UNION PLANTERS CORPORATION
 

UNION PLANTERS CORPORATION 2002 SUMMARY ANNUAL REPORT

PERFORMANCE MOMENTUM PHOTO


 

UNION PLANTERS CORPORATION
           
Principal Banking Subsidiary     Union Planters Bank, National Association, founded 1869
Headquarters     Memphis, Tennessee
Rank     Largest bank holding company headquartered in Tennessee
        Among the 30 largest U.S. bank holding companies
Market Capitalization     $5.6 billion at December 31, 2002
Number of Branches     762
Number of ATMs     965
Principal Banking Markets     AL, AR, FL, IA, IL, IN, KY, LA, MO, MS, TN and TX
Year-End        
  Assets     $34.1 billion
  Loans     $22.8 billion
  Deposits     $23.3 billion
  Common Equity     $3.2 billion
  2002 Net Earnings     $529 million

CORPORATE PROFILE

Union Planters Corporation, Memphis, Tennessee, is the largest bank holding company headquartered in Tennessee and is among the 30 largest bank holding companies based in the United States, with $34.1 billion in total assets at December 31, 2002. Union Planters Bank, National Association, the principal banking subsidiary, was founded in 1869 and operates branches in 12 states: Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas. Union Planters Bank offers a full range of commercial and consumer financial solutions through a network of 762 banking offices, 965 ATMs and the resources of specialized business units and subsidiaries. Trust services include investment management, personal trust services, employee benefit administration and proprietary mutual funds. Investment and insurance services include annuities, brokerage, life insurance, home and auto insurance, commercial property and casualty insurance, crop and hail insurance, environmental insurance and title insurance. Union Planters Mortgage provides a full range of mortgage products through Union Planters banking centers and a network of mortgage production offices. Capital Factors, Inc., based in Boca Raton, Florida, provides receivable-based commercial financing and related fee-based credit, collection and management information services. Capital Factors has regional offices in Atlanta, Georgia; Charlotte, North Carolina; Dallas, Texas; Los Angeles, California; and New York, New York. Strategic Outsourcing, Inc., based in Charlotte, North Carolina, provides professional employment services such as payroll administration, tax reporting, compliance, workers’ compensation, insurance and benefits management. Union Planters Corporation common stock is traded on the New York Stock Exchange under the symbol UPC and is included in the S&P 500 Index and the S&P 500 Banks Index. Union Planters is ranked in both the Fortune 500 and the Forbes 500.

 


 

INVESTOR INFORMATION

   
Annual Meeting
  Thursday, April 17, 2003, at 1 p.m. CDT
Main Floor
Union Planters Bank, National Association
6200 Poplar Avenue
Memphis, TN 38119
   
Corporate Headquarters
  6200 Poplar Avenue
Memphis, TN 38119
   
Corporate Mailing Address
  PO Box 387
Memphis, TN 38147
   
Financial Information
  Charles R. Boyce
Senior Vice President
(901) 580-5974
www.unionplanters.com/investor/
e-mail: suggest@upbna.com
   
Transfer Agent and Registrar
  American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
Toll-free (800) 937-5449
   
Dividend Reinvestment and Stock Purchase Plan
  The Plan allows Union Planters shareholders to reinvest their dividends in Union Planters Common Stock. No brokerage commissions or service charges are paid by shareholders. The Plan also permits participants in the Plan to buy additional shares with optional cash payments and no brokerage commissions. Details are available by calling toll-free (877) 681-8086 or writing American Stock Transfer & Trust Company at the address shown.
   
Common Stock
  NYSE Symbol: UPC
Wall Street Journal: UnPlantr
   
Series E Convertible Preferred Stock
  NASDAQ Symbol: UPCPO
Wall Street Journal: UnPlantr pfE
   
Options
  Philadelphia Stock Exchange
Pacific Stock Exchange
   
Indexes
  S&P 500
S&P 500 Banks
NYSE Composite
   
Independent Accountants
  PricewaterhouseCoopers LLP
Memphis, Tennessee
   
Dividend Paying Agent
  American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
Toll-free (877) 681-8066
   
Form 10-K and 2003 Proxy
  Copies of Union Planters’ Annual Report on Form 10-K and 2003 Proxy as filed with the Securities and Exchange Commission are available on request by calling Investor Relations at (901) 580-5974 or at www.unionplanters.com/investor/.

Anticipated Record and Dividend Payable Dates*

         
First Quarter   May 1, 2003   May 15, 2003
Second Quarter   August 1, 2003   August 15, 2003
Third Quarter   November 3, 2003   November 17, 2003
Fourth Quarter   February 2, 2004   February 16, 2004

*   Subject to action by Board of Directors

TABLE OF CONTENTS

 


 

FINANCIAL HIGHLIGHTS

                           
      Years Ended December 31,
                      Percent
      2002   2001   Change
     
 
 
      (Dollars in thousands, except per share data)
Earnings
                       
 
Net earnings
  $ 528,987     $ 443,550       19.3  
Per common share
                       
 
Net earnings per diluted share
  $ 2.59     $ 2.13       21.6  
 
Cash dividends declared
    1.33       1.33        
 
Book value (1)
    16.21       15.56       4.2  
Key ratios
                       
 
Return on average assets
    1.62 %     1.30 %        
 
Return on average common equity
    16.55       14.34          
 
Net interest margin
    4.43       4.20          
 
Net interest spread
    3.96       3.53          
Balance sheet and other data (1)
                       
 
Assets
  $ 34,144,363     $ 33,197,604       2.9  
 
Earning assets
    31,146,824       30,137,038       3.4  
 
Loans, net of unearned income
    22,774,732       23,163,039       (1.7 )
 
Allowance for losses on loans
    350,931       341,930       2.6  
 
Deposits
    23,330,440       23,430,502       (0.4 )
 
Shareholders’ equity
    3,226,282       3,223,741       0.1  
 
Common shares outstanding (in thousands)
    198,434       206,113       (3.7 )
 
Market capitalization
    5,583,944       6,201,263       (10.0 )
 
Number of banking locations
    762       764       (0.3 )
 
Number of full-time equivalent employees
    10,836       11,797       (8.2 )
Capital ratios (1)
                       
 
Shareholders’ equity to total assets
    9.45 %     9.71 %        
 
Leverage ratio
    7.47       7.56          
 
Tier 1 capital to risk-weighted assets
    9.40       9.75          
 
Total capital to risk-weighted assets
    13.89       14.47          
Credit quality ratios
                       
 
Allowance for losses on loans/loans (1)
    1.56 %     1.48 %        
 
Nonperforming loans/loans (1)
    1.17       1.02          
 
Allowance for losses on loans/nonperforming loans (1)
    133       145          
 
Nonperforming assets/loans and foreclosed properties (1)
    1.51       1.31          
 
Provision for losses on loans/average loans
    0.86       0.55          
 
Net charge-offs/average loans
    0.82       0.53          
Common stock — UPC (NYSE)
                       
 
High
  $ 33.63     $ 31.29          
 
Low
    23.65       23.13          
 
Close (1)
    28.14       30.09          

(1)   At year-end.
All share and per share amounts throughout this document have been adjusted to reflect the three-for-two stock split completed in the second quarter of 2002.

4


 

PHOTO OF WOMAN

“We have a relationship-based approach because we recognize that people make a difference in retaining and deepening customer relationships. Our associates have transformed Union Planters into a vibrant, customer-focused financial services company with significant performance momentum.”

Jackson W. Moore, Chairman, President and Chief Executive Officer

5


 

PHOTO OF JACKSON W. MOORE

“This summary annual report reviews important aspects of our record financial performance for the year. As we said in last year’s summary annual report, ‘Union Planters has deliberately focused on making the main thing the main thing...’ and that is to deliver consistent, quality earnings growth to our shareholders. We have made remarkable progress toward that goal.”

Jackson W. Moore

6


 

JACKSON W. MOORE QUOTE

PHOTO OF HAND AND PEN

PHOTO OF TWO MEN

TO OUR SHAREHOLDERS

On behalf of our directors and associates, it is with great pleasure that I report the highest earnings in the history of Union Planters Corporation. Net earnings last year were $529.0 million, or $2.59 per diluted share. This represents an increase of nearly 22 percent in earnings per diluted share compared to 2001. The culmination of two years of planning and implementation produced extraordinary results. We completed our ninth consecutive quarter of record earnings and achieved our key strategic goals for last year. This performance momentum places us in an excellent position to take advantage of opportunities this year. Additional highlights from last year include:

  Achieving a return on average common equity of 16.55 percent and a return on average tangible equity of 23.22 percent.
 
  Producing a return on average assets of 1.62 percent.
 
  Reaching our efficiency ratio goal.
 
  Implementing standard business models for relationship and sales management.
 
  Increasing the breadth of our products and the effectiveness of delivery channels.
 
  Completing installation of critical systems that improve customer service and efficiency.

7


 

QUARTERLY EARNINGS PER DILUTED SHARE GRAPH

We could not have reached our performance goals last year without the dedication of our 11,000 associates and the guidance of our directors. We raised the bar throughout the Company in our commitment to continuous improvement. Key to our success was completion of our UPExcelTM project, a focused, company-wide effort to improve efficiency, enhance customer service and accelerate revenue growth. Union Planters implemented hundreds of recommendations from associates. The benefits were visible by the fourth quarter of 2001 and had a significant impact on results last year. These improvements fundamentally changed the way we do business. The process has now been ingrained into our culture, and we will see the positive results for years to come.

We achieved these outstanding financial results last year under challenging economic conditions and amid turbulence in the world financial markets. Interest rates decreased sharply throughout the year to the lowest levels in decades due to a soft economy. The stock market was also very volatile during 2002 due to the weak economy and high profile accounting scandals. This volatility is evidenced by the S&P 500 Index reaching post-September 11 lows. Bank stocks fared much better than the broad market. While the S&P 500 Index showed a total return of negative 22 percent, bank stocks were relatively stable. Union Planters common stock performed consistent with the S&P 500 Banks Index during 2002.

When evaluated over the last two years — the span during which our strategic repositioning initiatives were developed and implemented — the Company’s common stock yielded an annualized total return of 13.7 percent and significantly outperformed the annualized return of both the S&P 500 Banks Index and the S&P 500 Index, which had negative total returns of 0.5 percent and 17.1 percent, respectively. Our common stock dividend yield of 4.7 percent at December 31, 2002 was one of the highest among large commercial banks in the United States and reflected a payout of 51 percent of our annual net earnings.

The prolonged soft economy created weak commercial loan demand and adversely impacted borrowers last year. Credit quality deteriorated, resulting in higher net charge-offs and the related provision for losses on loans last year compared to 2001. We are comfortable with year-end reserve levels and believe we have provided for all inherent loan losses. We recognize that we still have a lot of work to do to reduce nonperforming assets to a level we are proud of; however, we are beginning to show progress. Nonperforming assets, which rose during the first three quarters, declined 10 percent in the fourth quarter of last year. This was the first quarterly decline since the economy started to soften in mid-year 2000. We expect nonperforming assets to continue showing improvement as the economy recovers.

ANNUALIZED TWO-YEAR TOTAL RETURN

8


 

RETURN ON AVERAGE COMMON EQUITY GRAPH

Net interest income and the related net interest margin increased last year compared to the prior year on a smaller but more efficient balance sheet. The higher margin resulted from a better mix of earning assets, better loan and deposit pricing and lower levels of interest bearing deposits and borrowings. Commercial loan demand was weak last year consistent with lower levels of economic activity, while consumer loan activity was strong. Home equity lines of credit increased 64 percent during the year compared to the prior year-end, and we also originated nearly $12 billion in secondary market mortgage loans during the year. This resulted in higher loans held for resale and a double-digit increase in mortgage banking revenue but also added higher costs. Borrower refinancing of residential real estate loans, loan sales and deliberate reductions in low return portfolios contributed to a slight decrease in net loans for the year. Core deposits grew last year, driven by an increase in average checking deposits in excess of 8 percent. This growth largely offset the impact of reductions in higher rate deposits and resulted in an improved deposit mix.

Noninterest income is an important component of our revenue growth strategy and contributed significantly to record earnings last year. In addition to a double-digit increase in mortgage banking revenue, other sources of noninterest income had solid growth last year. Some of the large components were bankcard fees, service charges on deposit accounts and net revenues from Strategic Outsourcing, Inc., our professional employment organization subsidiary.

One of the largest drivers of our higher earnings last year was a reduction in non-interest expense in excess of 10 percent. This reduction was a result of expense control initiatives and reduced goodwill amortization expense due to changes in accounting principles. We consolidated several operational functions to enhance customer service, increase efficiency and improve controls. We also reduced the cost of communications, facilities and other support services. The impact of streamlining our branch delivery system and creating more efficient support functions over the past two years is visible in approximately a 30 percent increase in revenue per branch and a 37 percent increase in core deposits per branch.

We continued to maintain strong capital levels last year consistent with a targeted leverage capital ratio of 7.5 percent. Through December 31, 2002, we had repurchased nine million shares of common stock under our stock repurchase plan. Total shareholders’ equity at December 31, 2002 was $3.2 billion.

Union Planters further enhanced overall corporate governance last year. The Board of Directors established the Compensation/Nominations/Corporate Governance Committee to formalize oversight of all corporate governance activities. This committee is comprised solely of independent directors. We were recently ranked third among

RETURN ON AVERAGE ASSETS

9


 

ANNUAL EARNINGS PER DILUTED SHARE GRAPH

large U.S. banks in overall corporate governance in a study published in Bank Director magazine. We also added an enterprise risk manager to our executive management team and engaged a separate public accounting firm to support our internal audit function. We have a strong board and a highly experienced and competent team of executive officers. They are supported by a professional team of well-trained associates, strong systems and effective controls.

Union Planters has a deep commitment to supporting local communities. We focus our resources in six core areas: education, the arts, civic support, health, human services and community activities. More than 1,000 groups and organizations in our markets receive support through the Union Planters Community Foundation. Last year, we helped families to purchase their own homes through the Habitat for Humanity organization; funded a new arts center for downtown redevelopment in Paducah, Kentucky; and supported cancer research at a Baton Rouge, Louisiana foundation. Our largest recipients are the United Way organizations in the markets we serve, since they have the best local assessment of the needs in each community.

Our associates do an outstanding job of supporting Union Planters’ commitment to community involvement. In Jackson, Tennessee, we have a loan officer who works tirelessly with the Boys & Girls Club and was honored last year by being named an Outstanding Board Member for the Club. In Columbia, Missouri, there is an assistant branch manager who organized a food drive for the Alpha Phi Alpha fraternity to benefit needy families in Columbia. The food drive provided three meals a day for 15 families for an entire week.

Union Planters’ future is bright. We have completed our strategic repositioning initiatives, including our 18-month UPExcelTM project, and have an efficient business model that serves as a platform for future growth. We have the capacity to grow revenue in strong markets with an effective distribution network of nearly 800 branches in 12 states. We are focused on local market execution of our revenue growth strategies and also on improving overall asset quality. On behalf of everyone in the Union Planters family, I thank you for your continued support. We remain focused on consistent quality earnings growth for the benefit of you, our shareholders, as we take our company from good to great.

Jackson W. Moore

-s- Jackson W. Moore

Chairman, President and Chief Executive Officer

10


 

QUOTE

TECHNOLOGY IS THE PLATFORM FOR OUR EFFICIENT BUSINESS MODEL

We made significant investments in technology in 2002 to ensure customer satisfaction and create a climate for the success of our associates.

Customers receive high quality service and information about new products and services through new systems installed in our UPDirect® call center. This new technology allows call agents quicker access to customer information and the ability to cross-sell appropriate products when making sales calls. Real-time customer satisfaction surveys and a new monitoring process ensure the quality of customer service.

New consumer and business loan origination systems allow customers to receive loan approvals more quickly. Sales associates can now spend more time on managing customer relationships. These systems also ensure consistency in credit scoring, underwriting and product pricing, which allows the credit center to operate more efficiently.

The new automated dialing system in our collections area prioritizes and dials collection calls, allowing our associates to make more calls and collect more loan payments in less time than before. These efficiencies help control both credit and operating costs.

We also implemented financial management software that streamlines procurement, accounts payable and fixed asset activities. The related accounting entries are processed electronically, which conserves natural resources, reduces operating expenses and improves financial controls.

Investing in people and technology helps create the greatest value for our customers and our shareholders. This blend of talent and technology is the essence of our winning team.

11


 

OUR EFFICIENT BUSINESS MODEL

“Investing in people and technology helps create the greatest value for our customers and our shareholders. This blend of talent and technology is the essence of our winning team.”

Bobby L. Doxey

12


 

MICHAEL B. RUSSELL QUOTE

ASSOCIATES ARE THE POWER BEHIND OUR EFFICIENT BUSINESS MODEL

Our associates generated and implemented hundreds of recommendations to improve productivity and processes by realigning distribution channels, improving customer service and streamlining functions for greater efficiency. They embraced new sales tools, sales training and delivery approaches to accelerate revenue growth. These initiatives enabled Union Planters to undergo a tremendous amount of productive change in only 18 months. We responded to the changing needs of our customers and the changing conditions in our industry and the economy. People and companies must reinvent themselves or face the great risk of becoming obsolete.

These are some of the tools and training we provided to our associates in 2002 to help them respond to the changing needs of our customers:

  The Senior Leadership Development Program is a four-day course during which senior leaders learn to understand themselves and to improve their effectiveness as leaders and team members. They learn to motivate and to reward associates for performance excellence using the appropriate leadership style in various situations.
 
  Union Planters University consists of colleges specialized in developing our associates for excellence in sales, customer service and support functions. Programs are tailored for the customer segment served, and the course work is part of our unified sales and service model.
 
  UP3 is a Web-based learning management system that helps associates manage their training needs and career development plans. We believe that the development of our associates ensures the success of our winning team.

13


 

TURNING OUR VISION INTO REALITY

Local market execution is facilitated by the coordination and integration of sales efforts across retail, mortgage, commercial and wealth management product lines.

14


 

STEVEN J. SCHENCK QUOTE

TWO PEOPLE

MAN'S FACE

LOCAL MARKET EXECUTION WILL DRIVE REVENUE GROWTH

Union Planters has a network of 762 branches and 965 automated teller machines in markets with significant growth opportunity spanning 12 states. We offer a full range of consumer and commercial financial solutions. Success in growing revenue depends on effective sales execution at the local market level. Our local market execution is facilitated by the coordination and integration of sales efforts across retail, mortgage, commercial and wealth management product lines. Our regional presidents own their markets and are responsible for sales and service in all customer segments. We follow standard business models in each market and give regional presidents the necessary product management and targeted marketing support.

We have given our leaders and their salespeople the tools and the training they need to be successful. Sales associates, sales managers and regional sales executives attend comprehensive training programs. We have a relationship-based approach because associates are the link in retaining and deepening customer relationships. We have instilled accountability into our culture by linking compensation to sales results, ranking performance of salespeople and sales managers, and reinforcing effective disciplines through daily and weekly meetings.

15


 

WOMAN ON THE PHONE

RETAIL BANKING PRODUCTS

“Our retail banking associates offer customers more choices in how they bank by providing individual financial solutions.”

John V. White, Jr.

Union Planters is focused on becoming the premier retailer of financial services in the markets we serve. Our retail banking associates offer customers more choices in how they bank by providing individual financial solutions. Establishing the vision is straightforward. Making it happen in a way that is visible to customers is the challenge.

We continued to improve our banking basics. We established a uniform product line in all of our markets and introduced several new deposit, insurance and investment products in 2002. Union Planters offers simplicity and convenience to customers by giving them access to all financial services and a variety of ways to conduct business.

Customers can access their accounts at any time, day or night, through our automated customer service capability, Internet banking and 965 automated teller machines. Our UPDirect® customer contact center provides toll-free access to accounts and additional products and services. Our call center agents handle many routine requests that previously were directed to sales associates who now have more time for selling and servicing.

16


 

ALDOLFO HERRIQUES QUOTE

PHOTO OF FAST MOVING PEOPLE

PHOTO OF TWO WOMEN

COMMERCIAL BANKING PRODUCTS

Our regional presidents and their senior sales managers are responsible for commercial banking activities in each of the communities we serve. They are supported by a team of corporate relationship managers, business bankers and branch sales managers. These associates work directly with business owners and corporate customers, offering a wide range of products and expertise. Whether our customer needs capital to support funding and expansion, cash management to improve treasury operations, or insurance and professional employment organization services to reduce enterprise risk, Union Planters has the solution.

Union Planters is consistently ranked among the top 10 small business-friendly lenders in the country. Small business owners know they can rely on us to provide the products they need to manage their businesses. We also focus on opportunities with middle market companies that have annual sales between $10 million and $100 million. We have found that companies in this group typically are looking for financial relationships with partners who can provide counsel and strategic alternatives. For example, Union Planters gives foreign market access to domestic companies by financing product imports and exports. Through our Capital Factors, Inc. subsidiary, we provide funding and one of the oldest forms of outsourcing, accounts receivable management, to high-growth companies.

Our refined structure, combined with standard models for sales management and credit, has streamlined relationship management and enhanced our ability to meet the needs of business customers. Our relationship managers get to know their customer and the business to provide targeted solutions for today’s objectives as well as for future growth. We are well poised to respond to commercial banking opportunities throughout our markets.

17


 

SETTING NEW RECORDS

Union Planters combines the strength of traditional mortgage banking and nonconforming portfolio lending through multiple channels.

18


 

LOU ANN PAYNTER QUOTE

WOMAN WALKING

HANDSHAKE

MORTGAGE BANKING PRODUCTS

Union Planters originated a record $12 billion in mortgage loans in the low interest rate environment that prevailed throughout 2002. Our capabilities combine the strength of traditional mortgage banking and nonconforming portfolio lending in the origination of loans through multiple channels that include wholesale, correspondent and retail production offices in 20 states. We are dedicated to providing current and prospective homeowners a wide variety of mortgage financing options with superior customer service.

Union Planters also offers affordable housing loans and is active in initiatives with government and community organizations. An example is our partnership with 50 not-for-profit organizations in the Affordable Housing Program of the Federal Home Loan Bank of Cincinnati. Since 1990, Union Planters has supported approximately 100 affordable housing and community revitalization developments in five states. In July 2002, Union Planters entered into a multicultural partnership agreement with Fannie Mae to generate $2 billion in mortgage loans for low-to-moderate income and minority borrowers. Union Planters has already exceeded 50 percent of this two-year goal.

In March 2002, we completed the consolidation of our mortgage servicing operations, which resulted in improved customer service and increased efficiency. Union Planters was the 29th largest mortgage servicer in the United States at the end of the third quarter.

19


 

EXPANDING RESOURCES

Union Planters has unified regional distribution capability for all investment, insurance and trust services.

20


 

ALAN W. KENNEBECK QUOTE

PEOPLE WALKING

MANS PROFILE

FINANCIAL SERVICES: INVESTMENT SERVICES, INSURANCE AND TRUST PRODUCTS

Union Planters continued to expand investment services, insurance and trust offerings in 2002. We have unified regional distribution capability for all investment, insurance and trust services. Union Planters provides both personal and business clients complete consultation and service at each stage of the client’s financial life cycle.

We introduced additional investment services products during 2002 to prepare for a resumption of growth in brokerage activity as market conditions improve. Union Planters continues to be a leader in annuity sales. Insurance sales expanded both geographically and through new product lines. We increased penetration of life insurance through our retail banking offices and entered five additional states to broaden our markets for title insurance sales.

Union Planters completed a company-wide standardization of trust operating functions and reorganized institutional trust services to focus on three primary product areas: retirement services, capital markets and custody.

21


 

SELECTED FINANCIAL DATA

                                             
                Years Ended December 31,        
        2002   2001   2000   1999   1998
       
 
 
 
 
                (Dollars in thousands, except per share data)        
Income statement data
                                       
 
Net interest income
  $ 1,289,445     $ 1,275,973     $ 1,231,116     $ 1,256,531     $ 1,207,233  
 
Provision for losses on loans
    (197,901 )     (131,963 )     (77,062 )     (74,045 )     (204,056 )
 
Investment securities gains (losses)
    23,027       9,582       381       2,128       (9,074 )
 
Other noninterest income
    763,427       760,089       559,021       510,582       577,833  
 
Noninterest expense
    (1,111,087 )     (1,238,262 )     (1,102,840 )     (1,076,364 )     (1,200,014 )
 
   
     
     
     
     
 
 
Earnings before income taxes
    766,911       675,419       610,616       618,832       371,922  
 
Income taxes
    (237,924 )     (231,869 )     (201,306 )     (208,834 )     (146,316 )
 
   
     
     
     
     
 
 
Net earnings
  $ 528,987     $ 443,550     $ 409,310     $ 409,998     $ 225,606  
 
   
     
     
     
     
 
Per common share data
                                       
 
Net earnings
                                       
   
Basic
  $ 2.61     $ 2.15     $ 2.01     $ 1.92     $ 1.07  
   
Diluted
    2.59       2.13       2.00       1.90       1.05  
 
Cash dividends
    1.33       1.33       1.33       1.33       1.33  
 
Book value
    16.21       15.56       14.35       13.27       13.91  
Balance sheet data (at year-end)
                                       
 
Total assets
  $ 34,144,363     $ 33,197,604     $ 34,720,718     $ 33,280,353     $ 31,691,953  
 
Loans, net of unearned income
    22,774,732       23,163,039       23,957,494       21,446,400       19,576,826  
 
Allowance for losses on loans
    350,931       341,930       335,452       342,300       321,476  
 
Investment securities
    5,467,283       4,780,629       6,843,670       7,472,455       8,301,703  
 
Total deposits
    23,330,440       23,430,502       23,113,383       23,372,116       24,896,455  
 
Short-term borrowings
    3,637,610       3,076,679       6,086,896       5,422,504       1,648,039  
 
Long-term debt
                                       
   
Parent Company
    890,017       878,626       379,303       379,656       378,249  
   
Subsidiary banks
    1,897,756       1,858,073       1,559,668       738,114       1,060,483  
 
Total shareholders’ equity
    3,226,282       3,223,741       2,920,054       2,776,109       2,984,078  
Balance sheet data (for the year ended)
                                       
 
Average assets
    32,617,526       34,209,871       33,882,405       32,902,370       30,744,326  
 
Average shareholders’ equity
    3,203,027       3,100,945       2,807,672       2,980,664       2,931,703  
 
Average shares outstanding (in thousands)
                                       
   
Basic
    201,927       205,443       202,756       212,781       208,551  
   
Diluted
    204,609       208,043       204,983       215,975       214,040  
Profitability and capital ratios
                                       
 
Return on average assets
    1.62 %     1.30 %     1.21 %     1.25 %     .73 %
 
Return on average common equity
    16.55       14.34       14.63       13.80       7.71  
 
Net interest margin
    4.43       4.20       4.11       4.36       4.40  
 
Net interest spread
    3.96       3.53       3.41       3.69       3.60  
 
Loans/deposits (year-end)
    97.62       98.86       103.65       91.76       78.63  
 
Common and preferred dividend payout ratio
    51.05       61.92       66.62       69.93       113.67  
 
Shareholders’ equity/total assets (year-end)
    9.45       9.71       8.41       8.34       9.42  
 
Average shareholders’ equity/average total assets
    9.82       9.06       8.29       9.06       9.54  
 
Leverage ratio
    7.47       7.56       6.53       6.65       8.86  
 
Tier 1 capital/risk-weighted assets
    9.40       9.75       8.63       9.50       13.34  
 
Total capital/risk-weighted assets
    13.89       14.47       11.47       12.69       16.78  
Credit quality ratios (1)
                                       
 
Allowance for losses on loans/year-end loans
    1.56 %     1.48 %     1.42 %     1.64 %     1.71 %
 
Nonperforming loans/total loans
    1.17       1.02       .57       .62       .83  
 
Allowance for losses on loans/nonperforming loans
    133       145       249       264       206  
 
Nonperforming assets/loans and foreclosed properties
    1.51       1.31       .75       .80       .97  
 
Provision for losses on loans/average loans
    .86       .55       .34       .36       1.04  
 
Net charge-offs/average loans
    .82       .53       .36       .47       .95  

For additional information, please refer to Union Planters Corporation’s 2002 audited financial statements included in the 2003 Proxy Statement.

(1)   Exclusive of FHA/VA loans, which represent minimal credit risk to Union Planters, and loans held for resale.

22


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The discussion in this summary annual report contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements may address issues that involve significant risks and uncertainties. Although management believes that the expectations reflected in this discussion are reasonable, actual results may be materially different. Please refer to Appendix F in the Union Planters 2003 Proxy for a more thorough description of the types of risks and uncertainties that may affect management’s forward-looking statements.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Union Planters Corporation:

We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Union Planters Corporation and its subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of earnings, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2002 (not presented herein); and in our report dated January 16, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements, when read in conjunction with the consolidated financial statements from which it has been derived, is fairly stated, in all material respects, in relation thereto.

As discussed in the notes to the consolidated financial statements, effective January 1, 2002, Union Planters adopted new accounting standards for goodwill and other intangibles.

-s- PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Memphis, Tennessee
January 16, 2003

23


 

CONSOLIDATED BALANCE SHEET

                         
            December 31,
            2002   2001
           
 
            (Dollars in thousands, except per share data)
Assets
               
 
Cash and due from banks
  $ 1,008,078     $ 953,846  
 
Interest-bearing deposits at financial institutions
    116,208       54,351  
 
Federal funds sold and securities purchased under agreements to resell
    122,069       13,067  
 
Trading account assets
    266,322       263,315  
 
Loans held for resale
    2,400,210       1,862,637  
 
Available for sale securities
    5,467,283       4,780,629  
 
Loans
               
   
Commercial, financial and agricultural
    5,216,820       5,145,917  
   
Foreign
    217,570       397,737  
   
Accounts receivable – factoring
    666,731       640,312  
   
Real estate – construction
    2,261,893       2,190,854  
   
Real estate – mortgage
               
     
Secured by 1-4 family residential
    4,240,731       5,166,097  
     
FHA/VA government-insured/guaranteed
    231,895       133,751  
     
Nonfarm, nonresidential properties
    5,027,161       4,821,293  
     
Multi-family (5 or more) residential
    843,631       846,259  
     
Secured by farmland
    489,584       462,676  
   
Home equity
    1,538,088       935,841  
   
Consumer
    1,989,835       2,338,560  
   
Direct lease financing
    73,768       104,705  
 
   
     
 
     
Total loans
    22,797,707       23,184,002  
     
Less: Unearned income
    (22,975 )     (20,963 )
       
Allowance for losses on loans
    (350,931 )     (341,930 )
 
   
     
 
     
Net loans
    22,423,801       22,821,109  
 
Premises and equipment, net
    540,183       556,686  
 
Accrued interest receivable
    207,869       245,847  
 
Mortgage servicing rights, net
    264,295       150,303  
 
Goodwill, net
    803,185       780,612  
 
Other intangibles, net
    128,756       146,695  
 
Other assets
    396,104       568,507  
 
   
     
 
     
Total assets
  $ 34,144,363     $ 33,197,604  
 
   
     
 
Liabilities and shareholders’ equity
               
 
Deposits
               
   
Noninterest-bearing
  $ 5,035,464     $ 4,509,944  
   
Certificates of deposit of $100,000 and over
    1,578,996       1,602,117  
   
Other interest-bearing
    16,715,980       17,318,441  
 
   
     
 
     
Total deposits
    23,330,440       23,430,502  
 
Short-term borrowings
    3,637,610       3,076,679  
 
Short- and medium-term senior notes
    600,045        
 
Federal Home Loan Bank advances
    960,029       1,461,190  
 
Other long-term debt
    1,227,699       1,275,509  
 
Accrued interest, expenses and taxes
    260,275       282,211  
 
Other liabilities
    901,983       447,772  
 
   
     
 
     
Total liabilities
    30,918,081       29,973,863  
 
   
     
 
 
Commitments and contingent liabilities
           
 
Shareholders’ equity
               
   
Convertible preferred stock
    10,194       16,101  
   
Common stock, $5 par value; 300,000,000 shares authorized; 198,434,384 issued and outstanding (206,113,331 at December 31, 2001)
    992,172       1,030,567  
 
Additional paid-in capital
    537,417       535,378  
 
Retained earnings
    1,639,465       1,600,153  
 
Unearned compensation
    (20,118 )     (13,022 )
 
Accumulated other comprehensive income
    67,152       54,564  
 
   
     
 
     
Total shareholders’ equity
    3,226,282       3,223,741  
 
   
     
 
     
Total liabilities and shareholders’ equity
  $ 34,144,363     $ 33,197,604  
 
   
     
 

For additional information, please refer to Union Planters Corporation’s 2002 audited financial statements included in the 2003 Proxy Statement.

24


 

CONSOLIDATED STATEMENT OF EARNINGS

                               
          Years Ended December 31,
          2002   2001   2000
         
 
 
          (Dollars in thousands, except per share data)
Interest income
                       
 
Interest and fees on loans
  $ 1,527,577     $ 1,937,215     $ 2,025,117  
 
Interest on investment securities
                 
     
Taxable
    230,355       281,741       387,505  
     
Tax-exempt
    42,167       59,307       64,897  
 
Interest on deposits at financial institutions
    2,421       2,047       2,170  
 
Interest on federal funds sold and securities purchased under agreements to resell
    1,437       2,213       5,072  
 
Interest on trading account assets
    9,562       15,836       16,806  
 
Interest on loans held for resale
    89,609       75,733       26,087  
 
   
     
     
 
     
Total interest income
    1,903,128       2,374,092       2,527,654  
 
   
     
     
 
Interest expense
                       
 
Interest on deposits
    428,656       757,354       835,109  
 
Interest on short-term borrowings
    36,252       176,649       366,753  
 
Interest on long-term debt
    148,775       164,116       94,676  
 
   
     
     
 
     
Total interest expense
    613,683       1,098,119       1,296,538  
 
   
     
     
 
     
Net interest income
    1,289,445       1,275,973       1,231,116  
Provision for losses on loans
    197,901       131,963       77,062  
 
   
     
     
 
     
Net interest income after provision for losses on loans
    1,091,544       1,144,010       1,154,054  
 
   
     
     
 
Noninterest income
                       
 
Service charges on deposit accounts
    232,229       218,341       182,035  
 
Mortgage banking revenue
    243,391       183,909       117,925  
 
Merchant services income
    11,996       65,518       37,047  
 
Factoring commissions and fees
    41,533       38,061       38,275  
 
Professional employment organization, net revenues
    28,305       21,916       13,755  
 
Bankcard transaction fees
    38,826       30,774       28,616  
 
Trust service income
    28,082       27,961       26,395  
 
Investment and insurance services
    54,877       50,891       47,744  
 
Investment securities gains
    23,027       9,582       381  
 
Other income
    84,188       122,718       67,229  
 
   
     
     
 
     
Total noninterest income
    786,454       769,671       559,402  
 
   
     
     
 
Noninterest expense
                       
 
Salaries and employee benefits
    536,799       537,060       508,439  
 
Net occupancy expense
    102,005       104,414       93,054  
 
Equipment expense
    84,192       89,371       84,668  
 
Goodwill amortization
    5,464       48,440       46,290  
 
Other intangibles amortization
    16,391       17,156       17,811  
 
Other expense
    366,236       441,821       352,578  
 
   
     
     
 
     
Total noninterest expense
    1,111,087       1,238,262       1,102,840  
 
   
     
     
 
     
Earnings before income taxes
    766,911       675,419       610,616  
Income taxes
    237,924       231,869       201,306  
 
   
     
     
 
     
Net earnings
  $ 528,987     $ 443,550     $ 409,310  
 
   
     
     
 
     
Net earnings applicable to common shares
  $ 528,011     $ 442,162     $ 407,703  
 
   
     
     
 
Earnings per common share
                       
 
Basic
  $ 2.61     $ 2.15     $ 2.01  
 
Diluted
    2.59       2.13       2.00  
Dividends per common share
    1.33       1.33       1.33  
Average common shares outstanding (in thousands)
                       
   
Basic
    201,927       205,543       202,756  
   
Diluted
    204,609       208,043       204,983  

For additional information, please refer to Union Planters Corporation’s 2002 audited financial statements included in the 2003 Proxy Statement.

25


 

UNION PLANTERS BUILDING

                          EXECUTIVE MANAGEMENT COMMITTEE

     
Jackson W. Moore   Lou Ann Poynter
Chairman, President   Senior Executive Vice President
and Chief Executive Officer   Mortgage Banking
     
Bobby L. Doxey   Michael B. Russell
Senior Executive Vice President   Senior Executive Vice President
and Chief Financial Officer   Manager of Credit Policy
     
Adolfo Henriques   Steven J. Schenck
Southern Banking Group Chief Executive   Midwest Banking Group Chief Executive
and Head of Commercial Banking   and Head of Credit Improvement
     
Alan W. Kennebeck   John V. White, Jr.
Senior Executive Vice President   Central Banking Group Chief Executive
Director of Financial Services   and Head of Retail Banking and Financial Services

26


 

NUMBERS

                          BOARD OF DIRECTORS

     
Albert M. Austin   Lou Ann Poynter
Chairman   Senior Executive Vice President
Cannon, Austin & Cannon, Inc.   Union Planters Corporation and
    Union Planters Bank, National Association
Samuel W. Bartholomew, Jr.    
Chairman and Chief Executive Officer   John R. Roberts
Stokes Bartholomew Evans & Petree, P.A.   Managing Parner (retired)
    Mid-South Region
George W. Bryan   Arthur Andersen LLP
Chief Executive Officer    
Old Waverly Investments, LLC   Michael S. Starnes
    President
James E. Harwood   M.S. Carriers, Inc., a subsidiary of
President   Swift Transportation Corporation
Sterling Equities, Inc.    
    Richard A. Trippeer, Jr.
Parnell S. Lewis, Jr.   President (retired)
Chief Executive Officer (retired)   R.A. Trippeer, Inc.
River Investments, LLC    
    Robert R. Waller, M.D.
Jackson W. Moore   President Emeritus (retired)
Chairman, President   Mayo Clinic
and Chief Executive Officer    
Union Planters Corporation and   Spence L. Wilson
Union Planters Bank, National Association   President
    Kemmons Wilson, Inc.
Jorge M. Perez    
President    
The Related Group of Florida    

   
  Please refer to Union Planters 2003 Proxy for a more thorough description.
© 2003 Union Planters Corporation

 


 

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