
Intangible assets												1,359,932
Tangible equity, March 31, 2002												1,142,293
Total equity, January 1, 2003	205,408,183		$	410,816		1,753,241		467,641		50,734		2,682,432
Net income	—			—		—		64,090		—		64,090
Restricted stock transactions, net	1,568			3		606		—		—		609
Options exercised, net of shares tendered	213,009			427		2,566		—		—		2,993
Shares repurchased and retired	(589,800	)		(1,180	)	(12,800	)	—		—		(13,980	)
Common stock issued in acquisitions								—		—		—
Cash dividends ($.17 per share)	—			—		—		(34,948	)	—		(34,948	)
Change in minimum pension liability, net of applicable income taxes	—			—		—		—		(742	)	(742	)
Change in unrealized gains on investment securities available for sale, net of applicable income taxes	—			—		—		—		(3,926	)	(3,926	)
Other transactions, net	(23,394	)		(47	)	(467	)	—		—		(514	)
Balance, March 31, 2003	205,009,566		$	410,019		1,743,146		496,783		46,066		2,696,014
Intangible assets												1,297,964
Tangible equity, March 31, 2003												1,398,050

12

NATIONAL COMMERCE FINANCIAL CORPORATION

Current Quarter Asset Quality

(In Thousands )

	As Of And For The Three Months Ended					% Inc/(Decr)		As Of And For The Three Months Ended				% Inc/(Decr)
Allowance For Loan Losses	3/31/03			12/31/02				3/31/03		3/31/02
Beginning balance	$	163,424		163,336		.1		163,424		156,401		4.5
Charge-offs:
Commercial		(1,441	)	(1,287	)	12.0		(1,441	)	(1,082	)	33.2
Construction and commercial real estate		(141	)	(123	)	14.6		(141	)	(98	)	43.9
Secured by real estate		(727	)	(951	)	(23.6	)	(727	)	(883	)	(17.7	)
Consumer		(5,977	)	(4,053	)	47.5		(5,977	)	(6,392	)	(6.5	)
Revolving credit		(941	)	(1,255	)	(25.0	)	(941	)	(944	)	(.3	)
Lease financing		(53	)	(708	)	(92.5	)	(53	)	(168	)	(68.5	)
Total charge-offs		(9,280	)	(8,377	)	10.8		(9,280	)	(9,567	)	(3.0	)
Recoveries:
Commercial		273		125		118.4		273		375		(27.2	)
Construction and commercial real estate		7		—		—		7		—		—
Secured by real estate		26		49		(46.9	)	26		4		550.0
Consumer		931		813		14.5		931		1,116		(16.6	)
Revolving credit		322		231		39.4		322		222		45.0
Lease financing		37		38		(2.6	)	37		22		68.2
Total recoveries		1,596		1,256		27.1		1,596		1,739		(8.2	)
Net charge-offs		(7,684	)	(7,121	)	7.9		(7,684	)	(7,828	)	(1.8	)
Provision for loan losses		7,684		7,127		7.8		7,684		5,514		39.4
Changes from acquisitions (sales)		(582	)	82		(809.8	)	(582	)	6,107		(109.5	)
Ending balance	$	162,842		163,424		(.4	)	162,842		160,194		1.7
Nonperforming Assets
Nonaccrual loans by loan type:
Commercial	$	19,833		16,992		16.7		19,833		16,764		18.3
Construction and commercial real estate		6,883		8,531		(19.3	)	6,883		13,095		(47.4	)
Secured by real estate		2,105		2,261		(6.9	)	2,105		1,463		43.9
Consumer		2,004		2,089		(4.1	)	2,004		673		197.8
Lease financing		2,013		933		115.8		2,013		758		165.6
Total nonperforming loans		32,838		30,806		6.6		32,838		32,753		.3
Foreclosed real estate		22,981		25,480		(9.8	)	22,981		11,571		98.6
Nonperforming loans and foreclosed real estate		55,819		56,286		(.8	)	55,819		44,324		25.9
Other repossessed assets		11,962		9,285		28.8		11,962		3,741		219.8
Nonperforming assets	$	67,781		65,571		3.4		67,781		48,065		41.0
Ninety days past due and accruing	$	56,104		56,384		(.5	)	56,104		55,265		1.5
Asset Quality Ratios
Net charge-offs (annualized) by loan type:
Commercial		.14	%	.14				.14		.10
Construction and commercial real estate		.01		.01				.01		.01
Secured by real estate		.18		.21				.18		.20
Consumer		.52		.33				.52		.58
Revolving credit		3.26		5.55				3.26		4.47
Lease financing		.05		2.01				.05		.44
Net loans charged-off (annualized) to average loans		.24		.22				.24		.26
Nonperforming loans to total loans		.27		.24				.27		.27
Nonperforming loans and foreclosed real estate to loans and foreclosed real estate		.45		.43				.45		.36
Nonperforming assets to loans plus foreclosed real estate and other repossessed assets		.55		.51				.55		.39
Loan loss allowance to total loans		1.33		1.26				1.33		1.31
Loan loss allowance to loans (excluding loans held for sale)		1.37		1.31				1.37		1.31
Loan loss allowance to net charge-offs (annualized)		5.23	x	5.78				5.23		5.05
Loan loss allowance to nonperforming loans		4.96		5.30				4.96		4.89

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NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Asset Quality

(In Thousands)

	As Of And For The Three Months Ended
Allowance For Loan Losses	03/31/2003			12/31/2002		09/30/2002		06/30/2002		03/31/2002
Beginning balance	$	163,424		163,336		161,616		160,194		156,401
Charge-offs:
Commercial		(1,441	)	(1,287	)	(2,449	)	(2,637	)	(1,082	)
Construction and commercial real estate		(141	)	(123	)	(126	)	(37	)	(98	)
Secured by real estate		(727	)	(951	)	(666	)	(985	)	(883	)
Consumer		(5,977	)	(4,053	)	(6,231	)	(4,140	)	(6,392	)
Revolving credit		(941	)	(1,255	)	(955	)	(926	)	(944	)
Lease financing		(53	)	(708	)	(249	)	(173	)	(168	)
Total charge-offs		(9,280	)	(8,377	)	(10,676	)	(8,898	)	(9,567	)
Recoveries:
Commercial		273		125		141		150		375
Construction and commercial real estate		7		—		6		2		—
Secured by real estate		26		49		119		88		4
Consumer		931		813		961		1,096		1,116
Revolving credit		322		231		179		287		222
Lease financing		37		38		—		(16	)	22
Total recoveries		1,596		1,256		1,406		1,607		1,739
Net charge-offs		(7,684	)	(7,121	)	(9,270	)	(7,291	)	(7,828	)
Provision for loan losses		7,684		7,127		10,990		8,713		5,514
Changes from acquisitions (sales)		(582	)	82		—		—		6,107
Ending balance	$	162,842		163,424		163,336		161,616		160,194
Nonperforming Assets
Nonaccrual loans by loan type:
Commercial	$	19,833		16,992		19,761		17,676		16,764
Construction and commercial real estate		6,883		8,531		6,976		9,988		13,095
Secured by real estate		2,105		2,261		278		238		1,463
Consumer		2,004		2,089		1,461		1,588		673
Lease financing		2,013		933		1,178		975		758
Total nonperforming loans		32,838		30,806		29,654		30,465		32,753
Foreclosed real estate		22,981		25,480		24,612		24,634		11,571
Nonperforming loans and foreclosed real estate		55,819		56,286		54,266		55,099		44,324
Other repossessed assets		11,962		9,285		9,688		10,602		3,741
Nonperforming assets	$	67,781		65,571		63,954		65,701		48,065
Ninety days past due and accruing		56,104		56,384		49,803		52,351		55,265
Asset Quality Ratios
Net charge-offs (annualized) by loan type:
Commercial		.14	%	.14		.29		.33		.10
Construction and commercial real estate		.01		.01		.01		.00		.01
Secured by real estate		.18		.21		.13		.22		.20
Consumer		.52		.33		.53		.31		.58
Revolving credit		3.26		5.55		4.37		3.74		4.47
Lease financing		.05		2.01		.74		.57		.44
Net loans charged-off (annualized) to average loans		.24		.22		.29		.24		.26
Nonperforming loans to total loans		.27		.24		.23		.24		.27
Nonperforming loans and foreclosed real estate to loans and foreclosed real estate		.45		.43		.43		.44		.36
Nonperforming assets to loans plus foreclosed real estate and other repossessed assets		.55		.51		.50		.53		.39
Loan loss allowance to total loans		1.33		1.26		1.28		1.30		1.31
Loan loss allowance to loans (excluding loans held for sale)		1.37		1.31		1.30		1.31		1.31
Loan loss allowance to net charge-offs (annualized)		5.23	x	5.78		4.44		5.53		5.05
Loan loss allowance to nonperforming loans		4.96		5.30		5.51		5.30		4.89

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NATIONAL COMMERCE FINANCIAL CORPORATION

Five Quarter Average Balance Sheets and Net Interest Income Analysis

(In Thousands Except Share and Per Share Data)

	Three Months Ended
	03/31/2003						12/31/2002			09/30/2002			06/30/2002			03/31/2002
	Average Balance		Interest		Average Yield/Rate		Average Balance	Interest	Average Yield/Rate	Average Balance	Interest	Average Yield/Rate	Average Balance	Interest	Average Yield/Rate	Average Balance	Interest	Average Yield/Rate
Earning assets:
Total loans (1)	$	12,789,028		199,861	6.32	%	12,803,821	214,799	6.67	12,600,075	217,482	6.86	12,335,537	218,856	7.11	12,108,855	220,821	7.38
Investment securities (2)		5,706,704		69,677	4.88		5,382,247	71,006	5.28	5,310,350	72,611	5.47	5,197,443	72,555	5.58	4,829,779	68,501	5.67
Trading securities		87,496		586	2.68		70,464	595	3.38	75,782	672	3.55	89,229	613	2.75	75,722	442	2.33
Time deposits in other banks		9,575		25	1.06		8,491	37	1.72	5,475	26	1.87	22,411	142	2.54	28,133	168	2.42
Federal funds sold and
other short-term investments		51,187		167	1.33		35,083	162	1.85	39,867	191	1.90	21,187	128	2.43	28,898	149	2.09
Total earning assets		18,643,990		270,316	5.85		18,300,106	286,599	6.23	18,031,549	290,982	6.42	17,665,807	292,294	6.63	17,071,387	290,081	6.86
Non-earning assets:
Cash and due from banks		398,564					419,601			418,062			436,473			472,661
Bank owned life insurance		228,214					224,742			221,185			217,458			213,996
Investment in First Market Bank		28,353					27,265			26,221			25,317			24,722
Premises and equipment		258,614					257,005			251,228			247,739			230,541
Goodwill		1,077,121					1,073,597			1,071,943			1,070,724			1,010,192
Core deposit intangibles		229,044					245,583			262,844			280,701			271,068
Other assets, net		428,542					433,114			356,642			289,085			253,312
Total assets	$	21,292,442					20,981,013			20,639,674			20,233,304			19,547,879
Interest-bearing liabilities
Interest-bearing deposits:
Savings, NOW and money market accounts	$	5,684,696		11,957	.85	%	5,601,106	14,036	.99	5,591,451	15,605	1.11	5,800,664	18,527	1.28	5,484,307	17,402	1.29
Jumbo and brokered certificates of deposit		1,796,198		7,189	1.62		1,740,695	8,281	1.89	1,683,886	8,611	2.03	1,533,119	8,290	2.17	1,571,856	8,818	2.28
Time deposits		4,909,848		38,142	3.15		4,865,312	40,878	3.33	4,773,297	41,651	3.46	4,681,751	45,046	3.86	4,502,626	48,614	4.38
Total interest-bearing deposits		12,390,742		57,288	1.88		12,207,113	63,195	2.05	12,053,634	65,867	2.17	12,015,534	71,863	2.40	11,558,789	74,834	2.63
Short-term borrowings		1,249,458		4,368	1.40		1,134,553	4,463	1.56	1,192,955	5,393	1.79	1,124,318	4,461	1.59	971,252	3,500	1.46
FHLB advances		2,056,896		22,118	4.36		2,132,665	23,667	4.40	2,133,208	24,010	4.47	1,949,166	22,626	4.66	2,093,957	23,189	4.49
Trust preferred securities and long-term debt		296,745		2,160	2.95		285,003	2,458	3.45	281,684	2,410	3.42	282,053	2,474	3.51	282,050	2,481	3.52
Total interest-bearing liabilities		15,993,841		85,934	2.18		15,759,334	93,783	2.36	15,661,481	97,680	2.47	15,371,071	101,424	2.65	14,906,048	104,004	2.83
Other liabilities and stockholders’ equity:
Demand deposits (noninterest-bearing)		2,140,299					2,120,154			1,989,040			1,923,408			1,746,302
Other liabilities		462,456					451,370			382,656			408,906			407,948
Stockholders’ equity		2,695,846					2,650,155			2,606,497			2,529,919			2,487,581
Total liabilities and stockholders’ equity	$	21,292,412					20,981,013			20,639,674			20,233,304			19,547,879
Net interest income and margin			$	184,382	3.98	%		192,816	4.20		193,302	4.27		190,870	4.33		186,077	4.39
Interest rate spread					3.67	%			3.87			3.95			3.98			4.03

(1) In late March 2003, the Company consummated a transaction securitizing mortgage loans and retained a majority of the resulting securities. The average and period end balances were reduced by $50 million and $646 million, respectively.

(2) Average balances exclude the mark-to-market adjustment for Statement of Financial Accounting Standards No. 115.

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