First Tennessee reports record earnings for 1995.

MEMPHIS, Tenn.--(BUSINESS WIRE)--Jan. 16, 1996--First Tennessee National Corporation (First Tennessee) (NASDAQ/NMS:FTEN) today reported the fifth consecutive year of record earnings.

Earnings for 1995 were $164.9 million, an increase of 12 percent from $147.1 million for 1994. Earnings per share for the year were $4.85, a gain of 13 percent from $4.30 in 1994. Return on average equity and return on average assets improved to 20.04 percent and 1.45 percent, respectively, for 1995, from 19.36 percent and 1.39 percent, respectively, in 1994.

Earnings for fourth quarter 1995 were $45.7 million, a record quarter, and an increase of 39 percent from $32.9 million earned in the fourth quarter of 1994. Earnings per share for the fourth quarter were $1.34 compared with $.96 for the same period in 1994. Return on average equity rose to 20.58 percent from 16.90 percent for the fourth quarter of 1994. Return on average assets for the fourth quarter increased to 1.51 percent from 1.22 percent for the same period in 1994.

During the fourth quarter, First Tennessee completed the acquisition of Financial Investment Corporation, parent company of First National Bank of Springdale, Ark. This acquisition was accounted for as a purchase and therefore the results of its operations are not included for prior periods.

"We are pleased with the continuation of our strong earnings and profitability performance in 1995," said Ralph Horn, Chairman and Chief Executive Officer of First Tennessee. "The strategies that we are implementing have provided growth opportunities in our fee-based businesses, many of which have higher growth rates than traditional retail/commercial banking. With this unique mix of businesses, we look forward to continuing these results into 1996."

Noninterest Income

Total noninterest income (excluding securities gains in both periods) accounted for 56 percent of total revenues for the year, and increased 13 percent to $494.1 million for 1995 compared with $438.8 million the previous year. All categories of noninterest income increased from the 1994 fourth quarter and annual levels.

For the year, mortgage banking noninterest income grew 13 percent and for the quarter grew 67 percent as a result of strong origination volume and growth from servicing. During the fourth quarter of 1995, First Tennessee's mortgage banking entities originated $2.3 billion compared with $1.2 billion in the fourth quarter of 1994. Originations in 1995 were $7.2 billion compared with $7.0 billion in 1994. At Dec. 31, 1995, the servicing portfolio was $16.7 billion, an increase of 17 percent from $14.2 billion at Dec. 31, 1994.

Noninterest income in the bond division grew 7 percent for the year, reflecting increased volumes over the previous year due to an expanded customer base. Other annual increases in noninterest income included: 18 percent from cardholder and merchant processing, two separate divisions related to the credit card business; 23 percent from trust services and 11 percent from deposit transactions and cash management, both of which benefited from an accounting change during the year from cash to accrual basis.

In the fourth quarter, the bond division increased noninterest income 56 percent, as customer demand improved from the fourth quarter of 1994. Noninterest income in cardholder and merchant processing increased 9 percent, in trust services increased 4 percent, and in deposit transactions and cash management increased 7 percent from fourth quarter 1994.

Net Interest Income

For the year, net interest income, on a taxable equivalent basis, was $395.7 million, which was relatively flat from 1994. The 7 percent annual increase in average earning assets, net of unearned income, was composed of a 12 percent increase in average loans, net of unearned income, and a 4 percent decrease in investment securities.

The growth in earning assets was supported by an increase in average interest-bearing core deposits of 6 percent. For the year, the net interest margin was 3.92 percent, a 33 basis point decrease from the previous year. "The net interest margin experienced compression in 1995 as the bank's short-term position was unfavorably impacted by the sharp rise in short-term rates at the end of 1994," said Horn. "Through management actions over the past year and the maturity of several asset positions, the net interest margin should continue to improve in 1996."

For the fourth quarter, net interest income, on a taxable equivalent basis, was $105.8 million and the net interest margin was 4.00 percent. This compares with net interest income of $96.8 million and net interest margin of 4.04 percent for the same period in 1994. The quarterly growth of 10 percent in earning assets included commercial loan growth of 13 percent, consumer loan growth of 12 percent, and mortgage warehouse growth of 67 percent. This growth was supported by a decline in the investment portfolio of 8 percent and an increase in interest-bearing core deposits of 7 percent.

Noninterest Operating Expense

Total noninterest operating expenses decreased 2 percent from 1994. Employee compensation, incentives and benefits, the largest component of noninterest operating expense, decreased 3 percent from 1994.

For the fourth quarter of 1995, noninterest expenses were up 14 percent, with a 14 percent increase in employee compensation, incentives and benefits, as a higher level of commissions were paid resulting from higher commission-based revenue in mortgage banking and the bond division.

Income Taxes

The effective tax rate increased from 29.2 percent for 1994 to 34.8 percent for 1995, primarily due to a $7.7 million tax reduction during 1994 for the elimination of a deferred tax valuation allowance related to the acquisition of SNMC Management Corporation, parent company of Sunbelt National Mortgage Company, and $2.9 million related to the establishment of a charitable foundation. Without these items, the 1994 effective tax rate would have been 34.3 percent.

Asset Quality

Total nonperforming assets were down 17 percent for the year, with the ratio of nonperforming assets to loans improving to .39 percent compared with .54 percent in 1994. The loan loss provision and net charge-offs for the year have increased slightly reflecting the strong loan growth experienced in 1995. In addition, this loan growth has reduced the ratio of allowance for loan losses to total loans from 1.57 percent at Dec. 31, 1994, to 1.39 percent at Dec. 31, 1995. The ratio of net charge-offs to total loans was .27 percent at both Dec. 31, 1995, and 1994.

General

First Tennessee, one of the 60 largest bank holding companies in the United States, had total assets of $12.1 billion and shareholders' equity of $873.2 million at Dec. 31, 1995. The corporation's common stock is traded over-the-counter on the NASDAQ Stock Market's national market system under the symbol FTEN. -0-

                       FIRST TENNESSEE NATIONAL CORPORATION
                             FINANCIAL HIGHLIGHTS
                                  (Unaudited)

                        Three Months Ended     Twelve Months Ended
                           December 31             December 31
                         1995        1994        1995        1994
Average Balance Sheet
(thousands)
Loans, net of unearned
 income:
 Commercial          $ 3,297,266 $ 2,910,173 $ 3,148,376 $ 2,775,708
 Consumer              2,502,047   2,225,943   2,367,133   2,082,651
 Credit card
  receivables            509,520     453,612     480,395     432,686
 Real estate
  construction           238,220     152,617     216,436     117,303
 Permanent mortgage      697,284     585,135     658,417     557,523
 Mortgage warehouse
  loans held for
  sale                   907,940     542,339     706,054     767,866
 Nonaccruing loans        17,480      17,012      16,461      18,553
 Total loans, net of
  unearned income      8,169,757   6,886,831   7,593,272   6,752,290
Investment securities  2,120,785   2,303,868   2,160,959   2,248,671
Other earning assets     259,533     372,335     340,427     405,251
Total earning assets  10,550,075   9,563,034  10,094,658   9,406,212
Cash and due from
 banks                   698,953     679,393     659,026     659,703
Other assets             743,980     496,304     605,785     513,932
Total assets         $11,993,008 $10,738,731 $11,359,469 $10,579,847

Interest-bearing
 deposits            $ 6,656,377 $ 6,126,408 $ 6,385,569 $ 5,971,719
Short-term
 borrowed funds        1,959,062   1,740,855   1,895,242   1,728,761
Term borrowings          240,082     111,393     208,943     101,800
Total interest-
 bearing
 liabilities           8,855,521   7,978,656   8,489,754   7,802,280
Demand deposits        1,878,354   1,762,461   1,746,808   1,742,758
Other liabilities        378,141     224,985     300,130     275,320
Shareholders'
 equity                  880,992     772,629     822,777     759,489
Total liabilities
 and shareholders'
 equity              $11,993,008 $10,738,731 $11,359,469 $10,579,847

Average shares
 outstanding          34,239,148  34,263,602  34,012,397  34,220,691

                                                   December 31
Period-End Balance Sheet (Thousands)             1995        1994
Loans, net of unearned income:
Commercial                                   $ 3,330,929 $ 2,991,231
Consumer                                       2,525,889   2,263,007
Credit card receivables                          529,104     475,489
Real estate construction                         238,863     160,368
Permanent mortgage                               689,458     591,094
Mortgage warehouse loans
 held for sale                                   789,183     515,407
Nonaccruing loans                                 19,040      16,853
Total loans, net of
 unearned income                               8,122,466   7,013,449
Investment securities                          2,111,399   2,170,915
Other earning assets                             249,752     425,689
Total earning assets                          10,483,617   9,610,053
Cash and due from banks                          710,870     724,828
Other assets                                     882,395     598,068
Total assets                                 $12,076,882 $10,932,949

Interest-bearing deposits                    $ 6,598,203 $ 6,146,970
Short-term borrowed funds                      1,760,745   1,810,039
Term borrowings                                  260,017     113,771
Total interest-bearing
 liabilities                                   8,618,965   8,070,780
Demand deposits                                1,983,994   1,733,336
Other liabilities                                600,699     353,928
Shareholders' equity                             873,224     774,905
Total liabilities and
 shareholders' equity                        $12,076,882 $10,932,949

Period-end shares
 outstanding                                  33,589,118  34,073,958

                        FINANCIAL HIGHLIGHTS
                            (Unaudited)

                       Three Months Ended     Twelve Months Ended
                          December 31             December 31
                        1995        1994        1995       1994
Summary Statements of Income (Thousands)
Interest income      $216,861     $185,649    $822,528   $701,058
Less interest
 expense              112,486       90,003     431,875    306,597
Net interest income   104,375       95,646     390,653    394,461
Provision for loan
 losses                 7,307        4,264      20,592     17,182
Net interest income
 after provision
 for loan losses       97,068       91,382     370,061    377,279
Noninterest income:
Mortgage banking       67,638       40,621     212,579    187,340
Bond division          21,452       13,719      82,814     77,478
Deposit transactions
 and cash management   17,657       16,569      70,957     64,169
Cardholder and merchant
 processing             9,599        8,783      36,984     31,402
Trust services          8,535        8,195      35,632     28,933
Securities gains
 (losses)               1,932       (2,627)      2,444     19,953
Other                  14,403       14,141      55,153     49,464
Total noninterest
 income               141,216       99,401     496,563    458,739
Adjusted gross income
 after provision for
 loan losses          238,284      190,783     866,624    836,018
Noninterest expense:
Employee compensation,
 incentives and
 benefits              92,658       81,021     340,508    349,769
Occupancy              10,814        8,849      37,867     34,102
Equipment rentals,
 depreciation and
 maintenance            8,619        8,032      31,845     29,202
Other                  57,106       50,017     203,447    215,183
Total noninterest
 expense              169,197      147,919     613,667    628,256
Income before income
 taxes                 69,087       42,864     252,957    207,762
Applicable income
 taxes                 23,389        9,950      88,069     60,694
Net income           $ 45,698     $ 32,914    $164,888   $147,068

Net interest income -
 FTE                 $105,842     $ 96,848    $395,667   $399,319

                         FINANCIAL HIGHLIGHTS
                             (Unaudited)

                               Three Months Ended  Twelve Months Ended
                                   December 31         December 31
                                 1995      1994      1995       1994
Per Share Data:
 Net income                      $1.34     $ .96     $4.85      $4.30
 Dividends declared                .53       .47      1.94       1.73
 Book value                      26.00     22.74     26.00      22.74
Selected Financial Ratios:
 Return on average assets         1.51%     1.22%     1.45%      1.39%
 Return on average equity        20.58     16.90     20.04      19.36
 Net interest margin              4.00      4.04      3.92       4.25

Asset Quality (Dollar amounts in thousands):

                               Three Months Ended   Twelve Months Ended
                                   December 31         December 31
                                 1995      1994      1995       1994
Net charge-offs:              $  7,226  $  4,583  $ 20,516   $ 18,043

                                                       December 31
                                                     1995       1994
Nonperforming assets:
 Nonaccrual loans                                 $ 18,737   $ 16,853
 Restructured loans                                    303        158
   Total nonperforming loans                        19,040     17,011
 Foreclosed real estate                             11,794     19,215
 Other assets                                        1,022      2,055
   Total nonperforming assets                     $ 31,856   $ 38,281
Nonperforming loans to total
 loans (net of unearned income)                        .23%       .24%
Nonperforming assets to total
 loans (net of unearned income)
 plus foreclosed real estate and
 other assets                                          .39%       .54%
Allowance for loan losses                         $112,567   $109,859
Allowance for loan losses to
 total loans                                          1.39%      1.57%
Allowance for loan losses to
 nonperforming loans                                591.21%    645.81%
Allowance for loan losses to
 nonperforming assets                               353.36%    286.98%
Non-government guaranteed past
 due loans                                        $ 21,942   $ 13,297
Government guaranteed past due
 loans                                            $ 11,331   $ 10,030

    During 1995, First Tennessee acquired Carl I. Brown and Company
and Community Bancshares, Inc.  These acquisitions were accounted
for as pooling of interests, and accordingly the financial position
and results of operations of these companies are reflected on a
combined basis from the earliest period presented.  First Tennessee
also acquired Peoples Commercial Services Corporation on
April 1, 1995 and Financial Investment Corporation on Oct. 1, 1995.
These acquisitions were accounted for as purchases and accordingly
the financial position and results of operations for these companies
are reflected on a combined basis from the date of acquisition.

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CONTACT: First Tennessee National Corporation, Memphis

Financial Information: Teresa Fehrman, 901/523-4161

Media Information: Kim Cherry, 901/523-4726

Investor Relations: Marty Mosby, 901/523-5620