-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U/xw0m3bmck5Pyn7GS9vL3qA4GmepiisSO8Cws8r8edU/7uFbUG6w5r/xjWFAgRW L8oIwkE6oVlqVv3EX6OYXA== 0000950144-96-005353.txt : 19960814 0000950144-96-005353.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950144-96-005353 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST TENNESSEE NATIONAL CORP CENTRAL INDEX KEY: 0000036966 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 620803242 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04491 FILM NUMBER: 96611096 BUSINESS ADDRESS: STREET 1: 165 MADISON AVE CITY: MEMPHIS STATE: TN ZIP: 38103 BUSINESS PHONE: 9015234444 MAIL ADDRESS: STREET 1: P O BOX 84 CITY: MEMPHIS STATE: TN ZIP: 38101-0084 FORMER COMPANY: FORMER CONFORMED NAME: FIRST TENNESSEE BANKS INC DATE OF NAME CHANGE: 19600201 10-Q 1 FIRST TENNESSEE NATIONAL CORP. FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 ------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file number 0-4491 ------ FIRST TENNESSEE NATIONAL CORPORATION ------------------------------------ (Exact name of registrant as specified in its charter) Tennessee 62-0803242 - -------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 165 Madison Avenue, Memphis, Tennessee 38103 - -------------------------------------- -------- (Address of principal executive offices) (Zip Code) (901) 523-4027 ------------------------------------------------ (Registrant's telephone number, including area code) None -------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $1.25 par value 67,155,030 - ----------------------------- ---------------------------- Class Outstanding at July 31, 1996 2 FIRST TENNESSEE NATIONAL CORPORATION INDEX Part I. Financial Information Part II. Other Information Signatures Exhibit Index Exhibit 3(ii) Exhibit 11 Exhibit 27 3 PART I. ------- FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ The Consolidated Statements of Condition The Consolidated Statements of Income The Statements of Cash Flows The Notes to Consolidated Financial Statements This financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented. 4
CONSOLIDATED STATEMENTS OF CONDITION First Tennessee National Corporation - ------------------------------------------------------------------------------------------------------------------------------- June 30 December 31 ---------------------------------- ------------ (Dollars in thousands)(Unaudited) 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------------- ASSETS: Cash and due from banks $ 674,458 $ 657,666 $ 710,870 Federal funds sold and securities purchased under agreements to resell 104,257 182,778 64,978 - ------------------------------------------------------------------------------------------------------------------------------- Total cash and cash equivalents 778,715 840,444 775,848 - ------------------------------------------------------------------------------------------------------------------------------- Investment in bank time deposits 1,642 1,744 2,119 Broker/dealer securities inventory 196,821 227,458 182,655 Mortgage loans held for sale 1,103,237 735,268 789,183 Securities available for sale 2,176,485 1,195,327 2,036,668 Securities held to maturity (market value of $71,870 at June 30, 1996; $977,857 at June 30, 1995; and $75,750 at December 31, 1995) 71,599 985,010 74,731 Loans, net of unearned income 7,487,691 6,882,044 7,333,283 Less: Allowance for loan losses 116,478 110,747 112,567 - ------------------------------------------------------------------------------------------------------------------------------- Total net loans 7,371,213 6,771,297 7,220,716 - ------------------------------------------------------------------------------------------------------------------------------- Premises and equipment, net 181,591 165,621 177,400 Real estate acquired by foreclosure 8,714 13,732 11,794 Mortgage servicing rights 216,082 94,437 149,220 Intangible assets 124,110 101,131 128,985 Bond division receivables and other assets 724,748 482,541 527,563 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $12,954,957 $11,614,010 $12,076,882 =============================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Demand $ 1,859,864 $ 1,775,417 $ 1,983,994 Checking/Interest 172,356 485,986 103,860 Savings 744,624 603,518 592,320 Money market account 2,546,617 1,867,453 2,499,817 Certificates of deposit under $100,000 and other time 2,900,771 2,866,162 2,882,094 Certificates of deposit $100,000 and more 748,146 514,797 520,112 - ------------------------------------------------------------------------------------------------------------------------------- Total deposits 8,972,378 8,113,333 8,582,197 - ------------------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under agreements to repurchase 1,525,945 1,558,908 1,674,225 Commercial paper and other short-term borrowings 591,944 377,137 86,520 Bond division payables and other liabilities 715,029 535,562 600,699 Term borrowings 257,327 202,320 260,017 - ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 12,062,623 10,787,260 11,203,658 - ------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY: Preferred stock - no par value (5,000,000 shares authorized, but unissued) - - - Common stock - $1.25 par value (shares authorized -200,000,000; shares issued - 67,122,092 at June 30, 1996; 67,800,580 at June 30, 1995; and 67,178,236 at December 31, 1995) 83,903 84,751 83,973 Capital surplus 58,780 82,467 63,610 Undivided profits 761,000 660,738 716,861 Unrealized market adjustment on available for sale securities (7,051) 1,140 10,582 Deferred compensation on restricted stock incentive plan (4,298) (2,346) (1,802) - ------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 892,334 826,750 873,224 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,954,957 $11,614,010 $12,076,882 ===============================================================================================================================
5
CONSOLIDATED STATEMENTS OF INCOME First Tennessee National Corporation - ---------------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30 June 30 --------------------------- ---------------------------- (Dollars in thousands except per share data) (Unaudited) 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $161,636 $151,393 $321,803 $293,065 Interest on investment securities: Taxable 34,227 33,166 66,323 66,837 Tax-exempt 1,326 1,152 2,669 2,240 Interest on mortgage loans held for sale 22,603 10,792 41,484 18,775 Interest on broker/dealer securities inventory 4,527 3,477 8,785 6,974 Interest on other earning assets 1,655 2,772 2,562 6,245 - ---------------------------------------------------------------------------------------------------------------------- Total interest income 225,974 202,752 443,626 394,136 - ---------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on deposits: Checking/Interest 670 2,063 1,319 4,209 Savings 2,411 2,739 4,914 5,667 Money market account 22,970 21,823 47,557 43,147 Certificates of deposit under $100,000 and other time 41,311 42,747 82,742 81,254 Certificates of deposit $100,000 and more 12,651 7,701 22,617 14,478 Interest on short-term borrowings 27,793 25,942 55,624 49,163 Interest on term borrowings 5,214 4,384 10,521 8,547 - ---------------------------------------------------------------------------------------------------------------------- Total interest expense 113,020 107,399 225,294 206,465 - ---------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 112,954 95,353 218,332 187,671 Provision for loan losses 7,559 3,216 15,592 7,364 - ---------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 105,395 92,137 202,740 180,307 - ---------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME: Mortgage banking 60,902 42,896 119,021 89,665 Bond division 17,145 22,602 45,266 41,021 Deposit transactions and cash management 19,860 18,286 37,295 36,881 Cardholder and merchant processing 9,478 8,589 19,238 16,206 Trust services 9,078 8,212 17,692 18,535 Equity securities gains/(losses) 15 (106) 490 92 Debt securities gains/(losses) 37 131 (180) 395 All other 13,205 13,176 27,475 24,405 - ---------------------------------------------------------------------------------------------------------------------- Total noninterest income 129,720 113,786 266,297 227,200 - ---------------------------------------------------------------------------------------------------------------------- ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 235,115 205,923 469,037 407,507 - ---------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE: Employee compensation, incentives, and benefits 93,062 81,637 192,004 160,961 Operations services 10,421 9,097 21,077 18,108 Occupancy 9,823 8,679 19,148 17,789 Communications and courier 8,545 7,156 16,786 14,490 Equipment rentals, depreciation, and maintenance 8,588 7,425 16,769 15,613 Amortization of mortgage servicing rights 4,816 2,951 13,899 5,769 Advertising and public relations 4,519 2,990 9,458 6,890 Legal and professional fees 3,362 2,394 5,862 7,590 Amortization of intangible assets 2,362 1,940 4,716 3,737 Deposit insurance premium 464 4,393 883 8,751 All other 22,035 15,843 42,981 31,970 - ---------------------------------------------------------------------------------------------------------------------- Total noninterest expense 167,997 144,505 343,583 291,668 - ---------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 67,118 61,418 125,454 115,839 Applicable income taxes 24,771 20,665 45,666 40,479 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $ 42,347 $ 40,753 $ 79,788 $ 75,360 ====================================================================================================================== NET INCOME PER COMMON SHARE $ .63 $ .59 $ 1.19 $ 1.10 - ---------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING 67,224,935 68,482,624 67,263,195 68,350,692 - ----------------------------------------------------------------------------------------------------------------------
6
CONSOLIDATED STATEMENTS OF CASH FLOWS First Tennessee National Corporation - --------------------------------------------------------------------------------------------------------------- Six Months Ended June 30 -------------------------- (Dollars in thousands)(Unaudited) 1996 1995 - --------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 79,788 $ 75,360 Adjustments to reconcile net income to net cash provided/(used) by operating activities: Provision for loan losses 15,592 7,364 Provision for deferred income tax 27,324 14,708 Depreciation and amortization of premises and equipment 13,912 11,877 Amortization of mortgage servicing rights 13,899 5,769 Amortization of intangibles 4,716 3,737 Net amortization of premiums and accretion of discounts 15,790 8,787 Market value adjustment on foreclosed property 1,394 1,409 Equity securities (gains)/losses (490) (92) Debt securities (gains)/losses 180 (395) Net (gain)/loss on disposal of fixed assets (8) 1,294 Net increase in: Broker/dealer securities inventory (14,166) (57,427) Mortgage loans held for sale (314,054) (219,861) Bond division receivables (123,154) (53,716) Interest receivable (4,112) - Other assets (161,486) (134,582) Net increase/(decrease)in: Bond division payables 60,608 87,588 Interest payable (208) 6,015 Other liabilities 38,260 84,579 - --------------------------------------------------------------------------------------------------------------- Total adjustments (426,003) (232,946) - --------------------------------------------------------------------------------------------------------------- Net cash used by operating activities (346,215) (157,586) - --------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITES: Proceeds from maturities of: Held to maturity securities 4,554 38,300 Available for sale securities 218,299 62,897 Proceeds from sale of: Available for sale securities 360,773 65,787 Premises and equipment 834 1,449 Payments for purchase of: Held to maturity securities (1,463) (5,064) Available for sale securities (746,117) (87,513) Premises and equipment (18,345) (19,405) Net increase in loans (162,868) (343,571) Decrease in investment in bank time deposits 477 790 Acquisitions, net of cash and cash equivalents acquired 400 12,691 - --------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (343,456) (273,639) - --------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Proceeds from: Exercise of stock options 2,712 2,282 Issuance of term borrowings - 90,000 Payments for: Capital lease obligations (117) (73) Term borrowings (2,776) (1,499) Stock repurchase (12,093) (30,573) Cash dividends (35,727) (31,102) Equity distributions related to acquisitions - (20) Net increase in: Deposits 383,395 138,696 Short-term borrowings 357,144 126,006 - --------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 692,538 293,717 - --------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents 2,867 (137,508) - --------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 775,848 977,952 - --------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 778,715 $ 840,444 =============================================================================================================== Total interest paid $ 218,537 $ 199,839 Total income taxes paid 18,341 22,666
7 NOTE 1 -- FINANCIAL INFORMATION The unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles. In the opinion of management, all necessary adjustments have been made for a fair presentation of financial position and results of operations for the periods presented. The operating results for the six month period ended June 30, 1996, 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 1995 Annual Report to shareholders. 8 NOTE 2 -- LOANS The composition of the loan portfolio at June 30 is detailed below:
(Dollars in thousands) 1996 1995 - --------------------------------------------------------------------------------------- Commercial $3,394,050 $3,147,611 Consumer 2,603,152 2,343,929 Permanent mortgage 658,219 663,355 Credit card receivables 534,784 479,494 Real estate construction 283,150 231,936 Nonaccrual 14,336 15,719 - --------------------------------------------------------------------------------------- Loans, net of unearned income 7,487,691 6,882,044 Allowance for loan losses 116,478 110,747 - --------------------------------------------------------------------------------------- Total net loans $7,371,213 $6,771,297 ======================================================================================= The following table presents information concerning nonperforming loans at June 30: (Dollars in thousands) 1996 1995 - --------------------------------------------------------------------------------------- Impaired loans $ 8,949 $ 9,556 Other nonaccrual loans 5,387 6,163 Restructured loans - 72 - --------------------------------------------------------------------------------------- Total nonperforming loans $14,336 $15,791 =======================================================================================
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. Total restructured impaired loans at June 30, 1996 and 1995, were $279,000 and $365,000, respectively. The following table presents information concerning impaired loans:
Three Months Ended Six Months Ended June 30 June 30 ------------------- -------------------- (Dollars in thousands) 1996 1995 1996 1995 - --------------------------------------------------------------------------------------- Total interest on impaired loans $ 243 $ 587 $ 384 $ 930 Average balance on impaired loans 8,479 11,804 8,564 10,798 - ---------------------------------------------------------------------------------------
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 six months ended June 30, 1995 and 1996, is summarized as follows:
(Dollars in thousands) Non-impaired Impaired Total - -------------------------------------------------------------------------------------- Balance at January 1, 1995 $109,859 $ - $109,859 Transfer of allowance (2,542) 2,542 - Allowance from acquisitions 881 - 881 Provision for loan losses 4,242 3,122 7,364 Charge-offs 13,788 2,239 16,027 Less loan recoveries 8,658 12 8,670 - --------------------------------------------------------------------------------------- Net charge-offs/(recoveries) 5,130 2,227 7,357 - --------------------------------------------------------------------------------------- Balance at June 30, 1995 $107,310 $3,437 $110,747 ======================================================================================= Balance at January 1, 1996 $109,051 $3,516 $112,567 Provision for loan losses 16,065 (473) 15,592 Charge-offs 17,710 299 18,009 Less loan recoveries 6,009 319 6,328 - --------------------------------------------------------------------------------------- Net charge-offs/(recoveries) 11,701 (20) 11,688 - --------------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1996 $113,415 $3,063 $116,478 =======================================================================================
9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations CONSOLIDATED FINANCIAL REVIEW The following is a discussion and analysis of the financial condition and results of operations of First Tennessee National Corporation (First Tennessee) for the three month and six month periods ended June 30, 1996, compared to the three month and six month periods ended June 30, 1995. 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 1995 financial statements, notes and management's discussion is provided in the 1995 annual report. OVERVIEW QUARTERLY COMPARISON: Earnings per share for the second quarter of 1996 was $.63, up 7 percent from last year's second quarter earnings per share of $.59. Net income for the second quarter of 1996 was $42.3 million, an increase of 4 percent over the $40.8 million earned in the second quarter of 1995. Return on average assets was 1.34 percent and return on average equity was 19.48 percent for the second quarter of 1996 compared with 1.48 percent and 20.05 percent, respectively, for the same period in 1995. YEAR-TO-DATE COMPARISON: For the first six months, net income in 1996 totaled $79.8 million, or $1.19 per share, compared with $75.4 million, or $1.10 per share, for the same period in 1995. Return on average assets for the first half of 1996 was 1.28 percent and return on average equity was 18.37 percent, compared with 1.39 percent and 19.07 percent, respectively, for the same period in 1995. Total assets were $13.0 billion and shareholders' equity was $892.3 million at June 30, 1996. INCOME STATEMENT/BALANCE SHEET DISCUSSION NONINTEREST INCOME QUARTERLY COMPARISON: Noninterest income, also called fee income, grew 14 percent, or $15.9 million, from the second quarter of 1995, excluding securities gains. Noninterest income accounted for 53 percent of total revenue in the second quarter of 1996. The rise in fee income resulted primarily from increases in mortgage banking which grew 42 percent, or $18.0 million, as origination volume increased $1.2 billion to $2.8 billion for the quarter and the servicing portfolio grew $6.6 billion to $20.5 billion at June 30, 1996. As a result of higher interest rates, the growth in fee income was lessened by higher secondary marketing losses and price concessions, as well as less gains on sales of servicing than what was experienced in 1995. Refinance activity decreased from 47 percent of total originations in the first quarter of 1996 to 26 percent in the second quarter of 1996. Refinance activity was 13 percent in the second quarter of 1995. Revenues in the bond division were 24 percent, or $5.5 million, lower in the second quarter of 1996 compared with the same period in 1995. As a result of a rising interest rate environment and stronger economic activity, bank customers experienced increased loan volume thus reducing their investment requirements and changing their long term investment preferences. This led to a change in customer's transaction mix towards shorter-term investments which historically have had lower spreads, thus resulting in lower revenues despite the increase in securities bought and sold ($48.8 billion in second quarter 1995 compared with $55.1 billion). In credit card and merchant processing, higher transaction volume from existing customers and an expanded customer base achieved through targeted marketing efforts led to a 10 percent, or $.9 million, increase in fees compared with the second quarter of 1995. As a result of increases in volume, fee income from deposit transactions and cash management increased 9 percent, or $1.6 million, for the same period. Trust services grew 11 percent, or $.9 million, as managed trust assets grew 13 percent from the second quarter of 1995. YEAR-TO-DATE COMPARISON: For the first six months of 1996, noninterest income increased $39.3 million, or 17 percent, over the same period last year excluding 10 securities gains. Fee income represented 55 percent of total revenues during the first six months of both 1995 and 1996. Mortgage banking fee income grew 33 percent, bond division fee income grew 10 percent, and cardholder and merchant processing grew 19 percent from the prior year. Trust services declined 5 percent; however, this decline includes the impact of an accounting change that was made in the first quarter of 1995 from cash basis to accrual basis. As a result of the decrease in FDIC premiums, fee income from deposit transactions and cash management was relatively flat from the prior year. NET INTEREST INCOME QUARTERLY COMPARISON: For the second quarter of 1996, net interest income, on a taxable-equivalent basis, increased 18 percent, or $17.8 million, over the second quarter of 1995. This increase was due to a larger balance sheet with increased levels of average earnings assets (13 percent) and an 18 basis point increase in the net interest margin. YEAR-TO-DATE COMPARISON: For the first six months of 1996, net interest income, on a taxable-equivalent basis, increased 16 percent, or $31.1 million, over the same period in 1995. Net interest income is the amount of income generated by earning assets reduced by the interest cost of funding those assets. Net interest margin is computed by dividing net interest income (on a taxable-equivalent basis) by average earning assets. The discussion that follows details changes in these two components of net interest income. BALANCE SHEET GROWTH QUARTERLY COMPARISON: Total assets at June 30, 1996, were 12 percent, or $1.3 billion, higher than total assets at June 30, 1995. Period-end net loans increased 9 percent, or $605.6 million from June 30, 1995 to June 30, 1996; the mortgage warehouse increased 50 percent, or $368.0 million; and investment securities increased 3 percent, or $67.7 million. The growth in the period-end balance sheet was partially funded by a 9 percent, or $541.2 million, increase in interest-bearing core deposits. The balance sheet growth is attributable primarily to internal growth and the purchase acquisition of Financial Investment Corporation (parent company of First National Bank of Springdale in Springdale, Arkansas, acquired on October 1, 1995, with assets of $349 million at acquisition). Excluding this acquisition, net loans grew 7 percent and interest-bearing core deposits grew 6 percent from June 30, 1995. Comparing average balances from second quarter 1995, total assets grew 15 percent, or $1.6 billion; net loans grew 9 percent, or $604.3 million, and interest-bearing core deposits grew 8 percent, or $485.3 million. Net commercial loans grew 7 percent, or $212.0 million, and net consumer loans grew 12 percent, or $271.1 million. Commercial loans represented 45 percent and consumer loans represented 35 percent of total loans. Credit card receivables grew 13 percent, or $60.9 million, as a result of targeted marketing campaigns. The permanent mortgage portfolio was relatively flat from the previous year, and real estate construction grew 24 percent, or $51.8 million. Excluding the purchase acquisition of Financial Investment Corporation, average net loans grew 7 percent and average interest-bearing core deposits grew 5 percent from the second quarter of 1995. With the increase in mortgage originations, average mortgage warehouse loans held for sale increased 125 percent, or $672.5 million, from the second quarter of 1995. This growth was funded by an increase of 34 percent, or $845.2 million, in purchased funds from the second quarter of 1995. YEAR-TO-DATE COMPARISON: Year-to-date average assets increased 15 percent between 1995 and 1996. In comparing the 1995 and 1996 six month periods, net loans grew 10 percent. Commercial loans grew 9 percent and consumer loans grew 12 percent over the same six month period. This growth was primarily funded with interest-bearing core deposits, which grew 8 percent. Credit card receivables grew 13 percent and mortgage warehouse loans grew 146 percent. The growth in the mortgage warehouse was primarily funded by an increase in purchased funds of 33 percent from the previous year. Excluding the purchase acquisition of Financial Investment Corporation, net loans grew 8 percent and interest-bearing core deposits grew 4 percent for the six month period. 11 NET INTEREST MARGIN QUARTERLY COMPARISON: The net interest margin (margin) percentage improved from 3.91 for the second quarter of 1995 to 4.09 for the second quarter of 1996. As shown in the Net Interest Margin Computation Table, the net interest spread (the difference between the yield on earning assets and the rates paid on interest-bearing liabilities) increased 34 basis points while the effect of net free funds decreased 16 basis points. The improvement in the net interest spread reflects the expiration of the amortization of a basis swap in May 1996, which improved margin 10 basis points. NET INTEREST MARGIN COMPUTATION TABLE
Second Quarter -------------- 1996 1995 - --------------------------------------------------------------------------- Yield on earning assets 8.04% 8.17% Rate paid on interest-bearing liabilities 4.69 5.16 - --------------------------------------------------------------------------- Net interest spread 3.35 3.01 Effect of interest-free sources .66 .82 Loan fees .10 .10 FRB interest and penalties (.02) (.02) - --------------------------------------------------------------------------- Net interest margin 4.09% 3.91% ===========================================================================
The net interest margin is affected by the activity levels of and related funding for First Tennessee's specialty lines of business, as these nonbank business lines generally produce lower margins than traditional retail/commercial banking activities. Consequently, First Tennessee's consolidated margin cannot readily be compared to that of other bank holding companies. The mortgage warehouse balance grew almost 125 percent between the second quarters of 1995 and 1996, adding $9.1 million to net interest income in 1996 compared to $4.9 million in the second quarter of 1995. Because the spread between the yields on mortgage loans temporarily in the warehouse and the related short-term funding rates is significantly less than the comparable spread earned in the retail/commercial bank, the consolidated margin was negatively impacted 15 basis points in the second quarter of 1996 compared with 3 basis points in the second quarter of 1995. The bond division contributed $.7 million more to net interest income in the second quarter of 1996 than in the same period in 1995. With its strategy to hedge inventory in the cash markets, the bond division also tends to negatively impact the consolidated net interest margin, since net interest income is effectively eliminated on these positions. This negative impact was 10 basis points in the second quarter of 1996, an improvement from the negative 15 basis points impact in the second quarter of 1995. The decline in the net interest margin in the other specialty lines of business, as shown in the Net Interest Margin Composition Table, came from the decreasing value of customer demand deposits that earn credit to pay for First Express services and from competitive pricing pressures experienced in credit card. The retail/commercial bank margin improved from 4.04 percent in the second quarter of 1995 to 4.29 percent in the second quarter of 1996. With First Tennessee's existing balance sheet mix and the current interest rate environment, the retail/commercial bank's margin is expected to remain stable throughout the balance of 1996, and going forward, the consolidated margin will improve with the expiration of the basis swap and will continue to be influenced by the activity levels of the specialty lines of business. NET INTEREST MARGIN COMPOSITION TABLE
Second Quarter --------------- 1996 1995 - --------------------------------------------------------------------------- Retail/commercial bank 4.29% 4.04% Basis swap (.09) (.19) Bond division (.10) (.15) Mortgage banking (.15) (.03) Other specialty lines of business .14 .24 - --------------------------------------------------------------------------- Total net interest margin 4.09% 3.91% ===========================================================================
12 YEAR-TO-DATE COMPARISON: Year-to-date net interest margin improved from 3.92 percent to 4.01 percent. This improvement came from the reasons noted above in the quarterly comparison discussion. PROVISION FOR LOAN LOSSES/ASSET QUALITY The provision for loan losses increased from $3.2 million for the second quarter of 1995 to $7.6 million for the second quarter of 1996. The higher provision reflects a higher level of allowance for loan losses commensurate with loan growth. In addition, the level of provision was increased due to inherent losses reflecting economic trends. The increase in net charge-offs was primarily related to consumer and credit card lending as the ratio of net charge-offs to total loans increased to .31 percent for the second quarter of 1996 compared with .19 percent from the same period in 1995. Although increased from the prior year's low level, credit card net charge-offs remain favorable to industry averages. The increase in 90 day past due loans reflects the overall trends in both permanent mortgage and the consumer loan delinquencies which are in line with current market trends. The allowance for loan losses to loans has remained stable over the past few quarters and was 1.56 percent at June 30, 1996, and 1.61 percent at June 30, 1995. At June 30, 1996, First Tennessee had no concentration of 10 percent or more of total loans in any single industry.
ASSET QUALITY INFORMATION June 30 (Dollars in thousands) ----------------------- 1996 1995 - ----------------------------------------------------------------------- Nonaccrual loans $ 14,336 $ 15,719 Restructured loans - 72 - ----------------------------------------------------------------------- Total nonperforming loans 14,336 15,791 - ----------------------------------------------------------------------- Foreclosed real estate 8,714 13,732 Other assets 925 1,785 - ----------------------------------------------------------------------- Total nonperforming assets $ 23,975 $ 31,308 ======================================================================= Loans 90 days past due $ 32,157 $ 23,078 Potential problem assets 79,063 72,742 Allowance for credit losses: Beginning balance $114,631 $109,862 Acquisitions - 881 Provision for loan losses 7,559 3,216 Charge-offs (9,159) (8,736) Loan recoveries 3,447 5,524 - ----------------------------------------------------------------------- Ending balance $116,478 $110,747 ======================================================================= Allowance as a percentage of loans 1.56% 1.61% Nonperforming loans to total loans .19 .23 Nonperforming assets to total loans, foreclosed real estate and other assets .32 .45 Allowance to nonperforming assets 485.8 353.7
NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS June 30 ---------------------- 1996 1995 - ------------------------------------------------------------------------ Commercial and commercial real estate (.13)% (.18)% Consumer .27 .15 Credit card receivables 3.98 3.29 Permanent mortgage (.04) .03 Total .31 .19 - ------------------------------------------------------------------------
13 NONINTEREST EXPENSE QUARTERLY COMPARISON: Total noninterest expense (operating expense) for the second quarter of 1996 increased 16 percent, or $23.5 million, over the same period in 1995. Employee compensation, incentives, and benefits (staff expense), the largest category, increased 14 percent, or $11.4 million. Staff expense includes commissions paid in several lines of business, such as the bond division, mortgage banking, and the venture capital companies. As the revenues increase or decrease in these business lines, the commissions change accordingly. Commissions and incentives in mortgage banking increased 52 percent and decreased 21 percent in the bond division from the second quarter of 1995. With higher origination volume and a larger servicing portfolio, amortization and hedging of mortgage servicing rights increased $1.9 million. The increase in advertising and public relations primarily resulted from targeted marketing expansion in the credit card business line in response to an increasingly competitive environment. The decrease in the deposit insurance premium reflects the cutback in the FDIC premium rate to zero at the beginning of 1996. The remaining expense in this category is the Savings Association Insurance Fund (SAIF) assessment on deposits that First Tennessee acquired in 1992 and a small FDIC administrative fee. Excluding purchase acquisitions since the second quarter of 1995, operating expense grew 1 percent in the retail/commercial bank and 26 percent in the specialty lines of business. YEAR-TO-DATE COMPARISON: For the first six months of 1996, noninterest expense increased 18 percent over the same period last year with the purchase acquisitions and one-time acquisition costs not materially impacting this increase. Excluding purchase acquisitions and one-time acquisition costs, operating expenses grew 1 percent in the retail/commercial bank and 35 percent in the specialty lines of business for the same reasons noted above. In addition, during the first quarter of 1996, mortgage banking recognized approximately $2 million related to back office consolidation. CAPITAL Shareholders' equity at June 30, 1996, was $892.3 million, an increase of $65.6 million, or 8 percent, from June 30, 1995. As a result of stock repurchased in the latter part of 1995, the period-end equity to assets ratio declined from 7.12 percent to 6.89 percent (June 1995 to June 1996). From time to time, First Tennessee will evaluate the level of capital and take action designed to generate or use the capital (i.e., acquisitions, stock buybacks, etc.) to maximize the benefit to shareholders. At June 30, 1996, the corporation's Tier 1 capital ratio was 8.78 percent, the Total capital ratio was 11.66 percent and the Leverage ratio was 6.37 percent. On June 30, 1996, First Tennessee's bank subsidiaries had sufficient capital to qualify as well-capitalized institutions under the regulatory capital standards. OFF-BALANCE SHEET ACTIVITY In the normal course of business, First Tennessee is a party to financial instruments that are not required to be reflected on a balance sheet. First Tennessee enters into transactions involving these instruments to meet the financial needs of its customers and manage its own exposure to fluctuations in interest rates. These instruments are categorized into those "Held or issued for purposes other than broker/dealer operations" and those "Held or issued for broker/dealer operations" as noted in the Off-Balance Sheet Financial Instruments table. 14 OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AT JUNE 30, 1996
Notional (Dollars in millions) Value - --------------------------------------------------------------------- HELD OR ISSUED FOR PURPOSES OTHER THAN BROKER/DEALER OPERATIONS Commitments to extend credit: Consumer credit card lines $1,606.5 Consumer home equity 282.7 Commercial real estate and construction and land development 353.7 Mortgage banking 826.6 Other 1,456.6 Commercial and standby letters of credit 238.4 Foreign exchange contracts, net position .4 Interest rate risk management activities: Interest rate swap receive fixed/ pay floating - amortizing 290.8 Mortgage banking Commitments to sell loans, net position 1,423.7 Put options purchased 924.5 HELD OR ISSUED FOR BROKER/DEALER OPERATIONS Forward contracts: Commitments to buy $1,010.2 Commitments to sell 1,028.0 Futures contracts: Commitments to buy 54.5 Options contracts: Written option contracts 2.0 Purchased option contracts 2.0 When-issued securities: Commitments to buy .2 Commitments to sell .2 Securities underwriting commitments 1.8 - ---------------------------------------------------------------------
15 Part II. -------- OTHER INFORMATION Items 1,2, 3, and 5. - -------------------- As of the end of the second quarter, 1996, the answers to Items 1,2, 3, and 5 were either inapplicable or negative, and therefore, these items are omitted. Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- (a) The Company's Annual Meeting of Shareholders was held April 16, 1996. (b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There were no solicitations in opposition to management's nominees for election to Class III (Messrs. Cantu, Cates, Haslam and Horn). The nominees were elected for a three-year term, or until their respective successors are duly elected and qualified. Directors continuing in office are Ms. Roman and Messrs. Blattberg, Martin, Orgill, Rose, Sansom, and Street. (c) At the Annual Meeting, the shareholders also ratified the appointment of Arthur Andersen LLP as independent auditors for the year 1996. The shareholders vote was as follows:
1. Nominees For Witheld -------- --- ------- Carlos H. Cantu 53,265,316 302,571 George E. Cates 53,280,273 287,614 James A. Haslam, III 53,278,934 288,954 Ralph Horn 53,319,802 248,086
For Witheld Abstain --- ------- ------- 2. Ratification of Auditors 53,250,121 218,894 98,647
There were no "broker non-votes" with respect to any of the nominees or the ratification of the auditors and no abstentions with respect to any of the nominees. Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------ (a) Exhibits furnished in accordance with the provisions of the Exhibit Table of Item 601 of Regulation S-K are included as described in the Exhibit Index which is a part of this report. Exhibits not listed in the Exhibit Index are omitted because they are inapplicable. (b) No reports on Form 8-K were filed during the second quarter of 1996. 16 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: 8/13/96 By: Elbert L. Thomas Jr. ---------------- -------------------------------- Elbert L. Thomas Jr. Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer 17 EXHIBIT INDEX
Exhibit No. Exhibit Description Page No. - ----------- ------------------- -------- 3(ii) Bylaws of the Corporation, as amended Filed Herewith 11 Statement re Computation of Per Share Earnings. Filed Herewith 27 Financial Data Schedule (for SEC use only) Filed Herewith
EX-3.(II) 2 BYLAWS OF THE CORPORATION 1 EXHIBIT 3 (ii) BY LAWS OF FIRST TENNESSEE NATIONAL CORPORATION (As Amended and Restated March 15, 1977) ARTICLE I. OFFICES 1. The principal office shall be in Memphis, Tennessee. 2. The Corporation may also have offices in such other places as the Board of Directors may from time to time appoint, or the business of the Corporation may require. ARTICLE II. SHAREHOLDERS' MEETINGS 1. 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 office of the Corporation in Memphis, Tennessee. 2. 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 day not a legal holiday, at a time to be fixed by resolution of the Board of Directors; at which meeting they shall elect by ballot, by plurality vote, a Board of Directors and may transact such other business as may properly come before the meeting. 3. The holders of a majority of the shares issued and out- standing and entitled to vote thereat, present in person or repre- sented by proxy, shall be requisite, and shall constitute a quorum at all meetings of the shareholders, for the transaction of busi- ness, except as otherwise provided by law, by the Charter of Incorporation, and these Bylaws. If, however, such majority shall not be present or represented at the meeting of the shareholders, the shareholders entitled to vote thereat, present in person or by Proxy, shall have power to adjourn the meeting from time to time 2 without notice other than announcement at the meeting until the requisite amount of voting shares shall be present. At such ad- journed 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. 4. Written notice of the annual meeting stating the place, day and hour of the meeting shall be mailed to each shareholder entitled to vote thereat at such address as appears on the stock records of the Corporation, at least ten (10), but not more than sixty (60), days prior to the meeting. 5. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribe by statute, may be called (i) by the Chairman of the Board of Directors, and shall be called by the Chairman of the Board of Directors or the Secretary at the request in writing of a majority of the Board of Directors, or (ii). by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. Such call shall state the purpose or purposes of the proposed meeting. 6. Written notice of a special meeting of shareholders, stating the place, day and hour and the purpose or purposes for which the meeting is called and the person or persons calling the meeting, shall be mailed, postage prepaid, at least ten (10) days before the date of such meeting, to each shareholder entitled to vote thereat at such address as appears on the stock transfer records of the Corporation. 7. Special meetings of the shareholders may be held at any time on written waiver of notice or by consent of all of the share- holders. 8. Any shareholder may waive notice of any meeting either before, at or after the meeting. 9. At each meeting of shareholders, each shareholder shall have one vote for each share of stock having voting power registered in his 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. -2- 3 10. Any director may be removed by the shareholders with or without cause, at any time by the affirmative vote of the holders of a majority of the stock entitled to vote, by resolution adopted at any meeting of shareholders, whether an annual or a special meeting. ARTICLE III DIRECTORS 1. The business and affairs of the Corporation shall be directed by a Board of Directors, which shall consist of 19 members. Directors need not be shareholders. 2. Each director shall serve for the term of one year and until his successor shall have been duly elected and qualified: subject, however, to the right of the removal of any director at any time by the affirmative vote of the majority of the shares entitled to vote by resolution adopted at any meeting of shareholders, whether an annual or a special meeting. 3. The directors may hold their meetings at the office of the Corporation in Memphis, Tennessee, or at such other place or places, either in the State of Tennessee or elsewhere, as they may from time to time determine. 4. A majority of the Board of Directors at a meeting duly assembled shall be necessary to constitute a quorum for the trans- action of business, and 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, by the Charter, or these Bylaws. 5. As compensation, the directors, for their services, shall be paid such amounts at such time as may, from tine to time, be determined by resolution of the entire Board of Directors; provide that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and being compensated therefor. 6. The directors, by resolution adopted by a majority of the entire Board, may designate any executive committee, consisting of three or more directors, and other committees, consisting of three or more directors, officers or employees, and may delegate to such -3- 4 committee or committees all such authority of the Board that it deems desirable, including, without limitation, authority to elect 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, unless specifically so authorized by the Board, shall have and exercise the authority of the Board to: (a) Adopt, amend or repeal the Bylaws; (b) Submit to shareholders any action that needs shareholders' authorization under Chapters 1 through 14, Title 48, Tennessee Code Annotated, and any and all amendments and supplements thereto; (c) Fill vacancies in the Board or in any committee; and (d) Declare dividends or make other corporate distributions. Regular and special meetings of committees may be held with or with- out notice as prescribed by resolution of the directors. ARTICLE IV. POWERS OF DIRECTORS 1. The Board of Directors shall have, in addition to such powers as are hereinafter expressly conferred on it and all such powers as may be conferred on it by law, all such powers as may be exercised by the Corporation, subject to the provisions of the law, the Charter and these Bylaws. 2. The Corporation shall be managed by the Board of Directors, which shall exercise all powers conferred under the laws of the State of Tennessee, including without limitation the powers speci- fied in the Charter of the Corporation, as amended, and the power: (a) To purchase or otherwise acquire property, rights or privileges for the Corporation which the Corpora- tion has power to take, at such prices and on such terms as the Board of Directors may deem proper; (b) To pay for such property, rights or privileges in whole or in part with money, stocks, bonds, deben- tures or other securities of the Corporation, or -4- 5 by the delivery of other property of the Corporation; (c) To create, make and issue mortgages, bonds, deeds of trust, trust agreements and negotiable or trans- ferable instruments end securities, secured by mortgage or otherwise, and to do every act and thing necessary to effectuate the same; (d) To elect the corporate officers and fix their salaries; to appoint employees and trustees; and to dismiss them at its discretion; to fix their duties and emoluments, and to change them from time to time; and to require security as it may deem proper; (e) To confer on any Officer of the Corporation the power of selecting, discharging or suspending such employees; and (f) To determine by whom and in what manner the Corporation's bills, notes, receipts, acceptances, guaranties, endorse- ments, checks, releases, contracts or other documents shall be signed. ARTICLE V. MEETINGS OF DIRECTORS 1. Following each annual election of directors, the newly elected directors shall meet for the purpose of organization, the election 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 written consent of the directors. 2. Meetings of the directors shall be held at least once each calendar quarter at such time and place as the Board of Directors may by resolution determine. Notice of the time and place of the meetings shall be given as specified for a special meeting. 3. Special meetings of the directors may be called by the Chairman or the Board of Directors or the President on two days' -5- 6 notice in writing or on one day's notice by telegram to each direc- tor, and shall be called by the Chairman in like manner on the written request of two directors. The notice shall state thou place, day and hour where it is to be held. 4. Special meetings of the directors may be held at any time on written waiver of notice or by consent of all the directors. 5. A majority of the directors shall constitute a quorum, 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. 6. The directors may 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. ARTICLE VI. OFFICERS 1. The officers of the Corporation shall be chosen at the annual organizational meeting following the annual meeting of share- holders, for a term of one (1) year and until their successors are elected and qualified. The officers of the Corporation shall con- sist of a Chairman of the Board of Directors, a President, such number of Vice Chairmen as the Board may from time to time determine and appoint, a Financial Vice President, a Secretary, a Treasurer, a Controller and an Auditor, and such number of Executive Vice Presidents. Senior Vice Presidents and Vice Presidents, Assistant Secretaries, Assistant Controllers, Assistant Auditors, and Corporate Officers as the Board may from time to time determine and appoint. 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 of Directors, need not be directors or shareholders. -6- 7 2. The Board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. 3. If the office of any officer or officers appointed by the Board of Directors becomes vacant for any reason, the vacancy may be filled by the Board of Directors. 4. The officers of the Corporation shall hold office until their successors are elected and qualified. Any officer shall be subject to removal at any time with or without cause by the affirma- tive vote of a majority of the Board of Directors. 5. The salaries and compensation of all officers of the Corporation shall be fixed by the Board. ARTICLE VII. CHAIRMAN OF THE BOARD OF DIRECTORS 1. The Chairman of the Board of Directors shall be the Chief Executive Officer of the Corporation; he shall preside at all meetings of the shareholders; he shall have general management of the business of the Corporation and shall exercise general super- vision over all of its affairs and shall see that all orders and resolutions of the Board are carried into effect. 2. He shall have the general powers and duties of supervision. and management usually vested in the office of Chairman of the Board of Directors and Chief Executive Officer of a Corporation. ARTICLE VIII. THE PRESIDENT 1. The President, in the absence of the Chairman of the Board, shall preside at all meetings of shareholders, and he shall be charged with the active management and administration of the business of the Corporation with power to make all contracts in the conduct of the regular and ordinary business of the Corporation; and he may appoint and discharge agents and employees of the Corporation and fix their compensation, subject to the general supervisory powers -7- 8 of the Chairman of the Board of Directors and of the Board of Directors, and do and perform such other duties as from time to time may be assigned to him by the Board of Directors and as may be authorized by law. ARTICLE IX. VICE CHAIRMAN 1. Vice Chairmen shall perform such of the duties and exer- cise such of the powers as may be prescribed by the Board of Direc- tors or the Chairman of the Board of Directors. ARTICLE X. CHAIRMAN OF THE CREDIT POLICY COMMITTEE 1. The Chairman of the Credit Policy Committee shall perform such of the duties and exercise such of the powers as may be pre- scribed by the Board of Directors or the Chairman of the Board of Directors. ARTICLE XI. FINANCIAL VICE PRESIDENT 1. The Financial Vice President shall perform such of the duties and exercise such of the powers as may be prescribed by the Board of Directors or the Chairman of the Board of Directors. ARTICLE XII. VICE PRESIDENT 1. Vice Presidents shall perform such of the duties and exercise such of the powers as may be prescribed by the Board of Directors, the Chairman of the Board of Directors or the President. ARTICLE XIII. SECRETARY 1. The Secretary shall attend all sessions of the Board and of the shareholders and record all votes and the minutes of all -8- 9 proceedings in a book to be kept for that purpose. He shall give or cause to be given notice of all meetings or the shareholders and of the Board of Directors and shall perform such other duties as are incident to his office or as may be prescribed by the Board of Directors or the Chairman of the Board of Directors. 2. In the absence or disability of the Secretary, the Assistant Secretary 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 or the Chairman of the Board of Directors shall prescribe. ARTICLE XIV. TREASURER 1. The Treasurer shall have custody of the funds and securi- ties 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 such depositories as may be designated by the Board of Directors. 2. He shall disburse the funds of the Corporation as may be ordered by the Board, or by the Chairman of the Board of Directors, or by the President, taking proper vouchers for such disbursements, and shall render to the Board, the Chairman of the Board, or the President, whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and at a regular meeting of the Board preceding the annual shareholders' meeting, a like report for the preceding year. 3. He shall keep or cause to be kept an account of stock registered and transferred in such manner and subject to such regulations as the Board of Directors may prescribe 4. He shall give the Corporation a bond, if required by the Board of Directors, in such sum and in form and with security satis- factory to the Board of Directors for the faithful performance of the duties of his office end the restoration to the Corporation, in case of his death, resignation or removal from office, of all books, -9- 10 papers, vouchers, money and other property of whatever kind in his possession, belonging to the corporation. He shall perform such other duties as the Board of Directors may from time to time pre- scribe or require. 5. In the absence or disability of the Treasurer, the Assis- tant 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 or the Chairman of the Board of Directors shall prescribe. ARTICLE XV. AUDITOR 1. The Auditor shall perform such of the duties and exercise such of the powers as may be prescribed by the Board of Directors. 2. In the absence or disability of the Auditor, the Assistant Auditor shall perform all the duties and exercise all the powers of the Auditor and shall perform such other duties as the Board of Directors shall prescribe. ARTICLE XVI. CONTROLLER 1. The Controller shall assist the management of the Corpora- tion in setting the financial goals and policies of the Corporation; shall provide financial and statistical information to the share- holders and to the management of the Corporation and shall perform such other duties and exercise such other powers as may be pre- scribed by the Board of Directors, the Chairman of the Board of Directors or the President. 2. In the absence or disability of the Controller, the Assis- tant Controller shall perform all duties and exercise all Powers of the Controller and shall perform such other duties as the Board of Directors or the Chairman of the Board of Directors shall prescribe. -10- 11 ARTICLE XVII CORPORATE OFFICER 1. Corporate Officers shall have such authority and perform such of the duties and exercise such of the powers as may be pre- scribed by the Board of Directors, the President or any Vice Chair- man. ARTICLE XVIII. DUTIES OF OFFICERS MAY BE DELEGATED 1. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board 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, provided a majority of the entire Board concur therein. ARTICLE XIX. CERTIFICATES OF STOCK 1. The certificates of stock of the Corporation shall be numbered, shall be entered in the book or records of the Corpora- tion as they are issued, and shall be signed by the Chairman of the Board and any one of the following: the President, the Treasurer or the Secretary. Each certificate shall include the following upon the face thereof: (a) That the Corporation is organized under the laws of this state; (b) The name of the Corporation; (c) The name of the person to whom issued; (d) The number and class of shares, and the designation of the series, if any, which such certificate represents; (e) The par value of each share represented by such certifi- cate: or a statement that the shares are without par value; and (f) Such other provisions as the Board may from time to time require. -11- 12 Either or both of the signatures upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or regis- tered by a registrar other than an officer or employee of the Corporation. ARTICLE XX. TRANSFERS OF STOCK AND RECORD DATE 1. Transfers of shares of stock shall be made upon the books of the Corporation by the person named in the certificate or by an attorney, lawfully constituted in writing, and upon surrender of the 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 may from time to time prescribe. The transfer books may be closed by the Board 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 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. The record date shall not be less than 10 days prior to the date on which the particular action requiring such determination is to be taken. All certificates surrendered the 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 prescribe by Article XXII of these Bylaws. ARTICLE XXI REGISTERED SHAREHOLDERS 1. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact there- of; 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 -12- 13 person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Tennessee. ARTICLE XXII. LOST CERTIFICATE 1. 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 XXIII. FISCAL YEAR. 1. 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 shall have power to determine when the said fiscal year shall begin and end. ARTICLE XXIV. DIVIDENDS 1. 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. 2. 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 discre- tion, 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. -13- 14 ARTICLE XXV SEAL 1. 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." ARTICLE XXVI. NOTICES 1. Whenever under the provisions of these Bylaws notice is required to be given to any director, officer or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing by depositing the same in the United States Mail, or by telegram addressed to such shareholder, at such address as appears on the stock transfer books of the Corporation, and addressed to such director or officer at such address as appears on the records of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus deposited, or the telegram sent. 2. Any director, officer or shareholder may waive any notice of any meeting required to be given under these Bylaws either be- fore, at or after the meeting. ARTICLE XXVII. AMENDMENTS 1. The Board of Directors shall have power to make, amend and repeal the Bylaws of the Corporation by vote of a majority of all the directors, at any regular or special meeting of the Board. 2. The shareholders may make, alter, amend and repeal the Bylaws of this Corporation at any annual meeting or at a special meeting called for that purpose, and all Bylaws made by the direc- tors may be altered or repealed by vote of the majority of the shareholders. -14- 15 ARTICLE XXVIII INDEMNIFICATION 1. If any current or former director or officer of First Tennessee National Corporation ("First Tennessee") shall be wholly successful, on the merits or otherwise, in any threatened or actual criminal or civil suit or proceeding other than by or in the right of First Tennessee to procure a judgement in its favor, including any suit or proceeding instituted as a result of such director or officer serving another corporation or other business entity in any capacity at the request of First Tennessee, which was commenced by reason of the fact that he is or was a director or officer of First Tennessee or served such other corporation or other business entity in any capacity, he shall be indemnified by First Tennessee against all reasonable expenses, including attorney fees, actually and necessarily incurred as a result of such threatened or actual suit or proceeding, or any appeal therein. 2. If any current or former director or officer of First Tennessee shall be wholly successful, on the merits or otherwise, in any actual suit by or in the right of First Tennessee to procure a judgment in its favor, which was commenced by reason of the fact that he is or was a director or officer of First Tennessee, he shall be indemnified by First Tennessee against all reasonable expenses; including attorney fees, actually and necessarily incurred as a result of such suit or proceeding, or any appeal therein. 3. If any current or former director or officer of First Tennessee has not been wholly successful, on the merits or other- wise, in defense of a threatened or actual suit or proceeding of the character described in Section 1 of this bylaw or a civil action of the character described in Section 2, unless ordered by the Court under Section 48-410 of the Tennessee Code Annotated ("T.C.A."), he shall be indemnified by First Tennessee (1) in a suit or proceeding of the character described in Section 1, against judgments and fines; and (2) in a suit or proceeding of the character described in Sections 1 or 2, against amounts paid in settlement and reasonable expenses, including attorney fees, actually and necessarily incurred as a result of such suit or proceeding, or any appeal therein, only if authorized in the specific case: -15- 16 a. By the Board of First Tennessee acting by a quorum consisting of Directors who are not parties to such action or proceeding upon a finding that: (1) In a suit or proceeding other than by or in the right of First Tennessee, the director or officer has acted in good faith for a purpose which he has reasonably believed to be in the best interest of First Tennessee, and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful; or (2) In a suit or proceeding by or in the right of First Tennessee, the director or officer has not breached his duty to First Tennessee under T.C.A. 48-813; and (3) In the case of any settlement, in addition to the appropriate standard of conduct under 3.a. (1) or (2), the settlement is in the best interest of First Tennes- ee; and if the settlement has been approved by a court, that the indemnification would not be inconsistent with any condition with respect to indemnification imposed by the court in approving the settlement. b. If a quorum under 3.a. is not available with due diligence: (1) By the Board of First Tennessee upon the opinion in writing of independent legal counsel that indemnification is proper in the circumstances because the applicable standard of conduct set forth in 3.a.(1), (2) or (3) has been met by such director or officer; or (2) By the shareholders of First Tennessee upon finding that the director or officer has met the applicable standard of conduct set forth in 3.a.(1), (2) or (3). 4. A director or officer of First Tennessee shall be deemed to be serving another corporation or other business entity at the request of First Tennessee only if such request is reflected in the records of a committee appointed by the Board of first Tennessee for the purpose of making such requests. 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by first Tennessee in advance of the -16- 17 final disposition of such action, suit or proceeding if authorized by the procedure established under 3.a. or b. of this bylaw. 6. If any expenses or other amounts are paid by way of in- demnification otherwise than by court order under T.C.A. 48-410 or action by the shareholders, First Tennessee shall give notice to the shareholders as provided in T.C.A. 48-411(3). 7. Every employee of First Tennessee shall be indemnified by First Tennessee to the same extent as directors or officers of First Tennessee. 8. a. The right of indemnification set forth above shall not be deemed to restrict any right of indemnifica- tion provided to any director, officer or employee of First Tennessee or any of its subsidiaries pursuant to a contract, agreement or resolution executed upon the approval or ratification of the Board of First Tennessee acting by a quorum of dis- interested directors, provided that any such con- tract shall not enlarge the rights of indemnification permitted under the Tennessee Central Corporation Act. b. This bylaw shall not be construed to affect or re- strict in any manner any right of indemnification granted by First Tennessee to persons other than directors, officers and employees of First Tennessee or any of its subsidiaries. 9. a. No combination of rights shall permit any current or former director, officer or employee of First Tennes- see to receive a double recovery. b. The right of indemnification provided in this bylaw shall inure to the benefit of the heirs, executors or administrators of each such current or former direc- tor, officer of employee of First Tennessee and shall or in no event be construed to enlarge the rights of indemnification permitted under the Tennessee General Corporation Act. -17- 18 ARTICLE XXIX RETIREMENT 1. Directors. Any director who shall attain the age of seventy (70) shall be automatically retired from the Board at time of the next succeeding annual meeting of shareholders. How- ever, a director may be retired before age seventy (70) as herein- after provided. Effective December 31, 1978, directors shall be retired from the Board as follows: (1) The retirement age for Directors will be sixty-five (65). Any Director who becomes sixty-five prior to December 31; 1978 or any December 31 thereafter will be retired as of the December 31 following his sixty-fifth birthday. (2) For the purpose of maintaining Boards of active business and professional men, Directors leaving their present occupation or the position held at their last election (by retirement or otherwise), will be expected to tender their resignation from the Board upon such occasion. The resig- nation will ordinarily be accepted unless (a) the Director assumes another management position deemed appropriate by the Board for continuation, or (b) the Director is so en- gaged in some specific project for the Board as to make his resignation detrimental to the Corporation. Under this circumstance, the Board may elect to set a subsequent date for his retirement timed to coincide with the comple- tion of the project. (3) Directors who are also Officers of the Corporation shall be retired from the Board on the date they retire from or otherwise discontinue active service with the Corporation or its affiliates. Any director of the Corporation who has retired from the Board is eligible for election to a position on the Honorary Advisory Board, the duties of which shall be as specified by such resolutions as the Board of Directors may from time to time adopt. Membership on the Honorary Advisory Board shall continue at the discretion of the Board of Directors. -18- 19 2. Officers and Employees. As each officer or employee attains the age of sixty-five years, his employment by the Corpora- tion shall automatically be terminated and his salary discontinued on the first day of the month coincident with or immediately following his sixty-fifth birthday; however, the Board of Directors, in its discretion, may continue any such officer or employee in service and designate the capacity in which he shall serve, and shall fix the remuneration he shall receive. The Board may also re-employ any former officer who had theretofore been retired. ARTICLE XXX. CONVEYANCES 1. All transfers and conveyances of real estate made by the Corporation shall be executed by any officer of the Corporation, ex- cept the Auditor and Assistant Auditor, with seal attested by any other officer of the Corporation. 2. Any officer of the Corporation, except the Auditor and Assistant Auditor, is authorized and empowered to sell, assign, transfer, and deliver any and all bonds, stocks, or other indicia of ownership of personal property which may now or hereafter be assigned to it, or owned or held by it, and to execute releases of assignments and conveyances made to the Corporation or instruments in which the Corporation is named beneficiary. -19- 20 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 17, 1978 RESOLVED, that Article III, Section 1, of the Bylaws of the Company be, and hereby is, amended to provide for a board of directors to consist of 18, rather than 19, members effective as of April 18, 1978, by deleting the number 19 from said section of the Bylaws and substituting therefor the number 18. RESOLVED, that Article XXIX, Section 1, of the Bylaws of the Company be, and hereby is, amended and restated so as to read as follows: "1. Directors. Any director who shall attain the age of seventy (70) shall be automatically retired from the Board at the time of the next succeeding annual meeting of shareholders. However, a director may be retired before age seventy (70) as hereinafter provided. Effective December 31, 1978, directors who are not also officers of the Corporation or its affiliates shall be retired- from the Board as follows: (1) Any director who shall attain the age of sixty- five (65) shall be automatically retired from the Board at the time of the next succeeding annual meeting of shareholders. (2) For the purpose of maintaining Boards of active business and professional men, directors leaving their present occupation or the position held at their last election (by retirement or otherwise), will be expected to tender their resignation from the Board upon such occasion. The resignation will ordinarily be accepted unless (a) the director assumes another management position deemed appro- priate by the Board for continuation, or (b) the director is so engaged in some specific project for the Board as to make his resignation detri- mental to the Corporation. Under this circumstance, the Board may elect to set a subsequent date for his retirement timed to coincide with the completion of the project. Effective January 17, 1978, directors who are also officers of the Corporation or its affiliates shall be retired from the Board on the date they retire from or otherwise discontinue active service with the Corporation or its affiliates. Any director of the Corporation who has retired from the Board is eligible for election to a position on the Honorary Advisory Board, the duties of which shall be as specified by such resolutions as the Board of Directors may from time to time adopt. Membership on the Honorary Advisory Board shall continue at the discretion of the Board of Directors." A-1, p.1 21 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION MAY 16, 1978 RESOLVED, that Article XXIX, Section 1 of the Bylaws of the Company be, and in hereby, amended to delete the word "Advisory" from the phrase "Honorary Advisory Board" where- ever that phrase appears in said section. A-1, p.3 22 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION DECEMBER 19, 1978 RESOLVED, that as a result of the Age Discrimination in Employment Act Amendments of 1978, Article XXIX, Section 2, of the Bylaws of the Company be, and hereby is, amended and restated as of January 1, 1979, so as to read as follows: "2. Officers and Employees. As each officer or employee attains the age of 70 years, his or her employment by the Corporation shall auto- matically be terminated and his or her salary discontinued on the first day of the month coincident with or immediately following the 70th birthday. Provided, however, each officer or employee who meets the exclusion for execu- tives and top policy makers under the Age Discrimination in Employment Act; as amended from time to time, shall automatically be ter- minated and his or salary discontinued on the first day of the month coincident with or immediately following the 65th birthday. 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." A-1, p.5 23 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION APRIL 15, 1980 RESOLVED, that Article III, Section 6 of the Bylaws be, and hereby is, amended to provide for committees to consist of two, rather than three, members by deleting the number three, wherever it appears, from said section of Bylaws and substituting therefor the number two. 24 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION OCTOBER 21, 1980 RESOLVED, that Article VI, Section 5, of the Bylaws of the Company be, and hereby is, amended and restated to read as follows: "5. The Board, or a committee thereof, shall fix the remuneration of executive officers. The renumeration of non-executive officers shall be fixed by the Board or by management under such policies and procedures as shall be established by the Board or a committee there- of." 25 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 19, 1982 RESOLVED, that Article V, Section 2, of the Bylaws of the Company be, and hereby is, amended by deleting the words "at least once each calendar quarter" from said section of Bylaws. 26 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION January 20, 1987 A new section 11 of Article II of the Bylaws of the Company is adopted as follows: "11. 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 or at the direction 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 otherwise properly brought before the annual 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 30 days nor more than 60 days prior to the date of the meeting; provided, however, that if less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of the 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 27 conducted at a meeting of shareholders except in accordance with the procedures set forth in this Section 11. 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 he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted." 28 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION January 20, 1987 A new Section 7 of Article III of the Bylaws of the Company is adopted as follows: "7. Only persons nominated in accordance with the procedures set forth in this Section 7 shall be eligible for election as directors. Nominations of persons for election to the Board may be made at a meeting of shareholders (i) by or at the direction of the Board, 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 7. Such nominations, other than those made by or at the direction of the Board, 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 30 days nor more than 60 days prior to the date of a meeting; provided, however, that if fewer than 40 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director (a) the name, age, business address and residence address of such person. (b) the principal occupation or employment of such person, (c) the class and number of shares of the Corporation which are beneficially owned by such person on the date of such shareholder's notice and (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or, is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice (a) the name and address, as they appear on the Corporation's books; of such shareholder and any other shareholders known by such shareholder to be supporting such nominees and (b) the class and number of shares of the Corporation which are beneficially owned by such shareholder on the date of such 29 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 7. 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 he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded." 30 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION January 20, 1987 Article V, Section 3 of the Bylaws of the Company is amended to read as follows: "3. Special meetings of the directors may be called by the Chairman of the Board of Directors or the President 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 to each director, and shall be called by the Chairman in like manner on the written request of a majority of directors then in office. The notice shall state the place, day and hour where the meeting is to be held." 31 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 20, 1987 ADOPTED SUBJECT TO APPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS APRIL 21, 1987 RESOLVED, that Article III, Section 2 of the Bylaws of First Tennessee National Corporation ("Company") is amended to read as follows: "2. Except as otherwise provided by law or by the Charter, the term of each director hereafter elected shall be from the time of his election and qualification until the third annual meeting next following his election and until his 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." 32 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 20, 1987 ADOPTED SUBJECT TO APPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS APRIL 21, 1987 RESOLVED, that a new Section 8 of Article III of the Bylaws of the Company is adopted as follows: "8. 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 the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred 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." 33 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 20, 1987 ADOPTED SUBJECT TO APPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS APRIL 21, 1987 RESOLVED, that Article 11, Section 10 of the Bylaws of the Company is repealed, and Section 11 of Article II of the Bylaws of the Company is renumbered to become Section 10. 34 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JANUARY 20, 1987 ADOPTED SUBJECT TO APPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS APRIL 21, 1987 RESOLVED, that Article XXVII, Section 2 of the Bylaws of the Company is amended to read as follows: "2. The shareholders may make, alter, amend and repeal the Bylaws 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 altered or repealed only by the vote of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock." 35 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION October 16, 1990 RESOLVED, that Article XXIX, Section 1, of the Bylaws of the Company be, and it hereby is, amended to read as follows: Directors who are not also officers of the Corporation or its affiliates shall be retired from the Board of Directors as follows: (1) Any director who shall attain the age of sixty-five (65) shall not thereafter be nominated for a directorship and shall be automatically retired from the Board at the expiration of the term for which he or she was elected. (2) 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 upon such occasion. A resignation will ordinarily be accepted unless (a) the director assumes another management position deemed appropriate by the Board for continuation, or (b) the director is so engaged in some specific project for the Board as to make his or her resignation detrimental to the Corporation. Under this circumstance, the Board may elect to set a subsequent date for his or her retirement to coincide with the completion of the project. Directors who are also officers of the Corporation or any of its affiliates will be retired from the Board on the date they retire from or otherwise discontinue active Service with the Corporation and its affiliates. All directors of the Corporation who have served until retirement, as specified herein, will be asked to serve on the Honorary Board of Directors. Those directors who do not serve until retirement but who have served for a minimum of 10 years as an active member of the Board and who retire in good standing will also be asked to serve. Members of the Honorary Board shall have no authority to bind the Corporation. They shall not attend Board meetings of the Corporation and Shall not have any authority to vote on any matter being considered by the Board. 36 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION January 22, 1991 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 13, rather than 15 members, effective as of the Annual Meeting of Shareholders, April 16, 1991, by deleting the number 15 from said section of the Bylaws and substituting therefor the number 13. 37 Amendment to Bylaws of First Tennessee National Corporation, adopted 4-16-91 ARTICLE XXVIII INDEMNIFICATION 1. 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) 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 he was a party because he is or was an officer of the Corporation, he shall be indemnified by the Corporation against all reasonable expenses, including attorney fees, incurred in connection with such Proceeding, or any appeal therein. 2. 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 he was or was threatened to be made a party because he was or is an officer, he shall be indemnified by the Corporation against any judgment, settlement, penalty, fine (including any excise tax assessed with respect to an employee benefit plan), or other liability and any reasonable expenses, including attorney fees, incurred as a result of such Proceeding, or any appeal therein, if authorized in the specific case after a determination has been made that indemnification is permissible because the following standard of conduct has been met: (1) He conducted himself in good faith, and (2) He reasonably believed: (A) In the case of conduct in his official capacity as an officer of the Corporation that his conduct was in the Corporation's best interest; and (B) In all other cases that his conduct was at least not opposed to its best interests; and (3) In the case of any criminal proceeding, he had no reasonable cause to believe his 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 him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. -31- 38 3. The determination required by Section 2 herein shall be made as follows: (1) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the Proceeding; (2) 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; (3) By independent special legal counsel; (A) Selected by the Board of Directors or its committee in the manner prescribed in subsection (1) or (2); or (B) If a quorum of the Board of Directors cannot be obtained under Subsection (1) and a committee cannot be designated under subsection (2), 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 1, 2, or 3 of this Section 3 cannot be obtained, then (4) 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. 4. An officer of the Corporation shall be deemed to be serving another corporation or other enterprise or employee benefit plan 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. 5. 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: (1) The officer furnishes to the Corporation a written affirmation of his good faith belief that he has met the standard of conduct described in Section 2 herein; (2) The officer furnishes to the Corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he is not entitle to indemnification; and -32- 39 (3) A determination is made that the facts then known to those making the determination would not preclude indemnification under this bylaw. 6. The undertaking required by Section 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. 7. Determinations and authorizations of payments under Section 5 herein shall be made in the same manner as is specified in Section 3 herein. 8. Every employee and every former director of the Corporation shall be indemnified by the Corporation to the same extent as officers of the Corporation. 9. The right of indemnification set forth above shall not be deemed exclusive of any other rights 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. 10. 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. -33- 40 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION July 16, 1991 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board Of Directors to consist of 14, rather than 13 members, effective as of August 1, 1991, by deleting the number 13 from said section of the Bylaws and substituting therefor the number 14. January 19, 1993 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 13, rather than 14 members, effective as of January 31, 1993, by deleting the number 14 from said section of the Bylaws and substituting therefor the number 13. 41 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION October 20, 1993 RESOLVED, that Article XXIX, Section 1, of the Bylaws of the Company be, and it hereby is, amended be deleting it in its entirety and amending it to read as follows: Directors who are not also officers of the Corporation or its affiliates shall be retired from the Board of Directors as follows: (1) 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 at the expiration of such term. (2) 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 upon such occasion. A resignation will ordinarily be accepted unless (a) the director assumes another management position deemed appropriate by the Board for continuation, or (b) the director is so engaged in some specific project for the Board as to make his or her resignation detrimental to the Corporation. Under this circumstance, the Board may elect to set a subsequent date for his or her retirement to coincide with the completion of the project. Directors who are also officers of the Corporation or any of its affiliates will be retired from the Board on the date they retire from or otherwise discontinue active service with the Corporation and its affiliates. All directors of the Corporation who have served until retirement, as specified herein, will be asked to serve on the Honorary Board of Directors. Those directors who do not serve until retirement but who have served for a minimum of 10 years as an active member of the Board and who retire in good standing will also be asked to serve. Members of the Honorary Board shall have no authority to bind the Bank. They shall not attend Board meetings of the Corporation and shall not have any authority to vote on any matter being considered by the Board. 42 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION December 21, 1993 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 14, rather than 13 members, effective as of December 21, 1993, by deleting the number 13 from said section of the Bylaws and substituting therefor the number 14. RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION March 2, 1994 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 11, rather than 14 members, effective as of April 19, 1994, by deleting the number 14 from said section of the Bylaws and substituting therefor the number 11. 43 RESOLUTIONS OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION April 19, 1994 RESOLVED, that Article VII of the Bylaws of First Tennessee National Corporation be, and it hereby is, amended by deleting it in its entirety and substituting therefor the following: ARTICLE VII. The Chairman of the Board of Directors and The Chief Executive Officer 1. The Chairman of the Board of Directors 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 may be 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. 2. The Chief Executive Officer, in the absence of the Chairman of the Board of Directors, 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 may be incident to the office and as may be assigned by the Board of Directors. FURTHER RESOLVED, that Article VIII of the Bylaws be, and it hereby is, amended by deleting it in its entirety and substituting therefore the following: ARTICLE VIII The President. 1. The President, in the absence of the Chairman of the Board of Directors and the Chief Executive Officer, shall preside at all meetings of the shareholders and of the Board of Directors and shall be charged with the active management and administration of the business of the Corporation with the power to make all contracts in the conduct of the regular and ordinary business of the Corporation, and he may appoint and discharge agents and employees of the Corporation and fix their compensation, subject to the general supervisory powers of the Chairman of the Board of Directors and of the Chief Executive Officer and of the Board of Directors. In addition, he shall have such powers and perform such duties as may be provided for herein and as may be incident to the office and as may be assigned by the Board of Directors or the chairman of the Board of Directors or the Chief Executive Officer. FURTHER RESOLVED, that Articles IX, X, XI, XII, XIII, XIV, XVI and XIX be, and they hereby are, amended by substituting the phrase "the Chairman of the Board of Directors or the Chief Executive Officer" for the phrase "the Chairman of the Board of Directors" or the phrase "the Chairman of the Board" wherever either of such phrases appears in such Articles. 44 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION JULY 19, 1994 ------------------------------------ RESOLVED, that Article XXIX, Section 2, of the Bylaws of the Company be, and it hereby is, amended by deleting it in its entirety and amending it to read as follows: "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 employeed 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 reemploy any former officer who had theretofor been retired." 45 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION October 18, 1994 ------------------------------------ RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 12, rather than 11 members, effective as of October 18, 1994, by deleting the number 11 from said section of the Bylaws and substituting therefor the number 12. 46 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION December 19, 1995 RESOLVED, that the second paragraph of Section 1 of Article XXIX of the Bylaws of the Corporation be, and it hereby is, amended by deleting it in its entirety and substituting therefor the following: Directors who are also officers of the Corporation or any of its affiliates will be retired from the Board 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. 47 RESOLUTION OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION April 16, 1996 RESOLVED, that Article III, Section 1 of the Bylaws of First Tennessee National Corporation be, and hereby is, amended to provide for a Board of Directors to consist of 11, rather than 12 members, effective as of April 16, 1996, by deleting the number 12 from said section of the Bylaws and substituting therefor the number 11. EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 FIRST TENNESSEE NATIONAL CORPORATION PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
Three Months Ended Six Months Ended June 30 June 30 --------------------------- --------------------------- Computation for Statements of Income: 1996 1995 1996 1995 - ------------------------------------- ---------- ---------- ---------- ---------- Per statements of income (Thousands): Net income $42,347 $40,753 $79,788 $75,360 ========== ========== ========== ========== Per statements of income: Weighted average shares outstanding 67,224,935 68,482,624 67,263,195 68,350,692 ========== ========== ========== ========== Primary earnings per share (a): Net income $ .63 $ .59 $ 1.19 $ 1.10 ========== ========== ========== ========== Additional Primary computation - ------------------------------------- Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 67,224,935 68,482,624 67,263,195 68,350,692 Add dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,646,335 1,003,994 1,575,857 961,324 ---------- ---------- ---------- ---------- Weighted average shares outstanding, as adjusted 68,871,270 69,486,618 68,839,052 69,312,016 ========== ========== ========== ========== Primary earnings per share, as adjusted (b): Net income $ .62 $ .59 $ 1.16 $ 1.09 ========== ========== ========== ========== Additional Fully Diluted Computation - ------------------------------------- Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 68,871,270 69,486,618 68,839,052 69,312,016 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 114 182,840 59,092 112,216 Weighted average shares outstanding, ----------- ---------- ---------- ---------- as adjusted 68,871,384 69,669,458 68,898,144 69,424,232 ========== ========== ========== ========== Fully diluted earnings per share, as adjusted (b): Net income $ .62 $ .59 $ 1.16 $ 1.09 ========== ========== ========== ==========
(a) These figures agree with the related amounts in the statements of income. (b) This calculation is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by footnote 2 paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. Per share data reflects the 1996 two-for-one stock split. EX-27 4 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST TENNESSEE NATIONAL CORPORATION'S JUNE 30, 1996, FINANCIAL STATEMENTS FILED IN ITS 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 674,458 1,642 104,257 196,821 2,176,485 71,599 71,870 7,487,691 116,478 12,954,957 8,972,378 2,117,889 715,029 257,327 0 0 83,903 808,431 12,954,957 363,287 68,992 11,347 443,626 159,149 225,294 218,332 15,592 310 343,583 125,454 79,788 0 0 79,788 1.19 1.16 4.09 14,336 35,952 0 79,063 112,567 18,009 6,328 116,478 116,478 0 0
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