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, 2004

OR
( ) 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 000-4491

CIK number 0000036966

FIRST HORIZON NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Tennessee (State or other jurisdiction of incorporation or organization)		62-0803242 (I.R.S. Employer Identification No.)
165 Madison Avenue, Memphis, Tennessee (Address of principal executive offices)		38103 (Zip Code)

(901) 523-4444
(Registrant's telephone number, including area code)

FIRST TENNESSEE NATIONAL CORPORATION
(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____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes __x__ No____

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.

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FIRST HORIZON NATIONAL CORPORATION

INDEX

Part I. Financial Information

Part II. Other Information

Signatures

Exhibit Index

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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 that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented.

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CONSOLIDATED STATEMENTS OF CONDITION		First Horizon National Corporation
	March 31				December 31
(Dollars in thousands)(Unaudited)	2004		2003		2003
Assets:
Cash and due from banks	$        859,091		$        962,208		$    773,294
Federal funds sold and securities
purchased under agreements to resell	564,118		267,167		381,500
Total cash and cash equivalents	1,423,209		1,229,375		1,154,794
Investment in bank time deposits	267		554		498
Trading securities	804,010		825,886		800,490
Loans held for sale	4,323,269		4,747,446		2,977,723
Securities available for sale	2,484,663		2,129,055		2,469,342
Securities held to maturity (market value of
$957 on March 31, 2004; $243,211 on
March 31, 2003; and $1,077 on December 31, 2003)	929		237,985		1,028
Loans, net of unearned income	14,212,120		11,909,771		13,990,525
Less:  Allowance for loan losses	160,685		144,484		160,333
Total net loans	14,051,435		11,765,287		13,830,192
Premises and equipment, net	355,624		255,723		350,202
Real estate acquired by foreclosure	29,877		13,962		24,075
Mortgage servicing rights, net	708,890		482,841		795,938
Goodwill	175,777		168,557		174,807
Other intangible assets, net	37,358		33,132		38,742
Capital markets receivables and other assets	2,688,860		2,921,328		1,888,859
Total assets	$  27,084,168		$   24,811,131		$ 24,506,690
Liabilities and shareholders' equity:
Deposits:
Interest-bearing	$  12,841,211		$     9,913,891		$ 11,139,758
Noninterest-bearing	4,870,703		5,090,700		4,540,213
Total deposits	17,711,914		15,004,591		15,679,971
Federal funds purchased and securities
sold under agreements to repurchase	2,028,188		3,755,503		3,079,248
Commercial paper and other short-term borrowings	363,586		346,891		227,976
Capital markets payables and other liabilities	2,715,727		2,767,094		1,901,959
Term borrowings	2,345,409		1,030,017		1,726,766
Total liabilities	25,164,824		22,904,096		22,615,920
Guaranteed preferred beneficial interests in     First Horizon's junior subordinated debentures	-		100,000		-
Preferred stock of subsidiary	448		44,417		452
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 - 123,980,548 on March 31, 2004;
125,666,395 on March 31, 2003; and 124,834,272 on
December 31, 2003)	77,488		78,541		78,021
Capital surplus	156,197		121,703		145,817
Undivided profits	1,662,677		1,536,821		1,662,699
Accumulated other comprehensive income	17,808		19,584		682
Deferred compensation on restricted stock incentive plans	(8,032)		(5,154)		(9,044)
Deferred compensation obligation	12,758		11,123		12,143
Total shareholders' equity	1,918,896		1,762,618		1,890,318
Total liabilities and shareholders' equity	$  27,084,168		$   24,811,131		$   24,506,690
See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME	First Horizon National Corporation
	Three Months Ended
	March 31
(Dollars in thousands except per share data)(Unaudited)	2004	2003
Interest income:
Interest and fees on loans	$ 172,362	$ 157,534
Interest on investment securities	26,776	31,097
Interest on loans held for sale	42,598	55,044
Interest on trading securities	11,046	10,986
Interest on other earning assets	1,233	1,135
Total interest income	254,015	255,796
Interest expense:
Interest on deposits:
Savings	105	281
Checking interest and money market account	5,106	6,159
Certificates of deposit under $100,000 and other time	13,341	15,300
Certificates of deposit $100,000 and more	17,567	17,749
Interest on short-term borrowings	12,432	14,434
Interest on term borrowings	9,455	7,593
Total interest expense	58,006	61,516
Net interest income	196,009	194,280
Provision for loan losses	14,229	27,450
Net interest income after provision for loan losses	181,780	166,830
Noninterest income:
Mortgage banking	131,531	195,876
Capital markets	117,928	139,675
Deposit transactions and cash management	33,961	32,776
Insurance premiums and commissions	16,394	14,463
Merchant processing	16,743	12,576
Trust services and investment management	11,804	11,383
Gains on divestitures	2,000	-
Equity securities losses, net	(509)	(1,499)
Debt securities gains, net	1,394	443
All other income and commissions	38,879	36,485
Total noninterest income	370,125	442,178
Adjusted gross income after provision for loan losses	551,905	609,008
Noninterest expense:
Employee compensation, incentives and benefits	238,250	261,840
Occupancy	20,963	19,605
Equipment rentals, depreciation and maintenance	17,776	17,190
Operations services	15,399	17,758
Communications and courier	11,803	11,978
Amortization of intangible assets	2,171	1,774
All other expense	65,614	97,219
Total noninterest expense	371,976	427,364
Pretax income	179,929	181,644
Applicable income taxes	60,658	62,615
Net income	$ 119,271	$ 119,029
Earnings per common share (Note 3)	.95	.94
Diluted earnings per common share (Note 3)	.92	.91
Weighted average shares outstanding	125,535,314	126,764,004
See accompanying notes to consolidated financial statements.

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Note 1 - Financial Information

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. 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, 2004, 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 2004 Proxy Statement.

Stock options. First Horizon National Corporation (FHN) accounts for its employee stock-based compensation plans under the intrinsic value based method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The following proforma presentation of net income and earnings per share is determined utilizing various assumptions and estimates and is based on stock option plan provisions in effect during the reportable period and may not reflect the actual impact upon adoption of a fair value based method of accounting for stock options. Had compensation cost for these plans been determined consistent with SFAS No. 123, FHN's net income and earnings per share would have been reduced to the following pro forma amounts:

Other disclosures -- Indemnification agreements and guarantees. In the ordinary course of business, FHN enters into indemnification agreements for legal proceedings against its directors and officers and standard representation warranties for underwriting agreements, merger and acquisition agreements, sold loans and other similar types of arrangements. It is not possible to estimate a maximum potential amount of payouts that could be required with such agreements.

First Horizon Home Loan Corporation (First Horizon Home Loans) services a mortgage loan portfolio of approximately $70.3 billion as of March 31, 2004, a significant portion of which is held by Government Sponsored Enterprises (GSE's) or private security holders. In connection with its servicing activities, First Horizon Home Loans guarantees the receipt of the scheduled principal and interest payments on the underlying loans. In the event of customer non-performance on the loan, First Horizon Home Loans is obligated to make the payment to the security holder. Under the terms of the servicing agreements, First Horizon Home Loans can utilize payments received from other prepaid loans in order to make the security holder whole. In the event payments are ultimately made by First Horizon Home Loans to satisfy this obligation, for loans sold with no recourse, all funds are recoverable from the GSE's at foreclosure sale.

First Horizon Home Loans is also subject to losses in its loan servicing portfolio due to loan foreclosures and other recourse obligations. Certain agencies have the authority to limit their repayment guarantees on foreclosed loans resulting in certain foreclosure costs being borne by servicers. In addition, First Horizon Home Loans has exposure on all loans sold with recourse. First Horizon Home Loans has various claims for reimbursement, repurchase obligations, and/or indemnification requests outstanding with government agencies or private investors. First Horizon Home Loans has sold certain mortgage loans with an agreement to repurchase the loans upon default. As of March 31, 2004 and 2003, First Horizon Home Loans had single-family residential loans with outstanding balances of $189.0 million and $162.9 million, respectively, that were sold on a recourse basis. For the single-family residential loans, in the event of borrower nonperformance, First Horizon Home Loans would assume losses to the ext ent they exceed the value of the collateral and private mortgage insurance, FHA insurance or VA guarantees. As of March 31, 2004, the outstanding principal balance of loans sold with limited recourse and serviced by First Horizon Home Loans was $3.7 billion down from $4.3 billion as of March 31, 2003. First Horizon Home Loans has evaluated all of its exposure under recourse obligations based on factors, which include loan delinquency status, foreclosure expectancy rates and claims outstanding. Accordingly, First Horizon Home Loans had a foreclosure reserve on the mortgage servicing portfolio of approximately $20.2 million and $30.9 million as of March 31, 2004 and 2003, respectively. While the servicing portfolio has grown from $58.2 billion on March 31, 2003 to $70.3 billion on March 31, 2004, the foreclosure reserve has decreased due to the decline in limited recourse obligations and improvements in loan delinquency status.

Note 1 - Financial Information (continued)

Standby letters of credit are conditional commitments issued by FHN to guarantee the performance and/or payment of a customer to a third party in connection with specified transactions. The credit risk involved in issuing these commitments is essentially the same as that involved in extending loan facilities to customers, as performance under any of the facilities would result in a loan being funded to the customer. Standby letters of credit outstanding as of March 31, 2004 and 2003, were $509.4 million and $469.5 million, respectively.

Accounting changes. On March 31, 2004, FHN adopted FASB Interpretation No. 46 (FIN 46-R), "Consolidation of Variable Interest Entities (revised December 2003)". FIN 46-R clarifies certain aspects of FIN 46 and provides certain entities with exemptions from the requirements of FIN 46. Additionally, FIN 46-R incorporates the guidance found in eight final FASB Staff Positions (FSPs) that had been issued prior to its release. FIN 46-R requires the consolidation by a business enterprise of variable interest entities (VIEs) in which it is the primary beneficiary. FIN 46-R also required the adoption of FIN 46, as of December 31, 2003, for all entities previously considered as special purpose entities and for all VIEs created after January 31, 2003. Upon adoption of FIN 46-R, FHN reassessed certain of its nonconsolidated interests as VIEs but did not meet the criteria of primary beneficiary and, therefore, has not consolidated any of its VIEs, including First Tennessee Capital I (Capital I ) and First Tennessee Capital II (Capital II).

On December 31, 2003, FHN adopted FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities". Upon adoption of this standard, FHN deconsolidated its subsidiary, Capital I, which has issued $100.0 million of capital securities that are fully and unconditionally guaranteed by FHN. As a result of this deconsolidation the capital securities are no longer included on FHN's balance sheet. However, $103.1 million of junior subordinated debentures issued by FHN to Capital I are no longer eliminated in consolidation and appear in term borrowings as of December 31, 2003. FHN identified certain of its nonconsolidated interests as VIEs but did not meet the criteria of primary beneficiary and, therefore, has not consolidated any of its VIEs. During first quarter 2004, Capital II issued $200.0 million of capital securities that are fully and unconditionally guaranteed by FHN. $206.0 million of junior subordinated debentures issued by FHN to Capital II appear in term borrowings as of Ma rch 31, 2004.

On December 31, 2003, FHN adopted FASB Staff Position (FSP) FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003". The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) introduces a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. FSP 106-1 allows either immediate recognition or deferred recognition. FHN elected to defer recognition and will not recognize the effect of the Act until the earlier of: (1) when the underlying accounting issues are resolved by the Financial Accounting Standards Board (FASB); or (2) when plan costs have to be remeasured (e.g. for a plan amendment). FHN does not expect the impact of recognizing this benefit to be material to results of operations.

On December 31, 2003, FHN adopted SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits". This standard does not change the measurement or recognition of those plans required by SFAS No. 87 and SFAS No. 106. Additionally, the disclosure requirements of the original SFAS No. 132 have been retained. SFAS No. 132 (revised 2003) requires additional disclosure about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The adoption of SFAS 132 (revised 2003) did not have an impact on the results of operations.

On December 31, 2003, FHN adopted Emerging Issues Task Force (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments". EITF Issue No. 03-1 requires disclosures concerning unrealized losses related to investments in debt and marketable equity securities that are accounted for under SFAS No. 115. Disclosures include the length of time investments have been in a loss position and discussion pertaining to the nature of the impairment. The adoption of EITF Issue No. 03-1 did not have an impact on the results of operations.

On July 1, 2003, FHN adopted SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", and classified its mandatorily redeemable preferred stock of subsidiary ($45.1 million on July 1, 2003) as term borrowings. Historically, the related distributions on these instruments ($4.6 million annually) were classified as noninterest expense on the Consolidated Statements of Income, but as of July 1, 2003, are classified as interest expense on a prospective basis. As required by SFAS No. 150, prior periods were not restated.

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Note 1 - Financial Information (continued)

On July 1, 2003, FHN adopted SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments", which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The impact of adopting this standard was immaterial to FHN.

On January 1, 2003, FHN adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement requires that a liability for the cost associated with an exit or disposal activity be recognized and measured initially at fair value in the period in which the liability is incurred. Prior to the effective date of this statement, costs associated with an exit or disposal plan were recognized at the date of commitment, as required under EITF Issue No. 94-3. This statement does not apply to costs associated with an exit activity that involves an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. The impact of adopting this statement was immaterial to FHN.

On January 1, 2003, FHN adopted the final provisions of Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This interpretation elaborates on the disclosures to be made by a guarantor in interim and annual financial statements about obligations assumed under certain guarantees it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This interpretation does not prescribe a specific approach for subsequently measuring the guarantor's liability over the term of the related guarantee. This interpretation also incorporates, without change, the guidance in FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others", which is superceded. The impact of adopting this statement was immaterial to FHN.

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Note 2 - Acquisitions/Divestitures

On December 31, 2003, FHN completed the sale of substantially all of the assets and liabilities of its wholly owned subsidiary, First National Bank of Springdale (FNB) of Springdale, Arkansas to First Security Bank of Searcy, Arkansas. This transaction resulted in a divestiture gain of $12.5 million. Immediately preceding the sale, FNB had investment securities of approximately $125 million, loans of approximately $165 million, deposits of approximately $300 million and equity of approximately $40 million.

On December 31, 2003, First Horizon Merchant Services, Inc., a wholly owned subsidiary of First Tennessee Bank National Association (FTBNA), recognized a divestiture gain of $10.0 million resulting from the sale of certain merchant relationships referred by selected agent banks within the merchant portfolio to NOVA Information Systems, Inc., a subsidiary of U.S. Bancorp. During first quarter 2004, a divestiture gain of $2.0 million resulted from an earn-out on the 2003 sale of merchant relationships.

On August 1, 2003, First Horizon Merchant Services, Inc., a wholly owned subsidiary of FTBNA, acquired Global Card Services, Inc., a merchant processing company based in Orlando, Florida, for approximately $15.8 million in cash. The acquisition was immaterial to FHN.

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Note 4 - Loans The composition of the loan portfolio on March 31 is detailed below:
(Dollars in thousands)			2004		2003
Commercial:
Commercial, financial and industrial			$     4,638,980		$       4,191,259
Real estate commercial			999,831		1,081,480
Real estate construction			701,574		592,556
Retail:
Real estate residential			6,832,121		5,143,403
Real estate construction			591,941		376,201
Other retail			195,478		269,017
Credit card receivables			252,195		255,855
Loans, net of unearned income			14,212,120		11,909,771
Allowance for loan losses			160,685		144,484
Total net loans			$   14,051,435		$     11,765,287
The following table presents information concerning nonperforming loans on March 31:
(Dollars in thousands)			2004		2003
Impaired loans			$    31,232		$    46,717
Other nonaccrual loans			16,015		17,662
Total nonperforming loans			$    47,247		$    64,379
Nonperforming loans consist of impaired loans and other nonaccrual 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)			2004		2003
Total interest on impaired loans			$            93		$          103
Average balance of impaired loans			31,829		51,814
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, 2004 and 2003, is summarized as follows:
(Dollars in thousands)	Non-Impaired		Impaired		Total
Balance on December 31, 2002	$      129,229		$     15,069		$    144,298
Provision for loan losses	23,027		4,423		27,450
Charge-offs	(23,213)		(7,648)		(30,861)
Loan recoveries	2,967		630		3,597
Net charge-offs	(20,246)		(7,018)		(27,264)
Balance on March 31, 2003	$      132,010		$     12,474		$    144,484
Balance on December 31, 2003	$      149,153		$     11,180		$    160,333
Provision for loan losses	13,344		885		14,229
Loans transferred to held for sale	(2,087)		-		(2,087)
Charge-offs	(13,240)		(2,845)		(16,085)
Loan recoveries	3,477		818		4,295
Net charge-offs	(9,763)		(2,027)		(11,790)
Balance on March 31, 2004	$      150,647		$     10,038		$    160,685

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Note 5 - Business Segment Information

FHN provides traditional retail/commercial banking and other financial services to its customers through various regional and national business lines, including First Tennessee Banking Group, First Horizon, FTN Financial, Transaction Processing, and Corporate. First Tennessee Banking Group includes the Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust Services and Asset Management, Credit Card and Cash Management. This segment offers traditional banking financial services and products, commercial insurance 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 the Northern Virginia financial centers. FTN Financial includes Capital Markets, Equity Research, Investment Banking, Strategic Alliances, and Correspondent Services. Transaction Processing includes credit ca rd merchant processing, nationwide bill payment processing, check clearing operations and other products and services. The Corporate segment includes unallocated corporate expenses and expense on trust preferred and REIT preferred stock (see also Note 1 - Financial Information). A portion of FHN's funds transfer credit associated with allocated capital is also included in the Corporate segment's net interest income.

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 amounts of consolidated revenue, expense, tax, and assets for each segment for the three months ending March 31:

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Note 5 - Business Segment Information (continued)

		Three Months Ended
		March 31
(Dollars in thousands)		2004		2003
First Tennessee Banking Group
Net interest income, FTE*	$	105,062	$	104,484
Provision		9,686		15,941
Noninterest income		82,651		73,128
Noninterest expense		124,813		126,078
Pre-tax income, FTE*		53,214		35,593
Income taxes, FTE*		13,534		8,537
Net income	$	39,680	$	27,056
Average assets	$	11,580,614	$	10,614,410
FTN Financial
Net interest income, FTE*	$	8,780	$	9,077
Provision		824		(272)
Noninterest income		119,730		141,938
Noninterest expense		90,475		104,993
Pre-tax income, FTE*		37,211		46,294
Income taxes, FTE*		14,140		17,591
Net income	$	23,071	$	28,703
Average assets	$	2,432,724	$	2,275,000
Transaction Processing
Net interest income, FTE*	$	4,014	$	4,441
Noninterest income		30,103		25,323
Noninterest expense		25,709		25,520
Pre-tax income, FTE*		8,408		4,244
Income taxes, FTE*		3,195		1,613
Net income	$	5,213		2,631
Average assets	$	631,191	$	680,364
Corporate
Net interest income, FTE*	$	(2,474)	$	2,343
Noninterest income		136		1
Noninterest expense		7,750		24,990
Pre-tax income, FTE*	$	(10,088)	$	(22,646)
Income taxes, FTE*		(3,833)		(8,605)
Net income	$	(6,255)	$	(14,041)
Average assets	$	69,355	$	168,198
* Fully taxable-equivalent basis. Certain previously reported amounts have been reclassified to agree with current presentation.

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Note 6 - 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*
Balance on December 31, 2002	$ 164,617	$ 29,648
Amortization expense	-	(1,774)
Acquisitions**	3,940	5,258
Balance on March 31, 2003	$ 168,557	$ 33,132
Balance on December 31, 2003	$ 174,807	$ 38,742
Amortization expense	-	(2,171)
Acquisitions**	970	787
Balance on March 31, 2004	$ 175,777	$ 37,358
*        Represents premium on purchased deposits, covenants not to compete and assets related to the           minimum pension liability.
**      Purchase price allocations on acquisitions are based upon estimates of fair value and are subject           to change.

The gross carrying amount of other intangible assets subject to amortization is $102.0 million on March 31, 2004, net of $64.7 million of accumulated amortization. Estimated aggregate amortization expense for the remainder of 2004 is expected to be $6.1 million and is expected to be $6.6 million, $5.1 million, $5.0 million and $4.4 million for the twelve-month periods of 2005, 2006, 2007 and 2008, respectively.

The following is a summary of goodwill detailed by reportable segments for the three months ended March 31:

	First Tennessee	First	FTN	Transaction
(Dollars in thousands)	Banking Group	Horizon	Financial	Processing	Total
December 31, 2002	$     88,070	$     52,378	$   13,294	$   10,875	$   164,617
Acquisitions*	-	630	-	3,310	3,940
March 31, 2003	$     88,070	$     53,008	$   13,294	$   14,185	$   168,557
December 31, 2003	$     84,217	$     51,988	$   13,294	$   25,308	$   174,807
Acquisitions*	53	661	-	256	970
March 31, 2004	$     84,270	$     52,649	$   13,294	$   25,564	$   175,777
* Purchase price allocations on acquisitions are based upon estimates of fair value and are subject to change.

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Note 7 - Mortgage Servicing Rights

Following is a summary of changes in capitalized mortgage servicing rights (MSRs), net of accumulated amortization, included in the Consolidated Statements of Condition:

The MSRs on March 31, 2004 and 2003, had estimated market values of approximately $738.2 million and $514.1 million, respectively. These balances represent the rights to service approximately $66.0 billion and $53.1 billion of mortgage loans on March 31, 2004 and 2003, respectively. On March 31, 2004 and 2003, valuation allowances due to impairment of $32.3 million and $45.1 million were required, respectively.

Estimated MSRs amortization expense for the twelve-month periods ending March 31, 2005, 2006, 2007, 2008 and 2009 are $118.3 million, $101.7 million, $84.7 million $70.1 million and $57.9 million, respectively. The assumptions underlying these estimates are subject to modification based on changes in market conditions and portfolio behavior (such as prepayment speeds). As a result, these estimates are subject to change in a manner and amount that is not presently determinable by management.

For purposes of impairment evaluation and measurement, the MSRs are stratified based on the predominant risk characteristics of the underlying loans. These strata currently include adjustable and fixed-rate loans. The MSRs are amortized over the period of and in proportion to the estimated net servicing revenues. A quarterly value impairment analysis is performed using a discounted cash flow methodology that is disaggregated by predominant risk characteristics. Impairment, if any, is recognized through a valuation allowance for individual strata. However, if the impairment is determined to be other than temporary, a direct write-off of the asset is made.

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Note 8 - Regulatory Capital

FHN is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on FHN's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities and certain derivatives as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (leverage). Management believes, as of March 31, 2004, t hat FHN met all capital adequacy requirements to which it was subject.

The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. In addition, FTBNA must also calculate its capital ratios after excluding financial subsidiaries as defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation FTBNA's Total Capital, Tier 1 Capital and Leverage ratios were 11.65 percent, 8.69 percent and 7.24 percent, respectively, on March 31, 2004, and were 11.32 percent, 9.03 percent and 6.94 percent, respectively, on March 31, 2003.

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Note 9 - Pension and Other Employee Benefits

Pension plan. The majority of employees of FHN are covered by a noncontributory, defined benefit pension plan. Pension benefits are based on years of service, average compensation near retirement and estimated social security benefits at age 65. The annual funding is based on an actuarially determined amount using the entry age cost method.

Other employee benefits. FHN provides postretirement medical insurance to full-time employees retiring under the provisions of the FHN Pension Plan. The postretirement medical plan is contributory with retiree contributions adjusted annually. The plan is based on criteria that are a combination of the employee's age and years of service and utilizes a two-step approach. For any employee retiring on or after January 1, 1995, FHN will contribute a fixed amount based on years of service and age at time of retirement. FHN's postretirement benefits include prescription drug benefits. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) introduces a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. FASB Staff Position (FSP) FAS 106-1 allows either immediate recognition or deferred recognition. FHN elected to d efer recognition and will not recognize the effect of the Act until the earlier of: (1) when the underlying accounting issues are resolved by FASB; or (2) when plan costs have to be remeasured (e.g. for a plan amendment).

The components of net periodic benefit cost for the three months ended March 31 are as follows:

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Note 10 - Term Borrowings

The following table presents information pertaining to term borrowings (debt with original maturities greater than one year) for FHN and its subsidiaries on March 31:

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Note 10 - Term Borrowings (continued)

Effective July 1, 2003, FHN adopted Statement of Financial Accounting Standard (SFAS) No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", and classified its mandatorily redeemable preferred stock of subsidiary ($45.1 million on July 1, 2003) as term borrowings. As required by SFAS No. 150 prior periods were not restated.

Effective December 31, 2003, FHN adopted FASB Interpretation No. 46, "Consolidation of Variable Interest Entities", and deconsolidated its subsidiary, First Tennessee Capital I (Capital I), which has issued $100.0 million of capital securities that are fully and unconditionally guaranteed by FHN. As a result of this deconsolidation the capital securities are no longer included on FHN's balance sheet. However, $103.1 million of junior subordinated debentures issued by FHN to Capital I is no longer eliminated in consolidation and appears in term borrowings as of December 31, 2003.

Annual principal repayment requirements as of March 31, 2004, are as follows:

All subordinated notes are unsecured and are subordinate to other present and future senior indebtedness. FTBNA's subordinated notes and FHN's subordinated capital notes qualify as Tier 2 risk-based capital under the Federal Reserve Board and Office of the Comptroller of the Currency guidelines for assessing capital adequacy. The subordinated and bank notes may not be redeemed or prepaid prior to maturity.

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Note 11 - Guaranteed Preferred Beneficial Interests in First Horizon's Junior Subordinated Debentures

On December 30, 1996, FHN, through its underwriters, sold to institutional investors $100 million of capital securities. First Tennessee Capital I (Capital I), a Delaware business trust wholly owned by FHN, issued $100 million of Capital Securities, Series A at 8.07 percent. The proceeds were upstreamed to FHN as junior subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally guaranteed all of Capital I's obligations with respect to the capital securities. The sole asset of Capital I is $103 million of junior subordinated debentures issued by FHN. These junior subordinated debentures also carry an interest rate of 8.07 percent. Both the capital securities of Capital I and the junior subordinated debentures of FHN will mature on January 6, 2027; however, under certain circumstances, the maturity of both may be shortened to a date not earlier than January 6, 2017. The capital securities qualify as Tier 1 capital and have historically been presented in the Consolidated Statements of Condition as "Guaranteed preferred beneficial interests in First Horizon's junior subordinated debentures." Effective December 31, 2003, FHN adopted FIN-46 which required the deconsolidation of Capital I and also resulted in the junior subordinated debentures no longer being eliminated in consolidation. The junior subordinated debentures are included in the Consolidated Statements of Condition in "Term borrowings" (see Note 10 - Term Borrowings).

During first quarter 2004, FHN, through its underwriter, sold $200 million of capital securities. First Tennessee Capital II (Capital II), a Delaware business trust wholly owned by FHN, issued $200 million of Capital Securities, Series B at 6.30 percent. The proceeds were upstreamed to FHN as junior subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally guaranteed all of Capital II's obligations with respect to the capital securities. The sole asset of Capital II is $206 million of junior subordinated debentures issued by FHN. These junior subordinated debentures also carry an interest rate of 6.30 percent. Both the capital securities of Capital II and the junior subordinated debentures of FHN will mature on April 15, 2034, however, under certain circumstances, the maturity of both may be shortened to a date not earlier than April 15, 2009. The capital securities qualify as Tier 1 capital.

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PART II ITEM 2. FIRST HORIZON NATIONAL CORPORATION - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

GENERAL INFORMATION

First Horizon National Corporation (FHN), formerly First Tennessee National Corporation, is a nationwide, financial services institution. From a small community bank chartered in 1864, FHN has grown to be one of the top 30 largest bank holding companies in terms of revenue in the United States.

FHN Facts:

• Achieved earnings of $119.3 million or $.92 diluted earnings per share for first quarter 2004
  
  
• Had $27.1 billion in assets and $6.0 billion in market capitalization on March 31, 2004
  
  
• Is listed in Standard and Poor's 500 Index, one of the most widely watched benchmarks of the stock market's performance
  
  
• Enjoys customers that are among the most loyal of the top financial institutions in the country
  
  
• Fortune magazine's list of one of the "100 Best Companies to Work For" for the seventh consecutive year
  
  
• Named to the AARP Best Employers for Workers over 50 list
  
  
• Ninth straight year on Working Mother magazine's annual list of the 100 Best Companies for Working Mothers

FHN provides a broad array of financial services to its customers through various regional and national business lines. The combined strengths of our business lines create an extensive range of financial products and services.

Business Lines:

• First Horizon helps provide home ownership through First Horizon Home Loans, one of the 15 largest providers of mortgage loans to consumers, which operates offices in 41 states. In addition First Horizon provides Equity Lending, Investments, Insurance, Financial Planning and Retail/Commercial Banking to its customers. The First Horizon Bank division recently opened four financial centers in Northern Virginia. Other First Horizon financial centers will open in markets where First Horizon Home Loans has established a customer base.
  
  
• First Tennessee Banking Group offers financial products to retail and commercial customers through its Retail/Commercial Bank, Investments, Insurance, Financial Planning, Trust Services, Asset Management, Credit Card and Cash Management divisions. This business line offers traditional financial services and products, commercial insurance and also promotes comprehensive financial planning to address customer needs and desires for investments, insurance, estate planning, education funding, cash reserves and retirement goals.
  
  
• FTN Financial provides a full spectrum of financial services for the investment and banking communities through the integration of Capital Markets, Equity Research, Investment Banking, Correspondent Services, and Strategic Alliances.
  
  
• Transaction Processing provides credit card merchant processing, nationwide bill payment processing, check clearing operations and other products and services.

For the purpose of this management discussion and analysis (MD&A), earning assets, including loans, have been expressed as averages, net of unearned income. The following financial discussion should be read with the accompanying consolidated financial statements and notes. In addition to the four major business lines, FHN's segments include the Corporate segment, which contains unallocated corporate expenses and expense on trust preferred and REIT preferred securities. A portion of FHN's funds transfer credit associated with allocated capital is also included in the Corporate segment's net interest income.

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FORWARD-LOOKING STATEMENTS

Management's discussion and analysis may contain forward-looking statements with respect to FHN's beliefs, plans, goals, expectations, and estimates. Forward-looking statements are statements that are not a representation of 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, operational, 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 (including 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 or deflation; the financial condition of borrowers and other counterparties; competition within and outside the financial services industry; geo-political developments including possible terrorist activity; effectiveness of FHN's hedging practices; technology; and new products and services in the industries in which FHN operates. Other factors are those inherent in originating and servicing loans including prepayment risks, pricing concessions, fluctuation in U.S. housing prices, fluctuation of collateral values, and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and other regulators; regulatory and judicial proceedings and changes in laws and regulations applicable to FHN; and FHN's success in executing its business plans and strategies and managing the risks involved in the foregoing, could cause actual results to differ. FHN assumes no obligation to update any forward-looking statements that are made from time to time.

FINANCIAL SUMMARY

The first quarter earnings of $.92 diluted earnings per share, a penny higher than last year, represented an important, planned transition from last year's operating environment which included high refinancing activities and increased cash flows in investment portfolios. As originations from refinancing activity fell 55 percent from last year's level, First Horizon's earnings fell 23 percent or $26.9 million. Additionally, FTN Financial's earnings were off 20 percent or $9.1 million, as investment portfolio cash flows slowed from peak levels last year. Despite these impacts, earnings were still up from last year's levels with First Tennessee Banking Group's and Transaction Processing's earnings improving as expected. Combined, these two segments created $21.8 million more in earnings than last year as the business environment improved, incremental investment spending declined and created returns, and asset quality costs declined. The remaining earnings balance was achieved by reducing discretionary cor porate spending by $14 million. In total, the net of these impacts enabled earnings to remain relatively stable while share repurchases were the primary driver on the additional $.01 in earnings per share reported this quarter.

National expansion initiatives continue to grow, adding $26 million in revenues over last year's first quarter, an 81 percent growth rate. This revenue increase reflects 64 percent growth in the consumer lending portfolio and 50 percent growth in the construction lending portfolio. The national expansion strategy continues to produce results from cross-sell efforts, expansion of the sales force, and the recent opening of financial centers have successfully created revenue growth from banking products sold outside of Tennessee.

Earnings for first quarter 2004 were $119.3 million, or $.92 diluted earnings per share. This compares to 2003's first quarter earnings of $119.0 million, or $.91 diluted earnings per share. Return on average shareholders' equity and return on average assets for first quarter 2004 were 25.6 percent and 1.93 percent, respectively, and were 27.7 percent and 2.07 percent for first quarter 2003. Total assets were $27.1 billion, shareholders' equity was $1.9 billion and market capitalization was $6.0 billion on March 31, 2004, compared to $24.8 billion, $1.8 billion and $5.0 billion, respectively, on March 31, 2003.

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INCOME STATEMENTS ANALYSIS - FIRST QUARTER 2004 COMPARED TO FIRST QUARTER 2003

Total revenue decreased 11 percent to $566.1 million from $636.5 million in first quarter 2003, with a 16 percent decrease in noninterest income and a 1 percent increase in net interest income.

NONINTEREST INCOME

Noninterest income provides the majority of FHN's revenue. During first quarter 2004 noninterest income decreased to $370.1 million from $442.2 million, and contributed 65 percent to total revenue in first quarter 2004 compared with 69 percent in first quarter 2003.

Mortgage Banking

First Horizon Home Loans, an indirect subsidiary of FHN and the major component of the First Horizon business segment, offers residential mortgage banking products and services to customers. First Horizon originates mortgage loans through its retail and wholesale operations and also purchases mortgage loans from third-party mortgage bankers (correspondent brokers) for sale to secondary market investors and subsequently services the majority of those loans.

Secondary marketing activities include net origination fees, gains or losses from secondary marketing trading, product pricing decisions, and gains or losses from the sale of loans into the secondary market including the capitalized value of the mortgage servicing rights (MSRs). Origination fees, net of costs, 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 (see Other - Further Interpretations of SFAS No. 133). First Horizon employs hedging strategies intended to counter a change in the value of its MSRs through changing interest rate environments (see Critical Accounting Policies). MSRs hedge gains/(losses) reflect effects of hedging including servicing rights net value changes (see Other - Accounting for Derivative Instruments and Hedging Activities). Other income includes income from the foreclosure repurchase progra m, gains from periodic sales of GNMA servicing, and other miscellaneous items. Mortgage trading securities gains/(losses) relate to market value adjustments primarily on interest-only strips that are classified as trading securities and related hedges. As shown in Table 1, total mortgage banking noninterest income decreased 33 percent in 2004.

Table 1 - Mortgage Banking

Mortgage loan origination volumes in first quarter 2004 were $7.0 billion compared to $11.5 billion in 2003. Given the industry-wide decline in refinance volume, the decrease in production volume was expected. However, home purchase related originations grew 22 percent from first quarter 2003, to $3.0 billion, demonstrating First Horizon's success in executing its strategy to grow the purchase market. Refinance activity represented 58 percent of total originations during first quarter 2004 compared to 79 percent last year. Loans securitized and sold

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into the secondary market decreased 44 percent to $6.4 billion as origination volume slowed. Net revenue from originating and selling mortgage loans (generally driven by origination volumes and loans securitized and sold) decreased 40 percent to $100.9 million compared to $169.1 million in first quarter 2003.

Included in this quarter's net revenue from originating and selling real estate loans are $5.0 million of net gains from the securitization of approximately $300 million of home equity lines of credit (HELOCs). Successful cross-sell strategies through First Horizon's national delivery channels have resulted in growth of HELOCs, and First Horizon will continue to securitize certain of these loans on a periodic basis for funding and other strategic reasons.

The mortgage-servicing portfolio was $70.3 billion on March 31, 2004, an increase of 21 percent compared to $58.2 billion on March 31, 2003. Total fees associated with mortgage servicing increased 20 percent to $54.4 million due to the growth in the servicing portfolio and the favorable impact of lower prepayment activity. Servicing fees were negatively impacted by a lower percentage of GNMA mortgages, which earn higher servicing fees. Additionally, as a result of improvements in processes and technology, productivity improved resulting in a 21 percent reduction of servicing costs to $62 per loan.

MSRs amortization was $34.0 million for first quarter 2004 compared with $31.1 million in first quarter 2003. In first quarter 2004 MSRs impairment losses decreased to $14.6 million compared to a $42.5 million loss in first quarter 2003 and in both periods impairment losses were mitigated in part by net MSRs hedging gains (including the effect of time decay) of $21.3 million in first quarter 2004 compared to $37.3 million net gains in first quarter 2003. This positive net change was brought about by the interest rate environment in first quarter 2004 versus 2003 which also resulted in 40 percent lower servicing portfolio prepayments.

Capital Markets

Capital markets noninterest income, the major component of revenue in the FTN Financial segment, is primarily generated 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 hedged to protect against movements in interest rates.

For first quarter 2004, capital markets noninterest income decreased 16 percent to $117.9 million from $139.6 million in 2003. This decline in revenue reflects the impact that the changing environment had on demand for capital market's products and services as the customer base purchased less fixed income securities due to less cash flow from mortgage-backed securities prepayments, increased loan demand on depository institutions as the economy began to recover, and temporary delays in investment decisions in anticipation of higher interest rates. As a result, noninterest income from depository institutions had the most significant decline of 29 percent in 2004 and represented 43 percent of capital markets noninterest income compared to 51 percent in 2003. Revenues from non-depository institutions proved to be more stable, declining only 12 percent and represented 28 percent of capital markets noninterest income compared to 27 percent in 2003. Noninterest income from other products and services, which includes investment banking, equity research and sales, and portfolio advisory services, increased 10 percent and represented 29 percent of capital markets noninterest income in 2004 compared to 22 percent in 2003.

Table 2 - Capital Markets

	Three Months Ended
	March 31		Growth
(Dollars in millions)	2004	2003	Rate (%)
Noninterest income:
Fixed income - depository	$    50.4	$   70.7	28.7 -
Fixed income - non-depository	33.6	38.0	11.6 -
Other products/services	33.9	30.9	9.7 +
Total capital markets noninterest income	$  117.9	$ 139.6	15.6 -
Certain previously reported amounts have been reclassified to agree with current presentation.

Other Noninterest Income

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Merchant processing noninterest income increased 33 percent to $16.7 million primarily due to acquisitions and limited recovery in the hospitality industry as transactions processed increased 21 percent. During the first quarter 2004, noninterest income was also impacted by a divestiture gain of $2.0 million resulting from an earn-out on the fourth quarter 2003 sale of certain merchant relationships. Noninterest income from insurance premiums and commissions increased 13 percent to $16.4 million in first quarter 2004 primarily due to Synaxis, a wholly-owned insurance broker, which experienced increased revenues from internal expansion and the 2003 acquisition of an insurance agency. Noninterest income from deposit transactions and cash management increased 4 percent primarily due to an increase in return check charges. Securities gains/(losses) provided a favorable impact to noninterest income with $.9 million net securities gains in first quarter 2004 from the sale of investment securities compared to $1.1 million net securities losses in first quarter 2003 from other-than-temporary impairment of equity investments held by FHN's venture capital subsidiaries.

NET INTEREST INCOME

During first quarter 2004 net interest income increased 1 percent to $196.0 million from $194.3 million in 2003. Net interest income was positively impacted by growth in the retail and commercial lending portfolios. First National Bank of Springdale (FNBS), which was divested on December 31, 2003, contributed $3.0 million to net interest income in first quarter 2003. Partially mitigating the favorable impact of loan growth was a decline in net interest income on loans held for sale reflecting the impact of a smaller mortgage warehouse and a lower net interest spread on the warehouse resulting from lower mortgage rates compared to first quarter 2003. Net interest income was also negatively impacted by compression in the net interest margin resulting from the repricing of assets to lower yields while liability rates have become less sensitive to rate movements and due to a change in the mix of the loan portfolio to a higher percentage of floating rate products.

The consolidated margin decreased to 3.68 percent in 2004 compared with 3.98 percent for the same period in 2003. The activity levels and related funding for FHN'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 MSRs. 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 reduces the term and accordingly the interest income earned on these positions. As a result, FHN's consolidated margin cannot be readily compared to that of other bank holding companies.

Table 3 - Net Interest Margin

				Three Months Ended
				March 31
				2004		2003
Consolidated Yields and Rates:
Investment securities				4.23	%	4.97	%
Loans, net of unearned				4.85		5.42
Other earning assets				4.51		4.77
Yields on earning assets				4.70		5.18
Interest bearing core deposits				1.27		1.52
CD's over $100,000				1.21		1.54
Fed funds purchased and repos				.88		1.09
Commercial paper and other short-term borrowings				3.30		3.45
Long-term debt				2.08		3.01
Rates paid on interest-bearing liabilities				1.32		1.60
Net interest spread				3.38		3.58
Effect of interest-free sources				.24		.34
Loan fees				.06		.07
FRB interest and penalties				-		(.01)
FHN - NIM				3.68	%	3.98	%

NONINTEREST EXPENSE

Total noninterest expense for first quarter 2004 decreased 13 percent to $372.0 million from $427.4 million in 2003. Noninterest expense in first quarter 2003 included approximately $35 million of discretionary spending on cost savings and revenue enhancing initiatives. In

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addition, expenses in FTN Financial and First Horizon fluctuate based on the type and level of activity. Going forward, FTN Financial and First Horizon will continue to influence the level of noninterest expense (see also Business Line Review for additional information).

Personnel expense decreased 9 percent to $238.2 million from $261.9 million in 2003. This decrease is primarily due to lower activity levels in FTN Financial in first quarter 2004 and $11.7 million of expense in 2003 resulting from modifications in and funding of an old deferred compensation plan, primarily for retirees. Higher personnel costs in First Tennessee Banking Group were largely attributable to commissions and incentives associated with higher product-related revenues.

All other expense decreased 33 percent to $65.6 million in 2004 from $97.2 million. All other expense was favorably impacted by a decline in losses on foreclosed real estate and by a reduction in contract employment expense. Also impacting the decline was a loss of approximately $14 million in first quarter 2003 associated with the termination of a lease arrangement with a single-purpose entity for First Horizon Home Loan's main office headquarters.

PROVISION FOR LOAN LOSSES / ASSET QUALITY

The provision for loan losses is the charge to operating earnings that management determines to be necessary to maintain the allowance for loan losses at an adequate level reflecting management's estimate of probable incurred losses in the loan portfolio. An analytical model based on historical loss experience adjusted for current events, trends and economic conditions is used by management to assess the adequacy of the loan loss allowance and to determine the amount of provision to be recognized. The provision for loan losses decreased 48 percent to $14.2 million in 2004 compared to $27.5 million in 2003. The improvement in first quarter 2004's provision is related to the positive shift in the mix of the loan portfolio. The risk profile of the retail loan portfolio improved as the mix shifted to a greater concentration of high credit score products. Also impacting the risk profile of this portfolio was the transfer of certain higher risk residential mortgage loans to held for sale in 2003. The decline in provision also reflects the substantial resolution in 2003 of a credit loss related to a large real estate project. The risk profile of the commercial loan portfolio improved as indicated by current lower levels of watch and classified loans. Net charge-offs decreased to $11.8 million in first quarter 2004 compared to $27.3 million in first quarter 2003. Net charge-offs were impacted in first quarter 2004 by improvement in both the consumer and commercial loan portfolios. Nonperforming assets were $77.5 million on March 31, 2004, compared to $78.4 million on March 31, 2003.

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Table 4 - Asset Quality Information

						March 31
(Dollars in thousands)						2004		2003
Lending Activities*:
Nonperforming loans					$	37,707		$         52,690
Foreclosed real estate						20,116		9,684
Other assets						336		57
Total Lending Activities						58,159		62,431
Mortgage Production Activities*:
Nonperforming loans - held for sale						9,157		7,139
Nonperforming loans - loan portfolio						383		4,550
Foreclosed real estate						9,761		4,245
Total Mortgage Production Activities						19,301		15,934
Total nonperforming assets					$	77,460		$         78,365
Loans and leases 30 to 89 days past due					$	72,441		$         99,135
Loans and leases 90 days past due						31,167		36,794
Potential problem assets**						112,808		127,954
Total loans, net of unearned income					$	14,212,120		$  11,909,771
Insured loans						(631,823)		(503,160)
Loans excluding insured loans					$	13,580,297		$  11,406,611
Off-balance sheet commitments***					$	5,294,069		$    3,848,048
						First Quarter
						2004		2003
Allowance for loan losses:
Beginning balance on December 31						$ 160,333		$ 144,298
Provision for loan losses						14,229		27,450
Loans transferred to held for sale						(2,087)		-
Charge-offs						(16,085)		(30,861)
Loan recoveries						4,295		3,597
Ending balance on March 31						$  160,685		$ 144,484
Reserve for off-balance sheet commitments						$      7,001		$     6,083
Total reserve for allowance for loan losses and off-balance sheet commitments						$  167,686		$ 150,567
						March 31
						2004		2003
Allowance to total loans						1.13%		1.21	%
Allowance to loans excluding insured loans						1.18		1.27
Allowance to nonperforming loans in the loan portfolio						422		252
Nonperforming assets to loans, foreclosed real estate
and other assets (Lending Activities only)						.42		.54
Nonperforming assets to unpaid principal balance of
servicing portfolio (Mortgage Production Activities only)						.03		.03

*	Lending activities include all activities associated with the loan portfolio. Mortgage production includes activities associated with the mortgage warehouse. Provision was negatively impacted by $3.1 million in 2003 related to the transfer of certain retail loans to held for sale.
**	Includes loans and leases 90 days past due.
***	Amount of off-balance sheet commitments for which a reserve has been provided.