UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

For the quarterly period ended March 31, 2002

OR

 

 ̈	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

For the transition period ________ to ________

Commission File No.   	
 
**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        
(Address of principal executive offices) 
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  S		No  ̈

 

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, 2002        
Common stock $5 par value
135,123,118
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

Form 10-Q For the Three Months Ended March 31, 2002**
 
**Index**
 

 
Page  **Part I.  Financial Information 
	Item 1. Financial Statements (Unaudited)
		Consolidated Balance Sheet - March 31, 2002, March 31, 2001 and December 31, 2001	
3
		Consolidated Statement of Earnings -Three Months Ended March 31, 2002 and 2001	
4
		Consolidated Statement of Changes in Shareholders' Equity - Three Months Ended March 31, 2002	
5
		Consolidated Statement of Cash Flows - Three Months Ended March 31, 2002 and 2001	
6
		Notes to Unaudited Consolidated Financial Statements	
7
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	
14
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	
27  **Part II.  Other Information 
	Item 1. Legal Proceeding	
30
	Item 2. Changes in Securities	
30
	Item 3. Defaults Upon Senior Securities	
30
	Item 4. Submission of Matters to a Vote of Security Holders	
30
	Item 5. Other Information	
30
	Item 6. Exhibits and Reports on Form 8-K	
30
Signature		
31
** 

 

UNION PLANTERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

 

 **   March 31,    **December 31, **   2002    **   2001    **   2001    **(Dollars in thousands)
Assets     
  Cash and due from banks	
$671,419 
$777,098 
$953,846
  Interest-bearing deposits at financial institutions
78,052 
30,012 
54,351
  Federal funds sold and securities purchased under agreements to resell
24,937 
2,867 
13,067
  Trading account assets
253,334 
261,221 
263,315
  Loans held for resale
1,200,868 
1,053,357 
1,862,637
  Available for sale securities (Amortized cost:  $4,756,548, $6,432,965 and 

   $4,694,248, respectively)
4,828,814 
6,523,197 
4,780,629
  Loans
23,067,156 
24,619,668 
23,184,002
    Less:  Unearned income
(20,800) 
(21,697) 
(20,963)
               Allowance for losses on loans
(351,452) 
(342,138) 
(341,930)
       Net loans
22,694,904 
24,255,833 
22,821,109
  Premises and equipment
553,742 
603,146 
556,686
  Accrued interest receivable
222,820 
291,426 
245,847
  FHA/VA claims receivable
41,766 
79,888 
55,813
  Mortgage servicing rights
184,981 
118,551 
150,303
  Goodwill 
776,906 
817,668 
780,612
  Other intangibles
142,116 
163,072 
146,695
  Other assets
386,514 
446,134 
512,694
          Total assets
$32,061,173 
$35,423,470 
$33,197,604      
Liabilities and shareholders' equity     
  Deposits     
     Noninterest-bearing
$4,369,138 
$4,047,894 
$4,509,944
     Certificates of deposit of $100,000 and over
1,586,207 
2,182,318 
1,602,117
     Other interest-bearing
17,806,540 
17,375,015 
17,318,441
          Total deposits
23,761,885 
23,605,227 
23,430,502
  Short-term borrowings
1,656,711 
5,301,437 
3,076,679
  Short- and medium-term senior notes
- 
60,000 
-
  Federal Home Loan Bank advances
1,460,856 
1,361,452 
1,461,190
  Other long-term debt
1,273,849 
1,276,214 
1,275,509
  Accrued interest, expenses and taxes
281,891 
359,334 
282,211
  Other liabilities
393,164 
371,699 
447,772
          Total liabilities
28,828,356 
32,335,363 
29,973,863      
  Commitments and contingent liabilities (Note 14)
- 
- 
-
  Shareholders' equity     
    Convertible preferred stock (Note 7)
13,404 
19,445 
16,101
    Common stock, $5 par value; 300,000,000 shares authorized; 136,811,055      
       issued and outstanding (137,050,599 at March 31, 2001,     
       and 137,408,887 at December 31, 2001)
683,801 
685,253 
687,044
    Additional paid-in capital
880,333 
869,947 
878,901
    Retained earnings
1,622,024 
1,472,877 
1,600,153
    Unearned compensation
(12,553) 
(16,296) 
(13,022)
    Accumulated other comprehensive income
45,808 
56,881 
54,564
          Total shareholders' equity
3,232,817 
3,088,107 
3,223,741      
          Total liabilities and shareholders' equity
$32,061,173 
$35,423,470 
$33,197,604

The accompanying notes are an integral part of these consolidated financial statements.

 
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS

(Unaudited)**
**    Three Months Ended  March 31,   **     2002     **     2001     **(Dollars in thousands, except per share data)
Interest income
  Interest and fees on loans
 $393,659 
 $529,097 
  Interest on investment securities

    Taxable
 55,041 
 88,685 
    Tax-exempt
 13,145 
 15,362 
  Interest on deposits at financial institutions
 576 
 487 
  Interest on federal funds sold and securities
    purchased under agreements to resell
 698 
 519 
  Interest on trading account assets
 2,278 
 4,237 
  Interest on loans held for resale
   22,527 
    10,030 
      Total interest income
 487,924 
  648,417 
Interest expense
  Interest on deposits
 121,649 
 217,101 
  Interest on short-term borrowings
 7,903 
 81,864 
  Interest on long-term debt
    38,277 
    38,426 
      Total interest expense
  167,829 
  337,391 
      Net interest income
 320,095 
 311,026 
Provision for losses on loans
    44,991 
    25,300 
      Net interest income after provision for losses on loans
  275,104 
  285,726 
Noninterest income
  Service charges on deposit accounts
 52,293 
 53,416 
  Mortgage banking revenue
 49,356 
 41,349 
  Merchant servicing income
 803 
 9,660 
  Factoring commissions and fees
 9,025 
 9,158 
  Trust service income
 7,237 
 7,084 
  Profits and commissions from trading activities
 1,314 
 2,718 
  Investment securities gains
 9,236 
 25 
  Investments and insurance
 12,251 
 11,661 
  Other income
    33,858 
   29,843 
      Total noninterest income
  175,373 
 164,914 
Noninterest expense
  Salaries and employee benefits
 132,763 
 132,343 
  Net occupancy expense
 25,908 
 25,767 
  Equipment expense
 21,055 
 22,134 
  Goodwill amortization
 3,652 
 11,966 
  Other intangibles amortization
 4,092 
 4,485 
  Other expense
   80,669 
   92,977 
      Total noninterest expense
 268,139 
 289,672 
      Earnings before income taxes
  182,338 
  160,968 
Income taxes
    56,415 
    54,601 
      Net earnings
$125,923
$106,367
      Net earnings applicable to common shares
 $125,689
$105,981
Earnings per common share 
      Basic
 $.92 
 $.78 
      Diluted
 .91 
 .77 
Average common shares outstanding (in thousands)
      Basic
 136,966 
 136,600 
      Diluted
 138,942 
 138,179 

The accompanying notes are an integral part of these consolidated financial statements.
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

 **
      **Accumulated  **Convertible **Additional  **Other  **Preferred**Common**Paid-in**Retained**Unearned**Comprehensive  **   Stock   **   Stock   **  Capital  **Earnings**Compensation**   Income   **   Total    **(Dollars in thousands, except per share data)
Balance, December 31, 2001
$16,101
$687,044
$878,901
$1,600,153
$(13,022)
$54,564
$3,223,741
Comprehensive income       
  Net earnings
-
-
-
125,923
-
-
125,923
Other comprehensive income, net of taxes:       
  Net change in the unrealized gain       
       on available for sale securities
-
-
-
-
-
(8,756)
 (8,756)
          Total comprehensive income      
117,167
Cash dividends       
  Common stock, $.50 per share
-
-
-
(68,734)
-
-
(68,734)
  Preferred stock, $.50 per share
-
-
-
(234)
-
-
(234)
Common stock issued under employee benefit        
  plans, net of stock exchanged
-
1,320
6,161
-
469
-
7,950
Conversion of preferred stock
(2,697)
659
1,956
-
-
-
(82)
Common stock purchased and retired
-
(5,222)
(6,685)
(35,084)
-
-
(46,991)
Balance, March 31, 2002
$13,404
$683,801
$880,333
$1,622,024
$(12,553)
$45,808
$3,232,817

 

 **Before Tax**Tax**Net of Tax 
Disclosure of reclassification amount:**Amount**Benefit/(Expense)**Amount 
Change in the unrealized gain on available for sale securities arising  

   during the period
$(14,115)
$5,359
$(8,756) 
Less:  reclassification for gains included in net income
9,236
(3,593)
5,643 
Net change in the unrealized gain on available for sale securities
$(4,879)
$1,766
$(3,113) 

The accompanying notes are an integral part of these consolidated financial statements.
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)**
 **Three Months Ended **   March 31,    **   2002    **   2001    **(Dollars in thousands)**Operating activities   
  Net earnings
$125,923 
$106,367
  Reconciliation of net earnings to net cash provided by operating activities:   
    Provision for losses on loans, other real estate and FHA/VA foreclosure claims
44,991 
25,187
    Depreciation and amortization of premises and equipment
16,782 
19,898
    Amortization of goodwill and other intangibles
7,744 
16,451
    Amortization of mortgage servicing rights, net
4,332 
7,099
    Net amortization (accretion) of investment securities
2,421 
(943)
    Net realized gains on sales of investment securities
(9,236) 
(25)
    Gain on sale of residential mortgage loans
(13,228) 
(8,228)
    Gain on sale of branches
(1,599) 
-
    Deferred income tax expense 
4,929 
2,777
    Decrease (increase) in assets   
        Trading account assets and loans held for resale
684,978 
(623,593)
        Other assets
130,176 
33,714
    Net (decrease) increase in accrued interest, expenses, taxes and other liabilities
(54,713) 
51,577
    Other, net
481 
1,147
          Net cash provided (used) by operating activities
943,981 
(368,572)    **Investing activities   
  Net (increase) decrease in short-term investments
(23,701) 
19,032
  Proceeds from sales of available for sale securities
274,247 
25,328
  Proceeds from maturities, calls and prepayments of available for sale securities
331,648 
516,193
  Purchases of available for sale securities
(663,288) 
(82,242)
  Net decrease in loans
 76,572 
242,900
  Net cash received from acquired institutions
- 
61,970
  Sale of residential real estate loans
- 
423,777
  Purchases of premises and equipment, net
(15,441) 
(8,406)
          Net cash (used) provided by investing activities
(19,963) 
1,198,552    **Financing activities   
  Net increase (decrease) in deposits
376,935 
(384,791)
  Net decrease in short-term borrowings
(1,419,968) 
(793,197)
  Proceeds from long-term debt
- 
866,125
  Repayment of long-term debt
(2,007) 
(649,972)
  Net cash paid for sales of branches, including deposits
(40,761) 
-
  Proceeds from issuance of common stock
7,494 
7,943
  Purchase and retirement of common stock
(46,933) 
(83,028)
  Cash dividends paid
(69,335) 
(67,797)
          Net cash used by financing activities
(1,194,575) 
(1,104,717)
  Net decrease in cash and cash equivalents
(270,557) 
(274,737)
  Cash and cash equivalents at the beginning of the period
966,913 
1,054,702
  Cash and cash equivalents at the end of the period
$696,356 
$779,965    **Supplemental disclosures   
  Cash paid (received) for   
    Interest
$182,738 
$342,889
    Income taxes 
19,629 
(827)
  Unrealized gain on securities available for sale
72,266 
90,232

The accompanying notes are an integral part of these consolidated financial statements.
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS****Note 1.  Principles of Accounting**
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, including normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements 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 as noted below. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in Appendix C of Union Planters Corporation's Definitive Proxy Statement for the Annual Shareholders' Meeting held April 18, 2002 (the Definitive Proxy Statement including the 2001 Annual Financial Disclosures are referred to as the Proxy and Annual Financial Disclosures).  Certain prior year amounts have been reclassified to be consistent with the 2002 financial reporting presentation.
***Goodwill and Other Intangible Assets.  In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," which changes the required accounting and reporting for acquired goodwill and other intangible assets and supercedes Accounting Principles Board (APB) Opinion No. 17, "Intangible Assets."  SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in the financial statements upon their acquisition.  SFAS No. 142 changes the accounting for goodwill and other intangible assets in the following significant respects:
Acquiring entities integrate acquired entities into their operations; thus, the acquirers' expectations of benefits from the resulting synergies usually are reflected in the premium that they pay to acquire those entities.  APB No. 17 treated the acquired entity as if it remained a stand-alone entity rather than being integrated with the acquiring entity.  SFAS No. 142 adopts a view of goodwill that bases the accounting for goodwill on the units of the combined entity into which the acquired entity is integrated.
APB Opinion No. 17 presumed that goodwill and other intangible assets were wasting assets and were amortized over an estimated life.  SFAS No. 142 requires goodwill and other intangible assets that have indefinite lives to not be amortized but rather to be tested at least annually for impairment.  Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of an arbitrary ceiling.
SFAS No. 142 provides specific guidance for testing goodwill for impairment.
SFAS No. 142 provides specific guidance on testing intangible assets that will not be amortized for impairment and thus removes those assets from the scope of other impairment guidance.  Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair value of those assets with their recorded amount.
SFAS No. 142 requires disclosure about changes in the carrying amount of goodwill from period to period (in the aggregate and by reportable segment), the carrying amount of intangible assets by major intangible asset class for those subject to amortization and for those not subject to amortization and the estimated asset amortization for the next five years.

In October 2001, the FASB issued interpretive guidance for SFAS No. 142 affirming that intangible assets acquired through the purchase of branches will continue to be amortized.  This will result in the continued amortization of certain unidentified intangibles included in goodwill associated with branch purchases.  During the first quarter of 2002, this amortization expense was $3.7 million.  The FASB has undertaken a project to review this issue during 2002.

Union Planters adopted the Standard on January 1, 2002.  For the quarter ended March 31, 2002, the net impact on the consolidated statement of earnings was an increase in net income of $8.2 million.
***Impairment or Disposal of Long-Lived Assets.In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a business and amends Accounting Research Bulletin (ARB) No. 51, "Consolidated Financial Statements."  Significant changes in accounting include:
Establishment of a single accounting model for long-lived assets to be disposed of by sale.
Goodwill is no longer included in the scope of this guidance.
Long-lived assets to be abandoned are now required to have depreciable lives that are in accordance with APB Opinion 20, "Accounting Changes."
Long-lived assets to be disposed of by sale are required to be measured at the lower of book value or the fair value, less the cost to sell.
Losses related to discontinued operations are no longer reported until they have been incurred.

The provisions of this Standard are required to be applied starting with fiscal years beginning after December 15, 2001.  Union Planters adopted this Standard on January 1, 2002.  The adoption had an immaterial impact on the Company's financial condition, results of operations and cash flows.
**Note 2.  Acquisitions**
In  February 2001, Union Planters acquired Jefferson Savings Bancorp, Inc. (Jefferson Savings) of Ballwin, Missouri, the parent of Jefferson Heritage Bank, a federal savings bank.  Jefferson Savings' total assets of $1.6 billion, total loans of $1.3 billion and total deposits of $877 million were acquired in exchange for approximately 4.4 million shares of Union Planters' common stock.  The acquisition was accounted for as a purchase.  
**Note 3.  Investment Securities**
The amortized cost and fair value of investment securities are summarized as follows:

 **      March 31, 2002       **Amortized **    Unrealized       **    Cost     **   Gains    **   Losses    **  Fair Value   **(Dollars in thousands)
Available for sale securities       
U.S. Government obligations       
  U.S. Treasury
$141,027 
$985 
$1,236 
$140,776
  U.S. Government agencies       
    Collateralized mortgage obligations
1,830,745 
36,556 
1,528 
1,865,773
    Mortgage-backed
431,046 
8,105 
1,198 
437,953
    Other
215,395 
7,167 
101 
222,461
          Total U.S. Government obligations
2,618,213 
52,813 
4,063 
2,666,963
Obligations of states and political subdivisions
815,454 
15,375 
4,043 
826,786
Other stocks and securities
1,322,881 
19,128 
6,944 
1,335,065
          Total available for sale securities
$4,756,548 
$87,316 
$15,050 
$4,828,814

 

 **      December 31, 2001       **Amortized **    Unrealized       **    Cost     **   Gains    **   Losses    **  Fair Value   **(Dollars in thousands)
Available for sale securities       
U.S. Government obligations       
  U.S. Treasury
$78,414 
$1,478 
$156 
$79,736
  U.S. Government agencies       
    Collateralized mortgage obligations
1,699,771 
34,352 
1,480 
1,732,643
    Mortgage-backed
355,830 
9,323 
621 
364,532
    Other
324,361 
9,421 
95 
333,687
          Total U.S. Government obligations
2,458,376 
54,574 
2,352 
2,510,598
Obligations of states and political subdivisions
1,084,757 
24,065 
4,049 
1,104,773
Other stocks and securities
1,151,115 
21,277 
7,134 
1,165,258
          Total available for sale securities
$4,694,248 
$99,916 
$13,535 
$4,780,629

Investment securities having a fair value of approximately $2.1 billion and $2.2 billion at March 31, 2002 and December 31, 2001, respectively, 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 investment securities is $266.5 million and $269.9 million of Federal Home Loan Bank and Federal Reserve Bank stock at March 31, 2002 and December 31, 2001, respectively, for which there is no readily determinable market value.

The following table presents the gross realized gains and losses on available for sale investment securities: 

 **Three Months Ended **      March 31,       **   2002   **   2001    **(Dollars in thousands)
Realized gains
$9,425
$37
Realized losses
(189)
(12)
**Note 4.  Loans

Loans are summarized by type as follows:

 **    March 31,     **December 31, **    2002     **    2001     **    2001     **(Dollars in thousands)      
Commercial, financial and agricultural
$5,082,746 
$5,413,931 
$5,145,917
Foreign
340,857 
489,340 
397,737
Accounts receivable - factoring
675,899 
683,076 
640,312
Real estate - construction
2,245,889 
2,252,445 
2,190,854
Real estate - mortgage     
  Secured by 1-4 family residential
5,031,731 
6,320,706 
5,166,097
  FHA/VA government-insured/guaranteed
131,885 
303,177 
133,751
  Non-farm, nonresidential properties
4,896,649 
4,456,004 
4,821,293
  Multifamily (5 or more) residential
841,370 
767,756 
846,259
  Secured by farmland
467,118 
417,598 
462,676
Home equity
1,028,002 
755,799 
935,841
Consumer
2,225,097 
2,652,596 
2,338,560
Direct lease financing
99,913 
107,240 
104,705
          Total loans
$23,067,156 
$24,619,668 
$23,184,002

Nonperforming loans are summarized as follows: 

 **March 31, **December 31, **    2002     **    2001     **(Dollars in thousands)    
Nonaccrual loans
$271,925 
$234,405
Restructured loans
2,892 
868
          Total nonperforming loans
$274,817 
$235,273    
FHA/VA government-insured/guaranteed   
  loans on nonaccrual status
$1,824 
$1,872    
**Note 5.  Allowance for Losses on Loans

The changes in the allowance for losses on loans for the three months ended March 31, 2002 and 2001 are as follows:

 **Three Months Ended March 31, **    2002     **    2001     **(Dollars in thousands)    
Beginning balance
$341,930 
$335,452
Provision for losses on loans
44,991 
25,300
Recoveries of loans previously charged off
8,798 
13,514
Loans charged off
(44,267) 
(36,114)
Increase due to acquisitions
- 
5,753
Decrease due to sale of loans
- 
(1,767)
Balance, end of period
$351,452 
$342,138
**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 and generally mature in one business day.  Securities sold under agreements to repurchase are collateralized by U.S. Government and agency securities.

Short-term borrowings are summarized as follows:

 **     March 31,      **December 31, **    2002     **    2001    **    2001     **(Dollars in thousands)
Balances at period-end     
  Short-term FHLB advances
$- 
$1,500,000 
$400,000
  Federal funds purchased
334,686 
2,168,637 
1,266,804
  Securities sold under agreements to repurchase
1,319,610 
1,630,697 
1,408,134
  Other short-term borrowings
2,415 
2,103 
1,741
          Total short-term borrowings
$1,656,711 
$5,301,437 
$3,076,679      
Federal funds purchased and securities sold under agreements to repurchase     
  Daily average balance
$2,092,552 
$3,843,865 
$3,198,989
  Weighted average interest rate
1.48% 
5.35% 
2.54%
Short-term FHLB advances     
  Daily average balance
$ - 
$ 2,117,778 
$1,035,616
  Weighted average interest rate
-% 
5.94% 
4.93%
***Short- and Medium-Term Senior Notes*
Union Planters has a $5.0 billion senior and subordinated bank note program to supplement it's funding sources.  Under the program Union Planters Bank, National Association, a subsidiary of Union Planters Corporation, may from time to time issue senior bank notes having maturities ranging from 30 days to one year from their respective issue dates (Short-Term Senior Notes), senior bank notes having maturities of more than one year to 30 years from their respective dates of issue (Medium-Term Senior Notes) and subordinated bank notes with maturities from 5 years to 30 years from their respective dates of issue (Subordinated Notes).  At March 31, 2002, and December 31, 2001, there were no notes outstanding under this program.  At March 31, 2001, there was $60.0 million outstanding.
***Long-term Federal Home Loan Bank Advances*
Certain of Union Planters' banking and thrift subsidiaries had outstanding advances, with original maturity dates 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 110% and 135%, respectively, of the advances outstanding.  At March 31, 2002, 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, **    2002     **    2001     **    2001     **(Dollars in thousands)      
Balance at period-end
$1,460,856 
$1,361,452 
$1,461,190
Range of interest rates
1.75% -  6.92% 
1.75% -  6.92% 
1.75% -  6.92%
Range of maturities
2002 -  2021 
2001 - 2021 
2002 - 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 the Proxy and Annual Financial Disclosures for additional information regarding these borrowings.

 **    March 31,     **December 31, **    2002     **    2001     **    2001     **(Dollars in thousands)
8.20% Trust Preferred Securities
$199,124 
$199,089 
$199,115
6.75% Subordinated Notes due 2005
99,788 
99,729 
99,773
6.25% Subordinated Notes due 2003
74,417 
74,365 
74,404
6.50% Putable/Callable Subordinated Notes due 2018
300,636 
300,822 
300,682
7.75% Subordinated Notes due 2011
499,197 
499,108 
499,175
Variable-rate asset-backed certificates
100,000 
100,000 
100,000
Other long-term debt
687 
3,101 
2,360
          Total other long-term debt
$1,273,849 
$1,276,214 
$1,275,509
**Note 7.  Shareholders' Equity*****Preferred Stock*
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, **    2002    **    2001    **    2001    
Preferred stock, without par value, 10,000,000 shares authorized**(Dollars in thousands)
  Series E, 8% Cumulative, Convertible   
    Preferred Stock (stated at liquidation value of $25 per shares plus unpaid dividends), 

      536,148 shares issued and outstanding (777,792 at March 31, 2001 and 644,037 at 

       December 31, 2001)
 

$13,404
 

$19,445
 

$16,101
  Series F Preferred Stock   
    300,000 shares authorized, none issued 
-
-
-
**Total preferred stock**
$13,404
$19,445
$16,101
**Note 8.  Other Noninterest Income and Expense**
 **Three Months Ended March 31, **    2002     **    2001     **(Dollars in thousands)**Other noninterest income   
  ATM transaction fees
$8,012 
$6,936
  Strategic Outsourcing, Inc. net revenues 
5,454 
6,046
  Letters of credit fees
1,953 
1,741
  Net gain (loss) on sales of branches/deposits and other assets
1,599 
(51)
  Earnings of equity method investments
1,355 
1,343
  Other real estate revenue
2,672 
1,321
  Other income
12,813 
12,507
**Total other noninterest income**
$33,858 
$29,843    **Other noninterest expense   
  Communications
$7,301 
$8,385
  Other contracted services
8,690 
8,781
  Postage and carrier
6,658 
7,753
  Advertising and promotion
7,254 
6,586
  Stationery and supplies
4,684 
6,199
  Merchant interchange fees
337 
6,545
  Mortgage intangibles expense
4,332 
7,099
  Other personnel services
3,823 
2,926
  Legal fees
3,068 
2,425
  Travel
1,865 
2,657
  Federal Reserve fees
1,713 
2,027
  Accounting and audit fees
1,877 
1,650
  Other real estate expense
1,011 
1,444
  Brokerage and clearing fees on trading activities
1,473 
2,098
  Taxes other than income
1,672 
1,911
  FDIC insurance
1,033 
1,109
  Dues, subscriptions and contributions
2,121 
1,203
  Insurance
987 
901
  Credit related expense
9,836 
3,056
  Miscellaneous charge-offs
1,867 
2,659
  Other expense
9,067 
15,563
**Total other noninterest expense**
$80,669 
$92,977
**Note 9.  Income Taxes**
Income tax expense for the first three months ended March 31, 2002 and 2001 was $56.4 million and $54.6 million, respectively, resulting in an effective tax rate of 30.94% and 33.92%, respectively.  At March 31, 2002, Union Planters had a net deferred tax asset of $67.9 million compared to $67.4 million at December 31, 2001.  Management believes that the deferred tax asset will be fully realized, and therefore, no valuation allowance has been provided.
**Note 10.  Earnings Per Share**
The following table sets forth the computation of basic net earnings per share and diluted net earnings per share:

 **Three Months Ended March 31, **    2002     **    2001     **(Dollars in thousands, except per share data)**Basic   
  Net earnings
$125,923 
$106,367
    Less preferred dividends
234 
386
  Net earnings applicable to common shares
$125,689 
$105,981    
  Average common shares outstanding
136,966,324 
136,600,438    
  Net earnings per common share - basic
$.92 
$.78    **Diluted   
  Net earnings
$125,923 
$106,367    
  Average common shares outstanding
136,966,324 
136,600,438
  Stock option adjustment
1,257,809 
601,669
  Preferred stock adjustment
717,519 
976,589
  Average common shares outstanding
138,941,652 
138,178,696    
  Net earnings per common share - diluted
$.91 
$.77
**Note 11.  Mortgage Loan Servicing**
Union Planters acted as servicing agent for residential mortgage loans totaling approximately $16.5 billion at March 31, 2002, compared to $16.2 billion at December 31, 2001.  The loans serviced for others are not included in Union Planters' consolidated balance sheet.  The following table presents a reconciliation of the changes in mortgage servicing rights for the three months ended March 31,:

 **    2002    **    2001     **(Dollars in thousands)
Beginning balance
$150,303
$123,940
Additions
39,010
4,902
Amortization of servicing rights
(9,569)
(7,099)
Provision for impairment
5,237
(3,192)
Ending balance
$184,981
$118,551

Union Planters had a valuation allowance of $9.9 million associated with the mortgage servicing rights portfolio at March 31, 2002 compared to $15.1 million as of December 31, 2001.  The fair value of mortgage servicing rights at March 31, 2002 was $203.9 million.  Significant assumptions utilized in determining the fair value were as follows:

Dealer consensus prepayment speeds
    19.9% CPR
Market discount rates
    9.7%

Both of 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 mortgage servicing rights 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, 2002, the reduction in the current fair value of mortgage servicing rights resulting from an immediate 50 and 100 basis point decline in mortgage interest rates would be approximately $44.7 million and $82.6 million, respectively. 
**Note 12.  Intangible Assets**
In accordance with SFAS No. 142, most goodwill is no longer subject to amortization.  The carrying value of goodwill not subject to amortization was $529.3 million at March 31, 2002 of which $50.7 million was in the "other operating units" line of business, with the remainder in the "banking" line of business.  During the second quarter of 2002, Union Planters will finalize its evaluation of goodwill for impairment using the cash flow method; however, no impairment is expected.  Had SFAS No. 142 been implemented prior to the first quarter of 2001, net income for the first quarter of 2001 would have increased $8.0 million to $114.4 million.  Both basic and diluted earnings per share would have been $.83. 

Union Planters' other intangible assets are core deposit intangibles acquired through bank acquisitions and are subject to amortization periods up to 15 years with no residual value.  The gross amount of intangible assets at March 31, 2002 was $232.0 million, with accumulated amortization of $52.2 million.  All other intangibles are in the "banking" line of business.  The weighted average amortization period is 159.9 months.  Amortization expense over the next five years on current other intangibles is expected to be:

**(Dollars in thousands)
2002
$  16,131
2003
16,131
2004
15,132
2005
12,644
2006
12,423
**Note 13.  Lines of Business Reporting**
 **Three Months Ended March 31, 2002   **Other       **Operating **Parent **Consolidated **Banking **Units **Company **Total **(Dollars in thousands)        
Net interest income (loss)
$288,185 
$44,280 
$(12,370) 
$320,095
Provision for losses on loans
(39,391) 
(5,600) 
- 
(44,991)
Noninterest income (1)
95,732 
79,494 
147 
175,373
Noninterest expense
(201,556) 
(64,568) 
(2,015) 
(268,139)
Earnings (loss) before taxes (1)
$142,970 
$53,606 
$(14,238) 
$182,338        
Average assets
$27,752,916 
$4,493,389 
$179,839 
$32,426,144                 **Three Months Ended March 31, 2001   **Other       **Operating **Parent **Consolidated **Banking **Units **Company **Total **(Dollars in thousands)        
Net interest income (loss)
$284,135 
$31,274 
$(4,383) 
$311,026
Provision for losses on loans
(22,657) 
(2,643) 
- 
(25,300)
Noninterest income (1)
106,001 
58,632 
281 
164,914
Noninterest expense
(234,679) 
(52,987) 
(2,006) 
(289,672)
Earnings (loss) before taxes (1)
$132,800 
$34,276 
$(6,108) 
$160,968        
Average assets
$32,470,331 
$2,492,515 
$140,977 
$35,103,823

____________________
- Parent company noninterest income and earnings before income taxes are net of the intercompany dividend eliminations of $70.5 million and $103.5 million for the three months ended March 31, 2002 and 2001, respectively.
**Note 14.  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.  Management is of the opinion, based upon present information, including evaluations by outside counsel, that neither Union Planters' financial position, results of operations nor liquidity will be materially affected by the ultimate resolution of pending or threatened legal proceedings.
** 

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 Appendix C of Union Planters Corporation's Definitive Proxy Statement for the Annual Shareholders' Meeting held April 18, 2002 (the Definitive Proxy Statement including the 2001 Annual Financial Disclosures are referred to as the Proxy and Annual Financial Disclosures), the interim unaudited consolidated financial statements and notes for the three months ended March 31, 2002 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).  These statements are contained in certain sections that follow, such as Net Interest Income, Provision for Losses on Loans, Noninterest Income, Noninterest Expense, Loans and Interest-Rate Risk.  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" 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; 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; and loan loss experience, the rate of loan charge-offs and the level of the provision for losses on loans.  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 from 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 Highlights**
The following table presents selected financial highlights for the three-month periods ended March 31, 2002 and 2001:

 **Three Months Ended   **   March 31,    **Percentage **   2002    **   2001    **   Change    **(Dollars in thousands, except per share data)      **Net earnings
$125,923 
$106,367 
18%
  Per share     
    Basic
.92 
.78 
18  
    Diluted
.91 
.77 
18  
  Return on average assets
1.57
%
1.23
%
 
  Return on average common equity
15.91 
14.54  
  Return on average tangible assets
1.62 
1.26  
  Return on average tangible common equity
22.34 
21.55  
Net interest margin (FTE)
4.53
%
4.05
% 
Net interest spread (FTE)
4.02 
3.34  
Expense ratio
1.07 
1.10  
Efficiency ratio
50.86 
54.11  
Tier 1 capital
$2,467,886 
$2,255,613 
9  
Leverage ratio
7.85
%
6.61
% 
Book value per common share
$23.53 
$22.39 
5  
Dividends per common share
.50 
.50 
-  
Common share prices     
  High closing price
48.58 
39.12  
  Low closing price
43.99 
34.70  
  Closing price at quarter-end
47.39 
38.49  

____________________

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

Expense ratio = Operating net noninterest expense (noninterest expense minus noninterest income, excluding investment securities gains [losses], significant items and goodwill and other intangibles amortization) divided by average assets

Efficiency ratio = Operating noninterest expense (excluding significant expense items, goodwill and other intangibles amortization) divided by net interest income (FTE) plus noninterest income, excluding significant revenue items and investment securities gains (losses)

FTE = Fully taxable-equivalent basis
**Operating Results - Three Months Ended March 31, 2002 and 2001**
The following table presents a summary of Union Planters' operating results for the three months ended March 31, 2002 and 2001 identifying significant items impacting the results for the periods shown:
**UNION PLANTERS CORPORATION

SUMMARY OF CONSOLIDATED RESULTS

(Unaudited)**
 **Three Months Ended **   March 31,    **   2002    **   2001    **(Dollars in thousands, except  per share data)    
Interest income
$487,924 
$648,417
Interest expense
167,829 
337,391
**Net interest income**
320,095 
311,026**Provision for losses on loans
44,991 
25,300
**Net interest income after provision for losses on loans**
275,104 
285,726**Noninterest income   
  Service charges on deposit accounts
52,293 
53,416
  Mortgage banking revenue
49,356 
41,349
  Merchant servicing income
803 
9,660
  Factoring commissions and fees
9,025 
9,158
  Trust service income
7,237 
7,084
  Profits and commissions from trading activities
1,314 
2,718
  Investments and insurance
12,251 
11,661
  Other income
32,259 
29,843
     Total noninterest income
164,538 
164,889**Noninterest expense   
  Salaries and employee benefits
132,400 
132,343
  Net occupancy expense
25,908 
25,767
  Equipment expense
20,230 
21,718
  Goodwill
3,652 
11,966
  Other intangibles amortization
4,092 
4,485
  Other expense
72,274 
82,686
     Total noninterest expense
258,556 
278,965    **Earnings before significant items**and income taxes**
181,086 
171,650    **Significant items   
  Gain on sale of branches
1,599 
-
  UPExcel project expenses
(3,849) 
-
  Loss on sale of fixed assets
(1,402) 
(416)
  Amortization/impairment of mortgage servicing rights
(4,332) 
(10,291)
  Investment securities gains
9,236 
25
**Earnings before income taxes**
182,338 
160,968
Income taxes
56,415 
54,601
**Net earnings**
$125,923 
$106,367    **Per common share data   
  Diluted earnings 
$.91 
$.77

The table that follows presents the contributions to diluted earnings per common share.  A discussion of the operating results follows this table.
**Union Planters Corporation

Contributions to Diluted Earnings per Common Share**
 **Three Months Ended **EPS **   March 31,    **Increase **   2002    **   2001    ** (Decrease)       
Net interest income-FTE
$2.36 
$2.31 
$.05
Provision for losses on loans
     (.32)
(.18)
(.14)
Net interest income after provision for losses on loans-FTE
2.04 
2.13 
(.09)      
Noninterest income     
  Service charges on deposit accounts
.38 
.39 
(.01)
  Mortgage banking revenue
.36 
.31 
.05
  Merchant servicing income
.01 
.07 
(.06)
  Factoring fees and commissions
.06 
.05 
.01
  Trust service income
.05 
.05 
-
  Profits and commissions from trading activities
.01 
.02 
(.01)
  Investment securities gains
.07 
- 
.07
  Investments and insurance
.09 
.08 
.01
  Other income
.25 
.22 
.03
**Total noninterest income**
1.28 
1.19 
.09      
Noninterest expense     
  Salaries and employee benefits
.96 
.96 
-
  Net occupancy expense
.19 
.18 
(.01)
  Equipment expense
.15 
.16 
.01
  Goodwill
.03 
.09 
.06
  Other intangibles amortization
.03 
.03 
-
  Other expense
.58 
.67 
.09
**Total noninterest expense**
1.94 
2.09 
.15      **Earnings before income taxes-FTE
1.38 
1.23 
.15
Income taxes-FTE
.47 
.46 
(.01)**Net earnings
.91 
.77 
.14
Less preferred stock dividends
- 
- 
-
**Diluted earnings per common share**
$.91 
$.77 
$.14      
Change in net earnings applicable to diluted earnings     
  per share using previous year average shares outstanding    
$.14
Change in average shares outstanding    
-
**Change in net earnings**    
$.14      **Average diluted shares (in thousands)
138,942 
138,179  

____________________

FTE = Fully taxable-equivalent basis
** 

FIRST QUARTER EARNINGS OVERVIEW**
For the first quarter of 2002, Union Planters reported net earnings of  $125.9 million, or $.91 per diluted common share.  This compared to net earnings for the same period in 2001 of $106.4 million, or $.77 per diluted common share.  Net earnings for the first quarter of 2002 resulted in annualized returns on average assets, average common equity and average tangible common equity of 1.57%, 15.91% and 22.34%, respectively, which compares to 1.23%, 14.54% and 21.55%, respectively, for the same period in 2001. 
**EARNINGS ANALYSIS
*Net Interest Income*
Taxable-equivalent net interest income for the first quarter of 2002 was $328.3 million, an increase of $8.0 million from $320.3 million for the first quarter of 2001.  The net interest margin (taxable-equivalent net interest income as a percentage of average earning assets) for the first quarter of 2002 was 4.53%, which compares to 4.05% for the first quarter of 2001.  The net interest spread was 4.02% for the first quarter of 2002, an increase from 3.34% for the first quarter of 2001. 

Focused management initiatives and a favorable interest rate environment drove the increase in net interest income in the first quarter of 2002 compared to the same period in 2001.  The key business drivers supporting growth in net interest income and improved net interest margin included:
Targeted promotions driving core deposit growth of 5.4% over first quarter 2001
Sale or reduction during 2001 of low return assets, including investment securities and selected loan products
Focus on relationship pricing
Sale during 2001 of under-performing branches with higher-rate deposit balances 
Elimination of high-cost brokered deposits
Significant reduction in wholesale funding 

This improvement was accomplished while reducing the level of earnings at risk to changes in market interest rates from 7.6% of net income at March 31, 2001 to less than 1.0% of net income at March 31, 2002.

Reference is made to Union Planters' average balance sheet and analysis of volume and rate changes, which follows this discussion, for additional information regarding the changes in net interest income.
***Interest Income*
The following table presents a breakdown of average earning assets:

 **   Three Months Ended    **    March 31,     **December 31,  **   2002    **   2001   **   2001    **(Dollars in billions)
Average earning assets
$29.4 
$32.1
$30.2
  Comprised of:    
    Loans
83% 
78%
83%
    Investment securities
15   
21  
16   
    Other earning assets 
2 
1
1
____________________         
Fully taxable-equivalent yield on average earning assets
6.85% 
8.31%
7.08%

Taxable-equivalent interest income decreased $161.6 million for the first quarter of 2002 compared to the same period in 2001.  A decrease in the average yield on earning assets from 8.31% to 6.85% accounted for $111.7 million of the decline.  Average earning assets, primarily loans, decreased 8.47%, which accounted for $49.9 million of the decrease in interest income.  

The decline in average yield is related to the lower interest rate environment, which impacted both interest income and interest expense.

Reference is made to the Market Risk and Asset/Liability Management section for a discussion on interest rate risk management activities.***Interest Expense*
The following table presents a breakdown of average interest-bearing liabilities:

**Three Months Ended**    March 31,     **December 31, **    2002    **    2001    **    2001    **(Dollars in billions)
Average interest-bearing liabilities
$24.1
$27.5
$24.8
  Comprised of:
    Deposits
80%
70%
74%
    Short-term borrowings
9 
22  
16  
    FHLB advances and long-term debt
11  
8
10  
____________________
Rate paid on average interest-bearing liabilities
2.83%
4.97%
4.19%

Interest expense decreased $169.6 million in the first quarter of 2002 compared to the same quarter last year.  The decrease was driven by a decrease in average rate paid for interest-bearing liabilities from 4.97% to 2.83%, which accounted for $130.2 million of the decrease.  Additionally, a 12.6% decrease in the average interest-bearing liabilities accounted for $39.4 million of the decrease.

The decrease in average interest-bearing liabilities for the first quarter of 2002 compared to the same period in 2001 was attributable to decreases in short-term borrowings as a result of the aforementioned sale of certain loans and investment securities and increase in deposit balances.   

Reference is made to the Market Risk and Asset/Liability Management section for a discussion on interest rate risk management activities.
***Provision for Losses on Loans*
The provision for losses on loans for the first quarter of 2002 was $45.0 million, or .75% of average loans on an annualized basis.  This compares to $25.3 million, or .41% of average loans, for the first quarter of 2001.  The higher provision for losses on loans in the first quarter of 2002 is attributable to current economic conditions and the resulting increase in nonperforming loans.  Reference is made 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 2002 was $175.4 million, an increase of $10.5 million, or 6.3%, from the first quarter of 2001.  Growth of noninterest income continues to be one of management's priorities and is attributable to successful efforts in several areas.  Noninterest income as a percentage of total revenues decreased to 34.0% in the first quarter of 2002, compared to 34.7% for the same quarter last year.  The major components of noninterest income are presented in Note 8 to the unaudited interim consolidated financial statements.  Changes in the component of noninterest income include:
**Service charges on deposit accounts.  These fees decreased 2.1% to $52.3 million for the first quarter of 2002 compared to the same period in 2001 due to a decrease in transaction volume.
**Mortgage banking revenues.  These revenues increased $8.0 million in the first quarter of 2002 compared to the same period in 2001 due to increased loan origination volume and related fees from mortgage origination and servicing activites.
**Merchant servicing income.  These revenues were primarily fees earned for the conversion of payments received by merchants into cash, from customers using credit cards, debit cards, purchase cards and private label cards.  In the fourth quarter of 2001, Union Planters sold the majority of this nonstrategic business and entered into a long-term marketing agreement with the buyer.  Consequently, revenue for the first quarter of 2002 was $.8 million compared to $9.6 million for the first quarter of 2001.  
**Factoring commissions and fees.  Capital Factors, a subsidiary of Union Planters, purchases accounts receivable from clients and earns commissions and other fees in return for services rendered to those clients including credit protection, collection and management information services.  Commissions and fees earned were $9.0 million for the first quarter 2002 compared to $9.2 million for the same period last year.
**Investment securities gains.  These gains increased to $9.2 million in the first quarter of 2002 compared to $25,000 in the first quarter of 2001 as a result of the sale of small denomination municipal and other securities.  These sales were part of the Company's continued efforts to reposition the balance sheet.
**Other noninterest income. 
Small Business Administration loan trading revenues decreased $1.4 million to $1.3 million for the first quarter of 2002 compared to the first quarter of 2001 due to a decrease in transaction volume.  
Net revenues of Strategic Outsourcing, Inc., a wholly-owned subsidiary, were $5.5 million for the first quarter of 2002 compared to $6.0 million for the same period last year.
Earnings from VSIBG, an equity investee, were $1.4 million for the first quarter of 2002 compared with $1.3 million for the first quarter of 2001.
Gains on sales of branches were $1.5 million for the first quarter 2002 arising from the Company's sale of certain underperforming branches.  There were no branch sales during the first quarter of 2001.
Bank card fees increased $1.1 million to $8.0 million for the first quarter of 2002 compared to the first quarter of 2001 due to the repricing of bank card products and services.
Revenue from investments and insurance sales and trust services increased $.7 million to $19.5 million for the first quarter of 2002 compared to the first quarter of 2001.

***Noninterest Expense*
Noninterest expense for the first quarter of 2002 was $268.1 million compared to $289.7 million for the first quarter of 2001.  The major components of noninterest expense are presented on the consolidated statement of earnings and in Note 8 to the unaudited interim consolidated financial statements.  This reduction was achieved through the implementation of the following strategic initiatives:
Reduction of full-time equivalent employees by 7.9%
Negotiation of lower rates on communications, couriers and office supplies
Sale of over 100 branches
Sale of non-strategic merchant services portfolio, which reduced noninterest expense by $8.2 million

Noninterest expenses included in the results of the first quarter of 2002, which management considers significant, are expenses associated with UPExcel initiatives (discussed below) of $3.8 million, $4.3 million in amortization and impairment of mortgage servicing rights and $1.4 million in other items.  Significant noninterest expenses included in the results of the first quarter of 2001 are $10.3 million in amortization and impairment of mortgage servicing rights and $.4 million in other items.

Changes in the components of noninterest expense include:
**Salaries and employee benefits.  These expenses represent the largest category of noninterest expenses and were $132.8 million for the first quarter of 2002, a slight increase from  $132.3 million for the first quarter of 2001.  At March 31, 2002, Union Planters had 11,608 full-time equivalent employees, compared to 12,608 at March 31, 2001. 
**Occupancy and equipment expense.  Net occupancy and equipment expense was $47.0 million for the first quarter of 2002 compared to $47.9 million for the first quarter of 2001.
**Goodwill and other intangibles amortization.  These expenses decreased $8.7 million from the first quarter of 2001, $8.2 million of which was due to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," which discontinued the amortization of goodwill for most acquisitions. 
**Mortgage servicing rights amortization and impairment.  This expense decreased $6.0 million for the first quarter of 2002 compared to the same period in 2001, primarily due to a more stable interest rate environment, which resulted in a decrease in prepayment speeds.
**Other miscellaneous expenses.  Credit related expense, which represents expenses related to loan origination, increased $6.8 million for the first quarter of 2002 compared to the first quarter of 2001 due to increased mortgage loan production.
**UPExcel project expense.  Expenses related to this initiative, which is a comprehensive "grass roots" self-improvement project that is designed to enhance client service, identify opportunities for new revenue generation and expense savings and result in more efficient and more profitable operations, were $3.8 million for the first quarter 2002.  There were no related expenses in the first quarter of 2001. 
**Income taxes.  The Company initiated certain transactions that resulted in an effective tax rate of 30.94% during the first quarter of 2002 compared to 33.92% in the first quarter of 2001.  These transactions are designed to enhance the Company's ability to raise Tier I capital and also have the added benefit of reducing both Federal and state tax expense.    
** **
 
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCE SHEET AND INTEREST RATES**
**2002**2001**Average

  Balance **Interest

Income/

   Expense **FTE

Yield/

    Rate    **Average

    Balance **Interest

Income/

  Expense  **FTE

Yield/

    Rate    **Assets
Interest-bearing deposits at financial institutions
 $      60,188 
 $     576 
3.88 
%
 $       33,320 
 $      487 
5.93 
%
Federal funds sold and securities

  purchased under agreements to resell
163,739 
698 
1.73 
34,799 
519 
6.05 
Trading account assets
229,104 
2,278 
4.03 
206,574 
4,237 
8.32 
Investment securities (1), (2)
  Taxable securities
3,536,217 
55,041 
6.31 
5,450,605 
88,685 
6.60 
  Tax-exempt securities
  1,013,687 
  20,065 
8.03 
  1,183,380 
  22,958 
7.87 
     Total investment securities
4,549,904 
75,106 
6.69 
6,633,985 
111,643 
6.83 
Loans, net of unearned income (1), (3), (4)
 24,383,332 
417,469 
6.94 
 25,195,199 
540,797 
8.70 **Total earning assets (1), (2), (3), (4)
29,386,267 
496,127 
6.85 
32,103,877 
657,683 
8.31 
Cash and due from banks
879,383 
793,520 
Premises and equipment
556,288 
602,916 
Allowance for losses on loans
(341,518)
(338,675)
Goodwill and other intangibles
922,980 
962,693 
Other assets
    1,022,744 
      979,492 **Total assets
 $32,426,144 
$35,103,823 **Liabilities and shareholders' equity
Money market accounts 
 $  5,790,702 
26,334 
1.84 
%
 $  3,945,402 
42,477 
4.37 
%
Interest-bearing checking
 3,338,516 
9,111 
1.11 
 3,149,582 
11,433 
1.47 
Savings deposits
1,348,342 
3,886 
1.17 
1,350,986 
4,877 
1.46 
Certificates of deposit of $100,000 and over
1,633,504 
15,055 
3.74 
2,263,341 
34,783 
6.23 
Other time deposits
7,086,986 
67,264 
3.85 
8,514,807 
123,531 
5.88 
Short-term borrowings
  Federal funds purchased and securities sold under
    agreements to repurchase
 2,092,552 
 7,642 
1.48 
 3,843,865 
 50,730 
5.35 
  Other
 60,122 
 261 
1.76 
 2,121,701 
 31,134 
5.95 
Long-term debt
  Federal Home Loan Bank advances
1,461,060 
15,422 
4.28 
1,336,153 
19,595 
5.95 
  Subordinated capital notes
974,037 
17,556 
7.31 
657,925 
11,234 
6.92 
  Medium-term senior notes
-
-
60,000 
1,025 
6.93 
  Trust Preferred Securities
199,120 
4,128 
8.41 
199,084 
4,128 
8.41 
  Other
     101,210 
    1,171 
4.69 
     103,212 
    2,444 
9.60 **Total interest-bearing liabilities
24,086,151 
167,830 
2.83 
27,546,058 
337,391 
4.97 
Noninterest-bearing demand deposits
  4,417,321 
-
  3,890,023 
-**Total sources of funds
28,503,472 
167,830 

31,436,081 
337,391 

Other liabilities
703,860 
691,137 
Shareholders' equity
  Preferred stock
14,351 
19,532 
  Common equity
    3,204,461 
    2,957,073 
     Total shareholders' equity
    3,218,812 
    2,976,605 **Total liabilities and shareholders' equity
$32,426,144 
$35,103,823 **Net interest income (1)
$328,297 
$320,292 **Net interest rate spread (1)
4.02 
%
3.34 
%**Net interest margin (1)
 4.53 
%
 4.05 
%**Taxable-equivalent adjustments
          Loans
 $1,284 
 $1,670 
          Investment securities
  6,920 
  7,596 
                 Total
 $8,204
 $9,266

______________________
- Taxable-equivalent yields are calculated assuming a 35% federal income tax rate.
- Yields are calculated on historical cost and exclude the impact of the unrealized gain (loss) on available for sale securities.
- Includes loan fees in both interest income and the calculation of the yield on income.
- Includes loans on nonaccrual status.
**UNION PLANTERS CORPORATION AND SUBSIDIARIES

ANALYSIS OF VOLUME AND RATE CHANGES

 

 **Three months ended March 31, 2001 vs. 2002 **Increase (Decrease)  **Due to Change in: (1)**Total **Average**Average**Increase **Volume**Rate**(Decrease) **(Dollars in thousands)**Interest income   
  Interest-bearing deposits at financial institutions
$299
$(209)
$90
  Federal funds sold and securities purchased under agreements to resell
773  
(593)
180  
  Trading account assets
420  
(2,379)
(1,959)
  Investment securities (FTE)
(34,440)
(2,096)
(36,536)
  Loans, net of unearned income (FTE)
(16,942)
(106,386)
(123,328)**Total interest income (FTE)
(49,890)
(111,663)
(161,553) 
  **Interest expense   
  Money market accounts
14,733  
(30,876)
(16,143)
  Interest-bearing checking
653  
(2,975)
(2,322)
  Savings deposits
(10)
(981)
(991)
  Certificates of deposit of  $100,000 and over
(8,090)
(11,638)
(19,728)
  Other time deposits
(18,375)
(37,892)
(56,267)
  Short-term borrowings
(34,465)
(39,496)
(73,961)
  Long-term debt
6,178 
(6,327)
(149)**Total interest expense
(39,376)
(130,185)
(169,561)**Change in net interest income (FTE)
$  (10,514)
$18,522  
$8,008 **Percentage decrease in net interest income (FTE) over prior period
2.50%

FTE = Fully taxable-equivalent basis
- The change due to both rate and volume has been allocated to change due to volume and change due to rate in proportion to the relationship of the absolute dollar amounts of the change in each.

 

 
**FINANCIAL CONDITION**
Union Planters' total assets were $32.1 billion at March 31, 2002, compared to $35.4 billion at March 31, 2001 and $33.2 billion at December 31, 2001.  Average assets were $32.4 billion for the first quarter of 2002 compared to $35.1 billion for the first quarter of 2001. The decrease is primarily due to a decrease in average earning assets, which were $29.4 billion at March 31, 2002 compared to $30.2 billion for the fourth quarter of 2001 and $32.1 billion for the first quarter or 2001.
***Investment Securities*
Union Planters' investment securities portfolio of $4.8 billion at March 31, 2002 consisted entirely of available for sale securities, which are carried on the balance sheet at fair value.  This compares to investment securities of $6.5 billion and $4.8 billion at March 31, 2001 and December 31, 2001, respectively.  The decrease in investment securities is consistent with management's strategy of reducing the proportion of investment securities to total earning assets. 

At March 31, 2002, these securities had net unrealized gains of $72.3 million (before income taxes).  This compares to net unrealized gains of $90.2 million and $86.4 million, respectively, at March 31, 2001 and December 31, 2001.  Reference is made to Note 3 to the unaudited interim consolidated financial statements, which provides the composition of the investment portfolio at March 31, 2002 and December 31, 2001.

U.S. Treasury and U.S. Government agency obligations represented approximately 55.2% of the investment securities portfolio at March 31, 2002, (47.7% of which were Collateralized Mortgage Obligations (CMOs) and mortgage-backed securities issues).  Union Planters has some credit risk in the investment portfolio; however, management does not consider that risk to be significant and does not believe that cash flows will be significantly impacted.  Reference is made to the "Net Interest Income" and "Asset/Liability and Market Risk Management" discussions for information regarding the market-risk in the investment securities portfolio.

The limited credit risk in the investment securities portfolio at March 31, 2002 consisted of 21.5% investment grade CMOs, 17.1% municipal obligations and 6.1% other stocks and securities (primarily Federal Reserve Bank and FHLB stock). 
***Loans*
Loans, net of unearned income, at March 31, 2002 were $23.0 billion compared to $24.6 billion and $23.2 billion at March 31, 2001 and December 31, 2001, respectively.  Average loans for the first quarter of 2002 were $24.4 billion compared to $25.2 billion for the first quarter of 2001 and $25.1 billion for the fourth quarter of 2001.  Note 4 to the unaudited interim consolidated financial statements presents the composition of the loan portfolio. 

Average loans, excluding FHA/VA loans, were $24.2 billion for the first quarter of 2002, compared to $24.9 billion for the same quarter in 2001 and compared to $24.8 billion for the fourth quarter of 2001.  The sale and securitization of loans, sales of branches and the targeted runoff of low return loan products during 2001 impacted average loans for the first quarter of 2002.  Excluding the impact of these items, average loans increased 4.0% during the first quarter of 2001 compared to the same quarter last year.  The increase was driven by 12.6% growth in other mortgage loans and 7.4% growth in residential real estate loans.  
***Allowance for Losses on Loans*
Union Planters maintains the allowance for losses on loans (the allowance) at a level deemed sufficient to absorb probable losses in the loan portfolio at the balance sheet 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 estimates of 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 determination of the overall adequacy of the allowance.

A periodic review of selected loans (based on loan size) is conducted to identify loans with heightened risk or inherent losses.  The primary responsibility for this review rests with management who has been assigned accountability for the credit relationship.  This review is supplemented with periodic reviews by Union Planters' credit review function and regulatory agencies.  These reviews provide information which assists in the timely identification of problems or potential problems and provides a basis for deciding whether the credit represents a probable loss or risk which should be 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, 2002 and 2001 and for the year ended December 31, 2001:

 **Three Months Ended **Year Ended **        March 31,        **December 31, **     2002      **     2001      **     2001      **(Dollars in thousands)      **Balance at the beginning of period
$  341,930 
$335,452 
$335,452**Loans charged off     
  Commercial, financial and agricultural
17,867 
10,746 
72,294
  Foreign
- 
22 
819
  Accounts receivable - factoring
- 
3,704 
-
  Real estate - construction
1,614 
879 
2,667
  Real estate - mortgage     
     Secured by 1-4 family residential
8,980 
4,255 
51,422
     Non-farm, nonresidential properties
2,335 
2,415 
9,034
     Multifamily
57 
33 
471
     Secured by farmland
94 
198 
968
  Home equity
771 
347 
1,472
  Consumer
12,548 
13,451 
52,449
  Credit cards and related plans
- 
- 
363
  Direct lease financing
1 
64 
586
          Total charge-offs
44,267 
36,114 
192,545      **Recoveries on loans previously charged off     
  Commercial, financial and agricultural
2,145 
3,105 
18,230
  Foreign
116 
430 
531
  Accounts receivable - factoring
- 
892 
-
  Real estate - construction
146 
317 
721
  Real estate - mortgage     
    Secured by 1-4 family residential
520 
680 
19,287
     Non-farm, nonresidential properties
295 
1,571 
2,652
     Multifamily
10 
23 
91
     Secured by farmland
50 
61 
258
  Home equity
79 
50 
326
  Consumer
5,433 
6,385 
22,403
  Credit cards and related plans
- 
- 
254
  Direct lease financing
4 
- 
109
          Total recoveries
8,798 
13,514 
64,862      
Net charge-offs
(35,469) 
(22,600) 
(127,683)
Provision charged to expense
44,991 
25,300 
131,963
Decrease due to loan sales
- 
(1,767) 
(3,555)
Increase due to acquisitions
- 
5,753 
5,753
**Balance at end of period**
$351,452 
$342,138 
$341,930      
Total loans, net of unearned income, at end of period
$23,046,356 
$24,597,971 
$23,163,040
Less:  FHA/VA government insured/guaranteed loans
131,885 
303,177 
133,751      
**Loans used to calculate ratios**
$22,914,471 
$24,294,794 
$23,029,289      
Average total loans, net of unearned income, during period
$24,383,332
$25,195,199
$25,361,201
Less:  Average FHA/VA government-insured/guaranteed loans
137,066 
290,423 
252,924      
**Average loans used to calculate ratios**
$24,246,266 
$24,904,776 
$25,108,277      **Ratios (1):     
  Allowance at end of period/loans, net of unearned income
1.53%  
1.41% 
1.48%
  Net charge-offs/average loans, net of unearned income (2)
.59   
.37    
.51   
  Provision/average loans, net of unearned income (2)
.75    
.41    
.53   

____________________

(1)Ratio calculations exclude FHA/VA government-insured/guaranteed loans (FHA/VA loans), since they represent minimal credit risk.

(2)Annualized amounts for March 31, 2002 and 2001.

The allowance at March 31, 2002 was $351.5 million, an increase of $9.6 million from December 31, 2001.  The allowance at March 31, 2001 was $342.1 million.  The increase in the allowance from December 31, 2001 related to the provision for losses on loans exceeding net charge-offs in the first quarter.  Annualized net charge-offs as a percentage of average loans were .59% for the first quarter of 2002, an increase over the first quarter of 2001 and up slightly from the level for the year of 2001.  Moderate increases in nonperforming assets are anticipated over the next several quarters until economic conditions improve, while net charge-offs are expected to remain in line with the first quarter of 2002.  UPC's loan portfolio is diversified and well secured, and management expects losses to remain at their current manageable level.   This is a forward-looking statement 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. 
***Nonperforming Assets***Nonaccrual, Restructured, and Past Due Loans and Foreclosed Properties**
 **    March 31,     **December 31, **    2002     **     2001     **    2001     **(Dollars in thousands)      **Nonaccrual loans
$271,925 
$174,027 
$234,405**Restructured loans
2,892 
1,401 
868
**Total nonperforming loans**
274,817 
175,428 
235,273      **Foreclosed properties     
  Other real estate owned, net
60,502 
54,819 
65,661
  Other foreclosed property
898 
2,016 
1,128
**Total foreclosed properties**
61,400 
56,835 
66,789      
**Total nonperforming assets**
$336,217 
$232,263 
$302,062      **Loans past due 90 days or more and still accruing interest, other than FHA/VA
$187,630 
$109,705 
$173,092      **FHA/VA government-insured/guaranteed loans     
  Loans past due 90 days or more and still accruing interest
$38,941 
$129,776 
$47,612
  Nonaccrual loans
1,824 
3,216 
1,872      **Ratios (1):     
  Nonperforming loans/loans, net of unearned income
1.20% 
.72% 
1.01%
  Nonperforming assets/loans, net of unearned income plus foreclosed properties
1.46    
.95   
 
1.30   
  Allowance for losses on loans/nonperforming loans
128    
195    
145   
  Loans past due 90 days or more and still accruing interest/loans, net of unearned income
.82    
.45    
.74   

____________________

(1)FHA/VA government-insured/guaranteed loans are excluded from loans in the ratio calculations.

The breakdown of nonaccrual loans and loans past due 90 days or more and still accruing interest, both excluding FHA/VA loans, is as follows:

 **    Nonaccrual Loans (1)     **Loans Past Due 90 Days or More (1) **    March 31,     **December 31, **    March 31,     **December 31, **    2002     **    2001     **    2001     **    2002     **    2001     **    2001     **(Dollars in thousands)**Loan Type           
  Commercial, financial and agricultural
$109,779 
$66,031 
$81,881 
$25,570 
$13,296 
$21,552
  Foreign
30 
960 
30 
- 
30 
-
  Real estate - construction
30,922 
10,891 
21,046 
2,314 
3,407 
 7,981
  Real estate - mortgage           
     Secured by 1-4 family residential
45,362 
49,747 
45,710 
130,606 
73,411 
120,584
     Non-farm, nonresidential properties
57,270 
34,993 
59,752 
16,831 
8,737 
 9,508
     Multifamily (5 or more) residential
17,437 
2,662 
18,008 
4,314 
1,398 
 3,459
     Secured by farmland
4,141 
3,657 
4,264 
640 
2,355 
556
  Home equity
3,871 
3,265 
1,659 
1,799 
867 
3,644
  Consumer
3,080 
1,806 
2,030 
4,889 
4,898 
5,682
  Direct lease financing
33 
15 
25 
667 
1,306 
126
**Total**
$271,925 
$174,027 
$234,405 
$187,630 
$109,705 
$173,092

____________________

(1)See the preceding table for the amount of FHA/VA government-insured guaranteed/loans on nonaccrual and past due 90 days or more and still accruing interest.
**Loans Other than FHA/VA Loans.  As shown in the table above, nonperforming assets increased $34.2 million over year-end and $104.0 million over March 31, 2001.  A general increase in all categories of nonperforming assets was experienced during the first quarter.  The largest increase related to commercial, financial and agricultural loans.  This trend is expected to continue in the second quarter unless economic conditions improve.  Management believes the risk of losses in nonperforming assets will be mitigated by the diversity of the loan portfolio and the conservative underwriting practices across the banking franchise.  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 totaled $187.6 million, or .82% of loans, at March 31, 2002 compared to $173.1 million, or .74% and $109.7 million, or .45% of loans, at December 31, 2001 and March 31, 2001, respectively.  The preceding table details the composition of these loans.  As discussed above, the increase in these loans related primarily to current economic conditions.
**FHA/VA Loans.  FHA/VA government-insured/guaranteed loans do not, in management's opinion, have traditional credit risk inherent in the balance of the loan portfolio, and risk of principal loss is considered minimal.  FHA/VA loans past due 90 days or more and still accruing interest totaled $38.9 million at March 31, 2002 which compares to $47.6 million and $129.8 million at December 31, 2001 and March 31, 2001, respectively.  The decrease in past due loans relates to a decline in the overall volume of these loans.  At March 31, 2002, December 31, 2001 and March 31, 2001, $1.8 million, $1.9 million and $3.2 million, respectively, of these loans were placed on nonaccrual status by management because the contractual payment of interest by FHA/VA had stopped due to missed filing dates.  No loss of principal is expected from these loans. 
***FHA/VA Foreclosure Claims*
Provisions for losses related to FHA/VA claims are provided through noninterest expense as provisions for losses on FHA/VA foreclosure claims and the corresponding liability is carried in other liabilities.  At March 31, 2002, the Company had a reserve for FHA/VA claims losses of $3.0 million, compared to $3.7 million and $8.1 million at December 31, 2001 and March 31, 2001, respectively.
***Potential Problem Assets*
Potential problem assets consist of assets which are generally secured and are not currently considered nonperforming.  They include those assets where reliable 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, 2002, Union Planters had potential problem assets of $70.0 million, composed of 22 loans, the largest being $10.9 million.  This compares to $75.3 million, or 16 loans, at December 31, 2001 and $66.7 million, or 15 loans, at March 31, 2001.
***Deposits*
Union Planters' core deposit base is its most important and stable funding source and consists of deposits from the communities served by Union Planters.  A summary of deposits is as follows: 

 **Average Deposits **         Three Months Ended          **March 31, **December 31, **     2002      **     2001      **     2001      **(Dollars in thousands)      
Noninterest-bearing demand
$4,417,321 
$3,890,023 
$4,419,837
Money market
5,790,702 
3,945,402 
5,428,655
Interest-bearing checking
3,338,516 
3,149,582 
3,174,369
Savings
1,348,342 
1,350,986 
1,312,520
Other time
7,086,986 
8,514,807 
7,386,622
          Total average core deposits
21,981,867 
20,850,800 
21,722,003
Certificates of deposit of $100,000 and over
1,633,504 
2,263,341 
1,705,737
          Total average deposits 
$23,615,371 
$23,114,141 
$23,427,740

Average deposits were $23.6 billion for the first quarter of 2002, compared to $23.4 billion for the fourth quarter of 2001 and $23.1 billion for the first quarter of 2001.  The average for the first quarter of 2002 was affected by sales of branches during 2001 with $1 billion in deposits.  The upward trend in deposit levels is due primarily to growth of core deposit products, including demand deposit accounts, interest bearing checking and money market accounts.  Core deposit growth was driven by management focus on improving the competitiveness of the product offering and the recent trends in investor preference for the safety of bank deposits over other investment alternatives.  Management is continuing to monitor deposit pricing in all the markets it serves to ensure competitive levels.
***Shareholders' Equity*
Union Planters' total shareholders' equity increased by $9.1 million from December 31, 2001 to $3.2 billion at March 31, 2002.  The major items affecting shareholders' equity are as follows:
$  57.0 million increase due to retained net earnings (net earnings less dividends paid).
$    8.0 million increase due to common stock issued for employee benefit plans. 
$  47.0 million decrease due to shares purchased (2.2 million shares purchased). 
$    8.8 million decrease due to the net change in the unrealized gain or loss on available for sale investment securities.

On February 17, 2000, the Board of Directors authorized the purchase from time to time of up to an additional 7.1 million shares.   As of March 31, 2002, 1.6 million shares had been purchased under this plan.  In the first quarter of 2001, management announced the intent to purchase shares up to the number of shares issued in the Jefferson Heritage acquisition.  As of March 31, 2002, 3.3 million of the 4.4 million shares issued in the acquisition have been purchased.
***Capital Adequacy*
The following table presents capital adequacy information for Union Planters:

 **    March 31,     **December 31, **    2002     **    2001     **    2001    **Capital Adequacy Data     
  Total shareholders' equity/total assets (at period-end)
10.08% 
8.72% 
9.71%
  Average shareholders' equity/average total assets
9.93    
8.48    
9.06   
  Tier 1 capital/unweighted average assets (leverage ratio) (1)
7.85    
6.61    
7.56   

   ____________________
- Based on period-end capital and quarterly adjusted average assets.

The following table presents Union Planters' risk-based capital and capital adequacy ratios.  Union Planters' regulatory capital ratios qualify Union Planters for the "well-capitalized" regulatory classification. 
**Union Planters Corporation

Risk-Based Capital**
 **    March 31,     **December 31, **    2002     **    2001     **    2001     **(Dollars in thousands)**Tier 1 capital     
  Shareholders' equity
$3,232,817 
$3,088,107 
$3,223,741
  Trust Preferred Securities and minority interest in consolidated subsidiaries
199,124 
203,777 
199,115
  Less:  Goodwill and other intangibles
(917,922) 
(978,636) 
(926,012)
            Disallowed deferred tax asset
(324) 
(476) 
(347)
             Unrealized gain on available for sale securities
(45,809) 
(56,881) 
(54,564)
             Other
- 
(278) 
(2,286)
**Total Tier 1 capital**
2,467,886 
2,255,613 
2,439,647**Tier 2 capital     
  Allowance for losses on loans 
312,618 
329,851 
312,757
  Qualifying long-term debt
874,588 
909,459 
874,603
  Other adjustments
799 
- 
727
**Total capital before deductions**
3,655,891 
3,494,923 
3,630,020
  Less investment in unconsolidated subsidiaries
(10,749) 
(9,786) 
(10,679)
**Total capital**
$3,645,142 
$3,485,137 
$3,627,734      **Risk-weighted assets
$24,970,639 
$26,375,798 
$25,020,556      **Ratios as a percent of end of period risk-weighted assets     
  Tier 1 capital
9.88% 
8.55% 
9.75%
  Total capital
14.60    
13.21    
14.46   
**Union Planters Bank, National Association

Risk-Based Capital**
 **    March 31,     **December 31, **    2002     **    2001     **    2001     **(Dollars in millions)      **Tier 1 capital
$2,325 
$2,057 
$2,259
  Total capital
2,920 
2,664 
2,854
  Risk-weighted assets
24,417 
25,241 
24,406**Ratios     
  Leverage
7.61% 
6.25% 
7.24%
  Tier 1 risk-based capital
9.52    
8.15    
9.26   
  Total risk-based capital
11.96    
10.55   
   
11.70   
***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.

Parent company liquidity is achieved and maintained by dividends received from subsidiaries, interest on advances to subsidiaries and interest on its available for sale investment securities portfolio.  At March 31, 2002, the parent company had cash and cash equivalents totaling $452.8 million, which compares to $518.4 million and $585.0 million, respectively, at December 31, 2001 and March 31, 2001. Net working capital (total assets maturing within one year less similar liabilities) was $455.5 million, which compares to $502.0 million and $579.3 million, respectively, at December 31, 2001 and March 31, 2001.  

At April 1, 2002, the parent company could have received dividends from subsidiaries of $359.0 million without prior regulatory approval.  The payment of dividends by Union Planters' subsidiaries will be dependent on the future earnings and growth of the subsidiaries.  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 represented approximately 66% of Union Planters' revenues for the three months ended March 31, 2002.  Consequently, a substantial part of Union Planters' risk-management activities are devoted to managing interest-rate risk.  Currently, Union Planters does not have any significant risks related to foreign exchange, commodities or equity risk.

Since one of the most important aspects of management's efforts to sustain long-term profitability for Union Planters is the management of interest-rate risk, management's goal is to optimize net interest income within acceptable levels of interest-rate and liquidity risk.  To achieve this goal, a proper balance must be maintained between assets and liabilities with respect to size, maturity, repricing date, rate of return and degree of risk. Reference is made to the Investment Securities, Loans and Other Earning Assets discussions for additional information regarding the risks related to these items.

Union Planters' Asset/Liability Management Committee (the ALCO Committee) oversees the management of interest-rate risk, investments, capital and liquidity management activities.  The ALCO Committee meets monthly and reviews the outlook for the economy and interest rates, Union Planters' balance sheet structure, yields on earning assets and rates on interest-bearing liabilities, and the impact of anticipated business activities on these items.  The primary methods of analyzing and managing interest-rate risk at Union Planters are repricing gap (the difference between assets and liabilities that are repricing within a specified time) and simulation analysis (projecting net interest income under various interest rate and balance sheet assumptions).

Gap analysis is used to monitor the amounts and timing of balances exposed to changes in interest rates, as shown in the following table.  The analysis has been made at a point in time and could change significantly on a daily basis.  At March 31, 2002, the cumulative one-year gap was 3% of Union Planters' total assets, with $1 billion more assets repricing than liabilities.  This position compares to a December 31, 2001 cumulative one-year gap of 1% of total assets, with $276 million more assets repricing than liabilities. 

Since December 31, 2001, the one-year cumulative GAP change to a more asset sensitive position has occurred primarily due to the retirement of short-term borrowings and from longer term certificate of deposit promotions.

Interest-rate risk is evaluated by conducting balance sheet simulations to project net interest income for twelve months forward under various interest-rate scenarios.  Each of these scenarios is compared with a base case scenario wherein current market rates and current period balances are held constant for the simulation period.

The scenarios include immediate "shocks" to current rates of 200 basis points up and down and a "most likely" scenario in which current rates are moved according to economic forecasts and management's expectations of changes in administered rates.  At March 31, 2002, an additional scenario of 100 basis points down was run due to the unique interest-rate environment in which a 200 basis point decrease would drive many key market interest rates below zero, and, therefore, the risk assessment would not be meaningful. 

The results of these simulations are compared to policy guidelines approved by the ALCO Committee, which limit the change in net interest income to 20% of net earnings when compared with the base case (flat) scenario. 

At March 31, 2002, the 200 basis point immediate rise in interest rates produced a .31% ($1.6 million after-tax) increase in net earnings, which compared to a 2.8% ($12.4 million after-tax) decrease at December 31, 2001.  The 100 basis point immediate fall in interest rates produced a 1.8% ($9.2 million after-tax) decrease in net earnings versus a 1% ($3.4 million after-tax) decrease at December 31, 2001.  The "most likely" scenario (Federal Funds rate increasing 150 basis points over the next twelve months) at March 31, 2002 produced an approximate 2.3% ($11.6 million after-tax) increase in net earnings.  At December 31, 2001, the "most likely" scenario (Federal Funds rate increasing 175 basis points over the last eight months of 2002) produced a 1.0% ($.85 million after-tax) decrease at the end of 2001.

The key assumptions used in simulation analysis include the following:  
Prepayment rates on mortgage-related assets and fixed rate loans
Cash flows and repricings of all financial instruments
Changes in volumes and pricing
Future shapes of the yield curve
Relationship of market interest rates to each other (basis risk)
Credit spread
Deposit sensitivity
Management's financial plan

The assumptions are inherently uncertain, and, as a result, the simulation cannot precisely estimate net interest income nor predict the 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.
**Union Planters Corporation and Subsidiaries

Rate Sensitivity Analysis at March 31, 2002**
 **Interest-Sensitive Within (1) and (7) **0-90**91-180**181-365**1-3**3-5**5-15**Over**Noninterest-  **Days **Days**Days**Years**Years**Years**15 Years**Bearing**Total **(Dollars in millions)**Assets         
  Loans and leases (2),(3) and (4)
$ 9,702 
$1,614 
$2,605 
$5,610 
$2,344 
$516 
$26 
$650 
$23,067 
  Investment securities (5) and (6)
 462 
170 
378 
1,725 
955 
853 
214 
 72 
4,829 
  Other earning assets
 1,557 
-
-
-
-
-
-
-
1,557 
  Other assets 
-
-
-
-
-
 -
-
2,608 
2,608 
**Total assets**
$11,721 
$1,784 
$2,983 
$7,335 
$3,299 
$1,369 
$240 
$3,330 
$32,061           **Sources of funds         
  Money market deposits (7) and (8)
$4,809 
$-
$588 
$588 
$-
$-
$-
$-
$5,985 
  Savings and Interest bearing checking

    deposits (7) and (8)
1,569 
-
-
1,569 
-
1,616 
-
-
4,754 
  Other time deposits
 1,601 
1,366 
1,585 
1,965 
 524 
 24 
 2 
-
7,067 
  Certificates of deposit of $100,000 

    and over
515 
255 
310 
384 
122 
-
-
-
1,586 
  Short-term borrowings
1,657 
-
-
-
-
-
-
-
1,657 
  Federal Home Loan Bank advances
 1,000 
-
100 
141 
-
 220 
-
-
1,461 
  Other long-term debt
 100 
-
-
 75 
100 
 800 
 199 
-
1,274 
  Noninterest-bearing deposits
-
-
-
-
-
-
-
 4,369 
4,369 
  Other liabilities
-
-
-
-
-
-
-
675 
675 
  Shareholders' equity
-
-
-
-
-
 -
-
 3,233 
3,233 **Total sources of funds
$11,251 
$1,621 
$2,583 
$4,722 
$746 
$2,660 
$201 
$8,277 
$32,061           **Interest rate sensitivity gap
$470 
$163 
$400 
$2,613 
$2,553 
$(1,291)
$39 
$(4,947)
-**Cumulative interest rate sensitivity gap (8)
470
633 
1,033 
3,646 
6,199 
4,908 
4,947 
-
-**Cumulative gap as a percentage of total assets (8)
1% 
2% 
3% 
11% 
19% 
15% 
15% 
-
-**Policy         
none
+/-15%
+/-10%
+/-5%
0 or positive
0 or positive
0 or positive  

____________________

Management has made the following assumptions in presenting the above analysis:

(1)Assets and liabilities are generally scheduled according to their earliest repricing dates regardless of their contractual maturities.

(2)Nonaccrual loans and accounts receivable-factoring are included in the noninterest-bearing category.

(3)Fixed-rate mortgage loan maturities include estimates of principal prepayments using industry estimates of prepayment speeds for various coupon segments of the portfolio.

(4)Delinquent FHA/VA loans are scheduled based on foreclosure and repayment patterns.

(5)The scheduled maturities of mortgage-backed securities and CMOs assume principal prepayment of these securities calculated within a proprietary cash flow model. 

(6)Securities are generally scheduled according to their call dates when valued at a premium to par.

(7)Money market deposits and savings deposits that have no contractual maturities are scheduled according to management's best estimate of their repricing in response to changes in market rates.  The impact of changes in market rates would be expected to vary by product type and market.

(8)If all money market, NOW and savings deposits had been included in the 0-90 Days category above, the cumulative gap as a percentage of total assets would have been (12%), (12%) and (9%) for the 0-90 Days, 91-180 Days 181-365 Days, 6% for the 1-3 Years categories and positive 14%, 15% and 15%, respectively, for the 3-5 Years, 5-15 Years and over 15 Years categories at March 31, 2002.
**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 Item 3, Part I of the Union Planters 2001 10-K, in Note 20 to Union Planters' consolidated financial statements, in the Proxy and Annual Financial Disclosures.  Various other legal proceedings pending against Union Planters and /or its subsidiaries have arisen in the ordinary course of business.

Based upon present information, including evaluations of certain actions by outside counsel, management believes that neither Union Planters' financial position, results of operations, nor liquidity will be materially affected by the ultimate resolution of pending or threatened legal proceedings.  There were no significant developments during the first quarter of 2002 in any of the pending or threatened actions that affected such opinion.
***Item 2 - Changes in 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:
99 - PDF format copy of Union Planters Corporation first quarter 2002 Form 10-Q
- Reports on Form 8-K:

Date of Current Report
Subject
January 17, 2002
Press release announcing year ended December 31, 2001 net earnings, reported under Item 5.
April 18, 2002
Press release announcing first quarter 2002 net earnings, reported under Item 5.
April 19, 2002
Presentation materials containing information presented at the 2002 Annual Shareholders' meeting, reported under Item 9.
April 23, 2002
Press release, dated April 18, 2002, announcing stock split and dividend declaration, reported under Item 5.
**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 15, 2002
 

 

     /s/ Jackson W. Moore                             
Jackson W. Moore
Chairman, President, Chief Executive Officer and Director  
    /s/ Bobby L. Doxey                                  
Bobby L. Doxey
Senior Executive Vice President, Chief Financial Officer and Chief Accounting Officer***************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************