First Tennessee reports fourth year of record earnings.

MEMPHIS, Tenn.--(BUSINESS WIRE)--Jan. 17, 1995--First Tennessee National Corp. (First Tennessee) today reported fourth year record earnings of $146.3 million for 1994, an increase of 38 percent from the $106.1 million for 1993.

Earnings per share for the year were $4.56 compared to $3.31 in 1993. Return on average equity for 1994 improved to 20.04 percent from 16.07 percent in 1993, and return on average assets was 1.45 percent in 1994, up from 1.11 percent in 1993.

Earnings for the fourth quarter of 1994 were $37.1 million, or $1.16 per share, compared with $22.9 million or $.70 per share, for the same period in 1993. Return on average assets for the fourth quarter increased to 1.43 percent from .89 percent for the same period in 1993. Return on average equity rose to 19.81 percent from 13.30 percent for the fourth quarter of 1993.

Financial information for prior periods is restated for pooling of interests transactions. On an originally reported basis, earnings per share for 1993 were $4.26, and earnings per share for the fourth quarter of 1993 were $1.06; return on average assets for 1993 was 1.35 percent and 1.28 percent for the fourth quarter of 1993; return on average equity for 1993 was 18.99 percent and 18.33 percent for the fourth quarter of 1993.

"We are pleased to report these high levels of profitability for the third straight year, as the execution of our strategies continues to produce quality results, thus making First Tennessee one of the most profitable banks in the country," said Ralph Horn, president and chief executive officer.

Net Interest Earnings

Net interest income, on a taxable equivalent basis, rose 4 percent to $385.4 million for 1994 compared to 1993. Average earning assets, net of unearned income, increased 5 percent for the year and included a 20 percent increase in average loans, net of unearned income, and a 26 percent decrease in investment securities. The growth in earning assets was supported by an increase in average interest-bearing core deposits of 6 percent.

The net interest margin remained flat at 4.28 percent compared to 4.29 percent in 1993. "Our net interest margin has historically been stable, and 1994 was no exception, despite the fact that short term rates rose 250 basis points over the past year," said Horn. "However, the margin did experience some compression in the fourth quarter compared to the third quarter of 1994." Net interest income declined $3 million from third quarter 1994 to fourth quarter 1994. Approximately 50 percent of the decline was related to mortgage banking activities, while the remainder resulted from the unfavorable impact of the 125 basis points increase in short term rates since September 1994.

Noninterest income and expense

Noninterest income increased 16 percent to $389.2 million compared to the previous year. This increase includes venture capital gains of $16.7 million recognized in 1994. Excluding venture capital gains and other securities transactions in both periods, noninterest income grew 10 percent. During 1994, mortgage banking revenues grew 38 percent. This increase was a result of higher origination volume early in 1994 and the purchase acquisition of MNC Mortgage Corp., which closed in the fourth quarter of 1993.

Other annual increases in noninterest income included: 10 percent in credit card, 10 percent in service charges on deposit accounts, and 9 percent in trust services. Changing market conditions caused the bond division's revenues to decrease 15 percent over the previous year.

Noninterest expenses were up 11 percent over 1993 and were relatively flat from the third quarter to fourth quarter 1994. The annual increase includes an 11 percent increase in employee compensation, incentives and benefits from the previous year.

Asset Quality

Asset quality continued to improve as nonperforming assets decreased 38 percent to $36.5 million at Dec. 31, 1994. The ratio of nonperforming loans to total loans decreased to .25 percent at the end of 1994, compared to .41 percent at the end of 1993. The provision for loan losses dropped to $16.7 million from $35.7 million one year ago. Charge-offs in 1994 were $17.5 million of .27 percent of average loans, net of unearned income. This compares to $28.6 million or .53 percent for 1993.

Income Taxes

Income taxes in 1994 reflect benefits of realizing deferred tax assets of an acquired company and funding a charitable foundation.

Mortgage Companies

"The mortgage expansion is now substantially complete with the recent acquisitions of MNC Mortgage Corp., Sunbelt National Mortgage Corp., Emerald Mortgage Co., and Carl I. Brown and Company. With these acquisitions, First Tennessee now operates in 25 states with approximately 150 offices," said Horn.

During 1994, First Tennessee originated $4.2 billion of mortgage loans compared to $7.1 billion in 1993, when refinancing was at its peak and interest rates at historical lows. At year-end, the combined servicing portfolio was $1.7 billion compared to $13.1 billion one year ago. The decrease in the servicing portfolio reflects lower origination volume and the sale of a higher percentage of originations in 1994 compared to 1993. In 1994, mortgage banking contributed approximately 20 percent of total revenue.

General

First Tennessee, the 56th largest bank holding company in the United States, reported total assets of $10.5 billion and shareholders' equity of $748.8 million at Dec. 31, 1994. The corporation's common shares trade in the NASDAQ over-the-counter market and are quoted on its national market system under the symbol FTEN.

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                         FIRST TENNESSEE NATIONAL CORP.
                             FINANCIAL HIGHLIGHTS
                                 (Unaudited)

                            Three Months Ended         Year Ended
                                 Dec. 31                 Dec. 31
                            1994         1993        1994          1993
Average Balance Sheet (Thousands)
Loans, net of unearned income:
 Commercial              $ 2,809,030 $ 2,504,978 $ 2,683,978 $ 2,358,013
 Consumer                  2,199,392   1,695,171   2,055,884   1,505,438
 Credit card receivables     453,590     406,752     432,667     396,518
 Real estate construction    152,617      96,916     117,303      82,027
 Permanent mortgage          564,703     471,298     539,287     511,511
 Mortgage warehouse loans
  held for sale              392,230     971,668     583,284     479,965
 Nonaccruing loans            17,012      32,374      18,553      27,397
  Total loans, net of
   unearned income         6,588,574   6,179,157   6,430,956   5,360,869
Investment securities      2,210,372   2,525,434   2,153,905   2,921,928
Other earning assets         381,897     361,199     411,125     325,551
   Total earning assets    9,180,843   9,065,790   8,995,986   8,608,348
Cash and due from banks      657,117     616,192     637,272     555,251
Other assets                 477,099     525,428     494,655     427,334
   Total assets          $10,315,059 $10,207,410 $10,127,913 $ 9,590,933

Interest-bearing deposits$ 5,513,739 $ 5,024,327 $ 5,362,755 $ 5,077,282
Short-term borrowed funds  2,026,453   2,396,277   1,986,167   1,998,101
Long-term debt                91,393      92,629      91,718      97,513
   Total interest-bearing
    liabilities            7,631,585   7,513,233   7,440,640   7,172,896
Demand deposits            1,731,666   1,699,057   1,712,966   1,508,709
Other liabilities            208,912     313,702     244,011     249,039
Shareholder's equity         742,896     681,418     730,296     660,289
   Total liabilities and
    shareholder's equity $10,315,059 $10,207,410 $10,127,913 $ 9,590,933

Average shares
 outstanding              32,062,196  32,467,439  32,114,076  32,031,123

                                                 Dec. 31
Period-End Balance Sheet                  1994             1993
 (Thousands)
Loans, net of unearned income:
 Commercial                            $ 2,888,671     $ 2,611,024
 Consumer                                2,236,731       1,798,770
 Credit card receivables                   475,471         428,075
 Real estate construction                  160,368          75,844
 Permanent mortgage                        569,729         497,293
 Mortgage warehouse loans held for sale    369,869       1,099,686
 Nonaccruing loans                          16,539          25,966
   Total loans, net of unearned income   6,717,378       6,536,658
Investment securities                    2,093,663       2,273,122
Other earning assets                       440,410         323,963
   Total earning assets                  9,251,451       9,133,743
Cash and due from banks                    691,093         623,084
Other assets                               579,867         609,870
  Total assets                         $10,522,411     $10,366,697

Interest-bearing deposits              $ 5,986,565     $ 5,477,283
Short-term borrowed funds                1,653,764       1,761,205
Long-term debt                              93,771          92,043
   Total interest-bearing liabilities    7,734,100       7,330,531
Demand deposits                          1,701,857       1,925,298
Other liabilities                          337,683         417,284
Shareholder's equity                       748,771         693,584
   Total liabilities and shareholder's
    equity                             $10,522,411     $10,366,697

Period-end shares outstanding           31,853,323      32,031,683

                                 Three Months Ended     Year Ended
                                      Dec. 31             Dec. 31
                                   1994      1993      1994      1993
Summary Statements of Income
  (Thousands)
Interest income                  $178,104  $163,675  $668,659  $624,982
Less interest expense              85,484    67,454   288,094   261,524
   Net interest income             92,620    96,221   380,565   363,458
Provision for loan losses           4,175     8,125    16,733    35,697
   Net interest income after
    provision for loan losses      88,445    88,096   363,832   327,761
Noninterest income:
 Mortgage banking                  30,340    36,064   118,442    85,640
 Bond division                     13,719    22,282    77,478    91,525
 Service charges on deposit
  accounts                         16,345    15,217    63,198    57,420
 Bank card                          8,781     7,817    31,401    28,467
 Trust service                      8,195     8,302    28,933    26,532
 Securities gains (losses)         (1,939)     (755)   20,641       805
 Other                             13,981    12,124    49,077    44,418
  Total noninterest income         89,422   101,051   389,170   334,807
   Adjusted gross income after
    provision for loan losses     177,867   189,147   753,002   662,568
Noninterest expense:
 Employee compensation, incentives
  and benefits                     68,149    81,135   294,884   265,851
 Occupancy                          7,890     7,507    30,000    24,863
 Amortization of intangible assets  4,354    10,360    20,680    30,811
 Equipment rentals, depreciation
  and maintenance                   6,891     6,557    24,600    20,264
 Other                             40,800    43,994   175,540   150,109
  Total noninterest expense       128,084   149,553   545,704   491,898
   Income before income taxes      49,783    39,594   207,298   170,670
Applicable income taxes            12,682    16,743    60,949    64,588
   Net income                    $ 37,101  $ 22,851  $146,349  $106,082

                              Three Months Ended    Year Ended
                                   Dec. 31            Dec. 31
                                1994     1993      1994    1993
Per Share Data:
 Net income                    $ 1.16   $  .70   $ 4.56   $ 3.31
 Dividends declared               .47      .42     1.73     1.50
 Book value                     23.51    21.65    23.51    21.65

Selected Financial Ratios:
 Return on average assets        1.43%     .89%    1.45%    1.11%
 Return on average equity       19.81    13.30    20.04    16.07
 Net interest margin             4.08     4.30     4.28     4.29

                                        Dec. 31
                                    1994       1993
Nonperforming assets:
 Nonaccrual loans                $ 16,539   $ 25,966
 Restructured loans                   158        579
  Total nonperforming loans        16,697     26,545
 Foreclosed real estate            17,989     31,658
 Other assets                       2,055      1,292
  Total nonperforming assets       36,741     59,495

Nonperforming loans to total loans
 (net of unearned income)             .25%       .41%

Nonperforming assets to total loans
 (net of unearned income) plus
 foreclosed real estate and
 other assets                         .55%       .91%

Allowance for loan losses        $106,989   $107,723
Allowance for loan losses
 to total loans                      1.59%      1.65%
Allowance for loan losses
 to nonperforming loans            640.77%    405.81%
Allowance for loan losses
 to nonperforming assets           291.20%    181.06%
Non-government guaranteed
 past due loans                  $ 12,287   $ 12,873
Government guaranteed
 past due loans                  $ 10,030   $ 11,560

    During 1994, First Tennessee acquired SNMC Management Corp.,
Highland Capital Management Corp., Cleveland Bank and Trust Co., and
Planters Bank.  Each of these acquisitions was accounted for as a
pooling of interests, and accordingly the financial position and
results of operations of all companies are reflected on a combined
basis from the earliest period presented.  MNC Mortgage Corp. was
acquired on Oct. 1, 1993, and Emerald Mortgage Co. was acquired on
Oct. 1, 1994; each was accounted for as a purchase.  Therefore, the
consolidated statements do not reflect the financial position or
results of operations prior to their respective acquisition dates.

CONTACT: First Tennessee, Memphis

Teresa Fehrman, 901/523-4161 (financial information)

Kim Cherry, 901/523-4726 (media information)

Marty Mosby, 901/523-5620 (investor relations)