10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

(Mark one)

x    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________________ to ______________________________

Commission file number 000-4491

CIK number 0000036966

FIRST TENNESSEE NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Tennessee	62-0803242
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
165 Madison Avenue, Memphis, Tennessee	38103
(Address of principal executive offices)	(Zip Code)

(901) 523-4444

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x    No   o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.625 par value	125,564,763
Class	Outstanding on October 31, 2002

TABLE OF CONTENTS

ByLaws of the Corporation, as amended and restated

1997 Employee Stock Option Plan,amended & restated

FIRST TENNESSEE NATIONAL CORPORATION

INDEX

Part I. Financial Information

Part II. Other Information

Signatures

Certifications

Exhibit Index

2

PART I.
 
FINANCIAL INFORMATION

Item 1. Financial Statements
	The Consolidated Statements of Condition
	The Consolidated Statements of Income
	The Consolidated Statements of Shareholders’ Equity
	The Consolidated Statements of Cash Flows
	The Notes to Consolidated Financial Statements

This financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented.

3

CONSOLIDATED STATEMENTS OF CONDITION First Tennessee National Corporation

			September 30						December 31
(Dollars in thousands)(Unaudited)			2002			2001			2001
Assets:
Cash and due from banks			$	1,136,062		$	898,133		$	885,183
Federal funds sold and securities purchased under agreements to resell				392,276			158,252			229,440
		Total cash and cash equivalents		1,528,338			1,056,385			1,114,623
Investment in bank time deposits				2,030			5,570			1,740
Trading securities				876,052			600,168			646,179
Loans held for sale				3,792,082			2,194,390			3,399,309
Securities available for sale				2,219,615			2,035,628			2,064,611
Securities held to maturity (market value of $337,110 on September 30, 2002; $510,999 on September 30, 2001; and $459,109 on December 31, 2001)				328,452			513,496			461,259
Loans, net of unearned income				10,922,628			10,001,673			10,283,143
	Less: Allowance for loan losses			148,403			151,180			155,373
		Total net loans		10,774,225			9,850,493			10,127,770
Premises and equipment, net				243,121			259,587			251,504
Real estate acquired by foreclosure				19,782			18,818			21,989
Mortgage servicing rights, net				398,968			526,013			665,005
Goodwill				163,277			112,660			143,147
Other intangible assets, net				31,498			15,080			41,857
Capital markets receivables and other assets				2,362,483			2,494,714			1,677,798
Total assets			$	22,739,923		$	19,683,002		$	20,616,791
Liabilities and shareholders’ equity:
Deposits:
	Interest-bearing		$	9,448,477		$	8,248,807		$	9,596,230
	Noninterest-bearing			4,342,944			3,401,940			4,010,104
		Total deposits		13,791,421			11,650,747			13,606,334
Federal funds purchased and securities sold under agreements to repurchase				3,880,615			3,179,848			2,921,543
Commercial paper and other short-term borrowings				295,492			471,279			449,151
Capital markets payables and other liabilities				2,345,822			2,206,528			1,467,453
Term borrowings				654,533			593,737			550,361
		Total liabilities		20,967,883			18,102,139			18,994,842
Guaranteed preferred beneficial interests in First Tennessee’s junior subordinated debentures				100,000			100,000			100,000
Preferred stock of subsidiary				44,261			44,162			44,187
Shareholders’ equity
Preferred stock — no par value (5,000,000 shares authorized, but unissued)				—			—			—
Common stock — $.625 par value (shares authorized - 400,000,000; shares issued - 125,663,582 on September 30, 2002; 125,874,856 on September 30, 2001; and 125,865,188 on December 31, 2001)				78,540			78,672			78,666
Capital surplus				123,393			103,765			106,682
Undivided profits				1,396,297			1,215,907			1,263,649
Accumulated other comprehensive income				25,807			33,722			23,278
Deferred compensation on restricted stock incentive plans				(6,389	)		(2,526	)		(2,126	)
Deferred compensation obligation				10,131			7,161			7,613
		Total shareholders’ equity		1,627,779			1,436,701			1,477,762
Total liabilities and shareholders’ equity			$	22,739,923		$	19,683,002		$	20,616,791

See accompanying notes to consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME First Tennessee National Corporation

			Three Months Ended						Nine Months Ended
			September 30						September 30
(Dollars in thousands except per share data)(Unaudited)			2002			2001			2002			2001
Interest income:
Interest and fees on loans				$ 168,230			$ 195,088			$   501,515			$   626,568
Interest on investment securities:
	Taxable			34,565			40,620			106,966			127,278
	Tax-exempt			181			391			673			1,230
Interest on loans held for sale				46,136			37,918			118,599			117,856
Interest on trading securities				10,129			12,540			35,035			37,466
Interest on other earning assets				1,336			1,623			4,469			6,041
		Total interest income		260,577			288,180			767,257			916,439
Interest expense:
Interest on deposits:
	Savings			579			864			1,736			3,191
	Checking interest and money market account			9,253			19,539			29,292			72,151
	Certificates of deposit under $100,000 and other time			17,736			26,337			54,670			89,158
	Certificates of deposit $100,000 and more			19,259			30,148			58,638			112,555
Interest on short-term borrowings				17,911			30,431			51,956			124,950
Interest on term borrowings				7,198			7,922			20,806			23,310
		Total interest expense		71,936			115,241			217,098			425,315
Net interest income				188,641			172,939			550,159			491,124
Provision for loan losses				20,447			22,778			69,283			59,203
Net interest income after provision for loan losses				168,194			150,161			480,876			431,921
Noninterest income:
Mortgage banking				158,811			115,511			409,994			311,461
Capital markets				124,097			90,268			321,708			234,818
Deposit transactions and cash management				36,730			35,258			105,547			94,692
Trust services and investment management				10,768			13,752			38,181			43,357
Insurance premiums and commissions				10,765			3,097			36,678			8,959
Merchant processing				12,998			11,780			35,838			34,740
Divestitures				2,250			—			2,250			81,467
Equity securities gains/losses				8			39			(2,188	)		(3,264	)
Debt securities losses				(19	)		(1	)		(174	)		(238	)
All other income and commissions				35,537			32,490			105,624			102,844
		Total noninterest income		391,945			302,194			1,053,458			908,836
Adjusted gross income after provision for loan losses				560,139			452,355			1,534,334			1,340,757
Noninterest expense:
Employee compensation, incentives and benefits				258,061			199,911			698,218			568,965
Occupancy				19,883			17,898			55,470			53,460
Equipment rentals, depreciation and maintenance				18,493			15,366			51,005			55,908
Operations services				15,387			13,249			44,770			44,763
Communications and courier				13,331			12,296			38,873			35,392
Amortization of intangible assets				1,676			2,677			4,631			8,434
All other expense				94,280			59,709			235,789			210,165
		Total noninterest expense		421,111			321,106			1,128,756			977,087
Pretax income				139,028			131,249			405,578			363,670
Applicable income taxes				43,457			42,240			132,461			123,275
Income before debt restructurings and cumulative effect of changes in accounting principles				95,571			89,009			273,117			240,395
Debt restructurings				—			—			—			(3,225	)
Cumulative effect of changes in accounting principles				—			—			—			(8,168	)
Net income				$  95,571			$   89,009			$   273,117			$   229,002
Earnings per common share before debt restructurings and cumulative effect of changes in accounting principles (Note 3)				$        .75			$         .70			$         2.16			$         1.88
Earnings per common share (Note 3)				.75			.70			2.16			1.79
Diluted earnings per common share before debt restructurings and cumulative effect of changes in accounting principles (Note 3)				$        .73			$         .68			$         2.09			$         1.82
Diluted earnings per common share (Note 3)				.73			.68			2.09			1.74
Weighted average shares outstanding				126,698,671			127,156,679			126,721,080			128,109,322

See accompanying notes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY First Tennessee National Corporation

(Dollars in thousands)(Unaudited)		2002			2001
Balance, January 1		$	1,477,762		$	1,384,156
Net income			273,117			229,002
Other comprehensive income:
	Unrealized loss on cash flow hedge, net of tax		(1,030	)		—
	Unrealized market adjustments, net of tax		3,559			19,124
Comprehensive income			275,646			248,126
Cash dividends declared			(94,296	)		(83,842	)
Common stock issued for exercise of stock options			48,125			63,268
Tax benefit from non-qualified stock options			10,109			25,376
Common stock repurchased			(103,907	)		(214,982	)
Amortization on restricted stock incentive plans			1,906			1,426
Other			12,434			13,173
Balance, September 30		$	1,627,779		$	1,436,701
See accompanying notes to consolidated financial statements.

6

CONSOLIDATED STATEMENTS OF CASH FLOWS First Tennessee National Corporation

				Nine Months Ended September 30
(Dollars in thousands)(Unaudited)				2002			2001
Operating	Net income			$	273,117		$	229,002
Activities	Adjustments to reconcile net income to net cash provided/(used) by operating activities:
		Provision for loan losses			69,283			59,203
		Provision for deferred income tax			71,727			6,595
		Depreciation and amortization of premises and equipment			41,431			42,320
		Amortization and impairment of mortgage servicing rights			186,618			169,934
		Amortization of intangible assets			4,631			8,434
		Net other amortization and accretion			16,191			10,220
		Net increase in net derivative product assets			(234,562	)		(7,545	)
		Market value adjustment on foreclosed property			17,665			7,282
		Equity securities losses			2,188			3,264
		Debt securities losses			174			238
		Net losses on disposal of fixed assets			946			7,513
		Gains on divestitures			(2,250	)		(81,467	)
		Net (increase)/decrease in:
			Trading securities		(229,873	)		(191,648	)
			Loans held for sale		(392,773	)		(459,320	)
			Capital markets receivables		(207,802	)		(1,016,575	)
			Interest receivable		11,203			20,973
			Other assets		(103,188	)		80,136
		Net increase/(decrease)in:
			Capital markets payables		305,073			1,024,289
			Interest payable		(7,220	)		(20,120	)
			Other liabilities		432,440			174,365
			Total adjustments		(18,098	)		(161,909	)
	Net cash provided by operating activities				255,019			67,093
Investing	Maturities of held to maturity securities				131,915			123,817
Activities	Available for sale securities:
		Sales			162,616			118,221
		Maturities			764,020			541,807
		Purchases			(1,073,175	)		(634,102	)
	Premises and equipment:
		Sales			7,432			174
		Purchases			(32,795	)		(17,265	)
	Net increase in loans				(950,616	)		(321,256	)
	Net increase in investment in bank time deposits				(290	)		(1,941	)
	Proceeds from divestitures				206,664			453,279
	Acquisitions, net of cash and cash equivalents acquired				(1,433	)		(1,925	)
	Net cash (used)/provided by investing activities				(785,662	)		260,809
Financing	Common stock:
Activities		Exercise of stock options			48,147			60,320
		Cash dividends			(94,268	)		(84,352	)
		Repurchase of shares			(103,907	)		(214,981	)
	Term borrowings:
		Issuance			106,485			324,151
		Payments			(2,589	)		(190,333	)
	Net increase/(decrease) in:
		Deposits			185,077			(390,287	)
		Short-term borrowings			805,413			263,566
	Net cash provided/(used) by financing activities				944,358			(231,916	)
	Net increase in cash and cash equivalents				413,715			95,986
	Cash and cash equivalents at beginning of period				1,114,623			960,399
	Cash and cash equivalents at end of period			$	1,528,338		$	1,056,385
	Total interest paid			$	223,759		$	444,858
	Total income taxes paid				65,321			90,208
See accompanying notes to consolidated financial statements.

7

Note 1 – Financial Information

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In the opinion of management, all necessary adjustments have been made for a fair presentation of financial position and results of operations for the periods presented. The operating results for the nine-month period ended September 30, 2002, are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements and footnotes included in the financial appendix to the 2002 Proxy Statement.

On January 1, 2002, First Tennessee National Corporation (First Tennessee) adopted the final provisions of Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations” which requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method. The impact of adopting this standard was immaterial to First Tennessee.

On January 1, 2002, First Tennessee adopted the preliminary provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life, but is subject to an assessment for impairment using a fair-value-based test at least annually. First Tennessee has completed the initial analysis of impairment as required by the new standard and has not recognized any impairment of the goodwill currently on its books during 2002. See Note 7 – Intangible Assets and Note 8 – Mortgage Servicing Rights for additional information.

On January 1, 2002, First Tennessee adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses accounting and reporting issues related to the impairment of long-lived assets and for long-lived assets to be disposed of. This standard is effective for fiscal years beginning after December 15, 2001, which for First Tennessee was January 1, 2002. The impact of adopting this standard was immaterial to First Tennessee.

On January 1, 2001, First Tennessee adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and EITF Issue 99-20: Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets. SFAS No. 133 establishes accounting standards requiring that every derivative instrument (including certain instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. It requires that changes in the instrument’s fair value be recognized currently in earnings (or other comprehensive income). If certain criteria are met, changes in the fair value of the asset or liability being hedged are also recognized currently in earnings. Upon adoption of SFAS No. 133 all derivative instruments were measured at fair value with differences between the previous book value and fair value reported as part of a cumulative effect adjustment, except to the extent that they related to hedges of the variable cash flow exposure of forecasted transactions. To the extent the adoption adjustment related to hedges of the variable cash flow exposure of a forecasted transaction, the remainder of the accounting adjustment, a $1.4 million gain (after-tax) was reported as a cumulative effect adjustment of comprehensive income in first quarter 2001. Offsetting gains and losses on hedged assets and liabilities were recognized as adjustments of their respective book values at the adoption date as part of this cumulative effect adjustment. Additionally, EITF Issue 99-20, which provides impairment and interest income recognition and measurement guidance for interests retained in a securitization transaction accounted for as a sale, was adopted. The initial impact of adopting SFAS No. 133 and EITF Issue 99-20 was an $8.2 million loss (after-tax) net transition adjustment that was recognized as the cumulative effect of a change in accounting principle in first quarter 2001.

Fair value is determined on the last business day of a reporting period. This point in time measurement of derivative fair values and the related hedged item fair values may be well suited to the measurement of hedge effectiveness, as well as reported earnings, when hedge time horizons are short. The same measurement however may not consistently reflect the effectiveness of longer-term hedges and, in First Tennessee’s view, can distort short-term measures of reported earnings. First Tennessee uses a combination of derivative financial instruments to hedge certain components of the interest rate risk associated with its portfolio of capitalized mortgage servicing rights, which currently have an average life of three to four years. Over this long-term time horizon this combination of derivatives can be effective in significantly mitigating the effects of interest rate changes on the value of the servicing portfolio. However, these derivative financial instruments can and do demonstrate significant price volatility depending upon prevailing conditions in the financial markets. If a reporting period ends during a period of

8

Note 1 – Financial Information (continued)

volatile financial market conditions, the effect of such point in time conditions on reported earnings does not reflect the underlying economics of the transactions or the true value of the hedges to First Tennessee over their estimated lives. The fact that the fair value of a particular derivative is unusually low or high on the last day of the reporting period is meaningful in evaluating performance during the period only if First Tennessee sells the derivative within the period of time before fair value changes and does not replace the hedge coverage with another derivative. First Tennessee believes the effect of such volatility on short-term measures of earnings is not indicative of the expected long-term performance of this hedging practice.

For its internal evaluation of performance for an applicable period, First Tennessee reclassified select components of SFAS 133 hedge ineffectiveness from the reported net income of the First Horizon segment to the Corporate segment (see Note 5). The internal evaluation of First Horizon’s long-term performance will include the long-term trend, if any, in these select components of SFAS 133 hedge ineffectiveness.

Certain provisions of SFAS No. 133 continue to undergo significant discussion and debate by the Financial Accounting Standards Board (FASB). One such potential issue involves the assessment of hedge effectiveness (and its impact on qualifying for hedge accounting) when hedging fair value changes of prepayable assets due to changes in the benchmark interest rate. As the FASB continues to deliberate interpretation of the new rules, the potential exists for a difference between First Tennessee’s interpretation and that of the FASB, the effects of which cannot presently be anticipated, but failure to obtain hedge accounting treatment could be significant to results of operations.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions (an amendment of FASB Statement No. 72 and 144 and FASB Interpretation No. 9). This statement requires acquisitions of all or part of a financial institution meeting the definition of a business combination to be accounted for by the purchase method in accordance with SFAS No. 141, Business Combinations. Any previously recorded unidentified intangible asset related to the acquisition of a financial institution must now be classified as goodwill and is subject to the impairment testing provisions of SFAS No. 142. Impairment testing of previously identified long-term customer-relationship intangible assets will be subject to the impairment testing provisions of SFAS No 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Provisions of this statement are effective for acquisitions incurred on or after October 1, 2002. Provisions related to the accounting for impairment or disposal of certain long-term customer-relationship intangible assets and transition provisions for previously recognized unidentified intangible assets are effective on October 1, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement requires that a liability for the cost associated with an exit or disposal activity be recognized and measured initially at fair value in the period in which the liability is incurred. Prior to the effective date of this statement, costs associated with an exit or disposal plan were recognized at the date of commitment, as required under EITF Issued 94-3. This statement does not apply to costs associated with an exit activity that involves an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. This statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be classified as an extraordinary item, net of related income tax effect, if material in the aggregate. Due to the rescission of SFAS No. 4, the criteria in Opinion 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because of the rescission of SFAS No. 4. SFAS No. 44, which established accounting requirements for the effects of transition provisions of the Motor Carrier Act of 1980, is no longer necessary because the transition has been completed. SFAS No. 145 also amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. In addition this Statement also makes technical corrections to existing pronouncements which are generally not substantive in nature. The provisions of SFAS No. 145 that relate to the rescission of SFAS No. 4 are effective for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an

9

Note 1 – Financial Information (continued)

extraordinary item in prior periods presented that does not meet the criteria for classification as an extraordinary item will be reclassified. The provisions of SFAS No. 145 that relate to SFAS No. 13 are effective for transactions occurring after May 15, 2002. All other provisions of this Statement shall be effective for financial statements issued on or after May 15, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

Note 2 – Divestitures/Acquisitions

On September 16, 2002, First Tennessee Bank National Association (FTBNA), the primary banking subsidiary of First Tennessee, sold a portfolio of loans originated through First Horizon Money Centers totaling $208.3 million to American General Finance, Inc. of Evansville, Indiana and closed the related Money Center offices. This transaction resulted in a divestiture gain of $2.3 million.

On June 1, 2002, First Horizon Home Loan Corporation (FHHLC), a wholly owned subsidiary of First Tennessee, acquired certain assets and assumed certain liabilities of Real Estate Financial Services (REFS), a mortgage lending company based in Alpharetta, Georgia, for approximately $2.2 million in cash. This transaction was immaterial to First Tennessee.

On April 1, 2002, First Tennessee acquired First Premier Financial Services, Inc. (First Premier), a South Dakota based merchant processor, for approximately $11.9 million in cash. First Premier was merged into First Horizon Merchant Services, Inc., a wholly owned subsidiary of First Tennessee. The acquisition was immaterial to First Tennessee.

On December 31, 2001, FTBNA acquired Synaxis Group, Inc., a Nashville-based insurance broker operating through a network of major regional and community-based insurance agencies in Georgia, Kentucky and Tennessee. This transaction was completed for approximately $29.0 million and was immaterial to First Tennessee.

On June 6, 2001, FTBNA, along with its partner, International Business Machines, completed the sale of its interests in Check Solutions Company to Carreker Corporation of Dallas, Texas. First Tennessee recognized a divestiture gain of $42.7 million.

On April 27, 2001, First Tennessee completed the sale of its wholly owned subsidiary, Peoples and Union Bank, of Lewisburg, Tennessee, to First Farmers & Merchants National Bank, of Columbia, Tennessee. First Tennessee recognized a divestiture gain of $13.1 million.

On April 2, 2001, FTBNA sold its existing portfolio of education loans totaling $342.1 million to Educational Funding of the South, Inc. The transaction resulted in a divestiture gain of $11.8 million.

On January 17, 2001, FTBNA completed the sale of $31.4 million of its affinity, co-branded, and certain single relationship credit card accounts and assets to MBNA Corporation. On December 27, 2000, FTBNA sold $265.8 million of its single relationship credit card accounts and assets to MBNA Corporation. These transactions resulted in divestiture gains of $8.2 million in 2001 and $50.2 million in 2000.

On January 2, 2001, First Tennessee Securities Corporation (FTSC), a wholly owned subsidiary of FTBNA, acquired certain assets of Midwest Research-Maxus Group Limited, a Cleveland-based institutional equity research firm. This transaction was completed for approximately $13.7 million and was immaterial to First Tennessee.

On October 18, 2000, FTBNA sold its corporate and municipal trust business to The Chase Manhattan Bank for $35.1 million, which resulted in a divestiture gain of $33.4 million. An additional divestiture gain of $4.6 million due to an earn-out was recognized in first quarter 2001.

10

Note 3 — Earnings Per Share

The following table shows a reconciliation of earnings per share to diluted earnings per share:

	Three Months Ended				Nine Months Ended
	September 30				September 30
(Dollars in thousands, except per share data)	2002		2001		2002		2001
Income before debt restructurings and cumulative effect of changes in accounting principles		$   95,571		$   89,009		$ 273,117		$ 240,395
Debt restructurings		—		—		—		(3,225	)
Cumulative effect of changes in accounting principles		—		—		—		(8,168	)
Net income		$   95,571		$   89,009		$ 273,117		$ 229,002
Weighted average common shares outstanding		125,623,723		126,275,965		125,707,484		127,355,285
Shares attributable to deferred compensation		1,074,948		880,714		1,013,596		754,037
Total weighted average shares		126,698,671		127,156,679		126,721,080		128,109,322
Earnings per common share:
Income before debt restructurings and cumulative effect of changes in accounting principles		$         .75		$         .70		$       2.16		$       1.88
Debt restructurings		—		—		—		(.03	)
Cumulative effect of changes in accounting principles		—		—		—		(.06	)
Net income		$         .75		$         .70		$       2.16		$       1.79
Weighted average shares outstanding		126,698,671		127,156,679		126,721,080		128,109,322
Dilutive effect due to stock options		3,528,077		3,701,735		3,659,626		3,763,035
Total weighted average shares, as adjusted		130,226,748		130,858,414		130,380,706		131,872,357
Diluted earnings per common share:
Income before debt restructurings and cumulative effect of changes in accounting principles		$         .73		$         .68		$       2.09		$       1.82
Debt restructurings		—		—		—		(.02	)
Cumulative effect of changes in accounting principles		—		—		—		(.06	)
Net income		$         .73		$         .68		$       2.09		$       1.74

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Note 4 — Loans

The composition of the loan portfolio on September 30 is detailed below:

(Dollars in thousands)			2002		2001
Commercial:
		Commercial, financial and industrial	$	4,095,708	$	4,046,209
		Real estate commercial		1,045,327		908,647
		Real estate construction		521,700		453,020
Retail:
		Real estate residential		4,385,514		3,638,433
		Real estate construction		301,509		196,063
		Other retail		308,923		480,449
		Credit card receivables		263,947		278,852
	Loans, net of unearned income			10,922,628		10,001,673
Allowance for loan losses				148,403		151,180
Total net loans			$	10,774,225	$	9,850,493

The following table presents information concerning nonperforming loans on September 30:

(Dollars in thousands)	2002		2001
Impaired loans	$	48,214	$	45,296
Other nonaccrual loans		23,766		24,188
Total nonperforming loans	$	71,980	$	69,484

Nonperforming loans consist of impaired loans, other nonaccrual loans and certain restructured loans. An impaired loan is a loan that management believes the contractual amount due probably will not be collected. Impaired loans are generally carried on a nonaccrual status. Nonaccrual loans are loans on which interest accruals have been discontinued due to the borrower’s financial difficulties. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to recover the principal balance and accrued interest.

Generally, interest payments received on impaired loans are applied to principal. Once all principal has been received, additional payments are recognized as interest income on a cash basis. The following table presents information concerning impaired loans:

	Three Months Ended				Nine Months Ended
	September 30				September 30
(Dollars in thousands)	2002		2001		2002		2001
Total interest on impaired loans	$	116	$	213	$	321	$	405
Average balance of impaired loans		43,401		50,442		41,320		52,979

An allowance for loan losses is maintained for all impaired loans. Activity in the allowance for loan losses related to non-impaired loans, impaired loans, and for the total allowance for the nine months ended September 30, 2002 and 2001, is summarized as follows:

(Dollars in thousands)			Non-impaired			Impaired			Total
Balance on December 31, 2000			$	128,339		$	15,357		$	143,696
Provision for loan losses				44,405			14,798			59,203
Divestiture				(1,337	)		—			(1,337	)
Charge-offs				(44,246	)		(14,497	)		(58,743	)
	Less loan recoveries			6,785			1,576			8,361
		Net charge-offs		(37,461	)		(12,921	)		(50,382	)
Balance on September 30, 2001			$	133,946		$	17,234		$	151,180
Balance on December 31, 2001			$	138,427		$	16,946		$	155,373
Provision for loan losses				45,645			23,638			69,283
Charge-offs				(56,986	)		(29,627	)		(86,613	)
	Less loan recoveries			9,544			816			10,360
		Net charge-offs		(47,442	)		(28,811	)		(76,253	)
Balance on September 30, 2002			$	136,630		$	11,773		$	148,403

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Note 5 — Business Segment Information

First Tennessee provides traditional retail/commercial banking and other financial services to its customers through various regional and national business lines. Effective January 1, 2002, the business segment information has been adapted to better reflect First Tennessee’s strategic alignment and positioning and to conform to similar changes in internal segment reporting. Prior periods have been restated for comparability. The new segments are FTN Banking Group, First Horizon, FTN Financial, Transaction Processing, Corporate, and Strategic Initiative Items. FTN Banking Group includes the Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust, Credit Card and Cash Management. This segment offers traditional banking financial services and products and also promotes comprehensive financial planning to address customer needs and desires for investments, insurance, estate planning, education funding, cash reserves and retirement planning. First Horizon includes First Horizon Home Loans, First Horizon Equity Lending and First Horizon Money Centers (the last two were previously included in the Retail/Commercial Bank). These business lines were combined to create a common focus and a stronger presence in the national market. During third quarter 2002, First Tennessee sold the loan portfolio and closed the offices of First Horizon Money Centers as part of an ongoing plan to improve long term growth by enhancing overall business mix. FTN Financial added Strategic Alliances and Correspondent Services to the existing business mix that included Capital Markets, Equity Research and Investment Banking. Strategic Alliances is a customer relationship service group recently formed to enhance our portfolio of innovative investment services. Correspondent Services was a part of the Retail/Commercial Bank previously. Transaction Processing continues to offer credit card merchant processing, nationwide bill payment processing, check clearing operations and other products and services. The corporate segment includes certain corporate expenses, interest expense on trust preferred and REIT preferred stock, select components of SFAS 133 hedge ineffectiveness, and other items not allocated or not specifically assigned to business segments. The Strategic Initiative Items segment isolates items occurring in 2001 that were related to a strategic initiative to enhance growth and business mix.

Total revenue, expense and asset levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, they are to an extent subjective. This assignment and allocation has been consistently applied for all periods presented. The following table reflects the amounts of consolidated revenue, expense, tax, and assets for the three month and year to date periods ending September 30, 2002 and 2001, and has been adjusted for comparability.

		FTN											Strategic
		Banking		First		FTN		Transaction					Initiative
(Dollars in thousands)		Group		Horizon		Financial		Processing		Corporate			Items		Consolidated
3Q02
Net interest income, FTE*		$	111,688	$	61,895	$	8,928	$	4,988	$	1,527		$	—	$	189,026
Other revenues			74,005		166,279		125,650		26,011		—			—		391,945
Other expenses**			131,035		169,664		91,684		25,280		23,895			—		441,558
	Pre-tax income, FTE*		54,658		58,510		42,894		5,719		(22,368	)		—		139,413
Income taxes, FTE*			11,975		21,894		16,300		2,173		(8,500	)		—		43,842
Net income		$	42,683	$	36,616	$	26,594	$	3,546	$	(13,868	)	$	—	$	95,571
Average assets		$	10,356,262	$	7,672,867	$	1,852,156	$	608,516	$	106,343		$	—	$	20,596,144
3Q01
Net interest income, FTE*		$	116,819	$	43,603	$	8,133	$	4,712	$	204		$	—	$	173,471
Other revenues			66,951		116,028		90,792		23,874		4,549			—		302,194
Other expenses**			113,766		135,640		63,002		22,577		8,899			—		343,884
	Pre-tax income, FTE*		70,004		23,991		35,923		6,009		(4,146	)		—		131,781
Income taxes, FTE*			19,457		8,956		13,651		2,283		(1,575	)		—		42,772
Net income		$	50,547	$	15,035	$	22,272	$	3,726	$	(2,571	)	$	—	$	89,009
Average assets		$	10,526,391	$	6,121,437	$	1,623,476	$	545,632	$	19,509		$	—	$	18,836,445
Year to Date 2002
Net interest income, FTE*		$	345,711	$	162,645	$	25,626	$	14,621	$	2,713		$	—	$	551,316
Other revenues			223,166		433,770		326,962		75,337		(5,777	)		—		1,053,458
Other expenses**			385,950		452,362		236,265		72,666		50,796			—		1,198,039
	Pre-tax income, FTE*		182,927		144,053		116,323		17,292		(53,860	)		—		406,735
Income taxes, FTE*			50,063		53,247		44,203		6,571		(20,466	)		—		133,618
Net income		$	132,864	$	90,806	$	72,120	$	10,721	$	(33,394	)	$	—	$	273,117
Average assets		$	10,460,579	$	6,895,255	$	1,941,024	$	626,498	$	65,645		$	—	$	19,989,001
Year to Date 2001
Net interest income, FTE*		$	337,944	$	120,817	$	20,906	$	11,992	$	1,138		$	—	$	492,797
Other revenues			195,764		320,445		236,299		69,928		8,183			78,217		908,836
Other expenses**			345,612		387,242		165,904		70,052		26,064			41,416		1,036,290
	Pre-tax income, FTE*		188,096		54,020		91,301		11,868		(16,743	)		36,801		365,343
Income taxes, FTE*			58,624		19,794		34,696		4,511		(6,361	)		13,684		124,948
Income before debt restructurings and cumulative effect of changes in accounting principles			129,472		34,226		56,605		7,357		(10,382	)		23,117		240,395
Debt restructurings			—		—		—		—		(3,225	)		—		(3,225	)
Cumulative effect of changes in accounting principles			—		—		—		—		(8,168	)		—		(8,168	)
Net income		$	129,472	$	34,226	$	56,605	$	7,357	$	(21,775	)	$	23,117	$	229,002
Average assets		$	10,746,032	$	6,142,571	$	1,530,996	$	542,144	$	30,521		$	—	$	18,992,264

*	Fully taxable-equivalent basis.
**	Includes loan loss provision.

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Note 6 — Contingencies

Contingent liabilities arise in the ordinary course of business, including those related to litigation. Various claims and lawsuits, in addition to those listed below, are pending against First Tennessee and its subsidiaries. Although First Tennessee cannot predict the outcome of these lawsuits, after consulting with counsel, it is management’s opinion that when resolved, these lawsuits will not have a material adverse effect on the consolidated financial statements of First Tennessee.

Three cases alleging that First Tennessee engaged in unfair and deceptive practices in connection with the financing of satellite dish television systems are pending in Mississippi courts. First Tennessee has reached an agreement to settle one of these cases, filed by fifty plaintiffs and pending in federal court. The remaining two cases, each filed by one plaintiff, are pending in Choctaw Tribal Court.

Many mortgage lenders, including a First Tennessee subsidiary, have been sued in putative class actions on the theory that yield spread premiums paid to mortgage brokers are referral fees banned by the Real Estate Settlement Practices Act (“RESPA”). Under that act, liability for an impermissible referral fee is three times the amount of the fee. In June 2001, the Eleventh Circuit Court of Appeals upheld certification of a class in a yield spread premium case against a lender unaffiliated with First Tennessee. In October 2001, the U.S. Department of Housing and Urban Development (“HUD”) published a policy statement disagreeing with the Eleventh Circuit’s decision. In light of HUD’s 2001 policy statement, in a case involving a lender unaffiliated with First Tennessee, the U.S. Court of Appeals for the Eighth Circuit ruled in March 2002 that lawsuits challenging the payment of yield spread premiums under RESPA are not appropriate for class action treatment. Plaintiffs appealed that decision to the U.S. Supreme Court. In June 2002, the U.S. Court of Appeals for the Ninth Circuit held that the yield spread premium paid by another lender was not an impermissible “referral fee” and that certification of a plaintiff class was inappropriate. In September 2002, the Eleventh Circuit Court of Appeals applied HUD’s 2001 policy statement, and in issuing an opinion in a yield spread premium case pending against another lender, reversed class certification in that case and overruled its prior opinion which had upheld class certification in a similar case. Shortly thereafter, the U.S. Supreme Court denied certiorari in the Eighth Circuit case described earlier in this paragraph. First Tennessee believes its subsidiary’s yield spread premium payments, which are consistent with industry practices, are lawful, and intends to defend vigorously the lawsuits against it.

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Note 7 — Intangible Assets

Following is a summary of intangible assets, net of accumulated amortization, included in the Consolidated Statements of Condition:

				Other
(Dollars in thousands)	Goodwill			Intangibles*
Balance on December 31, 2000	$	103,765		$	17,859
Amortization expense		(4,755	)		(3,679	)
Acquisitions		13,650			900
Balance on September 30, 2001	$	112,660		$	15,080
Balance on December 31, 2001	$	143,147		$	41,857
Amortization expense		—			(4,631	)
Reclass		12,573			(12,573	)
Acquisitions**		7,557			6,845
Balance on September 30, 2002	$	163,277		$	31,498

*	Represents premium on purchased deposits, covenants not to compete and non-mortgage servicing rights.
**	Purchase price allocation on the Synaxis and First Premier acquisitions are based upon preliminary estimates of fair value and could change.

The gross carrying amount of other intangible assets subject to amortization is $93.9 million on September 30, 2002, net of $62.4 million of accumulated amortization. Estimated aggregate amortization expense for the remainder of 2002 is expected to be $1.7 million and is expected to be $6.3 million, $5.7 million, $4.1 million and $2.7 million for the twelve-month periods of 2003, 2004, 2005 and 2006, respectively.

On January 1, 2002, First Tennessee adopted the provisions of SFAS No. 142 (see Note 1 – Financial Information). The following table presents on a proforma basis net income and related per share amounts exclusive of amortization expense (net of tax effect) recognized in 2001 related to goodwill no longer being amortized.

	Three Months Ended				Nine Months Ended
	September 30				September 30
(Dollars in thousands)	2002		2001		2002		2001
Reported net income	$	95,571	$	89,009	$	273,117	$	229,002
Goodwill amortization (net of tax effect)		—		1,447		—		4,340
Adjusted net income	$	95,571	$	90,456	$	273,117	$	233,342
Earnings per common share:
Reported net income	$	.75	$	.70	$	2.16	$	1.79
Goodwill amortization (net of tax effect)		—		.01		—		.03
Adjusted net income	$	.75	$	.71	$	2.16	$	1.82
Diluted earnings per common share:
Reported net income	$	.73	$	.68	$	2.09	$	1.74
Goodwill amortization (net of tax effect)		—		.01		—		.03
Adjusted net income	$	.73	$	.69	$	2.09	$	1.77

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Note 8 — Mortgage Servicing Rights

Following is a summary of changes in capitalized mortgage servicing rights (MSR), net of accumulated amortization, included in the Consolidated Statements of Condition:

(Dollars in thousands)
Balance on December 31, 2000	$	743,714
Addition of mortgage servicing rights		269,329
Amortization		(82,738	)
Market value adjustments		(170,071	)
Sales of mortgage servicing rights		(129,748	)
Impairment		(87,196	)
Cumulative adjustment due to adoption of SFAS No. 133		(17,277	)
Balance on September 30, 2001	$	526,013
Balance on December 31, 2001	$	665,005
Addition of mortgage servicing rights		257,984
Amortization		(87,791	)
Market value adjustments		(337,515	)
Sales of mortgage servicing rights		112
Impairment		(98,827	)
Balance on September 30, 2002	$	398,968

The MSR on September 30, 2002 and 2001, had estimated market values of approximately $423.8 million and $555.0 million, respectively. These balances represent the rights to service approximately $52.1 billion and $44.2 billion of mortgage loans on September 30, 2002 and 2001. On September 30, 2002 and 2001, valuation allowances due to impairment of $34.4 million and $22.7 million were required, respectively.

Estimated MSR amortization expense for the twelve month periods ending September 30, 2003, 2004, 2005, 2006 and 2007, are $80.4 million, $58.5 million, $48.4 million, $39.5 million and $31.9 million, respectively. The assumptions underlying these estimates are subject to modification based on changes in market conditions and portfolio behavior (such as prepayment speeds). As a result, these estimates are subject to change in a manner and amount that is not presently determinable by management.

The MSR above represents the contractual fee to be received to service the mortgage loans. First Tennessee also has retained interest only strips (included in Trading Securities on the Consolidated Statements of Condition), which represents the excess over contractual fees to be received to service the mortgage loans. The carrying value (also equal to fair value) of this asset was $93.5 million on September 30, 2002, and was $104.5 million on September 30, 2001.

First Tennessee also has derivatives (included in Capital Markets Receivables and Other Assets on the Consolidated Statements of Condition) designated as hedges of MSR and retained interest only strips. The carrying value (also equal to fair value) of this asset was $360.4 million on September 30, 2002, and was $217.5 million on September 30, 2001.

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Item 2. First Tennessee National Corporation – Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL INFORMATION

First Tennessee National Corporation (First Tennessee) is headquartered in Memphis, Tennessee, and is a nationwide, diversified financial services institution which provides banking and other financial services to its customers through various regional and national business lines. Effective January 1, 2002, the business segment information has been adapted to better reflect First Tennessee’s strategic alignment and positioning and to conform to similar changes in internal segment reporting. Prior periods have been restated for comparability. The new segments are FTN Banking Group, First Horizon, FTN Financial, Transaction Processing, Corporate and Strategic Initiative Items. FTN Banking Group includes the Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust Services and Asset Management, Credit Card and Cash Management. This segment offers traditional banking financial services and products and also promotes comprehensive financial planning to address customer needs and desires for investments, insurance, estate planning, education funding, cash reserves and retirement goals. First Horizon includes First Horizon Home Loans (previously referred to as mortgage banking), First Horizon Equity Lending and First Horizon Money Centers (both of which were previously included in the Retail/Commercial Bank). These business lines were combined to create a common focus and a stronger presence in the national market. During third quarter 2002, First Tennessee sold the loan portfolio and closed the offices of First Horizon Money Centers as part of an ongoing plan to improve long-term growth by enhancing overall business mix. This operation has historically had only a nominal effect on earnings. See also Business Line Review and Note 2 – Divestitures/Acquisitions for additional detail. Also as part of the segment realignment, FTN Financial added Strategic Alliances and Correspondent Services to the existing business mix that included Capital Markets, Equity Research and Investment Banking. Strategic Alliances is a customer relationship service group recently formed to enhance a portfolio of innovative investment services. Correspondent Services was previously a part of the Retail/Commercial Bank. Transaction Processing continues to offer credit card merchant processing, nationwide bill payment processing, check clearing operations and other products and services. The Corporate segment includes certain corporate expenses, interest expense on trust preferred and REIT preferred stock, select components of SFAS 133 hedge ineffectiveness (see Other – Accounting for Derivative Instruments and Hedging Activities), and other items not allocated or not specifically assigned to business segments. The Strategic Initiative Items segment isolates items occurring in 2001 that were related to a strategic initiative to enhance growth and business mix, as announced by First Tennessee in 2000 (see Business Line Review for additional detail).

Based on management’s best estimates, certain revenues and expenses are allocated and equity is assigned to the various segments to reflect the inherent risk in each business line. These allocations are periodically reviewed and may be revised from time to time to more accurately reflect current business conditions and risks; the previously reported amounts have been adjusted to ensure comparability.

For the purpose of this management discussion and analysis (MD&A), noninterest income (also called fee income) and total revenue exclude securities gains and losses. Net interest income has been adjusted to a fully taxable equivalent (FTE) basis for certain tax-exempt loans and investments included in earning assets. Earning assets, including loans, have been expressed as averages, net of unearned income. First Tennessee Bank National Association, the primary bank subsidiary, is also referred to as FTBNA in this discussion.

The following is a discussion and analysis of the financial condition and results of operations of First Tennessee for the three-month and nine-month periods ended September 30, 2002, compared to the three-month and nine-month periods ended September 30, 2001. To assist the reader in obtaining a better understanding of First Tennessee and its performance, this discussion should be read in conjunction with First Tennessee’s unaudited consolidated financial statements and accompanying notes appearing in this report. Additional information including the 2001 financial statements, notes, and management’s discussion and analysis is provided in the 2001 Annual Financial Disclosures included as an appendix to the 2002 Proxy Statement.

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FORWARD-LOOKING STATEMENTS

Management’s discussion and analysis may contain forward-looking statements with respect to First Tennessee’s beliefs, plans, goals, expectations, and estimates. Forward-looking statements are statements that are not based on historical information but rather are related to future operations, strategies, financial results or other developments. The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “should”, “is likely”, “will”, “going forward”, and other expressions that indicate future events and trends identify forward-looking statements. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond a company’s control, and many of which, with respect to future business decisions and actions (such as acquisitions and divestitures), are subject to change. Examples of uncertainties and contingencies include, among other important factors, general and local economic and business conditions; expectations of and actual timing and amount of interest rate movements (which can have a significant impact on a financial services institution); market and monetary fluctuations; inflation; competition within and outside the financial services industry; possible terrorist activity; technology; and new products and services in the industries in which First Tennessee operates. Other factors are those inherent in originating and servicing loans, including prepayment risks and fluctuation of collateral values and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission, the Financial Accounting Standards Board (FASB), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and other regulators; unanticipated regulatory and judicial proceedings and changes in laws and regulations applicable to First Tennessee; and First Tennessee’s success in executing its business plans and strategies and managing the risks involved in the foregoing, could cause actual results to differ. First Tennessee assumes no obligation to update any forward-looking statements that are made from time to time.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements of First Tennessee are prepared in conformity with accounting principles generally accepted in the United States and follow general practices within the industries in which it operates. This preparation requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility of producing results that could be materially different than originally reported. Management believes the following policies are both important to the portrayal of the company’s financial condition and results and require subjective or complex judgments. Additional information is provided in the 2001 Annual Financial Disclosures.

Subject to the use of estimates, assumptions and judgments is management’s evaluation process used to determine the adequacy of the allowance for loan losses which combines several factors: historical loss experience derived from an analytical model, specific analysis of commercial credits over $1 million, and current events, trends and economic conditions. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change. First Tennessee believes the allowance for loan losses is adequate and properly recorded in the financial statements. See Provision for Loan Losses/Asset Quality.

The fair value of First Tennessee’s investment in mortgage servicing rights (MSR) is important to the presentation of the consolidated financial statements in that MSR are subject to a fair value based impairment standard and are actively hedged in fair value hedging relationships. MSR do not trade in an active open market with readily observable prices. Rather, sales of MSR tend to occur in principal-to-principal transactions, and although precise terms and conditions of sale are typically not readily available, information regarding the value of transactions is generally obtainable. As such, like other participants in the mortgage banking business, First Tennessee relies on an internal discounted cash flow model to estimate the fair value of its MSR. First Tennessee uses assumptions in the model that it believes are appropriate and comparable to those used by other participants in the mortgage banking business and reviews its values and assumptions with outside advisors on a quarterly basis. While First Tennessee believes that the values produced by its internal model are indicative of the fair value of its MSR

18

portfolio, these values can change significantly depending upon the then current interest rate environment and other economic conditions, and the proceeds that might be received should First Tennessee actually consider a sale of the MSR portfolio could differ from the amounts reported at any point in time. First Tennessee believes MSR are properly recorded in the financial statements.

In various segments of its business, particularly in First Horizon, First Tennessee uses derivative financial instruments to reduce exposure to changes in interest rates and market prices for financial instruments. Substantially all of these derivative financial instruments are designated as hedges for financial reporting purposes. The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings and measurement of changes in the fair value of hedged items. First Tennessee believes that its techniques for addressing these judgmental areas are in line with industry practices in assessing hedge effectiveness. However, if in the future the derivative financial instruments used by First Tennessee no longer qualify for hedge accounting treatment and, consequently, the change in fair value of hedged items could not be recognized in earnings, the impact on the consolidated results of operations and reported earnings could be significant. First Tennessee believes hedge effectiveness is evaluated properly in preparation of the financial statements.

Most of the derivative financial instruments used by First Tennessee have active markets, and indications of fair value can be readily obtained. Under the existing accounting rules, the commitments to extend mortgage loans at fixed interest rates entered into between First Horizon Home Loans and its customers qualify as derivative financial instruments. In the absence of a ready and observable market for loan commitments, First Tennessee uses an internal model and one of several industry valuation techniques to value its fixed-rate loan commitments. While First Tennessee believes the value produced by its internal model is reasonable, the proceeds that might be received should First Tennessee actually consider a sale of the loan commitments could differ from the amounts reported at any point in time. First Tennessee believes loan commitments are properly recorded in the financial statements.

First Tennessee’s activities as a servicer of mortgage loans subjects it to the risk of loss from foreclosure and other servicing-related activities. The estimation of an adequate foreclosure loss reserve involves the same judgments regarding the predictive power of past foreclosure results and the impact of current trends and operating conditions. While First Tennessee believes that the current analytical model and related assumptions used to determine the foreclosure loss reserve are proper and in line with industry practice and reflective of current trends and conditions, actual foreclosure losses could differ from the estimated amount as properties and collateral are actually disposed. First Tennessee believes the foreclosure loss reserve is adequate and properly recorded in the financial statements.

The assessment of contingent liabilities, including legal contingencies and tax liabilities, involves the use of estimates, assumptions and judgments, and there can be no assurance that future events, such as court decisions or I.R.S. positions, will not differ from management’s current assessment. First Tennessee believes reserves for contingent liabilities are adequate and properly recorded in the financial statements.

Under SFAS No. 142, “Goodwill and Other Intangible Assets”, which became effective on January 1, 2002, goodwill is no longer amortized, but is subject to an impairment test. First Tennessee has not recognized any impairment of the goodwill currently on its books during 2002; however, subsequent developments or information could result in impairment.

FINANCIAL SUMMARY (Comparison of third quarter 2002 to third quarter 2001)

Earnings for third quarter 2002 were $95.6 million, an increase of 7 percent from last year’s third quarter earnings of $89.0 million. Diluted earnings per common share were $.73 in 2002 compared to $.68 in 2001. Return on average shareholders’ equity was 23.8 percent and return on average assets was 1.84 percent for third quarter 2002. Return on average shareholders’ equity was 25.4 percent and return on average assets was 1.87 percent for the same period in 2001.

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On September 30, 2002, First Tennessee was ranked as one of the top 50 bank holding companies nationally in market capitalization ($4.4 billion) and total assets ($22.7 billion). On September 30, 2001, market capitalization was $4.7 billion and total assets were $19.7 billion.

Total revenue grew 22 percent from third quarter 2001, with a 30 percent increase in fee income (noninterest income excluding securities gains and losses) and a 9 percent increase in net interest income.

NONINTEREST INCOME

Fee income provides the majority of First Tennessee’s revenue and contributed 67 percent to total revenue in third quarter 2002 compared to 64 percent for the same period in 2001. Third quarter 2002 fee income increased 30 percent to $392.1 million from $302.3 million in 2001. The December 31, 2001, acquisition of Synaxis Group, Inc. (Synaxis), a commercial insurance broker, impacted the results of third quarter 2002, adding $9.8 million to noninterest income. Excluding the impact of Synaxis in 2002 total fee income would have increased 26 percent. A more detailed discussion of the major line items follows.

Mortgage Banking

First Horizon Home Loans, a subsidiary of FTBNA and the major component of the First Horizon business segment, originates and services residential mortgage loans. Following origination, the mortgage loans, primarily first-lien, are sold to investors in the secondary market. Various hedging strategies are used to mitigate changes in the market value of the loan during the time period beginning with a price commitment to the customer and ending when the loan is delivered to the investor. Closed loans held during this time period are referred to as the mortgage warehouse. Origination fees and gains or losses from the sale of loans are recognized at the time a mortgage loan is sold into the secondary market. A portion of the gain or loss is recognized at the time an interest rate lock commitment is made to the customer. Secondary marketing activities include gains or losses from mortgage pipeline and warehouse hedging activities, product pricing decisions, and gains or losses from the sale of loans into the secondary market including the capitalized net present value of the MSR. Servicing rights permit the collection of fees for gathering and processing monthly mortgage payments for the owner of the mortgage loans. There were no bulk or flow sales of MSR in third quarter 2002. First Horizon Home Loans employs hedging strategies intended to counter a change in the value of its MSR through changing interest rate environments. Other income includes income from the foreclosure repurchase program and other miscellaneous items. Mortgage trading securities gains/(losses) relate to market value adjustments primarily on interest-only strips and related hedges. Mortgage banking fee income is reported net of amortization, impairment and other expenses related to MSR and related hedges.

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Mortgage banking fee income increased 37 percent to $158.8 million from $115.5 million for third quarter 2001 as shown in Table 1.

Table 1 — Mortgage Banking

			Third Quarter									Nine Months
									Percent (%)									Percent (%)
(Dollars and volume in millions)			2002			2001			Change			2002			2001			Change
Noninterest income:
	Loan origination fees		$	61.6		$	46.9			31.3	+	$	153.0		$	134.1			14.0	+
	Secondary marketing activities			104.1			82.1			26.8	+		255.7			204.5			25.1	+
	Mortgage servicing fees			42.3			40.2			5.1	+		127.1			119.3			6.5	+
	MSR net hedge results*			27.6			16.9			62.8	+		71.4			27.8			156.7	+
	Other income			8.3			6.1			36.6	+		22.3			15.5			44.1	+
	Mortgage trading securities net losses			(5.5	)		1.1			N/A			(13.1	)		(8.5	)		53.8	+
	Amortization of MSR			(28.2	)		(29.5	)		4.5	-		(87.8	)		(82.7	)		6.1	+
	MSR impairment loss			(42.5	)		(44.6	)		4.7	-		(98.8	)		(87.2	)		13.3	+
	Time decay of MSR hedges			(8.9	)		(3.7	)		138.1	+		(19.8	)		(11.3	)		74.9	+
		Total mortgage noninterest income	$	158.8		$	115.5			37.5	+	$	410.0		$	311.5			31.6	+
	Refinance originations		$	6,026.6		$	2,729.5			120.8	+	$	11,890.3		$	9,362.4			27.0	+
	New loan originations			3,145.8			2,635.1			19.4	+		8,086.7			7,641.8			5.8	+
		Mortgage loan originations	$	9,172.4		$	5,364.6			71.0	+	$	19,977.0		$	17,004.2			17.5	+
	Servicing portfolio		$	52,109.5		$	44,221.4			17.8	+	$	52,109.5		$	44,221.4			17.8	+

* MSR net hedge results represent the net gain or loss resulting from the change in value of the hedged MSR and the offsetting change in value of servicing hedges exclusive of time decay of MSR hedges.

Certain previously reported amounts have been reclassified to agree with current presentation.

Origination activity increased 71 percent to $9.2 billion and loan sales into the secondary market increased 43 percent to $7.5 billion in third quarter 2002 compared to last year. Driven by low mortgage interest rates, refinance activity represented 66 percent of total originations during the quarter compared to 51 percent in third quarter 2001. Loan origination fees increased 31 percent to $61.6 million compared to third quarter 2001, reflecting the increased origination activity and increased loan sales into the secondary market. Secondary marketing activities increased to $104.1 million from the $82.1 million recorded in the comparable quarter last year. The increase was primarily the result of a $30.6 million increase in net secondary trading gains primarily due to the favorable interest rate environment experienced during the quarter. The favorable experience in net secondary trading gains was partially offset by an $8.6 million reduction in MSR revenues recognized on loans delivered during the quarter. The reduction in MSR revenues reflects a 38 percent decrease in the capitalized net present value of MSR’s created during the quarter as a result of increased prepayment assumptions used to value the retained servicing rights.

MSR amortization was $28.2 million for third quarter 2002 compared with $29.5 million in 2001, and for third quarter 2002 there was a MSR impairment loss of $42.5 million compared to a $44.6 million loss in third quarter 2001. Net MSR hedging gains (MSR net hedge results less time decay of MSR hedges) were $18.7 million (increase in the value of hedges offset by decrease in value of hedged MSR) in third quarter 2002 compared to $13.2 million net gains (increase in the value of hedged MSR offset by decrease in value of hedges) in 2001.

The mortgage-servicing portfolio (which includes servicing for ourselves and others) totaled $52.1 billion on September 30, 2002, compared to $44.2 billion on September 30, 2001. Mortgage servicing fee income increased 5 percent to $42.3 million in 2002 primarily due to the 18 percent increase in the mortgage-servicing portfolio. Servicing fees were negatively impacted in third quarter 2002 by a lower level of GNMA mortgages, which earn higher servicing fees.

Going forward, fee income from refinance loan originations will depend on mortgage interest rates. An increase in rates should reduce origination fees and profit from the sale of loans, but should also reduce MSR amortization

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expense and impairment losses, while a decrease in rates should increase this net revenue. Flat to rising interest rates should reduce net secondary marketing trading gains, while falling rates should increase this net revenue. If total origination volume increases and/or the yield curve steepens, net interest income from the warehouse should increase, while if volume decreases and/or the yield curve flattens, this revenue should decrease. Home purchase-related originations should reflect the relative strength or weakness of the economy. The continuing success of national cross-sell strategies should increase revenues from products other than traditional mortgage origination and servicing. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Capital Markets

Capital markets fee income, the major component of revenue in the FTN Financial segment, is primarily generated from the purchase and sale of securities as both principal and agent and from investment banking, portfolio advisory and equity research services. Inventory positions are limited to the procurement of securities solely for distribution to customers by the sales staff. Inventory is effectively hedged to protect against movements in interest rates. For third quarter 2002, capital markets fee income increased 37 percent to $124.1 million from $90.3 million in 2001. This increase reflects continued growth and penetration into the targeted institutional customer base through expanded products, services, sales force and marketing efforts. This growth has been influenced by the increased liquidity our customers have experienced as deposit growth has exceeded loan growth. Revenue has also been favorably impacted by changes in the interest rate environment and the equity markets. Total securities bought and sold increased 27 percent to $436.1 billion from $342.8 billion in 2001. Total underwritings during third quarter 2002 were $25.9 billion compared to $15.1 billion for the same period in 2001.

Going forward, revenues will fluctuate based on factors which include the expansion of the customer base, the volume of investment banking transactions and the introduction of new products, as well as the strength of loan growth in the U.S. economy and volatility in the interest rate environment and the equity markets. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Other Fee Income

In third quarter 2002, the First Horizon Money Centers’ loan portfolio sale resulted in a divestiture gain of $2.3 million. Expenses associated with the loan portfolio sale and the closing of the related Money Center offices are included in noninterest expense (see also Provision for Loan Losses/Asset Quality below for impact of the divestiture on the overall loan portfolio risk profile and on the provision). There were no divestiture gains or losses in third quarter 2001.

Fee income from deposit transactions and cash management for third quarter 2002 increased 4 percent to $36.8 million from $35.3 million in 2001 primarily due to growth in cash management fees. Trust services and investment management fees decreased 22 percent to $10.8 million from $13.8 million in 2001 primarily due to declining asset management fees related to a contraction in equity market valuations. Assets under management fell 17 percent to $6.9 billion on September 30, 2002 from $8.3 billion on September 30, 2001. Merchant processing fee income increased 10 percent to $13.0 million in third quarter 2002 from $11.8 million, due to a portfolio acquisition in second quarter 2002. Insurance premiums and commissions increased 248 percent to $10.8 million from $3.1 million in third quarter 2001 primarily due to the acquisition of Synaxis. All other income and commissions increased 9 percent to $35.5 million for third quarter 2002 from $32.5 million in 2001.

Going forward, when the equity market begins to recover, fee income, such as asset management and trust fees, should rebound.

NET INTEREST INCOME

Net interest income increased 9 percent to $189.0 million from $173.5 million in third quarter 2001. Earning asset growth of 10 percent generated this increase and was primarily related to rising levels of mortgage originations pushing the mortgage warehouse higher and the increase in home equity lines of credit within the Tennessee

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market and across the First Horizon franchise. The consolidated margin was 4.34 percent for third quarter 2002 compared to 4.39 percent for the same period in 2001. As shown in Table 2, the activity levels and related funding for First Tennessee’s mortgage production and servicing and capital markets activities affect the margin. These activities typically produce different margins than traditional banking activities. Mortgage production and servicing activities can affect the overall margin based on a number of factors, including the size of the mortgage warehouse, the time it takes to deliver loans into the secondary market, the amount of custodial balances, and the level of MSR. Capital markets activities tend to compress the margin because of its strategy to reduce market risk by hedging its inventory in the cash markets, which effectively eliminates net interest income on these positions. As a result, First Tennessee’s consolidated margin cannot be readily compared to that of other bank holding companies.

Table 2 — Net Interest Margin

		Third Quarter
		2002			2001
Traditional banking activities — NIM			4.68	%		4.96	%
	Mortgage production and servicing activities		(.13	)		(.37	)
	Capital markets activities		(.21	)		(.20	)
FTNC — NIM			4.34	%		4.39	%
Consolidated yields and rates:
	Investment securities		5.83	%		6.53	%
	Loans, net of unearned		6.06			7.61
	Other earning assets		5.50			6.36
Yields on earning assets			5.89			7.18
	Interest bearing core deposits		1.90			3.15
	CD’s over $100,000		2.09			4.08
	Fed funds purchased and repos		1.55			3.16
	Commercial paper and other short-term borrowings		3.98			4.54
	Long-term debt		4.41			5.43
Rates paid on interest-bearing liabilities			2.06			3.53
Net interest spread			3.83			3.65
	Effect of interest-free sources		.41			.63
	Loan fees		.10			.12
	FRB interest and penalties		—			(.01	)
FTNC — NIM			4.34	%		4.39	%

Going forward, if as expected over the near term, interest rates remain at current low levels, the net interest margin is likely to compress further. The consolidated margin will continue to be influenced by the activity levels of mortgage production and servicing and capital markets. Over the long term the margin could be unfavorably impacted if the yield curve flattens significantly. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

NONINTEREST EXPENSE

Total noninterest expense for third quarter 2002 increased 31 percent to $421.1 million from $321.1 million in 2001. The acquisition of Synaxis impacted the results of third quarter 2002, adding $8.8 million to noninterest expense. Excluding the impact of Synaxis in 2002, total noninterest expense would have increased 28 percent. Expenses in First Horizon and FTN Financial fluctuate based on the type and level of activity. Excluding First Horizon and FTN Financial in both periods and Synaxis in 2002, total operating expense increased 18 percent. Also impacting noninterest expense growth was a $13.0 million contribution to First Tennessee Foundation, a contributor to charitable causes. Excluding this expense in addition to the items previously mentioned, total operating expense

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increased 8 percent. Going forward, FTN Financial and First Horizon will continue to influence the level of noninterest expense.

Employee compensation, incentives and benefits (personnel expense), the largest component of noninterest expense, increased 29 percent to $258.0 million from $199.9 million in third quarter 2001. This increase is primarily due to higher activity levels for both FTN Financial and First Horizon and the Synaxis acquisition. Excluding the two business lines in both periods and Synaxis in 2002, total personnel expense increased 7 percent.

Equipment rentals, depreciation and maintenance expense increased 20 percent in 2002 to $18.5 million from $15.4 million in 2001 due primarily to losses on disposals of fixed assets, including those related to the Money Centers office closings. Operations services increased 16 percent to $15.4 million from $13.3 million in 2001 due to expanded usage related to customer service enhancements. Occupancy expense increased 11 percent to $19.9 million compared to $17.9 million in 2001 primarily due to costs associated with closing the Money Centers and expenses incurred in 2002 by Synaxis. Communications and courier expense increased 8 percent to $13.4 million in 2002 from $12.3 million in 2001 primarily due to the increased activity levels of FTN Financial. Amortization of intangible assets decreased 37 percent to $1.6 million from $2.6 million in 2001 due to the implementation of new accounting standards (see Note 1 for additional detail). All other expense increased 58 percent to $94.3 million in 2002 from $59.7 million. This increase includes the $13.0 million contribution to First Tennessee Foundation and increased costs for First Horizon related to the record origination volume in third quarter 2002. Additional information related to expenses by business line is provided in Table 3 (see also Business Line Review for additional information).

Table 3 — Noninterest Expense Composition

		Third Quarter						Nine Months
						Growth						Growth
(Dollars in millions)		2002		2001		Rate (%)		2002		2001		Rate (%)
FTN Banking Group		$	115.6	$	100.9		14.6	$	341.6	$	314.0		8.8
First Horizon			165.4		126.0		31.4		427.5		360.6		18.6
FTN Financial			90.9		62.8		44.6		236.2		165.0		43.1
Transaction Processing			25.3		22.5		12.0		72.7		70.0		3.7
Corporate			23.9		8.9		168.5		50.8		26.1		94.9
Strategic Initiative Items			—		—		—		—		41.4		(100.0	)
	Total noninterest expense	$	421.1	$	321.1		31.1	$	1,128.8	$	977.1		15.5

INCOME TAX EXPENSE

The effective tax rate for the third quarter 2002 was 31 percent compared to 32 percent for the third quarter of 2001. This year’s third quarter expense reflected a $3.7 million decrease (there will be a similar decrease in the fourth quarter) resulting from a change in the tax status of a subsidiary of First Tennessee Bank National Association. This change will not affect next year’s tax expense.

PROVISION FOR LOAN LOSSES / ASSET QUALITY

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at an adequate level reflecting management’s estimate of the risk of probable incurred losses in the loan portfolio. An analytical model based on historical loss experience, specific analysis of commercial credits over $1 million, current events, trends and economic conditions is used by management to determine the amount of provision to be recognized and to assess the adequacy of the loan loss allowance. The provision for loan losses decreased 10 percent to $20.5 million in 2002 compared to $22.8 million in 2001. This decline resulted from a $7.4 million reduction in provision due to the change in the risk profile of the loan portfolio after the sale of most of First Horizon Money Centers’ loan portfolio. Excluding the impact of this reduction, provision would have increased $5.1 million from third quarter last year, primarily due to higher loss experience,

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resulting from the impact of changes in economic conditions on our customer base and increased volume of repurchased loans. Additional asset quality information is provided in Table 4 – Asset Quality Information and Table 5 – Net Charge-off Ratios.

Table 4 — Asset Quality Information

		September 30
(Dollars in thousands)		2002			2001
Lending activities*:
Nonperforming loans		$	53,691		$	48,594
Foreclosed real estate			7,799			8,154
Other assets			112			146
	Total lending activities		61,602			56,894
Mortgage production activities*:
Nonperforming loans			18,289			20,890
Foreclosed real estate			11,983			10,658
	Total mortgage production activities		30,272			31,548
Total nonperforming assets		$	91,874		$	88,442
Loans and leases 30 to 89 days past due		$	101,526		$	93,836
Loans and leases 90 days past due		$	33,838		$	35,101
Potential problem assets**		$	132,866		$	108,141
		Third Quarter
		2002			2001
Allowance for loan losses:
	Balance on June 30	$	151,804		$	148,658
	Provision for loan losses***		20,447			22,778
	Charge-offs		(27,436	)		(23,542	)
	Loan recoveries		3,588			3,286
	Balance on September 30	$	148,403		$	151,180
		September 30
		2002			2001
Allowance to total loans			1.36	%		1.51	%
Allowance to nonperforming loans			206			218
Nonperforming assets to total loans, foreclosed real estate and other assets (Lending Activities only)			.56			.57
Nonperforming assets to unpaid principal balance of servicing portfolio (Mortgage Production Activities only)			.06			.07

*	Lending activities include all activities associated with the loan portfolio. Mortgage production includes activities associated with the origination of mortgage loans available for sale.
**	Includes loans and leases 90 days past due.
***	Provision was reduced by $7.4 million in 2002 related to the change in First Tennessee’s risk profile after the sale of a portfolio of loans originated through First Horizon Money Centers.

Certain previous reported amounts have been adjusted to conform with current presentation.

Net charge-offs increased to $23.8 million or .89 percent of total loans for third quarter 2002 compared to $20.3 million or .81 percent of total loans for third quarter 2001. The net charge-off ratio for lending activities, which excludes mortgage production activities, decreased to .77 percent of loans from ..80 percent of loans for third quarter 2001. Net charge-offs have been impacted by the effect of First Horizon’s increased volume of

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repurchased loans in third quarter 2002 and by the effect that changes in economic conditions have had on the customer base. In addition, commercial net charge-offs were impacted by the deterioration of three commercial credits. The ratio of allowance for loan losses to total loans, net of unearned income (coverage ratio), was 1.36 percent on September 30, 2002, compared to 1.51 percent on September 30, 2001, due in part to the change in risk profile from the sale of First Horizon Money Centers’ loans.

Nonperforming loans were $72.0 million on September 30, 2002, and the ratio of nonperforming loans to total loans decreased to .66 percent. This compares to nonperforming loans of $69.5 million on September 30, 2001, and a nonperforming loan ratio of .69 percent. Nonperforming assets totaled $91.9 million on September 30, 2002, compared with $88.4 million on September 30, 2001. While relatively stable compared to last year, nonperforming assets increased by $10.8 million from second quarter 2002. This increase is primarily due to additional deterioration of four commercial credits. Three of the four credits were assigned specific reserves at June 30, 2002, but after further deterioration, additional provision was recorded in third quarter 2002. On September 30, 2002, First Tennessee had no concentrations of 10 percent or more of total loans in any single industry.

Going forward the level of provision for loan losses should fluctuate primarily with the strength or weakness of the economy. In addition, asset quality ratios could be affected by balance sheet strategies and shifts in loan mix to and from products with different risk/reward profiles. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Table 5 — Net Charge-off Ratios*

	Third Quarter
	2002			2001
Commercial		.57	%		.48	%
Consumer real estate**		.53			.80
Other retail***		4.25			2.58
Credit card receivables		3.89			3.99
Total net charge-offs		.89			.81

*	Table 6 provides information on the relative size of each loan portfolio
**	Excludes $3.2 million and $.3 million of charge-offs for 2002 and 2001, respectively, related to loans classified as nonperforming from the warehouse and the repurchase of loans originated and previously sold by First Horizon Home Loans.
***	Excluding the impact of the Money Centers loan portfolio, which was divested in third quarter 2002, the other retail net charge-off ratio would have been 2.19 percent for third quarter 2002 and 1.40 percent for third quarter 2001.
Loans are averages expressed net of unearned income.

BUSINESS LINE REVIEW

There were several revenue and expense items in 2001 that make it difficult to compare this year’s results with last year’s results. The items were related to an initiative announced in 2000 to enhance growth and business mix (Strategic Initiative Items). The initiative, completed in fourth quarter 2001, resulted in net pre-tax revenue in excess of expenses of $33.7 million for the year 2001. However, there was no impact in third quarter 2001. In the discussions of business segment performance in the Financial Summary (comparison of first nine months of 2002 to first nine months of 2001) and in other quarters of 2002, these 2001 Strategic Initiative Items are excluded, but are disclosed separately as a segment.

FTN Banking Group

Pre-tax income for FTN Banking Group decreased 22 percent to $54.6 million for third quarter 2002, compared to $70.0 million for third quarter 2001. Total revenues for the segment were $185.6 million, an increase of 1 percent from $183.8 million in third quarter 2001. Total noninterest expense increased 15 percent in third quarter 2002 to $115.6 million from $100.9 million last year.

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The acquisition of Synaxis Group, Inc. (Synaxis), a commercial insurance broker, on December 31, 2001, impacted the results of this quarter. The following discussion of FTN Banking Group’s performance is adjusted to exclude this acquisition.

Total revenues decreased 4 percent to $176.8 million for third quarter 2002. Net interest income decreased 4 percent to $112.7 million in 2002, primarily due to a change in the mix of the loan portfolio to floating rate products and due to the repricing of term assets in this low interest rate environment. As a result, the net interest margin from traditional banking activities has declined approximately 30 basis points since third quarter 2001. Fee income (noninterest income excluding securities gains and losses) decreased 4 percent to $64.2 million in 2002, reflecting declining trust and investment management fees resulting from a contraction in equity market valuations.

The provision for loan losses increased to $15.4 million in third quarter 2002 from $12.9 million last year primarily due to the continued impact on our customer base of an ongoing economic period of slow growth. Compared to the three-month period ending June 30, 2002, the provision increased $1.7 million from $13.7 million. Going forward the level of provision for loan losses should fluctuate primarily with the strength or weakness of the Tennessee economy.

Total noninterest expense was $106.8 million in third quarter 2002 compared to $100.9 million in 2001. Contributing to this increase was a higher level of marketing expense in third quarter 2002.

Going forward, as term assets continue to reprice to lower rates, net interest margin should decline further in the near-term. Over the long term First Tennessee’s relatively neutral balance sheet position should allow the net interest margin to stabilize after the effect of this repricing has occurred. When the equity market begins to recover, fee income, such as asset management and trust fees, should rebound.

First Horizon

Pre-tax income for First Horizon increased 144 percent to $58.6 million for third quarter 2002, compared to $24.0 million for third quarter 2001. Due to the sale near the end of the quarter of a portfolio of loans originated through First Horizon Money Centers and to the closing of the related Money Center offices, First Horizon’s pre-tax income was increased by $7.0 million. This net increase is the result of a $.4 million net loss generated from the loan sale and office closings, and a $7.4 million reduction of loan loss provision due to the change in the risk profile of the loan portfolio after the sale of the Money Center loans. The loan portfolio sale and the closing of offices will have a nominal impact on the earnings of First Horizon in future quarters.

Total revenues were $228.3 million, an increase of 43 percent from $159.7 million in 2001. Net interest income increased 42 percent to $62.0 million in 2002, reflecting the benefits of lower funding costs and a larger portfolio of loans held for sale (warehouse). Net interest spread on the warehouse, which was positively impacted by the lower funding costs and the relative steepness of the yield curve, increased to 4.11 percent in 2002 from 3.28 percent in 2001. Total fee income increased 43 percent to $166.3 million in 2002. Fee income consists primarily of mortgage banking-related fees from the origination process, fees from mortgage servicing and mortgage servicing rights (MSR) net hedge gains or losses. Total fee income is net of amortization, impairment and other expenses related to MSR and related hedges.

Origination activity increased 71 percent to $9.2 billion and loan sales into the secondary market increased 43 percent to $7.5 billion in third quarter 2002 compared to last year. Driven by low mortgage interest rates, refinance activity represented 66 percent of total originations during the quarter compared to 51 percent in third quarter 2001. Loan origination fees increased 31 percent to $61.6 million compared to third quarter 2001, reflecting the increased origination activity and increased loan sales into the secondary market. Secondary marketing activities increased to $104.1 million from the $82.1 million recorded in the comparable quarter last year. The increase was primarily the result of a $30.6 million increase in net secondary trading gains primarily due to the favorable interest rate environment experienced during the quarter. The favorable experience in net secondary trading gains was partially offset by an $8.6 million reduction in MSR revenues recognized on loans delivered during the quarter. The reduction in MSR revenues reflects a 38 percent decrease in the capitalized net present value of MSR’s created during the quarter as a result of increased prepayment assumptions used to value the retained servicing rights.

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Fees associated with mortgage servicing increased 5 percent to $42.3 million in 2002, primarily due to an 18 percent increase in the servicing portfolio. On September 30, 2002, the mortgage-servicing portfolio totaled $52.1 billion, compared to $44.2 billion on September 30, 2001. Servicing fees were negatively impacted in third quarter 2002 by a lower level of GNMA mortgages, which earn higher servicing fees.

MSR amortization was $28.2 million for third quarter 2002 compared with $29.5 million in 2001. In third quarter 2002 there was a MSR impairment loss of $42.5 million compared to a $44.6 million loss in third quarter 2001. Net MSR hedging gains (including the effect of time decay) were $18.7 million in third quarter 2002 compared to $8.7 million net gains in 2001.

The provision for loan losses decreased to $4.3 million in third quarter 2002 compared to $9.7 million in 2001, due to the $7.4 million reduction in provision resulting from the change in risk profile after the sale of the Money Center loans. Excluding the impact of this reduction near the end of the quarter, provision would have increased $2.0 million. Going forward, net charge-offs and the provision for loan losses should decrease due to this change in risk profile.

Total noninterest expense increased 31 percent to $165.4 million in third quarter 2002. The increase was primarily the result of a 31 percent increase in personnel expense that includes the impact of increased commission expense related to the increased mortgage origination volume produced during the quarter. Also included is the impact of the investment made by First Horizon in growing the retail sales force. Since the end of third quarter 2001, the retail sales force has increased 51 percent.

Other consumer lending activities within First Horizon are comprised of lending activities related to national consumer finance and national cross-sell strategies. These lending activities had average outstandings of $2.1 billion for third quarter 2002, which represents a 31 percent increase from 2001. Third quarter 2002 originations were $.4 billion.

Going forward, fee income from refinance loan originations will depend on mortgage interest rates. An increase in rates should reduce origination fees and profit from the sale of loans, but should also reduce MSR amortization expense and impairment losses, while a decrease in rates should increase this net revenue. Flat to rising interest rates should reduce net secondary marketing trading gains, while falling rates should increase this net revenue. If total origination volume increases and/or the yield curve steepens, net interest income from the warehouse should increase, while if volume decreases and/or the yield curve flattens, this revenue should decrease. The continuing success of national cross-sell strategies should increase revenues from products other than traditional mortgage origination and servicing.

FTN Financial

Pre-tax income for FTN Financial increased 19 percent to $42.9 million for third quarter 2002, compared to $35.9 million for third quarter 2001.

Total revenues were $134.6 million, an increase of 36 percent from $98.9 million in 2001. Fee income increased 38 percent to $125.7 million in 2002. This increased revenue reflects continued growth and penetration into our targeted institutional customer base through expanded products, services, sales force and marketing efforts. This growth has been influenced by the increased liquidity our customers have experienced as deposit growth has exceeded loan growth. Revenue growth has also been favorably impacted by changes in the interest rate environment and the equity markets. Revenues from non-traditional product initiatives grew by 14 percent in third quarter 2002 compared to last year.

The provision for loan losses was $.8 million in third quarter 2002 compared to $.2 million in third quarter 2001.

Total noninterest expense increased 45 percent to $90.9 million in third quarter 2002 primarily due to an increase in personnel expense, the largest component of noninterest expense, resulting from commissions and incentives associated with the higher fee income this year.

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Going forward, revenues will fluctuate based on factors which include the expansion of the customer base, the volume of investment banking transactions and the introduction of new products, as well as the strength of loan growth in the U.S. economy and volatility in the interest rate environment and the equity markets.

Transaction Processing

Pre-tax income for Transaction Processing was $5.7 million for third quarter 2002, compared to $6.0 million for third quarter 2001. Contributing to this decline was the negative effect the slowdown in the hospitality industry had on the contribution of merchant processing to this segment.

Corporate

Corporate had a third quarter pre-tax loss of $22.4 million in 2002, compared to a pre-tax loss of $4.1 million in 2001. Included in the pre-tax loss for third quarter 2002 is the $13.0 million contribution to First Tennessee Foundation. In addition, select components of SFAS 133 hedge ineffectiveness resulted in a pre-tax net decrease of $4.5 million from third quarter 2001.

Strategic Initiative Items

First Tennessee’s third quarter 2000 earnings press release dated October 18, 2000, announced an ongoing initiative to enhance growth and business mix, in which several slower growth businesses were being considered for divestiture. Several strategic divestitures occurred in 2000 and 2001 – the corporate and municipal trust business and the MONEY BELT ATM network in fourth quarter 2000; the single relationship credit card portfolio in fourth quarter 2000 and first quarter 2001; and the student loan portfolio, Peoples and Union Bank, and a partnership interest in Check Solutions Company in second quarter 2001. In connection with this announced initiative, First Tennessee also announced plans to incur costs and expenses associated with various revenue and expense enhancement programs. First Tennessee has disclosed these revenue and expense items (“Strategic Initiative Items”) separately in order to enhance the comparability of period-to-period results. There was no third quarter 2001 financial statement impact due to Strategic Initiative Items.

BALANCE SHEET REVIEW

Earning assets

Earning assets primarily consist of loans, loans held for sale and investment securities. For third quarter 2002, earning assets averaged $17.3 billion compared with $15.8 billion for third quarter 2001. On September 30, 2002, First Tennessee reported total assets of $22.7 billion compared with $19.7 billion on September 30, 2001. Average total assets increased 9 percent to $20.6 billion from $18.8 billion in third quarter 2001.

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Loans

Average total loans increased 8 percent for third quarter 2002 to $10.8 billion due primarily to an increase of 15 percent in retail loans while commercial loans grew 2 percent. Additional loan information is provided in Table 6.

Table 6 — Average Loans

		Third Quarter
				Percent			Growth					Percent
(Dollars in millions)		2002		of Total			Rate			2001		of Total
Commercial:
	Commercial, financial and industrial	$	3,941.9		36	%		(2.1	)%	$	4,028.5		41	%
	Real estate commercial		1,056.6		10			13.5			930.9		9
	Real estate construction		504.8		5			15.9			435.4		4
Retail:
	Real estate residential		4,316.8		40			19.6			3,609.3		36
	Real estate construction		278.2		3			50.9			184.4		2
	Other retail		396.8		4			(18.0	)		484.1		5
	Credit card receivables		261.8		2			(6.3	)		279.4		3
Total loans, net of unearned		$	10,756.9		100	%		8.1	%	$	9,952.0		100	%

During years prior to 2002 certain retail loans have been securitized. The majority of these securities are owned by subsidiaries of First Tennessee, including FTBNA, and are classified as investment securities.

Loans Held for Sale / Investment Securities

Loans held for sale, consisting primarily of mortgage loans, increased 37 percent in 2002 to $3.0 billion from $2.2 billion due to the high level of originations in third quarter 2002. Average investment securities decreased 5 percent in third quarter 2002 to $2.4 billion from $2.5 billion.

Deposits / Other Sources of Funds

Core deposits grew 4 percent to $9.6 billion in third quarter 2002 compared to $9.2 billion in 2001. Interest-bearing core deposits decreased 2 percent to $5.8 billion from $5.9 billion due to the loss of funds related to one institutional investor. Excluding the effect of this investor, interest-bearing core deposits would have remained level in 2002. Noninterest-bearing deposits increased 16 percent in third quarter 2002 to $3.8 billion from $3.3 billion due to growth in a cash management investment product, demand deposit accounts, and mortgage escrow accounts. Short-term purchased funds increased 15 percent to $7.5 billion from $6.5 billion in third quarter 2001. Short-term purchased funds accounted for 42 percent of First Tennessee’s funding (core deposits, purchased funds and term borrowings) in third quarter 2002 compared to 40 percent in 2001. Term borrowings increased 12 percent to $.7 billion compared to $.6 billion for third quarter 2001.

LIQUIDITY MANAGEMENT

The objective of liquidity management is to ensure the continuous availability of funds to meet the demands of depositors, other creditors and borrowers. The Asset/Liability Committee, a committee consisting of senior management that meets regularly, is responsible for managing these needs by taking into account the marketability of assets; the sources, stability and availability of funding; and the level of unfunded commitments. Core deposits are First Tennessee’s primary source of funding and have been a stable source of liquidity for banks. These deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent authorized by law. For third quarter 2002, the average total loan to core deposit ratio was 112 percent compared with 108 percent in third quarter 2001. FTBNA has a bank note program available for additional liquidity, under which the bank may borrow funds from time to time, at maturities of 30 days to 30 years. On September 30, 2002, approximately $2.7 billion

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was available under current conditions through the bank note program as a long-term (greater than one year) funding source. First Tennessee also evaluates alternative sources of funding, including loan sales, securitizations, syndications, Federal Home Loan Bank borrowings and debt offerings in its management of liquidity. No employee of First Tennessee benefits personally from any ownership in these arrangements.

First Tennessee has a loan funding arrangement with a commercial paper conduit facility. Loans made under this facility would qualify for First Tennessee’s highest grades of low risk commercial loans if First Tennessee had made these loans. First Tennessee provides a liquidity facility and a credit enhancement to the conduit that totaled $232.4 million on September 30, 2002. The loans in the conduit are not reflected on First Tennessee’s Statement of Condition. Given the relatively small volume of loans currently referred to the conduit, this facility does not represent a critical element of First Tennessee’s liquidity.

First Horizon Home Loans originates conventional conforming and federally insured single-family residential mortgage loans. Likewise, First Tennessee Capital Assets Corporation frequently purchases the same types of loans from our customers. Substantially all of these mortgage loans are exchanged for securities, which are issued through GNMA for federally insured loans and FNMA and FHLMC for conventional loans, and then sold in the secondary markets. In many cases First Horizon Home Loans retains the right to service and receive servicing fees on these loans. After sale, these loans are not reflected on the Consolidated Statement of Condition. Each of these government-sponsored entities has specific guidelines and criteria for sellers and servicers of loans backing their respective securities. During third quarter 2002, approximately $5.6 billion of conventional and federally insured mortgage loans were securitized and sold by First Horizon Home Loans through these government-sponsored entities. First Tennessee’s use of these government-sponsored entities as an efficient outlet for our mortgage loan production is an essential source of liquidity for First Tennessee and other participants in the housing industry.

Certain of First Horizon Home Loans’ originated loans do not conform to the requirements for sale or securitization by FNMA and FHLMC due to exceeding the maximum loan size of approximately $301 thousand (jumbo loans). First Horizon Home Loans pools and securitizes these jumbo loans in proprietary transactions. After securitization and sale, these loans are not reflected on the Consolidated Statement of Condition except as described hereafter. These transactions, which are conducted through single-purpose business trusts, are the most efficient way for First Horizon Home Loans and other participants in the housing industry to monetize these assets. In most cases First Horizon Home Loans retains the right to service and receive servicing fees on these loans and, on occasion, has retained senior principal-only certificates or interest-only strips that are classified on the Consolidated Statement of Condition as trading securities. On September 30, 2002, the outstanding principal amount of loans in these off-balance sheet business trusts was $4.4 billion. Given the significance of First Horizon Home Loans’ origination of non-conforming loans, the use of single-purpose business trusts to securitize these loans is an important source of liquidity to First Tennessee.

Other securitization activity includes an automobile loan securitization in 2000. There was $31.0 million in unpaid principal balance of loans in the securitization trust on September 30, 2002. This securitization is not an essential element of First Tennessee’s liquidity.

In addition to these transactions, liquidity has been obtained in prior years through issuance of guaranteed preferred beneficial interests in First Tennessee’s junior subordinated debentures through a consolidated Delaware business trust wholly owned by First Tennessee ($100.0 million on September 30, 2002) and through preferred stock issued by an indirect wholly owned subsidiary of First Tennessee ($44.3 million on September 30, 2002).

First Tennessee has a lease arrangement with a single-purpose entity for First Horizon Home Loan’s main office headquarters in Dallas. Under this arrangement, First Tennessee has guaranteed a significant portion of the residual value of the Dallas property through the end of the lease term in 2011. Approximately $41 million of the construction cost of the property is not reflected on First Tennessee’s Statement of Condition but is rather owned by the single-purpose entity. If the value of the property were to decline below its original construction cost, First Tennessee would be obligated to reimburse the single-purpose entity for a significant portion of the deficiency, if any, at the end of the lease term. The use of this leasing arrangement is not an essential element of First Tennessee’s liquidity.

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Parent company liquidity is maintained by cash flows stemming from dividends and interest payments collected from subsidiaries, which represent the primary source of funds to pay dividends to shareholders and interest to debtholders. The parent company also has the ability to enhance its liquidity position by raising equity or incurring debt. Under an effective shelf registration statement on file with the Securities and Exchange Commission (SEC), First Tennessee, as of September 30, 2002, may offer from time to time at its discretion, debt securities, and common and preferred stock aggregating up to $225 million. In addition, First Tennessee also has an effective capital securities shelf registration statement on file with the SEC under which up to $200 million of capital securities is available for issuance.

CAPITAL

Capital adequacy is an important indicator of financial stability and performance. Management’s objectives are to maintain a level of capitalization that is sufficient to sustain asset growth, take advantage of profitable growth opportunities and promote depositor and investor confidence.

Shareholders’ equity was $1.6 billion on September 30, 2002, an increase of 13 percent from $1.4 billion on September 30, 2001. The increase in capital was primarily due to the retention of net income after dividends. The change in capital was reduced by share repurchases, primarily related to stock option exercises, which totaled $127.6 million, or 3.5 million shares since September 30, 2001. First Tennessee’s board has previously approved the purchase of shares authorized for issuance under its stock option plans. On October 16, 2001, the board of directors extended from June 30, 2002, until December 31, 2004, the non-stock option plan-related repurchases of up to 9.5 million shares, previously approved in October 2000. Through September 30, 2002, 2.5 million shares have been repurchased pursuant to this authority. Pursuant to board authority, First Tennessee plans to continue to repurchase shares from time to time and will evaluate the level of capital and take action designed to generate or use capital as appropriate for the interests of the shareholders. Repurchases will be made in the open market or through privately negotiated transactions and will be subject to market conditions, accumulation of excess equity and prudent capital management.

Average shareholders’ equity increased 15 percent since third quarter 2001 to $1.6 billion from $1.4 billion, reflecting internal capital generation. The average shareholders’ equity to average assets ratio was 7.74 percent for third quarter 2002 compared to 7.37 percent for third quarter 2001. Unrealized market valuations had no material effect on the ratios during third quarter 2002.

On September 30, 2002, the corporation’s Tier 1 capital ratio was 8.76 percent, the total capital ratio was 11.51 percent and the leverage ratio was 7.36 percent. On September 30, 2002, First Tennessee’s bank affiliates had sufficient capital to qualify as well-capitalized institutions. As discussed in Deposits, Other Sources of Funds and Liquidity Management above, First Horizon Home Loans uses single-purpose business trusts to securitize and sell jumbo loans, which, therefore, are not reflected on First Tennessee’s Statement of Condition. Even if these loans had not been securitized and sold, and were included on the Statement of Condition, First Tennessee and all of its banking affiliates would have been well capitalized.

FINANCIAL SUMMARY (Comparison of first nine months of 2002 to first nine months of 2001)

Earnings for 2002 were $273.1 million and diluted earnings per common share were $2.09. Earnings for 2001 were $229.0 million and diluted earnings per common share were $1.74. Earnings for 2001 before debt restructurings and the cumulative effect of changes in accounting principles related to derivatives (SFAS No. 133 and EITF 99-00) were $240.4 million. Diluted earnings per common share before debt restructurings and the cumulative effect of changes in accounting principles were $1.82 in 2001. For the first nine months of 2002, return on average shareholders’ equity was 23.7 percent and return on average assets was 1.83 percent, while in 2001 these ratios were 22.2 percent and 1.61 percent, respectively.

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Total revenue increased 14 percent, with a 16 percent increase in fee income and a 12 percent increase in net interest income. Fee income contributed 66 percent to total revenue in 2002 compared with 65 percent in 2001.

INCOME STATEMENT REVIEW

Noninterest income, excluding securities gains and losses, increased 16 percent for the first nine months of 2002 to $1,055.9 million from $912.4 million for the same period last year. The acquisition of Synaxis impacted the results of 2002, adding $29.5 million to noninterest income. Divestiture gains of $2.3 million in 2002 compared with gains of $81.5 million in 2001 (included in Strategic Initiative Items in 2001) also impacted the growth rate. Excluding the impact of Synaxis in 2002 and divestiture gains in both periods, total noninterest income would have increased 23 percent. Mortgage banking fee income increased 32 percent to $410.0 million from $311.5 million. During this period, fees from the mortgage origination process increased $70.1 million primarily due to the increased volume of loans sold into the secondary market combined with increased other gains from secondary marketing activities. MSR net hedge results (net of time decay) increased $35.1 million and mortgage servicing fee income increased $7.8 million compared to the first nine months of 2001. Amortization of capitalized mortgage servicing rights increased to $87.8 million from $82.7 million in 2001, and MSR impairment loss in 2002 was $98.8 million compared to $87.2 million in 2001. See Table 1 – Mortgage Banking for a breakout of noninterest income as well as mortgage banking origination volume and servicing portfolio levels. Fee income from capital markets increased 37 percent to $321.7 million from $234.8 million for 2001. Total securities bought and sold increased 22 percent to $1.2 trillion compared to 1.0 trillion for 2001. For the first nine months of 2002, fee income in deposit transactions and cash management grew 11 percent to $105.6 million from $94.7 million. Trust services and investment management fees decreased 12 percent to $38.2 million from $43.4 million for the same nine-month period. Insurance premiums and commissions increased 309 percent to $36.7 million from $8.9 million in 2001, primarily due to the acquisition of Synaxis; and merchant processing fees increased 3 percent to $35.8 million from $34.7 million in 2001, primarily due to a portfolio acquisition in second quarter 2002. All other income and commissions increased 3 percent to $105.6 million from $102.9 million. The reasons for the year-to-date trends were similar to the quarterly trend information already discussed.

Net interest income increased 12 percent to $551.3 million from $492.8 million for the first nine months of 2001 while earning assets increased 5 percent to $16.7 billion from $15.9 billion in 2001. Year-to-date consolidated margin increased to 4.40 percent in 2002 from 4.12 percent in 2001. The reasons for the year-to-date trends were similar to the quarterly trend information already discussed.

Total noninterest expense for the first nine months of 2002 increased 16 percent to $1,128.8 million from $977.1 million in 2001. The acquisition of Synaxis impacted the results of 2002, adding $25.2 million to noninterest expense. Excluding the impact of Synaxis in 2002 and Strategic Initiative Items in 2001 (see BUSINESS LINE REVIEW — Strategic Initiative Items below), total noninterest expense would have increased 18 percent. Expenses in First Horizon and FTN Financial fluctuate based on the type and level of activity. Excluding First Horizon and FTN Financial in both periods, Synaxis in 2002 and Strategic Initiative Items in 2001, total operating expense increased 7 percent.

Employee compensation, incentives and benefits (personnel expense), the largest component of noninterest expense, increased 23 percent to $698.2 million from $569.0 million in 2001. Equipment rentals, depreciation and maintenance expense decreased 9 percent in 2002 to $51.0 million from $55.9 million in 2001. Occupancy expense increased 4 percent to $55.5 million from $53.5 million in 2001. Communications and courier expense increased 10 percent to $38.9 million in 2002 from $35.4 million in 2001 primarily due to the increased activity levels of FTN Financial. Operations services remained level at $44.8 million in 2002 and 2001. Amortization of intangible assets decreased 45 percent to $4.6 million from $8.4 million in 2001. All other expense increased 12 percent to $235.8 million in 2002 from $210.1 million. The provision for loan losses increased 17 percent to $69.3 million from $59.2 million in the first nine months of 2001. The reasons for the year-to-date trends were similar to the quarterly trend information already discussed. Additional information related to expenses by business line is provided in Table 3 (see also Business Line Review for additional information).

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CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

SFAS No. 133 and EITF 99-20 were adopted on January 1, 2001. At that date all freestanding derivative instruments were measured at fair value with differences between the previous book value and fair value reported as a one-time accounting adjustment. Likewise, offsetting gains and losses on hedged assets, liabilities and firm commitments were recognized as adjustments of their respective book values at the adoption date as part of this accounting adjustment, except to the extent that they related to hedges of the variable cash flow exposure of a forecasted transaction. To the extent the adoption adjustment related to hedges of the variable cash flow exposure of a forecasted transaction, the accounting adjustment, a $1.4 million after-tax gain, was reported as a cumulative effect adjustment of comprehensive income in first quarter 2001. Additionally, the new rules regarding the recognition of impairment and income of interest-only strips were adopted. The net one-time accounting adjustments reported on the income statement as the cumulative effect of changes in accounting principles were an $8.2 million after-tax loss for first quarter 2001.

DEBT RESTRUCTURINGS

In second quarter 2001 there was a $5.1 million pre-tax ($3.2 million after-tax) loss related to debt restructurings. For financial statement presentation purposes this loss is treated as an extraordinary item and therefore, net income and earnings per share are indicated before and after the after-tax loss (see also Note 3 – Earnings Per Share).

BUSINESS LINE REVIEW

FTN Banking Group

For the first nine months of 2002, pre-tax income decreased 3 percent to $182.9 million from $188.1 million. Total revenues for the nine-month period were $568.8 million, an increase of 7 percent from $533.7 million in 2001. Total provision for the nine-month period increased 40 percent to $44.3 million from $31.6 million in 2001, and total noninterest expense increased 9 percent to $341.6 million from $314.0 million in 2001. The acquisition of Synaxis impacted total revenue and total noninterest expense results for the nine-month period. Excluding Synaxis, total revenues for the nine-month period increased 2 percent and total noninterest expense increased 1 percent. The reasons for the year-to-date trends were similar to the quarterly trend information already discussed.

First Horizon

For the first nine months of 2002, pre-tax income increased 167 percent to $144.1 million from $54.0 million in 2001. Total revenues for the nine-month period were $596.5 million, an increase of 35 percent from $441.3 million in 2001. Total provision for the nine-month period decreased 7 percent to $24.9 million from $26.7 million in 2001, and total noninterest expense increased 19 percent to $427.5 million from $360.6 million in 2001.

During this period, fees from the mortgage origination process increased $70.1 million primarily due to the increased volume of loans sold into the secondary market combined with increased other gains from secondary marketing activities. MSR net hedge results (net of time decay) increased $35.1 million and mortgage servicing fee income increased $7.8 million compared to the first nine months of 2001. Amortization of capitalized mortgage servicing rights increased to $87.8 million from $82.7 million in 2001, and MSR impairment loss in 2002 was $98.8 million compared to $87.2 million in 2001. See Table 1 – Mortgage Banking for a breakout of noninterest income as well as mortgage banking origination volume and servicing portfolio levels.

Total noninterest expense increased primarily due to a 23 percent increase in personnel expense resulting from increased origination volume and investments in production expansion in 2002.

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FTN Financial

For the first nine months of 2002, pre-tax income increased 27 percent to $116.3 million from $91.3 million in 2001. Total revenues for the nine-month period were $352.6 million, an increase of 37 percent from $257.2 million in 2001. Total provision for the nine-month period was $.1 million in 2002 compared to $.9 million in 2001. Total noninterest expense for the nine-month period increased 43 percent to $236.2 million from $165.0 million in 2001. The reasons for the year-to-date trends were similar to the quarterly trend information already discussed.

Transaction Processing

For the first nine months of 2002, pre-tax income increased 46 percent to $17.3 million from $11.9 million in 2001. This increase was primarily due to growth in net interest income due to the current interest rate environment and efficiency improvements in express processing operations.

Corporate

For the first nine months of 2002, Corporate had a pre-tax loss of $53.9 million compared to a pre-tax loss of $16.7 million in 2001. This increase in pre-tax loss was primarily due to (1) a net decrease of $14.0 million related to select components of SFAS 133 hedge ineffectiveness; (2) the $13.0 million contribution to First Tennessee Foundation in third quarter 2002; and (3) $6.6 million in expenses related to a specific litigation matter in first quarter 2002.

Strategic Initiative Items

First Tennessee’s third quarter 2000 earnings press release dated October 18, 2000, announced an ongoing initiative to enhance growth and business mix, in which several slower growth businesses were being considered for divestiture. Several strategic divestitures occurred in 2000 and 2001 – the corporate and municipal trust business and the MONEY BELT ATM network in fourth quarter 2000; the single relationship credit card portfolio in fourth quarter 2000 and first quarter 2001; and the student loan portfolio, Peoples and Union Bank, and a partnership interest in Check Solutions Company in second quarter 2001. In connection with this announced initiative, First Tennessee also announced plans to incur costs and expenses associated with various revenue and expense enhancement programs. First Tennessee has disclosed these revenue and expense items (“Strategic Initiative Items”) separately in order to enhance the comparability of period-to-period results.

For the first nine months of 2001, Strategic Initiative Items resulted in total revenues of $78.2 million and total noninterest expense of $41.4 million.

BALANCE SHEET REVIEW

For the first nine months of 2002, total assets averaged $20.0 billion compared with $19.0 billion in 2001. Average loans grew 4 percent to $10.5 billion from $10.1 billion for the first nine months of 2001. Average commercial loans increased 1 percent to $5.5 billion from $5.4 billion in 2001. Retail loans increased 7 percent to $5.0 billion in 2002 compared to $4.7 billion in 2001. Average investment securities decreased 8 percent to $2.4 billion from $2.6 billion for 2001. Loans held for sale, consisting primarily of mortgage loans, increased 13 percent for the nine-month period to $2.5 billion from $2.2 billion in 2001.

For the first nine months of 2002, average core deposits increased 2 percent to $9.4 billion from $9.2 billion. While interest-bearing core deposits decreased 3 percent to $5.8 billion from $6.0 billion, noninterest-bearing deposits increased 12 percent to $3.6 billion from $3.2 billion in 2001. Short-term purchased funds increased 6 percent for the nine-month period to $7.2 billion from $6.8 billion. Term borrowings increased 21 percent for the first nine months of 2002 to $.6 billion from $.5 billion in 2001.

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OTHER

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

SFAS No. 133, which was adopted on January 1, 2001, establishes accounting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. It requires that changes in the instrument’s fair value be recognized currently in earnings (or other comprehensive income). If certain criteria are met, changes in the fair value of the asset or liability being hedged are also recognized currently in earnings. The initial impact of adopting SFAS No. 133 resulted in a net transition adjustment that was recognized as the cumulative effect of a change in accounting principle.

Fair value is determined on the last business day of a reporting period. This point in time measurement of derivative fair values and the related hedged item fair values may be well suited to the measurement of hedge effectiveness, as well as reported earnings, when hedge time horizons are short. The same measurement, however, may not consistently reflect the effectiveness of longer-term hedges and, in First Tennessee’s view, can distort short-term measures of reported earnings. First Tennessee uses a combination of derivative financial instruments to hedge certain components of the interest rate risk associated with its portfolio of capitalized MSR, which currently have an average life of three to four years. Over this long-term time horizon this combination of derivatives can be effective in significantly mitigating the effects of interest rate changes on the value of the servicing portfolio. However, these derivative financial instruments can and do demonstrate significant price volatility depending upon prevailing conditions in the financial markets. If a reporting period ends during a period of volatile financial market conditions, the effect of such point in time conditions on reported earnings does not reflect the underlying economics of the transactions or the true value of the hedges to First Tennessee over their estimated lives. The fact that the fair value of a particular derivative is unusually low or high on the last day of the reporting period is meaningful in evaluating performance during the period only if First Tennessee sells the derivative within the period of time before fair value changes and does not replace the hedge coverage with another derivative. First Tennessee believes the effect of such volatility on short-term measures of earnings is not indicative of the expected long-term performance of this hedging practice.

For its internal evaluation of performance for an applicable period, First Tennessee reclassified select components of SFAS 133 hedge ineffectiveness from the reported net income of the First Horizon segment to the Corporate segment. The internal evaluation of First Horizon’s long-term performance will include the long-term trend, if any, in these select components of SFAS 133 hedge ineffectiveness.

FURTHER INTERPRETATIONS OF SFAS NO. 133

Certain provisions of SFAS No. 133 continue to undergo significant discussion and debate by the Financial Accounting Standards Board (FASB). One such potential issue involves the assessment of hedge effectiveness (and its impact on qualifying for hedge accounting) when hedging fair value changes of prepayable assets due to changes in the benchmark interest rate. As the FASB continues to deliberate interpretation of the new rules, the potential exists for a difference between First Tennessee’s interpretation and that of the FASB, the effects of which cannot presently be anticipated but failure to obtain hedge accounting treatment could be significant to results of operations.

ACCOUNTING CHANGES

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions (an amendment of FASB Statement No. 72 and 144 and FASB Interpretation No. 9). This statement requires acquisitions of all or part of a financial institution meeting the definition of a business combination to be accounted for by the purchase method in accordance with SFAS No. 141, Business Combinations. Any previously recorded unidentified intangible asset related to the acquisition of a financial institution must now be classified as goodwill and is subject to the impairment testing provisions of SFAS No. 142. Impairment testing of previously identified long-term customer-

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relationship intangible assets will be subject to the impairment testing provisions of SFAS No 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Provisions of this statement are effective for acquisitions on or after October 1, 2002. Provisions related to the accounting for impairment or disposal of certain long-term customer-relationship intangible assets and transition provisions for previously recognized unidentified intangible assets are effective on October 1, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement requires that a liability for the cost associated with an exit or disposal activity be recognized and measured initially at fair value in the period in which the liability is incurred. Prior to the effective date of this statement, costs associated with an exit or disposal plan were recognized at the date of commitment, as required under EITF Issued 94-3. This statement does not apply to costs associated with an exit activity that involves an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. This statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be classified as an extraordinary item, net of related income tax effect, if material in the aggregate. Due to the rescission of SFAS No. 4, the criteria in Opinion 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because of the rescission of SFAS No. 4. SFAS No. 44, which established accounting requirements for the effects of transition provisions of the Motor Carrier Act of 1980, is no longer necessary because the transition has been completed. SFAS No. 145 also amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. In addition this Statement also makes technical corrections to existing pronouncements, which are generally not substantive in nature. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria for classification as an extraordinary item will be reclassified. The provisions of SFAS No. 145 related to SFAS No. 13 are effective for transactions occurring after May 15, 2002. All other provisions of this Statement shall be effective for financial statements issued on or after May 15, 2002. First Tennessee expects the impact of adopting this standard to be immaterial.

37

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information called for by this Item is contained in (a) Management’s Discussion and Analysis of Results of Operations and Financial Condition in Item 2 of this report at pages 17 through 37, (b) the Section entitled Risk Management-Interest Rate Risk Management of the Management’s Discussion and Analysis of Results of Operations and Financial Condition section of the Financial Appendix to First Tennessee’s 2002 Proxy Statement at pages F-27 through F-31 and (c) the Interest Rate Risk Management subsection of Note 1 to First Tennessee’s consolidated financial statements at pages F-52 through F-53 of the Financial Appendix to First Tennessee’s 2002 Proxy Statement, and which information is incorporated herein by reference. Current information related to First Tennessee’s risk sensitivity position for financial instruments held for purposes other than trading is provided below. The derivative financial instruments listed in the following table are shown at both notional and fair values. This table also details First Tennessee’s interest rate sensitivity profile on September 30, 2002, based on projected cash flows using anticipated sale date on loans held for sale, contractual maturity for loans, and expected repayment dates for securities. The information provided below is forward-looking. Actual results could differ because of interest rate movements, the ability of management to execute its business plans and other factors, including those presented in the Forward-Looking Statements section of this MD&A.

Risk Sensitivity Analysis
Held For Purposes Other Than Trading			Within 1			Within 2			Within 3			Within 4			Within 5			After 5						Fair
(Dollars in millions)			year			years			years			years			years			years			Total			Value
Assets:
Loans, net of unearned income*:
	Floating		$	2,934		$	435		$	235		$	181		$	273		$	2,505		$	6,563		$	6,565
		Average interest rate		5.00	%		4.07	%		4.06	%		4.09	%		4.03	%		5.17	%		4.90	%
	Fixed		$	738		$	480		$	368		$	503		$	603		$	1,596		$	4,288		$	4,363
		Average interest rate		6.83	%		7.59	%		7.53	%		7.44	%		6.96	%		8.64	%		7.74	%
Loans held for sale			$	3,792			—			—			—			—			—		$	3,792		$	3,805
		Average interest rate		5.87	%		—			—			—			—			—			5.87	%
Investment securities — fixed			$	990		$	460		$	286		$	191		$	182		$	439		$	2,548		$	2,557
		Average interest rate		6.02	%		6.09	%		5.86	%		5.84	%		5.93	%		5.14	%		5.84	%
Liquid assets — floating**			$	409		$	15		$	16		$	16		$	16		$	16		$	488		$	488
		Average interest rate		1.83	%		10.08	%		10.08	%		10.08	%		10.08	%		10.08	%		3.17	%
Liabilities:
Interest-bearing deposits:
	Floating		$	2,454			—			—			—			—		$	260		$	2,714		$	2,714
		Average interest rate		1.48	%		—			—			—			—			1.38	%		1.47	%
	Fixed		$	4,373		$	355		$	451		$	154		$	204		$	1,197		$	6,734		$	6,769
		Average interest rate		2.07	%		3.34	%		4.04	%		3.13	%		3.78	%		.88	%		2.13	%
Short-term borrowings:
	Floating		$	4,156			—			—			—			—			—		$	4,156		$	4,156
		Average interest rate		1.76	%		—			—			—			—			—			1.76	%
	Fixed		$	20			—			—			—			—			—		$	20		$	20
		Average interest rate		1.33	%		—			—			—			—			—			1.33	%
Term borrowings — fixed			$	281		$	6		$	53		$	76		$	4		$	235		$	655		$	685
		Average interest rate		2.54	%		4.57	%		4.28	%		6.88	%		4.62	%		6.00	%		4.45	%
Guaranteed preferred beneficial interests in First Tennessee’s junior subordinated debentures — fixed				—			—			—			—			—		$	100		$	100		$	105
		Average interest rate		—			—			—			—			—			8.07	%		8.07	%
Preferred stock of subsidiary — fixed				—			—			—			—			—		$	44		$	44		$	48
		Average interest rate		—			—			—			—			—			9.50	%		9.50	%

*	Excludes nonaccrual loans.
**	Consists of federal funds sold, securities purchased under agreements to resell, investments in time deposits, and mortgage banking trading securities.

38

Risk Sensitivity Analysis (continued)
Held For Purposes Other Than Trading (continued)			Within 1			Within 2			Within 3			Within 4			Within 5			After 5						Fair
(Dollars in millions)			year			years			years			years			years			years			Total			Value
Derivatives (notional value):
Mortgage banking:
Pipeline and warehouse hedging
	Forward contracts -
	Commitments to sell		$	6,129			—			—			—			—			—		$	6,129		$	(63	)
		Weighted average settlement price		100.38	%		—			—			—			—			—			100.38	%
Servicing portfolio hedging
	Swaptions		$	500			—			—			—			—			—		$	500		$	6
		Weighted average strike price		4.05	%		—			—			—			—			—			4.05	%
	Swaps			—			—			—			—			—		$	2,050		$	2,050		$	314
		Average pay rate (floating)		—			—			—			—			—			1.84	%		1.84	%
		Average receive rate (fixed)		—			—			—			—			—			5.86	%		5.86	%
	Forward contracts purchased		$	1,945			—			—			—			—			—		$	1,945		$	40
		Weighted average strike price		6.00	%		—			—			—			—			—			6.00	%
Other
	Floors purchased		$	500		$	4,850			—			—			—			—		$	5,350		$	50
		Weighted average strike price		5.38	%		4.39	%		—			—			—			—			4.48	%
	Floors written		$	500		$	4,850			—			—			—			—		$	5,350		$	50
		Weighted average strike price		5.38	%		4.39	%		—			—			—			—			4.48	%
	Interest rate lock commitments		$	6,668			—			—			—			—			—		$	6,668		$	61
		Average locked rate		6.01	%		—			—			—			—			—			6.01	%
Interest rate risk management:
Swaps			$	20			—		$	25		$	21		$	10		$	50		$	126		$	7
	Average pay rate (floating)			1.86	%		—			—			1.85	%		1.82	%		—			1.85	%
	Average receive rate (fixed)			2.30	%		—			5.50	%		5.38	%		4.15	%		5.25	%		4.76	%
Swaps			$	100			—		$	25		$	21		$	10		$	50		$	206		$	(8	)
	Average pay rate (fixed)			5.10	%		—			5.24	%		5.26	%		3.93	%		5.07	%		5.07	%
	Average receive rate (floating)			1.88	%		—			—			1.85	%		1.82	%		—			1.87	%
Swaps			$	50			—			—			—			—			—		$	50			*
	Average pay rate (floating)			1.86	%		—			—			—			—			—			1.86	%
	Average receive rate (floating)			1.96	%		—			—			—			—			—			1.96	%
Caps:
	Purchased			—			—		$	9			—			—			—		$	9			*
		Weighted average strike price		—			—			4.00	%		—			—			—			4.00	%
	Written			—			—		$	(9	)		—			—			—		$	(9	)		*
		Weighted average strike price		—			—			4.00	%		—			—			—			4.00	%
Equity options purchased			$	2			—			—			—			—			—		$	2			*
		Weighted average strike price	$	1,117			—			—			—			—			—		$	1,117

*Amount is less than $500,000

39

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. First Tennessee’s chief executive officer and chief financial officer have evaluated the effectiveness of the design and operation of First Tennessee’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c)) as of a date within 90 days of the filing date of this quarterly report. Based on that evaluation, the chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to First Tennessee and First Tennessee’s consolidated subsidiaries is made known to such officers by others within these entities, particularly during the period this quarterly report was prepared, in order to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There have not been any significant changes in First Tennessee’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

40

Part II.
 
OTHER INFORMATION

Items 1, 2, 3, 4 and 5

As of the end of the third quarter, 2002, the answers to Items 1, 2, 3, 4 and 5 were either inapplicable or negative, and therefore, these items are omitted.

Item 6     Exhibits and Reports on Form 8-K.

(a)  Exhibits.

Exhibit No.	Description
3(ii)	Bylaws of the Corporation, as amended and restated
4	Instruments defining the rights of security holders, including indentures*
10(c)	1997 Employee Stock Option Plan, as amended and restated**
99(c)	The “Risk Management-Interest Rate Risk Management” subsection of the Management’s Discussion and Analysis section and the “Interest Rate Risk Management” subsection of Note 1 to the Corporation’s consolidated financial statements, contained, respectively, at pages F-27 - F-31 and pages F-52 - F-53, in the financial appendix to the Corporation’s Proxy Statement furnished to shareholders in connection with the Annual Meeting of Shareholders on April 16, 2002, filed March 18, 2002, and incorporated herein by reference.

*	The Corporation agrees to furnish copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries to the Securities and Exchange Commission upon request.
**	This is a management contract or compensatory plan required to be filed as an exhibit.

(b)  Reports on Form 8-K.

A report on Form 8-K was filed on July 17, 2002 (with a Date of Report of July 16, 2002) disclosing under Item 5 the appointment of J. Kenneth Glass as Chief Executive Officer of the Corporation.

A report on Form 8-K was furnished on August 12, 2002, disclosing under Item 9 that the Corporation was furnishing as exhibits officer certifications under section 906 of the Sarbanes-Oxley Act of 2002 and statements under oath pursuant to the SEC’s 6-27-02 Order.

41

SIGNATURES

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

	FIRST TENNESSEE NATIONAL CORPORATION (Registrant)
DATE: 11/12/02	By:	/s/ Elbert L. Thomas, Jr.
		Elbert L. Thomas, Jr. Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

42

FIRST TENNESSEE NATIONAL CORPORATION
SECTION 302 CERTIFICATIONS
(QUARTERLY REPORT)

CERTIFICATIONS

I, J. Kenneth Glass, the President and Chief Executive Officer of First Tennessee National Corporation, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Tennessee National Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date     November 12, 2002

/s/ J. Kenneth Glass

J. Kenneth Glass
President and Chief Executive Officer

43

I, Elbert L. Thomas, Jr., Executive Vice President and Chief Financial Officer of First Tennessee National Corporation, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Tennessee National Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date     November 12, 2002

/s/Elbert L. Thomas, Jr.

Elbert L. Thomas, Jr.
Executive Vice President and Chief Financial Officer

44

EXHIBIT INDEX

Exhibit No.	Description
3(ii)	Bylaws of the Corporation, as amended and restated
4	Instruments defining the rights of security holders, including indentures*
10(c)	1997 Employee Stock Option Plan, as amended and restated**
99(c)	The “Risk Management-Interest Rate Risk Management” subsection of the Management’s Discussion and Analysis section and the “Interest Rate Risk Management” subsection of Note 1 to the Corporation’s consolidated financial statements, contained, respectively, at pages F-27 - F-31 and pages F-52 - F-53, in the financial appendix to the Corporation’s Proxy Statement furnished to shareholders in connection with the Annual Meeting of Shareholders on April 16, 2002, filed March 18, 2002, and incorporated herein by reference.

*	The Corporation agrees to furnish copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries to the Securities and Exchange Commission upon request.
**	This is a management contract or compensatory plan required to be filed as an exhibit.

45 EX-3.II 3 g79009exv3wii.txt BYLAWS OF THE CORPORATION, AS AMENDED AND RESTATED EXHIBIT 3(ii) BYLAWS OF FIRST TENNESSEE NATIONAL CORPORATION (AS AMENDED AND RESTATED OCTOBER 15, 2002) ARTICLE ONE OFFICES 1.1 PRINCIPAL OFFICE. The principal office of First Tennessee National Corporation (the "Corporation") shall be 165 Madison Avenue, Memphis, Tennessee. 1.2 OTHER OFFICES. The Corporation may have offices at such other places, either within or without the State of Tennessee, as the Board of Directors may from time to time designate or as the business of the Corporation may from time to time require. 1.3 REGISTERED OFFICE. The registered office of the Corporation required to be maintained in the State of Tennessee shall be the same as its principal office and may be changed from time to time as provided by law. ARTICLE TWO SHAREHOLDERS 2.1 PLACE OF MEETINGS. Meetings of the shareholders of the Corporation may be held either in the State of Tennessee or elsewhere; but in the absence of notice to the contrary, shareholders' meetings shall be held at the principal office of the Corporation in Memphis, Tennessee. 2.2 QUORUM AND ADJOURNMENTS. The holders of a majority of the shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite, and shall constitute a quorum at all meetings of the shareholders, for the transaction of business, except as otherwise provided by law, the Restated Charter of the Corporation, as amended from time to time (the "Charter), or these Bylaws. In the event a quorum is not obtained at the meeting, the holders of a majority of the shares entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time and, whether or not a quorum is obtained at the meeting, the Chairman of the meeting shall have the power to adjourn the meeting from time to time, in either case without notice, except as otherwise provided by law, other than announcement at the meeting. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. 2.3 NOTICE OF MEETINGS. Unless otherwise required by applicable law, written notice of the annual and each special meeting stating the date, time and place of the meeting shall be mailed, postage prepaid, or otherwise delivered to each shareholder entitled to vote thereat at such address as appears on the records of shareholders of the Corporation, at least ten (10) days, but not more than two (2) months, prior to the meeting date. In addition, notice of any special meeting shall state the purpose or purposes for which the meeting is called and the person or persons calling the meeting. In the event of an adjournment of a meeting to a date more than four months after the date fixed for the original meeting or the Board of Directors fixes a new record date for the adjourned meeting, a new notice of the adjourned meeting must be given to shareholders as of the new record date. Any previously scheduled meeting may be postponed, and any special meeting may be canceled, by resolution of the Board of Directors upon public notice given prior to the date scheduled for such meeting. 2.4 ANNUAL MEETINGS. The annual meeting of shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on the third Tuesday in April, or if that day is a legal holiday, on the next succeeding business day not a legal holiday, at 10:00 a.m. Memphis time or on such other date and/or at such other time as the Board of Directors may fix by resolution by vote of a majority 1 of the entire Board of Directors. At the meeting, the shareholders shall elect by ballot, by plurality vote, directors to succeed directors in the class of directors whose term expires at the meeting and directors elected by the Board of Directors to fill vacancies in other classes of directors and may transact such other business as may properly come before the meeting. 2.5 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by Chairman of the Board and shall be called by the Chairman of the Board or the Secretary at the request in writing of a majority of the Board of Directors. Only such business within the purpose or purposes described in the notice of the meeting may be conducted at the meeting. 2.6 WAIVER OF NOTICE. Any shareholder may waive in writing notice of any meeting either before, at or after the meeting. Attendance by a shareholder in person or by proxy at a meeting shall constitute a waiver of objection to lack of notice or defective notice and a waiver of objection to consideration of a matter that was not described in the meeting notice unless the shareholder objects in the manner required by law. 2.7 VOTING. Unless otherwise required by the Charter, at each meeting of shareholders, each shareholder shall have one vote for each share of stock having voting power registered in the shareholder's name on the records of the Corporation on the record date for that meeting, and every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by instrument in writing or any other method permitted by law. 2.8 PROCEDURES FOR BRINGING BUSINESS BEFORE SHAREHOLDER MEETING. At an annual or special meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before an annual or special meeting of shareholders. To be properly brought before an annual or special meeting of shareholders, business must be (i) in the case of a special meeting called by the Chairman of the Board or at the request of the Board of Directors, specified in the notice of the special meeting (or any supplement thereto), or (ii) in the case of an annual meeting properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the annual or special meeting by a shareholder. For business to be properly brought before such a meeting of shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of the meeting; provided, however, that if fewer than 100 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholders to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before a meeting of shareholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business and any other shareholders known by such shareholder to be supporting such proposal, (iii) the class and number of shares of the Corporation which are beneficially owned by such shareholder on the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder's notice, and (iv) any material interest of the shareholder in such proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting of shareholders except in accordance with the procedures set forth in this Section 2.8. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the procedures prescribed by these Bylaws, and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 2.9 SEC PROXY RULES. In addition to complying with the provisions of Section 2.8, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder with respect to the matters set forth in Section 2.8. Nothing in Section 2.8 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to rules of the Securities and Exchange Commission. For such proposals to be acted upon at a meeting, however, compliance with the notice provisions of Section 2.8 is also required. 2 ARTICLE THREE DIRECTORS 3.1 POWERS OF DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of and all corporate powers shall be exercised by or under the authority of the Board of Directors. 3.2 NUMBER AND QUALIFICATIONS. The Board of Directors shall consist of eleven members. The Board of Directors has the power to change from time to time the number of directors specified in the preceding sentence. Any such change in the number of directors constituting the Corporation's Board Directors must be made exclusively by means of an amendment to these Bylaws adopted by a majority of the entire Board of Directors then in office. Directors need not be shareholders of the Corporation nor residents of the State of Tennessee. 3.3 TERM OF OFFICE. Except as otherwise provided by law or by the Charter, the term of each director hereafter elected shall be from the time of his or her election and qualification until the third annual meeting next following such election and until a successor shall have been duly elected and qualified; subject, however, to the right of the removal of any director as provided by law, by the Charter or by these Bylaws. 3.4 COMPENSATION. The directors shall be paid for their services on the Board of Directors and on any Committee thereof such compensation (which may include cash, shares of stock of the Corporation and options thereon) and benefits together with reasonable expenses, if any, at such times as may, from time to time, be determined by resolution adopted by a majority of the entire Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and being compensated therefor. 3.5 COMMITTEES. The directors, by resolution adopted by a majority of the entire Board of Directors, may designate an executive committee and other committees, consisting of two or more directors, and may delegate to such committee or committees all such authority of the Board of Directors that it deems desirable, including, without limitation, authority to appoint corporate officers, fix their salaries, and, to the extent such is not provided by law, the Charter or these Bylaws, to establish their authority and responsibility, except that no such committee or committees shall have and exercise the authority of the Board of Directors to: (a) authorize distributions (which include dividend declarations), except according to a formula or method prescribed by the Board of Directors, (b) fill vacancies on the Board of Directors or on any of its committees, (c) adopt, amend or repeal bylaws, (d) authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the Board of Directors, or (e) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee to do so within limits specifically prescribed by the Board of Directors. 3.6 PROCEDURES FOR DIRECTOR NOMINATIONS. Except as provided in Section 3.7 with respect to vacancies on the Board of Directors, only persons nominated in accordance with the procedures set forth in this Section 3.6 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of shareholders (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 3.6. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of a meeting; provided, however, that if fewer than 100 days' notice or prior public 3 disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the Corporation which are beneficially owned by such person on the date of such shareholder's notice and (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or, is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice (a) the name and address, as they appear on the Corporation's books, of such shareholder and any other shareholders known by such shareholder to be supporting such nominees and (b) the class and number of shares of the Corporation which are beneficially owned by such shareholder on the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such nominees on the date of such shareholder's notice. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.6. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the Chairman should so determine, the Chairman shall so declare to the meeting and the defective nomination shall be disregarded. 3.7 VACANCIES; REMOVAL FROM OFFICE. Except as otherwise provided by law or by the Charter, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification or any other cause (except removal from office) shall be filled only by the Board of Directors, provided that a quorum is then in office and present, or only by a majority of the directors then in office, if less than a quorum is then in office or by the sole remaining director. Any vacancies on the Board of Directors resulting from removal from office may be filled by the affirmative vote of the holders of at least a majority of the voting power of all outstanding voting stock or, if the shareholders do not so fill such a vacancy, by a majority of the directors then in office. Directors elected to fill a newly created directorship or other vacancy shall hold office for a term expiring at the next shareholders' meeting at which directors are elected and until such director's successor has been duly elected and qualified. The directors of any class of directors of the Corporation may be removed by the shareholders only for cause by the affirmative vote of the holders of at least a majority of the voting power of all outstanding voting stock. 3.8 PLACE OF MEETINGS. The directors may hold meetings of the Board of Directors or of a committee thereof at the principal office of the Corporation in Memphis, Tennessee, or at such other place or places, either in the State of Tennessee or elsewhere, as the Board of Directors or the members of the committee, as applicable, may from time to time determine by resolution or by written consent or as may be specified in the notice of the meeting. 3.9 QUORUM. A majority of the directors shall constitute a quorum for the transaction of business, but a smaller number may adjourn from time to time, without further notice, if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken and if the period of adjournment does not exceed thirty (30) days in any one (1) adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the vote of a greater number is required by law, the Charter, or these Bylaws. 3.10 REGULAR MEETINGS. Following each annual meeting of shareholders, the newly elected directors, together with the incumbent directors whose terms do not expire at such meeting, shall meet for the purpose of organization, the appointment of officers and the transaction of other business, and, if a majority of the directors be present at such place, day and hour, no prior notice of such meeting shall be required to be given to the directors. The place, day and hour of such meeting may also be fixed by resolution or by written consent of the directors. In addition, the Board of Directors may approve an annual schedule for additional regular meetings of the Board of Directors and of committees thereof. 4 3.11 SPECIAL MEETINGS. Special meetings of the directors may be called by the Chairman of the Board, the Chief Executive Officer, or the President (or as to any committee of the Board of Directors, by the person or persons specified in the resolution of the Board of Directors establishing the committee) on two days' notice by mail or on one day's notice by telegram or cablegram, or on two hours' notice given personally or by telephone or facsimile transmission to each director (or member of the committee, as appropriate), and shall be called by the Chairman of the Board or Secretary in like manner on the written request of a majority of directors then in office. The notice shall state the day and hour of the meeting and the place where the meeting is to be held. Special meetings of the directors may be held at any time on written waiver of notice or by consent of all the directors, either of which may be given either before, at or after the meeting. 3.12 ACTION WITHOUT A MEETING. The directors may (whether acting in lieu of a meeting of the Board of Directors or of a committee thereof) take action which they are required or permitted to take, without a meeting, on written consent setting forth the action so taken, signed by all of the directors entitled to vote thereon. If all the directors entitled to vote consent to taking such action without a meeting, the affirmative vote of the number of directors necessary to authorize or take such action at a meeting is the act of the Board of Directors or committee, as appropriate. 3.13 TELEPHONE MEETINGS. Directors may participate in a meeting of the Board of Directors or of a committee thereof by, or conduct a meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director so participating is deemed to be present in person at such meeting. ARTICLE FOUR OFFICERS 4.1 DESIGNATED OFFICERS. The officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, such number of Vice Chairmen as the Board may from time to time determine and appoint, an Auditor, a Chief Credit Officer, a Chief Financial Officer, a Controller, a General Counsel, a Manager of Risk Management, an Executive Vice President-Employee Services, a President-Business Financial Services, a President-Retail Financial Services, a Secretary, and a Treasurer, and such number of Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents and such other Officers and assistant Officers as may be from time to time determined and appointed in accordance with the provisions of this Article Four. The title of any officer may include any additional descriptive designation determined to be appropriate. Any person may hold two or more offices, except that the President shall not also be the Secretary or an Assistant Secretary. The officers, other than the Chairman of the Board, need not be directors, and officers need not be shareholders. 4.2 APPOINTMENT OF OFFICERS. Except as otherwise provided in this Section 4.2, the officers of the Corporation shall be appointed by the Board of Directors at the annual organizational meeting of the Board of Directors following the annual meeting of shareholders. The Board of Directors may delegate to a committee of the Board of Directors the power to create corporate offices, define the authority and responsibility of such offices, except to the extent such authority or responsibility would not be consistent with the law or the Charter, and to appoint persons to any office of the Corporation except the offices of the Chairman of the Board, Chief Executive Officer, and President, any office the incumbent in which is designated by the Board as an Executive Officer (as defined in Section 4.5 hereof), and, upon the recommendation of the Audit Committee, the Auditor. In addition, the Board of Directors may delegate to the officers appointed to the Corporation's personnel committee, acting as a committee, the authority to appoint persons to any offices of the Corporation of the level of Vice President and below annually at the personnel committee meeting following the annual meeting of shareholders and to appoint persons to any office of the Corporation of the level of Executive Vice President and below during the period of time between the annual appointment of officers by the Board of Directors or pursuant to this section 4.2 of the Bylaws. Notwithstanding the delegation of authority pursuant to this section 4.2 of the Bylaws, the Board of Directors retains the authority to appoint all officers and such other officers and agents as it shall deem necessary, who shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. 5 4.3 TERM. The officers of the Corporation shall be appointed for a term of one (1) year and until their successors are appointed and qualified, subject to the right of removal specified in Section 4.4 of these Bylaws. The designation of a specified term does not grant to any officer any contract rights. 4.4 VACANCIES, RESIGNATIONS AND REMOVAL. If the office of any officer or officers becomes vacant for any reason, the vacancy may be filled by the Board of Directors or, if such officer was appointed by a committee, by the committee appointing such officer. Any officer may resign at any time by delivering a written notice to the Chairman of the Board, Chief Executive Officer, President, Secretary, or Executive Vice President-Employee Services of the Corporation, or the designee of any of them, which shall be effective upon delivery unless it specifies a later date acceptable to the Corporation. Any officer designated by the Board as an Executive Officer shall be subject to removal at any time with or without cause only by the affirmative vote of a majority of the Board of Directors. The Auditor shall be subject to removal at any time with or without cause only by the affirmative vote of a majority of the Board of Directors, upon the recommendation of the Audit Committee. Any other officer shall be subject to removal at any time with or without cause by the affirmative vote of a majority of the Board of Directors, and in the event the officer was, or could have been, appointed by a committee, then by the affirmative vote of a majority of either such committee or the Board of Directors. 4.5 COMPENSATION. The Board of Directors, or a committee thereof, shall fix the compensation of Executive Officers (as defined herein) of the Corporation. "Executive Officers" shall be those officers of the Corporation identified as such from time to time in a resolution or resolutions of the Board of Directors. The compensation of officers who are not Executive Officers shall be fixed by the Board of Directors, by a committee thereof, or by management under such policies and procedures as shall be established by the Board of Directors or a committee thereof. 4.6 DELEGATION OF OFFICER DUTIES. In case of the absence of any officer of the Corporation, or for any reason that the Board of Directors (or, in addition, in the case of any officer appointed by a committee, such committee or any other committee which could appoint such officer pursuant to Section 4.2 of these Bylaws) may deem sufficient, the Board of Directors (or committee, as applicable) may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director. 4.7 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors and shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be assigned by the Board of Directors. If and at such times as the Board of Directors so determines, the Chairman of the Board may also serve as the Chief Executive Officer of the Corporation. 4.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors. The Chief Executive Officer shall be responsible for carrying out the orders of and the resolutions and policies adopted by the Board of Directors and shall have general management of the business of the Corporation and shall exercise general supervision over all of its affairs. In addition, the Chief Executive Officer shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors. If and at such time as the Board of Directors so determines, the Chief Executive Officer may also serve as the President of the Corporation. 4.9 PRESIDENT. The President, in the absence of the Chairman of the Board and the Chief Executive Officer, shall preside at all meetings of the shareholders and of the Board of Directors. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors has appointed another person to such office, in which case the President shall be the Chief Operating Officer of the Corporation and shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.10 VICE CHAIRMEN. Vice Chairmen shall perform such duties and exercise such powers as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 6 4.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the principal financial officer of the Corporation. The Chief Financial Officer is authorized to sign any document filed with the Securities and Exchange Commission or any state securities commission on behalf of the Corporation and shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.12 CHIEF CREDIT OFFICER. The Chief Credit Officer shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.13 GENERAL COUNSEL. The General Counsel shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.14 EXECUTIVE VICE PRESIDENT-EMPLOYEE SERVICES. The Executive Vice President-Employee Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.15 PRESIDENT-BUSINESS FINANCIAL SERVICES. The President-Business Financial Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.16 PRESIDENT-RETAIL FINANCIAL SERVICES. The President-Retail Financial Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.17 MANAGER OF RISK MANAGEMENT. The Manager of Risk Management shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.18 SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall perform such duties and exercise such powers as may be prescribed by the Board of Directors, a committee thereof, the personnel committee, the Chairman of the Board, or the Chief Executive Officer. 4.19 SECRETARY. The Secretary shall attend all sessions of the Board of Directors and of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose. The Secretary shall give or cause to be given notice of all meetings of the shareholders and of the Board of Directors, shall authenticate records of the Corporation, and shall perform such other duties as are incident to the office or as may be prescribed by the Board of Directors, the Chairman of the Board or the Chief Executive Officer. In the absence or disability of the Secretary, the Assistant Secretary or such other officer or officers as may be authorized by the Board of Directors or Executive Committee thereof shall perform all the duties and exercise all of the powers of the Secretary and shall perform such other duties as the Board of Directors, Chairman of the Board or the Chief Executive Officer shall prescribe. 4.20 TREASURER. The Treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, or the President, taking proper vouchers for such disbursements, and shall render to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, or the President, whenever they may require it, an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation, and at a regular meeting of the Board of Directors preceding the annual shareholders' meeting, a like report for the preceding year. The Treasurer shall keep or cause to be kept an account of stock registered and transferred in such manner and subject to such 7 regulations as the Board of Directors may prescribe. The Treasurer shall give the Corporation a bond, if required by the Board of Directors, in such a sum and in form and with security satisfactory to the Board of Directors for the faithful performance of the duties of the office and the restoration to the Corporation, in case of his or her death, resignation or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession, belonging to the Corporation. The Treasurer shall perform such other duties as the Board of Directors may from time to time prescribe or require. In the absence or disability of the Treasurer, the Assistant Treasurer shall perform all the duties and exercise all of the powers of the Treasurer and shall perform such other duties as the Board of Directors, the Chairman of the Board, or the Chief Executive Officer shall prescribe. 4.21 AUDITOR. The Auditor shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors or the Chairman of the Audit Committee. 4.22 CONTROLLER. The Controller shall be the principal accounting officer of the Corporation. The Controller is authorized to sign any document filed with the Securities and Exchange Commission or any state securities commission on behalf of the Corporation and shall assist the management of the Corporation in setting the financial goals and policies of the Corporation, shall provide financial and statistical information to the shareholders and to the management of the Corporation and shall perform such other duties and exercise such other powers as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. In the absence or disability of the Controller, the Assistant Controller shall perform all the duties and exercise all powers of the Controller and shall perform such duties as the Board of Directors or the Chairman of the Board or the Chief Executive Officer shall prescribe. 4.23 OTHER OFFICERS. Officers holding such other offices as may be created pursuant to Sections 4.1 and 4.2 of these Bylaws shall have such authority and perform such duties and exercise such powers as may be prescribed by the Board of Directors, a committee thereof, the personnel committee, the Chairman of the Board or the Chief Executive Officer. 4.24 OFFICER COMMITTEES. The directors, by resolution adopted by a majority of the entire Board of Directors, may designate one or more committees, consisting of two or more officers, and may delegate to such committee or committees all such authority that the Board of Directors deems desirable that is permitted by law. Members of such committees may take action without a meeting and may participate in meetings to the same extent and in the same manner that directors may take action and may participate pursuant to Sections 3.12 and 3.13 of these Bylaws. ARTICLE FIVE SHARES OF STOCK 5.1 CERTIFICATES. The certificates representing shares of stock of the Corporation shall be numbered, shall be entered in the books or records of the Corporation as they are issued, and shall be signed by the Chairman of the Board or the Chief Executive Officer and any one of the following: the President, the Treasurer, or the Secretary. Either or both of the signatures upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar other than an officer or employee of the Corporation. Each certificate shall include the following upon the face thereof: (a) A statement that the Corporation is organized under the laws of the State of Tennessee; (b) The name of the Corporation; (c) The name of the person to whom issued; (d) The number and class of shares, and the designation of the series, if any, which such certificate represents; 8 (e) The par value of each share represented by such certificate; or a statement that the shares are without par value; and (f) Such other provisions as the Board of Directors may from time to time require. 5.2 SHARES NOT REPRESENTED BY CERTIFICATES. Notwithstanding the provisions of Section 5.1 of these Bylaws, the Board of Directors may authorize the issuance of some or all of the shares of any class without certificates. The Corporation shall send to each shareholder to whom such shares have been issued or transferred at the appropriate time any written statement providing information about such shares, which is required by law. 5.3 STOCK TRANSFERS AND RECORD DATES. Transfers of shares of stock shall be made upon the books of the Corporation by the record owner or by an attorney, lawfully constituted in writing, and upon surrender of any certificate therefor. The Board of Directors may appoint suitable agents in Memphis, Tennessee, and elsewhere to facilitate transfers by shareholders under such regulations as the Board of Directors may from time to time prescribe. The transfer books may be closed by the Board of Directors for such period, not to exceed 40 days, as may be deemed advisable for dividend or other purposes, or in lieu of closing the books, the Board of Directors may fix in advance a date as the record date for determining shareholders entitled notice of and to vote at a meeting of shareholders, or entitled to payment of any dividend or other distribution. The record date for voting or taking other action as shareholders shall not be less than 10 days nor more than 70 days prior to the meeting date or action requiring such determination of shareholders. The record date for dividends and other distributions shall not be less than 10 days prior to the payment date of the dividend or other distribution. All certificates surrendered to the Corporation for transfer shall be canceled, and no new certificate shall be issued until the former certificate for like number of shares shall have been surrendered and canceled, except that in case of a lost or destroyed certificate a new one may be issued on the terms prescribed by Section 5.5 of these Bylaws. 5.4 RECORD OWNERS. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof; and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by applicable law. 5.5 LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES. The agent for transfer of the Corporation's stock may issue new share certificates in place of certificates represented to have been lost, destroyed, stolen or mutilated upon receiving an indemnity satisfactory to the agent and the Secretary or Treasurer of the Corporation, without further action of the Board of Directors. ARTICLE SIX INDEMNIFICATION 6.1 INDEMNIFICATION OF OFFICERS WHEN WHOLLY SUCCESSFUL. If any current or former officer of the Corporation [including for purposes of this Article an individual who, while an officer, is or was serving another corporation or other enterprise (including an employee benefit plan and a political action committee, which serves the interests of the employees of the Corporation or any of its subsidiaries) in any capacity at the request of the Corporation and unless the context requires otherwise the estate or personal representative of such officer] is wholly successful, on the merits or otherwise, in the defense of any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal ("Proceeding"), to which the officer was a party because he or she is or was an officer of the Corporation, the officer shall be indemnified by the Corporation against all reasonable expenses, including attorney fees, incurred in connection with such Proceeding, or any appeal therein. 6.2 INDEMNIFICATION OF OFFICERS WHEN NOT WHOLLY SUCCESSFUL. If any current or former officer of the Corporation has not been wholly successful on the merits or otherwise, in the defense of a Proceeding, to which the officer was or was threatened to be made a party because he or she was or is an officer, the officer shall be indemnified by the Corporation against any judgment, settlement, penalty, fine (including any excise tax assessed with respect to an employee benefit plan), or other liability and any reasonable expenses, including attorney fees, incurred as a result of 9 such Proceeding, or any appeal therein, if authorized in the specific case after a determination has been made that indemnification is permissible because the following standard of conduct has been met: (a) The officer conducted himself or herself in good faith, and (b) The officer reasonably believed: (i) in the case of conduct in the officer's official capacity as an officer of the Corporation that the officer's conduct was in the Corporation's best interest; and (ii) in all other cases that the officer's conduct was at least not opposed to its best interests; and (c) In the case of any criminal proceeding, the officer had no reasonable cause to believe his or her conduct was unlawful; provided, however, the Corporation may not indemnify an officer in connection with a Proceeding by or in the right of the Corporation in which the officer was adjudged liable to the Corporation or in connection with any other proceeding charging improper benefit to the officer, whether or not involving action in his or her official capacity, in which the officer was adjudged liable on the basis that personal benefit was improperly received by the officer. 6.3 PROCEDURES FOR INDEMNIFICATION DETERMINATIONS. The determination required by Section 6.2 herein shall be made as follows: (a) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the Proceeding; (b) If a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate) consisting solely of two or more directors not at the time parties to the Proceeding; (c) By independent special legal counsel: (i) selected by the Board of Directors or its committee in the manner prescribed in subsection (a) or (b); or (ii) if a quorum of the Board of Directors cannot be obtained under subsection (a) and a committee cannot be designated under subsection (b), selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or, if a determination pursuant to subsections (a), (b), or (c) of this Section 6.3 cannot be obtained, then (d) By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the Proceeding may not be voted on the determination. 6.4 SERVING AT THE REQUEST OF THE CORPORATION. An officer of the Corporation shall be deemed to be serving another corporation or other enterprise or employee benefit plan or political action committee at the request of the Corporation only if such request is reflected in the records of the Board of Directors or a committee appointed by the Board of Directors for the purpose of making such requests. Approval by the Board of Directors, or a committee thereof, may occur before or after commencement of such service by the officer. 6.5 ADVANCEMENT OF EXPENSES. The Corporation shall pay for or reimburse reasonable expenses, including attorney fees, incurred by an officer who is a party to a Proceeding in advance of the final disposition of the Proceeding if: (a) The officer furnishes to the Corporation a written affirmation of the officer's good faith belief that the officer has met the standard of conduct described in Section 6.2 herein; (b) The officer furnishes to the Corporation a written undertaking, executed personally or on behalf of the officer, to repay the advance if it is ultimately determined that the officer is not entitled to indemnification; and 10 (c) A determination is made that the facts then known to those making the determination would not preclude indemnification under this bylaw. 6.6 UNDERTAKING REQUIRED FOR EXPENSES. The undertaking required by Section 6.5 herein must be an unlimited general obligation of the officer but need not be secured and may be accepted without reference to financial ability to make repayment. 6.7 PROCEDURES FOR EXPENSE DETERMINATIONS. Determinations and authorizations of payments under Section 6.5 herein shall be made in the same manner as is specified in Section 6.3 herein. 6.8 INDEMNIFICATION OF EMPLOYEES AND FORMER DIRECTORS. Every employee and every former director of the Corporation shall be indemnified by the Corporation to the same extent as officers of the Corporation. 6.9 NONEXCLUSIVITY OF RIGHT OF INDEMNIFICATION. The right of indemnification set forth above shall not be deemed exclusive of any other rights, including, but not limited to, rights created pursuant to Section 6.11 of these Bylaws, to which an officer, employee, or former director seeking indemnification may be entitled. No combination of rights shall permit any officer, employee or former director of the Corporation to receive a double or greater recovery. 6.10 MANDATORY INDEMNIFICATION OF DIRECTORS AND DESIGNATED OFFICERS. The Corporation shall indemnify each of its directors and such of the non-director officers of the Corporation or any of its subsidiaries as the Board of Directors may designate, and shall advance expenses, including attorney's fees, to each director and such designated officers, to the maximum extent permitted (or not prohibited) by law, and in accordance with the foregoing, the Board of Directors is expressly authorized to enter into individual indemnity agreements on behalf of the Corporation with each director and such designated officers which provide for such indemnification and expense advancement and to adopt resolutions which provide for such indemnification and expense advancement. 6.11 INSURANCE. Notwithstanding anything in this Article Six to the contrary, the Corporation shall have the additional power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or who, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, political action committee, or other enterprise, against liability asserted against or incurred by the person in that capacity or arising from the person's status as a director, officer, employee, or agent, whether or not the Corporation would have the power to indemnify the person against the same liability. ARTICLE SEVEN RETIREMENT 7.1 NON-EMPLOYEE DIRECTORS. Directors who are not also officers of the Corporation or its affiliates shall be retired from the Board of Directors as follows: (a) Any director who shall attain the age of sixty-five (65) on or before the last day of the term for which he or she was elected shall not be nominated for re-election and shall be retired from the Board of Directors at the expiration of such term; provided, however, any director first elected to the Board of Directors prior to April 17, 1996, may serve a minimum of two three-year terms. (b) For the purpose of maintaining boards of active business and professional persons, directors leaving the occupation or the position held at their last election (by retirement or otherwise) will be expected to tender their resignation from the Board of Directors upon such occasion. A resignation will ordinarily be accepted unless (i) the director assumes another position deemed appropriate by the Board of Directors for continuation, or (ii) the director is so engaged in some specific project for the Board of Directors as to make his or her resignation detrimental to the Corporation. Under this circumstance, the Board of Directors may elect to set a subsequent date for his or her retirement to coincide with the completion of the project. 11 Directors who are also officers of the Corporation or any of its affiliates will be retired from the Board of Directors on the date of the annual meeting coincident with or next following the date of the director's retirement from or other discontinuation of active service with the Corporation and its affiliates. 7.2 OFFICERS AND EMPLOYEES. Except as provided in the following sentence, the Corporation has no compulsory retirement age for its officers or employees. Each officer or employee who has attained 65 years of age and who, for the two-year period immediately before attaining such age, has been employed in a "bona fide executive" or a "high policy-making" position as those terms are used and defined in the Age Discrimination in Employment Act, Section 12(c), and the regulations relating to that section prescribed by the Equal Employment Opportunity Commission, all as amended from time to time (collectively, the "ADEA"), shall automatically be terminated by way of compulsory retirement and his or her salary discontinued on the first day of the month coincident with or immediately following the 65th birthday, provided such employee is entitled to an immediate nonforfeitable annual retirement benefit, as specified in the ADEA, in the aggregate amount of at least $44,000. Notwithstanding the prior sentence, the Board of Directors, in its discretion, may continue any such officer or employee in service and designate the capacity in which he or she shall serve, and shall fix the remuneration he or she shall receive. The Board of Directors may also re-employ any former officer who had theretofore been retired. ARTICLE EIGHT EXECUTION OF DOCUMENTS 8.1 DEFINITION OF "DOCUMENT." For purposes of this Article Eight of the Bylaws, the term "document" shall mean a document of any type, including, but not limited to, an agreement, contract, instrument, power of attorney, endorsement, assignment, transfer, stock or bond power, deed, mortgage, deed of trust, lease, indenture, conveyance, proxy, waiver, consent, certificate, declaration, receipt, discharge, release, satisfaction, settlement, schedule, account, affidavit, security, bill, acceptance, bond, undertaking, check, note or other evidence of indebtedness, draft, guaranty, letter of credit, and order. 8.2 EXECUTION OF DOCUMENTS. Except as expressly provided in Section 5.1 of these Bylaws (with respect to signatures on certificates representing shares of stock of the Corporation), the Chairman of the Board, the Chief Executive Officer, the President, any Vice Chairman, any Senior Executive Vice President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Chief Credit Officer, the General Counsel, the Executive Vice President-Employee Services, the President - Retail Financial Services, the President - Business Financial Services, the Manager of Risk Management, the Controller, the Treasurer, the Secretary, and any other officer, or any of them acting individually, may (i) execute and deliver in the name and on behalf of the Corporation or in the name and on behalf of any division or department of the Corporation any document pertaining to the business, affairs, or property of the Corporation or any division or department of the Corporation, and (ii) delegate to any other officer, employee or agent of the Corporation the power to execute and deliver any such document. 8.3 METHOD OF EXECUTION BY SECRETARY. Unless otherwise required by law, the signature of the Secretary on any document may be a facsimile. ARTICLE NINE EMERGENCY BYLAWS 9.1 DEFINITION OF EMERGENCY. The provisions of this Article Nine shall be effective only during an "emergency." An "emergency" shall be deemed to exist whenever any two of the officers identified in Section 9.2 of these Bylaws in good faith determine that a quorum of the directors cannot readily be assembled because of a catastrophic event. 9.2 NOTICE OF MEETING. A meeting of the Board of Directors may be called by any one director or by any one of the following officers: Chairman of the Board, Chief Executive Officer, President, any Vice Chairman, any Senior Executive Vice President, any Senior Executive Vice President, any Executive Vice President, Chief Credit Officer, Chief Financial Officer, Controller, General Counsel, Manager of Risk Management, Executive Vice President-Employee 12 Services, President-Business Financial Services, President-Retail Financial Services, or Secretary. Notice of such meeting need be given only to those directors whom it is practical to reach by any means the person calling the meeting deems feasible, including, but not limited to, by publication and radio. Such notice shall be given at least two hours prior to commencement of the meeting. 9.3 QUORUM AND SUBSTITUTE DIRECTORS.. If a quorum has not been obtained, then one or more officers of the Corporation or the Bank present at the emergency meeting of the Board of Directors, as are necessary to achieve a quorum, shall be considered to be substitute directors for purposes of the meeting, and shall serve in order of rank, and within the same rank in order of seniority determined by hire date by the Corporation, the Bank or any of their subsidiaries. In the event that less than a quorum of the directors (including any officers who serve as substitute directors for the meeting) are present, those directors present (including such officers serving as substitute directors) shall constitute a quorum. 9.4 ACTION AT MEETING. The Board as constituted pursuant to Section 9.3 and after notice has been provided pursuant to Section 9.2 may take any of the following actions: (i) prescribe emergency powers of the Corporation, (ii) delegate to any officer or director any of the powers of the Board of Directors, (iii) designate lines of succession of officers and agents in the event that any of them are unable to discharge their duties, (iv) relocate the principal office or designate alternative or multiple principal offices, and (v) take any other action that is convenient, helpful, or necessary to carry on the business of the Corporation. 9.5 EFFECTIVENESS OF NON-EMERGENCY BYLAWS. All provisions of these Bylaws not contained in this Article Nine, which are consistent with the emergency bylaws contained in Article Nine, shall remain effective during the emergency. 9.6 TERMINATION OF EMERGENCY. Any emergency causing this Article Nine to become operative shall be deemed to be terminated whenever either of the following conditions is met: (i) the directors and any substitute directors determine by a majority vote at a meeting that the emergency is over or (ii) a majority of the directors elected pursuant to the provisions of these Bylaws other than this Article Nine hold a meeting and determine that the emergency is over. 9.7 ACTION TAKEN IN GOOD FAITH. Any corporate action taken in good faith in accordance with the provisions of this Article Nine binds the Corporation and may not be used to impose liability on any director, substitute director, officer, employee or agent of the Corporation. ARTICLE TEN MISCELLANEOUS PROVISIONS 10.1 FISCAL YEAR. The Board of Directors of the Corporation shall have authority from time to time to determine whether the Corporation shall operate upon a calendar year basis or upon a fiscal year basis, and if the latter, said Board of Directors shall have power to determine when the said fiscal year shall begin and end. 10.2 DIVIDENDS. Dividends on the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting pursuant to law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall think conducive to the interest of the Corporation. 10.3 SEAL. This Corporation shall have a Corporate Seal which shall consist of an imprint of the name of the Corporation, the state of its incorporation, the year of incorporation and the words "Corporate Seal." The Corporate Seal shall not be required to establish the validity or authenticity of any document executed in the name and on behalf of the Corporation. 13 10.4 NOTICES. Whenever notice is required to be given to any director, officer or shareholder under any of the provisions of the law, the Charter, or these Bylaws (except for notice required by Sections 2.8 and 3.6 of these Bylaws), it shall not be construed to require personal notice, but such notice may be given in writing by depositing the same in the United States mail, postage prepaid, or by telegram, teletype, facsimile transmission or other form of wire, wireless, or other electronic communication or by private carrier addressed to such shareholder at such address as appears on the Corporation's current record of shareholders, and addressed to such director or officer at such address as appears on the records of the Corporation. If mailed as provided above, notice to a shareholder shall be deemed to be effective at the time when it is deposited in the mail. 10.5 BYLAW AMENDMENTS. The Board of Directors shall have power to make, amend and repeal the Bylaws or any Bylaw of the Corporation by vote of not less than a majority of the directors then in office, at any regular or special meeting of the Board of Directors. The shareholders may make, amend and repeal the Bylaws or any Bylaw of this Corporation at any annual meeting or at a special meeting called for that purpose only by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock, and all Bylaws made by the directors may be amended or repealed by the shareholders only by the vote of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock. Without further authorization, at any time the Bylaws are amended, the Secretary is authorized to restate the Bylaws to reflect such amendment, and the Bylaws, as so restated, shall be the Bylaws of the Corporation. 14 EX-10.C 4 g79009exv10wc.txt 1997 EMPLOYEE STOCK OPTION PLAN,AMENDED & RESTATED EXHIBIT 10(C) FIRST TENNESSEE NATIONAL CORPORATION 1997 EMPLOYEE STOCK OPTION PLAN (Adopted 10-22-96, Amended and Restated 10-15-02) 1. PURPOSE. The 1997 Employee Stock Option Plan (the "Plan") of First Tennessee National Corporation and any successor thereto, (the "Company") is designed to enable employees of the Company and its subsidiaries to obtain a proprietary interest in the Company, and thus to share in the future success of the Company's business. Accordingly, the Plan is intended as a further means not only of attracting and retaining outstanding personnel, but also of promoting a closer identity of interest between employees and shareholders. 2. DEFINITIONS. As used in the Plan, the following terms shall have the respective meanings set forth below: (a) "Change in Control" means the occurrence of any one of the following events: (i) individuals who, on January 21, 1997, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 21, 1997, whose election or nomination for election was approved by a vote of at least three-fourths (3/4) of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual elected or nominated as a director of the Company initially as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; (ii) any "Person" (as defined under Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Section 13(d) or Section 14(d) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a change in control by virtue of any of the following acquisitions: (A) by the Company or any entity in which the Company directly or indirectly beneficially owns more than 50% of the voting securities or interests (a "Subsidiary"), (B) by an employee stock ownership or employee benefit plan or trust sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, or (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)); (iii) the shareholders of the Company approve a merger, consolidation, share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to the consummation of such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person 1 (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company's assets. Computations required by paragraph (iii) shall be made on and as of the date of shareholder approval and shall be based on reasonable assumptions that will result in the lowest percentage obtainable. Notwithstanding the foregoing, a change in control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a change in control of the Company shall then occur. (b) "Committee" means the Stock Option Committee or any successor committee designated by the Board of Directors to administer the Stock Option Plan, as provided in Section 5(a) hereof. (c) "Early Retirement" means termination of employment after an employee has fulfilled all service requirements for an early pension, and before his or her Normal Retirement Date, under the terms of the First Tennessee National Corporation Pension Plan, as amended from time to time. (d) "Quota" means the portion of the total number of shares subject to an option which the grantee of the option may purchase during the several periods of the term of the option (if the option is subject to quotas), as provided in Section 8(b) hereof. (e) "Retirement" means termination of employment after an employee has fulfilled all service requirements for a pension under the terms of the First Tennessee National Corporation Pension Plan, as amended from time to time. (f) "Subsidiary" means a subsidiary corporation as defined in Section 425 of the Internal Revenue Code. (g) "Successor" means the legal representative of the estate of a deceased grantee or the person or persons who shall acquire the right to exercise an option or related SAR by bequest or inheritance or by reason of the death of the grantee, as provided in Section 10 hereof. (h) "Term of the Option" means the period during which a particular option may be exercised, as provided in Section 8(a) hereof. (i) "Three months after cessation of employment" means a period of time beginning at 12:01 A.M. on the day following the date notice of termination of employment was given and ending at 11:59 P.M. on the date in the third following month corresponding numerically with the date notice of termination of employment was given ( or in the event that the third following month does not have a date so corresponding, then the last day of the third following month). 2 (j) "Five years after (an event occurring on day x)" and "five years from (an event occurring on day x)" means a period of time beginning at 12:01 A.M. on the day following day x and ending at 11:59 P.M. on the date in the fifth following year corresponding numerically with day x (or in the event that the fifth following year does not have a date so corresponding, then the last day of the sixtieth following month). (k) "Voluntary Resignation" means any termination of employment that is not involuntary and that is not the result of the employee's death, disability, early retirement or retirement. (l) "Workforce reduction" means any termination of employment of one or more employees of the Company or one or more of its subsidiaries as a result of the discontinuation by the Company of a business or line of business or a realignment of the Company, or a part thereof, or any other similar type of event; provided, however, in the case of any such event (whether the termination of employment was a result of a discontinuation, a realignment, or another event), that the Committee or the Board of Directors has designated the event as a "workforce reduction" for purposes of this Plan." 3. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon approval by the Board of Director of the Company. No options may be granted under the Plan after the month and day in the year 2006 corresponding to the day before the month and day on which the Plan becomes effective. The term of options granted on or before such date may, however, extend beyond that date. 4. SHARES SUBJECT TO THE PLAN. (a) The Company may grant options under the Plan authorizing the issuance of no more than 27,950,000 shares of its $0.625 par value (adjusted for any stock splits) common stock, which will be provided from shares purchased in the open market or privately (that became authorized but unissued shares under state corporation law) or by the issuance of previously authorized but unissued shares. (b) Shares as to which options previously granted under this Plan shall for any reason lapse shall be restored to the total number available for grant of options. 5. PLAN ADMINISTRATION. (a) The Plan shall be administered by a Stock Option Committee (the "Committee") whose members shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors of the Company. In addition, all members shall be directors and shall meet the definitional requirements for "non-employee director" (with any exceptions therein permitted) contained in the then current SEC Rule 16b-3 or any successor provision. (b) The Committee shall adopt such rules of procedure as it may deem proper. (c) The powers of the Committee shall include plenary authority to interpret the Plan, and subject to the provisions hereof, to determine the persons to whom options shall be granted, the number of shares subject to each option, the term of the option, and the date on which options shall be granted. 6. ELIGIBILITY. (a) Options may be granted under the Plan to employees of the Company or any subsidiary selected by the Committee. Determination by the Committee of the employees to whom options shall be granted shall be conclusive. (b) An individual may receive more than one option. 3 7. OPTION PRICE. The option price per share to be paid by the grantee to the Company upon exercise of the option shall be determined by the Committee, but shall not be less than 100% of the fair market value of the share at the time the option is granted, nor shall the price per share be less than the par value of the share. Notwithstanding the prior sentence, the option price per share may be less than 100% of the fair market value of the share at the time the option is granted if: (a) The grantee of the option has entered into an agreement with the Company pursuant to which the grant of the option is in lieu of the payment of compensation; and (b) The amount of such compensation when added to the cash exercise price of the option equals at least 100% of the fair market value (at the time the option is granted) of the shares subject to option. "Fair market value" for purposes of the Plan shall be the mean between the high and low sales prices at which shares of the Company were sold on the valuation day as quoted by the Nasdaq Stock Market or, if there were no sales on that day, then on the last day prior to the valuation day during which there were sales. In the event that this method of valuation is not practicable, then the Committee, in its discretion, shall establish the method by which fair market value shall be determined. 8. TERMS OR QUOTAS OF OPTIONS: (a) TERM. Each option granted under the Plan shall be exercisable only during a term (the "Term of the Option") commencing one year, or such other period of time (which may be less than or more than one year) as is determined to be appropriate by the Committee, after the date when the option was granted and ending (unless the option shall have terminated earlier under other provisions of the Plan) on a date to be fixed by the Committee. Notwithstanding the foregoing, each option granted under the Plan shall become exercisable in full immediately upon a Change in Control. (b) QUOTAS. The Committee shall have authority to grant options exercisable in full at any time during their term, or exercisable in quotas. Quotas or portions thereof not purchased in earlier periods shall be cumulated and be available for purchase in later periods. In exercising his or her option, the grantee may purchase less than the full quota available to him or her. (c) EXERCISE OF STOCK OPTIONS. Stock options shall be exercised by delivering, mailing, or transmitting to the Committee or its designee (for all purposes under the Plan, in the absence of an express designation by the Committee, the Company's Personnel Division Manager is deemed to be the Committee's designee) the following items: (i) A notice, in the form, by the method, and at times prescribed by the Committee, specifying the number of shares to be purchased; and (ii) A check or money order payable to the Company for the full option price. In addition, the Committee in its sole discretion may determine that it is an appropriate method of payment for grantees to pay, or make partial payment of, the option price with shares of Company common stock in lieu of cash. In addition, in its sole discretion the Committee may determine that it is an appropriate method of payment for grantees to pay for any shares subject to an option by delivering a properly executed exercise notice together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price (a "cashless exercise"). To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The value of Company common stock surrendered in payment of the exercise price shall be its fair market value, determined pursuant to Section 7, on the date of exercise. Upon receipt of such notice of exercise of a stock option and upon payment of the option price by a method other than a cashless exercise, the Company shall promptly 4 deliver to the grantee (or, in the event the grantee has executed a deferral agreement, the Company shall deliver to the grantee at the time specified in such deferral agreement) a certificate or certificates for the shares purchased, without charge to him or her for issue or transfer tax. (d) POSTPONEMENTS. The Committee may postpone any exercise of an option for such period of time as the Committee in its discretion reasonably believes necessary to prevent any acts or omissions that the Committee reasonably believes will be or will result in the violation of any state or federal law; and the Company shall not be obligated by virtue of any provision of the Plan or the terms of any prior grant of an option to recognize the exercise of an option or to sell or issue shares during the period of such postponement. Any such postponement shall automatically extend the time within which the option may be exercised, as follows: The exercise period shall be extended for a period of time equal to the number of days of the postponement, but in no event shall the exercise period be extended beyond the last day of the postponement for more days than there were remaining in the option exercise period on the first day of the postponement. Neither the Company nor any subsidiary of the Company, nor any of their respective directors or officers shall have any obligation or liability to the grantee of an option or to a successor with respect to any shares as to which the option shall lapse because of such postponement. (e) NON-TRANSFERABILITY. All options granted under the Plan shall be non-transferable other than by will or by the laws of descent and distribution, subject to Section 10 hereof, and an option may be exercised during the lifetime of the grantee only by him or her or by his/her guardian or legal representative. (f) CERTIFICATES. The stock certificate or certificates to be delivered under this Plan may, at the request of the grantee, be issued in his or her name or, with the consent of the Company, the name of another person as specified by the grantee. (g) RESTRICTIONS. This subsection (g) shall be void and of no legal effect in the event of a Change of Control. Notwithstanding anything in any other section or subsection herein to the contrary, the following provisions shall apply to all options (except options designated by the Committee as FirstShare options), exercises and grantees. An amount equal to the spread realized in connection with the exercise of an option within six months prior to a grantee's voluntary resignation shall be paid to the Company by the grantee in the event that the grantee, within six months following voluntary resignation, engages, directly or indirectly, in any activity determined by the Committee to be competitive with any activity of the Company or any of its subsidiaries. (h) TAXES. The Company shall be entitled to withhold the amount of any tax attributable to amounts payable or shares deliverable under the Plan, and the Company may defer making payment or delivery of any benefits under the Plan if any tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to such rules which it may adopt, permit a grantee to satisfy, in whole or in part, any federal, state and local withholding tax obligation which may arise in connection with the exercise of a stock option, by electing either: (i) to have the Company withhold shares of Company common stock from the shares to be issued upon the exercise of the option; (ii) to permit a grantee to tender back shares of Company common stock issued upon the exercise of an option; or (iii) to deliver to the Company previously owned shares of Company common stock, having, in the case of (i), (ii), or (iii), a fair market value equal to the amount of the federal, state, and local withholding tax associated with the exercise of the option. 5 (i) ADDITIONAL PROVISIONS APPLICABLE TO OPTION AGREEMENTS IN LIEU OF COMPENSATION. If the Committee, in its discretion permits participants to enter into agreements as contemplated by Section 7 herein, then such agreements must be irrevocable and cannot be changed by the participant once made, and such agreements must be made at least prior to the performance of any services with respect to which an option may be granted. If any participant who enters into such an agreement terminates employment prior to the grant of the option, then the option will not be granted and all compensation which would have been covered by the option will be paid to the participant in cash. 9. EXERCISE OF OPTION BY GRANTEE ON CESSATION OF EMPLOYMENT. If a person to whom an option has been granted shall cease, for a reason other than his or her death, disability, early retirement, retirement, workforce reduction, or voluntary resignation, to be employed by the Company or a subsidiary, the option shall terminate three months after the cessation of employment, unless it terminates earlier under other provisions of the Plan. Until the option terminates, it may be exercised by the grantee for all or a portion of the shares as to which the right to purchase had accrued under the Plan at the time of cessation of employment, subject to all applicable conditions and restrictions provided in Section 8 hereof. If a person to whom an option has been granted shall retire or become disabled, the option shall terminate five years after the date of early retirement, retirement or disability, unless it terminates earlier under other provisions of the Plan. Although such exercise by a retiree or disabled grantee is not limited to the exercise rights which had accrued at the date of early retirement, retirement or disability, such exercise shall be subject to all applicable conditions and restrictions prescribed in Section 8 hereof. If a person shall voluntarily resign, his option to the extent not previously exercised shall terminate at once. In the event that the sale of certain assets and assumption of certain liabilities (referred to herein as "the sale of the Division") of the HomeBanc Mortgage Corporation division (the "Division") of First Horizon Home Loan Corporation occurs, then notwithstanding anything herein to the contrary, if the grantee of one or more stock options described in the second sentence of Section 7 of the Plan is employed by the Division immediately prior to the closing of the sale of the Division and is not an employee of the Equibanc department of the Division and if the employment of the grantee of such option or options terminates at the time of the closing of the sale of the Division, then each of such stock options shall terminate at 5:00 p.m. Memphis time on the fifth anniversary of the closing of the sale of the Division (or if such date is not a business day, then on the immediately preceding business day), unless it terminates earlier under the Plan. The exercise of each of such options is subject to all applicable conditions and restrictions provided in Section 8 hereof. If the grantee of one or more stock options described in the second sentence of Section 7 of the Plan or as to which the number of shares awarded was based on a formula which included a percentage of the grantee's annual bonus or target bonus or participation in a bonus plan shall cease to be employed as a result of a workforce reduction, then each of such stock options shall terminate on the date specified by the Committee, not to exceed five years after the date of termination, unless it terminates earlier under other provisions of the Plan. Although such exercise is not limited to the exercise rights which had accrued at the date of termination, such exercise shall be subject to all applicable conditions and restrictions prescribed in Section 8 hereof. If the grantee of one or more stock options not described in the prior two sentences of this paragraph shall cease to be employed as a result of a workforce reduction, then each of such stock options shall terminate on the date specified by the Committee, not to exceed three years after the date of termination, unless it terminates earlier under other provisions of the Plan. Although such exercise is not limited to exercise rights which had accrued at the date of termination, such exercise shall be subject to all applicable conditions and restrictions prescribed in Section 8 hereof. 10. EXERCISE OF OPTION AFTER DEATH OF GRANTEE. If the grantee of an option shall die while in the employ of the Company or within three months after ceasing to be an employee, and if the option was in effect at the time of his or her death (whether or not its term had then commenced), the option may, until the expiration of five years from the date of death of the grantee or until the earlier expiration of the term of the option, be exercised by the successor of the deceased grantee. Although such exercise is not limited to the exercise rights which had accrued at the date of death of the grantee, such exercise shall be subject to all applicable conditions and restrictions prescribed in Section 8 hereof. 11. PYRAMIDING OF OPTIONS. The Committee in its sole discretion may from time to time permit the method of exercising options known as pyramiding (the automatic application of shares received upon the exercise of a portion of a stock option to satisfy the exercise price for additional portions of the option). 6 12. SHAREHOLDER RIGHTS. No person shall have any rights of a shareholder by virtue of a stock option except with respect to shares actually issued to him or her, and issuance of shares shall confer no retroactive right to dividends. 13. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Any increase in the number of outstanding shares of common stock of the Company occurring through stock splits or stock dividends after the adoption of the Plan shall be reflected proportionately: (a) in an increase in the aggregate number of shares then available for the grant of options under the Plan, or becoming available through the termination or forfeiture of options previously granted but unexercised; (b) in the number subject to options then outstanding; and (c) in the quotas remaining available for exercise under outstanding options, and a proportionate reduction shall be made in the per-share option price as to any outstanding options or portions thereof not yet exercised. Any fractional shares resulting from such adjustments shall be eliminated. If changes in capitalization other than those considered above shall occur, the Board of Directors shall make such adjustments in the number and class of shares for which options may thereafter be granted, and in the number and class of shares remaining subject to options previously granted and in the per-share option price as the Board in its discretion may consider appropriate, and all such adjustments shall be conclusive. 14. TERMINATION, SUSPENSION, OR MODIFICATION OF PLAN. The Board of Directors may at any time terminate, suspend, or modify the Plan, except that the Board of Directors shall not amend the Plan in violation of law. No termination, suspension, or modification of the Plan shall adversely affect any right acquired by any grantee, or by any successor of a grantee (as provided in Section 10 hereof), under the terms of an option granted before the date of such termination, suspension, or modification, unless such grantee or successor shall consent, but it shall be conclusively presumed that any adjustment for changes in capitalization as provided in Section 13 does not adversely affect any such right. 15. APPLICATION OF PROCEEDS. The proceeds received by the Company from the sale of its shares under the Plan will be used for general corporate purposes. 16. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the granting of any stock option shall confer upon the grantee any right to continue in the employ of the Company or any of its subsidiaries or interfere in any way with the right of the Company or the subsidiary to terminate such employment at any time. 17. GOVERNING LAW. The Plan and all determinations thereunder shall be governed by and construed in accordance with the laws of the State of Tennessee. 18. SUCCESSORS. This Plan shall bind any successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Plan, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company's obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. The term "Company," as used in the Plan, shall mean the Company as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by this Plan. 7 -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.II

                                                                  EXHIBIT 3(ii)

                                   BYLAWS OF
                      FIRST TENNESSEE NATIONAL CORPORATION
                   (AS AMENDED AND RESTATED OCTOBER 15, 2002)

                                  ARTICLE ONE
                                    OFFICES

         1.1      PRINCIPAL OFFICE. The principal office of First Tennessee
National Corporation (the "Corporation") shall be 165 Madison Avenue, Memphis,
Tennessee.

         1.2      OTHER OFFICES. The Corporation may have offices at such other
places, either within or without the State of Tennessee, as the Board of
Directors may from time to time designate or as the business of the Corporation
may from time to time require.

         1.3      REGISTERED  OFFICE.  The registered office of the Corporation
required to be maintained in the State of Tennessee shall be the same as its
principal office and may be changed from time to time as provided by law.

                                  ARTICLE TWO
                                  SHAREHOLDERS

         2.1      PLACE OF MEETINGS. Meetings of the shareholders of the
Corporation may be held either in the State of Tennessee or elsewhere; but in
the absence of notice to the contrary, shareholders' meetings shall be held at
the principal office of the Corporation in Memphis, Tennessee.

         2.2      QUORUM AND ADJOURNMENTS. The holders of a majority of the
shares issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall be requisite, and shall constitute a quorum at
all meetings of the shareholders, for the transaction of business, except as
otherwise provided by law, the Restated Charter of the Corporation, as amended
from time to time (the "Charter), or these Bylaws. In the event a quorum is not
obtained at the meeting, the holders of a majority of the shares entitled to
vote thereat, present in person or by proxy, shall have power to adjourn the
meeting from time to time and, whether or not a quorum is obtained at the
meeting, the Chairman of the meeting shall have the power to adjourn the
meeting from time to time, in either case without notice, except as otherwise
provided by law, other than announcement at the meeting. At such adjourned
meeting at which the requisite amount of voting shares shall be represented,
any business may be transacted which might have been transacted at the meeting
as originally notified.

         2.3      NOTICE OF MEETINGS. Unless otherwise required by applicable
law, written notice of the annual and each special meeting stating the date,
time and place of the meeting shall be mailed, postage prepaid, or otherwise
delivered to each shareholder entitled to vote thereat at such address as
appears on the records of shareholders of the Corporation, at least ten (10)
days, but not more than two (2) months, prior to the meeting date. In addition,
notice of any special meeting shall state the purpose or purposes for which the
meeting is called and the person or persons calling the meeting. In the event
of an adjournment of a meeting to a date more than four months after the date
fixed for the original meeting or the Board of Directors fixes a new record
date for the adjourned meeting, a new notice of the adjourned meeting must be
given to shareholders as of the new record date. Any previously scheduled
meeting may be postponed, and any special meeting may be canceled, by
resolution of the Board of Directors upon public notice given prior to the date
scheduled for such meeting.

         2.4      ANNUAL MEETINGS. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third Tuesday
in April, or if that day is a legal holiday, on the next succeeding business
day not a legal holiday, at 10:00 a.m. Memphis time or on such other date
and/or at such other time as the Board of Directors may fix by resolution by
vote of a majority


                                       1


of the entire Board of Directors. At the meeting, the shareholders shall elect
by ballot, by plurality vote, directors to succeed directors in the class of
directors whose term expires at the meeting and directors elected by the Board
of Directors to fill vacancies in other classes of directors and may transact
such other business as may properly come before the meeting.

         2.5      SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
Chairman of the Board and shall be called by the Chairman of the Board or the
Secretary at the request in writing of a majority of the Board of Directors.
Only such business within the purpose or purposes described in the notice of
the meeting may be conducted at the meeting.

         2.6      WAIVER OF NOTICE. Any shareholder may waive in writing notice
of any meeting either before, at or after the meeting. Attendance by a
shareholder in person or by proxy at a meeting shall constitute a waiver of
objection to lack of notice or defective notice and a waiver of objection to
consideration of a matter that was not described in the meeting notice unless
the shareholder objects in the manner required by law.

         2.7      VOTING. Unless otherwise required by the Charter, at each
meeting of shareholders, each shareholder shall have one vote for each share of
stock having voting power registered in the shareholder's name on the records
of the Corporation on the record date for that meeting, and every shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by instrument in writing or any other method permitted by law.

         2.8      PROCEDURES FOR BRINGING BUSINESS BEFORE SHAREHOLDER MEETING.
At an annual or special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before an annual or special meeting of shareholders. To be
properly brought before an annual or special meeting of shareholders, business
must be (i) in the case of a special meeting called by the Chairman of the
Board or at the request of the Board of Directors, specified in the notice of
the special meeting (or any supplement thereto), or (ii) in the case of an
annual meeting properly brought before the meeting by or at the direction of
the Board of Directors or (iii) otherwise properly brought before the annual or
special meeting by a shareholder. For business to be properly brought before
such a meeting of shareholders by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not less than 90 days nor
more than 120 days prior to the date of the meeting; provided, however, that if
fewer than 100 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholders to be
timely must be so delivered or received not later than the close of business on
the 10th day following the earlier of (i) the day on which such notice of the
date of such meeting was mailed or (ii) the day on which such public disclosure
was made. A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before a meeting of shareholders (i) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (ii) the name and
address, as they appear on the Corporation's books, of the shareholder
proposing such business and any other shareholders known by such shareholder to
be supporting such proposal, (iii) the class and number of shares of the
Corporation which are beneficially owned by such shareholder on the date of
such shareholder's notice and by any other shareholders known by such
shareholder to be supporting such proposal on the date of such shareholder's
notice, and (iv) any material interest of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of shareholders except in accordance with the procedures
set forth in this Section 2.8. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that the business was not
properly brought before the meeting in accordance with the procedures
prescribed by these Bylaws, and if the Chairman should so determine, the
Chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.

         2.9      SEC PROXY RULES. In addition to complying with the provisions
of Section 2.8, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder with respect to the matters set forth in Section 2.8.
Nothing in Section 2.8 shall be deemed to affect any rights of shareholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
rules of the Securities and Exchange Commission. For such proposals to be acted
upon at a meeting, however, compliance with the notice provisions of Section
2.8 is also required.


                                       2


                                 ARTICLE THREE
                                   DIRECTORS

         3.1      POWERS OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of and all corporate powers
shall be exercised by or under the authority of the Board of Directors.

         3.2      NUMBER AND QUALIFICATIONS. The Board of Directors shall
consist of eleven members. The Board of Directors has the power to change from
time to time the number of directors specified in the preceding sentence. Any
such change in the number of directors constituting the Corporation's Board
Directors must be made exclusively by means of an amendment to these Bylaws
adopted by a majority of the entire Board of Directors then in office.
Directors need not be shareholders of the Corporation nor residents of the
State of Tennessee.

         3.3      TERM OF OFFICE. Except as otherwise provided by law or by the
Charter, the term of each director hereafter elected shall be from the time of
his or her election and qualification until the third annual meeting next
following such election and until a successor shall have been duly elected and
qualified; subject, however, to the right of the removal of any director as
provided by law, by the Charter or by these Bylaws.

         3.4      COMPENSATION. The directors shall be paid for their services
on the Board of Directors and on any Committee thereof such compensation (which
may include cash, shares of stock of the Corporation and options thereon) and
benefits together with reasonable expenses, if any, at such times as may, from
time to time, be determined by resolution adopted by a majority of the entire
Board of Directors; provided that nothing herein contained shall be construed
to preclude any director from serving the Corporation in any other capacity and
being compensated therefor.

         3.5      COMMITTEES. The directors, by resolution adopted by a majority
of the entire Board of Directors, may designate an executive committee and
other committees, consisting of two or more directors, and may delegate to such
committee or committees all such authority of the Board of Directors that it
deems desirable, including, without limitation, authority to appoint corporate
officers, fix their salaries, and, to the extent such is not provided by law,
the Charter or these Bylaws, to establish their authority and responsibility,
except that no such committee or committees shall have and exercise the
authority of the Board of Directors to:

         (a)      authorize distributions (which include dividend
                  declarations), except according to a formula or method
                  prescribed by the Board of Directors,

         (b)      fill vacancies on the Board of Directors or on any of its
                  committees,

         (c)      adopt, amend or repeal bylaws,

         (d)      authorize or approve the reacquisition of shares, except
                  according to a formula or method prescribed by the Board of
                  Directors, or

         (e)      authorize or approve the issuance or sale or contract for
                  sale of shares, or determine the designation and relative
                  rights, preferences and limitations of a class or series of
                  shares, except that the Board of Directors may authorize a
                  committee to do so within limits specifically prescribed by
                  the Board of Directors.

         3.6      PROCEDURES FOR DIRECTOR NOMINATIONS. Except as provided in
Section 3.7 with respect to vacancies on the Board of Directors, only persons
nominated in accordance with the procedures set forth in this Section 3.6 shall
be eligible for election as directors. Nominations of persons for election to
the Board of Directors may be made at a meeting of shareholders (i) by or at
the direction of the Board of Directors, or (ii) by any shareholder of the
Corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Section 3.6. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 90 days nor more than 120 days prior to the date of a meeting;
provided, however, that if fewer than 100 days' notice or prior public



                                       3


disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be so delivered or received not later than
the close of business on the 10th day following the earlier of (i) the day on
which such notice of the date of such meeting was mailed or (ii) the day on
which such public disclosure was made. A shareholder's notice to the Secretary
shall set forth (i) as to each person whom the shareholder proposes to nominate
for election or reelection as a director (a) the name, age, business address
and residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of the
Corporation which are beneficially owned by such person on the date of such
shareholder's notice and (d) any other information relating to such person that
is required to be disclosed in solicitations of proxies for election of
directors or, is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
shareholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such shareholder and any other shareholders known by
such shareholder to be supporting such nominees and (b) the class and number of
shares of the Corporation which are beneficially owned by such shareholder on
the date of such shareholder's notice and by any other shareholders known by
such shareholder to be supporting such nominees on the date of such
shareholder's notice. No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Section 3.6. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if the Chairman
should so determine, the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.

         3.7      VACANCIES; REMOVAL FROM OFFICE. Except as otherwise provided
by law or by the Charter, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation, retirement, disqualification or
any other cause (except removal from office) shall be filled only by the Board
of Directors, provided that a quorum is then in office and present, or only by
a majority of the directors then in office, if less than a quorum is then in
office or by the sole remaining director. Any vacancies on the Board of
Directors resulting from removal from office may be filled by the affirmative
vote of the holders of at least a majority of the voting power of all
outstanding voting stock or, if the shareholders do not so fill such a vacancy,
by a majority of the directors then in office. Directors elected to fill a
newly created directorship or other vacancy shall hold office for a term
expiring at the next shareholders' meeting at which directors are elected and
until such director's successor has been duly elected and qualified. The
directors of any class of directors of the Corporation may be removed by the
shareholders only for cause by the affirmative vote of the holders of at least
a majority of the voting power of all outstanding voting stock.

         3.8      PLACE OF MEETINGS. The directors may hold meetings of the
Board of Directors or of a committee thereof at the principal office of the
Corporation in Memphis, Tennessee, or at such other place or places, either in
the State of Tennessee or elsewhere, as the Board of Directors or the members
of the committee, as applicable, may from time to time determine by resolution
or by written consent or as may be specified in the notice of the meeting.

         3.9      QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business, but a smaller number may adjourn from time to
time, without further notice, if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken and if the
period of adjournment does not exceed thirty (30) days in any one (1)
adjournment. The vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless
the vote of a greater number is required by law, the Charter, or these Bylaws.

         3.10     REGULAR MEETINGS. Following each annual meeting of
shareholders, the newly elected directors, together with the incumbent
directors whose terms do not expire at such meeting, shall meet for the purpose
of organization, the appointment of officers and the transaction of other
business, and, if a majority of the directors be present at such place, day and
hour, no prior notice of such meeting shall be required to be given to the
directors. The place, day and hour of such meeting may also be fixed by
resolution or by written consent of the directors. In addition, the Board of
Directors may approve an annual schedule for additional regular meetings of the
Board of Directors and of committees thereof.


                                       4


         3.11     SPECIAL MEETINGS. Special meetings of the directors may be
called by the Chairman of the Board, the Chief Executive Officer, or the
President (or as to any committee of the Board of Directors, by the person or
persons specified in the resolution of the Board of Directors establishing the
committee) on two days' notice by mail or on one day's notice by telegram or
cablegram, or on two hours' notice given personally or by telephone or
facsimile transmission to each director (or member of the committee, as
appropriate), and shall be called by the Chairman of the Board or Secretary in
like manner on the written request of a majority of directors then in office.
The notice shall state the day and hour of the meeting and the place where the
meeting is to be held. Special meetings of the directors may be held at any
time on written waiver of notice or by consent of all the directors, either of
which may be given either before, at or after the meeting.

         3.12     ACTION WITHOUT A MEETING. The directors may (whether acting in
lieu of a meeting of the Board of Directors or of a committee thereof) take
action which they are required or permitted to take, without a meeting, on
written consent setting forth the action so taken, signed by all of the
directors entitled to vote thereon. If all the directors entitled to vote
consent to taking such action without a meeting, the affirmative vote of the
number of directors necessary to authorize or take such action at a meeting is
the act of the Board of Directors or committee, as appropriate.

         3.13     TELEPHONE MEETINGS. Directors may participate in a meeting of
the Board of Directors or of a committee thereof by, or conduct a meeting
through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
so participating is deemed to be present in person at such meeting.

                                  ARTICLE FOUR
                                    OFFICERS

         4.1      DESIGNATED OFFICERS. The officers of the Corporation shall
consist of a Chairman of the Board, a Chief Executive Officer, a President,
such number of Vice Chairmen as the Board may from time to time determine and
appoint, an Auditor, a Chief Credit Officer, a Chief Financial Officer, a
Controller, a General Counsel, a Manager of Risk Management, an Executive Vice
President-Employee Services, a President-Business Financial Services, a
President-Retail Financial Services, a Secretary, and a Treasurer, and such
number of Senior Executive Vice Presidents, Executive Vice Presidents, Senior
Vice Presidents and Vice Presidents and such other Officers and assistant
Officers as may be from time to time determined and appointed in accordance
with the provisions of this Article Four. The title of any officer may include
any additional descriptive designation determined to be appropriate. Any person
may hold two or more offices, except that the President shall not also be the
Secretary or an Assistant Secretary. The officers, other than the Chairman of
the Board, need not be directors, and officers need not be shareholders.

         4.2      APPOINTMENT OF OFFICERS. Except as otherwise provided in this
Section 4.2, the officers of the Corporation shall be appointed by the Board of
Directors at the annual organizational meeting of the Board of Directors
following the annual meeting of shareholders. The Board of Directors may
delegate to a committee of the Board of Directors the power to create corporate
offices, define the authority and responsibility of such offices, except to the
extent such authority or responsibility would not be consistent with the law or
the Charter, and to appoint persons to any office of the Corporation except the
offices of the Chairman of the Board, Chief Executive Officer, and President,
any office the incumbent in which is designated by the Board as an Executive
Officer (as defined in Section 4.5 hereof), and, upon the recommendation of the
Audit Committee, the Auditor. In addition, the Board of Directors may delegate
to the officers appointed to the Corporation's personnel committee, acting as a
committee, the authority to appoint persons to any offices of the Corporation
of the level of Vice President and below annually at the personnel committee
meeting following the annual meeting of shareholders and to appoint persons to
any office of the Corporation of the level of Executive Vice President and
below during the period of time between the annual appointment of officers by
the Board of Directors or pursuant to this section 4.2 of the Bylaws.
Notwithstanding the delegation of authority pursuant to this section 4.2 of the
Bylaws, the Board of Directors retains the authority to appoint all officers
and such other officers and agents as it shall deem necessary, who shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board of Directors.


                                       5


         4.3      TERM. The officers of the Corporation shall be appointed for a
term of one (1) year and until their successors are appointed and qualified,
subject to the right of removal specified in Section 4.4 of these Bylaws. The
designation of a specified term does not grant to any officer any contract
rights.

         4.4      VACANCIES, RESIGNATIONS AND REMOVAL. If the office of any
officer or officers becomes vacant for any reason, the vacancy may be filled by
the Board of Directors or, if such officer was appointed by a committee, by the
committee appointing such officer. Any officer may resign at any time by
delivering a written notice to the Chairman of the Board, Chief Executive
Officer, President, Secretary, or Executive Vice President-Employee Services of
the Corporation, or the designee of any of them, which shall be effective upon
delivery unless it specifies a later date acceptable to the Corporation. Any
officer designated by the Board as an Executive Officer shall be subject to
removal at any time with or without cause only by the affirmative vote of a
majority of the Board of Directors. The Auditor shall be subject to removal at
any time with or without cause only by the affirmative vote of a majority of
the Board of Directors, upon the recommendation of the Audit Committee. Any
other officer shall be subject to removal at any time with or without cause by
the affirmative vote of a majority of the Board of Directors, and in the event
the officer was, or could have been, appointed by a committee, then by the
affirmative vote of a majority of either such committee or the Board of
Directors.

         4.5      COMPENSATION. The Board of Directors, or a committee thereof,
shall fix the compensation of Executive Officers (as defined herein) of the
Corporation. "Executive Officers" shall be those officers of the Corporation
identified as such from time to time in a resolution or resolutions of the
Board of Directors. The compensation of officers who are not Executive Officers
shall be fixed by the Board of Directors, by a committee thereof, or by
management under such policies and procedures as shall be established by the
Board of Directors or a committee thereof.

         4.6      DELEGATION OF OFFICER DUTIES. In case of the absence of any
officer of the Corporation, or for any reason that the Board of Directors (or,
in addition, in the case of any officer appointed by a committee, such
committee or any other committee which could appoint such officer pursuant to
Section 4.2 of these Bylaws) may deem sufficient, the Board of Directors (or
committee, as applicable) may delegate, for the time being, the powers or
duties, or any of them, of such officer to any other officer, or to any
director.

         4.7      CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Directors and shall
have such powers and perform such duties as may be provided for herein and as
are normally incident to the office and as may be assigned by the Board of
Directors. If and at such times as the Board of Directors so determines, the
Chairman of the Board may also serve as the Chief Executive Officer of the
Corporation.

         4.8      CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, in the
absence of the Chairman of the Board, shall preside at all meetings of the
shareholders and of the Board of Directors. The Chief Executive Officer shall
be responsible for carrying out the orders of and the resolutions and policies
adopted by the Board of Directors and shall have general management of the
business of the Corporation and shall exercise general supervision over all of
its affairs. In addition, the Chief Executive Officer shall have such powers
and perform such duties as may be provided for herein and as are normally
incident to the office and as may be prescribed by the Board of Directors. If
and at such time as the Board of Directors so determines, the Chief Executive
Officer may also serve as the President of the Corporation.

         4.9      PRESIDENT. The President, in the absence of the Chairman of
the Board and the Chief Executive Officer, shall preside at all meetings of the
shareholders and of the Board of Directors. The President shall be the Chief
Executive Officer of the Corporation unless the Board of Directors has
appointed another person to such office, in which case the President shall be
the Chief Operating Officer of the Corporation and shall have such powers and
perform such duties as may be provided for herein and as are normally incident
to the office and as may be prescribed by the Board of Directors, the Chairman
of the Board, or the Chief Executive Officer.

         4.10     VICE  CHAIRMEN.  Vice Chairmen  shall perform such duties and
exercise such powers as may be prescribed by the Board of Directors, the
Chairman of the Board, or the Chief Executive Officer.


                                       6


         4.11     CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
the principal financial officer of the Corporation. The Chief Financial Officer
is authorized to sign any document filed with the Securities and Exchange
Commission or any state securities commission on behalf of the Corporation and
shall perform such duties and exercise such powers as are normally incident to
the office and as may be prescribed by the Board of Directors, the Chairman of
the Board, or the Chief Executive Officer.

         4.12     CHIEF CREDIT OFFICER. The Chief Credit Officer shall perform
such duties and exercise such powers as are normally incident to the office and
as may be prescribed by the Board of Directors, the Chairman of the Board, or
the Chief Executive Officer.

         4.13     GENERAL COUNSEL. The General Counsel shall perform such duties
and exercise such powers as are normally incident to the office and as may be
prescribed by the Board of Directors, the Chairman of the Board, or the Chief
Executive Officer.

         4.14     EXECUTIVE VICE PRESIDENT-EMPLOYEE SERVICES. The Executive Vice
President-Employee Services shall perform such duties and exercise such powers
as are normally incident to the office and as may be prescribed by the Board of
Directors, the Chairman of the Board, or the Chief Executive Officer.

         4.15     PRESIDENT-BUSINESS FINANCIAL SERVICES. The President-Business
Financial Services shall perform such duties and exercise such powers as are
normally incident to the office and as may be prescribed by the Board of
Directors, the Chairman of the Board, or the Chief Executive Officer.

         4.16     PRESIDENT-RETAIL FINANCIAL SERVICES. The President-Retail
Financial Services shall perform such duties and exercise such powers as are
normally incident to the office and as may be prescribed by the Board of
Directors, the Chairman of the Board, or the Chief Executive Officer.

         4.17     MANAGER OF RISK MANAGEMENT. The Manager of Risk Management
shall perform such duties and exercise such powers as are normally incident to
the office and as may be prescribed by the Board of Directors, the Chairman of
the Board, or the Chief Executive Officer.

         4.18     SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS,
SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Senior Executive Vice Presidents,
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall
perform such duties and exercise such powers as may be prescribed by the Board
of Directors, a committee thereof, the personnel committee, the Chairman of the
Board, or the Chief Executive Officer.

         4.19     SECRETARY. The Secretary shall attend all sessions of the
Board of Directors and of the shareholders and record all votes and the minutes
of all proceedings in books to be kept for that purpose. The Secretary shall
give or cause to be given notice of all meetings of the shareholders and of the
Board of Directors, shall authenticate records of the Corporation, and shall
perform such other duties as are incident to the office or as may be prescribed
by the Board of Directors, the Chairman of the Board or the Chief Executive
Officer. In the absence or disability of the Secretary, the Assistant Secretary
or such other officer or officers as may be authorized by the Board of
Directors or Executive Committee thereof shall perform all the duties and
exercise all of the powers of the Secretary and shall perform such other duties
as the Board of Directors, Chairman of the Board or the Chief Executive Officer
shall prescribe.

          4.20    TREASURER. The Treasurer shall have the custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer, or the President, taking proper
vouchers for such disbursements, and shall render to the Board of Directors,
the Chairman of the Board, the Chief Executive Officer, the Chief Financial
Officer, or the President, whenever they may require it, an account of all of
his or her transactions as Treasurer and of the financial condition of the
Corporation, and at a regular meeting of the Board of Directors preceding the
annual shareholders' meeting, a like report for the preceding year. The
Treasurer shall keep or cause to be kept an account of stock registered and
transferred in such manner and subject to such



                                       7


regulations as the Board of Directors may prescribe. The Treasurer shall give
the Corporation a bond, if required by the Board of Directors, in such a sum
and in form and with security satisfactory to the Board of Directors for the
faithful performance of the duties of the office and the restoration to the
Corporation, in case of his or her death, resignation or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in
his or her possession, belonging to the Corporation. The Treasurer shall
perform such other duties as the Board of Directors may from time to time
prescribe or require. In the absence or disability of the Treasurer, the
Assistant Treasurer shall perform all the duties and exercise all of the powers
of the Treasurer and shall perform such other duties as the Board of Directors,
the Chairman of the Board, or the Chief Executive Officer shall prescribe.

         4.21     AUDITOR. The Auditor shall perform such duties and exercise
such powers as are normally incident to the office and as may be prescribed by
the Board of Directors or the Chairman of the Audit Committee.

         4.22     CONTROLLER. The Controller shall be the principal accounting
officer of the Corporation. The Controller is authorized to sign any document
filed with the Securities and Exchange Commission or any state securities
commission on behalf of the Corporation and shall assist the management of the
Corporation in setting the financial goals and policies of the Corporation,
shall provide financial and statistical information to the shareholders and to
the management of the Corporation and shall perform such other duties and
exercise such other powers as may be prescribed by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President. In the
absence or disability of the Controller, the Assistant Controller shall perform
all the duties and exercise all powers of the Controller and shall perform such
duties as the Board of Directors or the Chairman of the Board or the Chief
Executive Officer shall prescribe.

         4.23     OTHER OFFICERS. Officers holding such other offices as may be
created pursuant to Sections 4.1 and 4.2 of these Bylaws shall have such
authority and perform such duties and exercise such powers as may be prescribed
by the Board of Directors, a committee thereof, the personnel committee, the
Chairman of the Board or the Chief Executive Officer.

         4.24     OFFICER COMMITTEES. The directors, by resolution adopted by a
majority of the entire Board of Directors, may designate one or more
committees, consisting of two or more officers, and may delegate to such
committee or committees all such authority that the Board of Directors deems
desirable that is permitted by law. Members of such committees may take action
without a meeting and may participate in meetings to the same extent and in the
same manner that directors may take action and may participate pursuant to
Sections 3.12 and 3.13 of these Bylaws.

                                  ARTICLE FIVE
                                SHARES OF STOCK

         5.1      CERTIFICATES. The certificates representing shares of stock of
the Corporation shall be numbered, shall be entered in the books or records of
the Corporation as they are issued, and shall be signed by the Chairman of the
Board or the Chief Executive Officer and any one of the following: the
President, the Treasurer, or the Secretary. Either or both of the signatures
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar other than an officer or employee
of the Corporation. Each certificate shall include the following upon the face
thereof:

         (a)      A statement that the Corporation is organized under the laws
                  of the State of Tennessee;

         (b)      The name of the Corporation;

         (c)      The name of the person to whom issued;

         (d)      The number and class of shares, and the designation of the
                  series, if any, which such certificate represents;


                                       8


         (e)      The par value of each share represented by such certificate;
                  or a statement that the shares are without par value; and

         (f)      Such other provisions as the Board of Directors may from time
                  to time require.

         5.2      SHARES NOT REPRESENTED BY CERTIFICATES. Notwithstanding the
provisions of Section 5.1 of these Bylaws, the Board of Directors may authorize
the issuance of some or all of the shares of any class without certificates.
The Corporation shall send to each shareholder to whom such shares have been
issued or transferred at the appropriate time any written statement providing
information about such shares, which is required by law.

         5.3      STOCK TRANSFERS AND RECORD DATES. Transfers of shares of stock
shall be made upon the books of the Corporation by the record owner or by an
attorney, lawfully constituted in writing, and upon surrender of any
certificate therefor. The Board of Directors may appoint suitable agents in
Memphis, Tennessee, and elsewhere to facilitate transfers by shareholders under
such regulations as the Board of Directors may from time to time prescribe. The
transfer books may be closed by the Board of Directors for such period, not to
exceed 40 days, as may be deemed advisable for dividend or other purposes, or
in lieu of closing the books, the Board of Directors may fix in advance a date
as the record date for determining shareholders entitled notice of and to vote
at a meeting of shareholders, or entitled to payment of any dividend or other
distribution. The record date for voting or taking other action as shareholders
shall not be less than 10 days nor more than 70 days prior to the meeting date
or action requiring such determination of shareholders. The record date for
dividends and other distributions shall not be less than 10 days prior to the
payment date of the dividend or other distribution. All certificates
surrendered to the Corporation for transfer shall be canceled, and no new
certificate shall be issued until the former certificate for like number of
shares shall have been surrendered and canceled, except that in case of a lost
or destroyed certificate a new one may be issued on the terms prescribed by
Section 5.5 of these Bylaws.

         5.4      RECORD OWNERS. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof;
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, except as required by applicable
law.

         5.5      LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES. The agent
for transfer of the Corporation's stock may issue new share certificates in
place of certificates represented to have been lost, destroyed, stolen or
mutilated upon receiving an indemnity satisfactory to the agent and the
Secretary or Treasurer of the Corporation, without further action of the Board
of Directors.

                                  ARTICLE SIX
                                INDEMNIFICATION

         6.1      INDEMNIFICATION OF OFFICERS WHEN WHOLLY SUCCESSFUL. If any
current or former officer of the Corporation [including for purposes of this
Article an individual who, while an officer, is or was serving another
corporation or other enterprise (including an employee benefit plan and a
political action committee, which serves the interests of the employees of the
Corporation or any of its subsidiaries) in any capacity at the request of the
Corporation and unless the context requires otherwise the estate or personal
representative of such officer] is wholly successful, on the merits or
otherwise, in the defense of any threatened, pending or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal ("Proceeding"), to which the officer was a party
because he or she is or was an officer of the Corporation, the officer shall be
indemnified by the Corporation against all reasonable expenses, including
attorney fees, incurred in connection with such Proceeding, or any appeal
therein.

         6.2      INDEMNIFICATION OF OFFICERS WHEN NOT WHOLLY SUCCESSFUL. If any
current or former officer of the Corporation has not been wholly successful on
the merits or otherwise, in the defense of a Proceeding, to which the officer
was or was threatened to be made a party because he or she was or is an
officer, the officer shall be indemnified by the Corporation against any
judgment, settlement, penalty, fine (including any excise tax assessed with
respect to an employee benefit plan), or other liability and any reasonable
expenses, including attorney fees, incurred as a result of



                                       9


such Proceeding, or any appeal therein, if authorized in the specific case
after a determination has been made that indemnification is permissible because
the following standard of conduct has been met:

         (a)      The officer conducted himself or herself in good faith, and

         (b)      The officer reasonably believed: (i) in the case of conduct
                  in the officer's official capacity as an officer of the
                  Corporation that the officer's conduct was in the
                  Corporation's best interest; and (ii) in all other cases that
                  the officer's conduct was at least not opposed to its best
                  interests; and

         (c)      In the case of any criminal proceeding, the officer had no
                  reasonable cause to believe his or her conduct was unlawful;

provided, however, the Corporation may not indemnify an officer in connection
with a Proceeding by or in the right of the Corporation in which the officer
was adjudged liable to the Corporation or in connection with any other
proceeding charging improper benefit to the officer, whether or not involving
action in his or her official capacity, in which the officer was adjudged
liable on the basis that personal benefit was improperly received by the
officer.

         6.3      PROCEDURES FOR INDEMNIFICATION DETERMINATIONS. The
determination required by Section 6.2 herein shall be made as follows:

         (a)      By the Board of Directors by a majority vote of a quorum
                  consisting of directors not at the time parties to the
                  Proceeding;

         (b)      If a quorum cannot be obtained, by majority vote of a
                  committee duly designated by the Board of Directors (in which
                  designation directors who are parties may participate)
                  consisting solely of two or more directors not at the time
                  parties to the Proceeding;

         (c)      By independent special legal counsel: (i) selected by the
                  Board of Directors or its committee in the manner prescribed
                  in subsection (a) or (b); or (ii) if a quorum of the Board of
                  Directors cannot be obtained under subsection (a) and a
                  committee cannot be designated under subsection (b), selected
                  by majority vote of the full Board of Directors (in which
                  selection directors who are parties may participate); or, if
                  a determination pursuant to subsections (a), (b), or (c) of
                  this Section 6.3 cannot be obtained, then

         (d)      By the shareholders, but shares owned by or voted under the
                  control of directors who are at the time parties to the
                  Proceeding may not be voted on the determination.

         6.4      SERVING AT THE REQUEST OF THE CORPORATION. An officer of the
Corporation shall be deemed to be serving another corporation or other
enterprise or employee benefit plan or political action committee at the
request of the Corporation only if such request is reflected in the records of
the Board of Directors or a committee appointed by the Board of Directors for
the purpose of making such requests. Approval by the Board of Directors, or a
committee thereof, may occur before or after commencement of such service by
the officer.

         6.5      ADVANCEMENT OF EXPENSES. The Corporation shall pay for or
reimburse reasonable expenses, including attorney fees, incurred by an officer
who is a party to a Proceeding in advance of the final disposition of the
Proceeding if:

         (a)      The officer furnishes to the Corporation a written
                  affirmation of the officer's good faith belief that the
                  officer has met the standard of conduct described in Section
                  6.2 herein;

         (b)      The officer furnishes to the Corporation a written
                  undertaking, executed personally or on behalf of the officer,
                  to repay the advance if it is ultimately determined that the
                  officer is not entitled to indemnification; and


                                      10


         (c)      A determination is made that the facts then known to those
                  making the determination would not preclude indemnification
                  under this bylaw.

         6.6      UNDERTAKING REQUIRED FOR EXPENSES. The undertaking required by
Section 6.5 herein must be an unlimited general obligation of the officer but
need not be secured and may be accepted without reference to financial ability
to make repayment.

         6.7      PROCEDURES FOR EXPENSE DETERMINATIONS. Determinations and
authorizations of payments under Section 6.5 herein shall be made in the same
manner as is specified in Section 6.3 herein.

         6.8      INDEMNIFICATION OF EMPLOYEES AND FORMER DIRECTORS. Every
employee and every former director of the Corporation shall be indemnified by
the Corporation to the same extent as officers of the Corporation.

         6.9      NONEXCLUSIVITY OF RIGHT OF INDEMNIFICATION. The right of
indemnification set forth above shall not be deemed exclusive of any other
rights, including, but not limited to, rights created pursuant to Section 6.11
of these Bylaws, to which an officer, employee, or former director seeking
indemnification may be entitled. No combination of rights shall permit any
officer, employee or former director of the Corporation to receive a double or
greater recovery.

         6.10     MANDATORY INDEMNIFICATION OF DIRECTORS AND DESIGNATED
OFFICERS. The Corporation shall indemnify each of its directors and such of the
non-director officers of the Corporation or any of its subsidiaries as the Board
of Directors may designate, and shall advance expenses, including attorney's
fees, to each director and such designated officers, to the maximum extent
permitted (or not prohibited) by law, and in accordance with the foregoing, the
Board of Directors is expressly authorized to enter into individual indemnity
agreements on behalf of the Corporation with each director and such designated
officers which provide for such indemnification and expense advancement and to
adopt resolutions which provide for such indemnification and expense
advancement.

         6.11     INSURANCE. Notwithstanding anything in this Article Six to the
contrary, the Corporation shall have the additional power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, political action committee, or other enterprise, against
liability asserted against or incurred by the person in that capacity or arising
from the person's status as a director, officer, employee, or agent, whether or
not the Corporation would have the power to indemnify the person against the
same liability.

                                  ARTICLE SEVEN
                                   RETIREMENT

         7.1      NON-EMPLOYEE DIRECTORS. Directors who are not also officers of
the Corporation or its affiliates shall be retired from the Board of Directors
as follows:

         (a)      Any director who shall attain the age of sixty-five (65) on or
                  before the last day of the term for which he or she was
                  elected shall not be nominated for re-election and shall be
                  retired from the Board of Directors at the expiration of such
                  term; provided, however, any director first elected to the
                  Board of Directors prior to April 17, 1996, may serve a
                  minimum of two three-year terms.

         (b)      For the purpose of maintaining boards of active business and
                  professional persons, directors leaving the occupation or the
                  position held at their last election (by retirement or
                  otherwise) will be expected to tender their resignation from
                  the Board of Directors upon such occasion. A resignation will
                  ordinarily be accepted unless (i) the director assumes another
                  position deemed appropriate by the Board of Directors for
                  continuation, or (ii) the director is so engaged in some
                  specific project for the Board of Directors as to make his or
                  her resignation detrimental to the Corporation. Under this
                  circumstance, the Board of Directors may elect to set a
                  subsequent date for his or her retirement to coincide with the
                  completion of the project.



                                       11



Directors who are also officers of the Corporation or any of its affiliates will
be retired from the Board of Directors on the date of the annual meeting
coincident with or next following the date of the director's retirement from or
other discontinuation of active service with the Corporation and its affiliates.

         7.2      OFFICERS AND EMPLOYEES. Except as provided in the following
sentence, the Corporation has no compulsory retirement age for its officers or
employees. Each officer or employee who has attained 65 years of age and who,
for the two-year period immediately before attaining such age, has been employed
in a "bona fide executive" or a "high policy-making" position as those terms are
used and defined in the Age Discrimination in Employment Act, Section 12(c), and
the regulations relating to that section prescribed by the Equal Employment
Opportunity Commission, all as amended from time to time (collectively, the
"ADEA"), shall automatically be terminated by way of compulsory retirement and
his or her salary discontinued on the first day of the month coincident with or
immediately following the 65th birthday, provided such employee is entitled to
an immediate nonforfeitable annual retirement benefit, as specified in the ADEA,
in the aggregate amount of at least $44,000. Notwithstanding the prior sentence,
the Board of Directors, in its discretion, may continue any such officer or
employee in service and designate the capacity in which he or she shall serve,
and shall fix the remuneration he or she shall receive. The Board of Directors
may also re-employ any former officer who had theretofore been retired.

                                  ARTICLE EIGHT
                             EXECUTION OF DOCUMENTS

         8.1      DEFINITION OF "DOCUMENT." For purposes of this Article Eight
of the Bylaws, the term "document" shall mean a document of any type, including,
but not limited to, an agreement, contract, instrument, power of attorney,
endorsement, assignment, transfer, stock or bond power, deed, mortgage, deed of
trust, lease, indenture, conveyance, proxy, waiver, consent, certificate,
declaration, receipt, discharge, release, satisfaction, settlement, schedule,
account, affidavit, security, bill, acceptance, bond, undertaking, check, note
or other evidence of indebtedness, draft, guaranty, letter of credit, and order.

         8.2      EXECUTION OF DOCUMENTS. Except as expressly provided in
Section 5.1 of these Bylaws (with respect to signatures on certificates
representing shares of stock of the Corporation), the Chairman of the Board, the
Chief Executive Officer, the President, any Vice Chairman, any Senior Executive
Vice President, any Executive Vice President, any Senior Vice President, any
Vice President, the Chief Financial Officer, the Chief Credit Officer, the
General Counsel, the Executive Vice President-Employee Services, the President -
Retail Financial Services, the President - Business Financial Services, the
Manager of Risk Management, the Controller, the Treasurer, the Secretary, and
any other officer, or any of them acting individually, may (i) execute and
deliver in the name and on behalf of the Corporation or in the name and on
behalf of any division or department of the Corporation any document pertaining
to the business, affairs, or property of the Corporation or any division or
department of the Corporation, and (ii) delegate to any other officer, employee
or agent of the Corporation the power to execute and deliver any such document.

         8.3      METHOD OF EXECUTION BY SECRETARY. Unless otherwise required by
law, the signature of the Secretary on any document may be a facsimile.

                                  ARTICLE NINE
                                EMERGENCY BYLAWS

         9.1      DEFINITION OF EMERGENCY. The provisions of this Article Nine
shall be effective only during an "emergency." An "emergency" shall be deemed to
exist whenever any two of the officers identified in Section 9.2 of these Bylaws
in good faith determine that a quorum of the directors cannot readily be
assembled because of a catastrophic event.

         9.2      NOTICE OF MEETING. A meeting of the Board of Directors may be
called by any one director or by any one of the following officers: Chairman of
the Board, Chief Executive Officer, President, any Vice Chairman, any Senior
Executive Vice President, any Senior Executive Vice President, any Executive
Vice President, Chief Credit Officer, Chief Financial Officer, Controller,
General Counsel, Manager of Risk Management, Executive Vice President-Employee


                                       12


Services, President-Business Financial Services, President-Retail Financial
Services, or Secretary. Notice of such meeting need be given only to those
directors whom it is practical to reach by any means the person calling the
meeting deems feasible, including, but not limited to, by publication and radio.
Such notice shall be given at least two hours prior to commencement of the
meeting.

         9.3      QUORUM AND SUBSTITUTE DIRECTORS.. If a quorum has not been
obtained, then one or more officers of the Corporation or the Bank present at
the emergency meeting of the Board of Directors, as are necessary to achieve a
quorum, shall be considered to be substitute directors for purposes of the
meeting, and shall serve in order of rank, and within the same rank in order of
seniority determined by hire date by the Corporation, the Bank or any of their
subsidiaries. In the event that less than a quorum of the directors (including
any officers who serve as substitute directors for the meeting) are present,
those directors present (including such officers serving as substitute
directors) shall constitute a quorum.

         9.4      ACTION AT MEETING. The Board as constituted pursuant to
Section 9.3 and after notice has been provided pursuant to Section 9.2 may take
any of the following actions: (i) prescribe emergency powers of the Corporation,
(ii) delegate to any officer or director any of the powers of the Board of
Directors, (iii) designate lines of succession of officers and agents in the
event that any of them are unable to discharge their duties, (iv) relocate the
principal office or designate alternative or multiple principal offices, and (v)
take any other action that is convenient, helpful, or necessary to carry on the
business of the Corporation.

         9.5      EFFECTIVENESS OF NON-EMERGENCY BYLAWS. All provisions of these
Bylaws not contained in this Article Nine, which are consistent with the
emergency bylaws contained in Article Nine, shall remain effective during the
emergency.

         9.6      TERMINATION OF EMERGENCY. Any emergency causing this Article
Nine to become operative shall be deemed to be terminated whenever either of the
following conditions is met: (i) the directors and any substitute directors
determine by a majority vote at a meeting that the emergency is over or (ii) a
majority of the directors elected pursuant to the provisions of these Bylaws
other than this Article Nine hold a meeting and determine that the emergency is
over.

         9.7      ACTION TAKEN IN GOOD FAITH. Any corporate action taken in good
faith in accordance with the provisions of this Article Nine binds the
Corporation and may not be used to impose liability on any director, substitute
director, officer, employee or agent of the Corporation.

                                   ARTICLE TEN
                            MISCELLANEOUS PROVISIONS

         10.1     FISCAL YEAR. The Board of Directors of the Corporation shall
have authority from time to time to determine whether the Corporation shall
operate upon a calendar year basis or upon a fiscal year basis, and if the
latter, said Board of Directors shall have power to determine when the said
fiscal year shall begin and end.

         10.2     DIVIDENDS. Dividends on the capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting
pursuant to law. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends or for repairing
or maintaining any property of the Corporation, or for such other purposes as
the directors shall think conducive to the interest of the Corporation.

         10.3     SEAL. This Corporation shall have a Corporate Seal which shall
consist of an imprint of the name of the Corporation, the state of its
incorporation, the year of incorporation and the words "Corporate Seal." The
Corporate Seal shall not be required to establish the validity or authenticity
of any document executed in the name and on behalf of the Corporation.


                                       13




         10.4     NOTICES. Whenever notice is required to be given to any
director, officer or shareholder under any of the provisions of the law, the
Charter, or these Bylaws (except for notice required by Sections 2.8 and 3.6 of
these Bylaws), it shall not be construed to require personal notice, but such
notice may be given in writing by depositing the same in the United States mail,
postage prepaid, or by telegram, teletype, facsimile transmission or other form
of wire, wireless, or other electronic communication or by private carrier
addressed to such shareholder at such address as appears on the Corporation's
current record of shareholders, and addressed to such director or officer at
such address as appears on the records of the Corporation. If mailed as provided
above, notice to a shareholder shall be deemed to be effective at the time when
it is deposited in the mail.

         10.5     BYLAW AMENDMENTS. The Board of Directors shall have power to
make, amend and repeal the Bylaws or any Bylaw of the Corporation by vote of not
less than a majority of the directors then in office, at any regular or special
meeting of the Board of Directors. The shareholders may make, amend and repeal
the Bylaws or any Bylaw of this Corporation at any annual meeting or at a
special meeting called for that purpose only by the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all outstanding
voting stock, and all Bylaws made by the directors may be amended or repealed by
the shareholders only by the vote of the holders of at least eighty percent
(80%) of the voting power of all outstanding voting stock. Without further
authorization, at any time the Bylaws are amended, the Secretary is authorized
to restate the Bylaws to reflect such amendment, and the Bylaws, as so restated,
shall be the Bylaws of the Corporation.


                                       14

EX-10.C

                                                                   EXHIBIT 10(C)

                      FIRST TENNESSEE NATIONAL CORPORATION
                         1997 EMPLOYEE STOCK OPTION PLAN
                (Adopted 10-22-96, Amended and Restated 10-15-02)

1.       PURPOSE. The 1997 Employee Stock Option Plan (the "Plan") of First
Tennessee National Corporation and any successor thereto, (the "Company") is
designed to enable employees of the Company and its subsidiaries to obtain a
proprietary interest in the Company, and thus to share in the future success of
the Company's business. Accordingly, the Plan is intended as a further means not
only of attracting and retaining outstanding personnel, but also of promoting a
closer identity of interest between employees and shareholders.

2.       DEFINITIONS. As used in the Plan, the following terms shall have the
respective meanings set forth below:

         (a)      "Change in Control" means the occurrence of any one of the
following events:

                           (i) individuals who, on January 21, 1997, constitute
                  the Board (the "Incumbent Directors") cease for any reason to
                  constitute at least a majority of the Board, provided that any
                  person becoming a director subsequent to January 21, 1997,
                  whose election or nomination for election was approved by a
                  vote of at least three-fourths (3/4) of the Incumbent
                  Directors then on the Board (either by a specific vote or by
                  approval of the proxy statement of the Company in which such
                  person is named as a nominee for director, without written
                  objection to such nomination) shall be an Incumbent Director;
                  provided, however, that no individual elected or nominated as
                  a director of the Company initially as a result of an actual
                  or threatened election contest with respect to directors or as
                  a result of any other actual or threatened solicitation of
                  proxies or consents by or on behalf of any person other than
                  the Board shall be deemed to be an Incumbent Director;

                           (ii) any "Person" (as defined under Section 3(a)(9)
                  of the Securities Exchange Act of 1934, as amended (the
                  "Exchange Act") and as used in Section 13(d) or Section 14(d)
                  of the Exchange Act) is or becomes a "beneficial owner" (as
                  defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Company representing 20% or
                  more of the combined voting power of the Company's then
                  outstanding securities eligible to vote for the election of
                  the Board (the "Company Voting Securities"); provided,
                  however, that the event described in this paragraph (ii) shall
                  not be deemed to be a change in control by virtue of any of
                  the following acquisitions: (A) by the Company or any entity
                  in which the Company directly or indirectly beneficially owns
                  more than 50% of the voting securities or interests (a
                  "Subsidiary"), (B) by an employee stock ownership or employee
                  benefit plan or trust sponsored or maintained by the Company
                  or any Subsidiary, (C) by any underwriter temporarily holding
                  securities pursuant to an offering of such securities, or (D)
                  pursuant to a Non-Qualifying Transaction (as defined in
                  paragraph (iii));

                           (iii)    the shareholders of the Company approve a
                  merger, consolidation, share exchange or similar form of
                  corporate transaction involving the Company or any of its
                  Subsidiaries that requires the approval of the Company's
                  shareholders, whether for such transaction or the issuance of
                  securities in the transaction (a "Business Combination"),
                  unless immediately following such Business Combination: (A)
                  more than 50% of the total voting power of (x) the corporation
                  resulting from such Business Combination (the "Surviving
                  Corporation"), or (y) if applicable, the ultimate parent
                  corporation that directly or indirectly has beneficial
                  ownership of 100% of the voting securities eligible to elect
                  directors of the Surviving Corporation (the "Parent
                  Corporation"), is represented by Company Voting Securities
                  that were outstanding immediately prior to the consummation of
                  such Business Combination (or, if applicable, is represented
                  by shares into which such Company Voting Securities were
                  converted pursuant to such Business Combination), and such
                  voting power among the holders thereof is in substantially the
                  same proportion as the voting power of such Company Voting
                  Securities among the holders thereof immediately prior to the
                  Business Combination, (B) no person


                                       1


                  (other than any employee benefit plan sponsored or maintained
                  by the Surviving Corporation or the Parent Corporation), is or
                  becomes the beneficial owner, directly or indirectly, of 20%
                  or more of the total voting power of the outstanding voting
                  securities eligible to elect directors of the Parent
                  Corporation (or, if there is no Parent Corporation, the
                  Surviving Corporation) and (C) at least a majority of the
                  members of the board of directors of the Parent Corporation
                  (or, if there is no Parent Corporation, the Surviving
                  Corporation) were Incumbent Directors at the time of the
                  Board's approval of the execution of the initial agreement
                  providing for such Business Combination (any Business
                  Combination which satisfies all of the criteria specified in
                  (A), (B) and (C) above shall be deemed to be a "Non-Qualifying
                  Transaction"); or

                           (iv)     the shareholders of the Company approve a
                  plan of complete liquidation or dissolution of the Company or
                  a sale of all or substantially all of the Company's assets.

         Computations required by paragraph (iii) shall be made on and as of the
date of shareholder approval and shall be based on reasonable assumptions that
will result in the lowest percentage obtainable.

         Notwithstanding the foregoing, a change in control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a change in control of the Company
shall then occur.


         (b)      "Committee" means the Stock Option Committee or any successor
                  committee designated by the Board of Directors to administer
                  the Stock Option Plan, as provided in Section 5(a) hereof.

         (c)      "Early Retirement" means termination of employment after an
                  employee has fulfilled all service requirements for an early
                  pension, and before his or her Normal Retirement Date, under
                  the terms of the First Tennessee National Corporation Pension
                  Plan, as amended from time to time.

         (d)      "Quota" means the portion of the total number of shares
                  subject to an option which the grantee of the option may
                  purchase during the several periods of the term of the option
                  (if the option is subject to quotas), as provided in Section
                  8(b) hereof.

         (e)      "Retirement" means termination of employment after an employee
                  has fulfilled all service requirements for a pension under the
                  terms of the First Tennessee National Corporation Pension
                  Plan, as amended from time to time.

         (f)      "Subsidiary" means a subsidiary corporation as defined in
                  Section 425 of the Internal Revenue Code.

         (g)      "Successor" means the legal representative of the estate of a
                  deceased grantee or the person or persons who shall acquire
                  the right to exercise an option or related SAR by bequest or
                  inheritance or by reason of the death of the grantee, as
                  provided in Section 10 hereof.

         (h)      "Term of the Option" means the period during which a
                  particular option may be exercised, as provided in Section
                  8(a) hereof.

         (i)      "Three months after cessation of employment" means a period of
                  time beginning at 12:01 A.M. on the day following the date
                  notice of termination of employment was given and ending at
                  11:59 P.M. on the date in the third following month
                  corresponding numerically with the date notice of termination
                  of employment was given ( or in the event that the third
                  following month does not have a date so corresponding, then
                  the last day of the third following month).


                                       2



         (j)      "Five years after (an event occurring on day x)" and "five
                  years from (an event occurring on day x)" means a period of
                  time beginning at 12:01 A.M. on the day following day x and
                  ending at 11:59 P.M. on the date in the fifth following year
                  corresponding numerically with day x (or in the event that the
                  fifth following year does not have a date so corresponding,
                  then the last day of the sixtieth following month).

         (k)      "Voluntary Resignation" means any termination of employment
                  that is not involuntary and that is not the result of the
                  employee's death, disability, early retirement or retirement.

         (l)      "Workforce reduction" means any termination of employment of
                  one or more employees of the Company or one or more of its
                  subsidiaries as a result of the discontinuation by the Company
                  of a business or line of business or a realignment of the
                  Company, or a part thereof, or any other similar type of
                  event; provided, however, in the case of any such event
                  (whether the termination of employment was a result of a
                  discontinuation, a realignment, or another event), that the
                  Committee or the Board of Directors has designated the event
                  as a "workforce reduction" for purposes of this Plan."

3.       EFFECTIVE DATE OF PLAN. The Plan shall become effective upon approval
by the Board of Director of the Company. No options may be granted under the
Plan after the month and day in the year 2006 corresponding to the day before
the month and day on which the Plan becomes effective. The term of options
granted on or before such date may, however, extend beyond that date.

4.       SHARES SUBJECT TO THE PLAN.

         (a)      The Company may grant options under the Plan authorizing the
                  issuance of no more than 27,950,000 shares of its $0.625 par
                  value (adjusted for any stock splits) common stock, which will
                  be provided from shares purchased in the open market or
                  privately (that became authorized but unissued shares under
                  state corporation law) or by the issuance of previously
                  authorized but unissued shares.

         (b)      Shares as to which options previously granted under this Plan
                  shall for any reason lapse shall be restored to the total
                  number available for grant of options.

5.       PLAN ADMINISTRATION.

         (a)      The Plan shall be administered by a Stock Option Committee
                  (the "Committee") whose members shall be appointed from time
                  to time by, and shall serve at the pleasure of, the Board of
                  Directors of the Company. In addition, all members shall be
                  directors and shall meet the definitional requirements for
                  "non-employee director" (with any exceptions therein
                  permitted) contained in the then current SEC Rule 16b-3 or any
                  successor provision.

         (b)      The Committee shall adopt such rules of procedure as it may
                  deem proper.

         (c)      The powers of the Committee shall include plenary authority to
                  interpret the Plan, and subject to the provisions hereof, to
                  determine the persons to whom options shall be granted, the
                  number of shares subject to each option, the term of the
                  option, and the date on which options shall be granted.

6.       ELIGIBILITY.

         (a)      Options may be granted under the Plan to employees of the
                  Company or any subsidiary selected by the Committee.
                  Determination by the Committee of the employees to whom
                  options shall be granted shall be conclusive.

         (b)      An individual may receive more than one option.


                                       3



7.       OPTION PRICE. The option price per share to be paid by the grantee to
the Company upon exercise of the option shall be determined by the Committee,
but shall not be less than 100% of the fair market value of the share at the
time the option is granted, nor shall the price per share be less than the par
value of the share. Notwithstanding the prior sentence, the option price per
share may be less than 100% of the fair market value of the share at the time
the option is granted if:

         (a)      The grantee of the option has entered into an agreement with
                  the Company pursuant to which the grant of the option is in
                  lieu of the payment of compensation; and

         (b)      The amount of such compensation when added to the cash
                  exercise price of the option equals at least 100% of the fair
                  market value (at the time the option is granted) of the shares
                  subject to option.

"Fair market value" for purposes of the Plan shall be the mean between the high
and low sales prices at which shares of the Company were sold on the valuation
day as quoted by the Nasdaq Stock Market or, if there were no sales on that day,
then on the last day prior to the valuation day during which there were sales.
In the event that this method of valuation is not practicable, then the
Committee, in its discretion, shall establish the method by which fair market
value shall be determined.

8.       TERMS OR QUOTAS OF OPTIONS:

         (a)      TERM. Each option granted under the Plan shall be exercisable
                  only during a term (the "Term of the Option") commencing one
                  year, or such other period of time (which may be less than or
                  more than one year) as is determined to be appropriate by the
                  Committee, after the date when the option was granted and
                  ending (unless the option shall have terminated earlier under
                  other provisions of the Plan) on a date to be fixed by the
                  Committee. Notwithstanding the foregoing, each option granted
                  under the Plan shall become exercisable in full immediately
                  upon a Change in Control.

         (b)      QUOTAS. The Committee shall have authority to grant options
                  exercisable in full at any time during their term, or
                  exercisable in quotas. Quotas or portions thereof not
                  purchased in earlier periods shall be cumulated and be
                  available for purchase in later periods. In exercising his or
                  her option, the grantee may purchase less than the full quota
                  available to him or her.

         (c)      EXERCISE OF STOCK OPTIONS. Stock options shall be exercised by
                  delivering, mailing, or transmitting to the Committee or its
                  designee (for all purposes under the Plan, in the absence of
                  an express designation by the Committee, the Company's
                  Personnel Division Manager is deemed to be the Committee's
                  designee) the following items:

                  (i) A notice, in the form, by the method, and at times
                  prescribed by the Committee, specifying the number of shares
                  to be purchased; and

                  (ii) A check or money order payable to the Company for the
                  full option price.

                  In addition, the Committee in its sole discretion may
                  determine that it is an appropriate method of payment for
                  grantees to pay, or make partial payment of, the option price
                  with shares of Company common stock in lieu of cash. In
                  addition, in its sole discretion the Committee may determine
                  that it is an appropriate method of payment for grantees to
                  pay for any shares subject to an option by delivering a
                  properly executed exercise notice together with a copy of
                  irrevocable instructions to a broker to deliver promptly to
                  the Company the amount of sale or loan proceeds to pay the
                  purchase price (a "cashless exercise"). To facilitate the
                  foregoing, the Company may enter into agreements for
                  coordinated procedures with one or more brokerage firms. The
                  value of Company common stock surrendered in payment of the
                  exercise price shall be its fair market value, determined
                  pursuant to Section 7, on the date of exercise. Upon receipt
                  of such notice of exercise of a stock option and upon payment
                  of the option price by a method other than a cashless
                  exercise, the Company shall promptly


                                       4


                  deliver to the grantee (or, in the event the grantee has
                  executed a deferral agreement, the Company shall deliver to
                  the grantee at the time specified in such deferral agreement)
                  a certificate or certificates for the shares purchased,
                  without charge to him or her for issue or transfer tax.

         (d)      POSTPONEMENTS. The Committee may postpone any exercise of an
                  option for such period of time as the Committee in its
                  discretion reasonably believes necessary to prevent any acts
                  or omissions that the Committee reasonably believes will be or
                  will result in the violation of any state or federal law; and
                  the Company shall not be obligated by virtue of any provision
                  of the Plan or the terms of any prior grant of an option to
                  recognize the exercise of an option or to sell or issue shares
                  during the period of such postponement. Any such postponement
                  shall automatically extend the time within which the option
                  may be exercised, as follows: The exercise period shall be
                  extended for a period of time equal to the number of days of
                  the postponement, but in no event shall the exercise period be
                  extended beyond the last day of the postponement for more days
                  than there were remaining in the option exercise period on the
                  first day of the postponement. Neither the Company nor any
                  subsidiary of the Company, nor any of their respective
                  directors or officers shall have any obligation or liability
                  to the grantee of an option or to a successor with respect to
                  any shares as to which the option shall lapse because of such
                  postponement.

         (e)      NON-TRANSFERABILITY. All options granted under the Plan shall
                  be non-transferable other than by will or by the laws of
                  descent and distribution, subject to Section 10 hereof, and an
                  option may be exercised during the lifetime of the grantee
                  only by him or her or by his/her guardian or legal
                  representative.

         (f)      CERTIFICATES. The stock certificate or certificates to be
                  delivered under this Plan may, at the request of the grantee,
                  be issued in his or her name or, with the consent of the
                  Company, the name of another person as specified by the
                  grantee.

         (g)      RESTRICTIONS. This subsection (g) shall be void and of no
                  legal effect in the event of a Change of Control.
                  Notwithstanding anything in any other section or subsection
                  herein to the contrary, the following provisions shall apply
                  to all options (except options designated by the Committee as
                  FirstShare options), exercises and grantees. An amount equal
                  to the spread realized in connection with the exercise of an
                  option within six months prior to a grantee's voluntary
                  resignation shall be paid to the Company by the grantee in the
                  event that the grantee, within six months following voluntary
                  resignation, engages, directly or indirectly, in any activity
                  determined by the Committee to be competitive with any
                  activity of the Company or any of its subsidiaries.

         (h)      TAXES. The Company shall be entitled to withhold the amount of
                  any tax attributable to amounts payable or shares deliverable
                  under the Plan, and the Company may defer making payment or
                  delivery of any benefits under the Plan if any tax is payable
                  until indemnified to its satisfaction. The Committee may, in
                  its discretion and subject to such rules which it may adopt,
                  permit a grantee to satisfy, in whole or in part, any federal,
                  state and local withholding tax obligation which may arise in
                  connection with the exercise of a stock option, by electing
                  either:

                  (i) to have the Company withhold shares of Company common
                  stock from the shares to be issued upon the exercise of the
                  option;

                  (ii) to permit a grantee to tender back shares of Company
                  common stock issued upon the exercise of an option; or

                  (iii) to deliver to the Company previously owned shares of
                  Company common stock, having, in the case of (i), (ii), or
                  (iii), a fair market value equal to the amount of the federal,
                  state, and local withholding tax associated with the exercise
                  of the option.


                                       5



         (i)      ADDITIONAL PROVISIONS APPLICABLE TO OPTION AGREEMENTS IN LIEU
                  OF COMPENSATION. If the Committee, in its discretion permits
                  participants to enter into agreements as contemplated by
                  Section 7 herein, then such agreements must be irrevocable and
                  cannot be changed by the participant once made, and such
                  agreements must be made at least prior to the performance of
                  any services with respect to which an option may be granted.
                  If any participant who enters into such an agreement
                  terminates employment prior to the grant of the option, then
                  the option will not be granted and all compensation which
                  would have been covered by the option will be paid to the
                  participant in cash.

9.       EXERCISE OF OPTION BY GRANTEE ON CESSATION OF EMPLOYMENT. If a person
to whom an option has been granted shall cease, for a reason other than his or
her death, disability, early retirement, retirement, workforce reduction, or
voluntary resignation, to be employed by the Company or a subsidiary, the option
shall terminate three months after the cessation of employment, unless it
terminates earlier under other provisions of the Plan. Until the option
terminates, it may be exercised by the grantee for all or a portion of the
shares as to which the right to purchase had accrued under the Plan at the time
of cessation of employment, subject to all applicable conditions and
restrictions provided in Section 8 hereof. If a person to whom an option has
been granted shall retire or become disabled, the option shall terminate five
years after the date of early retirement, retirement or disability, unless it
terminates earlier under other provisions of the Plan. Although such exercise by
a retiree or disabled grantee is not limited to the exercise rights which had
accrued at the date of early retirement, retirement or disability, such exercise
shall be subject to all applicable conditions and restrictions prescribed in
Section 8 hereof. If a person shall voluntarily resign, his option to the extent
not previously exercised shall terminate at once. In the event that the sale of
certain assets and assumption of certain liabilities (referred to herein as "the
sale of the Division") of the HomeBanc Mortgage Corporation division (the
"Division") of First Horizon Home Loan Corporation occurs, then notwithstanding
anything herein to the contrary, if the grantee of one or more stock options
described in the second sentence of Section 7 of the Plan is employed by the
Division immediately prior to the closing of the sale of the Division and is not
an employee of the Equibanc department of the Division and if the employment of
the grantee of such option or options terminates at the time of the closing of
the sale of the Division, then each of such stock options shall terminate at
5:00 p.m. Memphis time on the fifth anniversary of the closing of the sale of
the Division (or if such date is not a business day, then on the immediately
preceding business day), unless it terminates earlier under the Plan. The
exercise of each of such options is subject to all applicable conditions and
restrictions provided in Section 8 hereof. If the grantee of one or more stock
options described in the second sentence of Section 7 of the Plan or as to which
the number of shares awarded was based on a formula which included a percentage
of the grantee's annual bonus or target bonus or participation in a bonus plan
shall cease to be employed as a result of a workforce reduction, then each of
such stock options shall terminate on the date specified by the Committee, not
to exceed five years after the date of termination, unless it terminates earlier
under other provisions of the Plan. Although such exercise is not limited to the
exercise rights which had accrued at the date of termination, such exercise
shall be subject to all applicable conditions and restrictions prescribed in
Section 8 hereof. If the grantee of one or more stock options not described in
the prior two sentences of this paragraph shall cease to be employed as a result
of a workforce reduction, then each of such stock options shall terminate on the
date specified by the Committee, not to exceed three years after the date of
termination, unless it terminates earlier under other provisions of the Plan.
Although such exercise is not limited to exercise rights which had accrued at
the date of termination, such exercise shall be subject to all applicable
conditions and restrictions prescribed in Section 8 hereof.


10.      EXERCISE OF OPTION AFTER DEATH OF GRANTEE. If the grantee of an option
shall die while in the employ of the Company or within three months after
ceasing to be an employee, and if the option was in effect at the time of his or
her death (whether or not its term had then commenced), the option may, until
the expiration of five years from the date of death of the grantee or until the
earlier expiration of the term of the option, be exercised by the successor of
the deceased grantee. Although such exercise is not limited to the exercise
rights which had accrued at the date of death of the grantee, such exercise
shall be subject to all applicable conditions and restrictions prescribed in
Section 8 hereof.

11.      PYRAMIDING OF OPTIONS. The Committee in its sole discretion may from
time to time permit the method of exercising options known as pyramiding (the
automatic application of shares received upon the exercise of a portion of a
stock option to satisfy the exercise price for additional portions of the
option).


                                       6


12.      SHAREHOLDER RIGHTS. No person shall have any rights of a shareholder by
virtue of a stock option except with respect to shares actually issued to him or
her, and issuance of shares shall confer no retroactive right to dividends.

13.      ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Any increase in the number of
outstanding shares of common stock of the Company occurring through stock splits
or stock dividends after the adoption of the Plan shall be reflected
proportionately:

         (a)      in an increase in the aggregate number of shares then
                  available for the grant of options under the Plan, or becoming
                  available through the termination or forfeiture of options
                  previously granted but unexercised;

         (b)      in the number subject to options then outstanding; and

         (c)      in the quotas remaining available for exercise under
                  outstanding options,

and a proportionate reduction shall be made in the per-share option price as to
any outstanding options or portions thereof not yet exercised. Any fractional
shares resulting from such adjustments shall be eliminated. If changes in
capitalization other than those considered above shall occur, the Board of
Directors shall make such adjustments in the number and class of shares for
which options may thereafter be granted, and in the number and class of shares
remaining subject to options previously granted and in the per-share option
price as the Board in its discretion may consider appropriate, and all such
adjustments shall be conclusive.

14. TERMINATION, SUSPENSION, OR MODIFICATION OF PLAN. The Board of Directors may
at any time terminate, suspend, or modify the Plan, except that the Board of
Directors shall not amend the Plan in violation of law. No termination,
suspension, or modification of the Plan shall adversely affect any right
acquired by any grantee, or by any successor of a grantee (as provided in
Section 10 hereof), under the terms of an option granted before the date of such
termination, suspension, or modification, unless such grantee or successor shall
consent, but it shall be conclusively presumed that any adjustment for changes
in capitalization as provided in Section 13 does not adversely affect any such
right.

15.      APPLICATION OF PROCEEDS. The proceeds received by the Company from the
sale of its shares under the Plan will be used for general corporate purposes.

16.      NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any stock option shall confer upon the grantee any right to continue
in the employ of the Company or any of its subsidiaries or interfere in any way
with the right of the Company or the subsidiary to terminate such employment at
any time.

17.      GOVERNING LAW. The Plan and all determinations thereunder shall be
governed by and construed in accordance with the laws of the State of Tennessee.


18.      SUCCESSORS. This Plan shall bind any successor of the Company, its
assets or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that the
Company would be obligated under this Plan if no succession had taken place. In
the case of any transaction in which a successor would not by the foregoing
provision or by operation of law be bound by this Plan, the Company shall
require such successor expressly and unconditionally to assume and agree to
perform the Company's obligations under this Plan, in the same manner and to the
same extent that the Company would be required to perform if no such succession
had taken place. The term "Company," as used in the Plan, shall mean the Company
as hereinbefore defined and any successor or assignee to the business or assets
which by reason hereof becomes bound by this Plan.


                                       7