-----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, FICpae2pwy6nNiwny0KsIIzLhTBDBQKnu3bTTPUZu2gtRLzuOBJxgIa+grQJnoDW uuQ964Ab6T6Aoi/UMCzvqg== 0000950144-97-012110.txt : 19971113 0000950144-97-012110.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950144-97-012110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-04491 FILM NUMBER: 97716610 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.-QUARTERLY 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 September 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 64,103,572 - ----------------------------- ------------------------------- Class Outstanding at October 31, 1997 2 FIRST TENNESSEE NATIONAL CORPORATION INDEX Part I. Financial Information Part II. Other Information Signatures Exhibit Index Exhibit 11 Exhibit 27 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The Consolidated Statements of Condition The Consolidated Statements of Income The Consolidated 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 - ----------------------------------------------------------------------------------------------------------- September 30 December 31 ----------------------------- ------------ (Dollars in thousands)(Unaudited) 1997 1996 1996 - -------------------------------------------------------------------------------------------- ------------ ASSETS: Cash and due from banks $ 730,013 $ 778,719 $ 959,604 Federal funds sold and securities purchased under agreements to resell 240,150 168,253 138,365 - -------------------------------------------------------------------------------------------- ------------ Total cash and cash equivalents 970,163 946,972 1,097,969 - -------------------------------------------------------------------------------------------- ------------ Investment in bank time deposits 1,672 936 1,922 Capital markets securities inventory 315,199 179,169 150,402 Mortgage loans held for sale 1,033,648 737,037 787,362 Securities available for sale 2,040,983 2,154,602 2,173,620 Securities held to maturity (market value of $58,242 at September 30, 1997; $68,736 at September 30, 1996; and $66,677 at December 31, 1996) 57,298 68,357 65,914 Loans, net of unearned income 8,082,274 7,630,034 7,728,203 Less: Allowance for loan losses 123,875 117,717 117,748 - -------------------------------------------------------------------------------------------- ------------ Total net loans 7,958,399 7,512,317 7,610,455 - -------------------------------------------------------------------------------------------- ------------ Premises and equipment, net 201,356 184,903 185,624 Real estate acquired by foreclosure 12,352 7,059 7,823 Intangible assets, net 112,611 121,928 119,465 Mortgage servicing rights, net 368,037 244,334 266,027 Capital markets receivables and other assets 1,010,729 643,731 592,319 - -------------------------------------------------------------------------------------------- ------------ TOTAL ASSETS $ 14,082,447 $ 12,801,345 $ 13,058,902 ============================================================================================ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Interest bearing $ 6,910,608 $ 6,910,157 $ 6,677,669 Noninterest bearing 2,346,462 2,161,931 2,355,393 - -------------------------------------------------------------------------------------------- ------------ Total deposits 9,257,070 9,072,088 9,033,062 - -------------------------------------------------------------------------------------------- ------------ Federal funds purchased and securities sold under agreements to repurchase 1,909,928 1,589,888 1,881,187 Commercial paper and other short-term borrowings 731,765 322,297 377,369 Capital markets payables and other liabilities 994,858 636,038 578,113 Term borrowings 180,343 255,998 234,645 - -------------------------------------------------------------------------------------------- ------------ Total liabilities 13,073,964 11,876,309 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 - 64,059,810 at September 30, 1997; 67,143,632 at September 30, 1996; and 66,857,519 at December 31, 1996) 80,075 83,929 83,572 Capital surplus 44,574 60,802 48,657 Undivided profits 779,653 790,005 823,175 Unrealized market adjustment 6,799 (5,764) 2,697 Deferred compensation on restricted stock incentive plans (2,618) (3,936) (3,575) - -------------------------------------------------------------------------------------------- ------------ Total shareholders' equity 908,483 925,036 954,526 - -------------------------------------------------------------------------------------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,082,447 $ 12,801,345 $ 13,058,902 ============================================================================================ ============
5
CONSOLIDATED STATEMENTS OF INCOME First Tennessee National Corporation - ----------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30 September 30 ---------------------------- ----------------------------- (Dollars in thousands except per share data)(Unaudited) 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 178,530 $ 164,075 $ 518,752 $ 485,878 Interest on investment securities: Taxable 33,307 34,176 102,164 100,499 Tax-exempt 1,100 1,241 3,466 3,910 Interest on mortgage loans held for sale 21,680 22,034 52,398 63,518 Interest on capital markets inventory 3,661 2,483 9,613 11,268 Interest on other earning assets 3,467 1,768 8,590 4,330 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 241,745 225,777 694,983 669,403 - ----------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on deposits: Savings 2,035 2,336 6,236 7,250 Checking interest and money market 23,185 21,573 68,167 70,449 Certificates of deposit under $100,000 and other time 40,164 41,888 120,818 124,630 Certificates of deposit $100,000 and more 11,782 12,042 35,829 34,659 Interest on short-term borrowings 37,084 27,617 93,547 83,241 Interest on term borrowings 3,887 5,272 12,251 15,793 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 118,137 110,728 336,848 336,022 - ----------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 123,608 115,049 358,135 333,381 Provision for loan losses 12,753 8,853 37,783 24,445 - ----------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 110,855 106,196 320,352 308,936 - ----------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME: Mortgage banking 84,432 71,495 219,719 190,516 Capital markets 28,903 16,951 69,358 62,217 Deposit transactions and cash management 22,327 20,141 63,109 57,436 Merchant processing 8,575 6,636 23,488 17,519 Cardholder fees 4,941 4,224 14,358 12,579 Trust services and investment management 10,805 8,727 29,573 25,481 Equity securities gains/(losses) (1) 49 (841) 539 Debt securities gains/(losses) (22) (5) 58 (185) All other income and commissions 20,386 14,201 53,777 42,614 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 180,346 142,419 472,599 408,716 - ----------------------------------------------------------------------------------------------------------------------- ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES 291,201 248,615 792,951 717,652 - ----------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE: Employee compensation, incentives, and benefits 109,542 94,005 300,202 286,009 Operations services 12,205 11,706 35,504 32,783 Occupancy 10,995 10,129 32,621 29,286 Equipment rentals, depreciation, and maintenance 9,789 8,488 29,223 25,126 Amortization of mortgage servicing rights 9,371 6,669 26,862 18,534 Communications and courier 8,745 8,097 26,234 24,883 Advertising and public relations 4,370 3,469 13,739 12,927 Legal and professional fees 3,830 2,924 10,045 8,786 Amortization of intangible assets 2,419 2,412 7,229 7,128 Deposit insurance premium 371 4,259 1,106 5,142 All other 32,459 22,754 87,715 67,891 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 204,096 174,912 570,480 518,495 - ----------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 87,105 73,703 222,471 199,157 Applicable income taxes 32,417 26,906 82,856 72,572 - ----------------------------------------------------------------------------------------------------------------------- NET INCOME $ 54,688 $ 46,797 $ 139,615 $ 126,585 ======================================================================================================================= NET INCOME PER COMMON SHARE $ .85 $ .69 $ 2.17 $ 1.88 - ----------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING 64,049,081 67,144,391 64,210,469 67,223,305 - -----------------------------------------------------------------------------------------------------------------------
6
CONSOLIDATED STATEMENTS OF CASH FLOWS First Tennessee National Corporation - ------------------------------------------------------------------------------------------ Nine Months Ended September 30 ------------------------------ (Dollars in thousands)(Unaudited) 1997 1996 - ------------------------------------------------------------------------------------------ OPERATING ACTIVITIES: Net income $ 139,615 $ 126,585 Adjustments to reconcile net income to net cash provided/(used) by operating activities: Provision for loan losses 37,783 24,445 Provision for deferred income tax 39,608 39,465 Depreciation and amortization of premises and equipment 24,086 21,381 Amortization of mortgage servicing rights 26,862 18,534 Amortization of intangible assets 7,229 7,128 Net other amortization and accretion 3,767 (3,834) Market value adjustment on foreclosed property 3,745 3,029 Equity securities (gains)/losses 841 (539) Debt securities (gains)/losses (58) 185 Net gain on disposal of fixed assets (816) (43) Net (increase)/decrease in: Capital markets securities inventory (164,797) 3,486 Mortgage loans held for sale (246,286) 52,146 Capital markets receivables (358,028) (66,367) Interest receivable (8,544) (5,586) Other assets (186,491) (149,721) Net increase/(decrease) in: Capital markets payables 338,314 58,802 Interest payable 3,739 2,196 Other liabilities 39,288 (51,861) - ------------------------------------------------------------------------------------------ Total adjustments (439,758) (47,154) - ------------------------------------------------------------------------------------------ Net cash provided/(used) by operating activities (300,143) 79,431 - ------------------------------------------------------------------------------------------ INVESTING ACTIVITIES: Held to maturity securities: Maturities 8,586 7,766 Purchases -- (1,463) Available for sale securities: Sales 121,301 381,195 Maturities 441,996 316,193 Purchases (421,497) (840,550) Premises and equipment: Sales 4,134 941 Purchases (42,593) (28,705) Net increase in loans (393,251) (312,043) Decrease in investment in bank time deposits 250 1,183 Acquisitions, net of cash and cash equivalents acquired -- 400 - ------------------------------------------------------------------------------------------ Net cash used by investing activities (281,074) (475,083) - ------------------------------------------------------------------------------------------ FINANCING ACTIVITIES: Common stock: Exercise of stock options 16,599 3,948 Cash dividends (59,122) (53,517) Repurchase shares (156,781) (14,093) Payments of term borrowings (54,430) (4,149) Issuance of guaranteed preferred beneficial interests in First Tennessee's subordinated debentures 100,000 -- Net increase in: Deposits 224,008 483,147 Short-term borrowings 383,137 151,440 - ------------------------------------------------------------------------------------------ Net cash provided by financing activities 453,411 566,776 - ------------------------------------------------------------------------------------------ Net increase/(decrease) in cash and cash equivalents (127,806) 171,124 - ------------------------------------------------------------------------------------------ Cash and cash equivalents at beginning of period 1,097,969 775,848 - ------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 970,163 $ 946,972 ========================================================================================== Total interest paid $ 332,855 $ 326,812 Total income taxes paid 43,248 33,107
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 nine month period ended September 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, the pipeline, or the servicing portfolio. Capital markets uses various derivatives, including interest rate swaps, futures, forward and option contracts and securities underwriting commitments in order to meet the needs of its customers with forwards being the most commonly used instrument. 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 contracts used to hedge interest rate risk, income and expense are deferred and amortized over the lives of the hedged assets or 8 liabilities. The amortization of these gains and losses is an adjustment to interest income or expense of the hedged item. Fees are deferred and amortized over the lives of the contracts. Any related assets or liabilities are recorded on the balance sheet 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 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. 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 are designated to a specific risk tranche of servicing rights, must reduce earnings risk, and are periodically reviewed for a high correlation of expected changes in value. Forward and option 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 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 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 the gains or losses resulting from the return of time value premium are recognized in current earnings in other noninterest expense. 9 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. Derivative contracts utilized in trading activities by capital markets are measured at fair value, and gains or losses are recognized in capital markets noninterest 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 derivative contracts are reported as operating activities on the Consolidated Statements of Cash Flows. 10 NOTE 2 -- LOANS The composition of the loan portfolio at September 30 is detailed below:
(Dollars in thousands) 1997 1996 - ------------------------------------------------------------------------------------ Commercial $3,692,179 $3,465,575 Consumer 2,810,802 2,657,539 Permanent mortgage 653,054 653,205 Credit card receivables 541,151 537,034 Real estate construction 347,262 298,074 Nonaccrual - Regional banking group 11,671 12,390 Nonaccrual - Mortgage banking 26,155 6,217 - ------------------------------------------------------------------------------------ Loans, net of unearned income 8,082,274 7,630,034 Allowance for loan losses 123,875 117,717 - ------------------------------------------------------------------------------------ Total net loans $7,958,399 $7,512,317 ====================================================================================
The following table presents information concerning nonperforming loans at September 30:
(Dollars in thousands) 1997 1996 - -------------------------------------------------------------------------------- Impaired loans $11,179 $11,777 Other nonaccrual loans 26,647 6,830 - -------------------------------------------------------------------------------- Total nonperforming loans $37,826 $18,607 ================================================================================
[FN] Restructured impaired loans at September 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 Nine Months Ended September 30 September 30 ---------------------------------------------- (Dollars in thousands) 1997 1996 1997 1996 - ---------------------------------------------------------------------------------- Total interest on impaired loans $ 57 $ 91 $ 454 $ 475 Average balance of impaired loans 10,218 10,723 11,417 9,289 - ----------------------------------------------------------------------------------
An allowance for loan losses is maintained for all impaired loans. Activity in the allowance for loan losses related to non-impaired loans, impaired loans, and for the total allowance for the nine months ended September 30, 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 24,111 334 24,445 Charge-offs 27,935 816 28,751 Less loan recoveries 9,099 357 9,456 - ----------------------------------------------------------------------------------------- Net charge-offs/(recoveries) 18,836 459 19,295 - ----------------------------------------------------------------------------------------- Balance at September 30, 1996 $114,326 $3,391 $117,717 ========================================================================================= Balance at December 31, 1996 $114,217 $3,531 $117,748 Provision for loan losses 33,982 3,801 37,783 Charge-offs 34,760 3,374 38,134 Less loan recoveries 6,362 116 6,478 - ----------------------------------------------------------------------------------------- Net charge-offs 28,398 3,258 31,656 - ----------------------------------------------------------------------------------------- Balance at September 30, 1997 $119,801 $4,074 $123,875 =========================================================================================
11 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 nine month periods ended September 30, 1997, compared to the three month and nine month periods ended September 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 FT Mortgage Companies and affiliates (also referred to as mortgage banking), First Tennessee Capital Markets (also referred to as capital markets) and transaction processing (merchant processing, automated teller machine network and check clearing operations). Certain revenues and expenses are allocated and equity is assigned to the various business lines to reflect the inherent risk in each business line, based on management's best estimates. These allocations are periodically reviewed and may be revised from time to time to accurately reflect current business conditions and risks. In addition, certain reclassifications of accounts may occur to reflect current reporting standards within the industry. In each case the previous history is restated to ensure comparability. THIRD QUARTER OVERVIEW Net income for the third quarter of 1997 increased 17 percent (from $46.8 million to $54.7 million). This record earnings level resulted from record-breaking revenues in three business lines (the retail/commercial bank, mortgage banking, and capital markets). Earnings per share grew 23 percent (from $.69 to $.85) from the third quarter of 1996. Return on average common equity was 24.56 percent and return on average assets was 1.61 percent for the third quarter of 1997. On September 30, 1996, Federal legislation was enacted which required all banks to help bail out the Savings and Loan industry. The pre-tax cost to First Tennessee of the one-time Savings Association Insurance Fund (SAIF) assessment was $3.8 million in the third quarter of 1996. The table below details the impact of this assessment on the comparability of income and profitability ratios. 12 Income and Profitability Ratios for the Third Quarter Table - ----------------------------------------------------------------------------
1997 1996 ---- ---- One-Time SAIF Assessment ------------------------ Included Excluded -------- -------- Net income (millions) $ 54.7 $ 46.8 $ 49.1 Earnings per share $ .85 $ .69 $ .73 Return on average assets 1.61% 1.47% 1.55% Return on average common equity 24.56% 20.71% 21.75% - ----------------------------------------------------------------------------
Total assets grew 10 percent (from $12.8 billion to $14.1 billion) and shareholders' equity declined 2 percent (from $925.0 million to $908.5 million) from September 30, 1996, to September 30, 1997. Stock repurchase programs implemented since the third quarter of 1996 reduced period-end shares outstanding 5 percent (from 67.1 million to 64.1 million). QUARTERLY INCOME STATEMENT REVIEW NONINTEREST INCOME Fee income (noninterest income excluding securities gains and losses) for the third quarter contributed 59 percent to total revenue and grew 27 percent (from $142.4 million to $180.4 million) from the third quarter of 1996. The rise in noninterest income came from record-breaking fees from mortgage banking, capital markets, and merchant processing. Total mortgage banking fee income grew 18 percent from the third quarter of 1996 (from $71.5 million to $84.4 million) through growth in origination-related fees and servicing fees. Origination-related fee income (fees from mortgage origination and the secondary marketing process) increased 27 percent (from $46.9 million to $59.3 million). Mortgage loan originations increased 24 percent to a record level of $3.0 billion for the third quarter of 1997 (compared with $2.4 billion for the third quarter of 1996). The higher level of production was in part due to the increase in refinance activity, which accounted for approximately 26 percent of the origination volume during the third quarter of 1997 compared with 19 percent for the same period in 1996. As a consequence of a more stable interest rate environment and less price concessions, secondary marketing activities improved $8.5 million in the third quarter of 1997 compared to the same period in 1996. Income derived from the creation of originated mortgage servicing rights remained relatively flat to third quarter 1996 levels. This occurred because the servicing rights on loans retained from the higher origination volume during the quarter had a higher value and a lower volume of loans were sold. Servicing fees, which are fees collected for gathering and processing monthly mortgage payments, grew 24 percent (from $18.8 million to $23.4 million), commensurate with the increase in the servicing portfolio from $21.7 13 billion at September 30, 1996, to $25.7 billion at September 30, 1997. Fees from the sale of mortgage servicing rights declined $4.1 million as more servicing was retained. Capital markets fee income increased 71 percent (from $17.0 million to $28.9 million). Total securities bought and sold increased 44 percent (from $43.6 billion to $63.0 billion) and total underwritings increased 129 percent (from $3.7 billion to $8.5 billion) from the third quarter of 1996. This growth was due to market expansion through continued growth in the customer base of existing offices and the opening of an office in Chicago during 1997. Additionally, the increase in volume was reflective of improvement in the demand for securities by customers. Expectations of higher interest rates lowered transaction volume in the first two quarters of 1997, however, as the pressure for higher interest rates subsided, the demand for securities returned. Additionally, First Tennessee Capital Assets Corporation, a subsidiary of First Tennessee Bank National Association which helps customers securitize whole loan packages, experienced increased volume from bank customers selling loans to improve their liquidity positions. Fee income from deposit transactions and cash management increased 11 percent (from $20.1 million to $22.3 million) with increased volumes driven primarily by growth in sales and moderate price increases. Noninterest income from trust and investment management services increased 24 percent (from $8.7 million to $10.8 million) over the third quarter of 1996. This growth was primarily due to strong investment management performance. The addition of new merchants and continued growth in transactions from existing customers contributed to the record volume levels in merchant processing and the 29 percent increase (from $6.6 million to $8.6 million) in fee income. Cardholder noninterest income grew 17 percent (from $4.2 million to $4.9 million) primarily from pricing changes consistent with overall repricing trends in the industry. Other noninterest income increased 44 percent (from $14.2 million to $20.4 million). Approximately 61 percent of the increase came from mortgage banking and included a gain on the sale of a mortgage servicing hedge ($2.1 million). The remaining increase was spread over a number of categories. 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. Earning assets, including loans, have been expressed as averages, net of unearned income. For the third quarter of 1997, net interest income increased 7 percent (from $116.3 million to $124.7 million) from the third quarter of 1996. This increase was due to a 6 basis point improvement in the net interest margin and a 6 percent increase in average earning assets. 14 NET INTEREST MARGIN The net interest margin (margin) has remained relatively stable over the past few quarters and was 4.24 percent for the third quarter of 1997 compared with 4.18 percent for the third 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 4 basis points while the effect of interest-free sources increased 2 basis points. The components of net interest margin (specifically the rate paid on interest-bearing liabilities and the effect of interest-free sources) reflect a change from prior period calculations in the categorization of various noninterest-bearing accounts. Net Interest Margin Computation Table - ---------------------------------------------------------------------------
Third Quarter ------------- 1997 1996 ---- ---- Yield on earning assets 8.15% 8.06% Rate paid on interest-bearing liabilities 4.78 4.73 ---- ---- Net interest spread 3.37 3.33 Effect of interest-free sources .79 .77 Loan fees .09 .09 FRB interest and penalties(F1) (.01) (.01) ---- ---- Net interest margin 4.24% 4.18% ==== ==== - ---------------------------------------------------------------------------
[FN] F1 Federal Reserve Bank The overall net interest margin is lowered by the activity levels of and related funding for First Tennessee's fee-based businesses, as these nonbank business lines generally produce lower margins than banking-related units. 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 - ---------------------------------------------------------------------------
Third Quarter ------------- 1997 1996 ---- ---- Regional banking group 4.75% 4.42% Capital markets (.14) (.10) Mortgage banking (.38) (.19) Transaction processing .01 .05 ---- ---- Total net interest margin 4.24% 4.18% ==== ==== - ---------------------------------------------------------------------------
The regional banking group's margin improved from 4.42 percent to 4.75 percent due to positive changes in the mix of deposit liabilities. Since the third quarter of 1996, deposit liabilities have shifted from higher cost certificates of deposit to lower cost money market deposit products. This lower cost of funds and the above market level of growth in loans helped achieve the increase in net interest margin. 15 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 is significantly less than the comparable spread earned in the regional banking group. Thus as the origination volume and resulting warehouse volume fluctuates, the negative impact on margin also fluctuates. 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. NONINTEREST EXPENSE Total noninterest expense (operating expense) for the third quarter of 1997 increased 17 percent (from $174.9 million to $204.1 million) over the same period in 1996. Excluding the $3.8 million pre-tax SAIF charge, operating expense growth would have been 19 percent. Employee compensation, incentives, and benefits (personnel expense), the largest category, increased 17 percent (from $94.0 million to $109.5 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. Excluding mortgage banking and capital markets, personnel expense and total operating expense each would have increased 7 percent. As a result of the growth in the servicing portfolio and in mortgage servicing rights, amortization of mortgage servicing rights increased 41 percent (from $6.7 million to $9.4 million). The decrease in the deposit insurance premium from the third quarter of 1996 reflects the one-time SAIF assessment charged in that quarter. Other expenses increased 43 percent (from $22.8 million to $32.5 million) from the third quarter of 1996. Approximately 53 percent of this increase ($5.1 million) was related to mortgage banking. The use of contract employment increased partially due to higher origination volume. In addition, miscellaneous expenses have been incurred to cure the documentation backlog that occurred earlier in 1997. The remaining increase was spread over a number of categories and included $2.0 million of dividend expense associated with the $100 million qualifying capital securities issued on January 6, 1997. PROVISION FOR LOAN LOSSES/ASSET QUALITY The provision for loan losses increased $3.9 million to $12.8 million for the quarter ended September 30, 1997. The increase in provision reflects a higher amount of allowance for loan losses commensurate with loan growth; inherent losses in the consumer and credit card portfolios reflecting the 16 national trend in consumer asset quality; and inherent losses resulting from mortgages repurchased during 1997. The allowance for loan losses remained stable at 1.53 percent of net loans on September 30, 1997, compared with 1.54 percent on September 30, 1996. Net charge-offs to average net loans for the third quarter was .62 percent, an increase from the .41 percent in the third quarter of 1996. The increase in the level of net charge-offs was primarily related to commercial lending, repurchased mortgages and credit card loans. The commercial loan net charge-offs reflects a more normalized charge-off and recovery level. The amount and ratio of credit card net charge-offs increased from the previous year, consistent with trends in the industry. However, the ratio of net charge-offs to average credit card receivables declined from the first and second quarter of 1997, and still remained favorable to industry averages. The overall net charge-off ratio was impacted by $1.4 million in net charge-offs from mortgage banking related to the mortgage loans repurchased since the beginning of 1997. Loans and leases past due 90 days or more decreased $2.1 million from the third quarter of 1996 and decreased $1.2 million from the second quarter of 1997. Nonperforming assets increased from $25.9 million to $50.4 million for the third quarter of 1997. Since September 30, 1996, the mortgage banking operation added $19.9 million to nonperforming loans and $4.0 million to foreclosed real estate. This increase came primarily from a larger number of mortgage loans being repurchased by mortgage banking during the first quarter of 1997 to correct loan file documentation in order to certify loan pools. The 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 which occurred concurrently with an unanticipated higher level of loan originations last year due to large refinance volume. Since the first quarter of 1997, nonperforming assets in mortgage banking have decreased $6.4 million. 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 third quarter of 1997. 17 Asset Quality Information Table(F1) (Dollars in thousands) - ----------------------------------------------------------------------
September 30 ------------ 1997 1996 ---- ---- Nonperforming loans $37,826 $18,607 Foreclosed real estate 12,352 7,059 Other assets 221 203 ------- ------- Total nonperforming assets $50,399 $25,869 ======= ======= Loans 90 days past due $30,298 $32,424 Potential problem assets(F2) 72,362 77,984 Third Quarter ------------ 1997 1996 ---- ---- Allowance for credit losses: Balance at June 30 $123,458 $116,478 Provision for loan losses 12,753 8,853 Charge-offs (14,521) (10,742) Loan recoveries 2,185 3,128 -------- -------- Balance at September 30 $123,875 $117,717 September 30 ------------ 1997 1996 ---- ---- Allowance to total loans 1.53% 1.54% Nonperforming loans to total loans .47 .24 Nonperforming assets to total loans, foreclosed real estate and other assets .62 .34 Allowance to nonperforming assets 245.8 455.1 - ----------------------------------------------------------------------
[FN] F1 total loans are net of unearned income F2 includes loans 90 days past due Net Charge-offs as a Percentage of Average Loans Table(F1) - ----------------------------------------------------------------------
September 30 ------------ 1997 1996 ---- ---- Total net charge-offs excluding repurchased mortgages(F2) .55% .41% Impact of repurchased mortgages .07 -- ---- ---- Total net charge-offs .62% .41% ==== ==== BREAKDOWN BY LOAN TYPE: Commercial and commercial real estate .17% (.02)% Consumer .39 .39 Credit card receivables 4.54 3.94 Permanent mortgage(F3) .18 (.02) - ---------------------------------------------------------------------
[FN] F1 average loans are net of unearned income F2 see discussion for more information F3 excludes repurchased mortgages 18 BALANCE SHEET REVIEW For purposes of this discussion, loans are expressed net of unearned income, unless otherwise noted. Period-end total assets grew 10 percent from $12.8 billion at September 30, 1996 to $14.1 billion at September 30, 1997. Period-end loans increased 6 percent (from $7.6 billion to $8.1 billion) from September 30, 1996, to September 30, 1997; mortgage loans held for sale (mortgage warehouse) increased 40 percent (from $.7 billion to $1.0 billion); and investment securities decreased 6 percent (from $2.2 billion to $2.1 billion). The growth in the period-end balance sheet was primarily funded by a 38 percent increase in short-term borrowed funds (from $1.9 billion to $2.6 billion). At September 30, 1997, First Tennessee had no concentration of 10 percent or more of total loans in any single industry. Comparing average balances from third quarter 1996, total assets grew 7 percent (from $12.6 billion to $13.5 billion) and loans grew 7 percent (from $7.5 billion to $8.0 billion). Average commercial loans increased 8 percent (from $3.4 billion to $3.7 billion) and represented 46 percent of total loans during the third quarter of 1997. Average consumer loans grew 6 percent (from $2.6 billion to $2.8 billion) and represented 35 percent of total loans. Average credit card receivables grew 1 percent (from $539 million to $544 million). The permanent mortgage portfolio declined 2 percent (from $653 million to $641 million) as a result of older loans paying down. Real estate construction loans grew 18 percent (from $289 million to $340 million). Mortgage warehouse loans increased 4 percent to $1.1 billion for the third quarter of 1997. Short-term borrowed funds increased 28 percent (from $2.1 billion to $2.7 billion). CAPITAL Average shareholders' equity declined 2 percent (from $898.9 million to $883.3 million) from the third quarter of 1996. However, the internal equity generation rate (net income less dividends declared as a percentage of average shareholders' equity) improved to 16.1 percent for the third quarter of 1997 compared with 12.9 percent for the third quarter of 1996. This ratio reflects the amount of income earned on the equity base. Since September 30, 1996, approximately $171.0 million of equity has been repurchased which includes the settlement of an accelerated share repurchase program for an additional $11.6 million during the third quarter of 1997. The equity repurchased since September 30, 1996, resulted in a decline in average shares outstanding of 5 percent (from 67.1 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. 19 Return on average common equity was 24.56 percent and return on capital (net income/total shareholders' equity plus qualifying capital securities) was 22.07 percent for the third quarter of 1997. Qualifying capital securities were issued during the first quarter of 1997, and a portion of the proceeds were used to fund stock repurchase programs. The average common equity to assets ratio for the third quarter of 1997 was 6.55 percent compared to 7.12 percent for the third quarter of 1996. The total average equity to assets ratio (including the qualifying capital securities) for the third quarter of 1997 was 7.29 percent compared to 7.12 percent for the third quarter of 1996. The effects of unrealized market adjustments had no material effect on these ratios. At September 30, 1997, the corporation's Tier 1 capital ratio was 8.50 percent, the total capital ratio was 11.11 percent and the leverage ratio was 6.66 percent. On September 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. Off-Balance Sheet Financial Instruments at September 30, 1997 (Dollars in billions) - --------------------------------------------------------------------------------
Notional Value -------------- LENDING Commitments to extend credit: Consumer credit card lines $1,865.2 Consumer home equity 391.0 Commercial real estate and construction and land development 362.2 Mortgage banking 939.5 Other 1,753.1 Other Commitments: Commercial and standby letters of credit 591.8 Foreign exchange contracts 2.7 MORTGAGE BANKING Mortgage pipeline and warehouse hedging: Interest rate forward contracts - commitments to sell 1,444.7 Interest rate option contracts - put option purchased(F1) 24.0 Servicing portfolio hedging: Interest rate floors(F2) 2,675.0 INTEREST RATE RISK MANAGEMENT Interest rate swap agreements: Receive fixed/pay floating 210.0 Receive fixed/pay floating - amortizing 25.9 CAPITAL MARKETS Forward contracts: Commitments to buy 1,636.3 Commitments to sell 1,719.8 Securities underwriting commitments 2.5 - --------------------------------------------------------------------------------
20 [FN] F1 Purchased options have a remaining book value of $105,000 at September 30, 1997 F2 Interest rate floors have a remaining book value of $13,830,000 at September 30, 1997 NINE MONTH REVIEW INCOME STATEMENT REVIEW Net income totaled $139.6 million for the nine months ended September 30, 1997, an increase of 10 percent from $126.6 million for the same period last year, and earnings per share increased 15 percent from $1.88 in 1996 to $2.17 in 1997. Return on average assets for the first nine months of 1997 was 1.43 percent and return on average common equity was 21.53 percent, compared with 1.35 percent and 19.17 percent, respectively, for the same period in 1996. Noninterest income, excluding securities gains and losses, increased 16 percent (from $408.4 million to $473.4 million) over the same period last year. Fee income represented 57 percent of total revenues during the first nine months of 1997 and 55 percent for the first nine months of 1996. Generally due to increased volumes, growth was seen in all major categories of noninterest income. Mortgage banking fee income grew 15 percent (from $190.5 million to $219.7 million) primarily from higher servicing fees related to a larger servicing portfolio. Capital markets fee income increased 11 percent (from $62.2 million to $69.4 million) from the same period in 1996. Deposit transactions and cash management fees grew 10 percent (from $57.4 million to $63.1 million). Merchant processing fees increased 34 percent (from $17.5 million to $23.5 million), while cardholder fees increased 14 percent (from $12.6 million to $14.4 million). Trust and investment management fees grew 16 percent (from $25.5 million to $29.6 million) from the previous year. Net interest income stated on a fully taxable-equivalent basis totaled $361.4 million, up 7 percent from $337.5 million for the same period in 1996. Year-to-date net interest margin improved from 4.07 percent in 1996 to 4.25 percent in 1997. The growth in net interest income and the net interest margin reflects continued strong loan growth and lower funding costs. Approximately 8 basis points of the improvement was due to the expiration of amortization expense related to a basis swap terminated in May of 1996. The net interest spread increased 21 basis points while the effect of net free funds decreased 3 basis points. The provision for loan losses increased to $37.8 million from $24.4 million in the previous year. The increase reflects a higher amount of allowance for loan losses commensurate with commercial loan growth and the higher level of mortgage loans repurchased during 1997. In addition, the level of provision was increased commensurate with loan growth and inherent losses in the consumer and credit card portfolios. 21 Noninterest expense increased 10 percent (from $518.5 million to $570.5 million). Personnel expense, the largest category, increased 5 percent (from $286.0 million to $300.2 million). Due to a larger servicing portfolio, amortization of mortgage servicing rights increased 45 percent (from $18.5 million to $26.9 million). BALANCE SHEET REVIEW During the nine months ended September 30, 1997, average total assets grew 4 percent (from $12.5 billion to $13.1 billion) and average loans grew 6 percent (from $7.4 billion to $7.9 billion). Average commercial loans increased 8 percent (from $3.4 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 3 percent (from $526 million to $543 million) during the first nine months of 1997. The permanent mortgage portfolio declined 5 percent (from $666 million to $633 million), while real estate construction loans grew 19 percent (from $267 million to $318 million) for the nine month period of 1997. Interest-bearing core deposits increased 2 percent (from $6.0 billion to $6.1 billion) from the first nine months of 1996. Short-term borrowed funds increased 8 percent (from $3.0 billion to $3.2 billion). 22 Part II. OTHER INFORMATION Items 1, 3, 4, and 5. As of the end of the third quarter, 1997, the answers to Items 1, 3, 4, and 5 were either inapplicable or negative, and therefore, these items are omitted. Item 2. Changes in Securities On July 14, 1997, the Corporation acquired Federal Flood Certification Corporation ("Federal Flood"), Dallas, Texas, in a transaction in which a wholly owned subsidiary of the Corporation merged with and into Federal Flood. At closing, the Corporation acquired from the eight shareholders of Federal Flood all 2,060 shares of Federal Flood's common stock, $1.00 par value, in exchange for a closing payment of $95,000 cash and 35,113 shares of the Corporation's common stock, $1,25 par value. On September 12, 1997, 2,164 additional shares of the Corporation's common stock were issued to the shareholders of Federal Flood in payment of the balance of the acquisition price. No underwriter was involved in the transaction. The shares were sold in a private offering pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, based on the limited number of shareholders of Federal Flood receiving the Corporation's common stock. 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 third quarter of 1997. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST TENNESSEE NATIONAL CORPORATION ------------------------------------ (Registrant) DATE: 11/13/97 By: Elbert L. Thomas Jr. ------------------ --------------------------------- Elbert L. Thomas Jr. Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 24 EXHIBIT INDEX
Exhibit No. Exhibit Description Page No. - ----------- ------------------- -------- 11 Statement re Computation of Per Share Earnings. Filed Herewith 27 Financial Data Schedule (for SEC use only). Filed Herewith
EX-11 2 STATEMENT RE 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 Nine Months Ended September 30 September 30 ------------------------- ------------------------- Computation for Statements of Income: 1997 1996 1997 1996 - ------------------------------------- ----------- ----------- ----------- ----------- Per statements of income (Thousands): Net income $ 54,688 $ 46,797 $ 139,615 $ 126,585 =========== =========== =========== =========== Per statements of income: Weighted average shares outstanding 64,049,081 67,144,391 64,210,469 67,223,305 =========== =========== =========== =========== Primary earnings per share (a): Net income $ .85 $ .69 $ 2.17 $ 1.88 =========== =========== =========== =========== Additional Primary computation - ------------------------------ Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 64,049,081 67,144,391 64,210,469 67,223,305 Add dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,802,865 916,346 1,680,832 905,313 Weighted average shares outstanding, ----------- ----------- ---------- ---------- as adjusted 65,851,946 68,060,737 65,891,301 68,128,618 =========== =========== =========== =========== Primary earnings per share, as adjusted (b): Net income $ .83 $ .69 $ 2.12 $ 1.86 =========== =========== =========== =========== Additional Fully Diluted Computation - ------------------------------------ Adjustment to weighted average shares outstanding: Weighted average shares outstanding per primary computation above 65,851,946 68,060,737 65,891,301 68,128,618 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 162,209 60,642 93,564 45,163 Weighted average shares outstanding, ----------- ----------- ----------- ----------- as adjusted 66,014,155 68,121,379 65,984,865 68,173,781 =========== =========== =========== =========== Fully diluted earnings per share, as adjusted (b): Net income $ .83 $ .69 $ 2.12 $ 1.86 =========== =========== =========== ===========
[FN] (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 SEPTEMBER 30, 1997, FINANCIAL STATEMENTS FILED IN ITS 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 730,013 1,672 240,150 315,199 2,040,983 57,298 58,242 9,115,922 123,875 14,082,447 9,257,070 2,641,693 994,858 180,343 100,000 0 80,075 828,408 14,082,447 571,150 105,630 18,203 694,983 231,050 336,848 358,135 37,783 (783) 570,480 222,471 222,471 0 0 139,615 2.17 2.12 4.25 37,629 31,130 197 41,231 117,748 38,134 6,478 123,875 123,875 0 0
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