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MEMPHIS, Tenn.--Oct. 14, 1998--First Tennessee National Corporation (NASDAQ/NMS:FTEN)(First Tennessee) announced today that it had achieved record earnings of $61.8 million, up 13 percent over last year's third quarter earnings. Diluted earnings per share increased 12 percent to $.47. Return on average shareholders' equity was 24.4 percent for the third quarter of 1998 and return on average assets was 1.45 percent.
For the first nine months of 1998, net income totaled $160.9 million, or $1.22 per diluted share, compared with $139.6 million, or $1.06 per diluted share, for the first nine months of 1997. This represented a 15 percent growth over the same period in 1997 for both net income and earnings per share. Return on average shareholders' equity for the first nine months of 1998 was 22.1 percent and return on average assets was 1.35 percent, compared with 21.5 percent and 1.43 percent, respectively, in 1997.
"I am proud to report our best quarter ever," said Ralph Horn, chairman and chief executive officer of First Tennessee. "In spite of an uncertain economic environment in this country and the continued downturn in the world economy, we were able to grow our revenue more than 30 percent. Because our strategy with First Tennessee Capital Markets is one of distribution rather than trading, that division experienced strong growth while many of its competitors struggled with deteriorating market conditions. Also, our mortgage operations, FT Mortgage Companies, achieved record-breaking revenue for the quarter. These two important business lines continue to show the capability of operating predictably and profitably in all sorts of market conditions. Unfortunately, the stock market seems to have mistakenly lumped us in with many of the larger banks that have more exposure to world-wide negative current events."
Earnings Highlights (1998 third quarter compared with 1997 third quarter)
Noninterest Income
Fee income (noninterest income excluding securities gains and losses) was $267.9 million for the third quarter of 1998, representing a growth rate of 49 percent. The growth in fee income was led by increases in mortgage banking and capital markets. For the first nine months of 1998, noninterest income increased 43 percent over the same period in 1997.
Fee income in mortgage banking, First Tennessee's largest contributing business line to noninterest income, increased 81 percent to $160.1 million from the third quarter of 1997. The increase came primarily from the mortgage origination process (originations and sales into the secondary market). A favorable interest rate environment and a strong real estate market led to a record $5.6 billion of originations for the third quarter of 1998 compared with originations of $3.0 billion for the third quarter of 1997. Approximately 47 percent of the origination volume during the quarter came from refinance activity compared with 26 percent in the third quarter of 1997. Despite heavy prepayments during the quarter, the servicing portfolio grew 37 percent to $35.3 billion at September 30, 1998, from $25.7 billion at September 30, 1997. For the first nine months of 1998, mortgage banking noninterest income was $375.1 million, an increase of 65 percent over the same period in 1997.
During the third quarter of 1998, fee income from First Tennessee Capital Markets grew 22 percent to $35.4 million. Strong performance in all of the offices, including the recently opened New York office, and continued expansion of the customer base contributed to the increase in customer transactions. Capital markets ranked as one of the largest U.S. agency underwriters for the quarter. Total securities bought and sold for customers increased from $63.0 billion in the third quarter of 1997 to $109.1 billion in the third quarter of 1998. Fee income for the first nine months of 1998 was $103.6 million, an increase of 49 percent over the same period in 1997.
From the third quarter of 1997, deposit transactions and cash management fees increased 5 percent to $23.4 million. Merchant processing fees grew 17 percent to $10.1 million as a result of higher volumes. Cardholder fees grew 9 percent to $5.4 million from the third quarter of 1997 due to moderate growth in the credit card portfolio coupled with strong purchasing activity and higher interchange collections. Growth in assets under management and acquisition activity created the 17 percent growth to $12.6 million in trust services and investment management fees.
Other income and commissions grew 28 percent from the third quarter of 1997. This growth was spread out over a number of categories, including insurance sales and other service charges, which reflected strong growth in investment/mutual fund sales and servicing fees collected from securitized transactions.
For the first nine months of 1998, fee income in deposit transactions and cash management was $66.1 million, an increase of 5 percent; merchant processing fees were $25.0 million, an increase of 7 percent; cardholder fees were $15.3 million, an increase of 6 percent; trust services and investment management service fees were $38.1 million, an increase of 29 percent; and other income and commissions increased 19 percent to $54.7 million.
Net Interest Income
Net interest income (on a fully taxable equivalent basis) increased 9 percent from the third quarter of 1997 to $135.7 million primarily due to growth in earning assets. The mortgage warehouse produced almost 65 percent of the 23 percent growth in earning assets. Growth in demand deposit accounts contributed to the improvement in the regional banking group's margin from 4.74 percent in the third quarter of 1997 to 4.87 percent in the third quarter of 1998. The decline in the consolidated net interest margin (from 4.24 percent in the third quarter of 1997 to 3.75 percent in the third quarter of 1998) resulted naturally from the build-up in the mortgage warehouse. Because the spread between the rates on mortgage loans temporarily in the warehouse and the related short-term funding rates is less than the comparable spread earned in the regional banking group, the overall net interest margin was compressed. First Tennessee's margin is affected by the activity levels and related funding for its other fee-based businesses, as these business lines generally produce narrower margins than traditional banking activities.
For the first nine months of 1998, net interest income increased 10 percent to $397.0 million primarily as a result of the 20 percent increase in earning assets. The year-to-date consolidated margin for 1998 was 3.87 percent compared with 4.25 percent for the same period in 1997.
Noninterest Expense
Total noninterest expense (operating expense) increased 43 percent from third quarter 1997 to $292.7 million for the third quarter of 1998. Employee compensation, incentives and benefits (personnel expense), the largest component of noninterest expense, increased 32 percent from the previous year. Expense growth in mortgage banking and capital markets varies with the amount and mix of the products and/or services sold and impacted the growth rates because of the high volume levels during the quarter. Excluding these lines of business, total operating expense increased 16 percent. Investments in expanding consumer lending beyond our traditional markets, growth in our insurance business, consolidation expenses of our merchant processing operation, and technology contributed to this growth rate.
As a result of a larger servicing portfolio and additional prepayments, amortization of mortgage servicing rights increased 208 percent from $9.4 million in the third quarter of 1997 to $28.9 million for the same period in 1998. The majority of the 47 percent growth in other expense was related to increases in mortgage banking activities.
For the first nine months of 1998, operating expense increased 37 percent to $782.0 million, and personnel expense increased 30 percent. Excluding mortgage banking and capital markets, total operating expense increased 12 percent. Amortization of mortgage servicing rights increased 164 percent for the nine-month period and other expenses, principally related to mortgage banking, increased 39 percent.
Average Balance Sheet
Total average assets for the third quarter grew 25 percent from the previous year to $16.9 billion, with loan growth (which excludes securitized loans) of 1 percent. Managed loans (includes loans securitized in the second quarter of 1998) grew 10 percent. Commercial loan growth was 9 percent and real estate construction loans grew 20 percent compared with the previous year. On a managed basis, consumer loans grew 11 percent and the permanent mortgage portfolio grew 8 percent. The mortgage warehouse (mortgage loans held for sale) increased 154 percent (from $1.1 billion to $2.9 billion) over third quarter 1997 levels, reflecting strong origination volume. Comparing third quarter 1998 to third quarter 1997, interest-bearing core deposits grew 4 percent, total core deposits increased 8 percent and short-term purchased funds increased 67 percent. Shareholders' equity increased 14 percent from the third quarter of 1997.
Asset Quality
The provision for loan losses increased $.4 million from the third quarter of 1997 due to loan growth and inherent risk in the loan portfolio. The allowance for loan losses to total loans at September 30, 1998, was 1.63 percent compared with 1.53 percent at September 30, 1997. The ratio of nonperforming assets to total loans improved to .52 percent for the third quarter of 1998 from .62 percent for the same period in 1997. The ratio of net charge-offs to average loans was .38 percent for the third quarter of 1998, a decline from .62 percent for the third quarter of 1997. The level of nonperforming assets improved in both mortgage banking and the regional banking group from the third quarter of 1997.
General
First Tennessee, headquartered in Memphis, Tenn., is a high-performing, nationwide, diversified financial services institution and is one of the 50 largest bank holding companies in the United States in asset size and market capitalization. Banking and other financial services are provided through the regional banking group and three national lines of business: FT Mortgage Companies, First Tennessee Capital Markets and transaction processing. Transaction processing includes credit card merchant processing, MONEYBELT (our automated teller machine network), First Express (our nationwide check clearing operation), and other transaction-oriented cash management products. The corporation's common stock is traded over-the-counter on the Nasdaq Stock Market's national market system under the symbol FTEN. It is listed in the financial section of most newspapers as FstTN Ntl and is included in the Standard & Poor's MidCap 400 index. More information is available at First Tennessee's web site at www.ftb.com.
FIRST TENNESSEE NATIONAL CORPORATION
PER SHARE DATA AND FINANCIAL RATIOS
(Unaudited)
Year-to-date
September 30
--------------- Growth
1998 1997 Rate (%)
------ ------ --------
PER SHARE DATA:
---------------
Diluted earnings per share $ 1.22 $ 1.06 15.1 +
Dividends declared .495 .45
SELECTED FINANCIAL RATIOS:
--------------------------
Return on average assets 1.35% 1.43%
Return on average shareholders' equity 22.1 21.5
Quarter Ended
September 30
---------------
Growth
1998 1997 Rate (%)
------ ------ --------
PER SHARE DATA:
---------------
Diluted earnings per share $ .47 $ .42 11.9 +
Dividends declared .165 .15
SELECTED FINANCIAL RATIOS:
--------------------------
Return on average assets 1.45% 1.61%
Return on average shareholders' equity 24.4 24.6
QUARTERLY INFORMATION
3Q98 2Q98 1Q98 4Q97 3Q97
----- ----- ----- ----- -----
PER SHARE DATA:
---------------
Diluted earnings per share $ .47 $ .40 $ .35 $ .44 $ .42
Dividends declared .165 .165 .165 .165 .15
SELECTED FINANCIAL RATIOS:
--------------------------
Return on average assets 1.45% 1.31% 1.26% 1.66% 1.61%
Return on average shareholders'
equity 24.4 22.2 19.6 25.1 24.6
T-1
FIRST TENNESSEE NATIONAL CORPORATION
STATEMENTS OF INCOME - QUARTERLY GROWTH
(Unaudited)
Quarter Ended
September 30
----------------------- Growth
(THOUSANDS) 1998 1997 Rate (%)
--------------------- -------- -------- -------
Interest income $288,267 $241,745 19.2 +
Less interest expense 153,606 118,137 30.0 +
-------- --------
Net interest income 134,661 123,608 8.9 +
Provision for loan losses 13,127 12,753 2.9 +
-------- --------
Net interest income after
provision for loan
losses 121,534 110,855 9.6 +
Noninterest income:
Mortgage banking 160,063 88,402 81.1 +
Capital markets 35,370 28,903 22.4 +
Deposit transactions and
cash management 23,358 22,327 4.6 +
Merchant processing 10,074 8,575 17.5 +
Cardholder fees 5,392 4,941 9.1 +
Trust and investment
management 12,619 10,805 16.8 +
Securities gains/(losses) 9 (23) N/A
Other income and
commissions 21,035 16,416 28.1 +
-------- --------
Total noninterest income 267,920 180,346 48.6 +
-------- --------
Adjusted gross income
after provision for
loan losses 389,454 291,201 33.7 +
Noninterest expense:
Employee compensation,
incentives, and
benefits 145,038 109,542 32.4 +
Occupancy, equipment
rentals, depreciation,
and maintenance 25,179 20,784 21.1 +
Amortization of mortgage
servicing rights 28,851 9,371 207.9 +
Amortization of intangible
assets 2,726 2,419 12.7 +
Other 90,913 61,980 46.7 +
-------- --------
Total noninterest expense 292,707 204,096 43.4 +
-------- --------
Income before income
taxes 96,747 87,105 11.1 +
Applicable income taxes 34,927 32,417 7.7 +
-------- --------
Net income $ 61,820 $ 54,688 13.0 +
======== ========
Net interest income - FTE $135,651 $124,674 8.8 +
T-2
FIRST TENNESSEE NATIONAL CORPORATION
STATEMENTS OF INCOME - YEARLY GROWTH
(Unaudited)
Year-to-date
September 30
------------------- Growth
(THOUSANDS) 1998 1997 Rate (%)
--------------------- --------- --------- ---------
Interest income $ 821,429 $ 694,983 18.2 +
Less interest expense 427,439 336,848 26.9 +
--------- ---------
Net interest income 393,990 358,135 10.0 +
Provision for loan losses 39,427 37,783 4.4 +
--------- ---------
Net interest income after
provision for loan
losses 354,563 320,352 10.7 +
Noninterest income:
Mortgage banking 375,120 227,537 64.9 +
Capital markets 103,590 69,358 49.4 +
Deposit transactions and
cash management 66,125 63,109 4.8 +
Merchant processing 25,023 23,488 6.5 +
Cardholder fees 15,258 14,358 6.3 +
Trust and investment
management 38,080 29,573 28.8 +
Securities gains/(losses) (53) (783) 93.2 +
Other income and
commissions 54,677 45,959 19.0 +
--------- ---------
Total noninterest income 677,820 472,599 43.4 +
--------- ---------
Adjusted gross income
after provision for
loan losses 1,032,383 792,951 30.2 +
Noninterest expense:
Employee compensation,
incentives, and
benefits 391,452 300,202 30.4 +
Occupancy, equipment
rentals, depreciation,
and maintenance 68,981 61,844 11.5 +
Amortization of mortgage
servicing rights 70,796 26,862 163.6 +
Amortization of intangible
assets 8,021 7,229 11.0 +
Other 242,735 174,343 39.2 +
--------- ---------
Total noninterest expense 781,985 570,480 37.1 +
--------- ---------
Income before income
taxes 250,398 222,471 12.6 +
Applicable income taxes 89,477 82,856 8.0 +
--------- ---------
Net income $ 160,921 $ 139,615 15.3 +
========= =========
Net interest income - FTE $ 397,027 $ 361,436 9.8 +
T-3
FIRST TENNESSEE NATIONAL CORPORATION
STATEMENTS OF INCOME - QUARTERLY
(Unaudited)
(THOUSANDS) 3Q98 2Q98 1Q98 4Q97 3Q97
--------------- -------- -------- -------- -------- --------
Interest income $288,267 $276,121 $257,041 $246,310 $241,745
Less interest
expense 153,606 143,932 129,901 121,349 118,137
-------- -------- -------- -------- --------
Net interest
income 134,661 132,189 127,140 124,961 123,608
Provision for
loan losses 13,127 12,785 13,515 13,332 12,753
-------- -------- -------- -------- --------
Net interest
income after
provision for
loan losses 121,534 119,404 113,625 111,629 110,855
Noninterest income:
Mortgage
banking 160,063 122,500 92,557 102,594 88,402
Capital
markets 35,370 30,223 37,997 28,952 28,903
Deposit
transactions
and cash
management 23,358 22,732 20,035 22,938 22,327
Merchant
processing 10,074 7,740 7,209 8,623 8,575
Cardholder fees 5,392 5,354 4,512 5,475 4,941
Trust and
investment
management 12,619 13,340 12,121 11,368 10,805
Securities
gains/(losses) 9 (91) 29 70 (23)
Other income
and commissions 21,035 18,125 15,517 15,511 16,416
-------- -------- -------- -------- --------
Total
noninterest
income 267,920 219,923 189,977 195,531 180,346
-------- -------- -------- -------- --------
Adjusted gross
income after
provision for
loan losses 389,454 339,327 303,602 307,160 291,201
Noninterest expense:
Employee
compensation,
incentives, and
benefits 145,038 132,771 113,643 109,581 109,542
Occupancy,
equipment
rentals,
depreciation,
and
maintenance 25,179 22,671 21,131 21,097 20,784
Amortization
of mortgage
servicing
rights 28,851 24,645 17,300 10,590 9,371
Amortization of
intangible
assets 2,726 2,655 2,640 2,402 2,419
Other 90,913 75,628 76,194 70,894 61,980
-------- -------- -------- -------- --------
Total
noninterest
expense 292,707 258,370 230,908 214,564 204,096
-------- -------- -------- -------- --------
Income before
income taxes 96,747 80,957 72,694 92,596 87,105
Applicable
income taxes 34,927 28,211 26,339 34,739 32,417
-------- -------- -------- -------- --------
Net income $ 61,820 $ 52,746 $ 46,355 $ 57,857 $ 54,688
======== ======== ======== ======== ========
Net interest
income - FTE $135,651 $133,197 $128,179 $125,997 $124,674
T-4
FIRST TENNESSEE NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION - QUARTERLY GROWTH
(Unaudited)
Quarter Ended
September 30
-------------
Growth
(THOUSANDS) 1998 1997 Rate (%)
----------------- ----------- ----------- --------
Loans, net of unearned income:
Commercial $ 4,010,127 $ 3,673,096 9.2 +
Consumer (a) 2,698,734 2,781,323 3.0 --
Permanent mortgage (a) 390,867 640,656 39.0 --
Credit card receivables 569,566 544,010 4.7 +
Real estate construction 409,237 339,636 20.5 +
Nonaccrual - Regional
Banking Group 7,235 10,311 29.8 --
Nonaccrual - Mortgage
Banking 16,420 25,861 36.5 --
----------- -----------
Total loans, net of
unearned income (a) 8,102,186 8,014,893 1.1 +
Investment securities 1,951,020 2,102,738 7.2 --
REMIC securities (a) 664,782 - -
Mortgage loans held for sale 2,868,570 1,127,946 154.3 +
Other earning assets 860,596 476,242 80.7 +
----------- -----------
Total earning assets 14,447,154 11,721,819 23.3 +
Cash and due from banks 657,393 628,420 4.6 +
Other assets 1,772,563 1,138,186 55.7 +
----------- -----------
Total assets $16,877,110 $13,488,425 25.1 +
=========== ===========
Certificates of deposit under
$100,000 and other time $ 2,564,143 $ 2,783,340 7.9 --
Other interest-bearing deposits 3,724,212 3,267,627 14.0 +
----------- -----------
Total interest-bearing
core deposits 6,288,355 6,050,967 3.9 +
Certificates of deposit
$100,000 and more 2,088,210 820,473 154.5 +
Short-term borrowed funds 3,847,308 2,739,117 40.5 +
Term borrowings 266,484 180,824 47.4 +
----------- -----------
Total interest-bearing
liabilities 12,490,357 9,791,381 27.6 +
Demand deposits 1,751,334 1,581,677 10.7 +
Other noninterest-bearing
deposits 932,098 653,078 42.7 +
Other liabilities 597,331 479,037 24.7 +
Qualifying capital securities (b) 100,000 100,000 -
Shareholders' equity 1,005,990 883,252 13.9 +
----------- -----------
Total liabilities and
shareholders' equity $16,877,110 $13,488,425 25.1 +
=========== ===========
(a) As a result of the Real Estate Mortgage Investment Conduit
certain securitized consumer and permanent mortgage loans are now
classified as REMIC securities
(b) Guaranteed preferred beneficial interests in First Tennessee's
junior subordinated debentures
T-5
FIRST TENNESSEE NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION - YEARLY GROWTH
(Unaudited)
Year-to-date
September 30
------------
Growth
(THOUSANDS) 1998 1997 Rate (%)
----------------- ----------- ----------- --------
Loans, net of unearned income:
Commercial $ 3,917,051 $ 3,612,577 8.4 +
Consumer (c) 2,750,132 2,737,399 .5 +
Permanent mortgage (c) 503,247 632,718 20.5 --
Credit card receivables 560,384 543,096 3.2 +
Real estate construction 410,799 317,752 29.3 +
Nonaccrual - Regional
Banking Group 8,587 11,125 22.8 --
Nonaccrual - Mortgage
Banking 24,306 28,822 15.7 --
----------- -----------
Total loans, net of
unearned income (c) 8,174,506 7,883,489 3.7 +
Investment securities 1,999,695 2,155,624 7.2 --
REMIC securities (c) 381,197 - -
Mortgage loans held for sale 2,430,267 909,303 167.3 +
Other earning assets 701,355 410,923 70.7 +
----------- -----------
Total earning assets 13,687,020 11,359,339 20.5 +
Cash and due from banks 684,410 655,074 4.5 +
Other assets 1,611,208 1,070,945 50.4 +
----------- -----------
Total assets $15,982,638 $13,085,358 22.1 +
=========== ===========
Certificates of deposit under
$100,000 and other time $ 2,615,703 $ 2,817,306 7.2 --
Other interest-bearing deposits 3,726,170 3,288,259 13.3 +
----------- -----------
Total interest-bearing
core deposits 6,341,873 6,105,565 3.9 +
Certificates of deposit
$100,000 and more 1,716,823 849,145 102.2 +
Short-term borrowed funds 3,439,577 2,355,704 46.0 +
Term borrowings 234,745 190,867 23.0 +
----------- -----------
Total interest-bearing
liabilities 11,733,018 9,501,281 23.5 +
Demand deposits 1,713,496 1,699,108 .8 +
Other noninterest-bearing deposits 864,563 476,298 81.5 +
Other liabilities 599,245 443,613 35.1 +
Qualifying capital securities (d) 100,000 98,169 1.9 +
Shareholders' equity 972,316 866,889 12.2 +
----------- -----------
Total liabilities and
shareholders' equity $15,982,638 $13,085,358 22.1 +
=========== ===========
(c) As a result of the Real Estate Mortgage Investment Conduit
certain securitized consumer and permanent mortgage loans are now
classified as REMIC securities
(d) Guaranteed preferred beneficial interests in First Tennessee's
junior subordinated debentures
T-6
FIRST TENNESSEE NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION - QUARTERLY
(Unaudited)
(MILLIONS) 3Q98 2Q98 1Q98 4Q97 3Q97
------------- --------- --------- --------- --------- ---------
Loans, net of
unearned income:
Commercial $4,010.1 $3,929.9 $3,808.9 $3,661.2 $3,673.1
Consumer (e) 2,698.7 2,674.4 2,879.2 2,827.1 2,781.3
Permanent
mortgage (e) 390.9 453.0 668.9 655.3 640.7
Credit card
receivables 569.6 550.8 560.7 549.5 544.0
Real estate
construction 409.3 410.1 413.1 395.8 339.6
Nonaccrual
- Regional
Banking Group 7.2 9.0 9.6 11.2 10.3
Nonaccrual
- Mortgage
Banking 16.4 28.3 28.3 28.0 25.9
--------- --------- --------- --------- ---------
Total loans,
net of
unearned
income (e) 8,102.2 8,055.5 8,368.7 8,128.1 8,014.9
Investment
securities 1,951.0 1,950.6 2,099.1 2,091.4 2,102.7
REMIC
securities (e) 664.8 471.5 - - -
Mortgage loans
held for sale 2,868.6 2,705.8 1,703.7 1,292.5 1,128.0
Other earning
assets 860.6 641.3 599.3 453.6 476.2
--------- --------- --------- --------- ---------
Total earning
assets 14,447.2 13,824.7 12,770.8 11,965.6 11,721.8
Cash and due
from banks 657.4 697.5 698.8 668.9 628.4
Other assets 1,772.5 1,601.3 1,456.3 1,225.4 1,138.2
--------- --------- --------- --------- ---------
Total assets $16,877.1 $16,123.5 $14,925.9 $13,859.9 $13,488.4
========= ========= ========= ========= =========
Certificates
of deposit
under $100,000
and other time $2,564.2 $2,613.1 $2,671.1 $2,740.7 $2,783.4
Other
interest-bearing
deposits 3,724.2 3,728.3 3,726.0 3,494.1 3,267.6
--------- --------- --------- --------- ---------
Total interest-
bearing core
deposits 6,288.4 6,341.4 6,397.1 6,234.8 6,051.0
Certificates
of deposit
$100,000 and
more 2,088.2 1,791.0 1,262.2 824.8 820.5
Short-term
borrowed funds 3,847.3 3,455.4 3,006.8 2,742.3 2,739.1
Term borrowings 266.5 266.5 170.1 169.6 180.8
--------- --------- --------- --------- ---------
Total interest-
bearing
liabilities 12,490.4 11,854.3 10,836.2 9,971.5 9,791.4
Demand deposits 1,751.3 1,705.9 1,682.5 1,686.0 1,581.7
Other
noninterest-
bearing deposits 932.1 876.7 783.2 689.6 653.1
Other liabilities 597.3 633.1 567.0 498.6 479.0
Qualifying
capital
securities (f) 100.0 100.0 100.0 100.0 100.0
Shareholders'
equity 1,006.0 953.5 957.0 914.2 883.2
--------- --------- --------- --------- ---------
Total
liabilities
and
shareholders'
equity $16,877.1 $16,123.5 $14,925.9 $13,859.9 $13,488.4
========= ========= ========= ========= =========
Diluted shares
outstanding 131.5 131.6 132.2 132.2 131.8
(e) As a result of the Real Estate Mortgage Investment Conduit
certain securitized consumer and permanent mortgage loans are now
classified as REMIC securities
(f) Guaranteed preferred beneficial interests in First Tennessee's
junior subordinated debentures
T-7
FIRST TENNESSEE NATIONAL CORPORATION
PERIOD-END STATEMENTS OF CONDITION
(Unaudited)
September 30 Growth
(THOUSANDS) 1998 1997 Rate (%)
------------------ ----------- ----------- ---------
Loans, net of unearned income:
Commercial $ 4,076,573 $ 3,692,179 10.4 +
Consumer (g) 2,832,518 2,810,802 .8 +
Permanent mortgage (g) 408,034 653,054 37.5 --
Credit card receivables 573,248 541,151 5.9 +
Real estate construction 397,686 347,262 14.5 +
Nonaccrual - Regional
Banking Group 8,437 11,671 27.7 --
Nonaccrual - Mortgage
Banking 19,220 26,155 26.5 --
----------- -----------
Total loans, net of
unearned income (g) 8,315,716 8,082,274 2.9 +
Investment securities 1,956,927 2,098,281 6.7 --
REMIC securities (g) 637,863 - -
Mortgage loans held for sale 2,841,957 1,033,648 174.9 +
Other earning assets 534,777 557,021 4.0 --
----------- -----------
Total earning assets 14,287,240 11,771,224 21.4 +
Cash and due from banks 726,605 730,013 .5 --
Other assets 2,234,164 1,581,210 41.3 +
----------- -----------
Total assets $17,248,009 $14,082,447 22.5 +
=========== ===========
Certificates of deposit under
$100,000 and other time $ 2,535,356 $ 2,790,609 9.1 --
Other interest-bearing deposits 3,719,061 3,282,951 13.3 +
----------- -----------
Total interest-bearing
core deposits 6,254,417 6,073,560 3.0 +
Certificates of deposit
$100,000 and more 2,129,984 837,047 154.5 +
Short-term borrowed funds 3,472,743 2,641,693 31.5 +
Term borrowings 266,468 180,343 47.8 +
----------- -----------
Total interest-bearing
liabilities 12,123,612 9,732,643 24.6 +
Demand deposits 1,840,041 1,761,046 4.5 +
Other noninterest-bearing
deposits 876,047 585,417 49.6 +
Other liabilities 1,257,096 994,858 26.4 +
Qualifying capital securities (h) 100,000 100,000 -
Shareholders' equity 1,051,213 908,483 15.7 +
----------- ----------
Total liabilities and
shareholders' equity $17,248,009 $14,082,447 22.5 +
=========== ===========
(g) As a result of the Real Estate Mortgage Investment Conduit certain
securitized consumer and permanent mortgage loans are now
classified as REMIC securities
(h) Guaranteed preferred beneficial interests in First Tennessee's
junior subordinated debentures
T-8
FIRST TENNESSEE NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Dollars in thousands, Unaudited)
(THOUSANDS) 3Q98 2Q98 1Q98 4Q97 3Q97
--------------- -------- -------- -------- -------- --------
ALLOWANCE FOR
LOAN LOSSES:
Beginning
Reserve $129,858 $130,026 $125,859 $123,875 $123,458
Provision 13,127 12,785 13,515 13,332 12,753
Securitization
adjustment - (3,575) - - -
Allowance from
acquisition 140 - - - -
Charge-offs (11,472) (11,739) (12,376) (16,141) (14,521)
Loan recoveries 3,760 2,361 3,028 4,793 2,185
-------- -------- -------- -------- --------
Ending Balance $135,413 $129,858 $130,026 $125,859 $123,875
======== ======== ======== ======== ========
NONPERFORMING ASSETS:
Nonperforming
loans $ 8,437 $ 8,281 $ 10,914 $ 9,405 $ 11,671
Foreclosed real
estate 4,703 4,323 4,294 4,499 4,971
Other assets 207 214 225 235 221
-------- -------- -------- -------- --------
Total Regional
Banking Group 13,347 12,818 15,433 14,139 16,863
-------- -------- -------- -------- --------
Mortgage Banking
nonperforming
loans 19,220 12,981 29,283 29,010 26,155
Mortgage Banking
foreclosed real
estate 10,810 16,600 7,281 7,703 7,381
-------- -------- -------- -------- --------
Total
nonperforming
assets $ 43,377 $ 42,399 $ 51,997 $ 50,852 $ 50,399
======== ======== ======== ======== ========
Loans and leases
past due 90 days
or more $ 34,012 $ 27,192 $ 29,062 $ 32,074 $ 30,298
T-9
FIRST TENNESSEE NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Unaudited)
3Q98 2Q98 1Q98 4Q97 3Q97
-------- -------- -------- -------- --------
TOTAL FIRST TENNESSEE:
Nonperforming
loans ratio (i) .33% .27% .47% .46% .47%
Nonperforming
assets ratio (j) .52 .53 .61 .61 .62
Allowance to
total loans 1.63 1.63 1.53 1.51 1.53
Allowance to
nonperforming
loans 489.62 610.75 323.47 327.63 327.49
Allowance to
nonperforming
assets 312.18 306.28 250.06 247.50 245.79
Net charge-off
ratio (k) .38 .47 .45 .56 .62
REGIONAL BANKING GROUP:
Nonperforming
loans ratio (i) .11% .11% .13% .12% .15%
Nonperforming
assets ratio (j) .17 .17 .19 .17 .21
Allowance to
total loans 1.64 1.65 1.53 1.51 1.51
Allowance to
nonperforming
loans 1,550.99 1,522.28 1,152.00 1,294.58 1,027.68
Allowance to
nonperforming
assets 980.42 983.46 814.68 861.13 711.26
(i) Ratio is nonperforming loans to total loans
(j) Ratio is nonperforming assets to total loans plus foreclosed real
estate and other assets
(k) Ratio is net charge-offs to average loans
T-10
FIRST TENNESSEE NATIONAL CORPORATION
NET INTEREST MARGIN HIGHLIGHTS
(Unaudited)
3Q98 2Q98 1Q98 4Q97 3Q97
------------------------ ------ ------ ------ ------ ------
REGIONAL BANKING GROUP
Yields on earning assets 8.23 % 8.23 % 8.25 % 8.30 % 8.29 %
Rates paid on
interest-bearing
liabilities 4.38 4.40 4.51 4.54 4.55
------ ------ ------ ------ ------
Net interest spread 3.85 3.83 3.74 3.76 3.74
------ ------ ------ ------ ------
Effect of interest-free
sources .89 .90 .90 .95 .89
Loan fees .13 .13 .13 .10 .11
------ ------ ------ ------ ------
Net interest margin-
REGIONAL BANKING GROUP 4.87 % 4.86 % 4.77 % 4.81 % 4.74 %
MORTGAGE BANKING (.95) (.88) (.61) (.48) (.38)
CAPITAL MARKETS (.20) (.13) (.13) (.13) (.14)
TRANSACTION PROCESSING .03 .01 - - .02
------ ------ ------ ------ ------
Net interest margin 3.75 % 3.86 % 4.03 % 4.20 % 4.24 %
====== ====== ====== ====== ======
T-11
FIRST TENNESSEE NATIONAL CORPORATION
CAPITAL HIGHLIGHTS
(Dollars in millions except per share amounts, Unaudited)
3Q98 2Q98 1Q98 4Q97 3Q97
----------------- --------- --------- --------- --------- ---------
Tier 1 Capital (l) $ 998.7 $ 944.2 $ 952.1 $ 938.5 $ 890.1
Tier 2 Capital (l) 384.1 378.5 378.5 275.1 273.1
--------- --------- --------- --------- ---------
Total Capital (l) $ 1,382.8 $ 1,322.7 $ 1,330.6 $ 1,213.6 $ 1,163.2
========= ========= ========= ========= =========
Risk-Adjusted
Assets (l) $12,606.0 $11,699.7 $11,196.3 $10,418.1 $10,471.7
Tier 1 Ratio (l) 7.95% 8.07% 8.50% 9.01% 8.50%
Tier 2 Ratio (l) 3.05 3.24 3.38 2.64 2.61
--------- --------- --------- --------- ---------
Total Capital
Ratio (l) 11.00% 11.31% 11.88% 11.65% 11.11%
========= ========= ========= ========= =========
Leverage Ratio (l) 6.00% 5.91% 6.44% 6.83% 6.66%
Shareholders' Equity/Assets
Ratio (m) 5.96 5.91 6.41 6.60 6.55
Total Capital (n)/Assets
Ratio (m) 6.55 6.53 7.08 7.32 7.29
Book Value $ 8.19 $ 7.70 $ 7.63 $ 7.44 $ 7.09
(l) Current quarter is an estimate
(m) Calculated on average balances
(n) Total capital includes shareholders' equity and guaranteed
preferred beneficial interests in First Tennessee's junior
subordinated debentures
T-12
FIRST TENNESSEE NATIONAL CORPORATION
REGIONAL BANKING GROUP HIGHLIGHTS
(Earnings in thousands, Unaudited)
(Statistics in millions)
3Q98 2Q98 1Q98 4Q97 3Q97
-------- -------- -------- -------- --------
REGIONAL BANKING
GROUP
----------------
Total Revenues $173,054 $168,205 $159,534 $162,510 $159,837
Loan Loss
Provision 11,174 11,689 12,460 11,839 11,753
Operating
Expenses 102,713 98,509 91,737 93,064 88,050
-------- --------- -------- -------- --------
Pre-Tax Income $59,167 $58,007 $55,337 $57,607 $60,034
RETAIL/
COMMERCIAL BANK
---------------
Total Revenues $145,157 $139,442 $132,816 $135,352 $133,352
Loan Loss
Provision 6,113 6,144 6,391 5,623 5,638
Operating
Expenses 88,136 84,056 78,007 81,057 75,444
-------- -------- -------- -------- --------
Pre-Tax
Income $50,908 $49,242 $48,418 $48,672 $52,270
CREDIT CARD
-----------
Total Revenues $15,286 $15,415 $14,984 $15,471 $15,572
Loan Loss
Provision 5,061 5,545 6,069 6,216 6,115
Operating
Expenses 6,076 5,919 5,821 5,161 5,641
------- --------- --------- --------- ---------
Pre-Tax Income $4,149 $3,951 $3,094 $4,094 $3,816
KEY STATISTICS:
Outstandings $573.2 $561.0 $551.1 $581.5 $541.2
Net Charge-offs /
Average Loans 3.52% 4.12% 4.29% 4.59% 4.54%
TRUST SERVICES
--------------
Total Revenues $12,611 $13,348 $11,734 $11,687 $10,913
Operating
Expenses 8,501 8,534 7,909 6,846 6,965
-------- --------- --------- --------- ---------
Pre-Tax Income $4,110 $4,814 $3,825 $4,841 $3,948
KEY STATISTICS:
Managed Assets (o)
(FTBNA) $8,183.4 $8,490.0 $8,256.9 $6,558.1 $6,383.9
(o) Current quarter is an estimate
The business line financial information excludes significant
nonrecurring items, such as security gains and losses. Expenses have
been allocated based on management's best estimates, and equity has
been assigned to reflect the inherent risk in each individual business
line.
T-13
FIRST TENNESSEE NATIONAL CORPORATION
NATIONAL BUSINESS LINES HIGHLIGHTS
(Earnings in thousands, Unaudited)
3Q98 2Q98 1Q98 4Q97 3Q97
-------- ---------- ---------- ---------- ----------
MORTGAGE BANKING
----------------
Total Revenues $172,945 $135,580 $102,352 $110,514 $96,314
Loan Loss
Provision 1,953 1,097 1,055 1,493 1,001
Operating
Expenses 144,671 119,186 95,357 83,986 77,917
--------- ---------- ---------- ---------- ----------
Pre-Tax Income $26,321 $15,297 $5,940 $25,035 $17,396
Key Statistics
(in millions):
Origination
Volume $5,636.3 $4,862.4 $4,676.7 $3,255.6 $3,028.9
Servicing
Portfolio $35,292.6 $32,147.5 $29,452.0 $26,928.6 $25,672.2
CAPITAL MARKETS
---------------
Total Revenues $36,467 $31,201 $39,210 $29,757 $29,650
Operating
Expenses 26,625 23,456 27,832 21,217 21,419
--------- ---------- ---------- ---------- ----------
Pre-Tax
Income $9,842 $7,745 $11,378 $8,540 $8,231
Key Statistics
(in millions):
Total Securities
Bought/
Sold $109,140.5 $95,197.4 $84,697.7 $70,258.2 $63,041.6
Total
Under-
writings $12,789.3 $7,129.5 $11,280.5 $9,753.0 $8,466.5
TRANSACTION
PROCESSING
--------------
Total Revenues $21,101 $18,222 $17,029 $18,677 $19,241
Operating
Expenses 16,667 15,190 13,951 14,266 14,680
---------- ---------- ---------- ---------- ----------
Pre-Tax
Income $4,434 $3,032 $3,078 $4,411 $4,561
Key Statistics
(in thousands):
Merchant
Transactions
Processed 42,650.9 39,111.3 33,210.3 33,028.8 34,323.9
MONEY BELT
Transactions
Processed
(correspon-
dent) 7,060.4 6,553.5 5,335.6 5,396.9 5,232.3
First Express
Transactions
Processed 65,771.1 64,372.4 59,093.3 58,267.4 69,134.6
The business line financial information excludes significant
nonrecurring items, such as security gains and losses. Expenses have
been allocated based on management's best estimates, and equity has
been assigned to reflect the inherent risk in each individual business
line.
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