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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                                          to                                              

Commission File Number: 0-6094

NATIONAL COMMERCE FINANCIAL CORPORATION

(Exact name of Registrant as specified in its charter)

One Commerce Square, Memphis, Tennessee 38150

(Address of principal executive offices)

Registrant’s telephone number, including area code (901) 523-3434

Former Name of Registrant: National Commerce Bancorporation

Securities issued pursuant to Section 12(b) of the Act:

None

Securities issued pursuant to Section 12(g) of the Act:

Common Stock, $2 par value

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.

x Yes    ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 20, 2003 was $4,688,766,333. On February 20, 2003, there were 205,649,197 outstanding shares of the Registrant’s $2.00 par value Common Stock.

DOCUMENT INCORPORATED BY REFERENCE

Portions of the Proxy Statement of Registrant for the Annual Meeting of Shareholders to be held on April 23, 2003, which Proxy Statement has been filed contemporaneously herewith, are incorporated in Part III of this report.

CROSS REFERENCE INDEX

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Item 1.    BUSINESS

REGISTRANT

National Commerce Financial Corporation (“NCF”) is a registered bank holding company headquartered in Memphis, Tennessee. We provide banking and other financial services through our banking and non-banking subsidiaries. We are the surviving corporation from the July 2000 merger of National Commerce Bancorporation with the former CCB Financial Corporation (“CCBF”), an $8.8 billion bank holding company at the time of the merger headquartered in Durham, North Carolina. At December 31, 2002, we had consolidated assets of approximately $21.5 billion.

Our primary banking subsidiary is National Bank of Commerce (“NBC”). NBC is a nationally chartered bank headquartered in Memphis, Tennessee with its operations headquarters in Durham, North Carolina. In North and South Carolina, NBC operates under the name Central Carolina Bank (“CCB”). NBC offers commercial and retail banking, savings and trust services through 266 CCB offices located in North Carolina and South Carolina and 183 NBC offices located in Tennessee, Mississippi, Arkansas, Georgia, Virginia and West Virginia. In addition, NBC offers trust services through a subsidiary located in Florida. NBC had approximately $21.3 billion in assets at December 31, 2002. NBC provides a full range of financial products including demand and time deposits; secured and unsecured commercial and consumer loans; safe deposit boxes; trust services for corporations, employee benefit plans and individuals; and certain insurance and securities brokerage services. We own all of the outstanding shares of NBC Bank, FSB, a $26 million federal savings bank that operates two branches in DeSoto County, Mississippi. We also own a 49 percent interest in First Market Bank, FSB (“First Market”). First Market operates 28 branch offices in the Richmond, Virginia area. Additionally, we own all of the outstanding common stock of numerous non-bank subsidiaries that provide a variety of financial services. The principal assets of NCF are all of the outstanding shares of common stock of its subsidiaries. NCF’s principal sources of revenue are the interest income and dividends it receives from its banking subsidiaries. Additional information relating to National Commerce Financial Corporation only is set forth in Note 18 to the Consolidated Financial Statements.

In February 2002, NBC acquired 37 former Wachovia and First Union branches from Wachovia Bank, N.A. and First Union National Bank. In the transaction, NBC acquired loans of approximately $450 million, investment securities of approximately $1 billion and deposits of approximately $1.4 billion. In December 2002, NCF acquired BancMortgage Financial Corp. (“BancMortgage”), an Atlanta-based mortgage originator. BancMortgage is a subsidiary of NBC. Additional information on the acquisitions is set forth in Note 2 to the Consolidated Financial Statements.

We operate our non-bank businesses through six wholly owned non-bank subsidiaries: TransPlatinum Service Corp. (“TransPlatinum”), Commerce Capital Management, Inc., USI Alliance, First Mercantile Trust, First Mercantile Capital Management (“First Mercantile Capital”), and Senior Housing Crime Prevention Foundation Investment Corporation. TransPlatinum and its two wholly owned subsidiaries provide financial services to the trucking and petroleum industries and bankcard services to merchants. TransPlatinum’s subsidiary Fleet One, LLC, provides fuel cards and related transportation services and subsidiary Prime Financial Services, Inc. is a receivables financing company. Commerce Capital Management, Inc. is an investment advisor registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisor’s Act of 1940. USI Alliance and Senior Housing Crime Prevention Foundation Investment Corporation are providers of security programs for the long-term care industry. First Mercantile Trust provides processing and other services for retirement plans. First Mercantile Capital provides professional money management services for employee benefit plans.

NBC has 16 wholly owned non-bank subsidiaries, including: National Commerce Bank Services, Inc. (“NCBS”) a provider of retail banking consulting services to other financial institutions; Salem Trust Company, a provider of institutional trust services in Florida; BancMortgage, a mortgage originator; and NCF Financial Services, Inc., a registered broker/dealer providing retail brokerage services. Additionally, NBC owns 80 percent of NBC Capital Markets Group, Inc. (“Capital Markets”), a registered broker/dealer providing retail and institutional brokerage services.

BUSINESS SEGMENTS

Management views our business as consisting of two business segments, traditional banking and financial enterprises. The traditional banking segment includes sales and distribution of financial products and services to individuals. These products and services include loan products such as residential mortgage, home equity lending, automobile and other personal financing needs. Traditional banking also offers various deposit products that are designed to meet the saving and transaction needs of our customers. Our traditional banking segment also provides lending and related financial services to small- and medium-sized corporations. Included among these services are several specialty services such as real estate finance, asset-based lending and residential construction lending. Our banks also manage investment portfolios and provide non-deposit based funding. The financial enterprises

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segment is comprised of trust services and investment management, transaction processing, retail banking consulting/in-store licensing and broker/dealer activities. See Note 19 to the Consolidated Financial Statements for segment information.

COMPETITION

We face vigorous competition in all our major geographic markets and across all products that we offer. Our banks compete with other major commercial banks, diversified financial institutions such as thrift institutions, money market and other mutual funds, securities firms, mortgage companies, leasing companies, finance companies and a variety of financial services and advisory companies. Competitors are not limited to companies located in our immediate geographic markets, as an increased variety of financial services are being offered on the Internet. Larger competing financial institutions may be able to offer services and products that are not cost-efficient for us to offer. Moreover, larger competitors have access to greater financial resources that allow higher lending limits than our banks can offer.

The Gramm-Leach-Bliley Financial Modernization Act (the “Modernization Act”) enacted in 1999 permits bank holding companies to become financial holding companies (“FHC”) that may engage in a substantially broader range of nonbanking activities than was permissible prior to enactment. A bank holding company may become a FHC if it meets management, capital and Community Reinvestment Act (“CRA”) standards. We have not applied to become a FHC but may elect to do so in the future.

No prior regulatory approval is required for a FHC to acquire a company, other than a bank or savings association, engaged in activities that are “financial in nature” which are expressly permitted under the Modernization Act. Activities cited by the Modernization Act as being “financial in nature” include: securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking.

A national bank may also engage, subject to limitations, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment. A national bank may engage in these activities through a financial subsidiary or through the bank, if the bank meets management, capital and CRA standards. In addition, a FHC or a national bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the FHC or the bank has at least a satisfactory CRA rating.

The Modernization Act allows insurers and other financial services companies to acquire banks, removes various restrictions that applied to bank holding companies ownership of securities firms and mutual fund advisory companies and establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations. The Modernization Act also modifies laws related to financial privacy and community reinvestment.

The Modernization Act will change our competitive environment in substantial and unpredictable ways. We cannot accurately predict the ultimate effect that this legislation, or implementing regulations, will have upon our financial condition, results of operations or future prospects.

INTERSTATE BANKING AND BRANCHING

Federal law permits bank holding companies to acquire banks and bank holding companies located in any state, subject to certain concentration limits and other requirements. Any subsidiary bank of a bank holding company may receive deposits, renew time deposits, make loans, service loans and receive loan payments as an agent for any other bank subsidiary, wherever located, of that bank holding company. Banks may acquire branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states or establishing de novo branch offices in other states. The ability of banks to acquire branch offices through purchase or opening of other branches is contingent, however, on the host state having adopted legislation “opting in” to those applicable provisions of federal law. In addition, the ability of a bank to merge with a bank located in another state is contingent on the host state not having adopted legislation “opting out” of those applicable provisions of federal law.

SUPERVISION AND REGULATION

Bank holding companies and their subsidiaries are subject to extensive federal and state regulation. This regulatory framework is intended primarily to protect depositors and the federal deposit insurance funds and not security holders or other owners of the institutions. The following is a summary of regulations and statutes that affect us. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to those provisions. A change in the statutes, regulations or regulatory policies applicable to us may have a material effect on our businesses.

Bank Holding Company Regulation

As a bank holding company, NCF is subject to regulation under the Bank Holding Company Act (“BHCA”), and to inspection, examination and supervision by the Federal Reserve Board. Under the BHCA, bank holding companies generally may

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not acquire the ownership or control of more than 5 percent of the voting shares, or substantially all the assets, of any company, including a bank or another bank holding company, without the Federal Reserve Board’s prior approval. Generally, a bank holding company may engage only in banking and other activities that are determined by the Federal Reserve Board to be closely related or incidental to banking unless it has elected to become a FHC whereby it is subject to different requirements, as previously discussed.

There are a number of obligations and restrictions imposed by law on a bank holding company. These safety and soundness measures are designed to minimize potential loss to depositors and the Federal Deposit Insurance Corporation (“FDIC”) insurance funds. For example, if an insured banking subsidiary becomes “undercapitalized”, the parent bank holding company is required to guarantee (subject to certain limits) the subsidiary’s compliance with the terms of any capital restoration plan filed with the federal banking agency that is its primary regulator. Also, a bank holding company is required to serve as a source of financial strength to its banking subsidiaries and to commit resources to support such institutions in circumstances where it might not do so absent such policy. Under the BHCA, the Federal Reserve Board has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary upon the Federal Reserve Board’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of a banking subsidiary of the bank holding company.

Bank holding companies are required to comply with the Federal Reserve Board’s risk-based capital guidelines which require a minimum ratio of total capital to risk-weighted assets of 8 percent. At least half of the total capital is required to be Tier 1 capital. In addition to the risk-based capital guidelines, the Federal Reserve Board has adopted a minimum leverage capital ratio under which a bank holding company must maintain a level of Tier 1 capital to average total consolidated assets of at least 3 percent in the case of a bank holding company which has the highest regulatory examination rating and is not contemplating significant growth or expansion. All other bank holding companies are expected to maintain a leverage capital ratio of at least 1 percent to 2 percent above the stated minimum.

Regulation of Banking Subsidiaries

NBC is a national bank chartered under the National Banking Act and, as such, is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (the “OCC”) and, secondarily, by the FDIC and the Federal Reserve Board. NBC Bank, FSB and First Market Bank, FSB are federal savings banks primarily regulated by the Office of Thrift Supervision (the “OTS”). We have other direct and indirect subsidiaries that are subject to various other laws, regulations, supervision and examination by other state and federal regulatory agencies such as the National Association of Securities Dealers (“NASD”) and SEC. These include the regulation, examination and supervision of our subsidiaries and affiliates engaged in broker/dealer activities, investment advisory activities and insurance activities.

Almost every aspect of the operations and financial condition of our subsidiary and affiliated banks are subject to extensive regulation and supervision and to various requirements and restrictions under federal and state law. These include requirements governing capital adequacy, liquidity, earnings, dividends, reserves against deposits, management practices, branching, loans, investments and provision of services. The federal banking agencies have broad enforcement powers over our subsidiary and affiliated banks. These agencies have the power to terminate deposit insurance, to impose substantial fines and other civil and criminal penalties, and to appoint a conservator or receiver if any of a number of conditions are met.

Insurance Assessment

The deposits of our subsidiary and affiliated banks are insured up to regulatory limits by the FDIC. A majority of these deposits are subject to the deposit insurance assessments of the Bank Insurance Fund (“BIF”) of the FDIC. However, a portion of these deposits (relating to the acquisitions of various savings associations) are subject to assessments imposed by the Savings Association Insurance Fund (“SAIF”) of the FDIC.

The FDIC has adopted regulations establishing a permanent risk-related deposit insurance assessment system. Under this system, the FDIC places each insured bank in one of nine risk categories based on the bank’s capitalization and supervisory evaluations provided to the FDIC by the institution’s primary federal regulator. Each insured bank’s insurance assessment rate is then determined by the risk category in which the FDIC classifies it.

The FDIC equalized the assessment rates for BIF-insured and SAIF-insured deposits effective January 1, 1998. The assessments imposed on all FDIC deposits for deposit insurance have an effective rate ranging from 0 to 27 basis points per $100 of insured deposits, depending on the institution’s capital position and other supervisory factors. Legislation was enacted in 1997 requiring both SAIF-insured and BIF-insured deposits to pay a pro rata portion of the interest due on the debt obligations issued by the Financing Corporation (“FICO”).

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Fiscal and Monetary Policy

Banking is a business which depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loan and securities holdings, constitutes the major portion of its earnings. Thus, our earnings and growth are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The Federal Reserve Board regulates the supply of money through various means, including open market dealings in United States government securities, setting the discount rate at which banks may borrow from the Federal Reserve Board, and setting the reserve requirements on deposits. The nature and timing of any changes in such policies and their effect on NCF and its subsidiaries cannot be predicted.

Securities and Exchange Commission Availability of Filings on Company Web Site

Under the Securities Exchange Act of 1934 Sections 13 and 15(d), periodic and current reports must be filed with the SEC. We electronically file reports with the SEC, including Form 10-K (Annual Report), Form 10-Q (Quarterly Report), Form 8-K (Report of Unscheduled Material Events) and Form DEF 14A (Proxy Statement). We may file additional forms as circumstances warrant. The SEC maintains an Internet site, www.sec.gov, in which all forms filed electronically may be accessed. We make available on our corporate website, www.ncfcorp.com, our filings with the SEC, including all amendments to those filings, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

EXECUTIVE OFFICERS OF THE REGISTRANT

All of our executive officers are elected or appointed by our board of directors to hold their offices at the pleasure of the board, subject to the terms of employment agreements that are filed or incorporated as Exhibits to this Annual Report. At February 28, 2003, our executive officers were as follows:

These officers have served as our executive officers for more than five years except for the following:

Mr. Roessler served as Chairman of the Board, President and Chief Executive Officer of CCBF prior to July 2000;

Mr. Fox served as Executive Vice President and Chief Financial Officer of CCBF prior to July 2000. Prior to October 1998, he was a Partner with KPMG LLP;

Messrs. Edwards and Furr served as Senior Executive Vice Presidents of CCBF prior to July 2000; and

Mr. Popwell was elected Executive Vice President of NCF in August 1998. Prior to that time, he was an attorney with Baker, Donelson, Bearman and Caldwell for more than five years.

EMPLOYEE RELATIONS

As of December 31, 2002, NCF and its subsidiaries employed 5,490 full-time equivalent employees. NCF and its subsidiaries are not parties to any collective bargaining agreements and employee relations are considered to be good.

Item 2.    PROPERTIES

Our principal executive offices are located in leased space at One Commerce Square, Memphis, Tennessee. NBC’s Customer Service Center is a leased building located in Durham, North Carolina. Our subsidiary banks operate 451 banking offices, approximately 227 of which are either leased buildings or leased property on which banking offices have been constructed. Our subsidiary banks have 506 ATM locations in operation. In addition, First Market operates 28 banking offices and 48 ATM locations.

Item 3.    LEGAL PROCEEDINGS

Certain legal claims have arisen in the normal course of business in which NCF and certain of its bank subsidiaries have been named as defendants. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management and counsel, any such liability will have no material effect on NCF’s financial position or results of operations.

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In addition to legal actions in the normal courses of business, on December 10, 2002, the Corky’s Bar-B-Que retirement plan, through its co-trustees, on behalf of itself and its plan participants and on behalf of all similarly situated retirement plans and their plan participants, filed a putative class action lawsuit against First Mercantile and NBC, First Mercantile Capital and First Mercantile directors and officers Kenneth Lenoir and Scot Lenoir. Corky’s has withdrawn as a named plaintiff and an amended complaint has been filed adding two other named plaintiffs and NCF as a defendant. The suit alleges that the Lenoirs, First Mercantile and First Mercantile Capital violated ERISA, the Investment Advisers Act, and conducted an enterprise under RICO, by disclosing one fee for retirement plan administration and investment services but actually collecting a different, higher fee for those services. The suit also alleges that we and NBC violated ERISA by transferring plans from NBC to First Mercantile for administration and investment services, conspired with the other defendants and facilitated the RICO enterprise, and exercised dominion and control over First Mercantile justifying imputation of First Mercantile’s conduct to us and NBC. The plaintiffs seek certification of a class allegedly consisting of 2,300 plans with over 100,000 plan participants and beneficiaries, rescission of all contracts between First Mercantile and putative class members, restoration to putative class members of all funds placed with First Mercantile, disgorgement of all fees paid, prejudgment and post-judgment interest, attorneys’ fees and costs. The plaintiffs also seek a declaration that a mid-October, 2002, agreement between First Mercantile and a significant number of retirement plans regarding the fee issue is null and void. We obtained the mid-October 2002 agreement from affected customers after we determined that certain client information and agreements were out of date and that some lacked documentation with reference to trustee’s fees being collected for services rendered to the customers and plans. The amended complaint alleges an unspecified amount of compensatory damages and also seeks any damages to be tripled under RICO. The defendants have vigorously defended this suit to date and will continue doing so. The amount of damages awarded, if any, which could result if the plaintiffs were to prevail in their suit cannot be determined as no hearings have occurred with respect to the appropriateness of class certification. No liability was recorded in the financial statements at December 31, 2002.

Additionally, a thrift institution acquired by CCB Financial Corporation and subsequently merged into CCB filed a claim against the United States of America in the Court of Federal Claims in 1995. The complaint seeks compensation for exclusion of supervisory goodwill from the calculation of regulatory capital requirements as a result of enactment of the Financial Institution Reform, Recovery and Enforcement Act of 1989 (“FIRREA”). During the 1980’s, in order to induce healthy thrift institutions to buy troubled thrifts, regulatory agencies allowed the thrifts to count supervisory goodwill as regulatory capital on their balance sheets and amortize the purchase over several decades. Supervisory goodwill represented the difference between the purchase price and the actual value of an insolvent thrift’s tangible assets. However, when the FIRREA legislation was enacted in 1989, the acquiring thrifts were required to write-off their supervisory goodwill more rapidly, effectively wiping out a significant part of their regulatory capital. Over 100 lawsuits have been filed by the acquiring thrifts seeking compensation from the United States for the losses suffered from capital restrictions. The thrift institution’s supervisory goodwill arose from acquisitions in 1982. NCF is vigorously pursuing this litigation. The amount of recovery, if any, which could result if NCF were to prevail in its suit cannot be determined at this time. Legal expenses incurred in pursuit of the claim have not been significant.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There has been no submission of matters to a vote of stockholders during the quarter ended December 31, 2002.

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PART II.

Item 5.    MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our stock is traded on the New York Stock Exchange under the symbol NCF. The stock prices listed in the table below represent the high, low and closing sales prices and cash dividends declared per share for the indicated periods. As of December 31, 2002, we had 12,875 shareholders of record. On January 14, 2003, we declared a dividend of $.17 per share for payment on April 1, 2003 to shareholders of record as of March 7, 2003. See “Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of other shareholder matters.

Item 6.    SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with our Consolidated Financial Statements and the accompanying notes presented elsewhere herein. Results of operations from all entities acquired through business combinations accounted for as purchases are included in the consolidated results of operations from the date of acquisition. NCF adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. The CCB merger significantly impacts the selected financial data presented below as average balances and earnings from the net assets acquired are not included for the full years 1998 and 1999 and approximately one-half of 2000.

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Five Year Summary of Selected Financial Data

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a registered bank holding company headquartered in Memphis, Tennessee. We provide banking and other financial services through our banking and non-banking subsidiaries. We are the surviving corporation from the July 2000 merger of National Commerce Bancorporation with CCBF. Our banking subsidiaries are NBC and NBC Bank, FSB. In North and South Carolina, NBC operates under the name of Central Carolina Bank. We also are a 49% owner of First Market. First Market operates 28 branch offices in the Richmond, Virginia area. Additionally, we own all of the outstanding common stock of numerous non-bank subsidiaries that provide a variety of financial services. In February 2002, we acquired 37 former Wachovia and First Union branches from Wachovia Bank, N.A. and First Union National Bank. In the transaction, NBC acquired loans of approximately $450 million, investment securities of approximately $1 billion and deposits of approximately $1.4 billion. In December 2002, we acquired BancMortgage, an Atlanta-based mortgage originator. BancMortgage is a subsidiary of NBC. Additional information on the acquisitions is set forth in Note 2 to the Consolidated Financial Statements.

The following discussion contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things. Words such as “expects,” “plans,” “estimates,” “projects,” “objectives” and “goals” and similar expressions are intended to identify these forward-looking statements. We caution readers that such forward-looking statements are necessarily estimates based on management’s judgment, and obtaining the estimated results is subject to a number of risks and uncertainties. Such risks are discussed below. This discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this report.

Risk Factors

The following risks are those we believe to pose the greatest risk to our financial condition, operations and prospects:

Fluctuations in Interest Rates Could Adversely Affect Our Net Interest Income

A major element of our net income is our net interest income, which consists largely of the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We cannot predict fluctuations of market interest rates, which are affected by, among other things, changes in inflation rates, levels of business activity, unemployment levels, monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board, money supply and domestic and foreign financial markets. Rapid changes in interest rates could have a material adverse effect on our funding costs and our net interest income and, consequently, our earnings per share.

Competition With Other Providers of Financial Services Could Adversely Affect Our Profitability

Our markets are intensely competitive. Competition in loan and deposit pricing, as well as the entry of new competitors in our markets through, among other means, de novo expansion and acquisitions could have a material adverse effect on our operations in our existing markets. Moreover, we have expanded our operations into new markets, such as Atlanta, and will continue to look for additional expansion opportunities, in each case facing substantial competition from financial institutions with better established infrastructure and presence in those markets. Competition could have a material adverse effect on our net interest margin, our ability to recruit and retain associates in new and existing markets, our noninterest income and our ability to grow our banking and non-banking businesses at the same rate as we have historically grown. Moreover, the Modernization Act has removed many obstacles to bank holding companies entering other financial services businesses. Several larger bank holding companies could enter the transaction processing, asset management, securities brokerage and capital markets businesses in our markets, deploying capital resources that are significantly greater than ours. Such activities could adversely affect our banking and non-banking businesses and have a material adverse effect on our earnings.

The Weak United States Economy and Prospects for War and Additional Terrorism Could Adversely Affect Our Growth Rate

The economy in the United States continues to be sluggish and there is significant uncertainty about the economic future. Various domestic or international military or terrorist activities or conflicts could further impact the domestic and international economy. If the recovery of the domestic economy continues to lag, we could experience a decline in credit quality, resulting in higher charge-offs and higher provisions for loan losses which would have a material adverse effect on our earnings. In addition, we could have a decline in loan demand, our largest source of revenue.

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We are Subject to Significant Government Regulation Over Which We Have No Control

We are subject to regulation by federal banking agencies and authorities and the SEC. Changes in or new regulations could make it more costly for us to do business or could force changes to the way we do business, either of which could have a material adverse effect on earnings. The Parent Company relies on dividends from its subsidiaries as a primary source of funds to pay dividends to shareholders, cover debt obligations and for other corporate purposes. Federal banking law restricts the ability of our banking subsidiaries to pay dividends to the Parent Company. Although we expect to continue receiving dividends from our banking subsidiaries sufficient to meet our current and anticipated cash needs, a decline in their profitability could result in restrictions on the payment of future dividends to the Parent Company.

We Could Be Adversely Affected By Certain Pending Litigation

We currently are defending litigation, including the purported class action against First Mercantile, NBC and NCF. The defense of such litigation could be costly, and we or our subsidiaries could be held liable to the purported class of plaintiffs. Moreover, management could decide to settle the litigation if it believes settlement to be in the best interests of shareholders. The costs of defense and/or settlement and any judgment which might be rendered could have a material adverse effect on our results of operations.

A variety of factors, including those described above, could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in this report. We do not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States (“GAAP”) which require that we make estimates and assumptions (see Note 1 to the Consolidated Financial Statements) that affect the amounts reported in those financial statements. We believe that determination of the level of the allowance for loan losses involves a higher degree of judgment and complexity than our other significant accounting policies. The allowance for loan losses is maintained at a level we consider adequate to provide for estimated probable losses inherent in the loan portfolio and is increased though a provision for loan losses charged against earnings. The allowance is comprised of specific loan allocations, allocations for nonaccrual and classified loans and general allocations by loan type. The allowance is a significant estimate and we regularly evaluate it for adequacy. The use of different estimates or assumptions could produce different levels of allowance and provisions for loan losses. Additionally, an extended economic downturn could result in additional provisions to the allowance for loan losses. See “Allowance for Loan Losses” for additional discussion of our methodology for determining the adequacy of the allowance for loan losses.

Determining the fair value of assets, including the impairment of intangibles, is another area that involves a high degree of judgment and complexity. Certain assets, such as loans held for sale, are accounted for at the lower of cost or fair value. Some of these assets do not have readily available market quotations and require estimation of their fair value. We make these estimates based on valuation principles that may include discounting estimated future cash flows, utilizing standard valuation indices and/or comparing instruments to comparable publicly traded instruments for which market quotations are readily available. Additionally, certain recorded assets, such as goodwill and core deposit intangibles, are subject to impairment. As of December 31, 2002, we have unamortized goodwill totaling $1.1 billion and core deposit intangibles totaling $237 million. GAAP requires that applicable intangible assets be evaluated for impairment at least annually. Goodwill was evaluated as of January 1, 2002 and found not to be impaired. Factors that could affect our estimation of intangible assets include deterioration or sales of branches that resulted in intangible asset recognition, adverse regulatory action, increased competition or faster than anticipated run-off of acquired deposits.

Acquisitions

In December 2002, NCF acquired BancMortgage, a mortgage origination company headquartered in Atlanta. This transaction resulted in the issuance of 611,000 shares of our common stock and was accounted for as a purchase. The future financial performance of BancMortgage may result in contingent payments as described in Note 2 to the Consolidated Financial Statements. In February 2002, NBC acquired 37 former Wachovia and First Union branches. In the transaction, NBC acquired loans of approximately $450 million and deposits of approximately $1.4 billion. Results of operations of the acquisitions have been included in our consolidated statements of income from the respective dates of acquisition.

In November 2001, we acquired SouthBanc Shares, Inc., a $660 million South Carolina financial institution with 10 branch offices. Also in August 2001, NCF acquired First Vantage Bank-Tennessee, a $165 million financial institution located in Knoxville, Tennessee. Both transactions were accounted for as purchases. Results of operations of these acquired companies have been included in NCF’s consolidated statements of income from the dates of acquisition.

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In a March 2000 transaction, TransPlatinum acquired Prime Financial Services, Inc., a receivables financing company serving the transportation industry. In addition to the CCB Financial Corporation merger, we acquired Piedmont Bancorp, Inc., a $151 million bank holding company headquartered in Hillsborough, North Carolina in April 2000. We acquired First Mercantile and First Mercantile Capital in July 2000. These transactions (“the 2000 acquisitions”) resulted in the issuance of 97 million shares of our common stock. Each of these transactions has been accounted for as a purchase, and, accordingly, results of operations of the acquired companies have been included in the consolidated statements of income from the date of purchase.

See Note 2 to the Consolidated Financial Statements for additional information on our acquisitions.

In addition to the 2002 acquisitions, we completed the first phase of our expansion into the Atlanta market. Through our alliance with Kroger, we opened 18 new in-store branches. During October 2002, we announced plans which will expedite the expansion of our banking presence in the Atlanta metropolitan area by entering into an agreement to purchase 15 traditional branch facilities from Wachovia and assume Wachovia’s lease obligations for seven additional branch buildings. These 22 branches complement our existing and planned in-store branches and will give us the fifth largest branch presence in the Atlanta Metropolitan Statistical Area (“MSA”) by the end of 2003 with approximately 60 branches opened or under development. This agreement with Wachovia is expected to close in the first quarter of 2003. Under the terms of the agreement, we are not permitted to commence operations in these branches until the fourth quarter of 2003. We are focusing our efforts on capturing a five percent share of Atlanta’s $62 billion deposit market within five years. The expansion to Atlanta solidifies our geographic footprint, linking Tennessee and the north Georgia regions with the westernmost edge of our North and South Carolina operations.

Results of Operations

Performance Overview

Despite a challenging economy, our 2002 results exceeded 2001’s due to our focus on revenue growth and expense control while expanding our franchise through acquisitions and de novo expansion in Atlanta. Net income in 2002 totaled $324 million, a 43.6 percent increase over 2001’s $225 million. Basic and diluted earnings per share were $1.57 and $1.55, respectively, compared to 2001’s $1.10 and $1.09. Returns on average assets were 1.59 percent in 2002 and 1.26 percent in 2001. Returns on average stockholders’ equity were 12.60 percent and 9.32 percent, respectively, for the years ended 2002 and 2001.

The comparability of our results of operations during the three-year period ended December 31, 2002 was significantly impacted by the CCB merger in July 2000 as only six months of its operations are included in our 2000 income but a full year of earnings are included in subsequent years. Comparisons between the years are also impacted by significant merger costs and other non-recurring expenses recorded in 2000, as discussed below. Net income in 2000 totaled $45 million which equated to $.28 per diluted share in 2000. Returns on average assets and average stockholders’ equity in 2000 were .37 percent and 2.98 percent, respectively.

Items identified as non-recurring were comprised of:

Merger Expense.    During 2002, we recognized $5 million of merger-related expense related primarily to the acquisition of the Wachovia branches. In 2001, we recognized $11 million of merger-related expense in connection with the acquisitions of two financial institutions and the Wachovia branches. In 2000, we incurred $71 million of merger-related expense in connection with the CCBF merger and the acquisitions of Piedmont and First Mercantile, which expense included severance and other employee benefit costs, excess facilities costs and system conversion costs.

Unrealized losses on Interest Rate Swaps.    In 2000, we recognized $77 million of unrealized losses on interest rate swaps that did not qualify for hedge accounting under Statement No. 133. We entered into the swaps in the first half of the year during a rising interest rate environment. By entering into these contracts, we reduced our interest rate sensitivity to wholesale funding. When the rate environment changed in the latter half of 2000, we incurred losses on the swaps which were recognized as a charge to earnings. The swaps were terminated in the first quarter of 2001.

Goodwill Amortization.    As further discussed under the heading “Other Accounting Matters,” effective January 1, 2002 we adopted Statement No. 142, “Goodwill and Other Intangible Assets.” As a result, goodwill associated with corporate acquisitions will no longer be amortized, but rather will be tested for impairment no less frequently than annually. Goodwill amortization totaled $48 million in 2001 or $.23 per diluted share. Core deposit intangibles recorded in acquisitions will continue to be amortized over the estimated remaining life of the deposit base assumed. See Note 10 to the Consolidated Financial Statements for additional details on NCF’s intangible assets.

Operating Cash Earnings

We have made several acquisitions during the periods presented, the most significant of which was the July 2000 CCBF merger. Due to the significance of the intangible assets created from this merger and the merger-related expenses of combining the two

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equal-sized companies, management believes that operating cash earnings are an important measure in reviewing our performance as it better illustrates operating trends in our core businesses. In addition, we have incurred certain other non-recurring expenses as described in Table 1 below. We monitor and evaluate our performance on both a GAAP net income as well as on an operating cash basis. Operating cash earnings should not be viewed as a substitute for GAAP net income and earnings per share. Intangibles amortization and non-recurring items excluded from net income to derive operating cash earnings may be significant and may not be comparable to other companies. See Note 2 to the Consolidated Financial Statements for additional information on the merger-related expense.

Excluding the non-recurring items and amortization of intangibles, our 2002 diluted operating cash earnings per share totaled $1.78 compared to 2001’s $1.53 and operating cash returns on average tangible assets and average tangible equity were 1.94 percent and 29.62 percent, respectively, compared to 2001’s 1.89 percent and 25.66 percent. Table 1 reconciles “operating cash earnings” to our reported GAAP net income for the prior five years and their effect on earnings and diluted earnings per share. Table 1 also provides a summary of period-end and average tangible assets and tangible equity.

T A B L E   1

Operating Cash Earnings

Net Interest Income

Net interest income is one of the major determining factors in a financial institution’s performance as it is generally the principal source of earnings. Volume, yield/cost and relative mix of both earning assets and interest-bearing and noninterest-bearing sources of funds impact net interest income. The difference between earning asset yields (with a taxable equivalent adjustment made to provide comparability between tax-exempt and taxable income) and the average rate paid for interest-bearing funds is measured by the interest rate spread and net interest margin.

To combat recession fears and slowdowns in the economy, the Federal Reserve decreased the target federal funds rate during 2001 and 2002. During 2001, the Federal Reserve decreased the target federal funds rate eleven times by a total of 475 basis points. In November 2002, the Federal Reserve reduced the target federal funds rate by an additional 50 basis points. Each time

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the Federal Reserve decreased the target federal funds rate, our banking subsidiaries lowered their prime lending rate to keep pace with the changes in funding costs. The prime rates charged by our banking subsidiaries have fallen from 9.50 percent at December 31, 2000 to 4.75 percent by December 31, 2001 and to 4.25 percent at December 31, 2002. Our yield on interest-earning assets has fallen due to these interest rate changes. The rates paid on our interest-bearing liabilities correspondingly have decreased when repriced. Until mid-2002, our balance sheet had historically been liability sensitive and in times of falling interest rates, the decrease in interest expense from the lower cost of interest-bearing liabilities exceeded the decrease in interest income from the lower yield on earning assets. Consequently, our interest rate spread widened to 3.96 percent in 2002 compared to 2001’s 3.82 percent. Historically, the Federal Reserve has not increased interest rates until the national unemployment rate is on a sustained downward trend. We anticipate a very slow-paced recovery of the U.S. economy with a gradual increase in interest rates beginning in the second half of 2003. See Table 2 for an analysis of the net interest margin.

The contribution of “net free liabilities” to the net interest margin (computed as net interest margin less the interest rate spread) fell to 33 basis points in 2002 from 2001’s 54 basis points. Despite the increase in our “net free liabilities” of approximately $332 million, the contribution of net free liabilities to our net interest margin declined as a result of the significant decline in the average yield on our interest-earning assets as discussed previously. Our Asset/Liability Management Committee (“ALCO”), which continually monitors our interest sensitivity and liquidity, restructured our balance sheet during 2002 to be more asset sensitive in anticipation that interest rates will rise in 2003. By mid-2002, our balance sheet had been repositioned to be slightly asset sensitive. Based on its view of existing and expected market conditions, ALCO adopts strategies that are intended to optimize net interest income to the extent possible while minimizing the risk associated with changes in interest rates. See Table 3 for an analysis of the impact of changes in volume and rate on our net interest margin.

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The following analysis of average balances and net interest income is significantly impacted by the July 2000 acquisition of CCB. CCB’s average balances and net interest income are included for approximately one-half year in 2000 and for the full year in 2001 and 2002.

TABLE    2

Average Balances and Net Interest Income Analysis