10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

(Mark one)

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

For the quarterly period ended March 31, 2002

OR

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

For the transition period from __________________________________ to _____________________________

Commission file number 00000-4491

CIK number 0000036966

FIRST TENNESSEE NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Tennessee	62-0803242
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

165 Madison Avenue, Memphis, Tennessee	38103
(Address of principal executive offices)	(Zip Code)

(901) 523-4444

(Registrant’s telephone number, including area code)

None

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

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

Yes    x   No    o

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Common Stock, $.625 par value	126,790,485
Class	Outstanding on April 30, 2002

TABLE OF CONTENTS

Bylaws of the Corporation

Non-employee Director Benefits

FIRST TENNESSEE NATIONAL CORPORATION

INDEX

Part I. Financial Information

Part II. Other Information

Signatures

Exhibit Index

PART I.

FINANCIAL INFORMATION

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

This financial information reflects all adjustments 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.

CONSOLIDATED STATEMENTS OF CONDITION First Tennessee National Corporation

			March 31						December 31
(Dollars in thousands)(Unaudited)			2002			2001			2001
ASSETS:
Cash and due from banks			$	674,369		$	752,415		$	885,183
Federal funds sold and securities purchased under agreements to resell				186,061			69,862			229,440
		Total cash and cash equivalents		860,430			822,277			1,114,623
Investment in bank time deposits				1,329			664			1,740
Trading securities				939,082			559,489			646,179
Loans held for sale				2,146,747			2,526,125			3,399,309
Securities available for sale				2,022,979			2,077,062			2,064,611
Securities held to maturity (market value of $396,132 at March 31, 2002; $602,340 at March 31, 2001; and $459,109 at December 31, 2001)				399,917			607,720			461,259
Loans, net of unearned income				10,344,027			10,407,757			10,283,143
	Less: Allowance for loan losses			153,167			146,949			155,373
		Total net loans		10,190,860			10,260,808			10,127,770
Premises and equipment, net				246,507			281,078			251,504
Real estate acquired by foreclosure				23,248			13,723			21,989
Mortgage servicing rights, net				748,933			683,510			665,005
Goodwill				156,354			115,830			143,147
Other intangible assets, net				28,028			16,563			41,857
Capital markets receivables and other assets				1,844,403			1,351,971			1,677,798
TOTAL ASSETS			$	19,608,817		$	19,316,820		$	20,616,791
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Deposits:
	Interest-bearing		$	9,652,637		$	9,324,541		$	9,596,230
	Noninterest-bearing			3,489,083			3,295,909			4,010,104
		Total deposits		13,141,720			12,620,450			13,606,334
Federal funds purchased and securities sold under agreements to repurchase				2,245,130			3,086,720			2,921,543
Commercial paper and other short-term borrowings				351,216			365,478			449,151
Capital markets payables and other liabilities				1,606,860			1,264,752			1,467,453
Term borrowings				600,582			449,648			550,361
		Total liabilities		17,945,508			17,787,048			18,994,842
Guaranteed preferred beneficial interests in First Tennessee’s junior subordinated debentures				100,000			100,000			100,000
Preferred stock of subsidiary				44,212			44,118			44,187
SHAREHOLDERS’ EQUITY:
Preferred stock — no par value (5,000,000 shares authorized, but unissued)				—			—			—
Common stock — $.625 par value (shares authorized - 400,000,000; shares issued - 125,851,831 at March 31, 2002; 127,703,874 at March 31, 2001; and 125,865,188 at December 31, 2001)				78,657			79,815			78,666
Capital surplus				110,728			88,338			106,682
Undivided profits				1,311,070			1,189,690			1,263,649
Accumulated other comprehensive income				17,793			26,360			23,278
Deferred compensation on restricted stock incentive plans				(7,695	)		(3,667	)		(2,126	)
Deferred compensation obligation				8,544			5,118			7,613
		Total shareholders’ equity		1,519,097			1,385,654			1,477,762
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	19,608,817		$	19,316,820		$	20,616,791

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME			First Tennessee National Corporation
			Three Months Ended
			March 31
(Dollars in thousands except per share data)(Unaudited)				2002			2001
INTEREST INCOME:
Interest and fees on loans			$	166,963		$	226,184
Interest on investment securities:
	Taxable			36,044			44,258
	Tax-exempt			296			440
Interest on loans held for sale				40,417			34,651
Interest on trading securities				12,971			13,102
Interest on other earning assets				1,289			2,518
		Total interest income		257,980			321,153
INTEREST EXPENSE:
Interest on deposits:
	Savings			571			1,247
	Checking interest and money market account			10,085			28,179
	Certificates of deposit under $100,000 and other time			18,578			32,880
	Certificates of deposit $100,000 and more			21,071			45,282
Interest on short-term borrowings				16,717			54,510
Interest on term borrowings				6,606			7,738
		Total interest expense		73,628			169,836
NET INTEREST INCOME				184,352			151,317
Provision for loan losses				25,728			18,989
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES				158,624			132,328
NONINTEREST INCOME:
Mortgage banking				121,257			88,189
Capital markets				99,436			78,810
Deposit transactions and cash management				32,424			27,760
Trust services and investment management				14,089			15,196
Merchant processing				10,213			11,630
Divestitures				—			11,434
Equity securities losses				—			(53	)
Debt securities losses				(34	)		(97	)
All other income and commissions				47,547			40,079
		Total noninterest income		324,932			272,948
ADJUSTED GROSS INCOME AFTER PROVISION FOR LOAN LOSSES				483,556			405,276
NONINTEREST EXPENSE:
Employee compensation, incentives and benefits				217,599			178,654
Occupancy				17,135			17,252
Equipment rentals, depreciation and maintenance				15,918			17,801
Operations services				14,516			14,823
Communications and courier				13,327			11,311
Amortization of intangible assets				1,598			2,880
All other expense				72,777			67,798
		Total noninterest expense		352,870			310,519
PRETAX INCOME				130,686			94,757
Applicable income taxes				43,605			32,385
Income before cumulative effect of changes in accounting principles				87,081			62,372
Cumulative effect of changes in accounting principles				—			(8,168	)
NET INCOME			$	87,081		$	54,204
EARNINGS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES (Note 3)			$	.69		$	.48
EARNINGS PER COMMON SHARE (Note 3)				.69			.42
DILUTED EARNINGS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES (Note 3)			$	.67		$	.47
DILUTED EARNINGS PER COMMON SHARE (Note 3)				.67			.41
WEIGHTED AVERAGE SHARES OUTSTANDING				126,784,812			129,304,935

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY				First Tennessee National Corporation
(Dollars in thousands)(Unaudited)		2002			2001
BALANCE, JANUARY 1		$	1,477,762		$	1,384,156
Net income			87,081			54,204
Other comprehensive income:
	Cumulative effect of change in accounting principle		—			1,449
	Unrealized market adjustments, net of tax and reclassification adjustment		(5,485	)		10,313
Comprehensive income			81,596			65,966
Cash dividends declared			(31,425	)		(28,182	)
Common stock issued for exercise of stock options			11,342			23,259
Tax benefit from non-qualified stock options			2,951			10,051
Common stock repurchased			(27,088	)		(76,172	)
Amortization on restricted stock incentive plans			600			516
Other			3,359			6,060
BALANCE, MARCH 31		$	1,519,097		$	1,385,654

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY					First Tennessee National Corporation
						Three Months Ended March 31
(Dollars in thousands) (Unaudited)						2002			2001
OPERATING ACTIVITIES:
Net income						$	87,081		$	54,204
Adjustments to reconcile net income to net cash provided/(used) by operating activities:
		Provision for loan losses					25,728			18,989
		Provision for deferred income tax					25,727			(7,771	)
		Depreciation and amortization of premises and equipment					13,542			14,110
		Amortization and impairment of mortgage servicing rights					61,125			26,441
		Amortization of intangible assets					1,598			2,880
		Net other amortization and accretion					4,428			8,548
		Net (increase)/decrease in net derivative product assets					37,546			(26,501	)
		Market value adjustment on foreclosed property					3,137			1,952
		Equity securities losses					—			53
		Debt securities losses					34			97
		Net (gains)/losses on disposal of fixed assets					(218	)		83
		Gains on divestitures					—			(11,434	)
		Net (increase)/decrease in:
			Trading securities				(292,903	)		(150,969	)
			Loans held for sale				1,252,562			(791,055	)
			Capital markets receivables				(140,078	)		(75,030	)
			Interest receivable				3,389			10,043
			Other assets				(205,783	)		239,156
		Net increase/(decrease) in:
			Capital markets payables				146,321			83,955
			Interest payable				786			(925	)
			Other liabilities				(34,351	)		219,974
				Total adjustments			902,590			(437,404	)
Net cash (used)/provided by operating activities							989,671			(383,200	)
INVESTING ACTIVITIES:
Held to maturity securities:
	Maturities						60,970			30,596
Available for sale securities:
	Sales						103,420			38,602
	Maturities						307,513			121,583
	Purchases						(376,368	)		(164,433	)
Premises and equipment:
	Sales						1,377			46
	Purchases						(7,492	)		(8,017	)
Net increase in loans							(97,753	)		(218,190	)
Net decrease in investment in bank time deposits							411			2,965
Proceeds from divestitures							—			37,899
Acquisitions, net of cash and cash equivalents acquired							—			(1,925	)
Net cash used by investing activities							(7,922	)		(160,874	)
FINANCING ACTIVITIES:
Common stock:
	Exercise of stock options						11,436			24,127
	Cash dividends						(31,458	)		(28,278	)
	Repurchase of shares						(27,088	)		(76,173	)
Term borrowings:
	Issuance						52,319			40,000
	Payments						(2,187	)		(50,104	)
Net increase/(decrease) in:
	Deposits						(464,616	)		431,743
	Short-term borrowings						(774,348	)		64,637
Net cash (used)/provided by financing activities							(1,235,942	)		405,952
Net decrease in cash and cash equivalents							(254,193	)		(138,122	)
Cash and cash equivalents at beginning of period							1,114,623			960,399
Cash and cash equivalents at end of period						$	860,430		$	822,277
Total interest paid						$	72,658		$	170,538
Total income taxes paid							391			69,269

See accompanying notes to consolidated financial statements.

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 three-month period ended March 31, 2002, are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements and footnotes included in the financial appendix to the 2002 Proxy Statement.

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

On January 1, 2002, First Tennessee adopted the preliminary provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life, but is subject to an assessment for impairment using a fair-value-based test at least annually. First Tennessee did not recognize any impairment of the goodwill currently on its books during first quarter 2002; however, management is still finalizing the initial analysis of impairment as required by the new standard. First Tennessee does not expect the final analysis to have a material adverse effect on the financial condition or results of operations. See Note 7 - Intangible Assets for additional information.

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

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

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

Note 1 — Financial Information (continued)

financial markets. If a reporting period ends during a period of volatile financial market conditions, the effect of such point in time conditions on reported earnings does not reflect the underlying economics of the transactions or the true value of the hedges to First Tennessee over their estimated lives. The fact that the fair value of a particular derivative is unusually low or high on the last day of the reporting period is meaningful in evaluating performance during the period only if First Tennessee sells the derivative within the period of time before fair value changes and does not replace the hedge coverage with another derivative. First Tennessee believes the effect of such volatility on short-term measures of earnings ($3.1 million pre-tax loss for the three-month period ending March 31, 2002, as compared to a $3.5 million pre-tax gain for the three-month period ending March 31, 2001) is not indicative of the expected long-term performance of this hedging practice.

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

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

Note 2 — Divestitures/Acquisitions

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

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

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

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

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

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

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

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

Note 3 — Earnings Per Share

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

	Three Months Ended
	March 31
(Dollars in thousands, except per share data)	2002		2001
Income before cumulative effect of changes in accounting principles	$	87,081	$	62,372
Cumulative effect of changes in accounting principles		—		(8,168	)
Net income	$	87,081	$	54,204
Weighted average common shares outstanding		125,864,396		128,635,537
Shares attributable to deferred compensation		920,416		669,398
Total weighted average shares		126,784,812		129,304,935
EARNINGS PER COMMON SHARE:
Income before cumulative effect of changes in accounting principles	$	.69	$	.48
Cumulative effect of changes in accounting principles		—		(.06	)
Net income	$	.69	$	.42
Weighted average shares outstanding		126,784,812		129,304,935
Dilutive effect due to stock options		3,545,425		3,608,180
Total weighted average shares, as adjusted		130,330,237		132,913,115
DILUTED EARNINGS PER COMMON SHARE:
Income before cumulative effect of changes in accounting principles	$	.67	$	.47
Cumulative effect of changes in accounting principles		—		(.06	)
Net income	$	.67	$	.41

Note 4 — Loans

The composition of the loan portfolio on March 31 is detailed below:

(Dollars in thousands)	2002		2001
Commercial:
Commercial, financial and industrial	$	4,014,259	$	4,136,252
Real estate commercial		989,431		971,940
Real estate construction		516,246		400,783
Retail:
Real estate residential		3,919,805		3,603,630
Real estate construction		213,814		182,579
Consumer		430,681		841,649
Credit card receivables		259,791		270,924
Loans, net of unearned income	$	10,344,027	$	10,407,757
Allowance for loan losses		153,167		146,949
Total net loans	$	10,190,860	$	10,260,808

The following table presents information concerning nonperforming loans at March 31:

(Dollars in thousands)	2002		2001
Impaired loans	$	39,613	$	58,136
Other nonaccrual loans		26,860		21,237
Total nonperforming loans	$	66,473	$	79,373

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
			March 31
(Dollars in thousands)	2002			2001
Total interest on impaired loans	$	75		$	79
Average balance of impaired loans		41,802			48,666

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 three months ended March 31, 2002 and 2001, is summarized as follows:

(Dollars in thousands)			Non-impaired		Impaired		Total
Balance on December 31, 2000			$	128,339	$	15,357	$	143,696
Provision for loan losses				10,979		8,010		18,989
Charge-offs				14,891		3,336		18,227
	Less loan recoveries			1,850		641		2,491
		Net charge-offs		13,041		2,695		15,736
Balance on March 31, 2001			$	126,277	$	20,672	$	146,949
Balance on December 31, 2001			$	138,427	$	16,946	$	155,373
Provision for loan losses				17,286		8,442		25,728
Charge-offs				18,259		13,076		31,335
	Less loan recoveries			2,968		433		3,401
		Net charge-offs		15,291		12,643		27,934
BALANCE ON MARCH 31, 2002			$	140,422	$	12,745	$	153,167

Note 5 — Business Segment Information

First Tennessee provides traditional retail/commercial banking and other financial services to its customers through various regional and national business lines. Effective January 1, 2002, the business segment information has been adapted to better reflect First Tennessee’s strategic alignment and positioning and to conform to similar changes in internal segment reporting. Prior periods have been restated for comparability. The new segments are FTN Banking Groups, First Horizon, FTN Financial, Transaction Processing, Corporate, and Strategic Initiative Items. FTN Banking Groups includes the Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust, and Credit Card. This segment offers traditional banking financial services and products and also promotes comprehensive financial planning to address customer needs and desires for investments, insurance, estate planning, education funding, cash reserves and retirement goals. First Horizon includes First Horizon Home Loans, First Horizon Equity Lending and First Horizon Money Centers (the last two were previously included in the Retail/Commercial Bank). These business lines were combined to create a common focus and a stronger presence in the national market. FTN Financial added Strategic Alliances and Correspondent Services to the existing business mix that included Capital Markets, Equity Research and Investment Banking. Strategic Alliances is a customer relationship service group recently formed to enhance our portfolio of innovative investment services. Correspondent Services was a part of the Retail/Commercial Bank previously. Transaction Processing continues to offer credit card merchant processing, nationwide bill payment processing, check clearing operations and other cash management products and services. The corporate segment includes certain corporate expenses, SFAS No. 133 gains/(losses), interest expense on trust preferred and REIT preferred stock, and other items not allocated or not specifically assigned to business segments. The Strategic Initiative Items segment isolates items occurring in 2001 that were related to a strategic initiative to enhance growth and business mix.

Total revenue, expense and asset levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, they are to an extent subjective. This assignment and allocation has been consistently applied for all periods presented. The following table reflects the approximate amounts of consolidated revenue, expense, tax, and assets for the year to date periods ending March 31, 2002 and 2001 and has been adjusted for comparability.

		FTN											Strategic
		Banking		First		FTN		Transaction					Initiative
(Dollars in thousands)		Groups		Horizon		Financial		Processing		Corporate			Items			Consolidated
Year To Date 2002 Net interest income, FTE*		$	118,440	$	52,681	$	8,738	$	4,112	$	777		$	—		$	184,748
Other revenues			73,721		129,648		101,119		23,507		(3,063	)		—			324,932
Other expenses**			126,440		141,001		70,998		22,671		17,488			—			378,598
	Pre-tax income, FTE*		65,721		41,328		38,859		4,948		(19,774	)		—			131,082
Income taxes, FTE*			19,778		15,090		14,767		1,880		(7,514	)		—			44,001
Net income		$	45,943	$	26,238	$	24,092	$	3,068	$	(12,260	)	$	—		$	87,081
Average assets		$	10,537,871	$	6,635,554	$	2,056,410	$	645,869	$	56,436		$	—		$	19,932,140
Year To Date 2001 Net interest income, FTE*		$	110,076	$	32,386	$	5,346	$	3,470	$	598		$	—		$	151,876
Other revenues			66,213		89,917		79,007		22,875		3,502			11,434			272,948
Other expenses**			119,218		113,113		54,966		22,674		7,949			11,588			329,508
	Pre-tax income, FTE*		57,071		9,190		29,387		3,671		(3,849	)		(154	)		95,316
Income taxes, FTE*			18,636		3,267		11,167		1,395		(1,462	)		(59	)		32,944
Income before cumulative effect of changes in accounting principles			38,435		5,923		18,220		2,276		(2,387	)		(95	)		62,372
Cumulative effect of changes in accounting principles			—		—		—		—		(8,168	)		—			(8,168	)
Net income		$	38,435	$	5,923	$	18,220	$	2,276	$	(10,555	)	$	(95	)	$	54,204
Average assets		$	11,109,049	$	5,791,642	$	1,476,102	$	549,661	$	44,237		$	—		$	18,970,691

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

Note 6 — Contingencies

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

In 2001, the Tennessee Supreme Court affirmed a $209,156 award of compensatory damages against FTBNA (as successor by merger to Community Bank of Germantown) as well as a $60,000 award in FTBNA’s favor against the plaintiff. The Supreme Court also vacated a $9,000,000 punitive damage award against FTBNA and remanded the case to the trial court to reassess punitive damages in accordance with the factors outlined in an earlier Tennessee Supreme Court opinion. No date has been set for the punitive damages hearing.

Two certified class actions, alleging that FTBNA and another defendant engaged in unfair and deceptive practices in connection with the financing of satellite dish television systems and involving approximately 8,000 plaintiffs, have been combined in Alabama federal court. In April 2002, the court granted final approval of the settlement of these actions pending appeal, if any. Four additional suits on similar allegations were filed on behalf of multiple individual plaintiffs in Mississippi state court in 2001 and 2002. These cases have been settled subject to receipt of releases. In addition, two similar satellite systems actions, each filed by one plaintiff, are pending in the Choctaw Tribal Court. Another case, filed by eight plaintiffs and involving similar allegations, is pending in federal court in Mississippi and has been amended to add as plaintiffs 42 of the 54 persons who chose to opt out of the class settlement.

Many mortgage lenders, including a First Tennessee subsidiary, have been sued in putative class actions on the theory that yield spread premiums paid to mortgage brokers are referral fees banned by the Real Estate Settlement Practices Act (“RESPA”). Under that act, liability for an impermissible referral fee is three times the amount of the fee. Accordingly, the potential damages could be substantial. In June 2001, the Eleventh Circuit Court of Appeals upheld certification of a class in a yield spread premium case against a lender unaffiliated with First Tennessee. Although the decision was procedural, certain statements in the decision could be interpreted to suggest a liability standard favorable to plaintiff borrowers. In October 2001, the U.S. Department of Housing and Urban Development published a policy statement disagreeing with the Eleventh Circuit’s decision. In other pending cases involving lenders unaffiliated with First Tennessee, the Eleventh Circuit has ordered briefing on the effect of HUD’s new policy statement. In light of HUD’s 2001 policy statement, the U.S. Court of Appeals for the Eighth Circuit ruled in March 2002 that lawsuits challenging the payment of yield spread premiums under RESPA are not appropriate for class action treatment. Because the suits against First Tennessee’s subsidiary are in an early stage of litigation and the law in this area is not clearly established, First Tennessee cannot at this time evaluate either the likelihood of an unfavorable outcome or the dollar amount of any potential loss exposure. First Tennessee believes its subsidiary’s yield spread premium payments, which are consistent with industry practices, are lawful, and intends to defend vigorously the lawsuits against it.

Note 7 — Intangible Assets

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

				Other
(Dollars in thousands)	Goodwill			Intangibles*
December 31, 2000	$	103,765		$	17,859
Amortization expense		(1,584	)		(1,296	)
Acquisitions		13,649			—
March 31, 2001	$	115,830		$	16,563
December 31, 2001	$	143,147		$	41,857
Amortization expense		—			(1,598	)
Reclass		12,573			(12,573	)
Acquisitions**		634			342
MARCH 31, 2002	$	156,354		$	28,028

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

The gross carrying amount of other intangible assets subject to amortization is $91.9 million on March 31, 2002, net of $63.9 million of accumulated amortization. Estimated aggregate amortization expense for the remainder of 2002 is expected to be $3.6 million and is expected to be $4.6 million, $4.1 million, $3.0 million, and $2.1 million for the twelve-month periods of 2003, 2004, 2005, and 2006, respectively.

ITEM 2.
FIRST TENNESSEE NATIONAL CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

GENERAL INFORMATION

First Tennessee National Corporation (First Tennessee) is headquartered in Memphis, Tennessee, and is a nationwide, diversified financial services institution which provides banking and other financial services to its customers through various regional and national business lines. Effective January 1, 2002, the business segment information has been adapted to better reflect First Tennessee’s strategic alignment and positioning and to conform to similar changes in internal segment reporting. Prior periods have been restated for comparability. The new segments are FTN Banking Groups, First Horizon, FTN Financial, Transaction Processing, Corporate and Strategic Initiative Items. FTN Banking Groups includes the Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust and Credit Card. This segment offers traditional banking financial services and products and also promotes comprehensive financial planning to address customer needs and desires for investments, insurance, estate planning, education funding, cash reserves and retirement goals. First Horizon includes First Horizon Home Loans (previously referred to as mortgage banking), First Horizon Equity Lending and First Horizon Money Centers (both of which were previously included in the Retail/Commercial Bank). These business lines were combined to create a common focus and a stronger presence in the national market. FTN Financial added Strategic Alliances and Correspondent Services to the existing business mix that included Capital Markets, Equity Research and Investment Banking. Strategic Alliances is a customer relationship service group recently formed to enhance our portfolio of innovative investment services. Correspondent Services was a part of the Retail/Commercial Bank previously. Transaction Processing continues to offer credit card merchant processing, nationwide bill payment processing, check clearing operations and other cash management products and services. The Corporate segment includes certain corporate expenses, SFAS No. 133 gains/(losses), interest expense on trust preferred and REIT preferred stock, and other items not allocated or not specifically assigned to business segments. The Strategic Initiative Items segment isolates items occurring in 2001 that were related to a strategic initiative to enhance growth and business mix, as announced by First Tennessee in 2000 (see Business Line Review for additional detail).

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

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

The following is a discussion and analysis of the financial condition and results of operations of First Tennessee for the three-month period ended March 31, 2002, compared to the three month period ended March 31, 2001. To assist the reader in obtaining a better understanding of First Tennessee and its performance, this discussion should be read in conjunction with First Tennessee’s unaudited consolidated financial statements and accompanying notes appearing in this report. Additional information including the 2001 financial statements, notes, and management’s discussion and analysis is provided in the 2001 Annual Financial Disclosures included as an appendix to the 2002 Proxy Statement.

FORWARD-LOOKING STATEMENTS

Management’s discussion and analysis may contain forward-looking statements with respect to First Tennessee’s beliefs, plans, goals, expectations, and estimates. These statements are contained in certain sections that follow such as Noninterest Income, Net Interest

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

CRITICAL ACCOUNTING POLICIES

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

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

The fair value of First Tennessee’s investment in mortgage servicing rights (MSR) is important to the presentation of the consolidated financial statements in that MSR are subject to a fair value based impairment standard and are actively hedged in fair value hedging relationships. MSR do not trade in an active open market with readily observable prices. Rather, sales of MSR tend to occur in principal-to-principal transactions, and although precise terms and conditions of sale are typically not readily available, information regarding the value of transactions is generally obtainable. As such, like other participants in the mortgage banking business, First Tennessee relies on an internal discounted cash flow model to estimate the fair value of its MSR. First Tennessee uses assumptions in the model that it believes are comparable to those used by other participants in the mortgage banking business and reviews its values and assumptions with outside advisors on a quarterly basis. While First Tennessee believes that the values produced by its internal model are indicative of the fair value of its MSR portfolio, these values can change significantly depending upon the then current interest rate environment and other economic conditions, and the proceeds that might be received should First Tennessee actually consider a sale of the MSR portfolio could differ from the amounts reported at any point in time. First Tennessee believes MSR are properly recorded in the financial statements.

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

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

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

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

Under SFAS No. 142, “Goodwill and Other Intangible Assets”, which became effective on January 1, 2002, goodwill is no longer amortized, but is subject to an impairment test. First Tennessee did not recognize any impairment of the goodwill currently on its books during first quarter 2002; however, management is still finalizing the initial analysis of impairment as required by the new standard. First Tennessee does not expect the final analysis to have a material impact on the financial condition or results of operations, but subsequent developments or information could result in impairment.

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

Earnings for first quarter 2002 were $87.1 million, an increase of 40 percent from last year’s first quarter earnings of $62.4 million before the cumulative effect of changes in accounting principles related to derivatives (Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133) and EITF 99-20). Diluted earnings per common share were $.67 in 2002 compared to $.47 in 2001 before the cumulative effect of changes in accounting principles. Earnings for first quarter 2001 after the cumulative effect of changes in accounting principles related to derivatives were $54.2 million, or $.41 diluted earnings per common share. Return on average shareholders’ equity was 23.6 percent and return on average assets was 1.77 percent for first quarter 2002. Before the cumulative effect of changes in accounting principles, return on average shareholders’

equity was 18.3 percent and return on average assets was 1.33 percent for the same period in 2001. After the cumulative effect of changes in accounting principles, return on average shareholders’ equity was 15.9 percent and return on average assets was 1.16 percent for first quarter 2001.

On March 31, 2002, First Tennessee was ranked as one of the top 50 bank holding companies nationally in market capitalization ($4.4 billion) and total assets ($19.6 billion). On March 31, 2001, market capitalization was $4.0 billion and total assets were $19.3 billion.

Total revenue grew 20 percent from first quarter 2001, with a 19 percent increase in fee income (noninterest income excluding securities gains and losses) and a 22 percent increase in net interest income.

NONINTEREST INCOME

Fee income provides the majority of First Tennessee’s revenue and contributed 64 percent to total revenue in first quarter 2002 and 2001. First quarter 2002 fee income increased 19 percent to $324.9 million from $273.1 million in 2001. The December 31, 2001, acquisition of Synaxis Group, Inc. (Synaxis), one of the 20 largest commercial insurance brokers in the United States impacted the results of first quarter 2002, adding $10.0 million to noninterest income. Excluding the impact of Synaxis, total fee income would have increased 15 percent. A more detailed discussion of the major line items follows.

Mortgage Banking

First Horizon Home Loans, a subsidiary of FTBNA and the major component of the First Horizon business segment, originates and services residential mortgage loans. Following origination, the mortgage loans, primarily first-lien, are sold to investors in the secondary market. Various hedging strategies are used to mitigate changes in the market value of the loan during the time period beginning with a price commitment to the customer and ending when the loan is delivered to the investor. Closed loans held during this time period are referred to as the mortgage warehouse. Origination fees and gains or losses from the sale of loans are recognized at the time a mortgage loan is sold into the secondary market. A portion of the gain or loss is recognized at the time an interest rate lock commitment is made to the customer. Secondary marketing activities include gains or losses from mortgage pipeline and warehouse hedging activities, product pricing decisions, and gains or losses from the sale of loans into the secondary market including the capitalized net present value of the MSR. Servicing rights permit the collection of fees for gathering and processing monthly mortgage payments for the owner of the mortgage loans. First Horizon Home Loans employs hedging strategies intended to counter a change in the value of its MSR through changing interest rate environments. MSR hedge gains/(losses) reflect effects of hedging including servicing rights net value changes (see also Other — Accounting for Derivative Instruments and Hedging Activities). Other income includes income from the foreclosure repurchase program and other miscellaneous items. Mortgage trading securities gains/(losses) relate to market value adjustments primarily on interest-only strips and related hedges. In order to be comparable with other mortgage companies’ disclosures, mortgage banking fee income is now reported net of amortization impairment and other expenses related to MSR and related hedges.

Mortgage banking fee income increased 38 percent to $121.3 million from $88.2 million for first quarter 2001 as shown in Table 1.

Table 1 — Mortgage Banking

			Three Months
									Percent
(Dollars and volume in millions)			2002			2001			Change (%)
Noninterest income:
	Loan origination fees		$	48.5		$	34.0			42.7 +
	Secondary marketing activities			77.0			55.6			38.4 +
	Mortgage servicing fees			41.4			40.9			1.3 +
	MSR net hedge results*			15.8			5.2			205.4 +
	Other income			7.1			4.0			78.6 +
	Mortgage trading securities net losses			(3.5	)		(3.8	)		5.3 +
	Amortization of MSR			(29.7	)		(26.4	)		12.3 –
	MSR impairment loss			(31.4	)		(17.1	)		84.4 –
	Time decay of MSR hedges			(3.9	)		(4.2	)		8.6 +
		Total mortgage noninterest income	$	121.3		$	88.2			37.5 +
	Refinance originations		$	3,579.2		$	3,010.8			18.9 +
	New loan originations		$	2,086.1		$	2,215.9			5.9 –
		Mortgage loan originations	$	5,665.3		$	5,226.7			8.4 +
	Servicing portfolio		$	46,660.2		$	47,096.6			.9 –

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

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

Origination activity increased 8 percent to $5.7 billion and loan sales into the secondary market increased 64 percent to $6.3 billion in 2002 primarily due to the impact that low interest rates had on refinance mortgage activity. Fees from the mortgage origination process (loan origination fees, profits from the sale of loans, flow sales of MSR, and other secondary marketing activities) increased 40 percent to $125.5 million from $89.6 million in first quarter 2001. This increase was primarily due to the increased volume of loans sold into the secondary market, increased gains on those sales created by improved pricing margin management, and improved pipeline hedging results. While growth in refinance activity produced increased origination fee income, much of this revenue was offset by substantially increased actual and projected MSR prepayment speeds. This increase in prepayment speeds was the primary reason for the 12 percent increase, to $29.7 million, in MSR amortization expense; and the increase to $31.4 million in MSR impairment loss compared to a $17.1 million loss in first quarter 2001. This increased impairment loss is also associated with the gain from net hedging results (increase in the value of hedged MSR offset by hedge losses) of $15.8 million in 2002 compared to $5.2 million net gain in 2001.

The mortgage-servicing portfolio (which includes servicing for ourselves and others) totaled $46.7 billion on March 31, 2002, compared to $47.1 billion on March 31, 2001. Mortgage servicing fee income was $41.4 million in 2002 compared to $40.9 million for first quarter 2001. There were no bulk sales of MSR in either first quarter 2002 or first quarter 2001.

Going forward, if mortgage interest rates remain at current levels, the origination volume from refinanced mortgages, and therefore revenue from origination fees, profits from the sale of loans and MSR and gains from pipeline and warehouse hedging and other loan sale activities, is expected to decline along with the current expense levels associated with amortization and write-off of existing MSR. Home purchase-related mortgage originations should reflect the relative strength or weakness of the economy. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Capital Markets

Capital markets generates fee income primarily from the purchase and sale of securities as both principal and agent and from investment banking, portfolio advisory and equity research services. Inventory positions are limited to the procurement of securities solely for distribution to customers by the sales staff. Inventory is effectively hedged to protect against movements in interest rates. For first quarter 2002, capital markets fee income increased 26 percent to $99.4 million from $78.8 million in 2001. This increase reflects the continued growth and penetration into the targeted institutional customer base and non-traditional product initiatives. Total securities bought and sold increased to $372.7 billion from $285.0 billion in 2001. Total underwritings during first quarter 2002 were $13.4 billion compared to $11.0 billion for the same period in 2001.

Going forward, while the favorable market conditions affecting the traditional business are likely to eventually stabilize, the extension of new products and services to the customer base will continue to increase revenue from nontraditional businesses. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Other Fee Income

Fee income from deposit transactions and cash management for first quarter 2002 increased 17 percent to $32.4 million from $27.8 million in 2001 primarily due to increased cash management fees and return check charges. Trust services and investment management fees decreased 7 percent to $14.1 million from $15.2 million in 2001 primarily due to declining asset management fees related to a contraction in market valuations. Assets under management fell 8 percent to $8.4 billion on March 31, 2002 from $9.2 billion on March 31, 2001. First quarter 2002 fee income from merchant processing decreased 12 percent to $10.2 million from $11.6 million in 2001 which reflects the negative effect of the slowdown in the hospitality industry and competitive pricing pressure within the industry. Cardholder fees increased 10 percent to $4.7 million from $4.3 million in first quarter 2001. All other income and commissions increased 20 percent to $42.8 million for first quarter 2002 from $35.8 million in 2001 primarily due to the acquisition of Synaxis. For first quarter 2001, gains from divestitures were $11.4 million due to an earn-out related to the divestiture of First Tennessee’s corporate and municipal trust business in fourth quarter 2000 ($4.5 million) and gains from the sale of certain single relationship credit card accounts in first quarter 2001 ($6.9 million). There were no divestiture gains in first quarter 2002.

Going forward, as the overall economy continues to strengthen, other fee income will improve.

NET INTEREST INCOME

Net interest income increased 22 percent to $184.7 million from $151.9 million in first quarter 2001, primarily due to an improving net interest margin (margin), which has benefited from lower funding costs and a steepening yield curve. Earning assets grew 4 percent in first quarter 2002 to $16.5 billion from $15.9 billion. The consolidated margin increased to 4.50 percent for first quarter 2002 compared to 3.83 percent for the same period in 2001. As shown in Table 2, the activity levels and related funding for First Tennessee’s mortgage production and servicing and capital markets activities affect the margin. These activities typically produce different margins than traditional banking activities. Mortgage production and servicing activities can affect the overall margin based on a number of factors, including the size of the mortgage warehouse, the time it takes to deliver loans into the secondary market, the amount of custodial balances, and the level of MSR. Capital markets activities tend to compress the margin because of its strategy to reduce market risk by hedging its inventory in the cash markets, which effectively eliminates net interest income on these positions. As a result, First Tennessee’s consolidated margin cannot be readily compared to that of other bank holding companies.

Table 2 — Net Interest Margin

		First Quarter
		2002			2001
Traditional Banking Activities — NIM			4.92	%		4.54	%
	Mortgage production and servicing activities		(.20	)		(.51	)
	Capital markets activities		(.22	)		(.20	)
FTNC — NIM			4.50	%		3.83	%
Consolidated Yields and Rates:
	Investment securities		6.06	%		6.64	%
	Loans, net of unearned		6.39			8.69
	Other earning assets		5.70			6.99
Yields on earning assets			6.18			8.03
	Interest bearing core deposits		2.02			4.18
	CD’s over $100,000		2.19			6.12
	Fed funds purchased and repos		1.48			5.28
	Commercial paper and other short-term borrowings		4.20			6.15
	Long-term debt		4.67			6.77
Rates paid on interest-bearing liabilities			2.16			5.06
Net interest spread			4.02			2.97
	Effect of interest-free sources		.37			.75
	Loan fees		.12			.12
	FRB interest and penalties		(.01	)		(.01	)
FTNC — NIM			4.50	%		3.83	%

Going forward, if as expected over the near term short-term rates remain at current low levels and the slope of the yield curve does not flatten, the net interest margin is likely to remain stable. Over the long term the margin should begin to decrease toward a more normal level as the yield curve flattens. The consolidated margin will continue to be influenced by the activity levels of mortgage production and servicing and capital markets. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

NONINTEREST EXPENSE

Total noninterest expense for first quarter 2002 increased 14 percent to $352.8 million from $310.5 million in 2001. The acquisition of Synaxis impacted the results of first quarter 2002, adding $8.1 million to noninterest expense. Excluding the impact of Synaxis, total noninterest expense would have increased 11 percent. Expenses in First Horizon and FTN Financial fluctuate based on the type and level of activity. Excluding First Horizon, FTN Financial and Synaxis, total operating expense decreased 5 percent. Going forward, FTN Financial and First Horizon will continue to influence the level of noninterest expense.

Employee compensation, incentives and benefits (personnel expense), the largest component of noninterest expense, increased 22 percent from first quarter 2001, primarily due to higher activity levels in First Horizon and FTN Financial and the Synaxis acquisition. Excluding the two business lines and Synaxis, total personnel expense decreased 3 percent.

Equipment rentals, depreciation and maintenance expense decreased 11 percent in 2002 to $15.9 million from $17.8 million in 2001 primarily due to asset write-offs in 2001 associated with efficiency initiatives. Communications and courier expense increased 18 percent to $13.3 million in 2002 from $11.3 million in 2001 primarily due to the increased activity levels of First Horizon and FTN Financial. Amortization of intangible assets decreased 45 percent to $1.6 million from $2.9 million in 2001 due to the implementation of new accounting standards (see Note 1 for additional detail). All other expense increased 7 percent to $72.8 million in 2002 from $67.8 million due

primarily to increased professional fees, the acquisition of Synaxis, and increased activity levels at First Horizon. The impact of these increases was reduced by a decline in advertising expenses that was related to a 2001 marketing campaign to attract new retail banking customers. Additional information related to expenses by business line is provided in Table 3 (see also Business Line Review for additional information).

Table 3 — Noninterest Expense Composition

		Three Months
						Growth
(Dollars in millions)		2002		2001		Rate (%)
FTN Banking Groups		$	111.3	$	108.0		3.0
First Horizon			129.6		105.6		22.7
FTN Financial			71.8		54.7		31.4
Transaction Processing			22.6		22.7		—
Corporate			17.5		7.9		120.0
Strategic Initiative Items			—		11.6		(100.0	)
	Total noninterest expense	$	352.8	$	310.5		13.6

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

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

PROVISION FOR LOAN LOSSES / ASSET QUALITY

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at an adequate level reflecting management’s estimate of the risk of loss inherent in the loan portfolio. An analytical model based on historical loss experience, current trends and economic conditions, and reasonably foreseeable events is used to determine the amount of provision to be recognized and to test the adequacy of the loan loss allowance. The provision for loan losses increased 35 percent in 2002 to $25.7 million from $19.0 million in 2001, reflecting deterioration in commercial and consumer credits contributed to by the economic environment. Additional asset quality information is provided in Table 4 — Asset Quality Information and Table 5 — Charge-off Ratios.

Table 4 — Asset Quality Information

		March 31
(Dollars in thousands)		2002		2001
Lending Activities*:
Nonperforming loans		$	45,290	$	58,474
Foreclosed real estate			7,810		4,388
Other assets			97		97
	Total Lending activities		53,197		62,959
Mortgage Production Activities*:
Nonperforming loans			21,183		20,899
Foreclosed real estate			15,438		9,340
	Total Mortgage Production Activities		36,621		30,239
Total nonperforming assets		$	89,818	$	93,198
Loans and leases 30 to 89 days past due		$	97,932	$	86,567
Loans and leases 90 days past due		$	37,951	$	49,852
Potential problem assets**		$	121,472	$	120,499

			First Quarter
			2002			2001
Allowance for loan losses:
	Beginning balance on December 31		$	155,373		$	143,696
		Provision for loan losses		25,728			18,989
		Charge-offs		(31,335	)		(18,227	)
		Loan recoveries		3,401			2,491
	Ending balance on March 31		$	153,167		$	146,949

	March 31
	2002			2001
Allowance to total loans		1.48	%		1.41	%
Allowance to nonperforming loans		230			186
Nonperforming assets to total loans, foreclosed real estate and other assets (Lending Activities only)		.51			.61
Nonperforming assets to unpaid principal balance of servicing portfolio (Mortgage Production Activities only)		.08			.06

*	Lending activities include all activities associated with the loan portfolio. Mortgage production includes activities associated with the mortgage warehouse.
**	Includes loans and leases 90 days past due.

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

Net charge-offs increased to $27.9 million or 1.09 percent of total loans for first quarter 2002 compared to $15.7 million or .61 percent of total loans for first quarter 2001. This increase was primarily due to commercial loan deterioration, which had been provided for previously. In first quarter 2002, approximately 40% of total net charge-offs were related to two large commercial credits for which principally all of the loss had been previously provided for in the loan loss allowance. The ratio of allowance for loan losses to total loans, net of unearned income (coverage ratio), was 1.48 percent on March 31, 2002, compared to 1.41 percent on March 31, 2001.

As nonperforming loans fell to $66.5 million on March 31, 2002, the ratio of nonperforming loans to total loans decreased to .64 percent. This compares to nonperforming loans of $79.4 million on March 31, 2001 and a nonperforming loans ratio of .76 percent. Nonperforming assets totaled $89.8 million on March 31, 2002, compared with $93.2 million on March 31, 2001. On March 31, 2002,

First Tennessee had no concentrations of 10 percent or more of total loans in any single industry.

Going forward, as the overall economy continues to strengthen, the provision for loan losses should decrease as should the coverage ratio, since there will be charge-offs of commercial loans for which there was specifically allocated loan loss allowance on March 31, 2002. In addition, asset quality ratios could be affected by balance sheet strategies and shifts in loan mix to and from products with different risk/reward profiles. Actual results could differ because of several factors, including those presented in the Forward-Looking Statements section of the MD&A discussion.

Table 5 — Charge-off Ratios

	First Quarter
	2002			2001
Commercial		.94	%		.22	%
Consumer real estate		.77			.59
Other consumer*		3.69			1.91
Credit card receivables		4.45			4.29
Total net charge-offs		1.09			.61

* 2001 charge-off ratio included government insured student loans which were sold in second quarter 2001.

BUSINESS LINE REVIEW

There were several revenue and expense items in 2001 that make it difficult to compare this year’s results with last year. The items were related to an initiative announced in 2000 to enhance growth and business mix (Strategic Initiative Items). The initiative, completed in fourth quarter 2001, resulted in net pre-tax revenue in excess of expenses of $33.7 million for the year 2001 with $.2 million of expenses in excess of revenue occurring in first quarter 2001. In the following discussion of business segment performance in this and future quarters of 2002, these 2001 Strategic Initiative Items are excluded, but are disclosed separately as a segment.

FTN Banking Groups

Pre-tax income for FTN Banking Groups increased 15 percent to $65.7 million for first quarter 2002, compared to $57.1 million for first quarter 2001. Total revenues for the segment were $192.2 million, an increase of 9 percent from $176.3 million in 2001. Total noninterest expense increased 3 percent in 2002 to $111.3 million from $108.0 million last year. The acquisition of Synaxis impacted the results of first quarter 2002, adding $9.1 million to total revenue and $8.5 million to noninterest expense. The following discussion of the FTN Banking Groups’ performance is adjusted for this acquisition.

Total revenues increased 4 percent to $183.1 million for 2002. Net interest income increased 8 percent to $119.4 million in 2002 due primarily to an improving net interest margin, which has benefited from lower funding costs and a steepening yield curve. Fee income decreased 4 percent to $63.7 million in 2002. This decline was primarily due to decreases in asset management fees related to a contraction in market valuations and servicing fees received on securitizations and the impact of a gain received from a cash flow hedge in 2001. Partially offsetting these decreases was an increase in service charges on deposit accounts.

The provision for loan losses increased 36 percent to $15.2 million in 2002 due to deterioration in the commercial loan portfolio. However, compared to the three-month period ending December 31, 2001, the provision decreased 24 percent.

Total noninterest expense decreased 5 percent to $102.7 million in 2002 reflecting efficiency and overhead reduction initiatives. As a result, the efficiency ratio improved to 56.1 percent for first quarter 2002 from 61.2 percent for first quarter 2001.

Going forward, if as expected over the near term short-term rates remain at current low levels and the slope of the yield curve does not flatten, the net interest margin is likely to remain stable. Over the long term the margin should begin to decrease toward a more normal level as the yield curve flattens. As the overall economy continues to strengthen, fee income and the provision for loan losses will improve.

First Horizon

Pre-tax income for First Horizon increased 350 percent to $41.3 million for first quarter 2002, compared to $9.2 million for first quarter 2001.

Total revenues were $182.3 million, an increase of 49 percent from $122.3 million in 2001. Net interest income increased 63 percent to $52.7 million in 2002 primarily due to lower funding costs. Net interest spread on mortgage loans held for sale, which was positively impacted by the lower funding costs, increased to 4.63 percent in 2002 from 1.96 percent in 2001. Total fee income increased 44 percent to $129.6 million in 2002. Fee income consists primarily of mortgage banking related fees from the origination process, fees from the mortgage servicing portfolio and mortgage servicing rights (MSR) net hedge gains or losses and is net of amortization, impairment and other expenses related to MSR and related hedges.

Fees from the mortgage origination process increased 40 percent to $125.5 million in 2002 primarily due to the increase in the volume of loans sold into the secondary markets, as well as to increased gains on those sales created by improved pricing margin management and to improved pipeline hedging results. Total mortgage origination volume increased 8 percent to $5.7 billion and loan sales into the secondary market increased 64 percent to $6.3 billion in 2002 primarily due to the impact that low mortgage interest rates had on refinance mortgage activity. While this growth in refinance activity produced increased origination fee income, much of this revenue was offset because it also substantially increased actual and projected MSR prepayment speeds. This increase in prepayment speeds was the primary reason for the 12 percent increase, to $29.7 million, in MSR amortization expense; and the increase to $31.4 million in MSR impairment loss compared to a $17.1 million loss in first quarter 2001. This increased impairment loss is also associated with the gain from net hedging results (increase in the value of hedged MSR offset by hedge losses) of $18.9 million in 2002 compared to $1.7 million net gain in 2001.

Fees associated with the mortgage-servicing portfolio were $41.4 million in 2002, compared to $40.9 million in 2001. The mortgage-servicing portfolio totaled $46.7 billion on March 31, 2002, compared to $47.1 billion on March 31, 2001.

Other activities within First Horizon are comprised of national consumer lending activities and lending and other cross-sell strategies with First Horizon Home Loans. The lending activities had average outstandings of $1.7 billion for first quarter 2002, which represents a 10 percent increase from 2001. First quarter 2002 originations were $.4 billion.

The provision for loan losses increased $3.9 million over 2001 due to deterioration in the national consumer lending activities reflecting the maturation of the portfolio in the current economic environment. However, asset quality related to First Horizon cross-sell lending activities has continued to perform well. Compared to the three-month period ending December 31, 2001, the provision decreased 12 percent.

Total noninterest expense increased 23 percent to $129.6 million in 2002. Personnel expense, the largest component of noninterest expense, increased 34 percent to $80.2 million in 2002 primarily due to the commissions and incentives associated with the higher mortgage origination volume. The remaining noninterest expense increased 8 percent to $49.4 million primarily reflecting the higher origination volume. Reflecting the implementation of various productivity enhancements, the efficiency ratio improved to 71.1 percent for first quarter 2002 from 86.4 percent for first quarter 2001.

Going forward, if mortgage interest rates remain at current levels, the origination volume from refinanced mortgages, and therefore revenue from origination fees, profits from the sale of loans and MSR and gains from pipeline and warehouse hedging and other loan sale activities, is expected to decline along with the current expense levels associated with amortization and write-off of existing MSR. Home purchase-related mortgage originations should reflect the relative strength or weakness of the economy. If as expected over the

near term, short-term rates remain at current low levels and the slope of the yield curve does not flatten, the net interest margin on mortgage loans held for sale is likely to remain stable. Over the long term the margin should begin to decrease toward a more normal level as the yield curve flattens. The continuing success of our national cross-sell strategies will increase revenues from products other than traditional mortgage origination and servicing.

FTN Financial

Pre-tax income for FTN Financial increased 32 percent to $38.9 million for first quarter 2002, compared to $29.4 million for first quarter 2001.

Total revenues were $109.9 million, an increase of 30 percent from $84.4 million in 2001. Fee income increased 28 percent to $101.1 million in 2002. This increased revenue reflects continued growth and penetration into our targeted institutional customer base and non-traditional product initiatives.

The provision for loan losses, related to correspondent banking services which is now included in this business segment, was negative $.8 million in 2002 due to a decline in outstandings from year-end and net recoveries. For first quarter 2001 the provision for loan losses was $.3 million.

Total noninterest expense increased 31 percent to $71.8 million in 2002 primarily due to an increase in personnel expense, the largest component of noninterest expense, resulting from commissions and incentives associated with the higher fee income this year. The efficiency ratio remained relatively stable at 65.4 percent for first quarter 2002 compared to 64.8 percent for first quarter 2001.

Going forward, while the favorable market conditions affecting our traditional business are likely to eventually stabilize, the extension of new products and services to the FTN Financial customer base will continue to increase revenue from nontraditional businesses.

Transaction Processing

Pre-tax income for Transaction Processing increased 35 percent to $4.9 million for first quarter 2002, compared to $3.7 million for first quarter 2001. This increase was primarily due to efficiency improvements in express processing operations. The efficiency ratio improved to 82.1 percent for first quarter 2002 from 86.1 percent for first quarter 2001. While express processing improved over first quarter 2001, revenue from merchant processing decreased 10 percent due to the negative effect of the slowdown in the hospitality industry and competitive pricing pressure within the industry.

Corporate

Corporate had a pre-tax loss of $19.8 million for 2002, compared to a loss of $3.8 million for 2001. This increase in pre-tax loss was primarily due to (1) a SFAS No. 133 loss of $3.1 million in 2002 compared to a gain of $3.5 million in 2001, therefore combining for a $6.6 million net change between periods and (2) $6.6 million in expenses in 2002 related to a specific litigation matter.

Strategic Initiative Items

There were several revenue and expense items in 2001 that make it difficult to compare this year’s results with last year. The items were related to an initiative announced in 2000 to enhance growth and business mix. The initiative, completed in fourth quarter 2001, resulted in $.2 million of expenses in excess of revenue in first quarter 2001. Total revenues of $11.4 million in first quarter 2001 resulted from gains on divestitures ($4.5 million due to an earn-out related to the divestiture of First Tennessee’s corporate and municipal trust business in fourth quarter 2000 and $6.9 million from the sale of certain single relationship credit card accounts in first quarter 2001). Total noninterest expense of $11.6 million was related to a major marketing campaign to attract new retail banking customers, litigation costs and asset write-offs.

BALANCE SHEET REVIEW

Earning assets

Earning assets primarily consist of loans, loans held for sale and investment securities. For first quarter 2002, earning assets averaged $16.5 billion compared with $15.9 billion for first quarter 2001. The increase in earning assets was primarily due to growth in loans held for sale of 35 percent. On March 31, 2002, First Tennessee reported total assets of $19.6 billion compared with $19.3 billion on March 31, 2001. Average total assets increased 5 percent to $19.9 billion from $19.0 billion in first quarter 2001.

Loans

Average total loans decreased 1 percent for first quarter 2002 to $10.3 billion due to a decrease of 3 percent in retail loans, which resulted from the divestitures of the student loan portfolio and Peoples & Union Bank (PUB). Commercial loans increased 2 percent to $5.5 billion. Excluding the impact of these divestitures, retail loans grew 6 percent in 2002 and total loans grew 4 percent. Additional loan information is provided in Table 6.

Table 6 — Average Loans

		Three Months
				Percent			Growth					Percent
(Dollars in millions)		1Q02		of Total			Rate			1Q01		of Total
Commercial:
	Commercial, financial and industrial	$	4,063.5		39	%		—	%	$	4,062.0		39	%
	Real estate commercial		981.1		10			1.2			969.9		9
	Real estate construction		504.1		5			22.2			412.6		4
Retail:
	Real estate residential		3,810.0		37			6.1			3,590.6		35
	Real estate construction		210.1		2			18.8			176.8		2
	Other consumer		444.5		4			(47.6	)		847.7		8
	Credit card receivables		268.7		3			(5.0	)		282.7		3
Total loans, net of unearned		$	10,282.0		100	%		(.6	)%	$	10,342.3		100	%

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

Loans Held for Sale / Investment Securities

Loans held for sale, consisting primarily of mortgage loans, increased 35 percent to $2.5 billion in 2002 from $1.9 billion in 2001 due to the high level of originations in 2001. Average investment securities decreased 11 percent in first quarter 2002 to $2.4 billion from $2.7 billion.

Deposits / Other Sources of Funds

Since first quarter 2001, average core deposits increased 3 percent to $9.3 billion from $9.0 billion while interest-bearing core deposits decreased 3 percent to $5.8 billion from $6.0 billion. Noninterest-bearing deposits increased 16 percent in first quarter 2002 to $3.5 billion from $3.0 billion due to growth in a cash management investment product and mortgage escrow accounts. Short-term purchased funds increased 4 percent to $7.3 billion from $7.1 billion for the previous year. Excluding the impact of the divestiture of PUB, total core deposits would have increased 5 percent. Short-term purchased funds accounted for 42 percent of First Tennessee’s funding (core deposits plus purchased funds and term borrowings for first quarter 2002 compared to 43 percent for first quarter 2001. Term borrowings increased 24 percent to $.6 billion for first quarter 2002 compared to $.5 billion for first quarter 2001.

LIQUIDITY MANAGEMENT

The objective of liquidity management is to ensure the continuous availability of funds to meet the demands of depositors, other creditors and borrowers. The Asset/Liability Committee, a committee consisting of senior management that meets regularly, is responsible for managing these needs by taking into account the marketability of assets; the sources, stability and availability of funding; and the level of unfunded commitments. Core deposits are First Tennessee’s primary source of funding and have been a stable source of liquidity for banks. These deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent authorized by law. For first quarter 2002, the average total loan to core deposit ratio was 110 percent compared with 114 percent in first quarter 2001. FTBNA has a bank note program available for additional liquidity, under which the bank may borrow funds from time to time, at maturities of 30 days to 30 years. On March 31, 2002, approximately $2.6 billion was available under the bank note program as a long-term (greater than one year) funding source. First Tennessee also evaluates alternative sources of funding, including loan sales, securitizations, syndications, and debt offerings in its management of liquidity.

First Tennessee has a loan funding arrangement with a commercial paper conduit facility. Loans made under this facility would qualify for First Tennessee’s highest grades of low risk commercial loans if these loans had been made by First Tennessee. First Tennessee provides a liquidity facility and a credit enhancement to the conduit that totaled $217.0 million on March 31, 2002. The loans in the conduit are not reflected on First Tennessee’s Statement of Condition. Given the relatively small volume of loans currently referred to the conduit, this facility does not represent a critical element of First Tennessee’s liquidity.

First Horizon Home Loans originates conventional conforming and federally insured single-family residential mortgage loans. Likewise, First Tennessee Capital Assets Corporation frequently purchases the same types of loans from our customers. Substantially all of these mortgage loans are exchanged for securities, which are issued through GNMA for federally insured loans and FNMA and FHLMC for conventional loans, and then sold in the secondary markets. In many cases First Horizon Home Loans retains the right to service and receive servicing fees on these loans. After sale, these loans are not reflected on the Consolidated Statement of Condition. Each of these government-sponsored entities has specific guidelines and criteria for sellers and servicers of loans backing their respective securities. During first quarter 2002, approximately $4.6 billion of conventional and federally insured mortgage loans were securitized and sold by First Horizon Home Loans through these government-sponsored entities. First Tennessee’s use of these government-sponsored entities as an efficient outlet for our mortgage loan production is an essential source of liquidity for First Tennessee and other participants in the housing industry.

Certain of First Horizon Home Loans’ originated loans do not conform to the requirements for sale or securitization by FNMA and FHLMC due to exceeding the maximum loan size of approximately $301 thousand (jumbo loans). First Horizon Home Loans pools and securitizes these jumbo loans in proprietary transactions. After securitization and sale, these loans are not reflected on the Consolidated Statement of Condition except as described hereafter. These transactions, which are conducted through single-purpose business trusts, are the most efficient way for First Horizon Home Loans and other participants in the housing industry to monetize these assets. In most cases First Horizon Home Loans retains the right to service and receive servicing fees on these loans and, on occasion, has retained senior principal-only certificates or interest-only strips that are classified on the Consolidated Statement of Condition as trading securities. On March 31, 2002, the outstanding principal amount of loans in these off-balance sheet business trusts was $3.7 billion. Given the significance of First Horizon Home Loans’ origination of non-conforming loans, the use of single-purpose business trusts to securitize these loans is an important source of liquidity to First Tennessee.

Other securitization activity includes an automobile loan securitization in 2000. There was $50.8 million in unpaid principal balance of loans in the securitization trust on March 31, 2002. This securitization is not an essential element of First Tennessee’s liquidity.

In addition to these transactions, liquidity has been obtained in prior years through issuance of guaranteed preferred beneficial interests in First Tennessee’s junior subordinated debentures through a Delaware business trust wholly owned by First Tennessee ($100.0 million on March 31, 2002)

and through preferred stock issued by an indirect wholly owned subsidiary of First Tennessee ($44.2 million on March 31, 2002).

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

Parent company liquidity is maintained by cash flows stemming from dividends and interest payments collected from subsidiaries, which represent the primary source of funds to pay dividends to shareholders and interest to debtholders. The parent company also has the ability to enhance its liquidity position by raising equity or incurring debt. Under an effective shelf registration statement on file with the Securities and Exchange Commission (SEC), First Tennessee, as of March 31, 2002, may offer from time to time at its discretion, debt securities, and common and preferred stock aggregating up to $225 million. In addition, First Tennessee also has an effective capital securities shelf registration statement on file with the SEC under which up to $200 million of capital securities is available for issuance.

CAPITAL

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

Shareholders’ equity was $1.5 billion on March 31, 2002, an increase of 10 percent from $1.4 billion on March 31, 2001. The increase in capital was primarily due to the retention of net income after dividends. The change in capital was reduced by share repurchases, primarily related to stock option exercises, which totaled $189.6 million, or 5.6 million shares since March 31, 2001. Pursuant to board authority, First Tennessee plans to continue to repurchase shares from time to time for its stock option plans and will evaluate the level of capital and take action designed to generate or use capital as appropriate for the interests of the shareholders. On October 16, 2001, the board of directors extended from June 30, 2002, until December 31, 2004, the non-stock option plan-related repurchases of up to 9.5 million shares, previously approved in October 2000. Repurchases will be made in the open market or through privately negotiated transactions and will be subject to market conditions, accumulation of excess equity and prudent capital management. Through March 31, 2002, 2.5 million shares have been repurchased pursuant to this authority.

Average shareholders’ equity increased 8 percent since first quarter 2001 to $1.5 billion from $1.4 billion, reflecting internal capital generation. The average shareholders’ equity to average assets ratio was 7.50 percent for first quarter 2002 compared to 7.30 percent for first quarter 2001. Unrealized market valuations had no material effect on the ratios during first quarter 2002.

On March 31, 2002, the corporation’s Tier 1 capital ratio was 8.90 percent, the total capital ratio was 11.94 percent and the leverage ratio was 7.02 percent. On March 31, 2002, First Tennessee’s bank affiliates had sufficient capital to qualify as well-capitalized institutions. As discussed in Deposits, Other Sources of Funds and Liquidity Management above, First Horizon Home Loans uses single-purpose business trusts to securitize and sell jumbo loans, which, therefore, are not reflected on First Tennessee’s Statement of Condition. Even if these loans had not been securitized and sold, and were included on the Statement of Condition, First Tennessee and all of its banking affiliates would have been well capitalized.

OTHER

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

First Tennessee believes that difficulties in interpreting the effects of SFAS No. 133 are sufficiently great that it may be worthwhile to be able to identify and isolate these effects and to determine what net income would be excluding certain SFAS No. 133 adjustments related to mortgage banking capitalized servicing rights. Therefore, this analysis has been added as a recurring part of management’s discussion of operating results. This item, servicing rights net value changes under SFAS No. 133 (SFAS No. 133 gain or loss), represents the change in the fair value of hedged interest rate risk of capitalized MSR, net of changes in the fair value of derivative financial instruments designated to hedge such risks excluding (1) the impact of cash settlements and interest accruals on derivatives with periodic cash flows (2) changes in fair value due to the passage of time including time decay of options (3) changes in fair value due to time-price convergence of forward instruments, and (4) the impact of the required utilization of a constant hedge allocation ratio. For first quarter 2002, a pre-tax loss of $3.1 million ($1.9 million after tax) was recognized compared to a pre-tax gain of $3.5 million ($2.3 million after tax) in first quarter 2001. The impact on earnings from hedging of the MSR portfolio is included on the Statement of Income in mortgage banking noninterest income.

First Tennessee believes a review of the trend, if any, of the servicing rights net value changes under SFAS No. 133 over a long period of time, preferably over an interest rate business cycle, is a more meaningful measure to determine the effectiveness of hedging strategies.

For its internal evaluation of performance and for segment reporting, for each applicable period, First Tennessee subtracts SFAS No. 133 gains from reported net income and adds SFAS No. 133 losses to reported net income. The internal evaluation of long-term performance will include the long-term trend, if any, in SFAS No. 133 gains or losses.

FURTHER INTERPRETATIONS OF SFAS NO. 133

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

SUBSEQUENT EVENT

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

ACCOUNTING CHANGES

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information called for by this item is incorporated herein by reference to Management’s Discussion and Analysis included as Item 2 of Part I of this report and to Note 1 to the Consolidated Financial Statements and the “Risk Management-Interest Rate Risk Management” subsection of the Management’s Discussion and Analysis section contained in the financial appendix to the Corporation’s 2002 Proxy Statement.

PART II.

OTHER INFORMATION

Items 1, 2, 3, 4 and 5

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

Item 6 — Exhibits and Reports on Form 8-K.

(a)  Exhibits.

Exhibit No.	Description
3(ii)	Bylaws of the Corporation, as amended and restated.
4	Instruments defining the rights of security holders, including indentures.*
10(r)**	Non-employee Director Benefits.

*	The Corporation agrees to furnish copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries to the Securities and Exchange Commission upon request.
**	Management contract or compensatory plan required to be filed as an exhibit.
(b)	Reports on Form 8-K.

No report on Form 8-K was filed during the first quarter of 2002.

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:  05/13/02	By:	/s/ Elbert L. Thomas Jr.
		Elbert L. Thomas Jr.
		Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

EXHIBIT INDEX

Exhibit No.	Description
3(ii)	Bylaws of the Corporation, as amended and restated.
4	Instruments defining the rights of security holders, including indentures.*
10(r)**	Non-employee Director Benefits.

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

EX-3.II 3 g76098ex3-ii.txt BYLAWS OF THE CORPORATION EXHIBIT 3(II) BYLAWS OF FIRST TENNESSEE NATIONAL CORPORATION (As Amended and Restated April 16, 2002) ARTICLE ONE OFFICES 1.1 PRINCIPAL OFFICE. The principal office of First Tennessee National Corporation (the "Corporation") shall be 165 Madison Avenue, Memphis, Tennessee. 1.2 OTHER OFFICES. The Corporation may have offices at such other places, either within or without the State of Tennessee, as the Board of Directors may from time to time designate or as the business of the Corporation may from time to time require. 1.3 REGISTERED OFFICE. The registered office of the Corporation required to be maintained in the State of Tennessee shall be the same as its principal office and may be changed from time to time as provided by law. ARTICLE TWO SHAREHOLDERS 2.1 PLACE OF MEETINGS. Meetings of the shareholders of the Corporation may be held either in the State of Tennessee or elsewhere; but in the absence of notice to the contrary, shareholders' meetings shall be held at the principal office of the Corporation in Memphis, Tennessee. 2.2 QUORUM AND ADJOURNMENTS. The holders of a majority of the shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite, and shall constitute a quorum at all meetings of the shareholders, for the transaction of business, except as otherwise provided by law, the Restated Charter of the Corporation, as amended from time to time (the "Charter), or these Bylaws. In the event a quorum is not obtained at the meeting, the holders of a majority of the shares entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time and, whether or not a quorum is obtained at the meeting, the Chairman of the meeting shall have the power to adjourn the meeting from time to time, in either case without notice, except as otherwise provided by law, other than announcement at the meeting. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. 2.3 NOTICE OF MEETINGS. Unless otherwise required by applicable law, written notice of the annual and each special meeting stating the date, time and place of the meeting shall be mailed, postage prepaid, or otherwise delivered to each shareholder entitled to vote thereat at such address as appears on the records of shareholders of the Corporation, at least ten (10) days, but not more than two (2) months, prior to the meeting date. In addition, notice of any special meeting shall state the purpose or purposes for which the meeting is called and the person or persons calling the meeting. In the event of an adjournment of a meeting to a date more than four months after the date fixed for the original meeting or the Board of Directors fixes a new record date for the adjourned meeting, a new notice of the adjourned meeting must be given to shareholders as of the new record date. Any previously scheduled meeting may be postponed, and any special meeting may be canceled, by resolution of the Board of Directors upon public notice given prior to the date scheduled for such meeting. 2.4 ANNUAL MEETINGS. The annual meeting of shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on the third Tuesday in April, or if that day is a legal holiday, on the next succeeding business day not a legal holiday, at 10:00 a.m. Memphis time or on such other date and/or at such other time as the Board of Directors may fix by resolution by vote of a majority 1 of the entire Board of Directors. At the meeting, the shareholders shall elect by ballot, by plurality vote, directors to succeed directors in the class of directors whose term expires at the meeting and directors elected by the Board of Directors to fill vacancies in other classes of directors and may transact such other business as may properly come before the meeting. 2.5 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by Chairman of the Board and shall be called by the Chairman of the Board or the Secretary at the request in writing of a majority of the Board of Directors. Only such business within the purpose or purposes described in the notice of the meeting may be conducted at the meeting. 2.6 WAIVER OF NOTICE. Any shareholder may waive in writing notice of any meeting either before, at or after the meeting. Attendance by a shareholder in person or by proxy at a meeting shall constitute a waiver of objection to lack of notice or defective notice and a waiver of objection to consideration of a matter that was not described in the meeting notice unless the shareholder objects in the manner required by law. 2.7 VOTING. Unless otherwise required by the Charter, at each meeting of shareholders, each shareholder shall have one vote for each share of stock having voting power registered in the shareholder's name on the records of the Corporation on the record date for that meeting, and every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by instrument in writing or any other method permitted by law. 2.8 PROCEDURES FOR BRINGING BUSINESS BEFORE SHAREHOLDER MEETING. At an annual or special meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before an annual or special meeting of shareholders. To be properly brought before an annual or special meeting of shareholders, business must be (i) in the case of a special meeting called by the Chairman of the Board or at the request of the Board of Directors, specified in the notice of the special meeting (or any supplement thereto), or (ii) in the case of an annual meeting properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the annual or special meeting by a shareholder. For business to be properly brought before such a meeting of shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of the meeting; provided, however, that if fewer than 100 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholders to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before a meeting of shareholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business and any other shareholders known by such shareholder to be supporting such proposal, (iii) the class and number of shares of the Corporation which are beneficially owned by such shareholder on the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder's notice, and (iv) any material interest of the shareholder in such proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting of shareholders except in accordance with the procedures set forth in this Section 2.8. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the procedures prescribed by these Bylaws, and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 2.9 SEC PROXY RULES. In addition to complying with the provisions of Section 2.8, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder with respect to the matters set forth in Section 2.8. Nothing in Section 2.8 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to rules of the Securities and Exchange Commission. For such proposals to be acted upon at a meeting, however, compliance with the notice provisions of Section 2.8 is also required. 2 ARTICLE THREE DIRECTORS 3.1 POWERS OF DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of and all corporate powers shall be exercised by or under the authority of the Board of Directors. 3.2 NUMBER AND QUALIFICATIONS. The Board of Directors shall consist of eleven members. The Board of Directors has the power to change from time to time the number of directors specified in the preceding sentence. Any such change in the number of directors constituting the Corporation's Board Directors must be made exclusively by means of an amendment to these Bylaws adopted by a majority of the entire Board of Directors then in office. Directors need not be shareholders of the Corporation nor residents of the State of Tennessee. 3.3 TERM OF OFFICE. Except as otherwise provided by law or by the Charter, the term of each director hereafter elected shall be from the time of his or her election and qualification until the third annual meeting next following such election and until a successor shall have been duly elected and qualified; subject, however, to the right of the removal of any director as provided by law, by the Charter or by these Bylaws. 3.4 COMPENSATION. The directors shall be paid for their services on the Board of Directors and on any Committee thereof such compensation (which may include cash, shares of stock of the Corporation and options thereon) and benefits together with reasonable expenses, if any, at such times as may, from time to time, be determined by resolution adopted by a majority of the entire Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and being compensated therefor. 3.5 COMMITTEES. The directors, by resolution adopted by a majority of the entire Board of Directors, may designate an executive committee and other committees, consisting of two or more directors, and may delegate to such committee or committees all such authority of the Board of Directors that it deems desirable, including, without limitation, authority to appoint corporate officers, fix their salaries, and, to the extent such is not provided by law, the Charter or these Bylaws, to establish their authority and responsibility, except that no such committee or committees shall have and exercise the authority of the Board of Directors to: (a) authorize distributions (which include dividend declarations), except according to a formula or method prescribed by the Board of Directors, (b) fill vacancies on the Board of Directors or on any of its committees, (c) adopt, amend or repeal bylaws, (d) authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the Board of Directors, or (e) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee to do so within limits specifically prescribed by the Board of Directors. 3.6 PROCEDURES FOR DIRECTOR NOMINATIONS. Except as provided in Section 3.7 with respect to vacancies on the Board of Directors, only persons nominated in accordance with the procedures set forth in this Section 3.6 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of shareholders (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 3.6. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of a meeting; provided, however, that if fewer than 100 days' notice or prior public 3 disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure was made. A shareholder's notice to the Secretary shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the Corporation which are beneficially owned by such person on the date of such shareholder's notice and (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or, is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice (a) the name and address, as they appear on the Corporation's books, of such shareholder and any other shareholders known by such shareholder to be supporting such nominees and (b) the class and number of shares of the Corporation which are beneficially owned by such shareholder on the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such nominees on the date of such shareholder's notice. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.6. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the Chairman should so determine, the Chairman shall so declare to the meeting and the defective nomination shall be disregarded. 3.7 VACANCIES; REMOVAL FROM OFFICE. Except as otherwise provided by law or by the Charter, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification or any other cause (except removal from office) shall be filled only by the Board of Directors, provided that a quorum is then in office and present, or only by a majority of the directors then in office, if less than a quorum is then in office or by the sole remaining director. Any vacancies on the Board of Directors resulting from removal from office may be filled by the affirmative vote of the holders of at least a majority of the voting power of all outstanding voting stock or, if the shareholders do not so fill such a vacancy, by a majority of the directors then in office. Directors elected to fill a newly created directorship or other vacancy shall hold office for a term expiring at the next shareholders' meeting at which directors are elected and until such director's successor has been duly elected and qualified. The directors of any class of directors of the Corporation may be removed by the shareholders only for cause by the affirmative vote of the holders of at least a majority of the voting power of all outstanding voting stock. 3.8 PLACE OF MEETINGS. The directors may hold meetings of the Board of Directors or of a committee thereof at the principal office of the Corporation in Memphis, Tennessee, or at such other place or places, either in the State of Tennessee or elsewhere, as the Board of Directors or the members of the committee, as applicable, may from time to time determine by resolution or by written consent or as may be specified in the notice of the meeting. 3.9 QUORUM. A majority of the directors shall constitute a quorum for the transaction of business, but a smaller number may adjourn from time to time, without further notice, if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken and if the period of adjournment does not exceed thirty (30) days in any one (1) adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the vote of a greater number is required by law, the Charter, or these Bylaws. 3.10 REGULAR MEETINGS. Following each annual meeting of shareholders, the newly elected directors, together with the incumbent directors whose terms do not expire at such meeting, shall meet for the purpose of organization, the appointment of officers and the transaction of other business, and, if a majority of the directors be present at such place, day and hour, no prior notice of such meeting shall be required to be given to the directors. The place, day and hour of such meeting may also be fixed by resolution or by written consent of the directors. In addition, the Board of Directors may approve an annual schedule for additional regular meetings of the Board of Directors and of committees thereof. 4 3.11 SPECIAL MEETINGS. Special meetings of the directors may be called by the Chairman of the Board, the Chief Executive Officer, or the President (or as to any committee of the Board of Directors, by the person or persons specified in the resolution of the Board of Directors establishing the committee) on two days' notice by mail or on one day's notice by telegram or cablegram, or on two hours' notice given personally or by telephone or facsimile transmission to each director (or member of the committee, as appropriate), and shall be called by the Chairman of the Board or Secretary in like manner on the written request of a majority of directors then in office. The notice shall state the day and hour of the meeting and the place where the meeting is to be held. Special meetings of the directors may be held at any time on written waiver of notice or by consent of all the directors, either of which may be given either before, at or after the meeting. 3.12 ACTION WITHOUT A MEETING. The directors may (whether acting in lieu of a meeting of the Board of Directors or of a committee thereof) take action which they are required or permitted to take, without a meeting, on written consent setting forth the action so taken, signed by all of the directors entitled to vote thereon. If all the directors entitled to vote consent to taking such action without a meeting, the affirmative vote of the number of directors necessary to authorize or take such action at a meeting is the act of the Board of Directors or committee, as appropriate. 3.13 TELEPHONE MEETINGS. Directors may participate in a meeting of the Board of Directors or of a committee thereof by, or conduct a meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director so participating is deemed to be present in person at such meeting. ARTICLE FOUR OFFICERS 4.1 DESIGNATED OFFICERS. The officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, such number of Vice Chairmen as the Board may from time to time determine and appoint, an Auditor, a Chief Credit Officer, a Chief Financial Officer, a Controller, a General Counsel, a Manager of Risk Management, an Executive Vice President-Employee Services, a President-Business Financial Services, a President- Retail Financial Services, a Secretary, and a Treasurer, and such number of Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents and such other Officers and assistant Officers as may be from time to time determined and appointed in accordance with the provisions of this Article Four. The title of any officer may include any additional descriptive designation determined to be appropriate. Any person may hold two or more offices, except that the President shall not also be the Secretary or an Assistant Secretary. The officers, other than the Chairman of the Board, need not be directors, and officers need not be shareholders. 4.2 APPOINTMENT OF OFFICERS. Except as otherwise provided in this Section 4.2, the officers of the Corporation shall be appointed by the Board of Directors at the annual organizational meeting of the Board of Directors following the annual meeting of shareholders. The Board of Directors may delegate to a committee of the Board of Directors the power to create corporate offices, define the authority and responsibility of such offices, except to the extent such authority or responsibility would not be consistent with the law or the Charter, and to appoint persons to any office of the Corporation except the offices of the Chairman of the Board, Chief Executive Officer, and President, any office the incumbent in which is designated by the Board as an Executive Officer (as defined in Section 4.5 hereof), and, upon the recommendation of the Audit Committee, the Auditor. In addition, the Board of Directors may delegate to the officers appointed to the Corporation's personnel committee, acting as a committee, the authority to appoint persons to any offices of the Corporation of the level of Vice President and below annually at the personnel committee meeting following the annual meeting of shareholders and to appoint persons to any office of the Corporation of the level of Senior Vice President and below during the period of time between the annual appointment of officers by the Board of Directors or pursuant to this section 4.2 of the Bylaws. Notwithstanding the delegation of authority pursuant to this section 4.2 of the Bylaws, the Board of Directors retains the authority to appoint all officers and such other officers and agents as it shall deem necessary, who shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. 5 4.3 TERM. The officers of the Corporation shall be appointed for a term of one (1) year and until their successors are appointed and qualified, subject to the right of removal specified in Section 4.4 of these Bylaws. The designation of a specified term does not grant to any officer any contract rights. 4.4 VACANCIES, RESIGNATIONS AND REMOVAL. If the office of any officer or officers becomes vacant for any reason, the vacancy may be filled by the Board of Directors or, if such officer was appointed by a committee, by the committee appointing such officer. Any officer may resign at any time by delivering a written notice to the Chairman of the Board, Chief Executive Officer, President, Secretary, or Executive Vice President-Employee Services of the Corporation, or the designee of any of them, which shall be effective upon delivery unless it specifies a later date acceptable to the Corporation. Any officer designated by the Board as an Executive Officer shall be subject to removal at any time with or without cause only by the affirmative vote of a majority of the Board of Directors. The Auditor shall be subject to removal at any time with or without cause only by the affirmative vote of a majority of the Board of Directors, upon the recommendation of the Audit Committee. Any other officer shall be subject to removal at any time with or without cause by the affirmative vote of a majority of the Board of Directors, and in the event the officer was, or could have been, appointed by a committee, then by the affirmative vote of a majority of either such committee or the Board of Directors. 4.5 COMPENSATION. The Board of Directors, or a committee thereof, shall fix the compensation of Executive Officers (as defined herein) of the Corporation. "Executive Officers" shall be those officers of the Corporation identified as such from time to time in a resolution or resolutions of the Board of Directors. The compensation of officers who are not Executive Officers shall be fixed by the Board of Directors, by a committee thereof, or by management under such policies and procedures as shall be established by the Board of Directors or a committee thereof. 4.6 DELEGATION OF OFFICER DUTIES. In case of the absence of any officer of the Corporation, or for any reason that the Board of Directors (or, in addition, in the case of any officer appointed by a committee, such committee or any other committee which could appoint such officer pursuant to Section 4.2 of these Bylaws) may deem sufficient, the Board of Directors (or committee, as applicable) may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director. 4.7 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors and shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be assigned by the Board of Directors. If and at such times as the Board of Directors so determines, the Chairman of the Board may also serve as the Chief Executive Officer of the Corporation. 4.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors. The Chief Executive Officer shall be responsible for carrying out the orders of and the resolutions and policies adopted by the Board of Directors and shall have general management of the business of the Corporation and shall exercise general supervision over all of its affairs. In addition, the Chief Executive Officer shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors. If and at such time as the Board of Directors so determines, the Chief Executive Officer may also serve as the President of the Corporation. 4.9 PRESIDENT. The President, in the absence of the Chairman of the Board and the Chief Executive Officer, shall preside at all meetings of the shareholders and of the Board of Directors. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors has appointed another person to such office, in which case the President shall be the Chief Operating Officer of the Corporation and shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.10 VICE CHAIRMEN. Vice Chairmen shall perform such duties and exercise such powers as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 6 4.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the principal financial officer of the Corporation. The Chief Financial Officer is authorized to sign any document filed with the Securities and Exchange Commission or any state securities commission on behalf of the Corporation and shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.12 CHIEF CREDIT OFFICER. The Chief Credit Officer shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.13 GENERAL COUNSEL. The General Counsel shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.14 EXECUTIVE VICE PRESIDENT-EMPLOYEE SERVICES. The Executive Vice President-Employee Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.15 PRESIDENT-BUSINESS FINANCIAL SERVICES. The President-Business Financial Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.16 PRESIDENT-RETAIL FINANCIAL SERVICES. The President-Retail Financial Services shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.17 MANAGER OF RISK MANAGEMENT. The Manager of Risk Management shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer. 4.18 SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall perform such duties and exercise such powers as may be prescribed by the Board of Directors, a committee thereof, the personnel committee, the Chairman of the Board, or the Chief Executive Officer. 4.19 SECRETARY. The Secretary shall attend all sessions of the Board of Directors and of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose. The Secretary shall give or cause to be given notice of all meetings of the shareholders and of the Board of Directors, shall authenticate records of the Corporation, and shall perform such other duties as are incident to the office or as may be prescribed by the Board of Directors, the Chairman of the Board or the Chief Executive Officer. In the absence or disability of the Secretary, the Assistant Secretary or such other officer or officers as may be authorized by the Board of Directors or Executive Committee thereof shall perform all the duties and exercise all of the powers of the Secretary and shall perform such other duties as the Board of Directors, Chairman of the Board or the Chief Executive Officer shall prescribe. 4.20 TREASURER. The Treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, or the President, taking proper vouchers for such disbursements, and shall render to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, or the President, whenever they may require it, an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation, and at a regular meeting of the Board of Directors preceding the annual shareholders' meeting, a like report for the preceding year. The Treasurer shall keep or cause to be kept an account of stock registered and transferred in such manner and subject to such 7 regulations as the Board of Directors may prescribe. The Treasurer shall give the Corporation a bond, if required by the Board of Directors, in such a sum and in form and with security satisfactory to the Board of Directors for the faithful performance of the duties of the office and the restoration to the Corporation, in case of his or her death, resignation or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession, belonging to the Corporation. The Treasurer shall perform such other duties as the Board of Directors may from time to time prescribe or require. In the absence or disability of the Treasurer, the Assistant Treasurer shall perform all the duties and exercise all of the powers of the Treasurer and shall perform such other duties as the Board of Directors, the Chairman of the Board, or the Chief Executive Officer shall prescribe. 4.21 AUDITOR. The Auditor shall perform such duties and exercise such powers as are normally incident to the office and as may be prescribed by the Board of Directors or the Chairman of the Audit Committee. 4.22 CONTROLLER. The Controller shall be the principal accounting officer of the Corporation. The Controller is authorized to sign any document filed with the Securities and Exchange Commission or any state securities commission on behalf of the Corporation and shall assist the management of the Corporation in setting the financial goals and policies of the Corporation, shall provide financial and statistical information to the shareholders and to the management of the Corporation and shall perform such other duties and exercise such other powers as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. In the absence or disability of the Controller, the Assistant Controller shall perform all the duties and exercise all powers of the Controller and shall perform such duties as the Board of Directors or the Chairman of the Board or the Chief Executive Officer shall prescribe. 4.23 OTHER OFFICERS. Officers holding such other offices as may be created pursuant to Sections 4.1 and 4.2 of these Bylaws shall have such authority and perform such duties and exercise such powers as may be prescribed by the Board of Directors, a committee thereof, the personnel committee, the Chairman of the Board or the Chief Executive Officer. 4.24 OFFICER COMMITTEES. The directors, by resolution adopted by a majority of the entire Board of Directors, may designate one or more committees, consisting of two or more officers, and may delegate to such committee or committees all such authority that the Board of Directors deems desirable that is permitted by law. Members of such committees may take action without a meeting and may participate in meetings to the same extent and in the same manner that directors may take action and may participate pursuant to Sections 3.12 and 3.13 of these Bylaws. ARTICLE FIVE SHARES OF STOCK 5.1 CERTIFICATES. The certificates representing shares of stock of the Corporation shall be numbered, shall be entered in the books or records of the Corporation as they are issued, and shall be signed by the Chairman of the Board or the Chief Executive Officer and any one of the following: the President, the Treasurer, or the Secretary. Either or both of the signatures upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar other than an officer or employee of the Corporation. Each certificate shall include the following upon the face thereof: (a) A statement that the Corporation is organized under the laws of the State of Tennessee; (b) The name of the Corporation; (c) The name of the person to whom issued; (d) The number and class of shares, and the designation of the series, if any, which such certificate represents; 8 (e) The par value of each share represented by such certificate; or a statement that the shares are without par value; and (f) Such other provisions as the Board of Directors may from time to time require. 5.2 SHARES NOT REPRESENTED BY CERTIFICATES. Notwithstanding the provisions of Section 5.1 of these Bylaws, the Board of Directors may authorize the issuance of some or all of the shares of any class without certificates. The Corporation shall send to each shareholder to whom such shares have been issued or transferred at the appropriate time any written statement providing information about such shares, which is required by law. 5.3 STOCK TRANSFERS AND RECORD DATES. Transfers of shares of stock shall be made upon the books of the Corporation by the record owner or by an attorney, lawfully constituted in writing, and upon surrender of any certificate therefor. The Board of Directors may appoint suitable agents in Memphis, Tennessee, and elsewhere to facilitate transfers by shareholders under such regulations as the Board of Directors may from time to time prescribe. The transfer books may be closed by the Board of Directors for such period, not to exceed 40 days, as may be deemed advisable for dividend or other purposes, or in lieu of closing the books, the Board of Directors may fix in advance a date as the record date for determining shareholders entitled notice of and to vote at a meeting of shareholders, or entitled to payment of any dividend or other distribution. The record date for voting or taking other action as shareholders shall not be less than 10 days nor more than 70 days prior to the meeting date or action requiring such determination of shareholders. The record date for dividends and other distributions shall not be less than 10 days prior to the payment date of the dividend or other distribution. All certificates surrendered to the Corporation for transfer shall be canceled, and no new certificate shall be issued until the former certificate for like number of shares shall have been surrendered and canceled, except that in case of a lost or destroyed certificate a new one may be issued on the terms prescribed by Section 5.5 of these Bylaws. 5.4 RECORD OWNERS. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof; and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by applicable law. 5.5 LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES. The agent for transfer of the Corporation's stock may issue new share certificates in place of certificates represented to have been lost, destroyed, stolen or mutilated upon receiving an indemnity satisfactory to the agent and the Secretary or Treasurer of the Corporation, without further action of the Board of Directors. ARTICLE SIX INDEMNIFICATION 6.1 INDEMNIFICATION OF OFFICERS WHEN WHOLLY SUCCESSFUL. If any current or former officer of the Corporation [including for purposes of this Article an individual who, while an officer, is or was serving another corporation or other enterprise (including an employee benefit plan and a political action committee, which serves the interests of the employees of the Corporation or any of its subsidiaries) in any capacity at the request of the Corporation and unless the context requires otherwise the estate or personal representative of such officer] is wholly successful, on the merits or otherwise, in the defense of any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal ("Proceeding"), to which the officer was a party because he or she is or was an officer of the Corporation, the officer shall be indemnified by the Corporation against all reasonable expenses, including attorney fees, incurred in connection with such Proceeding, or any appeal therein. 6.2 INDEMNIFICATION OF OFFICERS WHEN NOT WHOLLY SUCCESSFUL. If any current or former officer of the Corporation has not been wholly successful on the merits or otherwise, in the defense of a Proceeding, to which the officer was or was threatened to be made a party because he or she was or is an officer, the officer shall be indemnified by the Corporation against any judgment, settlement, penalty, fine (including any excise tax assessed with respect to an employee benefit plan), or other liability and any reasonable expenses, including attorney fees, incurred as a result of 9 such Proceeding, or any appeal therein, if authorized in the specific case after a determination has been made that indemnification is permissible because the following standard of conduct has been met: (a) The officer conducted himself or herself in good faith, and (b) The officer reasonably believed: (i) in the case of conduct in the officer's official capacity as an officer of the Corporation that the officer's conduct was in the Corporation's best interest; and (ii) in all other cases that the officer's conduct was at least not opposed to its best interests; and (c) In the case of any criminal proceeding, the officer had no reasonable cause to believe his or her conduct was unlawful; provided, however, the Corporation may not indemnify an officer in connection with a Proceeding by or in the right of the Corporation in which the officer was adjudged liable to the Corporation or in connection with any other proceeding charging improper benefit to the officer, whether or not involving action in his or her official capacity, in which the officer was adjudged liable on the basis that personal benefit was improperly received by the officer. 6.3 PROCEDURES FOR INDEMNIFICATION DETERMINATIONS. The determination required by Section 6.2 herein shall be made as follows: (a) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the Proceeding; (b) If a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate) consisting solely of two or more directors not at the time parties to the Proceeding; (c) By independent special legal counsel: (i) selected by the Board of Directors or its committee in the manner prescribed in subsection (a) or (b); or (ii) if a quorum of the Board of Directors cannot be obtained under subsection (a) and a committee cannot be designated under subsection (b), selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or, if a determination pursuant to subsections (a), (b), or (c) of this Section 6.3 cannot be obtained, then (d) By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the Proceeding may not be voted on the determination. 6.4 SERVING AT THE REQUEST OF THE CORPORATION. An officer of the Corporation shall be deemed to be serving another corporation or other enterprise or employee benefit plan or political action committee at the request of the Corporation only if such request is reflected in the records of the Board of Directors or a committee appointed by the Board of Directors for the purpose of making such requests. Approval by the Board of Directors, or a committee thereof, may occur before or after commencement of such service by the officer. 6.5 ADVANCEMENT OF EXPENSES. The Corporation shall pay for or reimburse reasonable expenses, including attorney fees, incurred by an officer who is a party to a Proceeding in advance of the final disposition of the Proceeding if: (a) The officer furnishes to the Corporation a written affirmation of the officer's good faith belief that the officer has met the standard of conduct described in Section 6.2 herein; (b) The officer furnishes to the Corporation a written undertaking, executed personally or on behalf of the officer, to repay the advance if it is ultimately determined that the officer is not entitled to indemnification; and 10 (c) A determination is made that the facts then known to those making the determination would not preclude indemnification under this bylaw. 6.6 UNDERTAKING REQUIRED FOR EXPENSES. The undertaking required by Section 6.5 herein must be an unlimited general obligation of the officer but need not be secured and may be accepted without reference to financial ability to make repayment. 6.7 PROCEDURES FOR EXPENSE DETERMINATIONS. Determinations and authorizations of payments under Section 6.5 herein shall be made in the same manner as is specified in Section 6.3 herein. 6.8 INDEMNIFICATION OF EMPLOYEES AND FORMER DIRECTORS. Every employee and every former director of the Corporation shall be indemnified by the Corporation to the same extent as officers of the Corporation. 6.9 NONEXCLUSIVITY OF RIGHT OF INDEMNIFICATION. The right of indemnification set forth above shall not be deemed exclusive of any other rights, including, but not limited to, rights created pursuant to Section 6.11 of these Bylaws, to which an officer, employee, or former director seeking indemnification may be entitled. No combination of rights shall permit any officer, employee or former director of the Corporation to receive a double or greater recovery. 6.10 MANDATORY INDEMNIFICATION OF DIRECTORS AND DESIGNATED OFFICERS. The Corporation shall indemnify each of its directors and such of the non-director officers of the Corporation or any of its subsidiaries as the Board of Directors may designate, and shall advance expenses, including attorney's fees, to each director and such designated officers, to the maximum extent permitted (or not prohibited) by law, and in accordance with the foregoing, the Board of Directors is expressly authorized to enter into individual indemnity agreements on behalf of the Corporation with each director and such designated officers which provide for such indemnification and expense advancement and to adopt resolutions which provide for such indemnification and expense advancement. 6.11 INSURANCE. Notwithstanding anything in this Article Six to the contrary, the Corporation shall have the additional power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or who, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, political action committee, or other enterprise, against liability asserted against or incurred by the person in that capacity or arising from the person's status as a director, officer, employee, or agent, whether or not the Corporation would have the power to indemnify the person against the same liability. ARTICLE SEVEN RETIREMENT 7.1 NON-EMPLOYEE DIRECTORS. Directors who are not also officers of the Corporation or its affiliates shall be retired from the Board of Directors as follows: (a) Any director who shall attain the age of sixty-five (65) on or before the last day of the term for which he or she was elected shall not be nominated for re-election and shall be retired from the Board of Directors at the expiration of such term; provided, however, any director first elected to the Board of Directors prior to April 17, 1996, may serve a minimum of two three-year terms. (b) For the purpose of maintaining boards of active business and professional persons, directors leaving the occupation or the position held at their last election (by retirement or otherwise) will be expected to tender their resignation from the Board of Directors upon such occasion. A resignation will ordinarily be accepted unless (i) the director assumes another position deemed appropriate by the Board of Directors for continuation, or (ii) the director is so engaged in some specific project for the Board of Directors as to make his or her resignation detrimental to the Corporation. Under this circumstance, the Board of Directors may elect to set a subsequent date for his or her retirement to coincide with the completion of the project. 11 Directors who are also officers of the Corporation or any of its affiliates will be retired from the Board of Directors on the date of the annual meeting coincident with or next following the date of the director's retirement from or other discontinuation of active service with the Corporation and its affiliates. 7.2 OFFICERS AND EMPLOYEES. Except as provided in the following sentence, the Corporation has no compulsory retirement age for its officers or employees. Each officer or employee who has attained 65 years of age and who, for the two-year period immediately before attaining such age, has been employed in a "bona fide executive" or a "high policy-making" position as those terms are used and defined in the Age Discrimination in Employment Act, Section 12(c), and the regulations relating to that section prescribed by the Equal Employment Opportunity Commission, all as amended from time to time (collectively, the "ADEA"), shall automatically be terminated by way of compulsory retirement and his or her salary discontinued on the first day of the month coincident with or immediately following the 65th birthday, provided such employee is entitled to an immediate nonforfeitable annual retirement benefit, as specified in the ADEA, in the aggregate amount of at least $44,000. Notwithstanding the prior sentence, the Board of Directors, in its discretion, may continue any such officer or employee in service and designate the capacity in which he or she shall serve, and shall fix the remuneration he or she shall receive. The Board of Directors may also re-employ any former officer who had theretofore been retired. ARTICLE EIGHT EXECUTION OF DOCUMENTS 8.1 DEFINITION OF "DOCUMENT." For purposes of this Article Eight of the Bylaws, the term "document" shall mean a document of any type, including, but not limited to, an agreement, contract, instrument, power of attorney, endorsement, assignment, transfer, stock or bond power, deed, mortgage, deed of trust, lease, indenture, conveyance, proxy, waiver, consent, certificate, declaration, receipt, discharge, release, satisfaction, settlement, schedule, account, affidavit, security, bill, acceptance, bond, undertaking, check, note or other evidence of indebtedness, draft, guaranty, letter of credit, and order. 8.2 EXECUTION OF DOCUMENTS. Except as expressly provided in Section 5.1 of these Bylaws (with respect to signatures on certificates representing shares of stock of the Corporation), the Chairman of the Board, the Chief Executive Officer, the President, any Vice Chairman, any Senior Executive Vice President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Chief Credit Officer, the General Counsel, the Executive Vice President-Employee Services, the President - Retail Financial Services, the President - Business Financial Services, the Manager of Risk Management, the Controller, the Treasurer, the Secretary, and any other officer, or any of them acting individually, may (i) execute and deliver in the name and on behalf of the Corporation or in the name and on behalf of any division or department of the Corporation any document pertaining to the business, affairs, or property of the Corporation or any division or department of the Corporation, and (ii) delegate to any other officer, employee or agent of the Corporation the power to execute and deliver any such document. 8.3 METHOD OF EXECUTION BY SECRETARY. Unless otherwise required by law, the signature of the Secretary on any document may be a facsimile. ARTICLE NINE EMERGENCY BYLAWS 9.1 DEFINITION OF EMERGENCY. The provisions of this Article Nine shall be effective only during an "emergency." An "emergency" shall be deemed to exist whenever any two of the officers identified in Section 9.2 of these Bylaws in good faith determine that a quorum of the directors cannot readily be assembled because of a catastrophic event. 9.2 NOTICE OF MEETING. A meeting of the Board of Directors may be called by any one director or by any one of the following officers: Chairman of the Board, Chief Executive Officer, President, any Vice Chairman, any Senior Executive Vice President, any Senior Executive Vice President, any Executive Vice President, Chief Credit Officer, Chief Financial Officer, Controller, General Counsel, Manager of Risk Management, Executive Vice President-Employee 12 Services, President-Business Financial Services, President-Retail Financial Services, or Secretary. Notice of such meeting need be given only to those directors whom it is practical to reach by any means the person calling the meeting deems feasible, including, but not limited to, by publication and radio. Such notice shall be given at least two hours prior to commencement of the meeting. 9.3 QUORUM AND SUBSTITUTE DIRECTORS. If a quorum has not been obtained, then one or more officers of the Corporation or the Bank present at the emergency meeting of the Board of Directors, as are necessary to achieve a quorum, shall be considered to be substitute directors for purposes of the meeting, and shall serve in order of rank, and within the same rank in order of seniority determined by hire date by the Corporation, the Bank or any of their subsidiaries. In the event that less than a quorum of the directors (including any officers who serve as substitute directors for the meeting) are present, those directors present (including such officers serving as substitute directors) shall constitute a quorum. 9.4 ACTION AT MEETING. The Board as constituted pursuant to Section 9.3 and after notice has been provided pursuant to Section 9.2 may take any of the following actions: (i) prescribe emergency powers of the Corporation, (ii) delegate to any officer or director any of the powers of the Board of Directors, (iii) designate lines of succession of officers and agents in the event that any of them are unable to discharge their duties, (iv) relocate the principal office or designate alternative or multiple principal offices, and (v) take any other action that is convenient, helpful, or necessary to carry on the business of the Corporation. 9.5 EFFECTIVENESS OF NON-EMERGENCY BYLAWS. All provisions of these Bylaws not contained in this Article Nine, which are consistent with the emergency bylaws contained in Article Nine, shall remain effective during the emergency. 9.6 TERMINATION OF EMERGENCY. Any emergency causing this Article Nine to become operative shall be deemed to be terminated whenever either of the following conditions is met: (i) the directors and any substitute directors determine by a majority vote at a meeting that the emergency is over or (ii) a majority of the directors elected pursuant to the provisions of these Bylaws other than this Article Nine hold a meeting and determine that the emergency is over. 9.7 ACTION TAKEN IN GOOD FAITH. Any corporate action taken in good faith in accordance with the provisions of this Article Nine binds the Corporation and may not be used to impose liability on any director, substitute director, officer, employee or agent of the Corporation. ARTICLE TEN MISCELLANEOUS PROVISIONS 10.1 FISCAL YEAR. The Board of Directors of the Corporation shall have authority from time to time to determine whether the Corporation shall operate upon a calendar year basis or upon a fiscal year basis, and if the latter, said Board of Directors shall have power to determine when the said fiscal year shall begin and end. 10.2 DIVIDENDS. Dividends on the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting pursuant to law. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall think conducive to the interest of the Corporation. 10.3 SEAL. This Corporation shall have a Corporate Seal which shall consist of an imprint of the name of the Corporation, the state of its incorporation, the year of incorporation and the words "Corporate Seal." The Corporate Seal shall not be required to establish the validity or authenticity of any document executed in the name and on behalf of the Corporation. 13 10.4 NOTICES. Whenever notice is required to be given to any director, officer or shareholder under any of the provisions of the law, the Charter, or these Bylaws (except for notice required by Sections 2.8 and 3.6 of these Bylaws), it shall not be construed to require personal notice, but such notice may be given in writing by depositing the same in the United States mail, postage prepaid, or by telegram, teletype, facsimile transmission or other form of wire, wireless, or other electronic communication or by private carrier addressed to such shareholder at such address as appears on the Corporation's current record of shareholders, and addressed to such director or officer at such address as appears on the records of the Corporation. If mailed as provided above, notice to a shareholder shall be deemed to be effective at the time when it is deposited in the mail. 10.5 BYLAW AMENDMENTS. The Board of Directors shall have power to make, amend and repeal the Bylaws or any Bylaw of the Corporation by vote of not less than a majority of the directors then in office, at any regular or special meeting of the Board of Directors. The shareholders may make, amend and repeal the Bylaws or any Bylaw of this Corporation at any annual meeting or at a special meeting called for that purpose only by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock, and all Bylaws made by the directors may be amended or repealed by the shareholders only by the vote of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock. Without further authorization, at any time the Bylaws are amended, the Secretary is authorized to restate the Bylaws to reflect such amendment, and the Bylaws, as so restated, shall be the Bylaws of the Corporation. 14 EX-10.R 4 g76098ex10-r.txt NON-EMPLOYEE DIRECTOR BENEFITS EXHIBIT 10(R) RESOLUTIONS OF BOARD OF DIRECTORS OF FIRST TENNESSEE NATIONAL CORPORATION APRIL 16, 2002 ---------------------------------------------- BE IT RESOLVED, that the following benefits, be, and they hereby are, approved as additional compensation to non-employee directors for service to the Corporation as a director: a personal account executive, a no fee personal checking account for the director and the director's spouse, a FirstCheck card, a 25% reduction in commissions charged by First Tennessee Brokerage, Inc., a no fee VISA gold card, no fee for a safe deposit box, traveler's checks, and cashier's checks, and if the Board has authorized a stock repurchase program, the repurchase of shares of Corporation common stock at the day's volume-weighted average price with no payment of any fees or commissions if the repurchase of the director's shares is otherwise permissible under the program that has been authorized. FURTHER RESOLVED, that these benefits are approved for calendar year 2002 and future years unless and until the Board modifies or terminates such benefits. -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.II

                                                                   EXHIBIT 3(II)


                                    BYLAWS OF
                      FIRST TENNESSEE NATIONAL CORPORATION
                    (As Amended and Restated April 16, 2002)

                                   ARTICLE ONE
                                     OFFICES

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

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

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

                                   ARTICLE TWO
                                  SHAREHOLDERS

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

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

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

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


                                       1


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

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

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

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

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

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


                                       2


                                  ARTICLE THREE
                                    DIRECTORS

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

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

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

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

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

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

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

         (c)      adopt, amend or repeal bylaws,

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

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

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


                                       3


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

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

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

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

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


                                       4


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

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

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

                                  ARTICLE FOUR
                                    OFFICERS

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

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


                                       5


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

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

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

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

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

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

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

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


                                       6


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

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

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

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

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

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

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

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

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

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


                                       7


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

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

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

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

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

                                  ARTICLE FIVE
                                 SHARES OF STOCK

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

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

         (b)      The name of the Corporation;

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

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


                                       8


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

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

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

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

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

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

                                   ARTICLE SIX
                                 INDEMNIFICATION

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

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


                                       9


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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       10


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

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

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

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

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

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

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

                                  ARTICLE SEVEN
                                   RETIREMENT

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

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

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


                                       11


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

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

                                  ARTICLE EIGHT
                             EXECUTION OF DOCUMENTS

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

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

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

                                  ARTICLE NINE
                                EMERGENCY BYLAWS

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

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


                                       12


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

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

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

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

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

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

                                   ARTICLE TEN
                            MISCELLANEOUS PROVISIONS

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

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

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


                                       13


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

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


                                       14

EX-10.R

                                                                   EXHIBIT 10(R)


                        RESOLUTIONS OF BOARD OF DIRECTORS
                     OF FIRST TENNESSEE NATIONAL CORPORATION
                                 APRIL 16, 2002

                 ----------------------------------------------

         BE IT RESOLVED, that the following benefits, be, and they hereby are,
approved as additional compensation to non-employee directors for service to the
Corporation as a director: a personal account executive, a no fee personal
checking account for the director and the director's spouse, a FirstCheck card,
a 25% reduction in commissions charged by First Tennessee Brokerage, Inc., a no
fee VISA gold card, no fee for a safe deposit box, traveler's checks, and
cashier's checks, and if the Board has authorized a stock repurchase program,
the repurchase of shares of Corporation common stock at the day's
volume-weighted average price with no payment of any fees or commissions if the
repurchase of the director's shares is otherwise permissible under the program
that has been authorized.

         FURTHER RESOLVED, that these benefits are approved for calendar year
2002 and future years unless and until the Board modifies or terminates such
benefits.