EX-99 2 ex99.txt PRESS RELEASE 1 EXHIBIT 99 (FIRST TENNESSEE LOGO) NEWS RELEASE RELEASE: Immediate DATE: July 18, 2000
Financial Information: Media Information: Investor Relations: ---------------------- ------------------ ------------------- Teresa Rosengarten Kim Cherry Marty Mosby (901) 523-4161 (901) 523-4726 (901) 523-5620
FIRST TENNESSEE REPORTS SECOND QUARTER EARNINGS MEMPHIS, TENN. -- First Tennessee National Corporation (First Tennessee) announced today second quarter earnings of $55.4 million or $.42 diluted earnings per share. This compares with last year's second quarter earnings of $61.0 million or $.45 diluted earnings per share. Return on average shareholders' equity was 17.4 percent and return on average assets was 1.14 percent for the second quarter of 2000, compared with 20.9 percent and 1.33 percent, respectively, for the same period in 1999. Total assets were $19.8 billion and shareholders' equity was $1.3 billion at June 30, 2000. At June 30, 1999, total assets were $18.6 billion and shareholders' equity was $1.2 billion. For the first six months of 2000, net income totaled $94.9 million, or $.72 per diluted share, compared with $114.0 million, or $.85 per diluted share, in the first six months of 1999. Return on average shareholders' equity for the first half of 2000 was 15.2 percent and return on average assets was .99 percent compared with 20.0 percent and 1.24 percent, respectively, for the same period in 1999. "The current business environment, including recent interest rate increases and the expectation for more, has continued to negatively affect the revenues from two of our business lines -- mortgage banking and capital markets -- which has only been partially offset by the performance of our other businesses," said Ralph Horn, chairman and chief executive officer of First Tennessee. "Contrary to our initial expectations, these market developments are 2 extending into the third quarter, and if prolonged into the remainder of the year will continue to negatively affect our earnings. However, we continue to evaluate opportunities to enhance our profitability and I remain encouraged by the commitment and execution of our employees in this unfavorable environment." INCOME STATEMENT Total revenues declined 9 percent from the second quarter of 1999, with a decline in fee income (noninterest income excluding securities gains and losses) of 15 percent and an increase in net interest income of 4 percent. In the second quarter of 2000, fee income contributed approximately 62 percent to total revenues compared with approximately 67 percent for the same period in 1999. For the first six months of 2000, total revenues declined 12 percent over the previous year, primarily due to a 19 percent decline in fee income. Fee income contributed approximately 61 percent to total revenues compared with 66 percent in 1999. NONINTEREST INCOME Fee income was $250.7 million for the second quarter of 2000 compared with $294.3 million for the same period in 1999. For the six-month comparison, fee income was $471.5 million in 2000 compared with $580.9 million in 1999. A discussion of major line items follows. Mortgage banking Fee income in First Horizon Home Loans (mortgage banking) for the second quarter of 2000 was $134.2 million, a decline of 24 percent from the $175.7 million earned in the same period one year ago. Mortgage banking fee income consists of various revenue streams from the origination process, servicing, and other activities such as sales of servicing. Origination activity fell 24 percent (from $5.6 billion to $4.3 billion) due to the rise in interest rates and competitive pricing pressures which have been in progress for the past several quarters. Mortgage rates in the second quarter of 2000 were at least 1 percentage point higher than the same period one year ago. More importantly, mortgage rates in the second quarter of 2000 were substantially higher than the average rates on existing mortgage loans, making it economically impractical for customers to refinance. As a result, the decline in origination volume came from lower refinance volume. Fees from the mortgage origination process (origination fees, profits from the sale of loans and secondary marketing activities) declined 45 3 percent from the second quarter of 1999 (from $116.3 million to $63.5 million). This decline came from fewer loans sold into the secondary market due to less production and a smaller beginning warehouse, lower margins related to competitive pricing pressures and a shift in product mix, and losses of approximately $4 million on certain loans affected by the volatility of interest rate movements. At June 30, 2000, the servicing portfolio totaled $45.8 billion compared with $44.3 billion at June 30, 1999. Servicing fees for the second quarter of 2000 were $38.6 million compared with $43.7 million for the same period in 1999. The lower level of fees was due to the classification of excess mortgage servicing rights to "interest-only" strips held in the investment securities portfolio and the portfolio's lower weighted average service fee due to change in mix driven by prior period bulk sales. Bulk servicing sales of only $.3 billion were transacted in the second quarter of 2000, compared with $1.9 billion in the second quarter of 1999. In addition, approximately $.5 billion of bulk servicing was purchased during the second quarter of 2000, compared with no purchases in the same period in 1999. For the second quarter of 2000 miscellaneous mortgage income totaled $32.3 million which included the $40.9 million gain from the sale of the HomeBanc Mortgage division, net of recognizing $13.9 million of losses on hedge instruments associated with the mortgage servicing rights portfolio. Miscellaneous mortgage income was $12.0 million in the second quarter of 1999. For the first six months of 2000, mortgage banking noninterest income was $234.1 million compared with $344.5 million for the same period in 1999. Capital markets The increase in interest rates also negatively impacted First Tennessee Capital Markets, which produced fee income of $18.9 million during the second quarter of 2000 compared with $30.2 million during the second quarter of 1999. Activity levels continued to grow as customers, primarily nondepository, invested principally in short-term securities. For the first six months of 2000, capital markets fee income was $43.3 million compared with $74.6 million for the same period in 1999. 4 Other fee income For the second quarter of 2000, deposit transactions and cash management fees grew 12 percent from $26.6 million to $29.7 million. Merchant processing fee income growth was affected by a special assessment received from a large customer in the second quarter of 1999, thus leading to a decline in fee income of 13 percent (from $14.2 million in the second quarter of 1999 to $12.3 million in the second quarter of 2000). Cardholder fees increased 15 percent, from $6.1 million to $7.0 million, from higher interchange collections and price increases. Trust services and investment management fees grew 9 percent from $14.8 million to $16.1 million, and assets under management grew 4 percent. Other income and commissions grew 22 percent from $26.7 million to $32.5 million, with more than half of the growth related to remittance processing fees. For the first six months of 2000, fees from deposit transactions and cash management increased 13 percent, merchant processing fees declined 6 percent, cardholder fees increased 27 percent, trust and investment management fees increased 9 percent and other income and commissions increased 47 percent. The reasons for these year-to-date trends are similar to the quarterly trends discussed above. NET INTEREST INCOME Net interest income (on a fully taxable equivalent basis) increased 4 percent from $147.1 million in the second quarter of 1999 to $152.5 million in the second quarter of 2000 due primarily to the 5 percent increase in earning assets. The consolidated net interest margin (margin) decreased to 3.74 percent for the second quarter of 2000 from 3.81 percent for the same period in 1999, primarily as a result of higher funding costs. The regional banking group's margin declined from 4.98 percent in the second quarter of 1999 to 4.89 percent for the second quarter of 2000. For the first six months of 2000, net interest income was relatively flat at $298.7 million compared with $296.1 million for the same period in 1999. For this same period, earning assets increased 2 percent. The year-to-date consolidated net interest margin was 3.74 percent compared with 3.78 percent for the same period in 1999. 5 NONINTEREST EXPENSE Total noninterest expense (operating expense) decreased 9 percent from $330.7 million for the second quarter of 1999 to $301.7 million for the second quarter of 2000. Employee compensation, incentives and benefits (personnel expense), the largest component of noninterest expense, decreased 10 percent. The percentage change in personnel and total operating expense is affected by activity levels and product mix in mortgage banking and capital markets. The rate of change in total operating expense from year to year was also affected by the inclusion of a full quarter of expense related to the remittance processing function compared with only one month of expense the previous year and lease abandonment costs, fixed asset writeoffs, and severance packages primarily in mortgage banking. With the increase in interest rates and lower prepayments, amortization of mortgage servicing rights declined 40 percent. Other expenses declined 8 percent primarily from the slowdown in mortgage banking activity. For the first six months of 2000, operating expenses decreased 11 percent and personnel expense decreased 15 percent. Amortization of mortgage servicing rights decreased 40 percent for the six-month period and other expenses, principally related to mortgage banking, decreased 5 percent. AVERAGE BALANCE SHEET For the second quarter of 2000, total average assets increased 6 percent to $19.6 billion. Total loans grew 14 percent, with the majority of the growth coming from consumer loans which were up 19 percent and commercial loans which were up 9 percent. Mortgage loans held for sale declined 9 percent. Interest-bearing core deposits and total core deposits declined 4 percent and 2 percent, respectively, while purchased funds increased 18 percent during this same period. Average shareholders' equity increased 9 percent from the second quarter of 1999. ASSET QUALITY The provision for loan losses increased $2.1 million from the second quarter of 1999 due to inherent risk in the loan portfolio and loan growth. An analytical model is used based on historical loss experience, current trends, and reasonably foreseeable events to determine the amount of provision to be recognized and to test the adequacy of the loan loss allowance. The allowance for loan losses to total loans at June 30, 2000, was 1.44 percent. The ratio of nonperforming assets to total loans was .45 percent and the ratio of net charge-offs to average 6 loans was .52 percent for the second quarter of 2000 compared with .53 percent and .65 percent, respectively, for the same period in 1999. Forward-Looking Information This press release contains forward-looking statements involving significant risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking information. Those factors include general economic and financial market conditions, including expectations of the timing and amount of interest rate movements, competition, ability to execute business plans, items already mentioned in this press release, and other factors described in our recent filings with the Securities and Exchange Commission. First Tennessee disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein to reflect future events or developments. (See accompanying tables for additional information) GENERAL INFORMATION Description - First Tennessee is a nationwide, diversified financial services institution. - One of the 50 largest bank holding companies in the United States in asset size and market capitalization. Banking and other financial services are provided through: - The regional banking group (includes trust services and credit card) - Three national lines of business - - First Horizon Home Loans (formerly FT Mortgage Companies) - First Tennessee Capital Markets - Transaction processing includes First Horizon Merchant Services (credit card merchant processing), MONEYBELT (automated teller machine network), and Express Processing (nationwide payment processing operation) Stock Information - Our common stock is traded on the New York Stock Exchange under the symbol FTN - Listed in most newspapers as FstTN Ntl - Included in the Standard and Poor's MidCap 400 Index 7 FIRST TENNESSEE NATIONAL CORPORATION PER SHARE DATA AND FINANCIAL RATIOS (Unaudited)
Year-to-date June 30 --------------- Growth 2000 1999 Rate (%) ---- ---- -------- PER SHARE DATA: --------------- Diluted earnings per share $.72 $.85 15.3 - Dividends declared .44 .38 SELECTED FINANCIAL RATIOS: -------------------------- Return on average assets .99% 1.24% Return on average shareholders' equity 15.2 20.0 Quarter Ended June 30 --------------- Growth 2000 1999 Rate (%) ---- ---- -------- PER SHARE DATA: --------------- Diluted earnings per share $.42 $.45 6.7 - Dividends declared .22 .19 SELECTED FINANCIAL RATIOS: -------------------------- Return on average assets 1.14% 1.33% Return on average shareholders' equity 17.4 20.9
QUARTERLY INFORMATION
2Q00 1Q00 4Q99 3Q99 2Q99 ------ ------ ------ ------ ------ PER SHARE DATA: --------------- Diluted earnings per share $ .42 $ .30 $ .48 $ .52 $ .45 Dividends declared .22 .22 .22 .19 .19 SELECTED FINANCIAL RATIOS: -------------------------- Return on average assets 1.14% .84% 1.35% 1.48% 1.33% Return on average shareholders' equity 17.4 13.0 20.7 22.6 20.9
T-1 8 FIRST TENNESSEE NATIONAL CORPORATION STATEMENTS OF INCOME - QUARTERLY GROWTH (Unaudited)
Quarter Ended June 30 ------------------------ Growth (THOUSANDS) 2000 1999 Rate (%) ----------- -------- -------- -------- Interest income $344,119 $293,177 17.4 + Less interest expense 192,263 146,811 31.0 + -------- -------- Net interest income 151,856 146,366 3.8 + Provision for loan losses 17,077 14,979 14.0 + -------- -------- Net interest income after provision for loan losses 134,779 131,387 2.6 + Noninterest income: Mortgage banking 134,196 175,696 23.6 -- Capital markets 18,973 30,177 37.1 -- Deposit transactions and cash management 29,731 26,608 11.7 + Trust and investment management 16,058 14,753 8.8 + Merchant processing 12,310 14,216 13.4 -- Cardholder fees 6,942 6,052 14.7 + Securities gains/(losses) 84 (38) N/A Other income and commissions 32,532 26,757 21.6 + -------- -------- Total noninterest income 250,826 294,221 14.7 -- -------- -------- Adjusted gross income after provision for loan losses 385,605 425,608 9.4 -- Noninterest expense: Employee compensation, incentives and benefits 146,201 162,391 10.0 -- Occupancy, equipment rentals, depreciation, and maintenance 37,758 30,695 23.0 + Amortization of mortgage servicing rights 17,954 29,937 40.0 -- Amortization of intangible assets 2,666 2,601 2.5 + Other 97,074 105,067 7.6 -- -------- -------- Total noninterest expense 301,653 330,691 8.8 -- -------- -------- Income before income taxes 83,952 94,917 11.6 -- Applicable income taxes 28,529 33,945 16.0 -- -------- -------- Net income $ 55,423 $ 60,972 9.1 -- ======== ======== Net interest income - FTE $152,509 $147,118 3.7 +
T-2 9 FIRST TENNESSEE NATIONAL CORPORATION STATEMENTS OF INCOME - YEARLY GROWTH (Unaudited)
Year-to-date June 30 -------------------------- Growth (THOUSANDS) 2000 1999 Rate (%) ----------- ---------- ---------- -------- Interest income $ 663,418 $ 593,443 11.8 + Less interest expense 366,068 298,910 22.5 + --------- --------- Net interest income 297,350 294,533 1.0 + Provision for loan losses 32,574 29,805 9.3 + --------- --------- Net interest income after provision for loan losses 264,776 264,728 - Noninterest income: Mortgage banking 234,068 344,474 32.1 -- Capital markets 43,337 74,565 41.9 -- Deposit transactions and cash management 56,144 49,824 12.7 + Trust and investment management 32,052 29,344 9.2 + Merchant processing 23,340 24,925 6.4 -- Cardholder fees 13,975 11,014 26.9 + Securities gains/(losses) 1,685 (72) N/A Other income and commissions 68,622 46,710 46.9 + --------- --------- Total noninterest income 473,223 580,784 18.5 -- --------- --------- Adjusted gross income after provision for loan losses 737,999 845,512 12.7 -- Noninterest expense: Employee compensation, incentives and benefits 286,195 336,286 14.9 -- Occupancy, equipment rentals, depreciation, and maintenance 71,623 59,815 19.7 + Amortization of mortgage servicing rights 36,383 60,835 40.2 -- Amortization of intangible assets 5,337 5,177 3.1 + Other 194,994 205,375 5.1 -- --------- --------- Total noninterest expense 594,532 667,488 10.9 -- --------- --------- Income before income taxes 143,467 178,024 19.4 -- Applicable income taxes 48,521 64,023 24.2 -- --------- --------- Net income $ 94,946 $ 114,001 16.7 -- ========= ========= Net interest income - FTE $ 298,652 $ 296,056 .9 +
T-3 10 FIRST TENNESSEE NATIONAL CORPORATION STATEMENTS OF INCOME - QUARTERLY (Unaudited)
(THOUSANDS) 2Q00 1Q00 4Q99 3Q99 2Q99 ----------- ---------- ---------- ---------- ---------- ---------- Interest income $ 344,119 $ 319,299 $ 310,509 $ 303,212 $ 293,177 Less interest expense 192,263 173,805 162,859 155,885 146,811 --------- --------- --------- --------- --------- Net interest income 151,856 145,494 147,650 147,327 146,366 Provision for loan losses 17,077 15,497 14,008 14,110 14,979 --------- --------- --------- --------- --------- Net interest income after provision for loan losses 134,779 129,997 133,642 133,217 131,387 Noninterest income: Mortgage banking 134,196 99,872 129,378 158,919 175,696 Capital markets 18,973 24,364 24,438 27,832 30,177 Deposit transactions and cash management 29,731 26,413 28,985 27,431 26,608 Trust and investment management 16,058 15,994 14,748 15,715 14,753 Merchant processing 12,310 11,030 11,906 12,880 14,216 Cardholder fees 6,942 7,033 7,481 7,084 6,052 Securities gains/ (losses) 84 1,601 470 1,859 (38) Other income and commissions 32,532 36,090 38,602 34,592 26,757 --------- --------- --------- --------- --------- Total noninterest income 250,826 222,397 256,008 286,312 294,221 --------- --------- --------- --------- --------- Adjusted gross income after provision for loan losses 385,605 352,394 389,650 419,529 425,608 Noninterest expense: Employee compensation, incentives and benefits 146,201 139,994 143,179 154,175 162,391 Occupancy, equipment rentals, depreciation, and maintenance 37,758 33,865 36,720 34,324 30,695 Amortization of mortgage servicing rights 17,954 18,429 19,852 22,784 29,937 Amortization of intangible assets 2,666 2,671 2,686 2,629 2,601 Other 97,074 97,920 90,887 100,528 105,067 --------- --------- --------- --------- --------- Total noninterest expense 301,653 292,879 293,324 314,440 330,691 --------- --------- --------- --------- --------- Income before income taxes 83,952 59,515 96,326 105,089 94,917 Applicable income taxes 28,529 19,992 32,212 35,671 33,945 --------- --------- --------- --------- --------- Net income $ 55,423 $ 39,523 $ 64,114 $ 69,418 $ 60,972 ========= ========= ========= ========= ========= Net interest income - FTE $ 152,509 $ 146,143 $ 148,391 $ 148,075 $ 147,118
T-4 11 FIRST TENNESSEE NATIONAL CORPORATION AVERAGE STATEMENTS OF CONDITION - QUARTERLY GROWTH (Unaudited)
Quarter Ended June 30 ------------------------------ Growth (THOUSANDS) 2000 1999 Rate (%) ----------- ------------ ------------ -------- Loans, net of unearned income: Commercial $ 4,614,858 $ 4,249,088 8.6 + Consumer(a) 3,556,245 2,999,728 18.6 + Permanent mortgage(a) 580,065 448,325 29.4 + Credit card receivables 552,292 567,056 2.6 -- Real estate construction 541,200 376,433 43.8 + Nonaccrual - Regional Banking Group 7,569 12,618 40.0 -- Nonaccrual - Mortgage Banking 22,110 16,590 33.3 + ------------ ------------ Total loans, net of unearned income(a) 9,874,339 8,669,838 13.9 + Investment securities 2,078,623 1,961,012 6.0 + REMIC securities(a) 698,807 733,405 4.7 -- Mortgage loans held for sale 2,871,333 3,154,836 9.0 -- Other earning assets 778,826 946,587 17.7 -- ------------ ------------ Total earning assets 16,301,928 15,465,678 5.4 + Cash and due from banks 835,129 730,574 14.3 + Other assets 2,434,048 2,245,225 8.4 + ------------ ------------ Total assets $ 19,571,105 $ 18,441,477 6.1 + ============ ============ Certificates of deposit under $100,000 and other time $ 2,303,376 $ 2,414,716 4.6 -- Other interest-bearing deposits 3,778,684 3,950,084 4.3 -- ------------ ------------ Total interest-bearing core deposits 6,082,060 6,364,800 4.4 -- Certificates of deposit $100,000 and more 3,687,760 2,714,710 35.8 + Short-term borrowed funds 4,431,274 4,145,517 6.9 + Term borrowings 359,846 376,787 4.5 -- ------------ ------------ Total interest-bearing liabilities 14,560,940 13,601,814 7.1 + Demand deposits 1,817,423 1,835,262 1.0 -- Other noninterest-bearing deposits 1,092,605 1,010,191 8.2 + Other liabilities 718,150 723,260 .7 -- Qualifying capital securities(b) 100,000 100,000 - Shareholders' equity 1,281,987 1,170,950 9.5 + ------------ ------------ Total liabilities and shareholders' equity $ 19,571,105 $ 18,441,477 6.1 + ============ ============ (a) As a result of the Real Estate Mortgage Investment Conduit certain securitized consumer and permanent mortgage loans are now classified as REMIC securities (b) Guaranteed preferred beneficial interests in First Tennessee's junior subordinated debentures
T-5 12 FIRST TENNESSEE NATIONAL CORPORATION AVERAGE STATEMENTS OF CONDITION - YEARLY GROWTH (Unaudited)
Year-to-date June 30 ---------------------------- Growth (THOUSANDS) 2000 1999 Rate (%) ----------------- ------------- -------------- --------------- Loans, net of unearned income: Commercial $ 4,538,784 $ 4,200,285 8.1 + Consumer (c) 3,456,474 3,044,785 13.5 + Permanent mortgage (c) 559,287 436,391 28.2 + Credit card receivables 564,018 569,940 1.0 -- Real estate construction 525,029 378,440 38.7 + Nonaccrual - Regional Banking Group 7,476 11,786 36.6 -- Nonaccrual - Mortgage Banking 22,829 19,920 14.6 + ------------ ------------ Total loans, net of unearned income (c) 9,673,897 8,661,547 11.7 + Investment securities 2,228,575 1,924,927 15.8 + REMIC securities (c) 714,789 637,976 12.0 + Mortgage loans held for sale 2,598,557 3,544,430 26.7 -- Other earning assets 746,332 891,409 16.3 -- ------------ ------------ Total earning assets 15,962,150 15,660,289 1.9 + Cash and due from banks 875,487 716,683 22.2 + Other assets 2,433,022 2,154,836 12.9 + ------------ ------------ Total assets $ 19,270,659 $ 18,531,808 4.0 + ============ ============ Certificates of deposit under $100,000 and other time $ 2,316,792 $ 2,436,501 4.9 -- Other interest-bearing deposits 3,810,511 3,963,185 3.9 -- ------------ ------------ Total interest-bearing core deposits 6,127,303 6,399,686 4.3 -- Certificates of deposit $100,000 and more 3,388,854 3,037,153 11.6 + Short-term borrowed funds 4,450,368 3,903,159 14.0 + Term borrowings 376,935 390,447 3.5 -- ------------ ------------ Total interest-bearing liabilities 14,343,460 13,730,445 4.5 + Demand deposits 1,861,483 1,835,983 1.4 + Other noninterest-bearing deposits 971,739 995,200 2.4 -- Other liabilities 739,442 721,437 2.5 + Qualifying capital securities (d) 100,000 100,000 - Shareholders' equity 1,254,535 1,148,743 9.2 + ------------ ------------ Total liabilities and shareholders' equity $ 19,270,659 $ 18,531,808 4.0 + ============ ============ (c) As a result of the Real Estate Mortgage Investment Conduit certain securitized consumer and permanent mortgage loans are now classified as REMIC securities (d) Guaranteed preferred beneficial interests in First Tennessee's junior subordinated debentures
T-6 13 FIRST TENNESSEE NATIONAL CORPORATION AVERAGE STATEMENTS OF CONDITION - QUARTERLY (Unaudited)
(MILLIONS) 2Q00 1Q00 4Q99 3Q99 2Q99 --------------------------------- ----------- ----------- ------------ ------------- ---------- Loans, net of unearned income: Commercial $ 4,614.9 $ 4,462.7 $ 4,380.9 $ 4,304.1 $ 4,249.1 Consumer (e) 3,556.2 3,356.7 3,200.6 3,048.6 2,999.7 Permanent mortgage (e) 580.1 538.5 491.1 460.2 448.3 Credit card receivables 552.3 575.8 581.0 572.8 567.1 Real estate construction 541.2 508.9 457.8 385.3 376.4 Nonaccrual - Regional Banking Group 7.6 7.4 10.8 12.1 12.6 Nonaccrual - Mortgage Banking 22.1 23.5 21.4 20.1 16.6 --------- --------- --------- --------- --------- Total loans, net of unearned income (e) 9,874.4 9,473.5 9,143.6 8,803.2 8,669.8 Investment securities 2,078.6 2,378.5 2,122.1 1,979.3 1,961.0 REMIC securities (e) 698.8 730.8 765.7 813.4 733.4 Mortgage loans held for sale 2,871.3 2,325.8 2,766.8 3,025.7 3,154.9 Other earning assets 778.8 713.8 721.3 875.5 946.6 --------- --------- --------- --------- --------- Total earning assets 16,301.9 15,622.4 15,519.5 15,497.1 15,465.7 Cash and due from banks 835.1 915.8 871.9 809.7 730.6 Other assets 2,434.1 2,432.0 2,391.8 2,326.5 2,245.2 --------- --------- --------- --------- --------- Total assets $19,571.1 $18,970.2 $18,783.2 $18,633.3 $18,441.5 ========= ========= ========= ========= ========= Certificates of deposit under $100,000 and other time $ 2,303.4 $ 2,330.2 $ 2,350.7 $ 2,371.0 $ 2,414.7 Other interest-bearing deposits 3,778.7 3,842.3 3,818.8 3,861.6 3,950.1 --------- --------- --------- --------- --------- Total interest-bearing core deposits 6,082.1 6,172.5 6,169.5 6,232.6 6,364.8 Certificates of deposit $100,000 and more 3,687.7 3,090.0 3,674.1 2,903.1 2,714.7 Short-term borrowed funds 4,431.3 4,469.5 3,645.0 4,245.0 4,145.5 Term borrowings 359.8 394.0 369.2 335.0 376.8 --------- --------- --------- --------- --------- Total interest-bearing liabilities 14,560.9 14,126.0 13,857.8 13,715.7 13,601.8 Demand deposits 1,817.4 1,905.5 1,940.1 1,853.3 1,835.3 Other noninterest- bearing deposits 1,092.6 850.9 892.7 1,005.8 1,010.2 Other liabilities 718.2 760.7 761.2 741.6 723.3 Qualifying capital securities (f) 100.0 100.0 100.0 100.0 100.0 Shareholders' equity 1,282.0 1,227.1 1,231.4 1,216.9 1,170.9 --------- --------- --------- --------- --------- Total liabilities and shareholders' equity $19,571.1 $18,970.2 $18,783.2 $18,633.3 $18,441.5 ========= ========= ========= ========= ========= Diluted shares outstanding 131.8 132.5 133.3 134.2 134.7 (e) As a result of the Real Estate Mortgage Investment Conduit certain securitized consumer and permanent mortgage loans are now classified as REMIC securities (f) Guaranteed preferred beneficial interests in First Tennessee's junior subordinated debentures
T-7 14 FIRST TENNESSEE NATIONAL CORPORATION PERIOD-END STATEMENTS OF CONDITION (Unaudited)
June 30 Growth (THOUSANDS) 2000 1999 Rate (%) ------------------ ------------ -------------- -------------- Loans, net of unearned income: Commercial $ 4,653,494 $ 4,295,676 8.3 + Consumer (g) 3,484,894 2,954,702 17.9 + Permanent mortgage (g) 608,827 454,364 34.0 + Credit card receivables 553,255 576,377 4.0 -- Real estate construction 550,117 351,651 56.4 + Nonaccrual - Regional Banking Group 5,973 11,633 48.7 -- Nonaccrual - Mortgage Banking 20,589 16,874 22.0 + ------------ ------------ Total loans, net of unearned income (g) 9,877,149 8,661,277 14.0 + Investment securities 2,093,029 2,000,045 4.6 + REMIC securities (g) 678,827 837,131 18.9 -- Mortgage loans held for sale 2,950,272 2,868,885 2.8 + Other earning assets 626,198 691,203 9.4 -- ----------- ----------- Total earning assets 16,225,475 15,058,541 7.7 + Cash and due from banks 844,741 764,018 10.6 + Other assets 2,734,400 2,801,091 2.4 -- ----------- ----------- Total assets $19,804,616 $18,623,650 6.3 + =========== =========== Certificates of deposit under $100,000 and other time $ 2,317,779 $ 2,388,353 3.0 -- Other interest-bearing deposits 3,676,523 3,879,839 5.2 -- ----------- ----------- Total interest-bearing core deposits 5,994,302 6,268,192 4.4 -- Certificates of deposit $100,000 and more 3,582,025 2,365,589 51.4 + Short-term borrowed funds 4,366,824 3,964,372 10.2 + Term borrowings 359,830 326,860 10.1 + ----------- ----------- Total interest-bearing liabilities 14,302,981 12,925,013 10.7 + Demand deposits 1,742,288 1,950,476 10.7 -- Other noninterest-bearing deposits 1,236,806 932,358 32.7 + Other liabilities 1,120,789 1,521,718 26.3 -- Qualifying capital securities (h) 100,000 100,000 - Shareholders' equity 1,301,752 1,194,085 9.0 + ----------- ----------- Total liabilities and shareholders' equity $19,804,616 $18,623,650 6.3 + =========== =========== (g) As a result of the Real Estate Mortgage Investment Conduit certain securitized consumer and permanent mortgage loans are now classified as REMIC securities (h) Guaranteed preferred beneficial interests in First Tennessee's junior subordinated debentures
T-8 15 FIRST TENNESSEE NATIONAL CORPORATION ASSET QUALITY HIGHLIGHTS (Unaudited)
(THOUSANDS) 2Q00 1Q00 4Q99 3Q99 2Q99 --------------------------- ----------- ------------- ------------- ------------- ----------- ALLOWANCE FOR LOAN LOSSES: Beginning Reserve $ 140,736 $ 139,603 $ 139,426 $ 138,595 $ 139,387 Provision 17,077 15,497 14,008 14,110 14,979 Securitization adjustment (2,173) - - - (1,790) Adjustment due to divestiture - - - (893) - Charge-offs (14,922) (16,487) (16,216) (14,366) (16,102) Loan recoveries 2,004 2,123 2,385 1,980 2,121 --------- --------- --------- --------- --------- Ending Balance $ 142,722 $ 140,736 $ 139,603 $ 139,426 $ 138,595 ========= ========= ========= ========= ========= NONPERFORMING ASSETS: Nonperforming loans $ 5,973 $ 7,047 $ 7,054 $ 11,476 $ 11,633 Foreclosed real estate 4,108 5,698 5,777 5,825 5,267 Other assets 90 91 91 85 202 --------- --------- --------- --------- --------- Total Regional Banking Group 10,171 12,836 12,922 17,386 17,102 --------- --------- --------- --------- --------- Mortgage Banking nonperforming loans 20,589 24,621 22,064 21,215 16,874 Mortgage Banking foreclosed real estate 13,769 12,716 12,093 11,240 11,701 --------- --------- --------- --------- --------- Total nonperforming assets $ 44,529 $ 50,173 $ 47,079 $ 49,841 $ 45,677 ========= ========= ========= ========= ========= Loans and leases past due 90 days or more $ 38,013 $ 31,259 $ 29,849 $ 24,004 $ 23,593
T-9 16 FIRST TENNESSEE NATIONAL CORPORATION ASSET QUALITY HIGHLIGHTS (Unaudited)
2Q00 1Q00 4Q99 3Q99 2Q99 ----------- ------------- ------------- ------------ ----------- TOTAL FIRST TENNESSEE: Nonperforming loans ratio (i) .27% .33% .31% .37% .33% Nonperforming assets ratio (j) .45 .52 .50 .56 .53 Allowance to total loans 1.44 1.47 1.49 1.56 1.60 Allowance to nonperforming loans 537.32 444.41 479.44 426.50 486.18 Allowance to nonperforming assets 320.51 280.50 296.53 279.74 303.42 Net charge-off ratio (k) .52 .61 .61 .56 .65 REGIONAL BANKING GROUP: Nonperforming loans ratio (i) .07% .08% .08% .14% .14% Nonperforming assets ratio (j) .11 .14 .15 .20 .21 Allowance to total loans 1.45 1.46 1.47 1.53 1.58 Allowance to nonperforming loans 2,227.74 1,854.58 1,830.82 1,134.93 1,121.05 Allowance to nonperforming assets 1,308.26 1,018.17 999.43 749.14 762.55 (i) Ratio is nonperforming loans to total loans (j) Ratio is nonperforming assets to total loans plus foreclosed real estate and other assets (k) Ratio is net charge-offs to average loans
T-10 17 FIRST TENNESSEE NATIONAL CORPORATION NET INTEREST MARGIN HIGHLIGHTS (Unaudited)
2Q00 1Q00 4Q99 3Q99 2Q99 --------------------------- ------ ------ ------ ------ ------ REGIONAL BANKING GROUP Yields on earning assets 8.46 % 8.23 % 8.06 % 7.98 % 7.80 % Rates paid on interest- bearing liabilities 4.60 4.25 3.99 3.90 3.73 ------ ------ ------ ------ ------ Net interest spread 3.86 3.98 4.07 4.08 4.07 ------ ------ ------ ------ ------ Effect of interest-free sources .86 .76 .82 .74 .77 Loan fees .17 .15 .13 .15 .13 FRB interest and penalties - .01 .01 - .01 ------ ------ ------ ------ ------ Net interest margin- REGIONAL BANKING GROUP 4.89 % 4.90 % 5.03 % 4.97 % 4.98 % MORTGAGE BANKING (1.03) (1.04) (1.07) (1.00) (.99) CAPITAL MARKETS (.13) (.13) (.16) (.17) (.20) TRANSACTION PROCESSING .01 .01 .02 .02 .02 ------ ------ ------ ------ ------ Net interest margin 3.74 % 3.74 % 3.82 % 3.82 % 3.81 % ====== ====== ====== ====== ======
T-11 18 FIRST TENNESSEE NATIONAL CORPORATION CAPITAL HIGHLIGHTS (Dollars in millions except per share amounts, Unaudited)
2Q00 1Q00 4Q99 3Q99 2Q99 ---------------- ---------- ---------- ---------- ---------- ---------- Tier 1 Capital(l) $ 1,252.9 $ 1,222.9 $ 1,218.1 $ 1,208.5 $ 1,135.1 Tier 2 Capital(l) 452.6 450.2 448.5 466.2 465.4 ---------- ---------- ---------- ---------- ---------- Total Capital(l) $ 1,705.5 $ 1,673.1 $ 1,666.6 $ 1,674.7 $ 1,600.5 ========== ========== ========== ========== ========== Risk-Adjusted Assets(l) $ 15,026.0 $ 14,829.6 $ 13,893.3 $ 13,744.0 $ 13,340.5 Tier 1 Ratio(l) 8.34% 8.25% 8.77% 8.79% 8.51% Tier 2 Ratio(l) 3.01 3.03 3.23 3.39 3.49 ---------- ---------- ---------- ---------- ---------- Total Capital Ratio(l) 11.35% 11.28% 12.00% 12.18% 12.00% ========== ========== ========== ========== ========== Leverage Ratio(l) 6.44% 6.48% 6.53% 6.53% 6.21% Shareholders' Equity/Assets Ratio (m) 6.55 6.47 6.56 6.53 6.35 Total Equity (n)/Assets Ratio (m) 7.06 7.00 7.09 7.07 6.89 Book Value $ 9.95 $ 9.67 $ 9.52 $ 9.51 $ 9.12 (l) Current quarter is an estimate (m) Calculated on average balances (n) Total capital includes shareholders' equity and guaranteed preferred beneficial interests in First Tennessee's junior subordinated debentures
T-12 19 FIRST TENNESSEE NATIONAL CORPORATION REGIONAL BANKING GROUP HIGHLIGHTS (Earnings in thousands, Unaudited) (Statistics in millions)
2Q00 1Q00 4Q99 3Q99 2Q99 -------- -------- -------- -------- -------- REGIONAL BANKING GROUP ---------------------- Total Revenues $200,820 $198,730 $204,324 $196,433 $189,529 Loan Loss Provision 17,077 15,527 12,292 12,498 12,146 Operating Expenses 114,908 117,650 111,151 114,636 114,688 -------- -------- -------- -------- -------- Pre-Tax Income $ 68,835 $ 65,553 $ 80,881 $ 69,299 $ 62,695 RETAIL/COMMERCIAL BANK ---------------------- Total Revenues $167,727 $165,731 $171,555 $163,634 $158,769 Loan Loss Provision 11,284 9,755 6,508 7,268 6,808 Operating Expenses 100,373 101,518 96,090 98,496 99,643 -------- -------- -------- -------- -------- Pre-Tax Income $ 56,070 $ 54,458 $ 68,957 $ 57,870 $ 52,318 CREDIT CARD ----------- Total Revenues $ 17,143 $ 17,133 $ 17,184 $ 17,341 $ 16,044 Loan Loss Provision 5,793 5,772 5,784 5,230 5,338 Operating Expenses 4,908 6,123 4,878 5,825 6,253 -------- -------- -------- -------- -------- Pre-Tax Income $ 6,442 $ 5,238 $ 6,522 $ 6,286 $ 4,453 KEY STATISTICS: Outstandings $ 553.3 $ 555.7 $ 607.2 $ 578.4 $ 576.4 Net Charge-offs/ Average Loans 4.05% 3.90% 3.82% 3.55% 3.51% TRUST SERVICES -------------- Total Revenues $ 15,950 $ 15,866 $ 15,585 $ 15,458 $ 14,716 Operating Expenses 9,627 10,009 10,183 10,315 8,792 -------- -------- -------- -------- -------- Pre-Tax Income $ 6,323 $ 5,857 $ 5,402 $ 5,143 $ 5,924 KEY STATISTICS: Managed Assets(o) (FTBNA) $9,801.8 $9,840.0 $9,642.0 $9,047.6 $9,416.4 (o) Current quarter is an estimate The business line financial information excludes significant nonrecurring items, such as security gains and losses. Expenses have been allocated based on management's best estimates, and equity has been assigned to reflect the inherent risk in each individual business line.
T-13 20 FIRST TENNESSEE NATIONAL CORPORATION NATIONAL BUSINESS LINES HIGHLIGHTS (Earnings in thousands, Unaudited)
2Q00 1Q00 4Q99 3Q99 2Q99 ---------- ---------- ---------- ---------- ---------- MORTGAGE BANKING ---------------- Total Revenues $ 149,441 $ 112,490 $ 142,556 $ 174,630 $ 192,019 Loan Loss Provision - (30) 1,716 1,612 2,833 Operating Expenses 141,496 129,021 134,506 152,098 170,240 ---------- ---------- ---------- ---------- ---------- Pre-Tax Income $ 7,945 $ (16,501) $ 6,334 $ 20,920 $ 18,946 Key Statistics (in millions): Origination Volume $ 4,286.6 $ 3,508.4 $ 3,868.2 $ 4,387.1 $ 5,639.3 Servicing Portfolio $ 45,774.3 $ 43,070.4 $ 44,628.4 $ 46,917.8 $ 44,281.2 CAPITAL MARKETS --------------- Total Revenues $ 20,329 $ 25,124 $ 25,519 $ 28,813 $ 31,410 Operating Expenses 17,178 19,903 19,182 20,886 24,078 ---------- ---------- ---------- ---------- ---------- Pre-Tax Income $ 3,151 $ 5,221 $ 6,337 $ 7,927 $ 7,332 Key Statistics (in millions): Total Securities Bought/Sold $188,189.0 $148,048.1 $120,886.9 $128,785.5 $138,765.6 Total Underwritings $ 4,112.5 $ 4,409.8 $ 2,667.0 $ 5,936.6 $ 8,036.0 TRANSACTION PROCESSING ---------------------- Total Revenues $ 32,661 $ 30,595 $ 31,530 $ 32,652 $ 28,419 Operating Expenses 25,948 24,182 26,455 24,285 19,655 ---------- ---------- ---------- ---------- ---------- Pre-Tax Income $ 6,713 $ 6,413 $ 5,075 $ 8,367 $ 8,764 Key Statistics (in thousands): Merchant Transactions Processed 35,067.1 31,103.1 31,535.4 32,930.8 43,132.4 MONEY BELT Transactions Processed (correspondent) 8,720.8 7,610.2 7,945.2 7,979.2 7,737.4 First Express Transactions Processed 127,290.2 122,479.7 119,797.5 122,403.6 90,721.3 The business line financial information excludes significant nonrecurring items, such as security gains and losses. Expenses have been allocated based on management's best estimates, and equity has been assigned to reflect the inherent risk in each individual business line.
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