##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (Union Planters Logo) FORM 10-Q x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2004ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period _________ to ________
 Commission File No. 1-10160 UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter) Tennessee
    
    62-0859007(State of incorporation)
    
    (IRS Employer Identification No.)
 Union Planters Corporation
6200 Poplar Avenue
Memphis, Tennessee 38119   Registrants telephone number, including area code: (901) 580-6000 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes x        No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x        No o Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date. Class
    
    Outstanding at April 30, 2004Common stock $5 par value
    
    190,019,883




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UNION PLANTERS CORPORATION AND SUBSIDIARIES
Form 10-Q For the Three Months Ended March 31, 2004 INDEX PagePart I. FINANCIAL INFORMATION
    
    
    3Item 1 - Financial Statements (unaudited)
    
    
    3CONSOLIDATED BALANCE SHEET
    
    
    3CONSOLIDATED STATEMENT OF EARNINGS
    
    
    4CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
    
    
    5CONSOLIDATED STATEMENT OF CASH FLOWS
    
    
    6NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    7Note 1. Principles of Consolidation and Basis of Presentation
    
    
    7Note 2. Available for Sale Securities
    
    
    8Note 3. Allowance for Losses on Loans and Nonperforming Loans
    
    
    9Note 4. Mortgage Servicing Rights
    
    
    9Note 5. Intangible Assets
    
    
    10Note 6. Borrowings
    
    
    10Note 7. Shareholders Equity
    
    
    11Note 8. Preferred Stock of Subsidiary
    
    
    12Note 9. Other Noninterest Income and Expense
    
    
    13Note 10. Income Taxes
    
    
    13Note 11. Other Comprehensive Income
    
    
    13Note 12. Earnings Per Share
    
    
    14Note 13. Derivative Financial Instruments
    
    
    14Note 14. Line of Business Reporting
    
    
    16Note 15. Contingent Liabilities
    
    
    16Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3 - Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4 - Controls and Procedures
    
    
    29PART II  OTHER INFORMATION
    
    
    31Item 1 - Legal Proceedings
    
    
    31Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    31Item 3 - Defaults Upon Senior Securities
    
    
    31Item 4 - Submission of Matters to a Vote of Security Holders
    
    
    31Item 5 - Other Information
    
    
    31Item 6 - Exhibits and Reports on Form 8-K
    
    
    31SIGNATURES
    
    
    32CERTIFICATIONS
    
    
    34EX-31 SECTION 302 CERTIFICATIONS OF THE CEO & CFOEX-32.A SECTION 906 CERTIFICATION OF THE CEOEX-32.B SECTION 906 CERTIFICATION OF THE CFO
  2




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##### Table of Contents



Part I. FINANCIAL INFORMATION 
 Item 1  Financial Statements (unaudited) 
 UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited) March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands, except per share data)AssetsCash and due from banks
    
    $
    741,678
    
    
    $
    842,860
    
    
    $
    961,986Interest-bearing deposits at financial institutions
    
    
    72,309
    
    
    
    105,452
    
    
    
    84,590Federal funds sold and securities purchased
under agreements to resell
    
    
    10,567
    
    
    
    43,885
    
    
    
    699,800Trading account assets
    
    
    297,734
    
    
    
    294,669
    
    
    
    343,089Loans held for resale
    
    
    1,141,788
    
    
    
    2,081,114
    
    
    
    832,474Available for sale securities
    
    
    5,211,084
    
    
    
    6,083,615
    
    
    
    4,955,877Loans:Commercial, financial and agricultural
    
    
    4,904,737
    
    
    
    5,176,219
    
    
    
    5,007,404Foreign
    
    
    284,223
    
    
    
    188,366
    
    
    
    258,713Accounts receivable  factoring
    
    
    641,566
    
    
    
    732,154
    
    
    
    595,337Real estate  construction
    
    
    2,343,970
    
    
    
    2,313,278
    
    
    
    2,304,309Real estate  mortgageSecured by 1-4 family residential
    
    
    3,476,528
    
    
    
    4,281,303
    
    
    
    3,515,057Non-farm, nonresidential properties
    
    
    5,164,793
    
    
    
    5,098,396
    
    
    
    5,139,525Multi-family (5 or more) residential
    
    
    868,239
    
    
    
    822,713
    
    
    
    856,094Secured by farmland
    
    
    467,805
    
    
    
    482,903
    
    
    
    474,456Home equity
    
    
    2,174,520
    
    
    
    1,674,379
    
    
    
    2,062,582Consumer
    
    
    1,719,029
    
    
    
    1,900,904
    
    
    
    1,759,076Direct lease financing
    
    
    44,417
    
    
    
    67,012
    
    
    
    47,926Total loans
    
    
    22,089,827
    
    
    
    22,737,627
    
    
    
    22,020,479Less: Unearned income
    
    
    (24,539
    )
    
    
    (23,012
    )
    
    
    (24,442
    )Allowance for losses on loans
    
    
    (308,763
    )
    
    
    (350,962
    )
    
    
    (330,826
    )Net loans
    
    
    21,756,525
    
    
    
    22,363,653
    
    
    
    21,665,211Mortgage servicing rights, net
    
    
    324,966
    
    
    
    240,287
    
    
    
    352,105Accrued interest receivable
    
    
    158,467
    
    
    
    204,454
    
    
    
    168,418Premises and equipment, net
    
    
    494,897
    
    
    
    532,663
    
    
    
    513,496Goodwill, net
    
    
    743,185
    
    
    
    743,212
    
    
    
    743,185Other intangibles, net
    
    
    157,955
    
    
    
    183,441
    
    
    
    167,921Other assets
    
    
    386,809
    
    
    
    441,523
    
    
    
    422,577Total assets
    
    $
    31,497,964
    
    
    $
    34,160,828
    
    
    $
    31,910,729Liabilities and shareholders equityDepositsNoninterest-bearing
    
    $
    5,498,829
    
    
    $
    5,109,821
    
    
    $
    5,384,335Time deposits of $100,000 and over
    
    
    1,494,822
    
    
    
    1,636,165
    
    
    
    1,576,916Other interest-bearing
    
    
    15,751,107
    
    
    
    17,797,243
    
    
    
    16,184,933Total deposits
    
    
    22,744,758
    
    
    
    24,543,229
    
    
    
    23,146,184Short-term borrowings
    
    
    2,013,696
    
    
    
    2,517,165
    
    
    
    2,451,285Short- and medium-term senior notes
    
    
    608,176
    
    
    
    601,300
    
    
    
    597,892Federal Home Loan Bank advances
    
    
    428,598
    
    
    
    959,687
    
    
    
    428,903Other long-term debt
    
    
    1,631,270
    
    
    
    1,201,349
    
    
    
    1,598,405Accrued interest, expenses and taxes
    
    
    205,475
    
    
    
    258,630
    
    
    
    158,778Other liabilities
    
    
    759,567
    
    
    
    789,909
    
    
    
    463,643Total liabilities
    
    
    28,391,540
    
    
    
    30,871,269
    
    
    
    28,845,090Commitments and contingent liabilities (Note 15)
    
    
    
    
    
    
    
    
    
    
    Shareholders equityConvertible preferred stock
    
    
    
    
    
    
    10,110
    
    
    
    9,603Common stock, $5 par value; 300,000,000 shares authorized;
190,019,520 issued and outstanding (198,737,222 at
March 31, 2003 and 188,918,687 at December 31, 2003)
    
    
    950,098
    
    
    
    993,686
    
    
    
    944,593Additional paid-in capital
    
    
    568,889
    
    
    
    542,265
    
    
    
    554,722Retained earnings
    
    
    1,599,551
    
    
    
    1,706,733
    
    
    
    1,590,355Unearned compensation
    
    
    (41,039
    )
    
    
    (21,603
    )
    
    
    (36,081
    )Accumulated other comprehensive income
    
    
    28,925
    
    
    
    58,368
    
    
    
    2,447Total shareholders equity
    
    
    3,106,424
    
    
    
    3,289,559
    
    
    
    3,065,639Total liabilities and shareholders equity
    
    $
    31,497,964
    
    
    $
    34,160,828
    
    
    $
    31,910,729
 The accompanying notes are an integral part of these consolidated financial statements. 3




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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited) Three Months EndedMarch 31,2004
    
    2003(Amounts in thousands,except per share data)Interest incomeInterest and fees on loans
    
    $
    293,597
    
    
    $
    342,327Interest on available for sale securitiesTaxable
    
    
    44,859
    
    
    
    51,757Tax-exempt
    
    
    4,202
    
    
    
    8,633Interest on deposits at financial institutions
    
    
    274
    
    
    
    452Interest on federal funds sold and securities purchased
under agreements to resell
    
    
    312
    
    
    
    155Interest on trading account assets
    
    
    1,763
    
    
    
    2,287Interest on loans held for resale
    
    
    9,927
    
    
    
    28,009Total interest income
    
    
    354,934
    
    
    
    433,620Interest expenseInterest on deposits
    
    
    56,015
    
    
    
    80,412Interest on short-term borrowings
    
    
    4,655
    
    
    
    9,272Interest on long-term debt
    
    
    27,176
    
    
    
    32,613Total interest expense
    
    
    87,846
    
    
    
    122,297Net interest income
    
    
    267,088
    
    
    
    311,323Provision for losses on loans
    
    
    62,823
    
    
    
    48,649Net interest income after provision for losses on loans
    
    
    204,265
    
    
    
    262,674Noninterest incomeService charges on deposit accounts
    
    
    55,624
    
    
    
    57,722Mortgage banking revenues, net
    
    
    1,324
    
    
    
    4,673Factoring commissions and fees
    
    
    9,787
    
    
    
    9,900Professional employment organization, net revenues
    
    
    5,811
    
    
    
    6,391Bankcard transaction fees
    
    
    9,577
    
    
    
    9,683Available for sale securities gains, net
    
    
    31,861
    
    
    
    18,956Financial services revenues
    
    
    19,514
    
    
    
    17,734Other income
    
    
    41,912
    
    
    
    24,467Total noninterest income
    
    
    175,410
    
    
    
    149,526Noninterest expenseSalaries and employee benefits
    
    
    137,374
    
    
    
    136,918Net occupancy expense
    
    
    25,630
    
    
    
    25,743Equipment expense
    
    
    20,431
    
    
    
    20,194Other intangibles amortization
    
    
    5,042
    
    
    
    5,290Other expense
    
    
    88,229
    
    
    
    81,515Total noninterest expense
    
    
    276,706
    
    
    
    269,660Earnings before income taxes
    
    
    102,969
    
    
    
    142,540Income taxes
    
    
    29,861
    
    
    
    8,829Net earnings
    
    $
    73,108
    
    
    $
    133,711Net earnings applicable to common shares
    
    $
    73,033
    
    
    $
    133,510Earnings per common shareBasic
    
    $
    .39
    
    
    $
    .67Diluted
    
    
    .38
    
    
    
    .67Dividends per common share
    
    
    .33
    
    
    
    .33Average common shares outstandingBasic
    
    
    189,295
    
    
    
    198,549Diluted
    
    
    191,093
    
    
    
    200,355
 The accompanying notes are an integral part of these consolidated financial statements. 4




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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited) Convertible
    
    Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedPreferred Stock
    
    Stock
    
    Additional
    
    
    
    
    
    
    
    
    
    OtherPaid-in
    
    Retained
    
    Unearned
    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    Compensation
    
    Income
    
    Total(Amounts in thousands)Balance, December 31, 2003
    
    
    384
    
    
    $
    9,603
    
    
    
    188,919
    
    
    $
    944,593
    
    
    $
    554,722
    
    
    $
    1,590,355
    
    
    $
    (36,081
    )
    
    $
    2,447
    
    
    $
    3,065,639Comprehensive incomeNet earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,108
    
    
    
    
    
    
    
    
    
    
    
    73,108Other comprehensive income, net of taxes:Net change in unrealized gain on
available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,422
    
    
    
    19,422Net change in unrealized gain on
cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,056
    
    
    
    7,056Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,586DividendsCommon dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,123
    )
    
    
    
    
    
    
    
    
    
    
    (63,123
    )Preferred dividends  Series E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    (75
    )Common stock issued under employee
benefit plans, net of exchanges
    
    
    
    
    
    
    
    
    
    
    441
    
    
    
    2,205
    
    
    
    8,667
    
    
    
    
    
    
    
    (6,477
    )
    
    
    
    
    
    
    4,395Amortization of restricted stock grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,519
    
    
    
    
    
    
    
    1,519Conversion of preferred stock
    
    
    (352
    )
    
    
    (8,800
    )
    
    
    660
    
    
    
    3,300
    
    
    
    5,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of preferred stock
    
    
    (32
    )
    
    
    (803
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (803
    )Final cash settlement for common stock
previously repurchased and retired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (714
    )
    
    
    
    
    
    
    
    
    
    
    (714
    )Balance, March 31, 2004
    
    
    
    
    
    $
    
    
    
    
    190,020
    
    
    $
    950,098
    
    
    $
    568,889
    
    
    $
    1,599,551
    
    
    $
    (41,039
    )
    
    $
    28,925
    
    
    $
    3,106,424
 The accompanying notes are an integral part of these consolidated financial statements. 5




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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Operating activitiesNet earnings
    
    $
    73,108
    
    
    $
    133,711Reconciliation of net earnings to net cash provided by operating activities:Provision for losses on loans
    
    
    62,823
    
    
    
    48,649Depreciation and amortization of premises and equipment
    
    
    16,907
    
    
    
    16,580Amortization of other intangibles
    
    
    5,042
    
    
    
    5,290Amortization and impairment of mortgage servicing rights, net
    
    
    47,505
    
    
    
    81,802Net amortization of available for sale securities
    
    
    6,410
    
    
    
    3,472Net realized gains on sales of available for sale securities
    
    
    (31,861
    )
    
    
    (18,956
    )Gain on sale of residential mortgage loans held for resale, net
    
    
    (9,632
    )
    
    
    (42,356
    )Gain on sale and securitization of residential mortgage loans, net
    
    
    (419
    )
    
    
    Gain on sale of branches
    
    
    (21,643
    )
    
    
    (2,026
    )Deferred income tax benefit
    
    
    (2,468
    )
    
    
    (3,995
    )(Increase) decrease in trading account assets and loans held for resale
    
    
    (255,814
    )
    
    
    363,193Decrease (increase) in other assets
    
    
    86,789
    
    
    
    (88,756
    )Net increase in accrued interest, expenses, taxes and other liabilities
    
    
    40,629
    
    
    
    4,003Other, net
    
    
    1,519
    
    
    
    643Net cash provided by operating activities
    
    
    18,895
    
    
    
    501,254Investing activitiesNet decrease in short-term investments
    
    
    12,281
    
    
    
    10,756Proceeds from sales of available for sale securities
    
    
    1,098,567
    
    
    
    748,106Proceeds from maturities, calls and prepayments of available for sale securities
    
    
    230,693
    
    
    
    807,564Purchases of available for sale securities
    
    
    (1,226,120
    )
    
    
    (2,371,948
    )Net increase in loans
    
    
    (322,552
    )
    
    
    (24,291
    )Proceeds from whole loan sales and securitizations of residential mortgages
    
    
    24,458
    
    
    
    Purchases of premises and equipment
    
    
    (3,839
    )
    
    
    (10,260
    )Proceeds from sales of premises and equipment
    
    
    498
    
    
    
    518Net cash used by investing activities
    
    
    (186,014
    )
    
    
    (839,555
    )Financing activitiesNet (decrease) increase in deposits
    
    
    (178,254
    )
    
    
    1,194,541Net decrease in short-term borrowings
    
    
    (437,589
    )
    
    
    (1,122,918
    )Repayment of long-term debt
    
    
    (307
    )
    
    
    (25,344
    )Net cash paid for sales of deposits
    
    
    (66,521
    )
    
    
    (16,106
    )Net cash received from deposits assumed
    
    
    
    
    
    
    37,286Proceeds from sale of subsidiary stock, net
    
    
    
    
    
    
    86,893Proceeds from issuance of common stock
    
    
    4,161
    
    
    
    6,855Final cash settlement for common stock previously repurchased and retired
    
    
    (714
    )
    
    
    Cash dividends
    
    
    (63,198
    )
    
    
    (66,308
    )Net cash (used) provided by financing activities
    
    
    (742,422
    )
    
    
    94,899Net decrease in cash and cash equivalents
    
    
    (909,541
    )
    
    
    (243,402
    )Cash and cash equivalents at the beginning of the period
    
    
    1,661,786
    
    
    
    1,130,147Cash and cash equivalents at the end of the period
    
    $
    752,245
    
    
    $
    886,745Supplemental disclosuresCash paid forInterest
    
    $
    88,362
    
    
    $
    127,328Income taxes
    
    
    2,319
    
    
    
    408Non-cash itemsUnrealized gain on available for sale securities at period-end
    
    
    31,562
    
    
    
    92,690Unrealized gain on cash flow hedges at period-end
    
    
    14,406
    
    
    
    Purchases of available for sale securities, pending settlement at period-end
    
    
    303,200
    
    
    
    305,344Transfers to other real estate from loans
    
    
    29,156
    
    
    
    35,788Transfers to loans held for resale from loans
    
    
    187,861
    
    
    
    
 The accompanying notes are an integral part of these consolidated financial statements. 6




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##### Table of Contents



UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
 Note 1. Principles of Consolidation and Basis of Presentation The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
foregoing financial statements are unaudited; however, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods have been
included. The accounting policies followed by Union Planters Corporation and its
subsidiaries (collectively, Union Planters or the Company) for interim
financial reporting are consistent with the accounting policies followed for
annual financial reporting, except for newly issued accounting pronouncements
discussed below. The notes included herein should be read in conjunction with
Union Planters 2003 Annual Report on Form 10-K. Certain prior period amounts
have been reclassified to conform with the 2004 financial reporting
presentation. In the second quarter of 2003, Union Planters began netting amortization and
impairment expense associated with mortgage servicing rights (MSRs) against
mortgage banking revenues in the Consolidated Statement of Earnings. This
classification is more consistent with prevailing practice in the banking
industry. All prior periods have been adjusted to conform with this
presentation. On January 22, 2004, Union Planters and Regions Financial Corporation (Regions)
entered into a definitive merger agreement. Regions, headquartered in
Birmingham, Alabama, is a full-service provider of banking, securities
brokerage, mortgage and insurance products and services. Upon completion of
the merger, the combined company and its banking operations will be
headquartered in Birmingham while Morgan Keegan, Regions securities brokerage
subsidiary, along with the combined mortgage business, will be headquartered in
Memphis. Terms of the agreement call for the formation of a new holding
company named New Regions Financial Corporation. In the transaction, each
share of Union Planters common stock will be converted into the right to
receive one share of the new company stock, and each share of Regions common
stock will be converted into the right to receive 1.2346 shares of the new
company common stock. The acquisition is subject to regulatory and shareholder
approvals and other customary closing conditions. The transaction is expected
to be completed in mid 2004. As a result of the merger, certain
change-in-control provisions will be triggered related to the Union Planters
401(k) Retirement Savings Plan and various stock incentive plans that will
result in the immediate vesting of these benefits. Stock-Based Compensation.Union Planters has currently elected not to adopt
the recognition provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, which requires a
fair-value based method of accounting for stock options and similar equity
awards. As permitted under SFAS No. 123, Union Planters continues to apply
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations in accounting for its stock
compensation plans and, accordingly, does not recognize compensation cost,
except for stock grants. Had compensation cost for Union Planters stock option
plans been consistently expensed based on fair value at the grant date for
awards under the methodology prescribed under SFAS No. 123, Union Planters net
income and earnings per share would have been reduced as shown in the table
below. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
during the quarters ended March 31, 2004 and 2003, respectively: expected
dividend yield of 4.19% and 4.59%; expected volatility of 25.14% and 26.79%;
risk-free interest rate of 2.64% and 2.16%; and an expected life of 2.3 years
for both periods. Forfeitures are recognized as they occur. Three Months Ended March 31,2004
    
    2003(Dollars in millions,except per share data)Weighted average fair value per share, at grant date
    
    $
    3.90
    
    
    $
    4.19Net earnings  as reported
    
    $
    73.1
    
    
    $
    133.7Less: Total stock-based employee compensation
expense determined under fair value-based method,
net of tax benefit
    
    
    3.6
    
    
    
    3.0Net earnings  pro-forma
    
    $
    69.5
    
    
    $
    130.7Earnings per share  as reportedBasic (1)
    
    $
    .39
    
    
    $
    .67Diluted
    
    
    .38
    
    
    
    .67Earnings per share  pro-formaBasic (1)
    
    
    .37
    
    
    
    .66Diluted
    
    
    .36
    
    
    
    .65
   (1)
    
    For the purpose of calculating basic earnings
per share, net earnings is adjusted by the
dividend on preferred stock, which was
approximately $.06 million in 2004 and $.20 million in 2003. Recent Accounting Pronouncements Interest Rate Lock Commitments.The United States Securities and Exchange
Commission (SEC) recently issued Staff Accounting Bulletin (SAB) No. 105. SAB
No. 105 clarifies the SECs position that the inclusion of cash flows from
servicing or ancillary income in the determination of the fair value of
interest rate lock commitments is not appropriate. SAB No. 105 must be 7




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##### Table of Contents



implemented for loan commitments entered into on or after April 1, 2004. The
adoption is not expected to have a material impact on the Companys financial
condition, results of operations or cash flows. Consolidation of Variable Interest Entities.In January 2003, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51. The Company adopted FIN No. 46 on July 1, 2003 and
as a result, deconsolidated Union Planters Capital Trust A (the UPC Trust).
The sole assets of the UPC Trust are 8.20% Junior Subordinated Deferrable
Interest Debentures of Union Planters Corporation (the Junior Subordinated
Debentures). The UPC Trusts liabilities are primarily represented by 8.20%
Trust Preferred Securities, which have previously been included in other
long-term debt in the Union Planters Consolidated Balance Sheet. Under FIN No.
46, the Junior Subordinated Debentures, which are substantially equal in amount
to the Trust Preferred Securities, cease to be eliminated in consolidation and
are included in other long-term debt in the Union Planters Consolidated Balance
Sheet as of March 31, 2004. The Trust Preferred Securities presently qualify
as Tier 1 regulatory capital and are reported in Federal Reserve regulatory
reports as a minority interest in a consolidated subsidiary. The Junior
Subordinated Debentures do not qualify as Tier 1 regulatory capital. The
Federal Reserve Board has reached no final conclusion on the continued
qualification of Trust Preferred Securities but has indicated that until
further notice, Trust Preferred Securities will continue to count as Tier 1
regulatory capital. Should the Federal Reserve Board reach a conclusion that
Trust Preferred Securities no longer included on the Consolidated Balance Sheet
would cease to qualify as Tier 1 regulatory capital, Union Planters Tier 1
regulatory capital would be reduced by approximately $200 million. 
 Note 2. Available for Sale Securities The following is a summary of Union Planters available for sale securities: UnrealizedAmortizedCost
    
    Gains
    
    Losses
    
    Fair Value(Dollars in thousands)March 31, 2004U.S. Government and federal agenciesU.S. Treasury
    
    $
    681,712
    
    
    $
    2,073
    
    
    $
    689
    
    
    $
    683,096U.S. Government agenciesCollateralized mortgage obligations
    
    
    858,633
    
    
    
    3,892
    
    
    
    5,346
    
    
    
    857,179Mortgage-backed
    
    
    1,272,159
    
    
    
    8,947
    
    
    
    8,170
    
    
    
    1,272,936Other
    
    
    1,052,657
    
    
    
    2,928
    
    
    
    3,739
    
    
    
    1,051,846Total U.S. Government and federal agencies
    
    
    3,865,161
    
    
    
    17,840
    
    
    
    17,944
    
    
    
    3,865,057Obligations of states and political subdivisions.
    
    
    193,244
    
    
    
    8,700
    
    
    
    30
    
    
    
    201,914Collateralized mortgage obligations
    
    
    634,525
    
    
    
    22,134
    
    
    
    2,682
    
    
    
    653,977Other stocks and securities
    
    
    486,592
    
    
    
    3,670
    
    
    
    126
    
    
    
    490,136Total available for sale securities
    
    $
    5,179,522
    
    
    $
    52,344
    
    
    $
    20,782
    
    
    $
    5,211,084December 31, 2003U.S. Government and federal agenciesU.S. Treasury
    
    $
    71,921
    
    
    $
    1,462
    
    
    $
    36
    
    
    $
    73,347U.S. Government agenciesCollateralized mortgage obligations
    
    
    900,831
    
    
    
    1,754
    
    
    
    11,143
    
    
    
    891,442Mortgage-backed
    
    
    1,181,765
    
    
    
    7,734
    
    
    
    19,471
    
    
    
    1,170,028Other
    
    
    1,075,082
    
    
    
    3,250
    
    
    
    17,671
    
    
    
    1,060,661Total U.S. Government and federal agencies
    
    
    3,229,599
    
    
    
    14,200
    
    
    
    48,321
    
    
    
    3,195,478Obligations of states and political subdivisions.
    
    
    384,020
    
    
    
    22,230
    
    
    
    40
    
    
    
    406,210Collateralized mortgage obligations
    
    
    1,019,691
    
    
    
    12,979
    
    
    
    2,003
    
    
    
    1,030,667Other stocks and securities
    
    
    320,701
    
    
    
    3,130
    
    
    
    309
    
    
    
    323,522Total available for sale securities
    
    $
    4,954,011
    
    
    $
    52,539
    
    
    $
    50,673
    
    
    $
    4,955,877
 Available for sale securities having a fair value of approximately $2.2 billion
at March 31, 2004 and $1.9 billion at December 31, 2003 were pledged to secure
public and trust funds on deposit, securities sold under agreements to
repurchase and Federal Home Loan Bank (FHLB) advances. Included in available for sale securities is $289.6 million and $285.2 million
of FHLB and Federal Reserve Bank stock at March 31, 2004 and December 31, 2003,
respectively, for which there is no readily determinable market value. 8




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##### Table of Contents



The following table presents the gross realized gains and losses on available
for sale securities for the three months ended March 31, 2004 and 2003: Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Realized gains
    
    $
    31,861
    
    
    $
    19,408Realized losses
    
    
    
    
    
    
    (452
    )
 The losses during the first quarter of 2003 are related to interest only strips
arising from Union Planters sales and securitizations of mortgage loans, which
had an other than temporary decline in value due to increased prepayment speeds
on the underlying mortgages that were accounted for as a realized loss. 
 Note 3. Allowance for Losses on Loans and Nonperforming Loans The changes in the allowance for losses on loans for the three months ended
March 31, 2004 and 2003 are as follows: Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Beginning balance
    
    $
    330,826
    
    
    $
    350,931Provision for losses on loans
    
    
    62,823
    
    
    
    48,649Recoveries of loans previously charged off
    
    
    9,848
    
    
    
    9,094Loans charged off
    
    
    (50,104
    )
    
    
    (57,712
    )Write-downs arising from transfers of loans
to loans held for resale and sale of loans
    
    
    (44,630
    )
    
    
    Ending balance
    
    $
    308,763
    
    
    $
    350,962
 During the first quarter of
2004, management wrote down the allowance for losses
on loans by $43.9 million as the result of a decision to sell a $235.2 million
portfolio of brokered home equity and rental car fleet loans. A $25.8 million
charge to the provision for losses on loans was also required to write the
portfolio down to fair value prior to completing the transfer to loans held for
resale. The charge was required because the change in intent with regard to
the loans from holding them to maturity to holding them for resale results in
the loans being accounted for at the lower of cost or fair value rather than at
historical cost. Under Generally Accepted Accounting Principles, the
difference between cost and the lower fair value is charged to the provision
for losses on loans, with any future write-downs charged to noninterest
expense. Nonperforming loans are summarized as follows: March 31,
    
    December 31,2004
    
    2003(Dollars in thousands)Nonaccrual loans
    
    $
    195,204
    
    
    $
    209,455Restructured loans
    
    
    298
    
    
    
    302Total nonperforming loans
    
    $
    195,502
    
    
    $
    209,757
 
 Note 4. Mortgage Servicing Rights Union Planters acted as servicing agent on behalf of others for residential
mortgage loans totaling approximately $24.3 billion at March 31, 2004, compared
to $24.7 billion at December 31, 2003. The principal balances of loans
serviced for others are not included in Union Planters Consolidated Balance
Sheet. The following table presents a reconciliation of the changes in MSRs
and the related valuation allowance: Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Mortgage Servicing Rights, NetBeginning balance
    
    $
    352,105
    
    
    $
    264,295Capitalization of mortgage servicing rights
    
    
    20,366
    
    
    
    57,794Amortization of mortgage servicing rights
    
    
    (14,852
    )
    
    
    (10,267
    )Recognition of permanent impairment
    
    
    (13,499
    )
    
    
    Change in valuation allowance
    
    
    (19,154
    )
    
    
    (71,535
    )Ending balance
    
    $
    324,966
    
    
    $
    240,287
 9




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##### Table of Contents



Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Valuation AllowanceBeginning balance
    
    $
    19,753
    
    
    $
    12,297Recognition of permanent impairment
    
    
    (13,499
    )
    
    
    Provision for impairment
    
    
    32,653
    
    
    
    71,535Ending balance
    
    $
    38,907
    
    
    $
    83,832
 During the first quarter of 2004, Union Planters recorded a permanent
impairment of MSRs of $13.5 million, which reduced both the gross carrying
value and associated valuation allowance of the MSRs. This write-down had no
impact on the Consolidated Statement of Earnings in the current year but will
result in a reduction of MSRs amortization expense in future periods. The estimated fair value of MSRs at March 31, 2004 was $325.4 million.
Significant assumptions utilized in estimating the fair value were as follows: Estimated portfolio prepayment speeds
    
    14.8% - 34.0% CPRMarket discount rates
    
    
    9.3% - 12.1
    %Weighted average discount rate
    
    
    9.71
    %
 The significant assumptions above directly relate to and move in concert with
mortgage interest rates. In the view of management, in order to understand the
hypothetical effect on the fair value of the MSRs as a result of unfavorable
variations in the significant assumptions, it is necessary to measure the
effect that would result from a decline in mortgage interest rates. At March
31, 2004, the reduction in the current fair value of MSRs resulting from an
immediate 50 and 100 basis point decline in mortgage interest rates would be
approximately $45.7 million and $101.4 million, respectively. The actual
decline in fair value related to decreased mortgage interest rates could differ
significantly from this estimate due to the propensity of borrowers to
refinance in light of the remaining life and unpaid principal balance of their
existing mortgage loan and the costs related to refinancing. 
 Note 5. Intangible Assets In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, most
goodwill is no longer subject to amortization but is assessed at least annually
for impairment. The carrying value of goodwill not subject to amortization was
$743.2 million at March 31, 2004, December 31, 2003 and March 31, 2003. At
each of these dates, $70.5 million of the goodwill was in the other operating
units line of business, with the remainder in the banking line of business. Union Planters other intangible assets are core deposit intangibles acquired
through bank acquisitions and other unidentified intangibles arising from
branch purchases and are subject to amortization periods up to 15 years with no
residual value. The gross amount of other intangible assets was $309.2 million
at March 31, 2004 and $316.3 million at December 31, 2003 and March 31, 2003
with accumulated amortization of $151.2 million, $148.4 million and $132.9
million, respectively. Branches sold during the first quarter of 2004 resulted
in the release of gross intangible assets of $7.1 million along with associated
accumulated amortization of $2.3 million. All other intangibles are in the
banking line of business. The weighted average amortization period is 164.9
months. Amortization expense over the next five years on current other
intangibles is expected to be: (Dollars in thousands)Total
    2004
    
    
    $
    21,4912005
    
    
    
    21,3832006
    
    
    
    21,2022007
    
    
    
    19,1502008
    
    
    
    16,999
 
 Note 6. Borrowings Short-Term Borrowings Short-term borrowings include short-term FHLB advances, federal funds
purchased, securities sold under agreements to repurchase and other short-term
borrowings. Short-term FHLB advances are borrowings from the FHLB, which are
collateralized by mortgage-backed securities and mortgage loans. Federal funds
purchased arise from Union Planters market activity with its correspondent
banks with maturities ranging up to 180 days; the majority mature in one
business day. Securities sold under agreements to repurchase are
collateralized by U.S. Government and agency securities. 10




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##### Table of Contents



Short-term borrowings are summarized as follows: March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands)Balances at period-endFederal funds purchased with maturities ranging up to 180 days
    
    $
    682,050
    
    
    $
    1,168,656
    
    
    $
    327,994Securities sold under agreements to repurchase
    
    
    1,199,001
    
    
    
    1,294,096
    
    
    
    1,323,749Other short-term borrowings
    
    
    132,645
    
    
    
    54,413
    
    
    
    799,542Total short-term borrowings
    
    $
    2,013,696
    
    
    $
    2,517,165
    
    
    $
    2,451,285Federal funds purchased and securities sold under agreements to repurchaseYear-to-date daily average balance
    
    $
    1,938,704
    
    
    $
    2,547,340
    
    
    $
    2,271,060Weighted average interest rate
    
    
    .84
    %
    
    
    1.09
    %
    
    
    1.27
    %Short-term FHLB advancesYear-to-date daily average balance
    
    $
    31,868
    
    
    $
    456,667
    
    
    $
    478,412Weighted average interest rate
    
    
    1.03
    %
    
    
    1.28
    %
    
    
    1.58
    %
 Short- and Medium-Term Senior Notes At March 31, 2004, March 31, 2003 and December 31, 2003, there were $600
million, 5.125% fixed-rate Medium-term Subordinated Notes outstanding that
mature in June 2007. Long-term Federal Home Loan Bank Advances Certain of Union Planters banking and thrift subsidiaries had outstanding
advances with original maturity dates of greater than one year from the FHLB
under Blanket Agreements for Advances and Security Agreements (the Agreements).
The Agreements enable these subsidiaries to borrow funds from the FHLB to fund
mortgage loan programs and to satisfy certain other funding needs. The value
of the mortgage-backed securities and mortgage loans pledged under the
Agreements must be maintained at not less than 115% and 150%, respectively, of
the outstanding advances. At March 31, 2004, Union Planters had an adequate
amount of mortgage-backed securities and loans to satisfy the collateral
requirements. A summary of the advances is as follows: March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands)Balance at period-end
    
    $
    428,598
    
    
    $
    959,687
    
    
    $
    428,903Range of interest rates
    
    
    1.75% - 6.55
    %
    
    
    1.35% - 6.55
    %
    
    
    1.75% - 6.55
    %Range of maturities
    
    
    2004-2021
    
    
    
    2003-2021
    
    
    
    2004-2021
 Other Long-Term Debt Union Planters other long-term debt is summarized as follows. Reference is
made to Note 9 to the consolidated financial statements in Union Planters 2003
Annual Report on Form 10-K for additional information regarding these
borrowings. March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands)Obligations for Trust Preferred Securities,
represented by 8.20% Junior Subordinated Debentures beginning July 1, 2003 and by 8.20%
Trust Preferred Securities prior to that date
    
    $
    205,356
    
    
    $
    199,159
    
    
    $
    205,3476.25% Subordinated Notes due 2003
    
    
    
    
    
    
    74,470
    
    
    
    6.75% Subordinated Notes due 2005
    
    
    99,906
    
    
    
    99,847
    
    
    
    99,8917.75% Subordinated Notes due 2011
    
    
    499,378
    
    
    
    499,287
    
    
    
    499,3554.375% Subordinated Notes due 2010
    
    
    496,476
    
    
    
    
    
    
    
    496,3446.50% Putable/Callable Subordinated Notes due 2018
    
    
    301,036
    
    
    
    301,417
    
    
    
    301,131Variable-rate asset-backed certificates
    
    
    
    
    
    
    16,667
    
    
    
    Other long-term debt
    
    
    183
    
    
    
    661
    
    
    
    185Valuation adjustments related to hedging activities
    
    
    28,935
    
    
    
    9,841
    
    
    
    (3,848
    )Total other long-term debt
    
    $
    1,631,270
    
    
    $
    1,201,349
    
    
    $
    1,598,405
 
 Note 7. Shareholders Equity Common Stock Union Planters has been authorized by its Board of Directors (Board) to
repurchase shares of its common stock from time-to-time, and currently has
remaining authorization from the Board to repurchase approximately 24.7 million
shares of the Companys common stock. 11




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##### Table of Contents



Preferred Stock During the first quarter of 2004, Union Planters announced its intention to
redeem all outstanding shares of its convertible Series E Preferred stock. All
shares that were not converted prior to March 31, 2004 were redeemed at par.
The result was the conversion of 352,012 shares and the redemption of 32,107
shares not converted prior to the announced redemption date. Union Planters outstanding preferred stock, all of which is convertible into
shares of Union Planters common stock, is summarized as follows: March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands)Preferred stock, without par value, 10,000,000 shares authorizedSeries E, 8% cumulative, convertible, preferred stock (stated
at liquidation value of $25 per share) 0 shares issued and
outstanding (404,391 at March 31, 2003 and 384,119 at
December 31, 2003)
    
    $
    
    
    
    $
    10,110
    
    
    $
    9,603Series F
preferred stock, 300,000 shares authorized, none issued
    
    
    
    
    
    
    
    
    
    
    Total preferred stock
    
    $
    
    
    
    $
    10,110
    
    
    $
    9,603
 
 Note 8. Preferred Stock of Subsidiary During 2003, Union Planters Preferred Funding Corporation (UPPFC), an indirect
majority-owned, consolidated subsidiary of Union Planters, issued 1,000 shares
of 7.75% non-cumulative, perpetual preferred stock, Series B (Series B
Preferred Shares), with a liquidation value of $100,000 per share to another
indirect wholly-owned subsidiary of Union Planters, U.P. REIT Holdings, Inc.
(UP REIT Holdings). UPPFC is a real-estate investment trust (REIT) established
for the purpose of acquiring, holding and managing real estate mortgage assets.
All of the Series B Preferred Shares were subsequently sold privately to
non-affiliates without registration. These securities qualify as Tier I
capital and are included in the Consolidated Balance Sheet in other
liabilities. Dividends on the Series B Preferred Shares are payable quarterly
and are included in the Consolidated Statement of Earnings in other noninterest
expense. The Series B Preferred Shares are redeemable on or after July 15, 2023 and
redeemable at the discretion of UPPFC in the event that the Series B Preferred
Shares cannot be accounted for as Tier 1 regulatory capital or there is more
than an insubstantial risk that dividends paid with respect to the Series B
Preferred Shares will not be fully tax deductible. The total amount of Series
B Preferred Shares issued and outstanding on December 31, 2003, net of discount
and issuance costs, was $89.2 million. Concurrent with the issuance of the Series B Preferred Shares, UPPFC also
issued 3,736 shares of non-cumulative, perpetual preferred stock, Series C
(Series C Preferred Shares), with a liquidation value of $100,000 per share to
UP REIT Holdings. The holder of each of the Series C Preferred Shares is
entitled to dividends, payable quarterly, at an annual rate of three month
LIBOR plus 3% on the liquidation value. Additionally, the Series C Preferred
Shares rank equal to the Series B Preferred Shares. At December 31, 2003, UP
REIT Holdings continued to own all of the Series C Preferred Shares. So long
as the Series C Preferred Shares are owned by Union Planters or a consolidated
subsidiary, the shares and dividends paid thereon are eliminated in the
consolidated financial statements. The Series B Preferred Shares and the Series C Preferred Shares are not
convertible into any other securities of UPPFC, Union Planters or any of its
subsidiaries. The Series B Preferred Shares are, however, automatically
exchangeable at the direction of the Office of the Comptroller of the Currency
(OCC) for preferred stock of UPB, having substantially the same terms as the
Series B Preferred Shares in the event UPB becomes undercapitalized under the
OCCs prompt corrective actions regulations, insolvent or, in the OCCs sole
discretion, in danger of becoming undercapitalized. Should UPPFC not pay
dividends on the Series B Preferred Shares or the Series C Preferred Shares,
both UPPFC and UPB will be precluded from paying dividends on their common
stock until dividends have been paid on the Series B Preferred Shares for four
consecutive quarters. 12




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##### Table of Contents



Note 9. Other Noninterest Income and Expense Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Other noninterest incomeMerchant services income
    
    $
    461
    
    
    $
    1,418Profits and commissions from Small Business Administration trading activities
    
    
    2,025
    
    
    
    1,108Letters of credit fees
    
    
    2,361
    
    
    
    2,741Other real estate income
    
    
    726
    
    
    
    1,285Net gain on sales of branches/deposits and other assets
    
    
    21,121
    
    
    
    2,026Earnings of equity method investments
    
    
    1,125
    
    
    
    1,814Other income
    
    
    14,093
    
    
    
    14,075Total other noninterest income
    
    $
    41,912
    
    
    $
    24,467Other noninterest expenseCommunications
    
    $
    6,987
    
    
    $
    7,042Other contracted services
    
    
    8,048
    
    
    
    10,686Postage and carrier
    
    
    5,802
    
    
    
    6,374Advertising and promotion
    
    
    5,354
    
    
    
    8,920Stationery and supplies
    
    
    4,143
    
    
    
    4,185Other personnel services
    
    
    3,627
    
    
    
    4,097Legal fees and litigation expense
    
    
    4,342
    
    
    
    2,647Travel
    
    
    2,234
    
    
    
    2,345Miscellaneous charge-offs
    
    
    4,563
    
    
    
    4,620Federal Reserve fees
    
    
    1,199
    
    
    
    1,501Taxes other than income
    
    
    1,347
    
    
    
    587Accounting, tax and audit fees
    
    
    363
    
    
    
    765Consultant fees
    
    
    3,878
    
    
    
    2,006Brokerage and clearing fees on trading activities
    
    
    1,892
    
    
    
    1,322Other real estate expense
    
    
    3,668
    
    
    
    1,792FDIC insurance
    
    
    887
    
    
    
    925Dues, subscriptions and contributions
    
    
    891
    
    
    
    935Bank examiner fees
    
    
    922
    
    
    
    996Insurance
    
    
    2,902
    
    
    
    1,987Credit related expenses
    
    
    9,594
    
    
    
    10,620Dividends on preferred stock of consolidated subsidiaries
    
    
    1,938
    
    
    
    Expense related to investment in a pass-through entity
    
    
    8,266
    
    
    
    Other noninterest expense
    
    
    5,382
    
    
    
    7,163Total other noninterest expense
    
    $
    88,229
    
    
    $
    81,515
 
 Note 10. Income Taxes Applicable income taxes for the three months ended March 31, 2004 were $29.9
million, resulting in an effective tax rate of 29.00%. Applicable income taxes
for the same period in 2003 were $8.8 million, resulting in an effective tax
rate of 6.19%. During the first quarter of 2003, the Company recorded current
federal tax benefits of $25.0 million related to the completion of a
transaction designed to raise Tier 1 capital through the issuance of preferred
stock and $11.0 million related to a reversal of a previously established tax
liability, that was no longer required. During the first quarter of 2004, the
Company made an investment in a pass-through entity that generates tax credits
that can be used to offset federal income tax. The first quarter 2004
effective tax rate reflects a reduction of $10.4 million in tax expense ($7.5
million in tax credits and $2.9 million in benefit from the $8.3 million cost
(expense) of the credits) arising from this investment. The cost of the
investment is included in noninterest expense. At March 31, 2004, the Company had a net deferred tax liability of $19.6
million. This compares to a net deferred tax liability of $13.0 million at
December 31, 2003. The tax expense applicable to available for sale securities
gains for the three months ended March 31, 2004 and 2003 was $11.9 million and
$6.8 million, respectively. 
 Note 11. Other Comprehensive Income The following table presents a reconciliation of the net change in unrealized
gains (losses) on available for sale securities and cash flow hedges for the
three months ended March 31, 2004: 13




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##### Table of Contents



Before Tax
    
    Tax
    
    Net of TaxAmount
    
    Expense
    
    Amount(Dollars in thousands)Change in the unrealized gains (losses) on available for sale securities arising
during the period
    
    $
    61,557
    
    
    $
    (22,218
    )
    
    $
    39,339Less: Reclassification for gains (losses) on available for sale securities
included in net earnings
    
    
    31,861
    
    
    
    (11,944
    )
    
    
    19,917Net change in the unrealized gains (losses) on available for sale securities
    
    $
    29,696
    
    
    $
    (10,274
    )
    
    $
    19,422Change in unrealized gains (losses) on cash flow hedges
    
    $
    13,093
    
    
    $
    (5,093
    )
    
    $
    8,000Less: Reclassification for gains (losses) on cash flow hedges included
in net earnings
    
    
    1,545
    
    
    
    (601
    )
    
    
    944Net change in the unrealized gains (losses) on cash flow hedges
    
    $
    11,548
    
    
    $
    (4,492
    )
    
    $
    7,056
 
 Note 12. Earnings Per Share The calculation of earnings per share is summarized as follows: Three Months EndedMarch 31,2004
    
    2003(amounts in thousands,except per share data)Basic:Net earnings
    
    $
    73,108
    
    
    $
    133,711Less: Preferred dividends
    
    
    75
    
    
    
    201Net earnings applicable to common shares
    
    $
    73,033
    
    
    $
    133,510Average common shares outstanding
    
    
    189,295
    
    
    
    198,549Earnings per common share-basic
    
    $
    0.39
    
    
    $
    0.67Diluted:Net earnings
    
    $
    73,108
    
    
    $
    133,711Average common shares outstanding
    
    
    189,295
    
    
    
    198,549Stock option adjustment
    
    
    1,214
    
    
    
    1,045Preferred stock adjustment
    
    
    584
    
    
    
    761Average common shares outstanding, adjusted
    
    
    191,093
    
    
    
    200,355Earnings per common share-diluted
    
    $
    0.38
    
    
    $
    0.67
 Excluded from the computation of diluted shares were options to purchase 7.2
million and 4.8 million shares that were outstanding at March 31, 2004 and
2003, respectively, because the exercise price of these options was greater
than the average market price of the common shares, and therefore, the effect
would be antidilutive. 
 Note 13. Derivative Financial Instruments Union Planters uses derivative financial instruments to manage risk associated
with certain assets and liabilities and provide customers with products that
meet their business requirements. Asset and Liability Management Positions Fair Value Hedges.To mitigate interest rate risk associated with certain
deposits and debt, Union Planters has entered into interest rate swap
agreements that qualify as fair value hedges. The swaps and the related debt
are reported on the Consolidated Balance Sheet at current fair value at the end
of each period. The changes in fair value of both the hedged item and the swap
along with the net interest income or expense on the swap are netted against
the interest expense related to the hedged item in the Consolidated Statement
of Earnings. The Company is also exposed to credit and interest-rate risk related to its
mortgage inventory from the time a loan is closed until completion of normal
post-closing review and the subsequent sale of the loan, normally 60 to 90
days. To mitigate interest rate risk associated with mortgage activities,
Union Planters enters into mandatory short-term forward contracts, which are
contracts for delayed delivery of mortgages in which the Company agrees to make
delivery at a specified future date of a specified instrument at a specified
price or yield. Risks arise from the possible inability of the counterparties
to meet the terms of their contracts and from market movements in securities
values and interest rates. These derivative financial instruments are
associated with closed loans pending review and sale in fair value hedging
relationships to reduce interest rate risk exposure. The fair value adjustment
to loans held for resale as a result of these hedging relationships was $5.3
million at March 31, 2004, compared to $6.8 million at December 31, 2003. The ineffective portion of all fair value hedges had an immaterial impact on
interest expense during the three month periods ended March 31, 2004 and March 31, 2003. 14




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##### Table of Contents



Cash Flow Hedges.Union Planters enters into interest rate swap agreements to
hedge the variability of future cash flows associated with certain
variable-rate loans. At March 31, 2004, an unrealized gain, net of taxes, of
$8.8 million was recorded in accumulated other comprehensive income for the
effective portion of changes in the fair value of derivatives designated as
cash flow hedges. The reclassification from accumulated other comprehensive
income to interest income will occur as interest income is accrued on the
underlying loans. Net gains of approximately $950,000 were reclassified to
interest income during the three months ended March 31, 2004. There were no
net gains reclassified during the three months ended March 31, 2003 as these
agreements were not entered into until after that date. Based on current
market conditions, it is expected that $9.4 million of gross unrealized gains
in accumulated other comprehensive income at March 31, 2004 will be
reclassified to interest income over the next 12 months. The change in fair
value attributable to hedge ineffectiveness and recorded directly to earnings
during the three-month period ended March 31, 2004 was not material. Other Asset and Liability Management Derivative Positions.The Companys
mortgage commitment pipeline is exposed to interest rate risk associated with
interest rate lock commitments (IRLCs) extended to individuals who have applied
for loan funding and meet certain defined credit and underwriting criteria.
IRLCs are considered derivative financial instruments under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and are recorded
at fair value, with changes in value recorded in current earnings. In addition
to the mandatory forward contracts designated in fair value hedging
relationships of loans held for resale, Union Planters also enters into both
mandatory and optional short-term forward contracts to mitigate interest rate
risk associated with IRLCs. (Losses) gains on IRLCs and related derivative
contracts totaled a net amount of ($2.0) million during the first three months
of 2004, compared to $4.8 million during the first three months of 2003. Union Planters also enters into various derivative instruments to offset
changes in fair value of its MSRs portfolio. These derivative instruments are
marked-to-market and recorded as a component of mortgage banking revenues.
Typical derivative instruments used by Union Planters may include interest rate
swaps, swaptions, caps and floors. The gain recorded in association with these
derivative instruments during the three months ended March 31, 2004 totaled
approximately $760,000. These derivative positions were closed-out during the
first quarter of 2004 resulting in the receipt of $46.5 million, which includes
the return of the initial investment. There was no gain or loss during the
three months ended March 31, 2003. Summary information for all derivative financial instruments follows: March 31, 2004
    
    March 31, 2003
    
    December 31, 2003Derivative
    
    
    
    
    
    Derivative
    
    
    
    
    
    DerivativeNotional
    
    
    
    Notional
    
    
    
    NotionalValue
    
    Asset
    
    Liability
    
    Value
    
    Asset
    
    Liability
    
    Value
    
    Asset
    
    Liability(Dollars in thousands)Fair Value HedgesForward contracts (loans held for resale)
    
    $
    874,262
    
    
    $
    
    
    
    $
    (5,279
    )
    
    $
    1,779,027
    
    
    $
    
    
    
    $
    (27,610
    )
    
    $
    748,004
    
    
    $
    
    
    
    $
    (6,766
    )Interest rate swaps (deposits)
    
    
    150,000
    
    
    
    5,470
    
    
    
    
    
    
    
    150,000
    
    
    
    5,065
    
    
    
    
    
    
    
    150,000
    
    
    
    3,590
    
    
    
    Interest rate swaps (long-term debt)
    
    
    1,785,000
    
    
    
    38,723
    
    
    
    
    
    
    
    1,785,000
    
    
    
    14,447
    
    
    
    (1,186
    )
    
    
    1,785,000
    
    
    
    7,300
    
    
    
    (11,542
    )Cash Flow HedgesInterest rate swaps (loans)
    
    
    825,000
    
    
    
    14,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825,000
    
    
    
    3,248
    
    
    
    (11
    )Other Derivative InstrumentsInterest rate locks
    
    
    975,458
    
    
    
    
    
    
    
    (1,821
    )
    
    
    1,700,421
    
    
    
    20,663
    
    
    
    
    
    
    
    507,540
    
    
    
    749
    
    
    
    Forward contracts
    
    
    954,738
    
    
    
    
    
    
    
    (540
    )
    
    
    1,583,973
    
    
    
    147
    
    
    
    
    
    
    
    392,246
    
    
    
    
    
    
    
    (1,254
    )Options on forward contracts
    
    
    270,000
    
    
    
    
    
    
    
    
    
    
    
    140,000
    
    
    
    156
    
    
    
    
    
    
    
    140,000
    
    
    
    194
    
    
    
    Swaptions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,850,000
    
    
    
    45,763
    
    
    
    
 15




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##### Table of Contents



Note 14. Line of Business Reporting Three Months Ended March 31, 2004OtherMortgage
    
    Operating
    
    Parent
    
    ConsolidatedBanking
    
    Banking
    
    Units
    
    Company
    
    Total(Dollars in thousands)Net interest income (expense)
    
    $
    242,537
    
    
    $
    21,071
    
    
    $
    11,294
    
    
    $
    (7,814
    )
    
    $
    267,088Provision for losses on loans
    
    
    (25,485
    )
    
    
    (21,445
    )
    
    
    (15,893
    )
    
    
    
    
    
    
    (62,823
    )Noninterest income (1)
    
    
    131,799
    
    
    
    5,577
    
    
    
    37,613
    
    
    
    421
    
    
    
    175,410Noninterest expense
    
    
    (207,742
    )
    
    
    (31,932
    )
    
    
    (34,009
    )
    
    
    (3,023
    )
    
    
    (276,706
    )Earnings (loss) before taxes (1)
    
    $
    141,109
    
    
    $
    (26,729
    )
    
    $
    (995
    )
    
    $
    (10,416
    )
    
    $
    102,969Average assets
    
    $
    26,091,495
    
    
    $
    2,787,599
    
    
    $
    1,245,534
    
    
    $
    1,149,181
    
    
    $
    31,273,809
 Three Months Ended March 31, 2003OtherMortgage
    
    Operating
    
    Parent
    
    ConsolidatedBanking
    
    Banking
    
    Units
    
    Company
    
    Total(Dollars in thousands)Net interest income (expense)
    
    $
    272,863
    
    
    $
    34,662
    
    
    $
    12,940
    
    
    $
    (9,142
    )
    
    $
    311,323Provision for losses on loans
    
    
    (31,400
    )
    
    
    (6,299
    )
    
    
    (10,950
    )
    
    
    
    
    
    
    (48,649
    )Noninterest income (1)
    
    
    132,826
    
    
    
    (20,070
    )
    
    
    36,754
    
    
    
    16
    
    
    
    149,526Noninterest expense
    
    
    (194,615
    )
    
    
    (36,323
    )
    
    
    (35,978
    )
    
    
    (2,744
    )
    
    
    (269,660
    )Earnings (loss) before taxes (1)
    
    $
    179,674
    
    
    $
    (28,030
    )
    
    $
    2,766
    
    
    $
    (11,870
    )
    
    $
    142,540Average assets
    
    $
    27,499,059
    
    
    $
    3,573,735
    
    
    $
    1,295,178
    
    
    $
    864,026
    
    
    $
    33,231,998
   (1)
    
    Parent company noninterest income and earnings before income taxes
are net of the intercompany dividend eliminations of $107.1 million and
$461.6 million for the three months ended March 31, 2004 and 2003,
respectively. 
 Note 15. Contingent Liabilities Union Planters and/or its subsidiaries are parties to various legal proceedings
that have arisen in the ordinary course of business and are parties to various
pending civil actions, all of which are being defended vigorously. Certain
proceedings previously outstanding have been subsequently settled within
previously estimated amounts. While it is impossible to predict with certainty
the outcome of any legal proceeding, based upon present information, including
evaluations by outside counsel, management is of the opinion that neither Union
Planters financial position, results of operations nor liquidity will be
materially adversely affected by the ultimate resolution of pending or
threatened legal proceedings. Activity affecting the Companys litigation
reserve (i.e., provision for losses and settlement of claims) was not material
to the Companys operations for the three months ended March 31, 2004 or 2003.
Reference is made to Part II Item 1 for a discussion of legal proceedings. 16




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##### Table of Contents



Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations The following provides a narrative discussion and analysis of significant
changes in Union Planters results of operations and financial condition. This
discussion should be read in conjunction with the notes to the consolidated
financial statements included in Union Planters 2003 Annual Report on Form
10-K, the interim unaudited consolidated financial statements and notes for the
three months ended March 31, 2004 included in Part I hereof and the
supplemental financial data included in this discussion. Cautionary Statement Regarding Forward-Looking Information This discussion contains certain forward-looking statements (as defined in the
Private Securities Litigation Reform Act of 1995). Certain sections that
follow contain forward-looking statements regarding: net interest income,
income taxes, provision for losses on loans, noninterest income, noninterest
expense, insurance expense, loans, potential problem loans and interest rate
risk, as well as market risk and asset/liability management in Item 3 and legal
proceedings in Part II, Item 1. Forward-looking statements are not based on
historical information, but rather are related to future operations,
strategies, financial results or other developments. The words anticipate,
project, expect, believe, intend, estimate, should, is likely,
target and other expressions that indicate future events and trends identify
forward-looking statements. Forward-looking statements are based on
managements expectations as well as certain assumptions and estimates made by,
and information available to, management at the time the statements are made.
Examples of factors that could cause future results to vary from current
management expectations include the following: the timing and amount of
interest rate movements (which can have a significant impact on a financial
institution); effects of changes in general economic conditions, as well as
economic conditions in markets in which Union Planters conducts business and
the impact in the United States of America of hostilities abroad; market and
monetary fluctuations and uncertainties in the financial markets; inflation;
competition within and outside the financial services industry; technology;
risks inherent in originating loans, including prepayment risks, fluctuations
in collateral values and changes in customer profiles; loan loss experience,
the rate of loan charge-offs, the level of the provision for losses on loans
and the receipt of information subsequent to the reporting date impacting the
collectability of loans; and changes in enacted tax laws and regulations and
accounting principles. Additionally, the policies of the Office of the
Comptroller of the Currency (OCC), the Board of Governors of the Federal
Reserve System (Federal Reserve), and insurance and securities regulatory
agencies, unanticipated regulatory and judicial proceedings, unanticipated
results in pending litigation or Internal Revenue Service examinations, changes
in the laws, regulations and regulatory policies applicable to Union Planters
and its subsidiaries, and Union Planters success in executing its business
plans and strategies and managing the risks involved in the foregoing, could
cause actual results to differ materially from current expectations. Union
Planters assumes no obligation to update any forward-looking statements that
are made from time to time. Selected Financial Data The following table presents selected financial data for the three-month
periods ended March 31, 2004 and 2003: Three Months EndedMarch 31,Percentage2004
    
    2003
    
    Change(Dollars in thousands, except per share data)Net earnings
    
    $
    73,108
    
    
    $
    133,711
    
    
    
    (45.3
    )%Per shareBasic
    
    
    .39
    
    
    
    .67
    
    
    
    (41.8
    )Diluted
    
    
    .38
    
    
    
    .67
    
    
    
    (43.3
    )Return on average assets
    
    
    .94
    %
    
    
    1.63
    %Return on average common equity
    
    
    9.58
    
    
    
    17.08Dividends per common share
    
    $
    .33
    
    
    $
    .33Net interest margin (FTE)
    
    
    3.82
    %
    
    
    4.24
    %Net interest spread (FTE)
    
    
    3.48
    
    
    
    3.86Book value per common share at period-end
    
    $
    16.35
    
    
    $
    16.50Leverage ratio
    
    
    8.01
    %
    
    
    8.00
    %Tier 1 Capital to risk-weighted assets
    
    
    9.74
    
    
    
    10.04Common share pricesHigh closing price
    
    $
    32.67
    
    
    $
    29.90Low closing price
    
    
    28.84
    
    
    
    26.24Closing price at period-end
    
    
    29.85
    
    
    
    26.29
   FTE = Fully taxable-equivalent basis Net interest margin = Net interest income (FTE) as a percentage of average
earning assets Net interest spread = Difference in the FTE yield on average earning assets and
the rate on average interest-bearing liabilities 17




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##### Table of Contents



FIRST QUARTER EARNINGS OVERVIEW For the first quarter of 2004, Union Planters reported net earnings of $73.1
million, or $.38 per diluted common share, compared with $133.7 million, or
$.67 per diluted common share, for the same period in 2003. These earnings
represented annualized returns on average assets and average common equity of
..94% and 9.58%, respectively, compared to 1.63% and 17.08%, respectively, for
the same period in 2003. EARNINGS ANALYSIS Net Interest Income Fully taxable-equivalent net interest income for the first quarter of 2004 was
$270.2 million, a decrease of $46.6 million from the same quarter last year.
The net interest margin for the first quarter of 2004 was 3.82%, which compares
to 4.24% for the first quarter of 2003. The net interest rate spread was 3.48%
for the first quarter of 2004, which compares to 3.86% for the first quarter of
2003. Changes in net interest income and the net interest margin since the
first quarter of 2003 are the result of lower yields on earning assets. The
declining yields are due to lower interest rates, customer-driven refinancing
of loans exceeding the favorable impact of lower funding rates, a decline in
average loans held for resale, a change in the asset mix and managements
continued efforts to lower the risk profile of the loan portfolio. Refer to
Union Planters average balance sheet and Market Risk and Asset/Liability
Management section in Item 3, which follow this discussion, for additional
information regarding the changes in net interest income and balance sheet
management initiatives. Interest Income The following table presents a breakdown of average earning assets: Three Months EndedMarch 31,
    
    December 31,2004
    
    2003
    
    2003(Dollars in billions)Average earning assets
    
    $
    28.5
    
    
    $
    30.3
    
    
    $
    28.6Comprised of:Loans
    
    
    78
    %
    
    
    75
    %
    
    
    78
    %Available for sale securities
    
    
    18
    
    
    
    17
    
    
    
    16Loans held for resale
    
    
    3
    
    
    
    7
    
    
    
    4Other earning assets
    
    
    1
    
    
    
    1
    
    
    
    2Fully taxable-equivalent yield on average earning assets
    
    
    5.06
    %
    
    
    5.87
    %
    
    
    5.15
    %
 Fully taxable-equivalent interest income decreased $81.1 million for the first
quarter of 2004 compared to the same period in 2003. This decline was
partially attributable to a decrease in the average yield on earning assets
from 5.87% to 5.06%. The declining yield is largely the result of declines in
market interest rates and the continued run-off of selected loan products that
do not meet the risk-adjusted returns targeted by management. An additional
factor in the decline of interest income was a $1.9 billion decrease in average
earning assets, primarily loans held for resale and mortgage loans secured by
1-4 family residential property. Mortgage loan balances were down as the
result of the decrease in mortgage loan production from $3.9 billion during the
first quarter of 2003 to $2.0 billion during the first quarter of 2004. Refer
to the Market Risk and Asset/Liability Management discussion in Item 3 for
additional information regarding balance sheet management initiatives, changes
in interest rates and how the Company is positioned to respond to the changes. Interest Expense The following table presents a breakdown of average interest-bearing
liabilities: Three Months EndedMarch 31,
    
    December 31,2004
    
    2003
    
    2003(Dollars in billions)Average interest-bearing liabilities
    
    $
    22.4
    
    
    $
    24.7
    
    
    $
    22.5Comprised of:Deposits
    
    
    78
    %
    
    
    75
    %
    
    
    80
    %Short-term borrowings
    
    
    10
    
    
    
    13
    
    
    
    9Federal Home Loan Bank advances and long-term debt
    
    
    12
    
    
    
    12
    
    
    
    11Rate paid on average interest-bearing liabilities
    
    
    1.57
    %
    
    
    2.01
    %
    
    
    1.59
    %
 18




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##### Table of Contents



Interest expense decreased $34.5 million in the first quarter of 2004 compared
to the same quarter last year. This decrease was driven by a decline in the
average rate paid for interest-bearing liabilities from 2.01% to 1.57%, which
primarily resulted from the decline in market interest rates. An additional
factor in the interest expense decrease was a $2.3 billion decline in average
interest-bearing liabilities. Provision for Losses on Loans The provision for losses on loans for the first quarter of 2004 was $62.8
million, or 1.14% of average loans on an annualized basis. This compares to
$48.6 million, or .87% of average loans, for the first quarter of 2003. The
higher provision for losses on loans in 2004 is attributable to a charge of
$25.8 million incurred as a result of the decision to sell a $235.2 million
portfolio of brokered home equity and rental car fleet loans. The charge was
required because the change in intent with regard to the loans from holding
them to maturity to holding them for resale results in the loans being
accounted for at the lower of cost or fair value rather than at historical
cost. Under Generally Accepted Accounting Principles, the difference between
cost and the lower fair value is charged to the provision for losses on loans.
Refer to the Allowance for Losses on Loans and Nonperforming Loans discussions
for additional information regarding loan charge-offs and other items impacting
the provision for losses on loans. Noninterest Income Noninterest income for the first quarter of 2004 was $175.4 million, an
increase of $25.9 million, or 17.3%, from the first quarter of 2003. The major
components of noninterest income are presented on the Consolidated Statement of
Earnings; following is a discussion of the key components: Service charges on deposit accounts.These fees were $55.6 million for the
first quarter of 2004 compared with $57.7 million during the same period in
2003. The modest decline is primarily attributable to a lower volume of
overdraft items and the impact of branch sales. Mortgage banking revenues.These revenues include origination, servicing and
miscellaneous fees, the impact of derivative financial instruments, and gain on
sales of mortgages and MSRs. They are also net of MSRs amortization and
impairment or recovery. Mortgage banking revenues for the three months ended
March 31, 2004 and 2003 are summarized as follows: Three Months EndedMarch 31,2004
    
    2003(Dollars in thousands)Gain on sales of residential mortgages
    
    $
    10,051
    
    
    $
    42,356Impact of derivative financial instruments related to secondary marketing
    
    
    (2,049
    )
    
    
    4,779Impact of derivative financial instruments related to mortgage servicing rights
    
    
    762
    
    
    
    Origination and miscellaneous fees
    
    
    11,312
    
    
    
    20,449Mortgage servicing income
    
    
    28,753
    
    
    
    18,891Amortization of mortgage servicing rights
    
    
    (14,852
    )
    
    
    (10,267
    )Provision for impairment of mortgage servicing rights
    
    
    (32,653
    )
    
    
    (71,535
    )Total mortgage banking revenues
    
    $
    1,324
    
    
    $
    4,673
 A decrease in loan production from $3.9 billion during the first quarter of
2003 to $2.0 billion in the first quarter of 2004 resulted in a substantial
decrease in gains on sale of residential mortgages, as well as decreasing
origination and miscellaneous fees. The increase in the MSRs balance from
$240.3 million at March 31, 2003 to $325.0 million at March 31, 2004 resulted
in increased servicing income and amortization while interest rate movements
during the current quarter caused the recognition of additional impairment.
The results for the first quarter of 2004 also include a $5.0 million increase
in mortgage servicing income due to a change in estimate on late fees on past
due loans. In the past, Union Planters has used a method for accounting for
late fees that approximated the accrual method. Since December 31, 2002, the
component of the serviced loan portfolio represented by government-backed loans
has decreased from 12.2% to 8.8%. Historically, the rate of collection of late
fees on these loans has been low. Over the same time, the component of the
serviced loan portfolio represented by conventional loans has increased from
53.4% to 66.6%. Historically, the rate of collection of late fees on these
loans has been much higher. As a result of this shift, Union Planters
estimates that a higher percentage of late fees assessed on serviced mortgage
loans will actually be collected and has accrued the $5.0 million to reflect
the historical rate of collection of all of its servicing portfolio. Financial services revenues.This category of noninterest income is comprised
of trust service fees and commissions, insurance commissions, annuity sales
commissions and brokerage fee income. For the first quarter of 2004, these
revenues were $19.5 million, a $1.8 million increase from the first quarter of
2003. The primary driver of this increase was trust services income, which was
up by $1.2 million as a result of a $1.3 billion increase in trust assets under
management, improved market conditions, an 8.4% increase in the number of trust
accounts, a more favorable mix towards long-term assets under management and
positive overall net inflows compared to the year earlier period.
Additionally, brokerage fee income increased $1.0 million and annuity sales
income increased $.4 million compared to the first quarter of 2003 as a result
of improved stock market performance. These increases were offset by a $.7
million decrease in insurance commissions compared to the first quarter of 2003
due to the discontinuation of certain product offerings as a result of changes
in lending regulations. 19




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##### Table of Contents



Factoring commissions and fees.Commissions and fees earned were $9.8 million
for the first quarter of 2004 compared with $9.9 million during the first
quarter of last year. This decrease is primarily related to a slight decline
in the volume of factored receivables. Factoring volume was $905.8 million for
the first quarter of 2004 compared to $961.7 million for the same period last
year. Factoring fees as a percentage of factored sales purchased increased
from .83% during the first quarter of 2003 to .87% during the first quarter of
2004. Professional employment organization, net revenues.Net revenues were $5.9
million for the first quarter of 2004 compared with $6.4 million during the
same period in 2003. The decline in net revenues is principally related to
increased workers compensation coverage costs. Bankcard transaction fees.These fees totaled $9.6 million for the current
quarter, essentially unchanged from the $9.7 million realized during the same
period in 2003. Available for sale securities gains.Available for sale securities gains for
the first quarter were $31.9 million, up $12.9 million compared to the same
period last year. From time-to-time, the Company may sell available for sale
securities with gains to offset the impact of MSRs impairment. Other noninterest income.The components of other noninterest income are
presented in Note 9 to the unaudited interim consolidated financial statements.
Changes in other components include:  
    
    As part of the ongoing rationalization of the distribution network,
Union Planters closed on previously announced branch sales. The sales
resulted in $21.1 million in gains and represented approximately $126.5
million and $225.2 million in loans and deposits, respectively.  
    
    Revenues from merchant services were down $1.0 million during the
first quarter of 2004 from the $1.4 million realized during the year
earlier period. This was principally due to a decrease in fees
generated from referrals under a marketing agreement with a third party.  
    
    Miscellaneous Fees increased by $1.0 million from the first quarter
of 2003 to the first quarter of 2004 as a result of the initiation of a
service charge to non-customers for check cashing services which were
previously provided free of charge. Noninterest Expense Noninterest expense for the first quarter of 2004 was $276.7 million, which
compares to $269.7 million for the first quarter of 2003. The Companys
efficiency ratio, which excludes the amortization of all intangibles, for the
first quarter of 2004 was 58.99%, compared to 55.47% for the first quarter of
2003 as a result of declining net interest income discussed under net interest
income. The efficiency ratio is calculated as noninterest expense (excluding
amortization of intangibles) divided by the sum of net interest income (FTE)
plus noninterest income (excluding amortization of MSRs). The major components of noninterest expense are presented on the Consolidated
Statement of Earnings; following is a discussion of the key components: Salaries and employee benefits.These expenses were $137.4 million for the
first quarter of 2004 compared with $136.9 million during the first quarter of
2003. Increasing severance costs of $3.1 million as a result of the
anticipated merger with Regions Financial Corporation were largely offset by
lower compensation costs resulting from a decrease in the number of employees.
At March 31, 2004, Union Planters had 10,335 full-time equivalent employees,
compared to 10,786 at March 31, 2003. Occupancy and equipment expense.Net occupancy and equipment expense was $46.1
million for the first quarter of 2004 substantially unchanged from $45.9
million during the first quarter of 2003. Other intangibles amortization.These expenses were $5.0 million for the first
quarter of 2004 and were a slight decrease compared to the first quarter of
2003. Refer to Note 5 to the unaudited interim consolidated financial
statements for more information. Other noninterest expenses.The components of other noninterest expense are
presented in Note 9 to the unaudited interim consolidated financial statements.
Changes in other components include:  
    
    Noninterest expense includes $8.3 million of expense during the first
quarter of 2004 attributable to an investment in a pass-through entity
that generates tax credits that can be utilized to offset federal income
tax.  
    
    For the first quarter of 2004, legal fees increased by $1.7 million
compared to the same period in 2003, primarily related to legal services
provided in association with the planned merger with Regions Financial
Corporation in addition to litigation surrounding collection efforts
with respect to an accounts receivable  factoring client whose balance
was previously charged off.  
    
    Advertising and promotion expense for the first quarter of 2004
decreased $3.6 million compared to the first quarter of 2003 due to
costs in the prior year associated with new advertising campaigns which
were not repeated in 2004. 20




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
    
    Other contracted services decreased $2.6 million for the first
quarter of 2004 compared to the first quarter of 2003, primarily due to
expenses during the first quarter of 2003 associated with the
restructuring of certain wholly- and majority-owned subsidiaries.  
    
    Credit related expenses decreased by $1.0 million from the first
quarter of 2003 to the first quarter of 2004 driven by reduced appraisal
fee expenses resulting from declining mortgage loan production.  
    
    Consulting fees increased $1.9 million for the first quarter of 2004
compared to the first quarter of 2003, related to several projects, the
largest of which is to improve Union Planters credit process.  
    
    Expenses associated with the payment of compensating interest to
mortgage loan investors in excess of the amount collected from borrowers
when the loans are paid off decreased $1.3 million during the first
quarter of 2004 when compared with the year earlier period. The
decrease was primarily due to lower payoffs from refinancing activity in
the mortgage servicing portfolio.  
    
    Other real estate expenses increased by $1.9 million for the first
quarter of 2004 compared to the first quarter of 2003, due to writedowns
on four properties. Increased provisioning for losses on other real
estate is the direct result of efforts to improve credit quality and
deal aggressively with problem loans. Income Taxes Applicable income taxes for the three months ended March 31, 2004 were $29.9
million, resulting in an effective tax rate of 29.00%. Applicable income taxes
for the same period in 2003 were $8.8 million, resulting in an effective tax
rate of 6.19%. The increase in the effective rate in 2004, as compared to
2003, is due primarily to the net effect of several items. During the first
quarter of 2003, the Company recorded current federal tax benefits of $25.0
million related to the completion of a transaction designed to raise Tier 1
capital through the issuance of preferred stock and $11.0 million related to a
reversal of a previously established tax liability, that was no longer
required. During the first quarter of 2004, the Company made an investment in
a pass-through entity that generates tax credits that can be used to offset
federal income tax. The first quarter 2004 effective tax rate reflects a
reduction of $10.4 million in tax expense ($7.5 million in tax credits and $2.9
million in benefit from the $8.3 million cost (expense) of the credits) arising
from this investment. The change in the effective tax rate for the first
quarter of 2004 compared to the first quarter of 2003 was further impacted by a
decrease in the level of tax-exempt interest income from available for sale
securities and other tax planning strategies. The tax expense applicable to
available for sale securities gains for the three months ended March 31, 2004
and 2003 was $11.9 million and $6.8 million, respectively. Business Segment Review Union Planters is managed along traditional and nontraditional banking lines
and has two reportable business segments, Banking and Mortgage Banking. For
the first quarter of 2004 and 2003, Banking accounted for 85% and 88%,
respectively, of total revenues (the sum of net interest income and noninterest
income.) For the same periods, Mortgage Banking accounted for 6% and 3%,
respectively. Refer to Note 14 to the unaudited consolidated financial
statements for additional information regarding Union Planters segments. Banking.The Banking segment consists of traditional deposit taking and
lending functions, including consumer, commercial and corporate lending, as
well as the origination of mortgage loans both to be retained in the loan
portfolio and to be sold into the secondary market; retail banking; online
banking and trade-finance activities. Earnings before income taxes were $141.1
million for the first quarter of 2004 compared with $179.7 million during the
first quarter of 2003. Net Interest Income.Net interest income declined from $272.8 million during
the first quarter of 2003 to $242.5 million during the first quarter of 2004, a
$30.3 million decrease. The decrease was the result of continued pressure on
the net interest margin from historically low interest rates, as well as a
reduction in average earning assets. The decline in average earning assets was
largely attributable to the refinancing of residential mortgage loans and
planned run-off of indirect consumer loans and brokered home equity loans,
which were partly offset by increases in home equity lines of credit. Provision for Losses on Loans.The provision for losses on loans decreased to
$25.5 million in the first quarter of 2004, compared to $31.4 million in the
first quarter of 2003. The decrease in the provision is attributable to a
decrease in nonperforming loans resulting from managements concerted efforts
to improve credit quality, including the planned run-off of higher-risk
indirect consumer loans and more stringent underwriting standards. Noninterest Income.Noninterest income for the first quarter of 2004 was
$131.8 million compared to $132.8 million during the year earlier period.
Changes in noninterest income were represented by the following:  
    
    Gain on sales of mortgage loans originated by bank branches decreased
$15.8 million, resulting from decreased production and sale activity,
consistent with industry trends.  
    
    Mortgage origination and miscellaneous fees decreased by $9.2 million
from the first quarter of 2003 to $11.3 million during the first quarter
of 2004.  
    
    Gain on sales of available for sale securities increased $1.5
million. This increase excludes gains realized on the of sale of a
portfolio of available for sale securities purchased to mitigate the
impact of changes in the fair value of MSRs in the Mortgage Banking
segment. 21




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##### Table of Contents




    
    Gain on sale of branches increased from $2.0 million during the first
quarter of 2003 to $21.1 million during the first quarter of 2004.  
    
    Service charges on deposit accounts decreased by $2.1 million as a
result of a lower volume of overdraft items and the impact of branch
sales.  
    
    Merchant services income decreased $1.0 million during the first
quarter of 2004, principally due to a decrease in the volume of
referrals under a marketing agreement. Noninterest Expense.Noninterest expense was $207.7 million during the first
quarter of 2004, an increase of $13.1 million compared to the first quarter of
2003. The increase in noninterest expense for the first quarter of 2004
compared to the first quarter of 2003 is primarily attributable to $8.3 million
of expense during the first quarter of 2004 related to an investment in a
pass-through entity that generates tax credits that can be utilized to offset
federal income tax. In addition, legal fees, consultant fees and other real
estate expense also grew. These increases were slightly offset by savings in
other contracted services and advertising and promotion. Mortgage Banking.Mortgage Banking includes the origination, sale and
servicing of both fixed- and adjustable-rate single-family first mortgage
loans. While certain mortgage loans are retained in the loan portfolio,
mortgage loans originated in the Mortgage Banking segment are principally sold
into the secondary market, with MSRs typically retained by Union Planters.
During the first quarter of 2004, the Mortgage Banking segment generated a
before tax loss of $26.7 million, compared to a before tax loss of $28.0
million for the first quarter of 2003. Net Interest Income.Net interest income was $21.1 million for the first
quarter of 2004, compared to $34.7 million for the first quarter of 2003. The
decrease is due to diminished loan origination activity and a corresponding
decrease in the average balance
of mortgage loans held for resale for both periods. Provision for Losses on Loans.The provision for losses on loans was $21.4
million for the first quarter of 2004, compared to $6.3 million for the first
quarter of 2003. The increase was driven by an $18.0 million charge taken as a
result of the decision to sell $140.1 million of brokered home equity loans. Noninterest Income.For the first quarter of 2004, noninterest income was $5.6
million, compared to $(20.1) million for the first quarter of 2003. Changes in
noninterest income were represented by the following:  
    
    Gains on sales of mortgage loans totaled $5.1 million in the first
quarter of 2004, compared to $20.9 million in the first quarter of 2003.
Origination and miscellaneous fees totaled $11.3 million in the first
quarter of 2004, compared to $20.4 million in the first quarter of 2003.
This decrease was the result of the substantial decrease in mortgage
origination volume from $3.9 billion in the first quarter of 2003 to
$2.0 billion in the first quarter of 2004.  
    
    Impairment charges of $32.7 million and $71.5 million were recognized
during the first quarter of 2004 and 2003, respectively, as a result of
the historically low interest rate environment.  
    
    Amortization expense related to MSRs was $14.9 million for the first
quarter of 2004, compared to $10.3 million for the first quarter of
2003. The increase is the result of a historically low interest rate
environment leading up to the first quarter of 2004 that increased
prepayment speed assumptions used in estimating the life of the MSRs
along with increased servicing balances.  
    
    Gain on sales of available for sale securities totaled $11.4 million
in the first quarter of 2004; there were no such sales in the first
quarter of 2003. The securities sold comprised a portfolio that was
established to mitigate the exposure to the volatility associated with
the fair value of MSRs.  
    
    Losses on derivative financial instruments aggregated $1.3 million
for the first quarter of 2004, compared to a gain of $4.8 million for
the first quarter of 2003. Included in the 2004 loss was a gain of $.8
million from a portfolio of derivative financial instruments that was
established during the third quarter of 2003 to mitigate exposure to the
volatility associated with the fair value of MSRs. Noninterest Expense.For the first quarter of 2004, noninterest expense was
$31.9 million, compared to $36.3 million for the first quarter of 2003. The
decrease was primarily driven by two factors: commissions, which decreased
$2.8 million in the first quarter of 2004 due to decreased loan production; and
expense associated with the payment of compensating interest to mortgage loan
investors in excess of the amount collected from borrowers when the loans are
paid off, which decreased $1.3 million in the first quarter of 2003. Other Nonreportable Segments.Other nonreportable segments include the
Companys wholly-owned subsidiaries, Capital Factors, Inc. and Strategic
Outsourcing, Inc., as well as other nontraditional banking lines, including
Financial Services and SBA Loan Trading. For the three months ended March 31,
2004, these segments, reported in Note 14 to the unaudited consolidated
financial statements as Other Operating Units, experienced an aggregate $3.8
million decrease in earnings before income taxes compared to the same period in
2003. This decline was the result of a $4.9 million increase in the provision
for losses on loans. The increase in the provision for losses on loans is
related to a $7.8 million charge incurred as a result of the decision to sell a
$95.1 million portfolio of rental car fleet loans. 22




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##### Table of Contents



UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEET AND INTEREST RATES Three Months Ended March 31,2004
    
    2003Interest
    
    FTE
    
    
    
    
    
    Interest
    
    FTEAverage
    
    Income/
    
    Yield/
    
    Average
    
    Income/
    
    Yield/Balance
    
    Expense
    
    Rate
    
    Balance
    
    Expense
    
    Rate(Dollars in thousands)AssetsInterest-bearing deposits at financial institutions
    
    $
    84,117
    
    
    $
    274
    
    
    
    1.31
    %
    
    $
    186,914
    
    
    $
    452
    
    
    
    0.98
    %Federal funds sold and securities purchased under
agreements to resell
    
    
    120,625
    
    
    
    312
    
    
    
    1.04
    
    
    
    49,840
    
    
    
    155
    
    
    
    1.26Trading account assets
    
    
    256,421
    
    
    
    1,763
    
    
    
    2.77
    
    
    
    250,235
    
    
    
    2,287
    
    
    
    3.71Loans held for resale
    
    
    736,241
    
    
    
    9,927
    
    
    
    5.42
    
    
    
    2,030,213
    
    
    
    28,009
    
    
    
    5.60Available for sale securities (1), (2)Taxable securities
    
    
    4,810,959
    
    
    
    44,859
    
    
    
    3.75
    
    
    
    4,394,265
    
    
    
    51,757
    
    
    
    4.78Tax-exempt securities
    
    
    339,611
    
    
    
    6,360
    
    
    
    7.53
    
    
    
    690,028
    
    
    
    13,106
    
    
    
    7.70Total available for sale securities
    
    
    5,150,570
    
    
    
    51,219
    
    
    
    4.00
    
    
    
    5,084,293
    
    
    
    64,863
    
    
    
    5.17Commercial, financial and agricultural loans
    
    
    4,985,149
    
    
    
    51,035
    
    
    
    4.12
    
    
    
    5,180,711
    
    
    
    60,993
    
    
    
    4.77Foreign loans
    
    
    243,235
    
    
    
    1,330
    
    
    
    2.20
    
    
    
    209,377
    
    
    
    1,362
    
    
    
    2.64Accounts receivable  factoring
    
    
    619,509
    
    
    
    11,390
    
    
    
    7.39
    
    
    
    679,816
    
    
    
    12,876
    
    
    
    7.68Real estate  construction loans
    
    
    2,346,914
    
    
    
    29,420
    
    
    
    5.04
    
    
    
    2,269,957
    
    
    
    30,081
    
    
    
    5.37Real estate  mortgage loansSecured by 1-4 family residential
    
    
    3,552,525
    
    
    
    57,951
    
    
    
    6.56
    
    
    
    4,386,125
    
    
    
    81,261
    
    
    
    7.51Non-farm, non-residential properties
    
    
    5,156,974
    
    
    
    69,989
    
    
    
    5.46
    
    
    
    5,060,147
    
    
    
    77,747
    
    
    
    6.23Multifamily (5 or more) residential
    
    
    852,808
    
    
    
    11,216
    
    
    
    5.29
    
    
    
    834,464
    
    
    
    12,880
    
    
    
    6.26Secured by farmland
    
    
    468,285
    
    
    
    6,808
    
    
    
    5.85
    
    
    
    486,779
    
    
    
    7,750
    
    
    
    6.46Home equity
    
    
    2,118,547
    
    
    
    24,117
    
    
    
    4.58
    
    
    
    1,600,416
    
    
    
    18,451
    
    
    
    4.68Consumer loans
    
    
    1,742,145
    
    
    
    30,603
    
    
    
    7.07
    
    
    
    1,955,312
    
    
    
    38,835
    
    
    
    8.05Direct lease financing
    
    
    45,165
    
    
    
    722
    
    
    
    6.43
    
    
    
    69,735
    
    
    
    1,132
    
    
    
    6.58Loans, net of unearned income (1), (3), (4)
    
    
    22,131,256
    
    
    
    294,581
    
    
    
    5.35
    
    
    
    22,732,839
    
    
    
    343,368
    
    
    
    6.13Total earning assets (1), (2), (3), (4)
    
    
    28,479,230
    
    
    
    358,076
    
    
    
    5.06
    
    
    
    30,334,334
    
    
    
    439,134
    
    
    
    5.87Cash and due from banks
    
    
    742,578
    
    
    
    
    
    
    
    
    
    
    
    664,796Premises and equipment, net
    
    
    506,541
    
    
    
    
    
    
    
    
    
    
    
    539,439Allowance for losses on loans
    
    
    (331,836
    )
    
    
    
    
    
    
    
    
    
    
    (329,786
    )Goodwill and other intangibles, net
    
    
    906,704
    
    
    
    
    
    
    
    
    
    
    
    929,323Other assets
    
    
    970,592
    
    
    
    
    
    
    
    
    
    
    
    1,093,892Total assets
    
    $
    31,273,809
    
    
    
    
    
    
    
    
    
    
    $
    33,231,998Liabilities
and shareholders equityMoney market accounts
    
    $
    5,663,604
    
    
    
    9,146
    
    
    
    0.65
    
    
    $
    5,722,316
    
    
    
    15,674
    
    
    
    1.11Interest-bearing checking
    
    
    3,429,944
    
    
    
    2,451
    
    
    
    0.29
    
    
    
    3,462,093
    
    
    
    4,729
    
    
    
    0.55Savings deposits
    
    
    1,488,195
    
    
    
    726
    
    
    
    0.20
    
    
    
    1,408,927
    
    
    
    1,755
    
    
    
    0.51Time deposits of $100,000 and over
    
    
    1,560,888
    
    
    
    10,391
    
    
    
    2.68
    
    
    
    1,643,022
    
    
    
    12,768
    
    
    
    3.15Other time deposits
    
    
    5,477,103
    
    
    
    33,301
    
    
    
    2.45
    
    
    
    6,345,182
    
    
    
    45,486
    
    
    
    2.91Total interest-bearing deposits
    
    
    17,619,734
    
    
    
    56,015
    
    
    
    1.28
    
    
    
    18,581,540
    
    
    
    80,412
    
    
    
    1.76Short-term borrowingsFederal funds purchased and securities sold under
agreements to repurchase
    
    
    1,938,704
    
    
    
    4,039
    
    
    
    0.84
    
    
    
    2,547,340
    
    
    
    6,859
    
    
    
    1.09Other
    
    
    231,964
    
    
    
    616
    
    
    
    1.07
    
    
    
    784,140
    
    
    
    2,413
    
    
    
    1.25Total short-term debt
    
    
    2,170,668
    
    
    
    4,655
    
    
    
    0.86
    
    
    
    3,331,480
    
    
    
    9,272
    
    
    
    1.13Long-term debtFederal Home Loan Bank advances
    
    
    428,748
    
    
    
    4,927
    
    
    
    4.62
    
    
    
    959,857
    
    
    
    6,864
    
    
    
    2.90Subordinated capital notes
    
    
    1,398,716
    
    
    
    15,032
    
    
    
    4.32
    
    
    
    975,030
    
    
    
    16,577
    
    
    
    6.90Medium-term senior notes
    
    
    602,637
    
    
    
    5,277
    
    
    
    3.52
    
    
    
    599,974
    
    
    
    6,844
    
    
    
    4.63Obligations for Trust Preferred Securities
    
    
    212,788
    
    
    
    1,935
    
    
    
    3.66
    
    
    
    209,713
    
    
    
    1,819
    
    
    
    3.52Other
    
    
    184
    
    
    
    5
    
    
    
    10.93
    
    
    
    29,552
    
    
    
    509
    
    
    
    6.99Total long-term debt
    
    
    2,643,073
    
    
    
    27,176
    
    
    
    4.14
    
    
    
    2,774,126
    
    
    
    32,613
    
    
    
    4.77Total interest-bearing liabilities
    
    
    22,433,475
    
    
    
    87,846
    
    
    
    1.57
    
    
    
    24,687,146
    
    
    
    122,297
    
    
    
    2.01Noninterest-bearing demand deposits
    
    
    5,079,356
    
    
    
    
    
    
    
    
    
    
    
    4,672,871
    
    
    
    Total sources of funds
    
    
    27,512,831
    
    
    
    87,846
    
    
    
    
    
    
    
    29,360,017
    
    
    
    122,297Other liabilities
    
    
    685,027
    
    
    
    
    
    
    
    
    
    
    
    691,839Shareholders equityPreferred stock
    
    
    9,277
    
    
    
    
    
    
    
    
    
    
    
    10,158Common equity
    
    
    3,066,674
    
    
    
    
    
    
    
    
    
    
    
    3,169,984Total shareholders equity
    
    
    3,075,951
    
    
    
    
    
    
    
    
    
    
    
    3,180,142Total liabilities and shareholders equity
    
    $
    31,273,809
    
    
    
    
    
    
    
    
    
    
    $
    33,231,998Net interest income (1)
    
    
    
    
    
    $
    270,230
    
    
    
    
    
    
    
    
    
    
    $
    316,837Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.86
    %Net interest margin (1)
    
    
    
    
    
    
    
    
    
    
    3.82
    %
    
    
    
    
    
    
    
    
    
    
    4.24
    %Taxable-equivalent adjustmentsLoans
    
    
    
    
    
    $
    984
    
    
    
    
    
    
    
    
    
    
    $
    1,041Available for sale securities
    
    
    
    
    
    
    2,158
    
    
    
    
    
    
    
    
    
    
    
    4,473Total
    
    
    
    
    
    $
    3,142
    
    
    
    
    
    
    
    
    
    
    $
    5,514
 (1)
    
    Taxable-equivalent yields are calculated assuming a 35% federal income tax rate.
    
    
    (3
    )
    
    Includes loan fees in both interest income and the calculation of the yield on income.(2)
    
    Yields are calculated on historical cost and exclude the impact of the unrealized gain (loss) on available
for sale securities.
    
    
    (4
    )
    
    Includes loans on nonaccrual status.
 23




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##### Table of Contents



FINANCIAL CONDITION Union Planters total assets were $31.5 billion at March 31, 2004, compared to
$31.9 billion at December 31, 2003 and $34.2 billion at March 31, 2003.
Average assets were $31.3 billion for the first quarter of 2004, compared to
$33.2 billion for the first quarter of 2003. Earning assets at March 31, 2004 were $28.8 billion, compared to $28.9 billion
at December 31, 2003 and $31.2 billion at March 31, 2003. Average earning
assets were $28.5 billion for the first quarter of 2004, which compares to
$30.3 billion for the same period last year and $28.6 billion for the fourth
quarter of 2003. Loans held for resale were $1.1 billion at March 31, 2004, compared to $.8
billion at December 31, 2003 and $2.1 billion at March 31, 2003. Available for Sale Securities Union Planters available for sale securities portfolio is carried on the
balance sheet at fair value and amounted to $5.2 billion at March 31, 2004,
compared to $5.0 billion and $6.1 billion at December 31, 2003 and March 31,
2003, respectively. Average available for sale securities were $5.2 billion
for the first quarter of 2004, compared with $4.6 billion for the fourth
quarter of 2003 and $5.1 billion for the first quarter of 2003. The purchase
and sale transactions in the portfolio were designed to adjust the Companys
interest rate risk profile. Gains of $31.9 million were recognized during the
first quarter of 2004 on sales of $1.1 billion of securities, compared to gains
during the first quarter of 2003 of $19.0 million on sales of $748.0 million of
securities. At March 31, 2004, Union Planters available for sale securities had net
unrealized gains of $31.6 million (before income taxes). This compares to net
unrealized gains of $1.9 million at December 31, 2003. Refer to Note 2 to the
unaudited consolidated financial statements for the composition of the
investment portfolio at March 31, 2004 and December 31, 2003. U.S. Treasury and U.S. Government agency obligations represented approximately
78% of the available for sale securities portfolio at March 31, 2004, 55% of
which were government collateralized mortgage obligations (CMOs) and
mortgage-backed securities issues. Union Planters has some credit risk in the
available for sale securities portfolio; however, management does not consider
that risk to be significant and does not believe that cash flows will be
significantly impacted. At March 31, 2004, the limited credit risk in the
investment portfolio consisted of 11% investment grade CMOs, 99% of which are
rated A or greater, 4% municipal obligations, 75% of which were rated A or
better, and 7% other stocks and securities, primarily Federal Reserve Bank and
Federal Home Loan Bank (FHLB) stock. Reference is made to the Net Interest
Income and Market Risk and Asset/Liability Management discussions for
information regarding the market-risk in the available for sale securities
portfolio. Loans Loans, net of unearned income at March 31, 2004 were $22.1 billion, compared to
$22.0 billion and $22.7 billion at December 31, 2003 and March 31, 2003,
respectively. Decreases due to refinancing of residential mortgage loans and
planned run-off of indirect consumer loans and brokered home equity loans were
partly offset by increases in home equity lines of credit. The loan balance
was also impacted by branch divestitures, which resulted in the sale of $126.5
million in loans during the first quarter of 2004. While commercial loan
demand was generally soft during the first quarter of 2004, the Companys
larger markets have begun to experience increased commercial loan demand. As
the economy continues to improve, commercial loan demand is expected to
increase. Allowance for Losses on Loans The allowance for losses on loans (the Allowance) at March 31, 2004 was $308.8
million, compared with $330.8 million at December 31, 2003 and $351.0 million
at March 31, 2003. The decrease in the Allowance from December 31, 2003
related primarily to the transfer of portfolios of brokered home equity and
rental car fleet loans aggregating $235.2 million to loans held for resale
based on managements intent to sell the loans. The transfer of the loans
resulted in the release of $43.9 million from the Allowance as the loans were
transferred at fair value. Annualized net charge-offs as a percentage of
average loans were .73% for the first quarter of 2004, a decrease from .87% in
the first quarter of 2003. Union Planters loan portfolio has no significant
concentration in terms of industry, geography, product type or size of
individual borrowing relationship. As detailed in the following tables, the
Allowance as a percentage of nonperforming loans at March 31, 2004 remained
unchanged from December 31, 2003 at 158%. This consistency prevailed in spite
of a decrease in the Allowance due to managements continued success in
reducing the amount of nonperforming loans. Over the remainder of 2004,
management expects that the level of nonperforming loans will continue to
gradually decrease, assuming a stable or improving economy. While a decrease
is expected during the year, the level of nonperforming loans may rise and fall
at various times during 2004. Similarly, management believes that net
charge-offs will also continue to decline during 2004 as long as economic
conditions continue to improve. While the timing of the actual charge-off of
loans for which reserves have been established is uncertain, management
believes that all inherent loan losses have been adequately provided for in the
Allowance. These are forward-looking statements, and actual results could
differ because of several factors, including those identified in this
discussion and in the discussion of Cautionary Statements Regarding
Forward-Looking Information. Union Planters maintains the Allowance at a level deemed sufficient to absorb
probable losses in the loan portfolio at the balance sheet 24




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##### Table of Contents



date. The Allowance is reviewed quarterly to assess the risk in the portfolio.
This methodology includes assigning loss factors to loans with similar
characteristics for which inherent probable loss can be assessed. The loss
factors are based on historical experience as adjusted for current business and
economic conditions and are applied to the respective portfolios to assist in
determining the overall adequacy of the Allowance. A periodic review of selected credits (based on loan size) is conducted to
identify loans with heightened risk or inherent losses. The primary
responsibility for this review rests with the management personnel assigned
with accountability for the credit relationship. This review is supplemented
with periodic reviews by Union Planters credit review function, as well as
periodic examination of both selected credits and the credit review process by
the applicable regulatory agencies. These reviews provide information, which
assists management in the timely identification of problems and potential
problems and provides a basis for deciding whether the credit represents a
probable loss or risk that should be quantified and recognized. The following table provides a reconciliation of the Allowance at the dates
indicated and certain key ratios for the three-month periods ended March 31,
2004 and 2003 and for the year ended December 31, 2003: Three Months EndedMarch 31,
    
    Year EndedDecember 31,2004
    
    2003
    
    2003(Dollars in thousands)Beginning balance
    
    $
    330,826
    
    
    $
    350,931
    
    
    $
    350,931Loans charged offCommercial, financial and agricultural
    
    
    (23,896
    )
    
    
    (17,520
    )
    
    
    (75,736
    )Foreign
    
    
    (12
    )
    
    
    (2,093
    )
    
    
    (2,179
    )Accounts receivable  factoring
    
    
    (4,769
    )
    
    
    (11,270
    )
    
    
    (47,519
    )Real estate  construction
    
    
    (1,814
    )
    
    
    (1,677
    )
    
    
    (9,662
    )Real estate  mortgageSecured by 1-4 family residential
    
    
    (5,997
    )
    
    
    (8,449
    )
    
    
    (42,225
    )Non-farm, nonresidential properties
    
    
    (5,066
    )
    
    
    (2,291
    )
    
    
    (12,348
    )Multifamily (5 or more) residential
    
    
    (243
    )
    
    
    (1,551
    )
    
    
    (2,866
    )Secured by farmland
    
    
    (379
    )
    
    
    (55
    )
    
    
    (883
    )Home equity
    
    
    (1,370
    )
    
    
    (920
    )
    
    
    (5,813
    )Consumer
    
    
    (6,501
    )
    
    
    (11,444
    )
    
    
    (42,325
    )Direct lease financing
    
    
    (57
    )
    
    
    (442
    )
    
    
    (493
    )Total charge-offs
    
    
    (50,104
    )
    
    
    (57,712
    )
    
    
    (242,049
    )Recoveries on loans previously charged offCommercial, financial and agricultural
    
    
    2,791
    
    
    
    2,406
    
    
    
    11,734Foreign
    
    
    33
    
    
    
    358
    
    
    
    2,633Accounts receivable  factoring
    
    
    1,512
    
    
    
    750
    
    
    
    2,159Real estate  construction
    
    
    613
    
    
    
    162
    
    
    
    865Real estate  mortgageSecured by 1-4 family residential
    
    
    442
    
    
    
    388
    
    
    
    1,904Non-farm, nonresidential properties
    
    
    354
    
    
    
    600
    
    
    
    4,230Multifamily (5 or more) residential
    
    
    7
    
    
    
    9
    
    
    
    87Secured by farmland
    
    
    38
    
    
    
    55
    
    
    
    195Home equity
    
    
    68
    
    
    
    188
    
    
    
    855Consumer
    
    
    3,985
    
    
    
    4,178
    
    
    
    17,659Direct lease financing
    
    
    5
    
    
    
    
    
    
    
    172Total recoveries
    
    
    9,848
    
    
    
    9,094
    
    
    
    42,493Net charge-offs
    
    
    (40,256
    )
    
    
    (48,618
    )
    
    
    (199,556
    )Provision charged to expense
    
    
    62,823
    
    
    
    48,649
    
    
    
    181,539Allowance related to the transfer of certain loans to loans held for resale and sale of loans
    
    
    (44,630
    )
    
    
    
    
    
    
    (2,088
    )Balance at end of period
    
    $
    308,763
    
    
    $
    350,962
    
    
    $
    330,826Total loans, net of unearned income, at end of period
    
    $
    22,065,288
    
    
    $
    22,714,615
    
    
    $
    21,996,037Average total loans, net of unearned income, during period
    
    $
    22,131,256
    
    
    $
    22,732,839
    
    
    $
    22,464,454Credit Quality RatiosAllowance for losses on loans/loans, net of unearned income
    
    
    1.40
    %
    
    
    1.55
    %
    
    
    1.50
    %Net charge-offs/average loans, net of unearned income (1)
    
    
    .73
    
    
    
    .87
    
    
    
    .89Provision for losses on loans/average loans, net of unearned income (1)
    
    
    1.14
    
    
    
    .87
    
    
    
    .81
   (1)
    
    Amounts annualized for March 31, 2004 and 2003. The increase in the first quarter of 2004 in charge-offs of commercial,
financial and agricultural loans is primarily due to write-downs of three large
credits for which specific reserves had already been established in earlier
periods. The decrease in charge-offs of accounts receivable  factoring
compared to the first quarter of 2003 primarily relates to charge-offs during
the first quarter of 2003 for receivables Union Planters purchased from
multiple factoring clients that were due from one customer that the factoring
clients have in common, a multi-national retailer of consumer goods that has
recently emerged from bankruptcy proceedings. Union Planters established a
specific reserve for this customer during 2002. The decrease in the first
quarter of 2004 in charge-offs of consumer loans is primarily the result of
more stringent underwriting standards established by management during the
first quarter of 25




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##### Table of Contents



2003 as well as the implementation of new collection processes during 2003.
Both of these initiatives are part of managements ongoing efforts to improve
credit quality. Nonperforming Assets Nonaccrual, Restructured and Past Due Loans and Foreclosed Properties March 31,December 31,2004
    
    2003
    
    2003(Dollars in thousands)Nonaccrual loans
    
    $
    195,204
    
    
    $
    242,740
    
    
    $
    209,455Restructured loans
    
    
    298
    
    
    
    481
    
    
    
    302Total nonperforming loans
    
    
    195,502
    
    
    
    243,221
    
    
    
    209,757Foreclosed propertiesOther real estate owned, net
    
    
    49,249
    
    
    
    68,676
    
    
    
    49,808Other foreclosed property
    
    
    7,532
    
    
    
    995
    
    
    
    2,236Total foreclosed properties
    
    
    56,781
    
    
    
    69,671
    
    
    
    52,044Total nonperforming assets
    
    $
    252,283
    
    
    $
    312,892
    
    
    $
    261,801Loans past due 90 days or more and still accruing interest
    
    $
    186,658
    
    
    $
    266,026
    
    
    $
    203,991Less: FHA/VA government-insured/guaranteed loans past due 90 days or more and
still accruing interest
    
    
    (30,295
    )
    
    
    (62,099
    )
    
    
    (44,148
    )Loans past due 90 days or more and still accruing interest, net of FHA/VA
government-insured/guaranteed loans
    
    $
    156,363
    
    
    $
    203,927
    
    
    $
    159,843RatiosNonperforming loans/loans, net of unearned income(2)
    
    
    .88
    %
    
    
    1.07
    %
    
    
    .95
    %Nonperforming assets/loans, net of unearned income plus foreclosed properties(2)
    
    
    1.14
    
    
    
    1.37
    
    
    
    1.19Allowance for losses on loans/nonperforming loans
    
    
    158
    
    
    
    144
    
    
    
    158Loans past due 90 days or more and still accruing interest/loans, net of unearned income
    
    
    .84
    
    
    
    1.17
    
    
    
    .93Excluding FHA/VA government-insured/guaranteed loans:(1)Loans past due 90 days or more and still accruing interest/loans, net of unearned income
    
    
    .71
    
    
    
    .91
    
    
    
    .73
   (1)
    
    Ratio calculations exclude FHA/VA government-insured guaranteed
loans, which represent minimal credit risk to Union Planters.(2)
    
    Includes nonperforming loans in loans held for resale. The breakdown of nonaccrual loans and loans past due 90 days or more and still
accruing interest is as follows: Nonaccrual Loans
    
    Loans Past Due 90 Days or MoreMarch 31,
    
    
    
    
    
    March 31,December 31,
    
    
    
    
    
    
    
    
    
    December 31,2004
    
    2003
    
    2003
    
    2004
    
    2003
    
    2003(Dollars in thousands)Loan TypeCommercial, financial and agricultural
    
    $
    99,378
    
    
    $
    98,755
    
    
    $
    108,926
    
    
    $
    11,871
    
    
    $
    16,823
    
    
    $
    14,723Foreign
    
    
    83
    
    
    
    5,124
    
    
    
    83
    
    
    
    4,786
    
    
    
    426
    
    
    
    Real estate  construction
    
    
    16,698
    
    
    
    30,798
    
    
    
    18,354
    
    
    
    1,897
    
    
    
    8,371
    
    
    
    1,505Real estate  mortgageSecured by 1-4 family residential
    
    
    15,175
    
    
    
    26,714
    
    
    
    15,729
    
    
    
    116,551
    
    
    
    155,339
    
    
    
    119,054FHA/VA government-insured/guaranteed
    
    
    561
    
    
    
    576
    
    
    
    525
    
    
    
    30,295
    
    
    
    62,099
    
    
    
    44,148Non-farm, nonresidential properties
    
    
    43,785
    
    
    
    61,267
    
    
    
    42,923
    
    
    
    7,177
    
    
    
    6,105
    
    
    
    9,849Multifamily (5 or more) residential
    
    
    10,733
    
    
    
    11,022
    
    
    
    12,311
    
    
    
    849
    
    
    
    3,944
    
    
    
    303Secured by farmland
    
    
    6,270
    
    
    
    5,100
    
    
    
    7,313
    
    
    
    2,461
    
    
    
    874
    
    
    
    2,862Home equity
    
    
    2,003
    
    
    
    2,458
    
    
    
    2,519
    
    
    
    5,787
    
    
    
    5,381
    
    
    
    5,539Consumer
    
    
    518
    
    
    
    926
    
    
    
    772
    
    
    
    4,388
    
    
    
    5,605
    
    
    
    5,296Direct lease financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596
    
    
    
    1,059
    
    
    
    712Total
    
    $
    195,204
    
    
    $
    242,740
    
    
    $
    209,455
    
    
    $
    186,658
    
    
    $
    266,026
    
    
    $
    203,991
 Nonperforming assets and past due loans.Nonperforming assets decreased $9.5
million compared to the fourth quarter of 2003, the lowest level since March
2001. Management anticipates further reductions in nonperforming assets this
year, subject to favorable economic and business conditions as a result of
managements continued commitment to improving credit quality. These are
forward-looking statements, and actual results could differ because of several
factors, including those mentioned in the Cautionary Statements Regarding
Forward-Looking Information at the beginning of this discussion. Loans past due 90 days or more and still accruing interest decreased $17.3
million from December 31, 2003, to .84% of loans at
March 31, 2004, compared to .93% at December 31, 2003 and 1.17% at March 31, 2003, respectively. The
preceding table details the composition of these loans. Potential Problem Assets 26




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##### Table of Contents



Potential problem assets consist of assets that are generally secured and are
not currently considered nonperforming. They include those assets where
information about possible credit problems has raised serious doubts as to the
ability of the borrowers to comply with present repayment terms. Historically,
such assets have been loans, which have ultimately become nonperforming. At
March 31, 2004, Union Planters had potential problem assets (all loans)
aggregating $28.5 million, comprised of three loans, the largest of which was
$13.0 million. This compares to potential problem assets (all loans)
aggregating $37.1 million, comprised of three loans at December 31, 2003. The
preceding statements are based on information available as of March 31, 2004.
The receipt of information subsequent to this date could result in changes in
the actual amounts and numbers of problem assets. These are forward-looking
statements, and actual results could differ because of several factors,
including those identified in this discussion and in the discussion of
Cautionary Statements Regarding Forward-Looking Information. Deposits Union Planters deposit base is its primary source of liquidity and consists of
deposits from the communities served in Union Planters twelve-state market
area. The composition of average deposits was as follows: Three Months EndedMarch 31,
    
    December 31,2004
    
    2003
    
    2003(Dollars in thousands)Noninterest-bearing deposits
    
    $
    5,079,356
    
    
    $
    4,672,871
    
    
    $
    5,122,324Money market deposits
    
    
    5,663,604
    
    
    
    5,722,316
    
    
    
    5,924,499Interest-bearing checking
    
    
    3,429,944
    
    
    
    3,462,093
    
    
    
    3,444,034Savings deposits
    
    
    1,488,195
    
    
    
    1,408,927
    
    
    
    1,472,907Total transaction and saving accounts
    
    
    15,661,099
    
    
    
    15,266,207
    
    
    
    15,963,764Other time deposits
    
    
    5,477,103
    
    
    
    6,345,182
    
    
    
    5,684,255Time deposits of $100,000 and over
    
    
    1,560,888
    
    
    
    1,643,022
    
    
    
    1,569,161Total time deposits
    
    
    7,037,991
    
    
    
    7,988,204
    
    
    
    7,253,416Total average deposits
    
    $
    22,699,090
    
    
    $
    23,254,411
    
    
    $
    23,217,180
 Average deposits decreased $518.1 million for the first quarter of 2004
compared to the fourth quarter of 2003 and $555.3 million compared to the first
quarter of 2003. Most of the overall decline in average deposits in the
current quarter from previous quarters related to time deposit and money market
accounts due to the low level of interest rates. An additional factor in the
decline in the deposit balance was branch divestitures, which resulted in the
sale of $225.2 million in deposits during the first quarter of 2004. A major
deposit campaign is planned for the second quarter of 2004 to offset this
decline. Borrowings Total borrowings at March 31, 2004 were $4.68 billion, compared to $5.08
billion at December 31, 2003 and $5.28 billion at March 31, 2003. The decrease
in debt from December 31, 2003 is primarily related to the decrease in federal
funds sold and securities purchased under agreements to resell. The decrease
from March 31, 2003 is the result of diminished funding needs due to a
significant decrease in loans held for resale. The Consolidated Average
Balance Sheet and Interest Rates and Note 6 to the unaudited consolidated
financial statements provide additional information regarding Union Planters
borrowings. Shareholders Equity Union Planters total shareholders equity increased $40.8 million from
December 31, 2003 to $3.11 billion at March 31, 2004. The major items
affecting shareholders equity are as follows:  
    
    $9.2 million increase due to retained net earnings (net earnings less dividends paid)  
    
    $4.4 million increase due to common stock issued for employee benefit plans  
    
    $19.4 million increase due to the net change in the unrealized gain or loss on available for sale securities  
    
    $7.1 million increase due to the net change in the unrealized gain on cash flow hedges Capital Adequacy The following table presents information concerning Union Planters
Corporations and Union Planters Bank, National Associations risk-based
capital and capital adequacy ratios. The regulatory capital ratios qualify
Union Planters Bank, National Association for the well-capitalized regulatory
classification. 27




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##### Table of Contents



Union Planters Corporation
Risk-Based Capital March 31,2004
    
    2003
    
    December 31,2003(Dollars in millions)Tier 1 capital
    
    $
    2,431
    
    
    $
    2,579
    
    
    $
    2,404Total risk-based capital
    
    
    3,943
    
    
    
    3,729
    
    
    
    3,908Risk-weighted assets
    
    
    24,985
    
    
    
    25,681
    
    
    
    25,043RatiosLeverage (1)
    
    
    8.01
    %
    
    
    8.00
    %
    
    
    7.89
    %Tier 1 risk-based capital
    
    
    9.74
    
    
    
    10.04
    
    
    
    9.60Total risk-based capital
    
    
    15.78
    
    
    
    14.52
    
    
    
    15.60Total shareholders equity/total assets (at period-end)
    
    
    9.86
    
    
    
    9.63
    
    
    
    9.61
   (1)
    
    Based on period-end capital and quarterly
adjusted average assets. Union Planters Bank, National Association
Risk-Based Capital March 31,December 31,2004
    
    2003
    
    2003(Dollars in millions)Tier 1 capital
    
    $
    2,408
    
    
    $
    2,367
    
    
    $
    2,427Total capital
    
    
    3,004
    
    
    
    2,976
    
    
    
    3,027Risk-weighted assets
    
    
    24,878
    
    
    
    25,491
    
    
    
    24,880RatiosLeverage (1)
    
    
    8.02
    %
    
    
    7.43
    %
    
    
    8.05
    %Tier 1 risk-based capital
    
    
    9.68
    
    
    
    9.29
    
    
    
    9.76Total risk-based capital
    
    
    12.08
    
    
    
    11.68
    
    
    
    12.17
   (1)
    
    Based on period-end capital and quarterly adjusted average assets. Accounting changes For information regarding accounting standards issued which will be adopted in
future periods, refer to Note 1 to the unaudited consolidated financial
statements. Liquidity Union Planters requires liquidity sufficient to meet cash requirements for
deposit withdrawals, to make new loans and satisfy loan commitments, to take
advantage of attractive investment opportunities and to repay borrowings at
maturity. Deposits, available for sale securities and money market investments
are Union Planters primary sources of liquidity. Liquidity is also achieved
through short-term borrowings, borrowings under available lines of credit, and
issuance of securities and debt instruments in the financial markets. Union
Planters believes it has adequate liquidity to meet its operating requirements. At April 1, 2004, the parent company could have received dividends from
subsidiaries of $2.2 million without prior regulatory approval. The payment of
dividends by Union Planters subsidiaries will be dependent on the future
earnings and capital and liquidity considerations. Management believes that
the parent company has adequate liquidity to meet its cash needs, including the
payment of its regular dividends and servicing of its debt. 
 Item 3  Quantitative and Qualitative Disclosures About Market Risk Market Risk and Asset/Liability Management Union Planters assets and liabilities are principally financial in nature, and
the resulting earnings, primarily net interest income, are subject to change as
a result of fluctuations in market interest rates and the mix of the various
assets and liabilities. Interest rates in the financial markets affect pricing
decisions on assets and liabilities, and the resulting net interest income
represents approximately 61% of Union Planters revenues, on a fully taxable
equivalent basis, for the three months ended March 31, 2004. Consequently, a
substantial part of Union Planters risk-management activities are devoted to
managing interest rate risk. Currently, Union Planters does not have
significant risks related to foreign exchange, commodities or equity risk. Interest Rate Risk The Companys primary market risk is interest rate risk, which is the risk that
earnings and shareholder value will be reduced by adverse changes in the
interest rate environment. Effectively managing interest rate risk is an
integral factor in maximizing the long-term earnings capacity and value of the
Company. Responsibility for managing interest rate risk within the limits
established by the Companys Board rests with the Asset/Liability Management
Committee (ALCO), which is comprised of the Chief Executive Officer, Chief
Financial Officer, members of the executive management committee and senior
financial executives. To accomplish that objective, the ALCO monitors
appropriate policies, reviews and approves balance sheet management strategies, 28




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and ensures compliance with interest rate risk policy limits. Reference is
made to the Available for Sale Securities and Loans discussions for additional
information regarding the risks related to these items. The Company employs simulation analysis as the primary tool for quantifying
interest rate risk. Simulation analysis utilizes cash flow, maturity and
repricing information from the Companys existing balance sheet and combines
that with assumptions about future market environments with respect to rates,
spread, volatilities, expected customer behavior and management pricing
actions. Key assumptions that drive simulation results include the following:  
    
    Prepayment speeds on mortgage-related assets and fixed-rate loans  
    
    Cash flows and repricings of all financial instruments  
    
    Changes in loan and deposit volumes and pricing  
    
    Future shapes of the yield curve  
    
    Relationship of market interest rates to each other (basis risk)  
    
    Credit spreads  
    
    Deposit rate sensitivity  
    
    Managements financial plan These assumptions are inherently uncertain, and, as a result, simulations
cannot precisely predict net interest income nor the exact impact of higher or
lower interest rates on net interest income. Actual results will differ from
simulated results due to the timing, magnitude and frequency of interest rate
changes, the difference between actual experience and the characteristics
assumed, as well as changes in market conditions and management strategies. Simulations are prepared using a variety of potential interest rate
environments to estimate the Companys earnings sensitivity to changing
interest rates. These potential interest rate environments include interest
rate shocks, gradual rate changes and changes in the shape of the yield curve.
As previously mentioned, the Companys Board has established policies that
limit the allowable earnings exposure to changing interest rates. The Boards
policy is based on a standard set of interest rate scenarios including those
listed below: Interest Rate Shock Scenario
    
    12 Months Percentage Change from Stable+200 basis points
    
    
    -10.0
    %+100 basis points
    
    
    -7.5-100 basis points
    
    
    -7.5-200 basis points
    
    
    -10.0
  
    
    Stable rates (base)  current market interest rates remain unchanged.
    
    Shocks of +100 and +200 basis points where market interest rates
receive an immediate, parallel and sustained increase along the stable
rate curve, and administered interest rates are adjusted based on
managements assumptions.  
    
    Shocks of -200 and -100 basis points where market interest rates
receive an immediate, parallel and sustained decrease along the stable
rate curve, and administered interest rates are adjusted based on
managements assumptions. As of March 31, 2004, simulation analysis indicated that the Companys earnings
would decrease under scenarios of dramatically lower rates as compared to
scenarios of stable rates. The following table depicts how sensitive Union
Planters net interest income is to immediate parallel shifts in rates. March 31,
    
    December 31,2004
    
    2003(Dollars in millions)+200 basis point rate shock
    
    $
    8.1
    
    
    $
    13.0+100 basis point rate shock
    
    
    4.0
    
    
    
    8.0-100 basis point rate shock
    
    
    (21.3
    )
    
    
    (18.2
    )
 Given the current level of short-term market interest rates, a 200 basis point
decline in rates is not possible without allowing rates to drop below 0%.
Therefore, management does not consider a -200 basis point rate shock scenario
meaningful. The Company manages market risk exposures by maintaining portfolios of
fixed-income securities, wholesale funding and derivative financial
instruments, including interest rate swaps, swaptions, caps and floors. 
 Item 4  Controls and Procedures Union Planters maintains disclosure controls and procedures that are designed
to ensure that information Union Planters is required to disclose in the
reports it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commissions rules and forms. 29




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##### Table of Contents



Union Planters management has evaluated, with the participation of Union
Planters Chief Executive Officer and Chief Financial Officer, the
effectiveness of these disclosure controls and procedures as of the end of the
period covered by this quarterly report. Based on that evaluation, the Chief
Executive Officer and the Chief Financial Officer have concluded that, as of
March 31, 2004, Union Planters disclosure controls and procedures are
effective in ensuring that all material information required to be filed in
this quarterly report has been made known to them in a timely fashion. There was no change in Union Planters internal control over financial
reporting identified in connection with that evaluation that occurred during
the quarter ended March 31, 2004 that has materially affected, or is reasonably
likely to materially affect, Union Planters internal controls over financial
reporting. 30




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 1  Legal Proceedings Union Planters and/or its various subsidiaries are parties to certain pending
or threatened civil actions, which are described in Note 23 to Union Planters
consolidated financial statements in Item 3, Part I of Union Planters Form
10-K for the year ended December 31, 2003, to which reference is made. Various
other legal proceedings pending against Union Planters and /or its subsidiaries
have arisen in the ordinary course of business. While it is impossible to predict with certainty the outcome of any legal
proceeding, based upon present information, including evaluations by outside
counsel, management is of the opinion that neither Union Planters financial
position, results of operations nor liquidity will be materially adversely,
affected by the ultimate resolution of pending or threatened legal proceedings.
There were no material developments during the first quarter of 2004 in any of
the pending or threatened actions that affected such opinion. 
 Item 2  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities None 
 Item 3  Defaults Upon Senior Securities None 
 Item 4  Submission of Matters to a Vote of Security Holders None 
 Item 5  Other Information None 
 Item 6  Exhibits and Reports on Form 8-K Exhibits: 2
    
    Agreement and Plan of Merger, dated as of January
22, 2004, by and between Regions Financial
Corporation and Union Planters Corporation
(incorporated by reference to Exhibit 2.1 to the
Form 8-K filed by Regions Financial Corporation
on January 30, 2004 (Commission File No.
001-31307))4
    
    Amendment to Rights Agreement, dated January 22,
2004, by and between Union Planters Corporation
and American Stock Transfer & Trust Company
(incorporated by reference to Form 8-A/A
Amendment No. 2 filed by Union Planters
Corporation on January 30, 2004, Commission File
No. 001-10160)10(a)
    
    Amendment to the Amended and Restated Employment
Agreement by and between Union Planters
Corporation and Jackson W. Moore, dated as of
January 22, 2004 (incorporated by reference to
Exhibit 10(p) to Union Planters Corporations
Form 10-K dated December 31, 2003, Commission
File No. 1-10160)10(b)
    
    Amendment Number Three to the Supplemental
Executive Retirement Agreement by and between
Union Planters Corporation and Jackson W. Moore,
dated as of January 22, 2004 (incorporated by
reference to Exhibit 10(t) to Union Planters
Corporations Form 10-K dated December 31, 2003,
Commission File No. 1-10160)10(c)
    
    Letter Agreement regarding the Supplemental
Executive Retirement Agreement by and between
Union Planters Corporation and Jackson W. Moore,
dated as of January 22, 2004 (incorporated by
reference to Exhibit 10(u) to Union Planters
Corporations Form 10-K dated December 31, 2003,
Commission File No. 1-10160)31
    
    Certifications of Chief Executive Officer and
Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002Additional exhibits furnished with this report:32(a)
    
    906 Certification of Chief Executive Officer32(b)
    
    906 Certification of Chief Financial Officer
 Reports on Form 8-K filed or furnished during the quarter ended March 31,
2004: Date of Current Report
    
    Subject1.
    
    January 15, 2004
    
    Press release announcing Fourth Quarter
and Year-End 2003 operating results,
furnished under Item 12.2.
    
    January 20, 2004
    
    Slides referred to in a prerecorded
earnings message and a transcript of the
earnings message, furnished under Item
12.3.
    
    January 30, 2004
    
    Copy of Agreement and Plan of Merger,
dated as of January 22, 2004, by and
between Union Planters Corporation and
Regions Financial Corporation, filed
under Item 5.
 31




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. UNION PLANTERS CORPORATION
(Registrant)Date:
May 10, 2004
    
    By:
    
    /s/ Jackson W. MooreJackson W. Moore, Chairman,President and Chief Executive OfficerDate:
May 10, 2004
    
    By:
    
    /s/ Bobby L. DoxeyBobby L. Doxey,Senior Executive Vice President, Chief Financial
Officerand Chief Accounting Officer
 32




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##### Table of Contents



Exhibit Index ExhibitNumber
    
    Description2
    
    Agreement and Plan of Merger, dated as of January 22, 2004, by and between
Regions Financial Corporation and Union Planters Corporation (incorporated by
reference to Exhibit 2.1 to the Form 8-K filed by Regions Financial Corporation
on January 30, 2004 (Commission File No. 001-31307))4
    
    Amendment to Rights Agreement, dated January 22, 2004, by and between Union
Planters Corporation and American Stock Transfer & Trust Company (incorporated
by reference to Form 8-A/A Amendment No. 2 filed by Union Planters Corporation
on January 30, 2004, Commission File No. 001-10160)10(a)
    
    Amendment to the Amended and Restated Employment Agreement by and between Union
Planters Corporation and Jackson W. Moore, dated as of January 22, 2004
(incorporated by reference to Exhibit 10(p) to Union Planters Corporations Form
10-K dated December 31, 2003, Commission File No. 1-10160)10(b)
    
    Amendment Number Three to the Supplemental Executive Retirement Agreement by and
between Union Planters Corporation and Jackson W. Moore, dated as of January 22,
2004 (incorporated by reference to Exhibit 10(t) to Union Planters
Corporations Form 10-K dated December 31, 2003, Commission File No. 1-10160)10(c)
    
    Letter Agreement regarding the Supplemental Executive Retirement Agreement by
and between Union Planters Corporation and Jackson W. Moore, dated as of January
22, 2004 (incorporated by reference to Exhibit 10(u) to Union Planters
Corporations Form 10-K dated December 31, 2003, Commission File No. 1-10160)31
    
    Section 302 Certifications of Chief Executive Officer and Chief Financial Officer32(a)
    
    Section 906 Certification of Chief Executive Officer32(b)
    
    Section 906 Certification of Chief Financial Officer
 33