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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-Q



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



For the quarterly period ended June 30, 2004



Commission File Number: 0-6094



NATIONAL COMMERCE FINANCIAL CORPORATION

(Exact name of issuer as specified in charter)



|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Tennessee                                      |  | 62-0784645                          
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)



One Commerce Square,
Memphis, Tennessee 38150

(Address of principal executive offices)



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



Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ̈



APPLICABLE ONLY TO CORPORATE ISSUERS:



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                           |  |                                          
|-------------------------- |  | -----------------------------------------
|Common Stock, $2 Par Value |  | 205,282,726                              
|(Class of Stock)           |  | (Shares outstanding as of August 4, 2004)



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

INDEX TO FORM 10-Q



|                              |  |                                                                                                      |  |   
|----------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | --
|                              | 
|Part I. Financial Information |  |                                                                                                     
|                              |  |                                                                                                     
|Item 1.                       |  | Financial Statements (Unaudited)                                                                     |  |   
|                              |  | Consolidated Balance Sheets June 30, 2004 and December 31, 2003                                      |  | 3 
|                              |  | Consolidated Statements of Income Three and Six Months Ended June 30, 2004 and 2003                  |  | 4 
|                              |  | Consolidated Statements of Stockholders Equity Six Months Ended June 30, 2004 and 2003              |  | 5 
|                              |  | Consolidated Statements of Cash Flows Six Months Ended June 30, 2004 and 2003                        |  | 6 
|                              |  | Notes to Consolidated Financial Statements As of and for the Six Months Ended June 30, 2004 and 2003 |  | 7 
|                              |  |                                                                                                     
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                |  | 16
|                              |  |                                                                                                     
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                           |  | 29
|                              |  |                                                                                                     
|Item 4.                       |  | Controls and Procedures                                                                              |  | 29
|                              | 
|Part II. Other Information    |  |                                                                                                     
|                              |  |                                                                                                     
|Item 2.                       |  | Purchases of Equity Securities by the Issuer                                                         |  | 30
|                              |  |                                                                                                     
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                  |  | 30
|                              |  |                                                                                                     
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                     |  | 31
|                              | 
|Signatures                    |  | 32                                                                                                  



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



National Commerce Financial Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30, 2004 and December 31, 2003



|                                                                                                                  |  |               |            |   |                   |           
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | ----------
|                                                                                                                  |  | (Unaudited)   |            |   |                  
|In Thousands Except Share Data                                                                                    |  | June 30, 2004 |            |   | December 31, 2003
|ASSETS                                                                                                            |  |               |            |   |                   |           
|Cash and due from banks                                                                                           |  | $             | 568,360    |   |                   | 558,313   
|Time deposits in other banks                                                                                      |  |               | 7,803      |   |                   | 64,174    
|Federal funds sold and other short-term investments                                                               |  |               | 267,182    |   |                   | 129,722   
|Investment securities:                                                                                            |  |               |            |   |                   |           
|Available for sale (amortized cost of $5,217,931 and $5,220,555)                                                  |  |               | 5,116,531  |   |                   | 5,238,429 
|Held to maturity (fair values of $1,113,177 and $1,375,484)                                                       |  |               | 1,140,777  |   |                   | 1,380,571 
|Trading account securities, at fair value                                                                         |  |               | 245,913    |   |                   | 280,649   
|Loans held for sale                                                                                               |  |               | 334,156    |   |                   | 215,132   
|Loans                                                                                                             |  |               | 14,191,270 |   |                   | 13,034,948
|Less allowance for loan losses                                                                                    |  |               | 178,438    |   |                   | 170,452   
|                                                                                                                  |  |               |            |   |                   |           
|Net loans                                                                                                         |  |               | 14,012,832 |   |                   | 12,864,496
|                                                                                                                  |  |               |            |   |                   |           
|Bank owned life insurance                                                                                         |  |               | 349,473    |   |                   | 241,481   
|Investment in First Market Bank, FSB                                                                              |  |               | 35,214     |   |                   | 32,527    
|Premises and equipment, net                                                                                       |  |               | 245,279    |   |                   | 266,401   
|Goodwill, net                                                                                                     |  |               | 1,090,101  |   |                   | 1,085,565 
|Core deposit intangibles, net                                                                                     |  |               | 145,899    |   |                   | 172,658   
|Other assets                                                                                                      |  |               | 484,597    |   |                   | 486,798   
|                                                                                                                  |  |               |            |   |                   |           
|Total assets                                                                                                      |  | $             | 24,044,117 |   |                   | 23,016,916
|                                                                                                                  |  |               |            |   |                   |           
|LIABILITIES                                                                                                       |  |               |            |   |                   |           
|Deposits:                                                                                                         |  |               |            |   |                   |           
|Demand (noninterest-bearing)                                                                                      |  | $             | 2,862,746  |   |                   | 2,602,026 
|Savings, NOW and money market accounts                                                                            |  |               | 5,804,172  |   |                   | 5,878,002 
|Jumbo and brokered certificates of deposits                                                                       |  |               | 2,464,471  |   |                   | 2,206,736 
|Time deposits                                                                                                     |  |               | 4,883,076  |   |                   | 4,862,823 
|                                                                                                                  |  |               |            |   |                   |           
|Total deposits                                                                                                    |  |               | 16,014,465 |   |                   | 15,549,587
|Short-term borrowed funds                                                                                         |  |               | 1,708,305  |   |                   | 1,671,908 
|Federal Home Loan Bank advances                                                                                   |  |               | 2,875,720  |   |                   | 2,301,191 
|Long-term debt                                                                                                    |  |               | 285,158    |   |                   | 277,996   
|Other liabilities                                                                                                 |  |               | 378,357    |   |                   | 435,048   
|                                                                                                                  |  |               |            |   |                   |           
|Total liabilities                                                                                                 |  |               | 21,262,005 |   |                   | 20,235,730
|                                                                                                                  |  |               |            |   |                   |           
|STOCKHOLDERS EQUITY                                                                                              |  |               |            |   |                   |           
|Serial preferred stock. Authorized 5,000,000 shares; none issued                                                  |  |               |           |   |                   |          
|Common stock, $2 par value. Authorized 400,000,000 shares;205,003,949 and 205,136,649 shares issued, respectively |  |               | 410,008    |   |                   | 410,273   
|Additional paid-in capital                                                                                        |  |               | 1,722,205  |   |                   | 1,738,157 
|Retained earnings                                                                                                 |  |               | 720,633    |   |                   | 627,406   
|Accumulated other comprehensive income, net                                                                       |  |               | (70,734    | ) |                   | 5,350     
|                                                                                                                  |  |               |            |   |                   |           
|Total stockholders equity                                                                                        |  |               | 2,782,112  |   |                   | 2,781,186 
|                                                                                                                  |  |               |            |   |                   |           
|Total liabilities and stockholders equity                                                                        |  | $             | 24,044,117 |   |                   | 23,016,916
|                                                                                                                  |  |               |            |   |                   |           



Commitments and contingencies (note 11)



See accompanying notes to consolidated financial statements.



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

Three and Six Months Ended June 30, 2004 and 2003

(Unaudited)



|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | ---- | ------------------------- | - | ---- | ------- | ---- | ------- | -
|                                                                |  | Three Months Ended June 30, |         |      | Six Months Ended June 30, |  
|In Thousands Except Per Share Data                              |  | 2004                        |         | 2003 |                           |   | 2004 |         | 2003 |        
|INTEREST INCOME                                                 |  |                             |         |      |                           |   |      |         |      |         |  
|Interest and fees on loans                                      |  | $                           | 189,282 |      | 188,099                   |   |      | 372,264 |      | 385,768 |  
|Interest and dividends on investment securities:                |  |                             |         |      |                           |   |      |         |      |         |  
|U.S. Treasury                                                   |  |                             | 132     |      | 274                       |   |      | 306     |      | 556     |  
|U.S. Government agencies and corporations                       |  |                             | 51,619  |      | 58,118                    |   |      | 108,324 |      | 113,800 |  
|States and political subdivisions (primarily tax-exempt)        |  |                             | 1,293   |      | 1,453                     |   |      | 2,562   |      | 2,963   |  
|Equity and other securities                                     |  |                             | 18,304  |      | 15,875                    |   |      | 34,994  |      | 23,345  |  
|Interest and dividends on trading account securities            |  |                             | 2,248   |      | 421                       |   |      | 4,173   |      | 996     |  
|Interest on time deposits in other banks                        |  |                             | 9       |      | 17                        |   |      | 417     |      | 42      |  
|Interest on federal funds sold and other short-term investments |  |                             | 646     |      | 336                       |   |      | 1,020   |      | 499     |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Total interest income                                           |  |                             | 263,533 |      | 264,593                   |   |      | 524,060 |      | 527,969 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|INTEREST EXPENSE                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Deposits                                                        |  |                             | 47,110  |      | 55,184                    |   |      | 94,869  |      | 112,472 |  
|Short-term borrowed funds                                       |  |                             | 4,924   |      | 4,698                     |   |      | 9,489   |      | 9,066   |  
|Federal Home Loan Bank advances                                 |  |                             | 15,968  |      | 21,397                    |   |      | 31,570  |      | 43,515  |  
|Trust preferred securities and long-term debt                   |  |                             | 1,545   |      | 2,133                     |   |      | 3,075   |      | 4,293   |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Total interest expense                                          |  |                             | 69,547  |      | 83,412                    |   |      | 139,003 |      | 169,346 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Net interest income                                             |  |                             | 193,986 |      | 181,181                   |   |      | 385,057 |      | 358,623 |  
|Provision for loan losses                                       |  |                             | 12,845  |      | 13,376                    |   |      | 24,933  |      | 21,060  |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Net interest income after provision for loan losses             |  |                             | 181,141 |      | 167,805                   |   |      | 360,124 |      | 337,563 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|OTHER INCOME                                                    |  |                             |         |      |                           |   |      |         |      |         |  
|Service charges on deposit accounts                             |  |                             | 44,973  |      | 43,500                    |   |      | 85,999  |      | 84,750  |  
|Other service charges and fees                                  |  |                             | 9,467   |      | 9,721                     |   |      | 17,904  |      | 19,062  |  
|Broker/dealer revenue                                           |  |                             | 26,711  |      | 28,152                    |   |      | 52,473  |      | 49,233  |  
|Asset management                                                |  |                             | 15,986  |      | 13,356                    |   |      | 32,484  |      | 25,738  |  
|Mortgage banking income                                         |  |                             | 13,459  |      | 11,458                    |   |      | 20,842  |      | 21,112  |  
|Equity earnings from First Market Bank, FSB                     |  |                             | 1,402   |      | 1,071                     |   |      | 2,687   |      | 1,997   |  
|Other                                                           |  |                             | 11,470  |      | 7,700                     |   |      | 20,054  |      | 15,342  |  
|Gain (loss) on branch sales                                     |  |                             | 714     |      |                          |   |      | 759     |      | (145    | )
|Investment securities gains, net                                |  |                             | 66      |      | 2,460                     |   |      | 10,984  |      | 4,924   |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Total other income                                              |  |                             | 124,248 |      | 117,418                   |   |      | 244,186 |      | 222,013 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|OTHER EXPENSE                                                   |  |                             |         |      |                           |   |      |         |      |         |  
|Personnel                                                       |  |                             | 77,807  |      | 77,483                    |   |      | 156,928 |      | 154,936 |  
|Net occupancy                                                   |  |                             | 13,413  |      | 13,292                    |   |      | 26,820  |      | 26,196  |  
|Equipment                                                       |  |                             | 7,194   |      | 7,992                     |   |      | 14,427  |      | 15,397  |  
|Core deposit intangibles amortization                           |  |                             | 12,901  |      | 15,673                    |   |      | 26,540  |      | 31,957  |  
|Other                                                           |  |                             | 55,052  |      | 51,341                    |   |      | 105,378 |      | 97,745  |  
|Merger-related expenses                                         |  |                             | 8,290   |      |                          |   |      | 8,290   |      |        |  
|First Mercantile litigation                                     |  |                             |        |      | 1,041                     |   |      |        |      | 20,695  |  
|Employment contract terminations                                |  |                             |        |      | 14,108                    |   |      |        |      | 14,108  |  
|Debt retirement/prepayment gains                                |  |                             |        |      | (326                      | ) |      |        |      | (326    | )
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Total other expenses                                            |  |                             | 174,657 |      | 180,604                   |   |      | 338,383 |      | 360,708 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Income before income taxes                                      |  |                             | 130,732 |      | 104,619                   |   |      | 265,927 |      | 198,868 |  
|Income taxes                                                    |  |                             | 45,641  |      | 33,112                    |   |      | 90,592  |      | 63,271  |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|Net income                                                      |  | $                           | 85,091  |      | 71,507                    |   |      | 175,335 |      | 135,597 |  
|                                                                |  |                             |         |      |                           |   |      |         |      |         |  
|EARNINGS PER COMMON SHARE                                       |  |                             |         |      |                           |   |      |         |      |         |  
|Basic                                                           |  | $                           | .42     |      | .35                       |   |      | .86     |      | .66     |  
|Diluted                                                         |  |                             | .41     |      | .35                       |   |      | .85     |      | .66     |  
|WEIGHTED AVERAGE SHARES OUTSTANDING                             |  |                             |         |      |                           |   |      |         |      |         |  
|Basic                                                           |  |                             | 204,340 |      | 204,629                   |   |      | 204,660 |      | 204,948 |  
|Diluted                                                         |  |                             | 206,737 |      | 205,701                   |   |      | 206,910 |      | 206,225 |  



See
accompanying notes to consolidated financial statements.



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Six Months Ended June 30, 2004 and 2003

(Unaudited)



|                                                                                                        |  |                      |   |  |             |         |   |                          |           |   |                  |         |   |                  |         |   |                          |           |  
|------------------------------------------------------------------------------------------------------- |  | -------------------- | - |  | ----------- | ------- | - | ------------------------ | --------- | - | ---------------- | ------- | - | ---------------- | ------- | - | ------------------------ | --------- | -
|In Thousands Except Share Data                                                                          |  | Shares ofCommonStock |   |  | CommonStock |         |   | AdditionalPaid-InCapital |           |   | RetainedEarnings |         |   | OtherComp.Income |         |   | TotalStockholdersEquity |          
|Balance January 1, 2003                                                                                 |  | 205,408,183          |   |  | $           | 410,816 |   |                          | 1,753,241 |   |                  | 467,641 |   |                  | 50,734  |   |                          | 2,682,432 |  
|Net income                                                                                              |  |                     |   |  |             |        |   |                          |          |   |                  | 135,597 |   |                  |        |   |                          | 135,597   |  
|Restricted stock transactions, net                                                                      |  | 1,693                |   |  |             | 3       |   |                          | 1,258     |   |                  |        |   |                  |        |   |                          | 1,261     |  
|Options exercised, net of shares tendered                                                               |  | 472,596              |   |  |             | 947     |   |                          | 5,607     |   |                  |        |   |                  |        |   |                          | 6,554     |  
|Shares repurchased and retired                                                                          |  | (1,474,300           | ) |  |             | (2,949  | ) |                          | (29,272   | ) |                  |        |   |                  |        |   |                          | (32,221   | )
|Cash dividends ($.34 per share)                                                                         |  |                     |   |  |             |        |   |                          |          |   |                  | (69,776 | ) |                  |        |   |                          | (69,776   | )
|Change in minimum pension liability, net of applicable income taxes                                     |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (742    | ) |                          | (742      | )
|Change in unrealized gains on investment securities available for sale, net of applicable income taxes  |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (1,955  | ) |                          | (1,955    | )
|Unrealized loss on cash flow hedges, net of applicable income taxes                                     |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (201    | ) |                          | (201      | )
|Other transactions, net                                                                                 |  | (23,394              | ) |  |             | (47     | ) |                          | (467      | ) |                  |        |   |                  |        |   |                          | (514      | )
|                                                                                                        |  |                      |   |  |             |         |   |                          |           |   |                  |         |   |                  |         |   |                          |           |  
|Balance, June 30, 2003                                                                                  |  | 204,384,778          |   |  | $           | 408,770 |   |                          | 1,730,367 |   |                  | 533,462 |   |                  | 47,836  |   |                          | 2,720,435 |  
|                                                                                                        |  |                      |   |  |             |         |   |                          |           |   |                  |         |   |                  |         |   |                          |           |  
|Balance, January 1, 2004                                                                                |  | 205,136,649          |   |  | $           | 410,273 |   |                          | 1,738,157 |   |                  | 627,406 |   |                  | 5,350   |   |                          | 2,781,186 |  
|Net income                                                                                              |  |                     |   |  |             |        |   |                          |          |   |                  | 175,335 |   |                  |        |   |                          | 175,335   |  
|Restricted stock transactions, net                                                                      |  | 37,200               |   |  |             | 74      |   |                          | 297       |   |                  |        |   |                  |        |   |                          | 371       |  
|Options exercised, net of shares tendered                                                               |  | 2,128,005            |   |  |             | 4,257   |   |                          | 45,328    |   |                  |        |   |                  |        |   |                          | 49,585    |  
|Shares repurchased and retired                                                                          |  | (2,408,906           | ) |  |             | (4,818  | ) |                          | (62,532   | ) |                  |        |   |                  |        |   |                          | (67,350   | )
|Cash dividends ($.40 per share)                                                                         |  |                     |   |  |             |        |   |                          |          |   |                  | (82,108 | ) |                  |        |   |                          | (82,108   | )
|Change in minimum pension liability, net of applicable income taxes                                     |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (113    | ) |                          | (113      | )
|Change in unrealized losses on investment securities available for sale, net of applicable income taxes |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (72,735 | ) |                          | (72,735   | )
|Change in unrealized loss on hedging instruments, net of applicable income taxes                        |  |                     |   |  |             |        |   |                          |          |   |                  |        |   |                  | (3,236  | ) |                          | (3,236    | )
|Other transactions, net                                                                                 |  | 111,001              |   |  |             | 222     |   |                          | 955       |   |                  |        |   |                  |        |   |                          | 1,177     |  
|                                                                                                        |  |                      |   |  |             |         |   |                          |           |   |                  |         |   |                  |         |   |                          |           |  
|Balance, June 30, 2004                                                                                  |  | 205,003,949          |   |  | $           | 410,008 |   |                          | 1,722,205 |   |                  | 720,633 |   |                  | (70,734 | ) |                          | 2,782,112 |  
|                                                                                                        |  |                      |   |  |             |         |   |                          |           |   |                  |         |   |                  |         |   |                          |           |  



See
accompanying notes to the consolidated financial statements.



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2004 and 2003

(Unaudited)



|                                                                                  |  |      |            |   |      |            |  
|--------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | ---------- | -
|In Thousands                                                                      |  | 2004 |            |   | 2003 |           
|OPERATING ACTIVITIES                                                              |  |      |            |   |      |            |  
|Net income                                                                        |  | $    | 175,335    |   |      | 135,597    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |            |   |      |            |  
|Depreciation, amortization and accretion, net                                     |  |      | 48,324     |   |      | 62,433     |  
|Provision for loan losses                                                         |  |      | 24,933     |   |      | 21,060     |  
|Net gain on sales of investment securities                                        |  |      | (10,984    | ) |      | (4,924     | )
|Net gain on sales of loans held for sale                                          |  |      | (18,241    | ) |      | (4,157     | )
|Deferred income taxes                                                             |  |      | (889       | ) |      | (82        | )
|Origination of loans held for sale                                                |  |      | (2,407,640 | ) |      | (3,593,274 | )
|Sales of loans held for sale                                                      |  |      | 2,306,857  |   |      | 3,528,746  |  
|Gain on debt retirement/prepayment penalties                                      |  |      |           |   |      | (326       | )
|Tax benefit from exercise of stock options                                        |  |      | 8,504      |   |      | 1,731      |  
|Changes in:                                                                       |  |      |            |   |      |            |  
|Trading account securities                                                        |  |      | 34,736     |   |      | 11,031     |  
|Other assets                                                                      |  |      | (103,357   | ) |      | (81,566    | )
|Other liabilities                                                                 |  |      | (4,627     | ) |      | 40,355     |  
|Other operating activities, net                                                   |  |      | 211        |   |      | (215       | )
|                                                                                  |  |      |            |   |      |            |  
|Net cash provided by operating activities                                         |  |      | 53,162     |   |      | 116,409    |  
|                                                                                  |  |      |            |   |      |            |  
|INVESTING ACTIVITIES                                                              |  |      |            |   |      |            |  
|Proceeds from:                                                                    |  |      |            |   |      |            |  
|Maturities and issuer calls of investment securities held to maturity             |  |      | 244,339    |   |      | 305,806    |  
|Sales of investment securities available for sale                                 |  |      | 934,956    |   |      | 1,373,732  |  
|Maturities and issuer calls of investment securities available for sale           |  |      | 787,232    |   |      | 849,895    |  
|Purchases of:                                                                     |  |      |            |   |      |            |  
|Investment securities held to maturity                                            |  |      | (4,084     | ) |      | (788,776   | )
|Investment securities available for sale                                          |  |      | (1,712,181 | ) |      | (2,160,777 | )
|Premises and equipment                                                            |  |      | 6,421      |   |      | (32,190    | )
|Net originations of loans                                                         |  |      | (1,190,136 | ) |      | (596,469   | )
|Net cash paid on branch sales                                                     |  |      | (24,875    | ) |      | (1,327     | )
|                                                                                  |  |      |            |   |      |            |  
|Net cash used by investing activities                                             |  |      | (958,328   | ) |      | (1,050,106 | )
|                                                                                  |  |      |            |   |      |            |  
|FINANCING ACTIVITIES                                                              |  |      |            |   |      |            |  
|Net increase in deposit accounts                                                  |  |      | 495,757    |   |      | 954,191    |  
|Net increase in short-term borrowed funds                                         |  |      | 36,397     |   |      | 12,661     |  
|Net increase in Federal Home Loan Bank advances                                   |  |      | 574,778    |   |      | 168,047    |  
|Decrease in long-term debt                                                        |  |      | (2,134     | ) |      | (4,997     | )
|Issuances of common stock from exercise of stock options, net                     |  |      | 41,404     |   |      | 4,899      |  
|Purchase and retirement of common stock                                           |  |      | (67,350    | ) |      | (32,221    | )
|Other equity transactions, net                                                    |  |      | (442       | ) |      | (93        | )
|Cash dividends paid                                                               |  |      | (82,108    | ) |      | (69,776    | )
|                                                                                  |  |      |            |   |      |            |  
|Net cash provided by financing activities                                         |  |      | 996,302    |   |      | 1,032,711  |  
|                                                                                  |  |      |            |   |      |            |  
|Net increase in cash and cash equivalents                                         |  |      | 91,136     |   |      | 99,014     |  
|Cash and cash equivalents at beginning of period (December 31)                    |  |      | 752,209    |   |      | 602,757    |  
|                                                                                  |  |      |            |   |      |            |  
|Cash and cash equivalents at end of period                                        |  | $    | 843,345    |   |      | 701,771    |  
|                                                                                  |  |      |            |   |      |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                  |  |      |            |   |      |            |  
|Interest paid during the period                                                   |  | $    | 137,364    |   |      | 172,008    |  
|                                                                                  |  |      |            |   |      |            |  
|Income taxes paid during the period                                               |  | $    | 74,872     |   |      | 65,366     |  
|                                                                                  |  |      |            |   |      |            |  



See
accompanying notes to consolidated financial statements.



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Six Months Ended June 30, 2004 and 2003

(Unaudited)



(1) CONSOLIDATION AND PRESENTATION



The accompanying unaudited consolidated financial statements of National Commerce Financial Corporation (NCF) have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
In the opinion of management, the accompanying financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of NCF on a consolidated basis, and all such adjustments
are of a normal recurring nature. These financial statements and the notes thereto should be read in conjunction with NCFs Annual Report on Form 10-K for the year ended December 31, 2003. Operating results for the three- and six-month periods
ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.



CONSOLIDATION. NCF is a bank holding company that provides diverse financial services through a regional network of banking affiliates and a national network of
nonbanking affiliates. NCFs wholly owned banking subsidiaries include National Bank of Commerce (NBC) and NBC Bank, FSB. The consolidated financial statements also include the accounts and results of operations of NCFs direct
and indirect wholly owned non-bank subsidiaries. All significant intercompany transactions and accounts are eliminated in consolidation.



NCF has two business segments: traditional banking and financial enterprises. Financial enterprises include transaction processing, trust services and investment
management, retail banking consulting/in-store licensing and broker/dealer activities.



Certain prior period amounts have been reclassified to conform to the 2004 presentation. The reclassifications had no effect on net income available for common stockholders.



BUSINESS COMBINATIONS. On May 9, 2004, NCF announced that it had signed a definitive merger agreement with SunTrust Banks, Inc. The proposed
merger, which is subject to approval by regulatory authorities and by shareholders of both companies, is expected to close in the fourth quarter of 2004. Under the terms of the definitive merger agreement, which has been approved by both boards of
directors, NCF shareholders will have the right, subject to proration, to elect to receive cash or SunTrust common stock, in either case having a value equal to $8.625 plus .3713 SunTrust shares. During the second quarter of 2004, NCF incurred $8
million of investment advisor, contract termination and other expense directly attributable to the proposed merger.



EARNINGS PER SHARE. Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding during each
period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted EPS is computed by dividing net income by the weighted average number
of common shares outstanding plus dilutive stock options (as computed under the treasury stock method) assumed to have been exercised during the period.



COMPREHENSIVE INCOME. Comprehensive income is the change in equity during the period from transactions and other events and circumstances from non-owner sources. Total
comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income for the six months ended June 30, 2004 and 2003 and accumulated other comprehensive income as of June 30, 2004, December 31, 2003 and June 30,
2003 are comprised of unrealized gains and losses on investment securities available for sale, unrealized gains and losses on cash flow hedges and adjustments of minimum pension liability.



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1) CONSOLIDATION AND PRESENTATION (Continued)



STOCK-BASED COMPENSATION. NCF from time to time grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares on the date of grant, which become exercisable on certain future dates with continued service by employees. NCF has elected to account for these stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly, recognizes no compensation expense for these stock option grants. For all variable stock option grants, which
include any grant that is not at a fixed exercise price or whose vesting is dependent on future performance or some event other than the passage of time, compensation expense is recognized in accordance with APB Opinion No. 25 over the period the
employee performs related service, also called the vesting period.



NCF
discloses pro forma net income and earnings per share in the notes to its consolidated financial statements as if compensation expense was measured under the fair value based method according to Statement No. 123, Accounting for Stock-based
Compensation. Under the fair value based method, compensation cost is measured at the grant date of the option based on the value of the award and is recognized over the service period, which is usually the vesting period. Had compensation
expense for the stock option plans been determined consistent with Statement No. 123, NCFs net income and net income per share for the three- and six-month periods ended June 30, 2004 and 2003 would have been reduced to the pro forma amounts
indicated below. These pro forma amounts may not be representative of the effect on reported net income for future periods.



|                                   |  |             |  |                            |        |                          |        |      |         |      |        
|---------------------------------- |  | ----------- |  | -------------------------- | ------ | ------------------------ | ------ | ---- | ------- | ---- | -------
|                                   |  |             |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|In Thousands Except Per Share Data |  |             |  | 2004                       |        | 2003                     |        | 2004 |         | 2003
|Net income                         |  | As reported |  | $                          | 85,091 |                          | 71,507 |      | 175,335 |      | 135,597
|                                   |  | Pro forma   |  |                            | 82,909 |                          | 68,850 |      | 171,052 |      | 130,663
|Basic EPS                          |  | As reported |  |                            | .42    |                          | .35    |      | .86     |      | .66    
|                                   |  | Pro forma   |  |                            | .41    |                          | .34    |      | .84     |      | .64    
|Diluted EPS                        |  | As reported |  |                            | .41    |                          | .35    |      | .85     |      | .66    
|                                   |  | Pro forma   |  |                            | .40    |                          | .33    |      | .83     |      | .63    



CHANGES IN ACCOUNTING POLICY. NCF
adopted the provisions of SEC Staff Accounting Bulletin No. 105 on April 1, 2004. It requires all registrants to account for mortgage loan interest rate lock commitments related to loans held for sale as written options, effective no later than for
commitments entered into after March 31, 2004. NCF enters into such commitments with customers in connection with residential mortgage loan applications. This guidance requires NCF to recognize a liability on its balance sheet equal to the fair
value of the commitment at the time the loan commitment is issued. As a result, this guidance delays the recognition of any revenue related to these commitments until such time as the loan is sold; however, it has no effect on the ultimate amount of
revenue or cash flows recognized over time. Implementation of this guidance during the second quarter of 2004 did not have a material impact on NCF.



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##### Table of Contents

National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(2) LOANS



Management internally classifies the loan portfolio by the purpose of the borrowing. Such classification is presented below as of June 30,
2004 and December 31, 2003. This classification method emphasizes the source of loan repayment rather than the collateral for the loan, which is the classification method followed for regulatory reporting purposes.



|                                        |  |      |            |      |           
|--------------------------------------- |  | ---- | ---------- | ---- | ----------
|In Thousands                            |  | 2004 |            | 2003
|Commercial                              |  | $    | 4,058,205  |      | 3,820,585 
|Construction and commercial real estate |  |      | 3,919,168  |      | 3,723,336 
|Mortgage                                |  |      | 1,161,352  |      | 933,057   
|Consumer                                |  |      | 4,832,412  |      | 4,342,695 
|Revolving credit                        |  |      | 88,821     |      | 84,534    
|Lease financing                         |  |      | 131,312    |      | 130,741   
|                                        |  |      |            |      |           
|Total loans                             |  | $    | 14,191,270 |      | 13,034,948
|                                        |  |      |            |      |           



(3)
ALLOWANCE FOR LOAN LOSSES



Following is the activity in the allowance for loan
losses during the six months ended June 30, 2004 and 2003:



|                                        |  |      |         |   |      |         |  
|--------------------------------------- |  | ---- | ------- | - | ---- | ------- | -
|In Thousands                            |  | 2004 |         |   | 2003 |        
|Balance at beginning of period          |  | $    | 170,452 |   |      | 163,424 |  
|Charge-offs:                            |  |      |         |   |      |         |  
|Commercial                              |  |      | (3,420  | ) |      | (2,334  | )
|Construction and commercial real estate |  |      |        |   |      | (225    | )
|Secured by real estate                  |  |      | (2,642  | ) |      | (2,102  | )
|Consumer                                |  |      | (11,715 | ) |      | (12,266 | )
|Revolving credit                        |  |      | (2,204  | ) |      | (2,074  | )
|Lease financing                         |  |      | (581    | ) |      | (658    | )
|                                        |  |      |         |   |      |         |  
|Total charge-offs                       |  |      | (20,562 | ) |      | (19,659 | )
|Recoveries:                             |  |      |         |   |      |         |  
|Commercial                              |  |      | 909     |   |      | 534     |  
|Construction and commercial real estate |  |      | 2       |   |      | 8       |  
|Secured by real estate                  |  |      | 84      |   |      | 95      |  
|Consumer                                |  |      | 1,964   |   |      | 1,755   |  
|Revolving credit                        |  |      | 569     |   |      | 612     |  
|Lease financing                         |  |      | 87      |   |      | 69      |  
|                                        |  |      |         |   |      |         |  
|Total recoveries                        |  |      | 3,615   |   |      | 3,073   |  
|                                        |  |      |         |   |      |         |  
|Net charge-offs                         |  |      | (16,947 | ) |      | (16,586 | )
|Provision for loan losses               |  |      | 24,933  |   |      | 21,060  |  
|Changes from sales                      |  |      |        |   |      | (582    | )
|                                        |  |      |         |   |      |         |  
|Balance at end of period                |  | $    | 178,438 |   |      | 167,316 |  
|                                        |  |      |         |   |      |         |  



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(4) NONPERFORMING ASSETS



Following is a summary of nonperforming assets as of June 30, 2004, December 31, 2003 and
June 30, 2003:



|                                               |  |          |        |              |        |          |       
|---------------------------------------------- |  | -------- | ------ | ------------ | ------ | -------- | ------
|In Thousands                                   |  | June2004 |        | December2003 |        | June2003
|Nonaccrual loans                               |  | $        | 37,638 |              | 30,689 |          | 33,843
|Foreclosed real estate                         |  |          | 22,619 |              | 28,196 |          | 23,961
|                                               |  |          |        |              |        |          |       
|Nonperforming loans and foreclosed real estate |  |          | 60,257 |              | 58,885 |          | 57,804
|Other repossessed assets                       |  |          | 5,125  |              | 4,638  |          | 8,420 
|                                               |  |          |        |              |        |          |       
|Nonperforming assets                           |  | $        | 65,382 |              | 63,523 |          | 66,224
|                                               |  |          |        |              |        |          |       
|Accruing loans 90 days or more past due        |  | $        | 65,722 |              | 64,457 |          | 51,761
|                                               |  |          |        |              |        |          |       



(5)
GOODWILL AND OTHER INTANGIBLE ASSETS



The changes in the carrying amount of
goodwill for the year ended December 31, 2003 and six months ended June 30, 2004 for NCFs business segments are as follows:



|                                    |  |                    |           |                      |        |       |          
|----------------------------------- |  | ------------------ | --------- | -------------------- | ------ | ----- | ---------
|In Thousands                        |  | TraditionalBanking |           | FinancialEnterprises |        | Total
|Balance as of January 1, 2003       |  | $                  | 1,042,146 |                      | 34,972 |       | 1,077,118
|Other goodwill adjustments          |  |                    | 6,039     |                      |       |       | 6,039    
|Goodwill acquired during the year   |  |                    | 2,408     |                      |       |       | 2,408    
|                                    |  |                    |           |                      |        |       |          
|Balance as of December 31, 2003     |  |                    | 1,050,593 |                      | 34,972 |       | 1,085,565
|Goodwill acquired during the period |  |                    |          |                      | 4,536  |       | 4,536    
|                                    |  |                    |           |                      |        |       |          
|Balance as of June 30, 2004         |  | $                  | 1,050,593 |                      | 39,508 |       | 1,090,101
|                                    |  |                    |           |                      |        |       |          



Core deposit intangibles are amortized
over a period of up to 10 years using an accelerated method. Following is an analysis of core deposit intangibles:



|                                              |  |                               |         |                         |                             |   |                     |         |                         |          |  
|--------------------------------------------- |  | ----------------------------- | ------- | ----------------------- | --------------------------- | - | ------------------- | ------- | ----------------------- | -------- | -
|                                              |  | Six Months EndedJune 30, 2004 |         |                         | Year EndedDecember 31, 2003 |  
|In Thousands                                  |  | GrossCarryingAmount           |         | AccumulatedAmortization |                             |   | GrossCarryingAmount |         | AccumulatedAmortization |         
|Core deposit intangibles                      |  | $                             | 402,006 |                         | (256,107                    | ) |                     | 402,225 |                         | (229,567 | )
|Aggregate amortization expense for the period |  |                               | 26,540  |                         |                             |   |                     | 61,356  |                         |          |  
|Estimated annual amortization expense:        |  |                               |         |                         |                             |   |                     |         |                         |          |  
|For year ended 12/31/04                       |  |                               | 50,897  |                         |                             |   |                     |         |                         |          |  
|For year ended 12/31/05                       |  |                               | 41,296  |                         |                             |   |                     |         |                         |          |  
|For year ended 12/31/06                       |  |                               | 32,033  |                         |                             |   |                     |         |                         |          |  
|For year ended 12/31/07                       |  |                               | 23,137  |                         |                             |   |                     |         |                         |          |  
|For year ended 12/31/08                       |  |                               | 14,516  |                         |                             |   |                     |         |                         |          |  
|                                              |  |                               |         |                         |                             |   |                     |         |                         |          |  



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(6) COMPREHENSIVE INCOME



The following table presents the components of other comprehensive income and the related
tax effects allocated for the six months ended June 30, 2004 and 2003:



|                                                             |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  
|------------------------------------------------------------ |  | --------------- | -------- | - | ------------------- | ------ | --------------- | ------- | - | --------------- | ------ | - | ------------------- | ----- | - | --------------- | ------ | -
|                                                             |  | 2004            |          |   | 2003                |       
|In Thousands                                                 |  | BeforeTaxAmount |          |   | Tax(Expense)Benefit |        | Netof TaxAmount |         |   | BeforeTaxAmount |        |   | Tax(Expense)Benefit |       |   | Netof TaxAmount |       
|Unrealized (losses) gains on securities:                     |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  
|Unrealized (losses) gains arising during holding period      |  | $               | (108,236 | ) |                     | 42,146 |                 | (66,090 | ) |                 | 1,541  |   |                     | (517  | ) |                 | 1,024  |  
|Reclassification adjustment for gains realized in net income |  |                 | (10,984  | ) |                     | 4,339  |                 | (6,645  | ) |                 | (4,924 | ) |                     | 1,945 |   |                 | (2,979 | )
|Minimum pension liability:                                   |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  
|Adjustment to minimum pension liability                      |  |                 | (188     | ) |                     | 75     |                 | (113    | ) |                 | (1,237 | ) |                     | 495   |   |                 | (742   | )
|Unrealized losses on cash flow hedging instruments:          |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  
|Unrealized losses arising during holding period              |  |                 | (5,393   | ) |                     | 2,157  |                 | (3,236  | ) |                 | (335   | ) |                     | 134   |   |                 | (201   | )
|                                                             |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  
|Other comprehensive (income) loss                            |  | $               | (124,801 | ) |                     | 48,717 |                 | (76,084 | ) |                 | (4,955 | ) |                     | 2,057 |   |                 | (2,898 | )
|                                                             |  |                 |          |   |                     |        |                 |         |   |                 |        |   |                     |       |   |                 |        |  



(7)
FHLB ADVANCES



Maturities of FHLB advances for each of the years ending
December 31 are as follows:



|             |  |                |  |                  |          
|------------ |  | -------------- |  | ---------------- | ---------
|In Thousands |  | Range of Rates |  | Total Maturities
|2004         |  | 1.11% to 7.65% |  | $                | 1,812,253
|2005         |  | 1.82% to 5.68% |  |                  | 2,335    
|2006         |  | 4.44% to 4.44% |  |                  | 25,204   
|2007         |  | 7.00% to 7.00% |  |                  | 276      
|2008         |  | 2.00% to 5.94% |  |                  | 204,559  
|Thereafter   |  | 2.17% to 6.39% |  |                  | 831,093  
|             |  |                |  |                  |          
|Total        |  |                |  | $                | 2,875,720
|             |  |                |  |                  |          



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(8) EMPLOYEE BENEFITS



The following tables disclose the components of the net periodic benefit costs and the assumptions used in computing those costs for the six
months ended June 30, 2004 and 2003 for NCFs pension and other benefit plans:



|                                         |  |              |        |   |             |        |   |      |      |      |     
|---------------------------------------- |  | ------------ | ------ | - | ----------- | ------ | - | ---- | ---- | ---- | ----
|                                         |  | Pension Plan |        |   | Other Plans
|In Thousands                             |  | 2004         |        |   | 2003        |        |   | 2004 |      | 2003
|Components of Net Periodic Benefit Cost: |  |              |        |   |             |        |   |      |      |      |     
|Service cost                             |  | $            | 1,541  |   |             | 1,467  |   |      | 112  |      | 91  
|Interest cost                            |  |              | 2,076  |   |             | 2,173  |   |      | 444  |      | 402 
|Expected return on plan assets           |  |              | (3,311 | ) |             | (2,814 | ) |      |     |      |    
|Transition obligation amortization       |  |              |       |   |             |       |   |      | 5    |      | 5   
|Amortization of prior service cost       |  |              | (26    | ) |             | (26    | ) |      | 14   |      | 3   
|Amortization of net loss                 |  |              | 241    |   |             | 564    |   |      | 275  |      | 184 
|FAS88 settlement loss                    |  |              |       |   |             |       |   |      | 100  |      | 99  
|                                         |  |              |        |   |             |        |   |      |      |      |     
|Net expense                              |  | $            | 521    |   |             | 1,364  |   |      | 950  |      | 784 
|                                         |  |              |        |   |             |        |   |      |      |      |     
|Assumptions:                             |  |              |        |   |             |        |   |      |      |      |     
|Discount rate                            |  |              | 6.00   | % |             | 6.75   |   |      | 6.00 |      | 6.75
|Expected long-term return on assets      |  |              | 8.50   |   |             | 8.50   |   |      |     |      |    
|Rate of compensation increase            |  |              | 3.50   |   |             | 3.50   |   |      |     |      |    
|Initial health care trend rate           |  |              |       |   |             |       |   |      | 9.00 |      | 9.00
|Ultimate trend rate                      |  |              |       |   |             |       |   |      | 5.00 |      | 5.00
|Year ultimate trend rate is reached      |  |              |       |   |             |       |   |      | 2012 |      | 2011



(9)
PER SHARE DATA



The following schedule presents the components of the basic and
diluted EPS computations for the three and six months ended June 30, 2004 and 2003. Dilutive common shares arise from the potentially dilutive effect of NCFs stock options outstanding.



|                                   |  |                             |         |                           |         |      |         |      |        
|---------------------------------- |  | --------------------------- | ------- | ------------------------- | ------- | ---- | ------- | ---- | -------
|                                   |  | Three Months Ended June 30, |         | Six Months Ended June 30,
|In Thousands Except Per Share Data |  | 2004                        |         | 2003                      |         | 2004 |         | 2003
|Basic EPS                          |  |                             |         |                           |         |      |         |      |        
|Average common shares              |  |                             | 204,340 |                           | 204,629 |      | 204,660 |      | 204,948
|Net income                         |  | $                           | 85,091  |                           | 71,507  |      | 175,335 |      | 135,597
|Earnings per share                 |  |                             | .42     |                           | .35     |      | .86     |      | .66    
|                                   |  |                             |         |                           |         |      |         |      |        
|Diluted EPS                        |  |                             |         |                           |         |      |         |      |        
|Average common shares              |  |                             | 204,340 |                           | 204,629 |      | 204,660 |      | 204,948
|Average dilutive common shares     |  |                             | 2,397   |                           | 1,072   |      | 2,250   |      | 1,277  
|                                   |  |                             |         |                           |         |      |         |      |        
|Adjusted average common shares     |  |                             | 206,737 |                           | 205,701 |      | 206,910 |      | 206,225
|Net income                         |  | $                           | 85,091  |                           | 71,507  |      | 175,335 |      | 135,597
|Earnings per share                 |  |                             | .41     |                           | .35     |      | .85     |      | .66    
|                                   |  |                             |         |                           |         |      |         |      |        



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(10) SUPPLEMENTARY INCOME STATEMENT INFORMATION



Following is a breakdown of the components of other expense on the Consolidated
Statement of Income for the three- and six-month periods ended June 30, 2004 and 2003:



|                             |  |                             |        |                           |        |      |         |      |       
|---------------------------- |  | --------------------------- | ------ | ------------------------- | ------ | ---- | ------- | ---- | ------
|                             |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|In Thousands                 |  | 2004                        |        | 2003                      |        | 2004 |         | 2003
|Legal and professional fees  |  | $                           | 13,385 |                           | 9,830  |      | 26,684  |      | 17,975
|Telecommunications           |  |                             | 4,132  |                           | 4,544  |      | 8,265   |      | 9,052 
|Data processing              |  |                             | 7,061  |                           | 5,579  |      | 13,650  |      | 10,824
|Marketing                    |  |                             | 4,133  |                           | 2,967  |      | 7,162   |      | 5,486 
|Printing and office supplies |  |                             | 3,769  |                           | 3,781  |      | 6,885   |      | 7,095 
|Postage and freight          |  |                             | 2,622  |                           | 2,731  |      | 4,987   |      | 5,511 
|All other                    |  |                             | 19,950 |                           | 21,909 |      | 37,745  |      | 41,802
|                             |  |                             |        |                           |        |      |         |      |       
|Total other expense          |  | $                           | 55,052 |                           | 51,341 |      | 105,378 |      | 97,745
|                             |  |                             |        |                           |        |      |         |      |       



(11)
COMMITMENTS AND CONTINGENCIES



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



On May 9, 2004, a shareholder of NCF filed a purported class action complaint in the Circuit Court of Shelby County, Tennessee against NCF and each member of the NCF board of directors. On May 21, 2004, another
shareholder of NCF filed a purported class action complaint in the same court. The substantially identical complaints have been consolidated into one lawsuit and allege that the NCF board of directors breached its fiduciary duties to the NCF
shareholders in approving and adopting the merger agreement by, among other things, failing to wait until after announcement of 2ndquarter 2004 operating results in order to achieve a higher price for the company and by attempting to trigger the payment of certain change of control payments to NCFs senior management. The consolidated lawsuit seeks, among
other things, to enjoin the completion of the merger and to recover costs and disbursements incurred by the plaintiffs, including reasonable attorney fees and expert fees. Simultaneously with the filing of the lawsuits, the plaintiffs propounded
requests for production of documents controlled by NCF and its directors. NCF and its directors served written responses and objections thereto on June 25, 2004 and produced responsive documents to the plaintiffs on July 7, 2004. NCF believes that
these lawsuits are entirely without merit and intends to vigorously defend the lawsuits.



In December 2002, NCF completed the acquisition of BancMortgage, an Atlanta-based mortgage originator. Approximately 611,000 shares of NCF common stock were issued and $5 million of goodwill was initially recorded in
the transaction. In accordance with the merger agreement, additional consideration, shares of NCF common stock and cash, may be paid based on a multiple of pretax earnings for the three years ended December 31, 2005, provided such amount exceeds
consideration already exchanged. Any contingent payment will be recorded as goodwill.



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(12) SEGMENT INFORMATION



Management monitors NCF performance as two business segments, traditional banking and
financial enterprises.



The traditional banking segment includes sales and
distribution of financial products and services to individuals. These products and services include loan products such as residential mortgage, home equity lending, automobile and other personal financing needs. Traditional banking products also
include various deposit products that are designed for customers saving and transaction needs. This segment also includes lending and related financial services provided to small- to medium-sized companies. Included among these services are
several specialty services such as real estate finance, asset-based lending and residential construction lending. The traditional banking segment also includes management of the investment portfolio and non-deposit based funding.



The financial enterprises segment is comprised of trust services and investment management,
transaction processing, retail banking consulting/in-store licensing and broker/dealer activities.



The accounting policies of the individual segments are the same as those of NCF. Transactions between business segments are conducted at arms length. Interest income for tax-exempt loans and securities is
adjusted to a taxable-equivalent basis.



The following tables present condensed
income statements for each reportable segment:



|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|-------------------------------- |  | ------------------- | ---------- | - | --------------------- | --------- | - | ------------------------- | ------ | - | ----- | ---------- | -
|In Thousands                     |  | Traditional Banking |            |   | Financial Enterprises |           |   | Intersegment Eliminations |        |   | Total |           
|Quarter ended June 30, 2004:     |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net interest income (TE)         |  | $                   | 193,524    |   |                       | 7,241     |   |                           |       |   |       | 200,765    |  
|Provision for loan losses        |  |                     | (12,845    | ) |                       |          |   |                           |       |   |       | (12,845    | )
|Gain on branch sale              |  |                     | 714        |   |                       |          |   |                           |       |   |       | 714        |  
|Noninterest income               |  |                     | 69,050     |   |                       | 56,409    |   |                           | (1,925 | ) |       | 123,534    |  
|Intangibles amortization         |  |                     | (12,901    | ) |                       |          |   |                           |       |   |       | (12,901    | )
|Merger-related expenses          |  |                     | (8,290     | ) |                       |          |   |                           |       |   |       | (8,290     | )
|Noninterest expense              |  |                     | (112,800   | ) |                       | (42,591   | ) |                           | 1,925  |   |       | (153,466   | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Income before income taxes (TE)  |  |                     | 116,452    |   |                       | 21,059    |   |                           |       |   |       | 137,511    |  
|Income taxes                     |  |                     | (44,207    | ) |                       | (8,213    | ) |                           |       |   |       | (52,420    | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net income                       |  | $                   | 72,245     |   |                       | 12,846    |   |                           |       |   |       | 85,091     |  
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Average assets                   |  | $                   | 22,513,130 |   |                       | 1,228,760 |   |                           |       |   |       | 23,741,890 |  
|Quarter ended June 30, 2003:     |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net interest income (TE)         |  | $                   | 183,113    |   |                       | 5,286     |   |                           |       |   |       | 188,399    |  
|Provision for loan losses        |  |                     | (13,376    | ) |                       |          |   |                           |       |   |       | (13,376    | )
|Noninterest income               |  |                     | 65,301     |   |                       | 54,215    |   |                           | (2,098 | ) |       | 117,418    |  
|Intangibles amortization         |  |                     | (15,673    | ) |                       |          |   |                           |       |   |       | (15,673    | )
|First Mercantile litigation      |  |                     |           |   |                       | (1,041    | ) |                           |       |   |       | (1,041     | )
|Employment contract terminations |  |                     | (14,108    | ) |                       |          |   |                           |       |   |       | (14,108    | )
|Debt retirement/prepayment gains |  |                     | 326        |   |                       |          |   |                           |       |   |       | 326        |  
|Noninterest expense              |  |                     | (111,313   | ) |                       | (40,893   | ) |                           | 2,098  |   |       | (150,108   | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Income before income taxes (TE)  |  |                     | 94,270     |   |                       | 17,567    |   |                           |       |   |       | 111,837    |  
|Income taxes                     |  |                     | (33,479    | ) |                       | (6,851    | ) |                           |       |   |       | (40,330    | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net income                       |  | $                   | 60,791     |   |                       | 10,716    |   |                           |       |   |       | 71,507     |  
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Average assets                   |  | $                   | 21,369,652 |   |                       | 803,743   |   |                           |       |   |       | 22,173,395 |  



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National Commerce Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(12) SEGMENT INFORMATION (Continued)



|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|-------------------------------- |  | ------------------- | ---------- | - | --------------------- | --------- | - | ------------------------- | ------ | - | ----- | ---------- | -
|In Thousands                     |  | Traditional Banking |            |   | Financial Enterprises |           |   | Intersegment Eliminations |        |   | Total |           
|Six months ended June 30, 2004:  |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net interest income (TE)         |  | $                   | 384,410    |   |                       | 14,243    |   |                           |       |   |       | 398,653    |  
|Provision for loan losses        |  |                     | (24,933    | ) |                       |          |   |                           |       |   |       | (24,933    | )
|Gain on branch sale              |  |                     | 759        |   |                       |          |   |                           |       |   |       | 759        |  
|Noninterest income               |  |                     | 137,839    |   |                       | 109,477   |   |                           | (3,889 | ) |       | 243,427    |  
|Intangibles amortization         |  |                     | (26,540    | ) |                       |          |   |                           |       |   |       | (26,540    | )
|Merger-related expenses          |  |                     | (8,290     | ) |                       |          |   |                           |       |   |       | (8,290     | )
|Noninterest expense              |  |                     | (224,556   | ) |                       | (82,886   | ) |                           | 3,889  |   |       | (303,553   | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Income before income taxes (TE)  |  |                     | 238,689    |   |                       | 40,834    |   |                           |       |   |       | 279,523    |  
|Income taxes                     |  |                     | (88,263    | ) |                       | (15,925   | ) |                           |       |   |       | (104,188   | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net income                       |  | $                   | 150,426    |   |                       | 24,909    |   |                           |       |   |       | 175,335    |  
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Average assets                   |  | $                   | 22,308,654 |   |                       | 1,134,459 |   |                           |       |   |       | 23,443,113 |  
|Six months ended June 30, 2003:  |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net interest income (TE)         |  | $                   | 362,280    |   |                       | 10,501    |   |                           |       |   |       | 372,781    |  
|Provision for loan losses        |  |                     | (21,060    | ) |                       |          |   |                           |       |   |       | (21,060    | )
|Loss on branch sale              |  |                     | (145       | ) |                       |          |   |                           |       |   |       | (145       | )
|Noninterest income               |  |                     | 126,902    |   |                       | 98,972    |   |                           | (3,716 | ) |       | 222,158    |  
|Intangibles amortization         |  |                     | (31,957    | ) |                       |          |   |                           |       |   |       | (31,957    | )
|First Mercantile litigation      |  |                     |           |   |                       | (20,695   | ) |                           |       |   |       | (20,695    | )
|Employment contract terminations |  |                     | (14,108    | ) |                       |          |   |                           |       |   |       | (14,108    | )
|Debt retirement/prepayment gains |  |                     | 326        |   |                       |          |   |                           |       |   |       | 326        |  
|Noninterest expense              |  |                     | (222,366   | ) |                       | (75,624   | ) |                           | 3,716  |   |       | (294,274   | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Income before income taxes (TE)  |  |                     | 199,872    |   |                       | 13,154    |   |                           |       |   |       | 213,026    |  
|Income taxes                     |  |                     | (72,299    | ) |                       | (5,130    | ) |                           |       |   |       | (77,429    | )
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Net income                       |  | $                   | 127,573    |   |                       | 8,024     |   |                           |       |   |       | 135,597    |  
|                                 |  |                     |            |   |                       |           |   |                           |        |   |       |            |  
|Average assets                   |  | $                   | 20,976,051 |   |                       | 759,301   |   |                           |       |   |       | 21,735,352 |  



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



The following sets forth managements discussion and analysis of financial condition and results of operations of National Commerce Financial Corporation
(NCF) and its wholly owned subsidiaries on a consolidated basis for the six months ended June 30, 2004 and 2003. NCF is a registered bank holding company that provides diverse financial services through a regional network of banking
subsidiaries and a national network of non-bank subsidiaries. This Quarterly Report on Form 10-Q should be read in conjunction with NCFs 2003 Annual Report on Form 10-K.



The following discussion contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements relate to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things. Words such as
expects, plans, estimates, projects, objectives and goals and similar expressions are intended to identify these forward-looking statements. We caution readers that such
forward-looking statements are necessarily estimates based on managements judgment, and obtaining the estimated results is subject to a number of risks and uncertainties. Such risks are discussed below. A variety of factors, including those
described below, could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in this report. We do not assume any obligation to update these forward-looking statements or to update the
reasons why actual results could differ from those projected in the forward-looking statements. Certain amounts for prior periods have been reclassified to conform to the current presentation.



The following risks are those we believe to pose the greatest risk to our financial
condition, operations and prospects: fluctuations in interest rates could adversely affect our net interest income and impact funding sources; competition with other providers of financial services could adversely affect our profitability and
ability to grow core businesses; adverse changes in general economic conditions could result in declines in credit quality with resulting higher charge-offs, in the value of the collateral that secure our loans and in loan demand, our largest source
of revenue; unfavorable political conditions including acts or threats of terrorism and actions taken by governments in response to terrorism; various monetary and fiscal policies and regulations, including those determined by the Federal Reserve
Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission; and managements ability to manage these and other risks. Additionally, we have entered into a
definitive agreement to merge with SunTrust Banks, Inc. as discussed below. We believe that the proposed merger exposes us to the risks that the merger may not occur, or may not close within the expected time frame; expected cost savings from the
merger may not be fully realized or realized within the expected time frame; revenues of the combined SunTrust/NCF following the merger may be lower than expected; and, costs or difficulties related to the integration of our and SunTrusts
businesses may be greater than expected.



We are a registered bank holding
company headquartered in Memphis, Tennessee. We provide banking and other financial services through our banking and non-banking subsidiaries. We are the surviving corporation from the July 2000 merger of National Commerce Bancorporation with CCB
Financial Corporation. Our banking subsidiaries are National Bank of Commerce (NBC) and NBC Bank, FSB. In certain of our markets, NBC operates under the trade names of Central Carolina Bank and Wal-Mart Money Center by
National Bank of Commerce. We also are a 49 percent owner of First Market Bank, FSB. First Market operates 30 branch offices in the Richmond, Virginia area. Additionally, we own all of the outstanding common stock of numerous non-bank
subsidiaries that provide a variety of financial services.



On May 9, 2004, NCF
announced that it had signed a definitive agreement to merge with SunTrust Banks, Inc. The merger is subject to approval by regulatory authorities and shareholders. The merger is expected to close in the fourth quarter of 2004. Until the
consummation of the merger, both parties have agreed to conduct their business in the ordinary course consistent with past practice. In addition, NCF has agreed to additional covenants that place restrictions on the conduct of the business of NCF
and its subsidiaries in regards to changes in capital stock,



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indebtedness, contractual obligations and other restrictions normally imposed on the merger aquiree. Additionally, NCF has agreed to sell several NCF
branches located in overlapping markets prior to consummation of the merger.



PERFORMANCE OVERVIEW



Management focuses on five key financial
performance drivers in managing our operations and planning for the future. These performance drivers are: net interest margin, revenue growth, efficiency ratio, asset quality, and de novo expansion. Our discussion and analysis of operating results
is structured in the context of these key drivers.



During the second quarter
of 2004, with respect to our key drivers, we experienced:



| |  | Continued pressure on our net interest margin due primarily to interest rates remaining at historically low levels for most of the quarter;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| |  | An eight percent increase in noninterest income, excluding investment securities gains, over second quarter 2003;
| | - | -----------------------------------------------------------------------------------------------------------------



| |  | Improvement in our cash operating efficiency ratio to 46.68 percent for second quarter 2004 compared to 49.48 percent for the same period in 2003;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Merger-related expenses of $8 million;
| | - | --------------------------------------



| |  | Continued de novo expansion in Atlanta and through our co-branding relationship with Wal-Mart.
| | - | ----------------------------------------------------------------------------------------------



Net income for the three months ended June 30, 2004 totaled $85 million compared to 2003s $72 million. Basic and diluted net income
per share were $.42 and $.41, respectively, in second quarter 2004 and $.35 in the second quarter of 2003. Annualized returns on average assets and stockholders equity were 1.44 percent and 12.11 percent, respectively, for the three months
ended June 30, 2004 compared to 1.29 percent and 10.61 percent, respectively, for the three months ended June 30, 2003.



Net income for the six months ended June 30, 2004 totaled $175 million compared to 2003s $136 million. Basic and diluted net income per share were $.86 and $.85,
respectively, for the six month ended June 30, 2004 compared to $.66 for the same period in 2003. Annualized returns on average assets and stockholders equity were 1.50 percent and 12.57 percent, respectively, for the six months ended June 30,
2004 compared to 1.26 percent and 10.13 percent, respectively, for the six months ended June 30, 2003.



CRITICAL ACCOUNTING POLICIES



Our
consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States (GAAP), which require that we make estimates and assumptions (see Note 1 to the Consolidated Financial
Statements) that affect the amounts reported in those financial statements. We have established procedures and processes to facilitate making the judgments necessary to prepare financial statements. In particular, we have identified accounting for
loan losses, accounting for the fair value of tangible and intangible assets and accounting for income taxes as the more material items in our financial statements that involve complex accounting estimates and principles and a greater degree of
judgment than required for most of our accounting entries. We refer you to our 2003 Annual Report for a more complete summary of our critical accounting policies. In each case, we have identified the variables most important in the estimation
process. Management used the best information available to make the estimations necessary to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in key variables could change future
valuations and impact net income.



Determining our allowance for loan losses
inherently entails our making estimates based on future events and involves a large degree of judgment and subjective analysis. The allowance for loan losses is discussed more fully in the section following under the heading Provision for Loan
Losses.



As of June 30, 2004, we have unamortized goodwill totaling $1.1
billion and core deposit intangibles totaling $146 million (see Note 5 to the Consolidated Financial Statements). Mortgage servicing rights totaled $4 million at June



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30, 2004. Intangible assets subject to amortization are reviewed for impairment in accordance with GAAP. Goodwill and intangible assets not subject to
amortization are reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.



We employ certain tax structures to reduce our tax rate below the statutory rates of the federal and individual state governments. Our estimate of tax expense considers
the risk that certain income may be taxed or certain deductions may be disallowed. In the event that tax authorities disagree with our treatment of revenues and expenses, we could incur additional tax expense from prior periods and in the future.
Various states have been more aggressively pursuing income taxes due to their budget shortfalls. In addition, states periodically consider legislation that could impact our state tax expense.



DISCUSSION AND ANALYSIS OF KEY DRIVERS



Net Interest Margin



Net interest margin is one of the key drivers as net interest income is our principal source of earnings. Volume, yield/cost and relative
mix of both earning assets and interest-bearing and noninterest-bearing sources of funds impact net interest income.



The net interest margin for the second quarter of 2004 declined 3 basis points to 3.83 percent from 3.86 percent in the second quarter of 2003. We remain optimistic that
we are well positioned to benefit from an anticipated gradual increase in interest rates. New loan production continues to be predominately at lower, variable rates. Currently, more than half of our loans are at variable rates which would improve
our net interest margin in the short-term if rates rise. See Tables 1 and 2 for analysis of our net interest margin.



Interest-earning Assets and Interest-bearing Liabilities To combat recession fears and slowdowns in the economy, the Federal Reserve has decreased the
target federal funds rate during the past three years. Since the beginning of 2001, the Federal Reserve has decreased the target federal funds rate by a total of 550 basis points, with the most recent decrease being 25 basis points in June 2003. In
late June 2004, the Federal Reserve has moved forward with a measured approach, increasing the target federal funds rate by 25 basis points. We anticipate continuing gradual increases by the Federal Reserve during the remainder 2004.



Each time the Federal Reserve changes the target federal funds rate, our banking subsidiaries
adjust their prime lending rate to keep pace with the changes in funding costs. The prime rate charged by our banking subsidiaries changed to 4.25 percent on July 1, 2004 and was 4.00 percent at June 30, 2004 and 2003. Our yield on interest-earning
assets has fallen due to the interest rate decreases discussed earlier and the lower-reinvestment rates available as earning assets repaid. We continue to reduce the size of the investment securities portfolio as strong loan growth continues. During
second quarter of 2004, the increase in interest income from higher volumes of interest-earning assets was more than offset by the decrease in interest income from lower rates earned on those assets.



Corresponding with the falling yields on interest-earning assets, the rates paid on our
interest-bearing liabilities have decreased when repriced. Additionally, the long-term debt restructuring undertaken in 2003 decreased our cost of funds. Increases in interest expense due to higher volumes of interest-bearing liabilities were more
than offset by decreased interest expense due to lower rates paid on those liabilities. We remain optimistic that a gradual rise in rates will increase net interest income due to the slightly asset sensitive position of the balance sheet and the
relatively low current value of noninterest-bearing deposits. Overall, our net interest income increased by $47 million in second quarter of 2004 due to variances in volume from average outstandings in second quarter of 2003 and decreased $35
million due to variances in rates in effect during second quarter 2004 compared to 2003.



Our net free liabilities (noninterest-bearing liabilities and equity) impact our net interest margin as they provide a free source of funding our asset growth. We focused our sales efforts on increasing
noninterest-bearing deposits during 2003 and into 2004 with a resulting increase of $325 million in average noninterest-bearing deposits for the three month period ended June 30, 2004 compared to the same period of 2003. The contribution of
net free liabilities to the net interest margin (computed as net interest margin less interest rate spread) fell to 25 basis



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Table 1. Average Balances and Net Interest Income Analysis



|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|--------------------------------------------------- |  | --------------------------- | ---------- | -------- | ---- | ------------------- |  | ---- | --------------- |  | -------- | ---------- | ------------------- | ------- |  | ----
|                                                    |  | Three Months Ended June 30,
|                                                    |  | 2004                        |            |          | 2003
|In Thousands (1)  Taxable Equivalent Basis         |  | Average Balance             |            | Interest |      | Average Yield/ Rate |  |      | Average Balance |  | Interest |            | Average Yield/ Rate
|Earning assets:                                     |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Loans(2)                                            |  | $                           | 14,033,307 |          |      | 190,774             |  | 5.46 | %               |  |          | 12,614,546 |                     | 190,239 |  | 6.05
|U.S. Treasury and agency obligations(3)             |  |                             | 4,885,766  |          |      | 55,422              |  | 4.54 |                 |  |          | 5,319,993  |                     | 62,529  |  | 4.70
|States and political subdivision obligations(3)     |  |                             | 80,124     |          |      | 1,817               |  | 9.07 |                 |  |          | 106,362    |                     | 2,158   |  | 8.11
|Other securities(3)                                 |  |                             | 1,440,173  |          |      | 19,381              |  | 5.38 |                 |  |          | 1,248,182  |                     | 16,091  |  | 5.16
|Trading securities                                  |  |                             | 308,778    |          |      | 2,263               |  | 2.93 |                 |  |          | 120,999    |                     | 437     |  | 1.44
|Time deposits in other banks                        |  |                             | 4,467      |          |      | 9                   |  | .87  |                 |  |          | 5,742      |                     | 17      |  | 1.21
|Federal funds sold and other short-term investments |  |                             | 275,289    |          |      | 646                 |  | .94  |                 |  |          | 107,462    |                     | 340     |  | 1.27
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Total earning assets                                |  |                             | 21,027,904 |          |      | 270,312             |  | 5.16 |                 |  |          | 19,523,286 |                     | 271,811 |  | 5.58
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Other assets:                                       |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Cash and due from banks                             |  |                             | 459,043    |          |      |                     |  |      |                 |  |          | 422,653    |                     |         |  |     
|Bank owned life insurance                           |  |                             | 331,286    |          |      |                     |  |      |                 |  |          | 231,397    |                     |         |  |     
|Investment in First Market Bank                     |  |                             | 34,342     |          |      |                     |  |      |                 |  |          | 29,248     |                     |         |  |     
|Premises and equipment                              |  |                             | 261,521    |          |      |                     |  |      |                 |  |          | 276,227    |                     |         |  |     
|Goodwill                                            |  |                             | 1,090,126  |          |      |                     |  |      |                 |  |          | 1,082,077  |                     |         |  |     
|Core deposit intangibles                            |  |                             | 152,523    |          |      |                     |  |      |                 |  |          | 213,065    |                     |         |  |     
|All other assets, net                               |  |                             | 385,145    |          |      |                     |  |      |                 |  |          | 395,442    |                     |         |  |     
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Total assets                                        |  | $                           | 23,741,890 |          |      |                     |  |      |                 |  | $        | 22,173,395 |                     |         |  |     
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Interest-bearing liabilities:                       |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Savings, NOW and money market accounts              |  | $                           | 5,824,697  |          |      | 8,839               |  | .61  | %               |  | $        | 5,765,351  |                     | 11,006  |  | .76 
|Jumbo and brokered certificates of deposit          |  |                             | 2,522,513  |          |      | 7,073               |  | 1.13 |                 |  |          | 2,032,881  |                     | 7,378   |  | 1.46
|Time deposits                                       |  |                             | 4,865,314  |          |      | 31,198              |  | 2.58 |                 |  |          | 4,915,988  |                     | 36,800  |  | 3.00
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Total interest-bearing deposits                     |  |                             | 13,212,524 |          |      | 47,110              |  | 1.43 |                 |  |          | 12,714,220 |                     | 55,184  |  | 1.74
|Short-term borrowed funds                           |  |                             | 1,741,327  |          |      | 4,924               |  | 1.14 |                 |  |          | 1,388,604  |                     | 4,730   |  | 1.37
|FHLB advances                                       |  |                             | 2,495,581  |          |      | 15,968              |  | 2.57 |                 |  |          | 2,197,173  |                     | 21,397  |  | 3.91
|Trust preferred securities and long-term debt(4)    |  |                             | 282,425    |          |      | 1,545               |  | 2.19 |                 |  |          | 299,247    |                     | 2,101   |  | 2.81
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Total interest-bearing liabilities                  |  |                             | 17,731,857 |          |      | 69,547              |  | 1.58 |                 |  |          | 16,599,244 |                     | 83,412  |  | 2.02
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Other liabilities and stockholders equity:         |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Demand deposits                                     |  |                             | 2,700,613  |          |      |                     |  |      |                 |  |          | 2,375,641  |                     |         |  |     
|Other liabilities                                   |  |                             | 483,149    |          |      |                     |  |      |                 |  |          | 495,573    |                     |         |  |     
|Stockholders equity                                |  |                             | 2,826,271  |          |      |                     |  |      |                 |  |          | 2,702,937  |                     |         |  |     
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Total liabilities and stockholders equity          |  | $                           | 23,741,890 |          |      |                     |  |      |                 |  |          | 22,173,395 |                     |         |  |     
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Net interest income and net interest margin (5)     |  |                             |            |          | $    | 200,765             |  | 3.83 | %               |  |          |            |                     | 188,399 |  | 3.86
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     
|Interest rate spread (6)                            |  |                             |            |          |      |                     |  | 3.58 | %               |  |          |            |                     |         |  | 3.56
|                                                    |  |                             |            |          |      |                     |  |      |                 |  |          |            |                     |         |  |     



|(1) | The taxable equivalent basis is computed using 35% federal and applicable state tax rates in 2004 and 2003. A reconciliation of taxable equivalent interest income, a
non- GAAP measure, to GAAP interest income is provided below:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                    |  |      |         |      |        
|--------------------------------------------------- |  | ---- | ------- | ---- | -------
|In Thousands                                        |  | 2004 |         | 2003
|Taxable equivalent interest income                  |  | $    | 270,312 |      | 271,811
|Less taxable equivalent adjustment for:             |  |      |         |      |        
|Loans                                               |  |      | 1,492   |      | 2,140  
|Investment securities                               |  |      | 5,272   |      | 4,909  
|Trading account securities                          |  |      | 15      |      | 165    
|Federal funds sold and other short-term investments |  |      |        |      | 4      
|                                                    |  |      |         |      |        
|GAAP interest income                                |  | $    | 263,533 |      | 264,593
|                                                    |  |      |         |      |        



|(2) | The average loan balances include nonaccrual loans and loans available for sale.
|--- | --------------------------------------------------------------------------------



|(3) | The average balances for debt and equity securities exclude the effect of their mark-to-market adjustment, if any.
|--- | ------------------------------------------------------------------------------------------------------------------



|(4) | NCF adopted the provisions of FASB Interpretation No. 46 in the fourth quarter of 2003 and deconsolidated entities that had issued trust preferred securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Net interest margin is computed by dividing net interest income by total earning assets.
|--- | ----------------------------------------------------------------------------------------



|(6) | Interest rate spread equals the earning asset yield minus the interest-bearing liability rate.
|--- | ----------------------------------------------------------------------------------------------



19



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Table 2. Average Balances and Net Interest Income Analysis



|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|--------------------------------------------------- |  | ------------------------- | ---------- | -------- | ---- | ------------------- |  | ---- | --------------- |  | ---------- |  | ------------------- |  | ----
|                                                    |  | Six Months Ended June 30,
|                                                    |  | 2004                      |            |          | 2003
|In Thousands (1)  Taxable Equivalent Basis         |  | Average Balance           |            | Interest |      | Average Yield/ Rate |  |      | Average Balance |  | Interest   |  | Average Yield/ Rate
|Earning assets:                                     |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Loans(2)                                            |  | $                         | 13,503,093 |          |      | 375,411             |  | 5.49 | %               |  | 12,296,600 |  | 390,100             |  | 6.19
|U.S. Treasury and agency obligations(3)             |  |                           | 5,069,387  |          |      | 116,325             |  | 4.59 |                 |  | 5,148,493  |  | 122,416             |  | 4.75
|States and political subdivision obligations(3)     |  |                           | 84,862     |          |      | 3,693               |  | 8.70 |                 |  | 110,395    |  | 4,411               |  | 7.99
|Other securities(3)                                 |  |                           | 1,369,988  |          |      | 36,593              |  | 5.34 |                 |  | 934,406    |  | 23,628              |  | 5.06
|Trading securities                                  |  |                           | 284,190    |          |      | 4,197               |  | 2.95 |                 |  | 104,340    |  | 1,023               |  | 1.96
|Time deposits in other banks                        |  |                           | 21,245     |          |      | 417                 |  | 3.95 |                 |  | 7,648      |  | 42                  |  | 1.11
|Federal funds sold and other short-term investments |  |                           | 227,120    |          |      | 1,020               |  | .90  |                 |  | 79,480     |  | 507                 |  | 1.29
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Total earning assets                                |  |                           | 20,559,885 |          |      | 537,656             |  | 5.19 |                 |  | 18,681,362 |  | 542,127             |  | 5.71
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Other assets:                                       |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Cash and due from banks                             |  |                           | 445,166    |          |      |                     |  |      |                 |  | 410,675    |  |                     |  |     
|Bank owned life insurance                           |  |                           | 287,296    |          |      |                     |  |      |                 |  | 229,814    |  |                     |  |     
|Investment in First Market Bank                     |  |                           | 33,644     |          |      |                     |  |      |                 |  | 28,803     |  |                     |  |     
|Premises and equipment                              |  |                           | 263,600    |          |      |                     |  |      |                 |  | 267,469    |  |                     |  |     
|Goodwill                                            |  |                           | 1,088,621  |          |      |                     |  |      |                 |  | 1,079,613  |  |                     |  |     
|Core deposit intangibles                            |  |                           | 159,245    |          |      |                     |  |      |                 |  | 221,010    |  |                     |  |     
|All other assets, net                               |  |                           | 605,656    |          |      |                     |  |      |                 |  | 816,606    |  |                     |  |     
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Total assets                                        |  | $                         | 23,443,113 |          |      |                     |  |      |                 |  | 21,735,352 |  |                     |  |     
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Interest-bearing liabilities:                       |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Savings, NOW and money market accounts              |  | $                         | 5,820,727  |          |      | 17,829              |  | .62  | %               |  | 5,725,246  |  | 22,963              |  | .81 
|Jumbo and brokered certificates of deposit          |  |                           | 2,406,740  |          |      | 13,489              |  | 1.13 |                 |  | 1,915,194  |  | 14,567              |  | 1.53
|Time deposits                                       |  |                           | 4,889,300  |          |      | 63,551              |  | 2.62 |                 |  | 4,912,935  |  | 74,942              |  | 3.08
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Total interest-bearing deposits                     |  |                           | 13,116,767 |          |      | 94,869              |  | 1.45 |                 |  | 12,553,375 |  | 112,472             |  | 1.81
|Short-term borrowed funds                           |  |                           | 1,719,322  |          |      | 9,489               |  | 1.11 |                 |  | 1,319,415  |  | 9,066               |  | 1.38
|FHLB advances                                       |  |                           | 2,423,721  |          |      | 31,570              |  | 2.62 |                 |  | 2,127,422  |  | 43,515              |  | 4.12
|Trust preferred securities and long-term debt(4)    |  |                           | 280,384    |          |      | 3,075               |  | 2.19 |                 |  | 298,003    |  | 4,293               |  | 2.88
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Total interest-bearing liabilities                  |  |                           | 17,540,194 |          |      | 139,003             |  | 1.59 |                 |  | 16,298,215 |  | 169,346             |  | 2.09
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Other liabilities and stockholders equity:         |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Demand deposits                                     |  |                           | 2,607,703  |          |      |                     |  |      |                 |  | 2,258,620  |  |                     |  |     
|Other liabilities                                   |  |                           | 490,596    |          |      |                     |  |      |                 |  | 479,106    |  |                     |  |     
|Stockholders equity                                |  |                           | 2,804,620  |          |      |                     |  |      |                 |  | 2,699,411  |  |                     |  |     
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Total liabilities and stockholders equity          |  | $                         | 23,443,113 |          |      |                     |  |      |                 |  | 21,735,352 |  |                     |  |     
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Net interest income and net interest margin (5)     |  |                           |            |          | $    | 398,653             |  | 3.84 | %               |  |            |  | 372,781             |  | 3.92
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     
|Interest rate spread (6)                            |  |                           |            |          |      |                     |  | 3.60 | %               |  |            |  |                     |  | 3.62
|                                                    |  |                           |            |          |      |                     |  |      |                 |  |            |  |                     |  |     



|(1) | The taxable equivalent basis is computed using 35% federal and applicable state tax rates in 2004 and 2003. A reconciliation of taxable equivalent interest income to
GAAP interest income is provided below:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                    |  |      |         |      |        
|--------------------------------------------------- |  | ---- | ------- | ---- | -------
|In Thousands                                        |  | 2004 |         | 2003
|Taxable equivalent interest income                  |  | $    | 537,656 |      | 542,127
|Less taxable equivalent adjustment for:             |  |      |         |      |        
|Loans                                               |  |      | 3,147   |      | 4,332  
|Investment securities                               |  |      | 10,425  |      | 9,791  
|Trading account securities                          |  |      | 24      |      | 27     
|Federal funds sold and other short-term investments |  |      |        |      | 8      
|                                                    |  |      |         |      |        
|GAAP interest income                                |  | $    | 524,060 |      | 527,969
|                                                    |  |      |         |      |        



|(2) | The average loan balances include nonaccrual loans and loans available for sale.
|--- | --------------------------------------------------------------------------------



|(3) | The average balances for debt and equity securities exclude the effect of their
mark-to-market adjustment, if any.
|--- | ------------------------------------------------------------------------------------------------------------------



|(4) | NCF adopted the provisions of FASB Interpretation No. 46 in the fourth quarter of 2003 and deconsolidated entities that had issued trust preferred securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Net interest margin is computed by dividing net interest income by total earning assets.
|--- | ----------------------------------------------------------------------------------------



|(6) | Interest rate spread equals the earning asset yield minus the interest-bearing liability rate.
|--- | ----------------------------------------------------------------------------------------------



20



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##### Table of Contents

points for the three months ended June 30, 2004 from 30 basis points for the three months ended June 30, 2003. Despite
the increase in our average net free liabilities of approximately $436 million, the contribution of net free liabilities to our net interest margin declined as a result of the 42 basis point decline in the average yield on our
interest-earning assets as discussed previously.



Interest Rate Risk
ManagementWe manage the interest rate sensitive components of our balance sheet with a view toward achieving consistent net income increases in spite of fluctuations in net interest margin caused by changing interest rates. Interest
sensitivity is our primary market risk and is defined as the risk of economic loss resulting from changes in interest rates that negatively impact net interest income. Responsibility for managing interest rate, market and liquidity risks rests with
our Asset/Liability Management Committee (ALCO). ALCO reviews interest rate and liquidity exposures and, based on its view of existing and expected market conditions, adopts balance sheet strategies that are intended to optimize net
interest income to the extent possible while minimizing the risk associated with changes in interest rates.



Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. Overnight federal funds, on which rates change daily, and loans which are tied to the prime rate are
much more interest rate sensitive than fixed-rate securities and loans. Similarly, time deposits of $100,000 and over and money market accounts are much more interest rate sensitive than savings accounts. The shorter-term interest rate sensitivities
are the key to measurement of the interest sensitivity gap, or difference between interest-sensitive earning assets and interest-sensitive liabilities. Trying to minimize this gap is a continual challenge in a changing interest rate environment and
is one of the objectives of ALCO. ALCO uses Gap Analysis as one method to determine and monitor the appropriate balance between interest-sensitive assets and interest-sensitive liabilities.



Gap Analysis measures the interest sensitivity of assets and liabilities at a given point in
time. The interest sensitivity of assets and liabilities is based on the timing of contractual maturities and repricing opportunities. A positive interest-sensitive gap occurs when interest-sensitive assets exceed interest-sensitive liabilities. The
reverse situation results in a negative gap. Management believes that an essentially balanced position (+/- 15 percent of tangible assets) between interest-sensitive assets and liabilities is necessary in order to protect against wide fluctuations
in interest rates. An analysis of our interest sensitivity position at June 30, 2004 is presented in Table 3. At June 30, 2004, we had a cumulative negative gap (interest-sensitive liabilities, equity and interest rate swaps exceeded
interest-sensitive assets) of $720 million or 3 percent of total assets over a twelve-month horizon. This compares to a cumulative negative gap of $821 million or 3.57 percent of total assets over a twelve-month horizon at December 31,
2003. The ratio of assets to liabilities, equity and interest rate swaps was .94x at June 30, 2004 compared to .93x at December 31, 2003. In 2003, ALCO decided that a change in our gap position was prudent due to its expectation that short-term
interest rates would begin a gradual increase during 2004. As a result of the asset sensitive gap position in the less than 30 day category, as shown in Table 3, increases in interest rates could have a positive impact on our net interest margin
until our interest-bearing liabilities reprice to higher rates.



Gap Analysis
is a limited measurement tool, however, because it does not incorporate the interrelationships between interest rates charged or paid, balance sheet trends and reaction to interest rate changes. In addition, a gap analysis model does not consider
that changes in interest rates do not affect all categories of assets and liabilities equally or simultaneously. Therefore, ALCO uses Gap Analysis as a tool to monitor changes in the balance sheet structure. To estimate the impact that changes in
interest rates would have on our earnings, ALCO uses Simulation Analysis. ALCO prepares and reviews the Simulation Analysis quarterly. The most recent Simulation Analysis was as of May 31, 2004 and those results do not vary significantly from those
that would have been obtained for an analysis as of June 30, 2004.



21



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Table 3. Interest Sensitivity Analysis



|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ----------------- | ---------- | - | --------------------------- | --------- | - | -------------- | ---------- | - | --------------------- | ---------- | - | ----- | ----------
|                                                                          |  | As of June 30, 2004 (1)
|In Thousands                                                              |  | 30 DaysSensitive        |           |   | 6 MonthsSensitive |            |   | 6 Months to 1 YearSensitive |           |   | TotalSensitive |            |   | Beyond 1YearSensitive |            |   | Total
|Assets:                                                                   |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Short term investments                                                    |  | $                       | 520,898   |   |                   |           |   |                             |          |   |                | 520,898    |   |                       |           |   |       | 520,898   
|Investment securities                                                     |  |                         | 533,196   |   |                   | 280,345    |   |                             | 339,753   |   |                | 1,153,294  |   |                       | 5,104,014  |   |       | 6,257,308 
|Loans                                                                     |  |                         | 7,575,546 |   |                   | 982,738    |   |                             | 1,012,371 |   |                | 9,570,655  |   |                       | 4,954,771  |   |       | 14,525,426
|Other assets                                                              |  |                         |          |   |                   |           |   |                             |          |   |                |           |   |                       | 2,740,485  |   |       | 2,740,485 
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Total assets                                                              |  |                         | 8,629,640 |   |                   | 1,263,083  |   |                             | 1,352,124 |   |                | 11,244,847 |   |                       | 12,799,270 |   |       | 24,044,117
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Liabilities:                                                              |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Noninterest DDA                                                           |  |                         | 238,598   |   |                   | 477,197    |   |                             |          |   |                | 715,795    |   |                       | 2,146,951  |   |       | 2,862,746 
|Savings deposits                                                          |  |                         | 853,364   |   |                   | 555,938    |   |                             | 555,938   |   |                | 1,965,240  |   |                       | 3,838,932  |   |       | 5,804,172 
|Time deposits                                                             |  |                         | 2,549,169 |   |                   | 1,693,313  |   |                             | 1,148,854 |   |                | 5,391,336  |   |                       | 1,956,211  |   |       | 7,347,547 
|Short-term borrowed funds                                                 |  |                         | 1,498,305 |   |                   |           |   |                             | 10,000    |   |                | 1,508,305  |   |                       | 200,000    |   |       | 1,708,305 
|Long-term debt                                                            |  |                         | 1,819,367 |   |                   | 39,444     |   |                             | 495       |   |                | 1,859,306  |   |                       | 1,301,572  |   |       | 3,160,878 
|Other liabilities                                                         |  |                         |          |   |                   |           |   |                             |          |   |                |           |   |                       | 378,357    |   |       | 378,357   
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Total liabilities                                                         |  |                         | 6,958,803 |   |                   | 2,765,892  |   |                             | 1,715,287 |   |                | 11,439,982 |   |                       | 9,822,023  |   |       | 21,262,005
|Total equity                                                              |  |                         |          |   |                   |           |   |                             |          |   |                |           |   |                       | 2,782,112  |   |       | 2,782,112 
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Total liabilities and equity                                              |  |                         | 6,958,803 |   |                   | 2,765,892  |   |                             | 1,715,287 |   |                | 11,439,982 |   |                       | 12,604,135 |   |       | 24,044,117
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Interest rate swaps:                                                      |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Pay floating/receive fixed                                                |  |                         | 300,000   |   |                   | 225,000    |   |                             |          |   |                | 525,000    |   |                       | (525,000   | ) |       |          
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Total interest rate swaps                                                 |  |                         | 300,000   |   |                   | 225,000    |   |                             |          |   |                | 525,000    |   |                       | (525,000   | ) |       |          
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Interest sensitivity gap                                                  |  |                         | 1,370,837 |   |                   | (1,727,809 | ) |                             | (363,163  | ) |                | (720,135   | ) |                       |            |   |       |           
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Cumulative gap                                                            |  | $                       | 1,370,837 |   |                   | (356,972   | ) |                             | (720,135  | ) |                |            |   |                       |            |   |       |           
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Cumulative ratio of assets to liabilities, equity and interest rate swaps |  |                         | 1.19      | x |                   | .97        |   |                             | .94       |   |                |            |   |                       |            |   |       |           
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           
|Cumulative gap to total assets                                            |  |                         | 5.70      | % |                   | (1.48      | ) |                             | (3.00     | ) |                |            |   |                       |            |   |       |           
|                                                                          |  |                         |           |   |                   |            |   |                             |           |   |                |            |   |                       |            |   |       |           



Comparative Interest Sensitivity
Gap



|                                                                          |  |                         |           |   |                   |          |   |                            |          |   |                |  |                       |  |       | 
|------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ----------------- | -------- | - | -------------------------- | -------- | - | -------------- |  | --------------------- |  | ----- | 
|                                                                          |  | As of December 31, 2003
|In Thousands                                                              |  | 30 DaysSensitive        |           |   | 6 MonthsSensitive |          |   | 6 Monthsto 1 YearSensitive |          |   | TotalSensitive |  | Beyond 1YearSensitive |  | Total
|Cumulative gap                                                            |  | $                       | 1,634,139 |   |                   | (326,487 | ) |                            | (821,082 | ) |                |  |                       |  |       | 
|                                                                          |  |                         |           |   |                   |          |   |                            |          |   |                |  |                       |  |       | 
|Cumulative ratio of assets to liabilities, equity and interest rate swaps |  |                         | 1.26      | x |                   | .97      |   |                            | .93      |   |                |  |                       |  |       | 
|                                                                          |  |                         |           |   |                   |          |   |                            |          |   |                |  |                       |  |       | 
|Cumulative gap to total assets                                            |  |                         | 7.10      | % |                   | (1.42    | ) |                            | (3.57    | ) |                |  |                       |  |       | 
|                                                                          |  |                         |           |   |                   |          |   |                            |          |   |                |  |                       |  |       | 



|(1) | Assets and liabilities that mature in one year or less and/or have interest rates that can be
adjusted during this period are considered interest-sensitive. The interest sensitivity position has meaning only as of the date for which it is prepared.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Simulation Analysis is performed using a computer-based asset/liability model incorporating current portfolio balances
and rates, contractual maturities, repricing opportunities, and assumptions about prepayments, future interest rates and future volumes. Using this information, the model calculates earnings estimates under multiple interest rate scenarios. To
measure the sensitivity of our earnings, the results of multiple simulations, which assume changes in interest rates, are compared to the base case simulation, which assumes no changes in interest rates. The sensitivity of earnings is
expressed as a percentage change in comparison to the base case simulation. The model assumes an immediate parallel shift in the interest rate environment. Using data as of May 31, 2004, a 100 basis point increase is projected to
decrease net income .6 percent and a 100 basis point decrease is projected to decrease net income 4.4 percent. The model uses asymmetrical pricing assumptions with respect to certain borrowings whereby interest rates are assumed not to be able to
fall as much as they are able to rise (a floor is established but no ceiling). With call risk, in a falling interest rate environment, issuer calls of higher yielding securities produce excess cash that would be re-invested at the lower rates
available in the market. In a rising rate environment, maturities of lower-yielding callable securities are extended and less cash is generated for re-investment at the higher market rates available.



As of June 30, 2004, management believes that NCF is positioned to avoid material negative
changes in net income resulting from future changes in interest rates. Management continues to target a relatively neutral position relative to future interest rate increases in the event that interest rates increase in 2004.If simulation
results show that earnings sensitivity exceeds the targeted limit, ALCO will adopt on-balance sheet and/or off-balance sheet strategies to bring earnings sensitivity within target guidelines. ALCO reviews the interest-earning and interest-bearing
portfolios to ensure a proper mix of fixed- and variable-rate products.



Estimating the amount of interest rate risk requires using significant assumptions about the future. These estimates will be different from actual results for many reasons, including but not limited to, changes in the growth of the overall
economy, changes in credit spreads, market interest rates moving in patterns other than the patterns chosen for analysis, changes in customer preferences, changes in tactical and strategic plans and changes in Federal Reserve policy. Stress testing
is performed quarterly on all market risk measurement analyses to help understand the relative sensitivity of key assumptions and thereby better understand and evaluate our risk profile.



Management will continue to monitor our interest sensitivity position with the goals of ensuring adequate liquidity while at the same time
seeking profitable spreads between the yields on funding uses and the rates paid for funding sources.



Revenue Growth



Revenue growth is our
second identified driver. Revenue consists of net interest income, discussed above, and noninterest income. Growth in noninterest income is, and will continue to be, a significant factor in determining our financial success. Noninterest income as a
percentage of total revenues (taxable equivalent basis) was 38.23 percent in second quarter 2004 compared to second quarter 2003s 38.39 percent. Excluding net investment securities gains and gains on branch sales, the percentages would be
37.99 percent and 37.59 percent, respectively. The largest increases in noninterest income in second quarter 2004 compared to second quarter 2003 were asset management fees, mortgage banking and other noninterest income.



Service charges on deposit accounts are our largest single category of noninterest income.
Despite our higher volume of deposit accounts, our service charge revenue growth has been restrained over the last 12 months by the Wal-Mart interchange settlement, by commercial deposit customers maintaining higher deposit balances as interest
rates on overnight sweep opportunities are not as attractive, by commercial customers processing more electronic and less paper transactions, by the rollout of our free Internet bill pay, and by the continued conversion by our retail customers of
fee-paying checking accounts to no-fee products. We review our deposit products and service charge structure periodically to ensure that we are competitive with the marketplace. We anticipate growth in deposit service charge income as we emphasize
transaction account deposit growth.



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Our mortgage banking income increased in the second quarter 2004 to $13 million from $11 million in second quarter 2003.
The mortgage industry experienced unprecedented levels of refinancings during the first three quarters of 2003 due to the lowest mortgage rates in many years. For approximately the last year, we retained the servicing rights on newly originated,
conforming loans eligible for sale in the secondary market due to unusually low market values. During the second quarter of 2004, we realized a gain of $3 million on the sale of retained mortgage servicing rights. We have resumed quarterly mortgage
servicing sales which will provide anticipated revenues of $1 million each quarter. Going forward, we will benefit from lower mortgage servicing rights amortization expense totaling approximately $1 million each quarter.



Broker/dealer revenues were down $1 million in second quarter 2004 to $27 million from second
quarter 2003 For the six months ended June 30, 2004, broker/dealer revenues were $52 million compared to $49 million for the same period of 2003 due primarily to sales of trust preferred securities to institutional customers. We expect broker/dealer
revenues in 2004 to be lower than 2003s due to the anticipated interest rate increases discussed previously. Changes in interest rate levels or equity markets could significantly impact these revenues.



In 2002, we began to extend our wealth management programs throughout our NCF footprint with
the goal of synchronizing private banking, trust, brokerage and our First Mercantile retirement plan products to provide complete wealth management solutions. In response to those efforts, asset management fees have risen steadily over the past five
quarters. First Mercantile continues to market their retirement plan products to other financial providers. Despite the difficult year First Mercantile faced in 2003, it added over 600 net new plans to their platform. Asset management income was $16
million for the second quarter of 2004 compared to $13 million for the second quarter 2003. Year to date June 30, 2004 asset management income was $32 million compared to $26 million for the same period of 2003.



Other noninterest income increased in second quarter 2004 over 2003 due primarily to our
expanded bank owned life insurance program and income from a customer survey subsidiary acquired in the first quarter of 2004.



In the first quarter of 2004, we recognized $11 million of investment securities gains. The market rates in effect presented us with the opportunity to take some of the
gains in the investment portfolio and, with our expectation that rates might rise in 2004, we determined that it was in our best interest to sell investments from the available for sale portfolio. We do not anticipate significant securities sales
during the remainder of 2004.



Efficiency



Management looks to our efficiency ratio as a key indicator of how well we manage the
noninterest cost of operating our diverse institution. NCFs second quarter operating cash efficiency ratio, defined as cash operating noninterest expense divided by operating revenues, has improved 280 basis points to 46.68 percent from second
quarter 2003s 49.48 percent. While operating revenues improved over the second quarter of last year, progress was also made in most of the major expense categories. Personnel, occupancy and equipment each declined or were essentially flat
versus the prior year quarter. Other expense increased $4 million, with the majority of the increase occurring in the discretionary areas such as advertising, charitable contributions and consulting.



With the announcement of the NCF/SunTrust merger, the agreement with the consultant utilized
to facilitate the efficiency project has been terminated which resulted in an expense of $1 million included in the merger-related expenses. Additionally, the second quarter included expenses of $2 million related to the project. However, our effort
to improve operational efficiency remains a top initiative and now has become a major responsibility of the NCF/SunTrust integration teams. Benefits to the bottom line are anticipated to continue throughout this year and into 2005, subject to the
integration with SunTrust.



Table 4 presents efficiency ratios for the second
quarter 2004, first quarter 2004 and second quarter 2003. Included within Table 4 is our efficiency ratio computed on a cash operating basis. Management uses a cash operating efficiency ratio as a key performance indicator rather a ratio computed
using GAAP measures. Accordingly, our cash operating efficiency ratio is a non-GAAP financial measure that is reconciled to the most



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comparable GAAP measure in the table below. Management believes that certain noninterest expenses included in the GAAP measure are not fairly indicative of
the on-going cost to operate our business. For example, merger expenses and gains or losses on investment securities are not considered part of our core earnings. Core deposit intangible amortization is a noninterest expense related to an intangible
asset that was recorded due to the accounting basis of certain acquisitions. Accordingly, such items have been excluded in computing our cash operating efficiency ratio. Our goal for 2004 is to maintain a cash operating efficiency ratio of less than
48 percent.



Table 4. Efficiency Ratios



|                                                  |  |                    |         |   |           |         |   |          |         |  
|------------------------------------------------- |  | ------------------ | ------- | - | --------- | ------- | - | -------- | ------- | -
|                                                  |  | Three Months Ended |        
|In Thousands                                      |  | June 2004          |         |   | March2004 |         |   | June2003 |        
|Noninterest expense                               |  | $                  | 174,657 |   |           | 163,726 |   |          | 180,604 |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Net interest income (TE)(1)                       |  | $                  | 200,765 |   |           | 197,888 |   |          | 188,399 |  
|Noninterest income                                |  |                    | 124,248 |   |           | 119,938 |   |          | 117,418 |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Total revenues                                    |  | $                  | 325,013 |   |           | 317,826 |   |          | 305,817 |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Efficiency ratio (TE)                             |  |                    | 53.74   | % |           | 51.51   |   |          | 59.06   |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Noninterest expense                               |  | $                  | 174,657 |   |           | 163,726 |   |          | 180,604 |  
|Less:                                             |  |                    |         |   |           |         |   |          |         |  
|Core deposit intangible and goodwill amortization |  |                    | (12,901 | ) |           | (13,639 | ) |          | (15,673 | )
|First Mercantile litigation                       |  |                    |        |   |           |        |   |          | (1,041  | )
|Employment contract terminations                  |  |                    |        |   |           |        |   |          | (14,108 | )
|Debt retirement/prepayment penalties (gains)      |  |                    |        |   |           |        |   |          | 326     |  
|Merger-related expenses                           |  |                    | (8,290  | ) |           |        |   |          |        |  
|Other items(2)                                    |  |                    | (2,123  | ) |           | (2,543  | ) |          |        |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Cash operating noninterest expense                |  | $                  | 151,343 |   |           | 147,544 |   |          | 150,108 |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Net interest income (TE)(1)                       |  | $                  | 200,765 |   |           | 197,888 |   |          | 188,399 |  
|Noninterest income                                |  |                    | 124,248 |   |           | 119,938 |   |          | 117,418 |  
|Less:                                             |  |                    |         |   |           |         |   |          |         |  
|(Gain) loss on branch sales                       |  |                    | (714    | ) |           | (45     | ) |          |        |  
|Investment securities (gains) losses              |  |                    | (66     | ) |           | (10,918 | ) |          | (2,460  | )
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Operating revenues                                |  | $                  | 324,233 |   |           | 306,863 |   |          | 303,357 |  
|                                                  |  |                    |         |   |           |         |   |          |         |  
|Cash operating efficiency ratio (TE)              |  |                    | 46.68   | % |           | 48.08   |   |          | 49.48   |  
|                                                  |  |                    |         |   |           |         |   |          |         |  



|(1) | The taxable equivalent adjustment to net interest income is computed using a 35% federal tax
rate and applicable state tax rates. See reconciliation to GAAP interest income in Table 1.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Comprised of expenses related to consulting project, severance and branch closures.
|--- | -----------------------------------------------------------------------------------



Core deposit intangible amortization expense decreased $3
million in second quarter of 2004 from second quarter of 2003. This decrease is consistent with the accelerated amortization method we use. During 2003, core deposit intangibles were reduced by $3 million in connection with deposits sold in branch
sales. We anticipate 2004s core deposit intangible amortization will be approximately $51 million. Year to date at June 30, 2004, core deposit intangible amortization totaled $27 million compared to $32 million for the same period of 2003.



Asset Quality



Nonperforming Loans and Nonperforming Assets. Nonperforming loans and nonperforming
assets have experienced moderate improvement over the last four quarters. During 2003, we charged-off $11 million of known problem loans within our aircraft portfolio and do not expect any future significant losses in this portfolio. The ratio of
nonperforming loans to loans outstanding (all ratios computed excluding loans held for sale) was .27 percent at June 30, 2004 compared to .24 percent at December 31, 2003 and .27 percent at June 30, 2003. At June 30, 2004, total nonperforming assets
(consisting of nonperforming loans, foreclosed real estate and other repossessed assets) amounted to $65 million or .46 percent of outstanding loans plus other real estate acquired through foreclosure and



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other repossessed assets. This compares to $64 million or .49 percent at December 31, 2003 and $66 million or .53 percent at June 30, 2003.



Allowance for Loan Losses. Management considers determination of the amount of the
allowance for loan losses to be a critical accounting estimate and performs periodic analysis of the loan portfolio to determine its appropriateness. The overall allowance analysis considers the results of the loan reviews, quantitative and
qualitative indicators of the current quality of the loan portfolio and the inherent risk of loss not captured in the reviews and assessments of pools of loans. Management responsible for credit and financial matters performs the assessment and
determines the amount of the allowance for loan losses.



The allowance for loan
losses at June 30, 2004 increased $5 million to $178 million or 1.26 percent of total loans. This compares to $170 million and 1.31 percent at December 31, 2003 and $167 million and 1.35 percent at June 30, 2003. The ratio of the allowance to total
loans declined in order to reflect the continued improvement in the asset quality measures and a growing unallocated reserve. Additionally, coverage levels of net charge-offs and nonperforming loans improved to 5.69 times and 4.74 times,
respectively, at June 30, 2004 and remain significantly above industry levels.



The unallocated allowance for loan losses increased to $52 million at June 30, 2004 compared to $50 million at December 31, 2003 and $48 million at June 30, 2003. We believe the level of unallocated reserve is appropriate given that the
economy has not yet experienced consistent trends in economic recovery indicators, we have higher levels of nonperforming loans than experienced one year ago and anticipated rising interest rates could increase debt service requirements on
borrowers.



Table 5 summarizes indicators of portfolio quality and the
allowance for loan losses as of and for the five quarters ended June 30, 2004.



Table 5. Indicators of Portfolio Quality and Allowance for Loan Losses



|                                                                           |  |               |            |   |               |            |               |            |               |            |               |           
|-------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | ---------- | ------------- | ---------- | ------------- | ---------- | ------------- | ----------
|                                                                           |  | 2004          |            |   | 2004          |            | 2003          |            | 2003          |            | 2003         
|In Thousands                                                               |  | SecondQuarter |            |   | First Quarter |            | FourthQuarter |            | Third Quarter |            | SecondQuarter
|Loans outstanding(1)                                                       |  | $             | 14,191,270 |   |               | 13,418,567 |               | 13,034,948 |               | 12,897,774 |               | 12,411,446
|Ratio of allowance for loan losses to loans outstanding                    |  |               | 1.26       | % |               | 1.29       |               | 1.31       |               | 1.34       |               | 1.35      
|Average loans outstanding for the period(1)                                |  | $             | 13,766,675 |   |               | 13,239,512 |               | 12,992,875 |               | 12,736,334 |               | 12,220,225
|Ratio of annualized net charge-offs to average loans for the period        |  |               | .23        | % |               | .28        |               | .43        |               | .31        |               | .29       
|Ratio of recoveries to charge-offs for the period                          |  |               | 20.99      |   |               | 14.44      |               | 14.48      |               | 11.80      |               | 14.23     
|Ratio of nonperforming loans to:                                           |  |               |            |   |               |            |               |            |               |            |               |           
|Loans outstanding                                                          |  |               | .27        |   |               | .26        |               | .24        |               | .28        |               | .27       
|Total assets                                                               |  |               | .16        |   |               | .15        |               | .13        |               | .16        |               | .15       
|Ratio of nonperforming assets to:                                          |  |               |            |   |               |            |               |            |               |            |               |           
|Loans outstanding plus foreclosed real estate and other repossessed assets |  |               | .46        |   |               | .48        |               | .49        |               | .52        |               | .53       
|Total assets                                                               |  |               | .27        |   |               | .28        |               | .28        |               | .29        |               | .29       
|Allowance for loan losses to total nonperforming loans                     |  |               | 4.74       | x |               | 4.99       |               | 5.55       |               | 4.79       |               | 4.94      



|(1) | Excluding loans held for sale.
|--- | ------------------------------



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The provision for loan losses during the second quarter of 2004 and 2003 was $13 million. Net loan charge-offs totaled $8
million in the second quarter of 2004 and $9 million in the second quarter of 2003, representing .23 percent and .29 percent (annualized) net charge-offs to average loans for the respective periods.



Provision for loan losses during the six months ended June 30, 2004 and 2003 was $25 million
and $21 million, respectively. Net loan charge-offs totaled for the six months period ended June 30, 2004 was $17 million, representing .25 percent (annualized) net charge-offs to average loans. For the six month period ended June 30, 2003, these
totals were $17 million and .27 percent, respectively. We continue to target a net charge-off range of .25 percent to .30 percent for the full year of 2004.



Management considers many quantitative ratios and factors in its ultimate determination of the allowance for loan losses including: coverage ratio, the level of
nonperforming loans and past due loans, the level of unallocated reserve and our loan mix. Qualitative factors considered include considerations of overall interest rates, political conditions, legislation that may directly or indirectly affect the
banking industry and economic conditions in the geographical areas and industries in which we do business.



Management believes that the allowance for loan losses is adequate to absorb estimated probable losses inherent in the loan portfolio. The most recent regulatory agency examinations have not revealed any material
problem credits that had not been previously identified; however, future regulatory examinations may result in the regulatory agencies requiring adjustments to the allowance for loan losses based on information available at the date of examination.



De Novo Expansion



Each of the de novo expansion initiatives experienced another strong quarter of growth with
Asheville and Savannah (acquired from Wachovia), Atlanta, and the pilot Wal-Mart Money Centers each growing end-of-period loan balances by double digits and at a pace faster than NCF as a whole. Table 6 provides information regarding loan and
deposit growth for our de novo markets.



Table 6. De Novo Loans and Deposits



|                       |  |              |           |               |           |              |          
|---------------------- |  | ------------ | --------- | ------------- | --------- | ------------ | ---------
|In Thousands           |  | June 30,2004 |           | March 31,2004 |           | June 30,2003
|Loans:                 |  |              |           |               |           |              |          
|Asheville and Savannah |  | $            | 429,041   |               | 399,065   |              | 320,854  
|Atlanta                |  |              | 400,291   |               | 335,304   |              | 150,790  
|Wal-Mart Money Center  |  |              | 83,453    |               | 78,008    |              | 55,171   
|                       |  |              |           |               |           |              |          
|Total                  |  | $            | 912,785   |               | 812,377   |              | 526,815  
|                       |  |              |           |               |           |              |          
|Deposits:              |  |              |           |               |           |              |          
|Asheville and Savannah |  | $            | 637,209   |               | 648,224   |              | 627,466  
|Atlanta                |  |              | 571,013   |               | 555,857   |              | 382,006  
|Wal-Mart Money Center  |  |              | 518,402   |               | 497,244   |              | 403,573  
|                       |  |              |           |               |           |              |          
|Total                  |  | $            | 1,726,624 |               | 1,701,325 |              | 1,413,045
|                       |  |              |           |               |           |              |          



During the quarter, we opened a total
of nine traditional and eight in-store locations. Of the total, seven traditional locations were opened in Atlanta. The proposed remaining build out in Atlanta is now on hold as NCF and SunTrust evaluate overlap in their respective markets. Our
commitment to our partnership with Wal-Mart continues, with the opening of five additional locations in the second quarter of 2004 and planning to open an additional 13 in the second half of 2004.



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CAPITAL RESOURCES AND REGULATORY CAPITAL



Capital Resources. Our ratio of average equity to average assets has fallen from 12.19 percent for the second quarter 2003 to 11.90
percent for second quarter 2004 due to the increase in our average assets. Our book value per share at June 30, 2004 was $13.57 compared to $13.31 at June 30, 2003. The effect of unrealized losses on investment securities available for sale, net of
applicable tax expense, decreased period-end stockholders equity by $73 million from December 31, 2003. As of June 30, 2004, unrealized net losses on investment securities available for sale, net of applicable tax expense, totaled $62 million
and eroded $.30 per share of period-end book value.



On July 20, 2004,
NCFs Board of Directors declared a quarterly cash dividend of $.2475 per common share payable September 15, 2004 to shareholders of record August 31, 2004.



Regulatory Capital. Bank holding companies are required to comply with the Federal Reserves risk-based capital guidelines
requiring a minimum leverage ratio relative to average total assets and minimum capital ratios relative to risk-adjusted assets. The minimum leverage ratio is 3 percent if the holding company has the highest regulatory rating and meets other
requirements but the leverage ratio required may be raised from 100 to 200 basis points if the holding company does not meet these requirements. The minimum risk-adjusted capital ratios are 4 percent for Tier I capital and 8 percent for total
capital. Additionally, the Federal Reserve may set capital requirements higher than the minimums we have described for holding companies whose circumstances warrant it. Each of our banking subsidiaries is subject to similar risk-based and leverage
capital requirements adopted by its applicable federal banking agency. Each continues to maintain higher capital ratios than required under regulatory guidelines and all were considered to be well-capitalized as of June 30, 2004. Table 7
discloses our components of capital, risk-adjusted asset information and capital ratios.



Table 7. Capital Information and Ratios



|                            |  |                     |           |     |        |   |                   |  |           |        |  |           
|--------------------------- |  | ------------------- | --------- | --- | ------ | - | ----------------- |  | --------- | ------ |  | ----------
|                            |  | As of June 30, 2004
|                            |  | NCF                 |           | NBC
|In Thousands                |  | Regulatory Minimum  |           |     | Actual |   | RegulatoryMinimum |  |           | Actual
|Tier I capital              |  | $                   | 683,945   |     |        |   | 1,857,388         |  | 675,655   |        |  | 1,666,458 
|Tier II capital            |  |                     |           |     |        |   |                   |  |           |        |  |           
|Allowable loan loss reserve |  |                     |           |     |        |   | 178,438           |  |           |        |  | 178,022   
|                            |  |                     |           |     |        |   |                   |  |           |        |  |           
|Total capital               |  |                     | 1,367,890 |     |        |   | 2,035,826         |  | 1,351,310 |        |  | 1,844,480 
|                            |  |                     |           |     |        |   |                   |  |           |        |  |           
|Risk-adjusted assets        |  |                     |           |     |        | $ | 17,098,630        |  |           |        |  | 16,891,383
|Average regulatory assets   |  |                     |           |     |        |   | 22,492,584        |  |           |        |  | 22,234,899
|Tier I capital ratio        |  |                     | 4.00      | %   |        |   | 10.86             |  | 4.00      | %      |  | 9.87      
|Total capital ratio         |  |                     | 8.00      |     |        |   | 11.91             |  | 8.00      |        |  | 10.92     
|Leverage ratio              |  |                     | 3.00      |     |        |   | 8.26              |  | 3.00      |        |  | 7.49      



OTHER ACCOUNTING MATTERS



On March 9, 2004, the SEC staff issued a Staff Accounting Bulletin that
require all registrants to account for mortgage loan interest rate lock commitments related to loans held for sale as written options, effective no later than for commitments entered into after March 31, 2004. NCF enters into such commitments with
customers in connection with residential mortgage loan applications. This guidance requires NCF to recognize a liability on its balance sheet equal to the fair value of the commitment at the time the loan commitment is issued. As a result, this
guidance delays the recognition of any revenue related to these commitments until such time as the loan is sold; however, it has no effect on the ultimate amount of revenue or cash flows recognized over time. Implementation of this guidance during
the second quarter of 2004 did not have a material impact on NCF.



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------



Market risk reflects the risk of economic loss resulting from adverse changes in market price and interest rates. This risk of loss can be reflected in diminished current
market values and/or reduced potential net interest income in future periods.



NCFs market risk arises primarily from interest rate risk inherent in its lending and deposit-taking activities. The structure of NCFs loan and deposit portfolios is such that a significant rise or decline in interest rates may
adversely impact net market values and net interest income. NCF is not subject to currency exchange risk or commodity price risk. Responsibility for monitoring interest rate risk rests with ALCO, comprised of senior management. ALCO regularly
reviews NCFs interest rate risk position and adopts balance sheet strategies that are intended to optimize net interest income while maintaining market risk within a set of Board-approved guidelines.



Management believes that there have been no other significant changes in market risk as
disclosed in NCFs Annual Report on Form 10-K for the year ended December 31, 2003.



|Item 4. | Controls and Procedures
|------- | -----------------------



|(a). | Evaluation of Disclosure Controls and Procedures
|---- | ------------------------------------------------



NCF maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to NCFs management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance
regarding managements control objectives. NCF also has an investment in an unconsolidated entity which is not under our control. Consequently, our disclosure controls and procedures with respect to such entity are necessarily more limited than
those we maintain with respect to our consolidated subsidiaries.



Within the
90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of NCFs management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that NCFs disclosure controls and procedures are effective in timely alerting them to material information relating to NCF (including its consolidated subsidiaries) that is required to be included in our Exchange Act filings.



|(b). | Changes in Internal Controls
|---- | ----------------------------



During the three months ended June 30, 2004, there were no significant changes in the Companys internal control over financial reporting that materially affected,
or that are reasonably likely to affect, the Companys internal control over financial reporting.



Special Note Regarding Analyst Reports



Investors should also be aware that while NCFs management does, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial
information. Accordingly, shareholders should not assume that NCF agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial
forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of NCF.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 2. | Purchases of Equity Securities by the Issuer
|------- | --------------------------------------------



|                   |  |                                  |  |                            |       |                                                                         |         |                                                                         |          
|------------------ |  | -------------------------------- |  | -------------------------- | ----- | ----------------------------------------------------------------------- | ------- | ----------------------------------------------------------------------- | ---------
|                   |  | Total Numberof SharesRepurchased |  | Average PricePaid perShare |       | Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs |         | Maximum Numberof Shares That MayBe Purchased Under thePlans or Programs
|April 1 through 30 |  | 522,100                          |  | $                          | 27.02 |                                                                         | 522,100 |                                                                         | 3,591,094



On April 29, 2004, the Board of
Directors authorized the purchase of three million shares of NCF common stock in addition to the 1,113,194 shares that were remaining from the January 29, 2004 authorization. Both authorizations expire December 31, 2004. NCF has not determined to
terminate the program and no programs expired during the period covered by the table. However, with the May announcement of NCFs pending merger with SunTrust, share repurchase activity was suspended.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



The Annual Meeting of Shareholders of National Commerce Financial Corporation was held April 28, 2004 at 10:00 a.m. (CDT), One Commerce Square, Memphis, Tennessee.



The following are the voting results on each matter submitted to the
shareholders:



|1. | To elect five directors
|-- | -----------------------



|                      |  |             |  |                 
|--------------------- |  | ----------- |  | ----------------
|                      |  | For         |  | Withheld/Against
|Blake P. Garrett Jr.  |  | 161,447,924 |  | 2,607,830       
|Thomas M. Garrott     |  | 159,748,014 |  | 4,307,741       
|C. Dan Joyner         |  | 161,497,194 |  | 2,558,559       
|W. Neely Mallory, Jr. |  | 160,748,316 |  | 3,307,439       
|Eric B. Munson        |  | 161,188,481 |  | 2,867,274       



|2. | To ratify the Board of Directors appointment of KPMG LLP, independent certified accountants, as auditors of NCF for the year ending December 31, 2004
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|            |  |                  |  |                       
|----------- |  | ---------------- |  | ----------------------
|For         |  | Withheld/Against |  | Exceptions/Abstentions
|159,804,427 |  | 3,906,922        |  | 344,403               



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##### Table of Contents

|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



|(a). | Exhibits
|---- | --------



|     |  |                                                                                                                       
|---- |  | ----------------------------------------------------------------------------------------------------------------------
|     | 
|10   |  | Employment Agreement dated April 26, 2004 by and between Registrant and James R. Gordon.                              
|     | 
|31.1 |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|     | 
|31.2 |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|     | 
|32   |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|     | 
|99.1 |  | Amendment to 2002 National Commerce Financial Corporation Plan for Severance Compensation After a Change in Control   



|(b). | Reports on Form 8-K
|---- | -------------------



A current report on Form 8-K dated April 15, 2004 was filed April 16, 2004 under Item 7 and Item 12 furnishing a copy of the March 31, 2004 earnings release and supplemental financial tables discussed during the April
16, 2004 investor conference call and audio web cast.



A current report on Form
8-K dated May 5, 2004 was filed May 5, 2004 under Item 10 reporting Amendments to the Registrants Code of Conduct for Officers and Associates and the Code of Conduct for Directors.



A current report on Form 8-K dated May 10, 2004 was filed May 11, 2004 under Item 9 announcing that a definitive merger agreement with
SunTrust Banks, Inc. had been signed May 9, 2004.



An amended current report on
Form 8-K/A dated May 19, 2004 was filed May 19, 2004 under Item 7 and Item 10 providing a copy of the National Commerce Financial Corporations Code of Conduct for Officers and Associates, as amended and the National Commerce Financial
Corporations Code of Conduct for Directors.



A current report on Form 8-K
dated May 7, 2004 was filed May 21, 2004 under Item 5 and Item 7 providing a copy of the Agreement and Plan of Merger by and between National Commerce Financial and SunTrust Banks, Inc.



A current report on Form 8-K dated June 3, 2004 was filed June 4, 2004 under Item 7 and Item 9 providing a copy of a slide package prepared
for use on June 3, 2004 at the Sanford C. Bernstein Strategic Decisions Conference.



31



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |                                         |  |                        
|-------------------- |  | --------------------------------------- |  | -----------------------
|                     |  | NATIONAL COMMERCE FINANCIAL CORPORATION
|                     |  |                                         |  | Registrant             
|                     |  |                                        
|Date: August 9, 2004 |  |                                         |  | /s/ JOHN M. PRESLEY    
|                     |  |                                         |  | John M. Presley        
|                     |  |                                         |  | Chief Financial Officer



32