-----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, TpLcoREcbwSSYZPKoULTOOQ07S2W/C49qwP1cBzhR8hiqpNg6il2QchLYWK0suPG dc3eFfxfYAf1EsI7i4F3Ow== 0000950144-97-009030.txt : 19970814 0000950144-97-009030.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950144-97-009030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97659257 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. 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, 1997 ------------- 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 64,083,009 - ----------------------------- ---------------------------- Class Outstanding at July 31, 1997 2 FIRST TENNESSEE NATIONAL CORPORATION INDEX Part I. Financial Information Part II. Other Information Signatures Exhibit Index Exhibit 10(a) 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 operations for the interim periods presented. 4
CONSOLIDATED STATEMENTS OF CONDITION First Tennessee National Corporation - -------------------------------------------------------------------------------------------------------- June 30 December 31 ----------------------- -------------- (Dollars in thousands)(Unaudited) 1997 1996 1996 - ---------------------------------------------------------------------------------------- -------------- ASSETS: Cash and due from banks $ 634,748 $ 674,458 $ 959,604 Federal funds sold and securities purchased under agreements to resell 357,229 104,257 138,365 - ---------------------------------------------------------------------------------------- -------------- Total cash and cash equivalents 991,977 778,715 1,097,969 - ---------------------------------------------------------------------------------------- -------------- Investment in bank time deposits 1,501 1,642 1,922 Capital markets securities inventory 282,753 196,821 150,402 Mortgage loans held for sale 814,160 1,103,237 787,362 Securities available for sale 2,081,222 2,176,485 2,173,620 Securities held to maturity (market value of $60,571 at June 30, 1997; $71,870 at June 30, 1996; and $66,677 at December 31, 1996) 59,814 71,599 65,914 Loans, net of unearned income 8,006,472 7,487,691 7,728,203 Less: Allowance for loan losses 123,458 116,478 117,748 - ---------------------------------------------------------------------------------------- -------------- Total net loans 7,883,014 7,371,213 7,610,455 - ---------------------------------------------------------------------------------------- -------------- Premises and equipment, net 190,696 181,591 185,624 Real estate acquired by foreclosure 14,410 8,714 7,823 Intangible assets, net 113,280 124,110 119,465 Mortgage servicing rights, net 330,281 211,282 266,027 Capital markets receivables and other assets 916,485 729,548 592,319 - ---------------------------------------------------------------------------------------- -------------- TOTAL ASSETS $13,679,593 $12,954,957 $13,058,902 ======================================================================================== ============== LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Demand $ 1,617,425 $ 1,859,864 $ 2,122,997 Checking/Interest 175,886 172,356 154,812 Savings 682,600 744,624 627,984 Money market account 2,973,174 2,546,617 2,685,931 Certificates of deposit under $100,000 and other time 2,778,707 2,900,771 2,868,322 Certificates of deposit $100,000 and more 826,200 748,146 573,016 - ---------------------------------------------------------------------------------------- -------------- Total deposits 9,053,992 8,972,378 9,033,062 - ---------------------------------------------------------------------------------------- -------------- Federal funds purchased and securities sold under agreements to repurchase 1,860,025 1,525,945 1,881,187 Commercial paper and other short-term borrowings 728,314 591,944 377,369 Capital markets payables and other liabilities 874,571 715,029 578,113 Term borrowings 181,768 257,327 234,645 - ---------------------------------------------------------------------------------------- -------------- Total liabilities 12,698,670 12,062,623 12,104,376 - ---------------------------------------------------------------------------------------- -------------- Guaranteed preferred beneficial interests in First Tennessee's subordinated debentures 100,000 - - - ---------------------------------------------------------------------------------------- -------------- 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 - 64,036,864 at June 30, 1997; 67,122,092 at June 30, 1996; and 66,857,519 at December 31, 1996) 80,046 83,903 83,572 Capital surplus 46,234 58,780 48,657 Undivided profits 756,281 761,000 823,175 Unrealized market adjustment 1,277 (7,051) 2,697 Deferred compensation on restricted stock incentive plans (2,915) (4,298) (3,575) - ---------------------------------------------------------------------------------------- -------------- Total shareholders' equity 880,923 892,334 954,526 - ---------------------------------------------------------------------------------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,679,593 $12,954,957 $13,058,902 ======================================================================================== ==============
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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) 1997 1996 1997 1996 - --------------------------------------------------------------------- -------------------------------------- INTEREST INCOME: Interest and fees on loans $ 173,265 $ 161,636 $ 340,222 $ 321,803 Interest on investment securities: Taxable 34,268 34,227 68,857 66,323 Tax-exempt 1,160 1,326 2,366 2,669 Interest on mortgage loans held for sale 15,843 22,603 30,718 41,484 Interest on capital markets inventory 3,373 4,527 5,952 8,785 Interest on other earning assets 3,003 1,655 5,123 2,562 - ------------------------------------------------------------------------------------------------------------ Total interest income 230,912 225,974 453,238 443,626 - ------------------------------------------------------------------------------------------------------------ INTEREST EXPENSE: Interest on deposits: Checking/Interest 817 670 1,350 1,319 Savings 2,105 2,411 4,201 4,914 Money market account 21,913 22,970 43,632 47,557 Certificates of deposit under $100,000 and other time 40,163 41,311 80,654 82,742 Certificates of deposit $100,000 and more 13,462 12,651 24,047 22,617 Interest on short-term borrowings 29,507 27,793 56,463 55,624 Interest on term borrowings 3,927 5,214 8,364 10,521 - ------------------------------------------------------------------------------------------------------------ Total interest expense 111,894 113,020 218,711 225,294 - ------------------------------------------------------------------------------------------------------------ NET INTEREST INCOME 119,018 112,954 234,527 218,332 Provision for loan losses 12,504 7,559 25,030 15,592 - ------------------------------------------------------------------------------------------------------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 106,514 105,395 209,497 202,740 - ------------------------------------------------------------------------------------------------------------ NONINTEREST INCOME: Mortgage banking 71,100 60,902 135,287 119,021 Capital markets 19,990 17,145 40,455 45,266 Deposit transactions and cash management 21,558 19,860 40,782 37,295 Merchant processing 8,164 5,116 14,913 10,883 Cardholder fees 4,893 4,362 9,417 8,355 Trust services and investment management 9,498 8,458 18,768 16,754 Equity securities gains/(losses) (846) 15 (840) 490 Debt securities gains/(losses) 57 37 80 (180) All other income and commissions 18,763 13,825 33,391 28,413 - ------------------------------------------------------------------------------------------------------------ Total noninterest income 153,177 129,720 292,253 266,297 - ------------------------------------------------------------------------------------------------------------ ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 259,691 235,115 501,750 469,037 - ------------------------------------------------------------------------------------------------------------ NONINTEREST EXPENSE: Employee compensation, incentives, and benefits 96,764 93,062 190,660 192,004 Operations services 12,338 10,421 23,299 21,077 Occupancy 10,963 9,828 21,626 19,157 Equipment rentals, depreciation, and maintenance 10,276 8,517 19,434 16,638 Communications and courier 8,803 8,545 17,489 16,786 Amortization of mortgage servicing rights 8,656 4,166 17,491 11,865 Advertising and public relations 4,437 4,519 9,369 9,458 Legal and professional fees 2,971 3,362 6,215 5,862 Amortization of intangible assets 2,403 2,362 4,810 4,716 Deposit insurance premium 370 464 735 883 All other 28,077 22,751 55,256 45,137 - ------------------------------------------------------------------------------------------------------------ Total noninterest expense 186,058 167,997 366,384 343,583 - ------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 73,633 67,118 135,366 125,454 Applicable income taxes 27,269 24,771 50,439 45,666 - ------------------------------------------------------------------------------------------------------------ NET INCOME $ 46,364 $ 42,347 $ 84,927 $ 79,788 ============================================================================================================ NET INCOME PER COMMON SHARE $ .72 $ .63 $ 1.32 $ 1.19 - ------------------------------------------------------------------------------------------------------------ WEIGHTED AVERAGE SHARES OUTSTANDING 64,005,532 67,224,935 64,292,500 67,263,195 - ------------------------------------------------------------------------------------------------------------
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CONSOLIDATED STATEMENTS OF CASH FLOWS First Tennessee National Corporation - ----------------------------------------------------------------------------------------- Six Months Ended June 30 ------------------------- (Dollars in thousands)(Unaudited) 1997 1996 - ----------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 84,927 $ 79,788 Adjustments to reconcile net income to net cash provided/(used) by operating activities: Provision for loan losses 25,030 15,592 Provision for deferred income tax 25,299 27,324 Depreciation and amortization of premises and equipment 16,044 13,912 Amortization of mortgage servicing rights 17,491 13,899 Amortization of intangible assets 4,810 4,716 Net other amortization and accretion 2,536 15,790 Market value adjustment on foreclosed property 1,645 1,394 Equity securities (gains)/losses 840 (490) Debt securities (gains)/losses (80) 180 Net gain on disposal of fixed assets (203) (8) Net increase in: Capital markets securities inventory (132,351) (14,166) Mortgage loans held for sale (26,798) (314,054) Capital markets receivables (272,074) (123,154) Interest receivable (5,004) (4,112) Other assets (131,628) (161,486) Net increase/(decrease) in: Capital markets payables 249,030 60,608 Interest payable (155) (208) Other liabilities 26,915 38,143 - ----------------------------------------------------------------------------------------- Total adjustments (198,653) (426,120) - ----------------------------------------------------------------------------------------- Net cash used by operating activities (113,726) (346,332) - ----------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Held to maturity securities: Maturities 6,071 4,554 Purchases -- (1,463) Available for sale securities: Sales 103,950 360,773 Maturities 213,993 218,299 Purchases (227,359) (746,117) Premises and equipment: Sales 4,017 834 Purchases (23,924) (18,345) Net increase in loans (305,206) (162,868) Decrease in investment in bank time deposits 421 477 Acquisitions, net of cash and cash equivalents acquired -- 400 - ----------------------------------------------------------------------------------------- Net cash used by investing activities (228,037) (343,456) - ----------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Common stock: Exercise of stock options 11,134 2,712 Cash dividends (39,931) (35,727) Repurchase shares (133,182) (12,093) Payments of term borrowings (52,963) (2,776) Issuance of guaranteed preferred beneficial interests in First Tennessee's subordinated debentures 100,000 -- Net increase in: Deposits 20,930 383,395 Short-term borrowings 329,783 357,144 - ----------------------------------------------------------------------------------------- Net cash provided by financing activities 235,771 692,655 - ----------------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents (105,992) 2,867 - ----------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 1,097,969 775,848 - ----------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 991,977 $ 778,715 ========================================================================================= Total interest paid $ 218,696 $ 218,537 Total income taxes paid 24,159 18,341
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, 1997, 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 1996 annual report to shareholders. Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," specifies the computation, presentation, and disclosure requirements for earnings per share (EPS). The objective of SFAS No. 128 is to simplify the computation and to make the U.S. standard more compatible with EPS standards of other countries and with that of the International Accounting Standards Committee. When adopted for the 1997 annual report, the standard is not expected to have a material impact on the EPS computation of First Tennessee National Corporation (First Tennessee). SFAS No. 130, "Reporting Comprehensive Income," establishes standards for reporting comprehensive income and its components in the financial statements. Comprehensive income is the total of net income and all other nonowner changes in equity. The only component of comprehensive income First Tennessee currently would be required to report is unrealized holding gains/(losses) on available-for-sale securities. First Tennessee will adopt this standard in the first quarter of 1998. First Tennessee uses derivative financial instruments in order to manage exposure to fluctuations in interest rates and to meet the financial needs of customers. For interest rate risk management purposes, First Tennessee primarily utilizes interest rate swaps. Mortgage banking operations mainly use mandatory forward delivery commitments and purchased options to hedge against risks associated with the warehouse (mortgage loans that are held for sale), the pipeline (unfunded mortgage loans in process), or the servicing portfolio. Capital Markets uses various derivatives, including interest rate swaps, futures, forward and options contracts and agency securities underwriting commitments in order to meet the needs of its customers with forwards being the most commonly used instrument. INTEREST RATE RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS To qualify as a hedge used to manage interest rate risk, the following criteria must be met: (1) the asset or liability to be hedged exposes First Tennessee to interest rate risk; (2) the instrument alters or reduces sensitivity to interest rate changes; and (3) the instrument is designated and effective as a hedge. For interest rate swaps used to hedge interest rate risk, income and expense related to the next settlement payment are accrued as an adjustment to interest income or expense of the hedged item. Any related assets or liabilities are recorded on the Statement of Condition in other assets or other liabilities. For those derivatives used to manage interest rate risk that are terminated prior to maturity, realized gains and losses are deferred and amortized straight-line over the remaining original life of the agreement as an adjustment to the yield of the hedged asset or liability. If the underlying hedged asset or liability is sold or prepaid, the related portion of any unrecognized gain or loss on the derivative is recognized in current earnings as part of the gain or loss on the sale or prepayment. Any contracts that fail to qualify for hedge accounting are measured at fair value with any gains or losses included in current earnings in noninterest income. MORTGAGE BANKING DERIVATIVE FINANCIAL INSTRUMENTS Forward and option contracts used by mortgage banking operations to hedge against interest rate risks in the warehouse and the pipeline are designated to a specific asset and are reviewed periodically for a high correlation of expected changes in value. Option contracts used to hedge against risks in the servicing portfolio must meet the following criteria: (1) designated to a specific risk tranche of servicing rights; (2) must reduce earnings risk; and (3) must be periodically reviewed for a high correlation of expected changes in value. 8 Forward contracts used to hedge the warehouse are considered in the lower of cost or market valuation of the warehouse with any related gains or losses being recognized in mortgage banking noninterest income. Premiums paid for purchased options are deferred and reported with the hedged assets and are amortized over the lives of the contracts to mortgage banking noninterest income. Options used to hedge the servicing portfolio are adjusted for changes in intrinsic value with gains and losses recognized as a basis adjustment of the related mortgage servicing rights risk tranche. Premiums are deferred and amortized on a straight-line basis over the contract life to other noninterest expense. The deferred gains and losses are recognized on the balance sheet in mortgage servicing rights, and unamortized premiums are recorded in other assets. For derivatives hedging the warehouse and pipeline that are terminated prior to maturity, gains and losses are recognized in current earnings as mortgage banking noninterest income or expense for excess coverage and are deferred and recognized at the time the loan is sold if the sale is deferred to a future date. For derivatives hedging the servicing portfolio that are terminated prior to maturity, gains and losses are split between the return of the time value premium and the intrinsic value. Gains or losses from the change in the intrinsic value are deferred as a basis adjustment to the related mortgage servicing rights risk tranche, and gains or losses resulting from the return of the time value premium are recognized in current earnings in other noninterest expense. Any contracts that fail to qualify for hedge accounting are measured at fair value with any gains or losses included in current earnings in noninterest income. CAPITAL MARKETS DERIVATIVE FINANCIAL INSTRUMENTS Derivative contracts utilized in trading activities by Capital Markets are measured at fair value, and gains or losses are recognized in Capital Markets income as they occur. Related assets are recorded on the balance sheet as Capital Markets securities inventory or receivables and any liabilities are recognized as Capital Markets payables. Cash flows from all derivative contracts are reported as operating activities on the Consolidated Statements of Cash Flows. 9 NOTE 2 -- LOANS The composition of the loan portfolio at June 30 is detailed below:
(Dollars in thousands) 1997 1996 - ----------------------------------------------------------------------------------- Commercial $3,707,017 $3,394,050 Consumer 2,751,428 2,603,152 Permanent mortgage 636,859 658,219 Credit card receivables 537,398 534,784 Real estate construction 335,443 283,150 Nonaccrual - Regional banking group 11,506 9,730 Nonaccrual - Mortgage banking 26,821 4,606 - ----------------------------------------------------------------------------------- Loans, net of unearned income 8,006,472 7,487,691 Allowance for loan losses 123,458 116,478 - ----------------------------------------------------------------------------------- Total net loans $7,883,014 $7,371,213 ===================================================================================
The following table presents information concerning nonperforming loans at June 30:
(Dollars in thousands) 1997 1996 - ----------------------------------------------------------------------------------- Impaired loans $11,451 $ 8,949 Other nonaccrual loans 26,876 5,387 - ----------------------------------------------------------------------------------- Total nonperforming loans $38,327 $14,336 =================================================================================== Restructured impaired loans at June 30, 1997 and 1996, were $196,000 and $279,000, respectively.
Nonperforming loans consist of impaired loans, other nonaccrual loans and certain restructured loans. An impaired loan is a loan that management believes the contractual amount due probably will not be collected. Impaired loans are generally carried on a nonaccrual status. Nonaccrual loans are loans on which interest accruals have been discontinued due to the borrower's financial difficulties. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to recover the principal balance and accrued interest. Generally, interest payments received on impaired loans are applied to principal. Once all principal has been received, additional payments are recognized as interest income on a cash basis. The following table presents information concerning impaired loans:
Three Months Ended Six Months Ended June 30 June 30 ------------------------------------------------- (Dollars in thousands) 1997 1996 1997 1996 - ----------------------------------------------------------------------------------- Total interest on impaired loans $ 246 $ 243 $ 397 $ 384 Average balance of impaired loans 12,202 8,479 12,026 8,564 - -----------------------------------------------------------------------------------
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, 1996 and 1997, is summarized as follows:
(Dollars in thousands) Non-impaired Impaired Total - ----------------------------------------------------------------------------------- Balance at December 31, 1995 $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) 11,681 - ----------------------------------------------------------------------------------- Balance at June 30, 1996 $113,415 $3,063 $116,478 =================================================================================== Balance at December 31, 1996 $114,217 $3,531 $117,748 Provision for loan losses 23,251 1,779 25,030 Charge-offs 22,124 1,489 23,613 Less loan recoveries 4,206 87 4,293 - ----------------------------------------------------------------------------------- Net charge-offs 17,918 1,402 19,320 - ----------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1997 $119,550 $3,908 $123,458 ===================================================================================
10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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, 1997, compared to the three month and six month periods ended June 30, 1996. 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 1996 financial statements, notes and management's discussion is provided in the 1996 annual report. BUSINESS DESCRIPTION First Tennessee is headquartered in Memphis, Tennessee, and is a nationwide, diversified financial services institution which provides banking and other financial services to its customers through various national and regional business lines. The Regional Banking Group includes the retail/commercial bank, the credit card division and the trust division. The National Lines of Business include mortgage banking, First Tennessee Capital Markets (also referred to as capital markets) and transaction processing. Expenses are allocated to the various business lines based on management's best estimates and equity is assigned to reflect the inherent risk in each business line. These allocations are periodically reviewed and may be revised from time to time, in which case the previous history is restated to ensure comparability. SECOND QUARTER OVERVIEW Earnings per share for the second quarter of 1997 grew 14 percent (from $.63 to $.72). Net income for the second quarter of 1997 increased 9 percent (from $42.3 million to $46.4 million). The growth in earnings came primarily from the fee based businesses. Return on average assets was 1.43 percent and return on average common equity was 21.81 percent for the second quarter of 1997 compared with 1.34 percent and 19.48 percent, respectively, for the same period in 1996. Total assets grew 6 percent (from $13.0 billion to $13.7 billion) and shareholders' equity declined 1 percent (from $892.3 million to $880.9 million) from June 30, 1996, to June 30, 1997. Stock repurchase programs implemented since the second quarter of 1996 reduced period-end shares outstanding 5 percent (from 67.1 million to 64.0 million). INCOME STATEMENT REVIEW NONINTEREST INCOME Fee income (noninterest income excluding securities gains and losses) contributed 56 percent to total revenue and grew 19 percent (from $129.7 million to $154.0 million). The rise in fee income came primarily from mortgage banking due to the benefit of less interest rate volatility and growth in servicing fees. Total mortgage banking fee income grew 17 percent from the second quarter of 1996 (from $60.9 million to $71.1 million). Mortgage servicing fee income increased 36 percent from the second quarter of 1996 (from $16.4 million to $22.4 million) as the servicing portfolio grew from $20.5 billion at June 30, 1996, to $23.9 billion at June 30, 1997. Revenues from the sale of mortgage servicing rights remained flat ($1.8 million in 1996 and $1.7 million in 1997). Total fee income related to the mortgage origination and secondary marketing process increased 10 percent (from $42.7 million to $47.0 million). Mortgage loan originations declined 14 percent from $2.8 billion in the second quarter of 1996 to $2.4 billion in the second quarter of 1997 with higher interest rates causing an industrywide slowdown in refinance activity and new loan originations. During the second quarter of 1996, refinance activity accounted for 26 percent of originations compared to 20 percent in the second quarter of 1997. As a consequence of a more stable rate environment, less volume of loans sold, and a higher mix of adjustable rate mortgage products, secondary marketing activities resulted in a $17.2 million improvement in the second quarter of 1997 compared to the same period in 1996. With less origination volume than the second quarter of 1996, income derived from the creation of originated mortgage servicing rights decreased $9.9 million. Capital markets fee income grew 17 percent (from $17.1 million to $20.0 million). This growth was due in part to increased customer penetration, a more favorable market environment and increased sales of whole loan mortgage products. Fee income from deposit transactions and cash management increased 9 percent (from $19.9 million to $21.6 million). Noninterest income from trust and investment management services (personal trust, corporate trust, employee benefits and Highland Capital Management Corp.) increased 12 percent (from $8.5 to $9.5 million) over the second quarter of 1996 primarily due to the increased portfolio market values under the management of Highland Capital and income from new asset management accounts. 11 Merchant processing fee income increased 60 percent (from $5.1 million to $8.2 million) primarily due to volume growth and gains on equipment sold. Cardholder noninterest income grew 12 percent (from $4.4 million to $4.9 million) with higher customer purchases, the introduction of a cash advance charge and increases in delinquencies fees. Net securities losses were $.8 million for the second quarter of 1997. This included a $1.1 million loss in a venture capital company investment which was partially offset by securities gains from the investment portfolio during the second quarter of 1997. NET INTEREST INCOME For purposes of this discussion, net interest income has been adjusted to a fully taxable equivalent (FTE) basis for certain tax-exempt loans and investments included in earning assets. Earning assets, including loans, have been expressed as averages, net of unearned income. For the second quarter of 1997, net interest income increased 5 percent (from $114.4 million to $120.1 million) from the second quarter of 1996. This increase was due to a 17 basis point improvement in the net interest margin and a 1 percent increase in earning assets. NET INTEREST MARGIN The net interest margin (margin) improved from 4.09 percent for the second quarter of 1996 to 4.26 percent for the second quarter of 1997. 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 30 basis points while the effect of net free funds decreased 13 basis points primarily due to the impact of share repurchase programs and the movement of certain demand deposits (a source of interest free funding) to sweep accounts. Approximately 9 basis points of the net interest margin improvement came from the expiration in May 1996 of the amortization expense related to a terminated basis swap. 12 NET INTEREST MARGIN COMPUTATION TABLE - -------------------------------------
Second Quarter -------------- 1997 1996 ---- ---- Yield on earning assets 8.14% 8.04% Rate paid on interest-bearing liabilities 4.49 4.69 ----- ----- Net interest spread 3.65 3.35 Effect of interest-free sources .53 .66 Loan fees .09 .10 FRB interest and penalties (.01) (.02) ----- ----- Net interest margin 4.26% 4.09% ===== ===== - ---------------------------------------------------------------- Federal Reserve Bank
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 banking segments. Consequently, First Tennessee's consolidated margin cannot readily be compared to that of other bank holding companies. The Net Interest Margin Composition Table provides a breakdown by business line of the impact on the consolidated margin. NET INTEREST MARGIN COMPOSITION TABLE - -------------------------------------
Second Quarter -------------- 1997 1996 ---- ---- Regional banking group 4.66% 4.40% Capital markets (.09) (.09) Mortgage banking (.32) (.24) Transaction processing .01 .02 ---- ---- Total net interest margin 4.26% 4.09% ==== ==== - ----------------------------------------------------------------
The regional banking group's margin improved from 4.40 percent to 4.66 percent because of loan and deposit growth, improvement in net interest spread and the expiration of the basis swap amortization expense. The negative impact on the net interest margin from mortgage banking occurs because the spread between the rates on mortgage loans temporarily in the warehouse and the related short-term funding rates are significantly less than the comparable spread earned in the regional banking group. The increase in nonperforming loans in mortgage banking has also negatively affected the margin (see Provision for Loan Losses/Asset Quality). Capital markets also tends to negatively impact the net interest margin because of its strategy to reduce market risk by hedging its inventory in the cash markets which effectively eliminates net interest income on these positions. 13 NONINTEREST EXPENSE Total noninterest expense (operating expense) for the second quarter of 1997 increased 11 percent (from $168.0 million to $186.1 million) over the same period in 1996. Employee compensation, incentives, and benefits (personnel expense), the largest category, increased 4 percent (from $93.1 million to $96.8 million). Personnel expense includes commissions paid in several lines of business, such as capital markets and mortgage banking. As the sales and/or originations increase or decrease or the product mix changes in these business lines, the commissions change accordingly. Personnel expense decreased 3 percent in mortgage banking due to lower originations, and personnel expense increased 7 percent in capital markets due to business expansion, primarily as a result of the newly opened Chicago office. Amortization of mortgage servicing rights increased 108 percent (from $4.2 million to $8.7 million) as a result of a larger servicing portfolio, implementation of a new accounting standard (Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"), and an adjustment which lowered the expense in the second quarter of 1996, due to lower than expected refinancing activities. Excluding expenses in capital markets and mortgage banking, expense growth between the second quarters of 1996 and 1997 was 10 percent. Most of this growth relates to personnel expense ($4.0 million), dividend expense associated with the $100 million qualifying capital securities issued on January 6, 1997 ($2.0 million) and equipment rental, depreciation and occupancy ($1.8 million). PROVISION FOR LOAN LOSSES/ASSET QUALITY The provision for loan losses increased $4.9 million to $12.5 million for the quarter ended June 30, 1997. The increase in provision reflects a higher amount of allowance for loan losses commensurate with loan growth. The level of provision was also increased to reflect increases in consumer debt burdens and resulting higher losses in consumer lending nationwide. However, the allowance for loan losses to loans remained stable at 1.54 percent on June 30, 1997, compared with 1.56 percent on June 30, 1996. Net charge-offs to average net loans for the second quarter was .54 percent, an increase from the .31 percent in the second quarter of 1996. The increase in net charge-offs was primarily related to consumer and credit card lending and fewer recoveries in commercial lending. Despite First Tennessee's increase in credit card net charge-offs from the previous year, this ratio still remained favorable to industry averages, and delinquency ratios for consumer loans also were favorable to industry averages. 14 Loans and leases past due 90 days or more decreased $.7 million from the second quarter of 1996 and decreased $4.6 million from the first quarter of 1997. Nonperforming assets increased 121 percent (from $24.0 million to $53.0 million) from the second quarter of 1996. The mortgage banking operation added $22.2 million to nonperforming loans and $6.4 million to foreclosed real estate primarily from a larger number of mortgage loans repurchased by mortgage banking during the first quarter of 1997 to correct loan file documentation in order to certify loan pools. This backlog in the documentation and pool certification process occurred principally as a result of disruptions in the normal business routine caused by the consolidation of five mortgage banking operations concurrent with an unanticipated higher level of loan originations last year due to large refinance volume. As this documentation is corrected the level of mortgage banking nonperforming assets will decrease. Nonperforming assets in mortgage banking decreased $3.4 million from the first quarter of 1997. Excluding the impact of the mortgage banking operation on nonperforming assets, the ratio of nonperforming loans to total loans was .14 percent and the ratio of nonperforming assets to total loans plus foreclosed real estate and other assets was .21 percent for the second quarter of 1997. ASSET QUALITY INFORMATION TABLE - ------------------------------- (Dollars in thousands)
June 30 --------------------- 1997 1996 --------------------- Nonperforming loans $ 38,327 $ 14,336 Foreclosed real estate 14,410 8,714 Other assets 227 925 -------- -------- Total nonperforming assets $ 52,964 $ 23,975 ======== ======== Loans 90 days past due $ 31,449 $ 32,157 Potential problem assets $ 77,926 $ 79,063 Second Quarter ---------------------- 1997 1996 ---------------------- Allowance for credit losses: Beginning balance at March 31 $121,688 $114,631 Provision for loan losses 12,504 7,559 Charge-offs (12,960) (9,159) Loan recoveries 2,226 3,447 -------- -------- Ending balance at June 30 $123,458 $116,478 ======== ======== June 30 --------------------- 1997 1996 --------------------- Allowance to total loans 1.54% 1.56% Nonperforming loans to total loans .48 .19 Nonperforming assets to total loans, foreclosed real estate and other assets .66 .32 Allowance to nonperforming assets 233.1 485.8 - ----------------------------------------------------------------------- Includes loans 90 days past due
15 NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS TABLE - ------------------------------------------------------
June 30 ---------------- 1997 1996 ---- ---- Commercial and commercial real estate .09% (.13)% Consumer .35 .27 Credit card receivables 5.15 3.98 Permanent mortgage .28 (.04) Total .54 .31 - --------------------------------------------------------------
BALANCE SHEET REVIEW For purposes of this discussion, loans are expressed net of unearned income, unless otherwise noted. Period-end total assets grew 6 percent from $13.0 billion at June 30, 1996 to $13.7 billion at June 30, 1997. Period-end loans increased 7 percent (from $7.5 billion to $8.0 billion) from June 30, 1996, to June 30, 1997; mortgage loans held for sale (mortgage warehouse) decreased 26 percent (from $1.1 billion to $.8 billion); and investment securities decreased 5 percent (from $2.2 billion to $2.1 billion). The growth in the period-end balance sheet was primarily funded by a 4 percent increase in interest-bearing core deposits (from $6.4 billion to $6.6 billion). At June 30, 1997, First Tennessee had no concentration of 10 percent or more of total loans in any single industry. Comparing average balances from second quarter 1996, total assets grew 2 percent (from $12.7 billion to $13.0 billion); loans grew 7 percent (from $7.4 billion to $7.9 billion) and interest-bearing core deposits increased 5 percent (from $6.3 billion to $6.6 billion). Average commercial loans increased 9 percent (from $3.3 billion to $3.6 billion) and represented 46 percent of total loans during the second quarter of 1997. Average consumer loans grew 6 percent (from $2.6 billion to $2.7 billion) and represented 35 percent of total loans. Average credit card receivables grew 3 percent (from $523 million to $541 million). The permanent mortgage portfolio declined 6 percent (from $664 million to $627 million) as a result of older loans paying down. Real estate construction loans grew 19 percent (from $265 million to $314 million). 16 With the decrease in mortgage origination volume, average mortgage warehouse loans decreased 32 percent (from $1.2 billion to $.8 billion) from the second quarter of 1996. CAPITAL Average shareholders' equity declined 2 percent (from $874.4 million to $852.7 million) from the second quarter of 1996. Average shares outstanding declined 5 percent (from 67.2 million to 64.0 million). Approximately .4 million shares were repurchased in the fourth quarter of 1996. During the first quarter of 1997, approximately 3.2 million shares were repurchased with 1.9 million of these shares repurchased under an accelerated share repurchase program. First Tennessee has an ongoing share repurchase program related to employee stock option plans. Return on common equity was 21.81 percent and return on capital (net income/total shareholders' equity plus qualifying capital securities) was 19.52 percent for the second quarter of 1997. Qualifying capital securities were issued during the first quarter of 1997, and a portion of these proceeds were used to fund stock repurchase programs. The average common equity to assets ratio for the second quarter of 1997 was 6.56 percent compared to 6.88 percent for the second quarter of 1996. The total average equity to assets ratio (including the qualifying capital securities) for the second quarter of 1997 was 7.33 percent compared to 6.88 percent for the second quarter of 1996. The effects of unrealized market adjustments had no material effect on these ratios. At June 30, 1997, the corporation's Tier 1 capital ratio was 8.82 percent, the total capital ratio was 11.51 percent and the leverage ratio was 6.90 percent. On June 30, 1997, 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 its balance sheet. First Tennessee enters into transactions involving these instruments to meet the financial needs of its customers and manage its own exposure to fluctuations in interest rates. These instruments are categorized into "Lending," "Mortgage banking," "Interest rate risk management" and "Capital markets" as noted in the Off-Balance Sheet Financial Instruments table. 17 OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AT JUNE 30, 1997 - -------------------------------------------------------- (Dollars in billions)
Notional value -------------- LENDING Commitments to extend credit: Consumer credit card lines $1,791.8 Consumer home equity 373.9 Commercial real estate and construction and land development 377.1 Mortgage banking 840.4 Other 1,628.3 Other Commitments: Commercial and standby letters of credit 560.2 Foreign exchange contracts .7 MORTGAGE BANKING Mortgage pipeline and warehouse hedging: Interest rate forward contracts - commitments to sell 1,201.0 Interest rate option contracts - put option purchased 27.0 Servicing portfolio hedging: Interest rate floors 2,440.0 INTEREST RATE RISK MANAGEMENT Interest rate swap agreements: Receive fixed/pay floating 210.0 Receive fixed/pay floating - amortizing 28.6 CAPITAL MARKETS Forward contracts: Commitments to buy 1,152.9 Commitments to sell 1,079.0 Securities underwriting commitments 1.7 - ------------------------------------------------------------------------ Purchased options have a remaining book value of $147,000 at June 30, 1997 Interest rate floors have a remaining book value of $17,232,000 at June 30, 1997
SIX MONTH REVIEW INCOME STATEMENT REVIEW Net income totaled $84.9 million for the six months ended June 30, 1997, an increase of 6 percent from $79.8 million for the same period last year, and earnings per share increased 11 percent from $1.19 in 1996 to $1.32 in 1997. Return on average assets for the first half of 1997 was 1.33 percent and return on average common equity was 19.95 percent, compared with 1.28 percent and 18.37 percent, respectively, for the same period in 1996. Noninterest income, excluding securities gains and losses, increased 10 percent (from $266.0 million to $293.0 million) over the same period last year. Fee income represented 56 percent of total revenues during the first six months of 1997 and 55 percent for the first six months of 1996. Mortgage banking fee income grew 14 percent primarily from higher servicing fees related to a larger servicing portfolio. Capital markets fee income declined 11 percent from the same period in 1996. A record level of fee income was earned during the first quarter of 1996 related to stronger customer demand from the 18 benefit of regulatory reclassifications of securities. Generally, increased volumes, new products and fees created the growth in deposit transactions and cash management fees of 9 percent, merchant processing fees of 37 percent, cardholder fees of 13 percent, and trust and investment management fees of 12 percent from the previous year. Net interest income stated on a fully taxable-equivalent basis totaled $236.8 million, up 7 percent from $221.2 million for the same period in 1996. Year-to-date net interest margin improved from 4.01 percent in 1996 to 4.25 percent in 1997. The net interest spread increased 36 basis points while the effect of net free funds decreased 12 basis points due to share repurchase programs and demand deposit transfers to sweep accounts. Approximately 13 basis points of the net interest margin improvement came from the expiration of the basis swap. The provision for loan losses increased to $25.0 million from $15.6 million in the previous year. The increase reflects a higher amount of allowance for loan losses commensurate with loan growth and the higher level of mortgage loans repurchased during 1997. In addition, the level of provision was increased due to increases in consumer debt burdens and resulting higher losses in consumer lending nationwide. Noninterest expense totaled $366.4 million, up 7 percent from $343.6 million in 1996. Personnel expense, the largest category, totaled $190.7 million in 1997, which was relatively flat to the 1996 level of $192.0 million. As a result of reduced volumes and a change in product mix, personnel expense decreased 15 percent in capital markets and 6 percent in mortgage banking. With a larger servicing portfolio and the implementation of SFAS No. 125, a new accounting methodology related to excess servicing, amortization of mortgage servicing rights increased 47 percent from $11.9 million in 1996 to $17.5 million in 1997. BALANCE SHEET REVIEW Average total assets grew 3 percent (from $12.5 billion to $12.9 billion), average loans grew 6 percent (from $7.4 billion to $7.8 billion) and interest-bearing core deposits increased 5 percent (from $6.2 billion to $6.5 billion) from the first six months of 1996. Average commercial loans increased 8 percent (from $3.3 billion to $3.6 billion), average consumer loans grew 6 percent (from $2.6 billion to $2.7 billion), and average credit card receivables grew 4 percent (from $520 million to $543 million) during the first six months of 1997. The permanent mortgage portfolio declined 7 percent (from $673 million to $629 million), while real estate construction loans grew 20 percent (from $255 million to $307 million) for the six month period of 1997. 19 Part II. OTHER INFORMATION Items 1, 2, 3, and 5. As of the end of the second quarter, 1997, 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 15, 1997. (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 I (Messrs. Martin, Orgill and Sansom and Ms. Roman) or Class II (Messrs. Glass and Kelley). The Class I nominees were elected for a three-year term and the Class II nominees were elected for a one-year term, or in either case until their respective successors are duly elected and qualified. Directors continuing in office are Messrs. Blattberg, Cantu, Cates, Haslam, Horn, Rose, and Street. (c) At the Annual Meeting, the shareholders also approved the Company's Amended and Restated Management Incentive Plan (the "Plan") and ratified the appointment of Arthur Andersen LLP as independent auditors for the year 1997. The shareholder vote was as follows:
For Withheld ---------- -------- 1. Nominees (Class I) R. Brad Martin 51,393,538 352,542 Joseph Orgill, III 51,406,205 339,875 Vicki G. Roman 51,391,012 355,068 William B. Sansom 51,404,195 341,885 Nominees (Class II) J. Kenneth Glass 51,396,009 350,071 John C. Kelley, Jr. 51,302,608 443,472 For Against Abstain ---------- --------- --------- 2. Approval of Plan 49,632,694 1,063,823 1,049,563 3. Ratification of Auditors 51,269,993 144,052 332,035
There were no "broker non-votes" with respect to any of the nominees, approval of the Plan, or the ratification of 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) A report on Form 8-K was filed on April 15, 1997 (with a Date of Report of April 14, 1997), disclosing under Item 5, Other Events, the Company's earnings for the quarter ended March 31, 1997, and the following financial statements: statements of condition for the three month periods ended March 31, 1997 and 1996 and statements of income for the three month periods ended March 31, 1997, December 31, 1996, September 30, 1996, June 30, 1996, and March 31, 1996. 20 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: 8/13/97 By: Elbert L. Thomas Jr. --------------------- --------------------------------- Elbert L. Thomas Jr. Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 21 EXHIBIT INDEX
Exhibit No. Exhibit Description Page No. - ----------- ------------------- -------- 10(a) Amended and Restated Management Incentive Plan, incorporated herein by reference to Exhibit A to the Corporation's definitive proxy statement filed on March 12, 1997 in connection with the April 15, 1997 Annual Meeting of Shareholders. 11 Statement re Computation of Per Share Earnings. Filed Herewith 27 Financial Data Schedule (for SEC use only) Filed Herewith A management contract or compensatory plan or arrangement required to be filed as an exhibit.
EX-11 2 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: 1997 1996 1997 1996 - ------------------------------------- ----------- ----------- ----------- ---------- Per statements of income (Thousands): Net income $46,364 $42,347 $84,927 $79,788 ========== ========== ========== ========== Per statements of income: Weighted average shares outstanding 64,005,532 67,224,935 64,292,500 67,263,195 ========== ========== ========== ========== Primary earnings per share (a): Net income $ .72 $ .63 $1.32 $1.19 ========== ========== ========== ========== Additional Primary computation - ------------------------------- Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 64,005,532 67,224,935 64,292,500 67,263,195 Add dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,643,107 910,352 1,643,564 899,736 ---------- ---------- ---------- ---------- Weighted average shares outstanding, as adjusted 65,648,639 68,135,287 65,936,064 68,162,931 ========== ========== ========== ========== Primary earnings per share, as adjusted (b): Net income $ .71 $ .62 $1.29 $1.17 ========== ========== ========== ========== Additional Fully Diluted Computation - ------------------------------------- Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 65,648,639 68,135,287 65,936,064 68,162,931 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 89,607 114 65,723 37,339 ---------- ---------- ---------- ---------- Weighted average shares outstanding, as adjusted 65,738,246 68,135,401 66,001,787 68,200,270 ========== ========== ========== ========== Fully diluted earnings per share, as adjusted (b): Net income $ .71 $ .62 $1.29 $1.17 ========== ========== ========== ========== (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%.
EX-27 3 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST TENNESSEE NATIONAL CORPORATION'S JUNE 30, 1997, FINANCIAL STATEMENTS FILED IN ITS 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 634,748 1,501 357,229 282,753 2,081,222 59,814 60,571 8,820,632 123,458 13,679,593 9,053,992 2,588,339 874,571 181,768 100,000 0 80,046 800,877 13,679,593 370,940 71,223 11,075 453,238 153,884 218,711 234,527 25,030 (760) 366,384 135,366 135,366 0 0 84,927 1.32 1.29 4.25 38,131 32,293 196 45,633 117,748 23,613 4,293 123,458 123,458 0 0
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