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SECURITIES AND EXCHANGE COMMISSION
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TN (State or Other Jurisdiction of Incorporation) | 62-0803242 (IRS Employer Identification No.) |
165 MADISON AVENUE | ||
MEMPHIS, TENNESSEE | 38103 | |
(Address of Principal Executive Office) | (Zip Code) |
Large accelerated filer x | Accelerated filer ___ | Non-accelerated filer ___ | Smaller reporting company ___ | |||
(Do not check if a smaller reporting company) |
Class | Outstanding on March 31, 2010 | |
Common Stock, $.625 par value | 225,676,659 |
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The Consolidated Condensed Statements of Condition | ||
The Consolidated Condensed Statements of Income | ||
The Consolidated Condensed Statements of Equity | ||
The Consolidated Condensed Statements of Cash Flows | ||
The Notes to Consolidated Condensed Financial Statements |
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CONSOLIDATED CONDENSED STATEMENTS OF CONDITION | First Horizon National Corporation | |||||||||||
March 31 | December 31 | |||||||||||
(Dollars in thousands)(Unaudited) | 2010 | 2009 | 2009 | |||||||||
Assets: | ||||||||||||
Cash and due from banks (Restricted - $.1 million) (a) | $279,730 | $438,181 | $465,712 | |||||||||
Federal funds sold and securities purchased under agreements to resell | 523,237 | 515,858 | 452,883 | |||||||||
Total cash and cash equivalents | 802,967 | 954,039 | 918,595 | |||||||||
Interest-bearing cash | 383,571 | 1,174,442 | 539,300 | |||||||||
Trading securities | 964,800 | 933,316 | 699,900 | |||||||||
Loans held for sale | 505,794 | 643,518 | 452,501 | |||||||||
Securities available for sale (Note 3) | 2,697,719 | 3,016,013 | 2,694,468 | |||||||||
Loans, net of unearned income (Restricted - $.9 billion) (Note 4) (a) | 17,484,224 | 20,572,477 | 18,123,884 | |||||||||
Less: Allowance for loan losses (Restricted - $59.8 million) (a) | 844,060 | 940,932 | 896,914 | |||||||||
Total net loans | 16,640,164 | 19,631,545 | 17,226,970 | |||||||||
Mortgage servicing rights (Note 5) | 264,959 | 381,024 | 302,611 | |||||||||
Goodwill (Note 6) | 162,180 | 192,408 | 165,528 | |||||||||
Other intangible assets, net (Note 6) | 37,027 | 43,446 | 38,256 | |||||||||
Capital markets receivables | 743,514 | 1,502,033 | 334,404 | |||||||||
Premises and equipment, net | 308,714 | 330,299 | 313,824 | |||||||||
Real estate acquired by foreclosure | 122,060 | 132,653 | 125,190 | |||||||||
Other assets (Restricted - $26.9 million) (a) | 2,290,107 | 2,273,288 | 2,257,131 | |||||||||
Total assets (Restricted - $.8 billion) (a) | $25,923,576 | $31,208,024 | $26,068,678 | |||||||||
Liabilities and equity: | ||||||||||||
Deposits: | ||||||||||||
Savings | $5,174,901 | $4,396,213 | $4,847,709 | |||||||||
Time deposits | 1,642,820 | 2,152,837 | 1,895,992 | |||||||||
Other interest-bearing deposits | 3,256,040 | 1,868,902 | 3,169,474 | |||||||||
Certificates of deposit $100,000 and more | 534,889 | 1,583,928 | 559,944 | |||||||||
Interest-bearing | 10,608,650 | 10,001,880 | 10,473,119 | |||||||||
Noninterest-bearing (Restricted - $1.5 million) (a) | 4,461,050 | 4,908,175 | 4,394,096 | |||||||||
Total deposits (Restricted - $1.5 million) (a) | 15,069,700 | 14,910,055 | 14,867,215 | |||||||||
Federal funds purchased and securities sold under agreements to repurchase | 2,635,423 | 2,264,077 | 2,874,353 | |||||||||
Trading liabilities | 357,919 | 288,029 | 293,387 | |||||||||
Other short-term borrowings and commercial paper | 167,508 | 3,827,278 | 761,758 | |||||||||
Term borrowings (Restricted - $.9 billion) (a) | 2,932,524 | 3,353,464 | 2,190,544 | |||||||||
Other collateralized borrowings | - | 736,172 | 700,589 | |||||||||
Total long-term debt | 2,932,524 | 4,089,636 | 2,891,133 | |||||||||
Capital markets payables | 740,852 | 1,383,447 | 292,975 | |||||||||
Other liabilities (Restricted - $.1 million) (a) | 748,708 | 937,826 | 785,389 | |||||||||
Total liabilities (Restricted - $.9 billion) (a) | 22,652,634 | 27,700,348 | 22,766,210 | |||||||||
Equity: | ||||||||||||
First Horizon National Corporation Shareholders’ Equity: | ||||||||||||
Preferred stock - no par value (shares authorized - 5,000,000; shares issued - series CPP 866,540 on March 31, 2010, March 31, 2009, and December 31, 2009) (Note 12) | 802,760 | 786,582 | 798,685 | |||||||||
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 225,676,659 on March 31, 2010; 224,847,862 on March 31, 2009; and 225,212,464 on December 31, 2009) (b) | 141,048 | 132,247 | 138,738 | |||||||||
Capital surplus | 1,251,776 | 1,087,252 | 1,208,649 | |||||||||
Capital surplus common stock warrant - CPP (Note 12) | 83,860 | 83,860 | 83,860 | |||||||||
Undivided profits | 809,624 | 1,265,073 | 891,580 | |||||||||
Accumulated other comprehensive loss, net | (113,291 | ) | (142,503 | ) | (114,209 | ) | ||||||
Total First Horizon National Corporation Shareholders’ Equity | 2,975,777 | 3,212,511 | 3,007,303 | |||||||||
Noncontrolling interest (Note 12) | 295,165 | 295,165 | 295,165 | |||||||||
Total equity | 3,270,942 | 3,507,676 | 3,302,468 | |||||||||
Total liabilities and equity | $25,923,576 | $31,208,024 | $26,068,678 | |||||||||
(a) | Restricted balances presented are as of March 31, 2010. See Note 1 for accounting updates adopted in first quarter 2010. | |
(b) | Outstanding shares have been restated to reflect stock dividends distributed through April 1, 2010. |
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME | First Horizon National Corporation | |||||||
Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands except per share data)(Unaudited) | 2010 | 2009 | ||||||
Interest income: | ||||||||
Interest and fees on loans | $173,342 | $205,739 | ||||||
Interest on investment securities | 31,155 | 40,102 | ||||||
Interest on loans held for sale | 4,968 | 7,732 | ||||||
Interest on trading securities | 9,714 | 15,655 | ||||||
Interest on other earning assets | 317 | 865 | ||||||
Total interest income | 219,496 | 270,093 | ||||||
Interest expense: | ||||||||
Interest on deposits: | ||||||||
Savings | 7,418 | 15,404 | ||||||
Time deposits | 10,593 | 18,244 | ||||||
Other interest-bearing deposits | 2,518 | 1,068 | ||||||
Certificates of deposit $100,000 and more | 3,375 | 9,459 | ||||||
Interest on trading liabilities | 5,415 | 5,468 | ||||||
Interest on short-term borrowings | 1,922 | 4,263 | ||||||
Interest on long-term debt | 7,860 | 19,600 | ||||||
Total interest expense | 39,101 | 73,506 | ||||||
Net interest income | 180,395 | 196,587 | ||||||
Provision for loan losses | 105,000 | 300,000 | ||||||
Net interest income/(expense) after provision for loan losses | 75,395 | (103,413 | ) | |||||
Noninterest income: | ||||||||
Capital markets | 114,571 | 205,700 | ||||||
Deposit transactions and cash management | 35,767 | 39,032 | ||||||
Mortgage banking | 34,884 | 115,749 | ||||||
Trust services and investment management | 7,270 | 6,820 | ||||||
Brokerage management fees and commissions | 6,339 | 6,632 | ||||||
Insurance commissions | 5,183 | 6,918 | ||||||
Equity securities losses, net | (1,906 | ) | (2 | ) | ||||
All other income and commissions | 46,155 | 18,497 | ||||||
Total noninterest income | 248,263 | 399,346 | ||||||
Adjusted gross income after provision for loan losses | 323,658 | 295,933 | ||||||
Noninterest expense: | ||||||||
Employee compensation, incentives, and benefits | 180,181 | 242,175 | ||||||
Mortgage banking foreclosure and repurchase provision | 40,675 | 12,267 | ||||||
Occupancy | 14,817 | 15,722 | ||||||
Operations services | 14,608 | 15,339 | ||||||
Legal and professional fees | 13,974 | 13,869 | ||||||
Foreclosed real estate | 10,470 | 10,033 | ||||||
Deposit insurance premiums | 8,493 | 7,628 | ||||||
Computer software | 7,166 | 6,883 | ||||||
Communications and courier | 6,255 | 6,920 | ||||||
Contract employment | 6,174 | 10,161 | ||||||
Equipment rentals, depreciation, and maintenance | 6,032 | 8,628 | ||||||
Miscellaneous loan costs | 4,112 | 5,139 | ||||||
Amortization of intangible assets | 1,380 | 1,636 | ||||||
All other expense | 28,336 | 51,403 | ||||||
Total noninterest expense | 342,673 | 407,803 | ||||||
Loss before income taxes | (19,015 | ) | (111,870 | ) | ||||
Benefit for income taxes | (16,393 | ) | (47,423 | ) | ||||
Loss from continuing operations | (2,622 | ) | (64,447 | ) | ||||
Loss from discontinued operations, net of tax | (7,271 | ) | (648 | ) | ||||
Net loss | $(9,893 | ) | $(65,095 | ) | ||||
Net income attributable to noncontrolling interest | 2,844 | 2,750 | ||||||
Net loss attributable to controlling interest | $(12,737 | ) | $(67,845 | ) | ||||
Preferred stock dividends | 14,918 | 14,956 | ||||||
Net loss available to common shareholders | $(27,655 | ) | $(82,801 | ) | ||||
Loss per share from continuing operations (Note 8) | $(0.09 | ) | $(0.37 | ) | ||||
Diluted loss per share from continuing operations (Note 8) | $(0.09 | ) | $(0.37 | ) | ||||
Loss per share available to common shareholders (Note 8) | $(0.12 | ) | $(0.37 | ) | ||||
Diluted loss per share available to common shareholders (Note 8) | $(0.12 | ) | $(0.37 | ) | ||||
Weighted average common shares (Note 8) | 223,658 | 223,594 | ||||||
Diluted average common shares (Note 8) | 223,658 | 223,594 | ||||||
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First Horizon National Corporation | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Controlling | Noncontrolling | Controlling | Noncontrolling | |||||||||||||||||||||
(Dollars in thousands)(Unaudited) | Interest | Interest | Total | Interest | Interest | Total | ||||||||||||||||||
Balance, January 1 | $3,007,303 | $295,165 | $3,302,468 | $3,279,467 | $295,165 | $3,574,632 | ||||||||||||||||||
Adjustment to reflect adoption of amendments to ASC 810 | (10,562 | ) | - | (10,562 | ) | - | - | - | ||||||||||||||||
Net income/(loss) | (12,737 | ) | 2,844 | (9,893 | ) | (67,845 | ) | 2,750 | (65,095 | ) | ||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||
Unrealized fair value adjustments, net of tax: | ||||||||||||||||||||||||
Securities available for sale | (1,654 | ) | - | (1,654 | ) | 15,060 | - | 15,060 | ||||||||||||||||
Recognized pension and other employee benefit plans net periodic benefit costs | 2,571 | - | 2,571 | (5,732 | ) | - | (5,732 | ) | ||||||||||||||||
Comprehensive income/(loss) | (11,820 | ) | 2,844 | (8,976 | ) | (58,517 | ) | 2,750 | (55,767 | ) | ||||||||||||||
Preferred stock - (CPP) accretion | 4,076 | - | 4,076 | 3,902 | - | 3,902 | ||||||||||||||||||
Preferred stock - (CPP) dividends | (14,907 | ) | - | (14,907 | ) | (14,945 | ) | - | (14,945 | ) | ||||||||||||||
Common stock repurchased | - | - | - | (110 | ) | - | (110 | ) | ||||||||||||||||
Common stock issued for stock options and restricted stock | 9 | - | 9 | 438 | - | 438 | ||||||||||||||||||
Stock-based compensation expense | 1,675 | - | 1,675 | 2,276 | - | 2,276 | ||||||||||||||||||
Dividends paid to noncontrolling interest of subsidiary preferred stock | - | (2,844 | ) | (2,844 | ) | - | (2,750 | ) | (2,750 | ) | ||||||||||||||
Other changes in equity | 3 | - | 3 | - | - | - | ||||||||||||||||||
Balance, March 31 | $2,975,777 | $295,165 | $3,270,942 | $3,212,511 | $295,165 | $3,507,676 | ||||||||||||||||||
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | First Horizon National Corporation | |||||||
Three Months Ended March 31 | ||||||||
(Dollars in thousands)(Unaudited) | 2010 | 2009 | ||||||
Operating Activities | ||||||||
Net loss | $(9,893 | ) | $(65,095 | ) | ||||
Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
Provision for loan losses | 105,000 | 300,000 | ||||||
(Benefit)/provision for deferred income tax | 124,672 | (79,844 | ) | |||||
Depreciation and amortization of premises and equipment | 7,535 | 8,502 | ||||||
Amortization of intangible assets | 1,380 | 1,636 | ||||||
Net other amortization and accretion | 10,443 | 11,420 | ||||||
Decrease in derivatives, net | 18,456 | 132,651 | ||||||
Market value adjustment on mortgage servicing rights | 26,038 | (26,734 | ) | |||||
Provision for foreclosure and repurchase losses | 40,675 | 12,267 | ||||||
Fair value adjustment for real estate losses | 6,011 | 5,734 | ||||||
Goodwill impairment | 3,348 | - | ||||||
Stock-based compensation expense | 1,675 | 2,276 | ||||||
Excess tax provision from stock-based compensation arrangements | (3 | ) | - | |||||
Equity securities losses, net | 1,906 | 2 | ||||||
Gains on repurchases of debt | (17,060 | ) | (60 | ) | ||||
Net losses on disposal of fixed assets | 793 | 1,560 | ||||||
Net (increase)/decrease in: | ||||||||
Trading securities | (271,971 | ) | 30,665 | |||||
Loans held for sale | (53,293 | ) | (76,864 | ) | ||||
Capital markets receivables | (409,110 | ) | (323,101 | ) | ||||
Interest receivable | (4,617 | ) | (1,239 | ) | ||||
Other assets | (144,624 | ) | (216,541 | ) | ||||
Net increase/(decrease) in: | ||||||||
Capital markets payables | 447,877 | 268,019 | ||||||
Interest payable | 3,270 | (10,704 | ) | |||||
Other liabilities | (75,599 | ) | 61,466 | |||||
Trading liabilities | 64,532 | (71,473 | ) | |||||
Total adjustments | (112,666 | ) | 29,638 | |||||
Net cash used by operating activities | (122,559 | ) | (35,457 | ) | ||||
Investing Activities | ||||||||
Available for sale securities: | ||||||||
Sales | 4,832 | 8,566 | ||||||
Maturities | 275,917 | 149,505 | ||||||
Purchases | (287,988 | ) | (21,833 | ) | ||||
Premises and equipment: | ||||||||
Purchases | (3,218 | ) | (6,430 | ) | ||||
Net (increase)/decrease in: | ||||||||
Securitization retained interests classified as trading securities | 2,296 | (18,215 | ) | |||||
Loans | 664,086 | 475,846 | ||||||
Interest-bearing cash | 155,729 | (966,650 | ) | |||||
Net cash provided/(used) by investing activities | 811,654 | (379,211 | ) | |||||
Financing Activities | ||||||||
Common stock: | ||||||||
Exercise of stock options | 9 | - | ||||||
Repurchase of shares | - | (109 | ) | |||||
Excess tax provision from stock-based compensation arrangements | 3 | - | ||||||
Cash dividends paid - preferred stock - CPP | (10,832 | ) | (10,952 | ) | ||||
Cash dividends paid - preferred stock - noncontrolling interest | (2,844 | ) | (4,209 | ) | ||||
Long-term debt: | ||||||||
Payments/maturities | (72,524 | ) | (664,929 | ) | ||||
Net cash paid for repurchase of debt | (87,840 | ) | (4,710 | ) | ||||
Net increase/(decrease) in: | ||||||||
Deposits | 202,485 | 668,249 | ||||||
Short-term borrowings | (833,180 | ) | 60,587 | |||||
Net cash provided/(used) by financing activities | (804,723 | ) | 43,927 | |||||
Net decrease in cash and cash equivalents | (115,628 | ) | (370,741 | ) | ||||
Cash and cash equivalents at beginning of period | 918,595 | 1,324,780 | ||||||
Cash and cash equivalents at end of period | $802,967 | $954,039 | ||||||
Total interest paid | 35,658 | 84,023 | ||||||
Total income taxes paid | $563 | $106,246 | ||||||
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On March 31, 2010 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. Treasuries | $88,487 | $36 | $(5 | ) | $88,518 | |||||||||||
Government agency issued MBS (a) | 951,074 | 54,948 | (406 | ) | 1,005,616 | |||||||||||
Government agency issued CMO (a) | 1,129,803 | 42,414 | - | 1,172,217 | ||||||||||||
Other U.S. government agencies (a) | 106,409 | 5,980 | - | 112,389 | ||||||||||||
States and municipalities | 42,175 | - | - | 42,175 | ||||||||||||
Equity (b) | 275,551 | 550 | - | 276,101 | ||||||||||||
Other | 667 | 36 | - | 703 | ||||||||||||
Total securities available for sale (c) | $2,594,166 | $103,964 | $(411 | ) | $2,697,719 | |||||||||||
(a) | Includes securities issued by government sponsored entities. | |
(b) | Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.3 million. The remainder is money market, venture capital, and cost method investments. Additionally, $31.8 million is restricted pursuant to reinsurance contract agreements. | |
(c) | Includes $2.1 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes. As of March 31, 2010, FHN had pledged $1.4 billion of the $2.1 billion pledged available for sale securities as collateral for securities sold under repurchase agreements. |
On March 31, 2009 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. Treasuries | $47,932 | $570 | $- | $48,502 | ||||||||||||
Government agency issued MBS (a) | 1,156,691 | 49,272 | - | 1,205,963 | ||||||||||||
Government agency issued CMO (a) | 1,232,844 | 38,701 | - | 1,271,545 | ||||||||||||
Other U.S. government agencies (a) | 127,735 | 5,376 | - | 133,111 | ||||||||||||
States and municipalities | 62,220 | 18 | - | 62,238 | ||||||||||||
Equity (b) | 292,484 | 107 | (94 | ) | 292,497 | |||||||||||
Other | 2,212 | 2 | (57 | ) | 2,157 | |||||||||||
Total securities available for sale (c) | $2,922,118 | $94,046 | $(151 | ) | $3,016,013 | |||||||||||
(a) | Includes securities issued by government sponsored entities. | |
(b) | Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $44.3 million. The remainder is money market, venture capital, and cost method investments. Additionally, $56.7 million is restricted pursuant to reinsurance contract agreements. | |
(c) | Includes $2.5 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes. As of March 31, 2009, FHN had pledged $1.2 billion of the $2.5 billion pledged available for sale securities as collateral for securities sold under repurchase agreements. |
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Available for Sale | ||||||||
Amortized | Fair | |||||||
(Dollars in thousands) | Cost | Value | ||||||
Within 1 year | $88,487 | $88,518 | ||||||
After 1 year; within 5 years | 18,369 | 19,561 | ||||||
After 5 years; within 10 years | 91,280 | 96,068 | ||||||
After 10 years | 38,935 | 38,935 | ||||||
Subtotal | 237,071 | 243,082 | ||||||
Government agency issued MBS and CMO | 2,080,877 | 2,177,833 | ||||||
Equity and other securities | 276,218 | 276,804 | ||||||
Total | $2,594,166 | $2,697,719 | ||||||
On March 31, 2010 | ||||||||||||||||||||||||
Less than 12 months | 12 Months or Longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
(Dollars in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
US Treasuries | $80,485 | $(5 | ) | $- | $- | $80,485 | $(5 | ) | ||||||||||||||||
Government agency issued MBS | $102,830 | $(406 | ) | $- | $- | $102,830 | $(406 | ) | ||||||||||||||||
Total debt securities | 183,315 | (411 | ) | - | - | 183,315 | (411 | ) | ||||||||||||||||
Total temporarily impaired securities | $183,315 | $(411 | ) | $- | $- | $183,315 | $(411 | ) | ||||||||||||||||
On March 31, 2009 | ||||||||||||||||||||||||
Less than 12 months | 12 Months or Longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
(Dollars in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Other | $- | $- | $581 | $(57 | ) | $581 | $(57 | ) | ||||||||||||||||
Total debt securities | - | - | 581 | (57 | ) | 581 | (57 | ) | ||||||||||||||||
Equity | - | - | 137 | (94 | ) | 137 | (94 | ) | ||||||||||||||||
Total temporarily impaired securities | $- | $- | $718 | $(151 | ) | $718 | $(151 | ) | ||||||||||||||||
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March 31 | December 31 | |||||||||||
(Dollars in thousands) | 2010 | 2009 | 2009 | |||||||||
Commercial: | ||||||||||||
Commercial, financial and industrial | $6,865,577 | $7,716,733 | $7,159,370 | |||||||||
Real estate commercial | 1,430,801 | 1,501,964 | 1,479,888 | |||||||||
Real estate construction | 761,900 | 1,550,158 | 924,475 | |||||||||
Retail: | ||||||||||||
Real estate residential | 7,152,059 | 8,016,018 | 7,362,458 | |||||||||
Real estate construction | 105,375 | 772,982 | 229,487 | |||||||||
Other retail | 114,429 | 132,452 | 121,526 | |||||||||
Credit card receivables | 183,656 | 180,282 | 192,036 | |||||||||
Restricted real estate loans | 870,427 | 701,888 | 654,644 | |||||||||
Loans, net of unearned income | 17,484,224 | 20,572,477 | 18,123,884 | |||||||||
Allowance for loan losses (Restricted - $59.8 million) | 844,060 | 940,932 | 896,914 | |||||||||
Total net loans | $16,640,164 | $19,631,545 | $17,226,970 | |||||||||
March 31 | December 31 | |||||||||||
(Dollars in thousands) | 2010 | 2009 | 2009 | |||||||||
Impaired loans | $556,806 | $526,282 | $509,073 | |||||||||
Other nonaccrual loans (a) | 371,401 | 606,826 | 428,611 | |||||||||
Total nonperforming loans (b) | $928,207 | $1,133,108 | $937,684 | |||||||||
(a) | On March 31, 2010 and 2009, and on December 31, 2009, other nonaccrual loans included $51.3 million, $14.5 million, and $38.3 million, respectively, of loans held for sale. | |
(b) | On March 31, 2010, total nonperforming loans included $45.3 million of loans that have been restructured. |
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Total interest recognized on impaired loans | NM | $243 | ||||||
Average balance of impaired loans | $532,940 | 500,186 | ||||||
(Dollars in thousands) | Non-impaired | Impaired | Total | |||||||||
Balance on December 31, 2008 | $836,907 | $12,303 | $849,210 | |||||||||
Provision for loan losses | 231,936 | 68,064 | 300,000 | |||||||||
Charge-offs | (140,655 | ) | (76,506 | ) | (217,161 | ) | ||||||
Recoveries | 6,981 | 1,902 | 8,883 | |||||||||
Net charge-offs | (133,674 | ) | (74,604 | ) | (208,278 | ) | ||||||
Balance on March 31, 2009 | $935,169 | $5,763 | $940,932 | |||||||||
Balance on December 31, 2009 | $876,121 | $20,793 | $896,914 | |||||||||
Adjustment for adoption of amendments to ASC 810 | 24,578 | - | 24,578 | |||||||||
Provision for loan losses | (2,239 | ) | 107,239 | 105,000 | ||||||||
Charge-offs | (110,374 | ) | (83,581 | ) | (193,955 | ) | ||||||
Recoveries | 5,819 | 5,704 | 11,523 | |||||||||
Net charge-offs | (104,555 | ) | (77,877 | ) | (182,432 | ) | ||||||
Balance on March 31, 2010 | $793,905 | $50,155 | $844,060 | |||||||||
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First | Second | |||||||||||
(Dollars in thousands) | Liens | Liens | HELOC | |||||||||
Fair value on January 1, 2009 | $354,394 | $13,558 | $8,892 | |||||||||
Addition of mortgage servicing rights | 189 | - | 11 | |||||||||
Reductions due to loan payments | (17,480 | ) | (2,524 | ) | (419 | ) | ||||||
Changes in fair value due to: | ||||||||||||
Changes in valuation model inputs or assumptions | 26,740 | (5 | ) | - | ||||||||
Other changes in fair value | (2,500 | ) | - | 168 | ||||||||
Fair value on March 31, 2009 | $361,343 | $11,029 | $8,652 | |||||||||
Fair value on January 1, 2010 | $296,115 | $1,174 | $5,322 | |||||||||
Adjustment due to adoption of amendments to ASC 810 | (197 | ) | (928 | ) | (1,168 | ) | ||||||
Reductions due to loan payments | (8,793 | ) | (7 | ) | (521 | ) | ||||||
Changes in fair value due to: | ||||||||||||
Changes in valuation model inputs or assumptions | (26,968 | ) | 3 | - | ||||||||
Other changes in fair value | 926 | - | 1 | |||||||||
Fair value on March 31, 2010 | $261,083 | $242 | $3,634 | |||||||||
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Other | ||||||||
Intangible | ||||||||
(Dollars in thousands) | Goodwill | Assets (a) | ||||||
December 31, 2008 | $192,408 | $45,082 | ||||||
Amortization expense | - | (1,636 | ) | |||||
March 31, 2009 | $192,408 | $43,446 | ||||||
December 31, 2009 | $165,528 | $38,256 | ||||||
Amortization expense | - | (1,380 | ) | |||||
Impairment (b) (c) | (3,348 | ) | - | |||||
Additions | - | 151 | ||||||
March 31, 2010 | $162,180 | $37,027 | ||||||
(a) | Represents customer lists, acquired contracts, premium on purchased deposits, and covenants not to compete. | |
(b) | See Note 17 - Restructuring, Repositioning, and Efficiency for further details related to goodwill impairments. | |
(c) | See Note 2 - Acquisitions/Divestitures for further details regarding goodwill included within divestitures. |
Regional | Capital | |||||||||||||||
(Dollars in thousands) | Non-Strategic | Banking | Markets | Total | ||||||||||||
Gross goodwill | $168,032 | $64,759 | $97,421 | $330,212 | ||||||||||||
Accumulated impairments | (98,380 | ) | - | - | (98,380 | ) | ||||||||||
Accumulated divestiture related write-offs | (66,304 | ) | - | - | (66,304 | ) | ||||||||||
December 31, 2009 | $3,348 | $64,759 | $97,421 | $165,528 | ||||||||||||
Regional | Capital | |||||||||||||||
(Dollars in thousands) | Non-Strategic | Banking | Markets | Total | ||||||||||||
December 31, 2008 | $30,228 | $64,759 | $97,421 | $192,408 | ||||||||||||
March 31, 2009 | $30,228 | $64,759 | $97,421 | $192,408 | ||||||||||||
December 31, 2009 | $3,348 | $64,759 | $97,421 | $165,528 | ||||||||||||
Impairment | (3,348 | ) | - | - | (3,348 | ) | ||||||||||
March 31, 2010 | $- | $64,759 | $97,421 | $162,180 | ||||||||||||
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Regional | Capital | |||||||||||||||
(Dollars in thousands) | Non-Strategic | Banking | Markets | Total | ||||||||||||
Gross goodwill | $168,032 | $64,759 | $97,421 | $330,212 | ||||||||||||
Accumulated impairments | (101,728 | ) | - | - | (101,728 | ) | ||||||||||
Accumulated divestiture related write-offs | (66,304 | ) | - | - | (66,304 | ) | ||||||||||
March 31, 2010 | $- | $64,759 | $97,421 | $162,180 | ||||||||||||
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First Horizon National | First Tennessee Bank | |||||||||||||||
Corporation | National Association | |||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | ||||||||||||
On March 31, 2010: | ||||||||||||||||
Actual: | ||||||||||||||||
Total Capital | $4,505,835 | 21.43 | % | $4,311,198 | 20.71 | % | ||||||||||
Tier 1 Capital | 3,484,847 | 16.58 | 3,352,967 | 16.10 | ||||||||||||
Leverage | 3,484,847 | 13.71 | 3,352,967 | 13.31 | ||||||||||||
For Capital Adequacy Purposes: | ||||||||||||||||
Total Capital | 1,681,814 | ³ | 8.00 | 1,665,627 | ³ | 8.00 | ||||||||||
Tier 1 Capital | 840,907 | ³ | 4.00 | 832,813 | ³ | 4.00 | ||||||||||
Leverage | 1,016,982 | ³ | 4.00 | 1,007,997 | ³ | 4.00 | ||||||||||
To Be Well Capitalized Under Prompt Corrective Action Provisions: | ||||||||||||||||
Total Capital | 2,082,033 | ³ | 10.00 | |||||||||||||
Tier 1 Capital | 1,249,220 | ³ | 6.00 | |||||||||||||
Leverage | 1,259,996 | ³ | 5.00 | |||||||||||||
On March 31, 2009: | ||||||||||||||||
Actual: | ||||||||||||||||
Total Capital | $5,004,558 | 20.20 | % | $4,731,268 | 19.27 | % | ||||||||||
Tier 1 Capital | 3,708,962 | 14.97 | 3,518,478 | 14.33 | ||||||||||||
Leverage | 3,708,962 | 12.23 | 3,518,478 | 11.69 | ||||||||||||
For Capital Adequacy Purposes: | ||||||||||||||||
Total Capital | 1,981,748 | ³ | 8.00 | 1,963,701 | ³ | 8.00 | ||||||||||
Tier 1 Capital | 990,874 | ³ | 4.00 | 981,851 | ³ | 4.00 | ||||||||||
Leverage | 1,213,301 | ³ | 4.00 | 1,204,230 | ³ | 4.00 | ||||||||||
To Be Well Capitalized Under Prompt Corrective Action Provisions: | ||||||||||||||||
Total Capital | 2,454,626 | ³ | 10.00 | |||||||||||||
Tier 1 Capital | 1,472,776 | ³ | 6.00 | |||||||||||||
Leverage | 1,505,287 | ³ | 5.00 | |||||||||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
(In thousands) | 2010 | 2009 | ||||||
Loss from continuing operations | $(2,622 | ) | $(64,447 | ) | ||||
Loss from discontinued operations, net of tax | (7,271 | ) | (648 | ) | ||||
Net loss | $(9,893 | ) | $(65,095 | ) | ||||
Net income attributable to noncontrolling interest | 2,844 | 2,750 | ||||||
Net loss attributable to controlling interest | $(12,737 | ) | $(67,845 | ) | ||||
Preferred stock dividends | 14,918 | 14,956 | ||||||
Net loss available to common shareholders | $(27,655 | ) | $(82,801 | ) | ||||
Loss from continuing operations | $(2,622 | ) | $(64,447 | ) | ||||
Net income attributable to noncontrolling interest | 2,844 | 2,750 | ||||||
Preferred stock dividends | 14,918 | 14,956 | ||||||
Net loss from continuing operations available to common shareholders | $(20,384 | ) | $(82,153 | ) | ||||
Three Months Ended | ||||||||
March 31 | ||||||||
(In thousands, except per share data) | 2010 | 2009 | ||||||
Weighted average common shares outstanding - basic (a) | 223,658 | 223,594 | ||||||
Effect of dilutive securities | - | - | ||||||
Weighted average common shares outstanding - diluted (a) | 223,658 | 223,594 | ||||||
Three Months Ended | ||||||||
March 31 | ||||||||
Loss per common share: | 2010 | 2009 | ||||||
Loss per share from continuing operations available to common shareholders | $(0.09 | ) | $(0.37 | ) | ||||
Loss per share from discontinued operations, net of tax | (0.03 | ) | - | |||||
Net loss per share available to common shareholders | $(0.12 | ) | $(0.37 | ) | ||||
Diluted loss per common share: | ||||||||
Loss per share from continuing operations available to common shareholders | $(0.09 | ) | $(0.37 | ) | ||||
Loss per share from discontinued operations, net of tax | (0.03 | ) | - | |||||
Net loss per share available to common shareholders | $(0.12 | ) | $(0.37 | ) | ||||
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Pension Benefits | Other Benefits | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Components of net periodic benefit cost | ||||||||||||||||
Service cost | $3,778 | $4,401 | $136 | $339 | ||||||||||||
Interest cost | 7,836 | 7,926 | 595 | 990 | ||||||||||||
Expected return on plan assets | (11,879 | ) | (11,582 | ) | (287 | ) | (279 | ) | ||||||||
Amortization of unrecognized: | ||||||||||||||||
Transition obligation | - | - | 247 | 247 | ||||||||||||
Prior service cost/(credit) | 67 | 190 | (2 | ) | 617 | |||||||||||
Actuarial (gain)/loss | 3,772 | 1,973 | (216 | ) | (124 | ) | ||||||||||
Net periodic benefit cost | $3,574 | $2,908 | $473 | $1,790 | ||||||||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Consolidated | ||||||||
Net interest income | $180,395 | $196,587 | ||||||
Provision for loan loss | 105,000 | 300,000 | ||||||
Noninterest income | 248,263 | 399,346 | ||||||
Noninterest expense | 342,673 | 407,803 | ||||||
Loss before income taxes | (19,015 | ) | (111,870 | ) | ||||
Benefit for income taxes | (16,393 | ) | (47,423 | ) | ||||
Loss from continuing operations | (2,622 | ) | (64,447 | ) | ||||
Loss from discontinued operations, net of tax | (7,271 | ) | (648 | ) | ||||
Net loss | $(9,893 | ) | $(65,095 | ) | ||||
Average assets | $25,559,408 | $30,467,211 | ||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Regional Banking | ||||||||
Net interest income | $133,160 | $137,847 | ||||||
Provision for loan loss | 52,166 | 107,242 | ||||||
Noninterest income | 75,910 | 79,815 | ||||||
Noninterest expense | 161,702 | 171,088 | ||||||
Loss before income taxes | (4,798 | ) | (60,668 | ) | ||||
Benefit for income taxes | (2,129 | ) | (22,943 | ) | ||||
Net loss | $(2,669 | ) | $(37,725 | ) | ||||
Average assets | $11,326,802 | $12,918,615 | ||||||
Capital Markets | ||||||||
Net interest income | $2,320 | $4,533 | ||||||
Noninterest income | 114,606 | 206,254 | ||||||
Noninterest expense | 84,126 | 135,625 | ||||||
Income before income taxes | 32,800 | 75,162 | ||||||
Provision for income taxes | 12,279 | 28,278 | ||||||
Net income | $20,521 | $46,884 | ||||||
Average assets | $1,884,882 | $2,377,627 | ||||||
Non-Strategic | ||||||||
Net interest income | $38,896 | $50,163 | ||||||
Provision for loan loss | 52,834 | 192,758 | ||||||
Noninterest income | 32,858 | 111,601 | ||||||
Noninterest expense | 76,654 | 84,025 | ||||||
Loss before income taxes | (57,734 | ) | (115,019 | ) | ||||
Benefit for income taxes | (21,754 | ) | (43,339 | ) | ||||
Loss from continuing operations | (35,980 | ) | (71,680 | ) | ||||
Loss from discontinued operations, net of tax | (7,271 | ) | (648 | ) | ||||
Net loss | $(43,251 | ) | $(72,328 | ) | ||||
Average assets | $7,853,301 | $10,272,995 | ||||||
Corporate | ||||||||
Net interest income | $6,019 | $4,044 | ||||||
Noninterest income | 24,889 | 1,676 | ||||||
Noninterest expense | 20,191 | 17,065 | ||||||
Income/(loss) before income taxes | 10,717 | (11,345 | ) | |||||
Benefit for income taxes | (4,789 | ) | (9,419 | ) | ||||
Net income/(loss) | $15,506 | $(1,926 | ) | |||||
Average assets | $4,494,423 | $4,897,974 | ||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Net loss from continuing operations (a) | $(5,466 | ) | $(67,197 | ) | ||||
Loss from discontinued operations, net of tax | (7,271 | ) | (648 | ) | ||||
Net loss | $(12,737 | ) | $(67,845 | ) | ||||
(a) | Net loss from continuing operations adjusted for net income attributable to the noncontrolling interest holder. |
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March 31, 2010 | March 31, 2009 | |||||||||||||||||||||||
(Dollars in thousands | First | Second | First | Second | ||||||||||||||||||||
except for annual cost to service) | Liens | Liens | HELOC | Liens | Liens | HELOC | ||||||||||||||||||
Fair value of retained interests | $261,083 | $242 | $3,634 | $361,343 | $11,029 | $8,652 | ||||||||||||||||||
Weighted average life (in years) | 4.2 | 2.1 | 2.4 | 2.7 | 1.8 | 2.4 | ||||||||||||||||||
Annual prepayment rate | 19.8 | % | 36.0 | % | 32.4 | % | 31.0 | % | 41.9 | % | 34.0 | % | ||||||||||||
Impact on fair value of 10% adverse change | $(13,903 | ) | $(27 | ) | $(470 | ) | $(18,810 | ) | $(1,275 | ) | $(710 | ) | ||||||||||||
Impact on fair value of 20% adverse change | (26,615 | ) | (51 | ) | (898 | ) | (35,686 | ) | (2,423 | ) | (1,357 | ) | ||||||||||||
Annual discount rate on servicing cash flows | 11.7 | % | 14.0 | % | 18.0 | % | 11.5 | % | 14.0 | % | 18.0 | % | ||||||||||||
Impact on fair value of 10% adverse change | $(7,317 | ) | $(6 | ) | $(174 | ) | $(6,265 | ) | $(253 | ) | $(258 | ) | ||||||||||||
Impact on fair value of 20% adverse change | (14,179 | ) | (12 | ) | (337 | ) | (12,200 | ) | (493 | ) | (500 | ) | ||||||||||||
Annual cost to service (per loan) | $121 | $50 | $50 | $55 | $50 | $50 | ||||||||||||||||||
Impact on fair value of 10% adverse change | (6,959 | ) | (5 | ) | (115 | ) | (3,196 | ) | (271 | ) | (266 | ) | ||||||||||||
Impact on fair value of 20% adverse change | (13,871 | ) | (10 | ) | (231 | ) | (6,392 | ) | (542 | ) | (531 | ) | ||||||||||||
Annual earnings on escrow | 2.2 | % | - | - | 1.6 | % | 0.5 | % | 0.4 | % | ||||||||||||||
Impact on fair value of 10% adverse change | $(3,633 | ) | - | - | $(4,485 | ) | $(56 | ) | $(27 | ) | ||||||||||||||
Impact on fair value of 20% adverse change | (7,267 | ) | - | - | (8,999 | ) | (112 | ) | (53 | ) | ||||||||||||||
Residual | Residual | |||||||||||||||||||||||
Excess | Interest | Interest | ||||||||||||||||||||||
(Dollars in thousands | Interest | Certificated | Subordinated | Certificates | Certificates | |||||||||||||||||||
except for annual cost to service) | IO | PO | IO | Bonds | 2nd Liens | HELOC | ||||||||||||||||||
March 31, 2010 | ||||||||||||||||||||||||
Fair value of retained interests | $47,106 | $10,664 | NM | N/A | N/A | N/A | ||||||||||||||||||
Weighted average life (in years) | 4.5 | 5.0 | NM | N/A | N/A | N/A | ||||||||||||||||||
Annual prepayment rate | 16.6 | % | 25.2 | % | NM | N/A | N/A | N/A | ||||||||||||||||
Impact on fair value of 10% adverse change | $(2,209 | ) | $(459 | ) | NM | N/A | N/A | N/A | ||||||||||||||||
Impact on fair value of 20% adverse change | (4,289 | ) | (826 | ) | NM | N/A | N/A | N/A | ||||||||||||||||
Annual discount rate on residual cash flows | 10.3 | % | 20.3 | % | NM | N/A | N/A | N/A | ||||||||||||||||
Impact on fair value of 10% adverse change | $(1,975 | ) | $(504 | ) | NM | N/A | N/A | N/A | ||||||||||||||||
Impact on fair value of 20% adverse change | (3,780 | ) | (1,029 | ) | NM | N/A | N/A | N/A | ||||||||||||||||
March 31, 2009 | ||||||||||||||||||||||||
Fair value of retained interests | $142,735 | $12,165 | $303 | $3,060 | $3,193 | $4,757 | ||||||||||||||||||
Weighted average life (in years) | 2.8 | 3.7 | 7.9 | 7.2 | 2.6 | 2.3 | ||||||||||||||||||
Annual prepayment rate | 30.2 | % | 41.8 | % | 10.2 | % | 7.1 | % | 30.0 | % | 27.0 | % | ||||||||||||
Impact on fair value of 10% adverse change | $(8,031 | ) | $(619 | ) | $(10 | ) | $(36 | ) | $(36 | ) | $(383 | ) | ||||||||||||
Impact on fair value of 20% adverse change | (15,292 | ) | (1,293 | ) | (19 | ) | (60 | ) | (67 | ) | (722 | ) | ||||||||||||
Annual discount rate on residual cash flows | 12.4 | % | 40.0 | % | 34.8 | % | 25.7 | % | 34.9 | % | 33.0 | % | ||||||||||||
Impact on fair value of 10% adverse change | $(2,770 | ) | $(457 | ) | $(26 | ) | $(92 | ) | $(130 | ) | $(437 | ) | ||||||||||||
Impact on fair value of 20% adverse change | (5,391 | ) | (879 | ) | (44 | ) | (167 | ) | (245 | ) | (815 | ) | ||||||||||||
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(Dollars in thousands) | March 31, 2010 | March 31, 2009 | ||||||
Proceeds from initial sales and securitizations | $176,337 | $384,317 | ||||||
Servicing fees retained* | 28,816 | 38,898 | ||||||
Purchases of GNMA guaranteed mortgages | 18,144 | - | ||||||
Purchases of delinquent or foreclosed assets | 15,006 | 4,699 | ||||||
Other cash flows received on retained interests | 2,296 | 18,215 | ||||||
Total Principal | Principal Amount | Net Credit | ||||||||||
(Dollars in thousands) | Amount of Loans | of Delinquent Loans (a) | Losses (b) | |||||||||
For the quarter ended | ||||||||||||
On March 31, 2010 | March 31, 2010 | |||||||||||
Type of loan: | ||||||||||||
Real estate residential | $30,799,181 | $1,028,706 | $142,921 | |||||||||
Total loans managed or transferred (c) | $30,799,181 | $1,028,706 | $142,921 | |||||||||
Loans sold | (22,430,171 | ) | ||||||||||
Loans held for sale | (346,524 | ) | ||||||||||
Loans held in portfolio | $8,022,486 | |||||||||||
(a) | Loans 90 days or more past due include $.2 million of GNMA guaranteed mortgages. | |
(b) | Principal amount of loans securitized and sold includes $17.8 billion of loans securitized through GNMA, FNMA or FHLMC. FHN retains interests other than servicing rights on a portion of these securitized loans. No delinquency or net credit loss data is included for the loans securitized through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans securitized and sold were securitized through proprietary trusts, where FHN retained interests other than servicing rights. | |
(c) | Transferred loans are real estate residential loans in which FHN has a retained interest other than servicing rights. |
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Total Principal | Principal Amount | Net Credit | ||||||||||
(Dollars in thousands) | Amount of Loans | of Delinquent Loans (a) | Losses (b) | |||||||||
For the quarter ended | ||||||||||||
On March 31, 2009 | March 31, 2009 | |||||||||||
Type of loan: | ||||||||||||
Real estate residential | $48,813,187 | $920,343 | $128,922 | |||||||||
Total loans managed or transferred (c) | $48,813,187 | $920,343 | $128,922 | |||||||||
Loans sold | (39,657,121 | ) | ||||||||||
Loans held for sale | (438,160 | ) | ||||||||||
Loans held in portfolio | $8,717,906 | |||||||||||
(a) | Loans 90 days or more past due include $40.0 million of GNMA guaranteed mortgages. | |
(b) | Principal amount of loans securitized and sold includes $34.7 billion of loans securitized through GNMA, FNMA or FHLMC. FHN retains interests other than servicing rights on a portion of these securitized loans. No delinquency or net credit loss data is included for the loans securitized through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans securitized and sold were securitized through proprietary trusts, where FHN retained interests other than servicing rights. | |
(c) | Transferred loans are real estate residential loans in which FHN has a retained interest other than servicing rights. |
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As of March 31, 2010 | Type | |||||||
(Dollars in thousands) | On Balance Sheet | Rabbi Trusts Used for Deferred | ||||||
Consumer Loan Securitizations | Compensation Plans | |||||||
Carrying Value | Carrying Value | |||||||
Assets: | ||||||||
Cash and due from banks | $105 | N/A | ||||||
Loans, net of unearned income | 870,427 | N/A | ||||||
Less: Allowance for loan losses | 59,789 | N/A | ||||||
Total net loans | 810,638 | N/A | ||||||
Other assets | 26,938 | $60,836 | ||||||
Total assets | $837,681 | $60,836 | ||||||
Noninterest-bearing deposits | $1,523 | N/A | ||||||
Term borrowings | 862,401 | N/A | ||||||
Other liabilities | 132 | $57,076 | ||||||
Total liabilities | $864,056 | $57,076 | ||||||
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As of March 31, 2010 | ||||||||||||
(Dollars in thousands) | Maximum | Liability | ||||||||||
Type | Loss Exposure | Recognized | Classification | |||||||||
Low Income Housing Partnerships (a) (b) | $105,347 | $- | Other assets | |||||||||
Small Issuer Trust Preferred Holdings (c) | 465,350 | - | Loans, net of unearned income | |||||||||
On Balance Sheet Trust Preferred Securitization | 63,727 | 50,446 | (d) | |||||||||
Proprietary Trust Preferred Issuances (e) | N/A | 309,000 | Term borrowings | |||||||||
Proprietary & Agency Residential Mortgage Securitizations | 392,734 | - | (f) | |||||||||
Holdings of Agency Mortgage-Backed Securities (c) | 2,311,139 | - | (g) | |||||||||
Short Positions in Agency Mortgage-Backed Securities (e) | N/A | 988 | Trading liabilities | |||||||||
Pooled Trust Preferred Securities (c) | 34 | - | Trading securities | |||||||||
Commercial Loan Troubled Debt Restructurings (h)(i) | 21,231 | - | Loans, net of unearned income | |||||||||
Managed Discretionary Trusts (e) | N/A | N/A | N/A | |||||||||
(a) | Maximum loss exposure represents $102.8 million of current investments and $2.5 million of contractual funding commitments. Only the current investment amount is included in Other Assets. | |
(b) | A liability is not recognized because investments are written down over the life of the related tax credit. | |
(c) | Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities. | |
(d) | $112.5 million was classified as Loans, net of unearned income, and $1.7 million was classified as Trading securities which are offset by $50.4 million classified as Term borrowings. | |
(e) | No exposure to loss due to the nature of FHN’s involvement. | |
(f) | Includes $106.2 million and $117.9 million classified as Mortgage servicing rights and $17.8 million and $40.2 million classified as Trading securities related to proprietary and agency residential mortgage securitizations, respectively. Aggregate servicing advances of $233.9 million are classified as Other assets and is offset by aggregate custodial balances of $123.3 million classified as Noninterest-bearing deposits. | |
(g) | Includes $133.3 million classified as Trading securities and $2.2 billion classified as Securities available for sale. | |
(h) | Maximum loss exposure represents $21.1 million of current receivables and $.1 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring. | |
(i) | A liability is not recognized as the loans are the only variable interests held in the troubled commercial borrowers’ operations. |
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As of March 31, 2009 | ||||||||||||
(Dollars in thousands) | Assets | Liabilities | ||||||||||
Carrying | Carrying | |||||||||||
Type | Value | Classification | Value | Classification | ||||||||
On balance sheet consumer loan securitizations | $ | 701,888 | Loans, net of unearned income | $ | 687,087 | Other collateralized borrowings | ||||||
Small issuer trust preferred holdings | 465,350 | Loans, net of unearned income | 30,500 | Term borrowings | ||||||||
Rabbi trusts used for deferred compensation plans | 85,424 | Other assets | 51,990 | Other liabilities | ||||||||
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As of March 31, 2009 | ||||||||||||
(Dollars in thousands) | Maximum | Liability | ||||||||||
Type | Loss Exposure | Recognized | Classification | |||||||||
Low Income Housing Partnerships (a) (b) | $125,863 | $- | Other assets | |||||||||
Small Issuer Trust Preferred Holdings | 43,000 | - | Loans, net of unearned income | |||||||||
On Balance Sheet Trust Preferred Securitization | 65,088 | 49,086 | (c) | |||||||||
Proprietary Trust Preferred Issuances | N/A | 309,000 | Term borrowings | |||||||||
Management of Fund of Funds | N/A | N/A | N/A | |||||||||
(a) | Maximum loss exposure represents $111.9 million of current investments and $13.9 million of contractual funding commitments. Only the current investment amount is included in Other Assets. | |
(b) | A liability is not recognized because investments are written down over the life of the related tax credit. | |
(c) | $112.5 million was classified as Loans, net of unearned income and $1.7 million was classified as Trading securities which are offset by $49.1 million classified as Other collateralized borrowings. |
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Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2010 | ||||||||||||
Retained Interests Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Forwards and Futures (a) (b) | $6,065,000 | $3,951 | $3,398 | $5,560 | ||||||||||||
Interest Rate Swaps and Swaptions (a) (b) | $1,340,000 | $3,621 | $2,349 | $27,050 | ||||||||||||
Hedged Items: | ||||||||||||||||
Mortgage Servicing Rights (c) (b) | N/A | $260,301 | N/A | $(23,335 | ) | |||||||||||
Other Retained Interests (d) (b) | N/A | $58,029 | N/A | $1,631 | ||||||||||||
(a) | Assets included in the other assets section of the Consolidated Condensed Statements of Condition. Liabilities included in the other liabilities section of the Consolidated Condensed Statements of Condition. | |
(b) | Gains/losses included in the mortgage banking income section of the Consolidated Condensed Statements of Income. | |
(c) | Assets included in the mortgage servicing rights section of the Consolidated Condensed Statements of Condition. | |
(d) | Assets included in the trading securities section of the Consolidated Condensed Statements of Condition. |
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Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2009 | ||||||||||||
Retained Interests Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Forwards and Futures (a) (b) | $1,750,000 | $32,784 | N/A | $22,509 | ||||||||||||
Interest Rate Swaps and Swaptions (a) (b) | $2,085,000 | $32,511 | $7 | $19,483 | ||||||||||||
Hedged Items: | ||||||||||||||||
Mortgage Servicing Rights (c) (b) | N/A | $361,216 | N/A | $27,278 | ||||||||||||
Other Retained Interests (d) (b) | N/A | $161,458 | N/A | $15,456 | ||||||||||||
(a) | Assets included in the other assets section of the Consolidated Condensed Statements of Condition. Liabilities included in the other liabilities section of the Consolidated Condensed Statements of Condition. | |
(b) | Gains/losses included in the mortgage banking income section of the Consolidated Condensed Statements of Income. | |
(c) | Assets included in the mortgage servicing rights section of the Consolidated Condensed Statements of Condition. | |
(d) | Assets included in the trading securities section of the Consolidated Condensed Statements of Condition. |
Three Months Ended | ||||||||||||
(Dollars in thousands) | March 31, 2010 | |||||||||||
Description | Notional | Assets | Liabilities | |||||||||
Customer Interest Rate Contracts | $1,694,710 | $46,439 | $10,613 | |||||||||
Offsetting Upstream Interest Rate Contracts | $1,694,710 | $10,613 | $46,445 | |||||||||
Forwards and Futures Purchased | $4,862,889 | $5,843 | $3,005 | |||||||||
Forwards and Futures Sold | $5,047,256 | $1,450 | $8,806 | |||||||||
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Three Months Ended | ||||||||||||
(Dollars in thousands) | March 31, 2009 | |||||||||||
Description | Notional | Assets | Liabilities | |||||||||
Customer Interest Rate Contracts | $1,700,233 | $62,986 | $19,100 | |||||||||
Offsetting Upstream Interest Rate Contracts | $1,700,233 | $19,107 | $62,995 | |||||||||
Forwards and Futures Purchased | $4,786,130 | $660 | $43,258 | |||||||||
Forwards and Futures Sold | $5,045,124 | $44,844 | $3,073 | |||||||||
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Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2010 | ||||||||||||
Customer Interest Rate Contracts Hedging | ||||||||||||||||
Hedging Instruments and Hedged Items: | ||||||||||||||||
Customer Interest Rate Contracts (a) | $1,150,741 | $71,843 | $452 | $6,449 | ||||||||||||
Offsetting Upstream Interest Rate Contracts (a) | $1,150,741 | $452 | $75,843 | $(6,950 | ) | |||||||||||
Debt Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Interest Rate Swaps (b) | $1,104,000 | $92,745 | $2,476 | $13,284 | ||||||||||||
Hedged Items: | ||||||||||||||||
Long-Term Debt (b) | N/A | N/A | $1,104,000 | (c) | $(13,284 | ) (d) | ||||||||||
(a) | Gains/losses included in the other expense section of the Consolidated Condensed Statements of Income. | |
(b) | Gains/losses included in the all other income and commissions section of the Consolidated Condensed Statements of Income. | |
(c) | Represents par value of long term debt being hedged. | |
(d) | Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships. |
Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2009 | ||||||||||||
Customer Interest Rate Contracts Hedging | ||||||||||||||||
Hedging Instruments and Hedged Items: | ||||||||||||||||
Customer Interest Rate Contracts (a) | $1,163,012 | $9 | $113,486 | $5,737 | ||||||||||||
Offsetting Upstream Interest Rate Contracts (a) | $1,163,012 | $113,491 | $9 | $(5,905 | ) | |||||||||||
Debt Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Interest Rate Swaps (b) | $1,200,000 | $135,355 | N/A | $(10,607 | ) | |||||||||||
Hedged Items: | �� | |||||||||||||||
Long-Term Debt (b) | N/A | N/A | $1,200,000 | (c) | $10,607 | (d) | ||||||||||
(a) | Gains/losses included in the other expense section of the Consolidated Condensed Statements of Income. | |
(b) | Gains/losses included in the all other income and commissions section of the Consolidated Condensed Statements of Income. | |
(c) | Represents par value of long term debt being hedged. | |
(d) | Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships. |
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Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2010 | ||||||||||||
Loan Portfolio Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Interest Rate Swaps | $225,583 | N/A | $19,636 | $(415 | ) | |||||||||||
Hedged Items: | ||||||||||||||||
Trust Preferred Loans (a) | N/A | $225,583 | (b) | N/A | $398 | (c) | ||||||||||
(a) | Assets included in loans, net of unearned income section of the Consolidated Condensed Statements of Condition. | |
(b) | Represents principal balance being hedged. | |
(c) | Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships. |
Gains/(Losses) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | |||||||||||||||
Description | Notional | Assets | Liabilities | March 31, 2009 | ||||||||||||
Loan Portfolio Hedging | ||||||||||||||||
Hedging Instruments: | ||||||||||||||||
Interest Rate Swaps | $244,583 | N/A | $26,918 | $765 | ||||||||||||
Hedged Items: | ||||||||||||||||
Trust Preferred Loans (a) | N/A | $244,583 | (b) | N/A | $(770 | ) (c) | ||||||||||
(a) | Assets included in loans, net of unearned income section of the Consolidated Condensed Statements of Condition. | |
(b) | Represents principal balance being hedged. | |
(c) | Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships. |
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• | Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. | ||
• | Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. | ||
• | Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques. |
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March 31, 2010 | ||||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Trading securities — capital markets: | ||||||||||||||||
U.S. Treasuries | $- | $101,182 | $- | $101,182 | ||||||||||||
Government agency issued MBS | - | 111,096 | - | 111,096 | ||||||||||||
Government agency issued CMO | - | 22,211 | - | 22,211 | ||||||||||||
Other U.S. government agencies | - | 180,292 | - | 180,292 | ||||||||||||
States and municipalities | - | 18,767 | - | 18,767 | ||||||||||||
Corporate and other debt | - | 460,890 | 34 | 460,924 | ||||||||||||
Trading loans | - | 10,730 | - | 10,730 | ||||||||||||
Equity, mutual funds, and other | - | 1,684 | 12 | 1,696 | ||||||||||||
Total trading securities — capital markets | - | 906,852 | 46 | 906,898 | ||||||||||||
Trading securities — mortgage banking | ||||||||||||||||
Principal only | - | 10,664 | - | 10,664 | ||||||||||||
Interest only | - | - | 47,365 | 47,365 | ||||||||||||
Total trading securities — mortgage banking | - | 10,664 | 47,365 | 58,029 | ||||||||||||
Loans held for sale | - | 34,281 | 209,672 | 243,953 | ||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. Treasuries | - | 88,518 | - | 88,518 | ||||||||||||
Government agency issued MBS | - | 1,005,616 | - | 1,005,616 | ||||||||||||
Government agency issued CMO | - | 1,172,217 | - | 1,172,217 | ||||||||||||
Other U.S. government agencies | - | 19,561 | 92,828 | 112,389 | ||||||||||||
States and municipalities | - | 40,675 | 1,500 | 42,175 | ||||||||||||
Corporate and other debt | 703 | - | - | 703 | ||||||||||||
Venture capital | - | - | 16,141 | 16,141 | ||||||||||||
Equity, mutual funds, and other | 29,325 | 31,814 | - | 61,139 | ||||||||||||
Total securities available for sale | 30,028 | 2,358,401 | 110,469 | 2,498,898 | ||||||||||||
Mortgage servicing rights | - | - | 264,959 | 264,959 | ||||||||||||
Other assets: | ||||||||||||||||
Deferred compensation assets | 25,987 | - | - | 25,987 | ||||||||||||
Derivatives, forwards and futures | 11,244 | - | - | 11,244 | ||||||||||||
Derivatives, interest rate contracts | - | 225,713 | - | 225,713 | ||||||||||||
Total other assets | 37,231 | 225,713 | - | 262,944 | ||||||||||||
Total assets | $67,259 | $3,535,911 | $632,511 | $4,235,681 | ||||||||||||
Trading liabilities — capital markets: | ||||||||||||||||
U.S. Treasuries | $- | $72,705 | $- | $72,705 | ||||||||||||
Other U.S. government agencies | - | 71,146 | - | 71,146 | ||||||||||||
Corporate and other debt | - | 214,068 | - | 214,068 | ||||||||||||
Total trading liabilities — capital markets | - | 357,919 | - | 357,919 | ||||||||||||
Other short-term borrowings and commercial paper | - | - | 36,180 | 36,180 | ||||||||||||
Other liabilities: | ||||||||||||||||
Derivatives, forwards and futures | 15,209 | - | - | 15,209 | ||||||||||||
Derivatives, interest rate contracts | - | 157,814 | - | 157,814 | ||||||||||||
Total other liabilities | 15,209 | 157,814 | - | 173,023 | ||||||||||||
Total liabilities | $15,209 | $515,733 | $36,180 | $567,122 | ||||||||||||
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March 31, 2009 | ||||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Trading securities — capital markets: | ||||||||||||||||
U.S. Treasuries | $- | $100,538 | $- | $100,538 | ||||||||||||
Government agency issued MBS | - | 416,786 | - | 416,786 | ||||||||||||
Government agency issued CMO | - | 34,703 | - | 34,703 | ||||||||||||
Other U.S. government agencies | - | 17,756 | - | 17,756 | ||||||||||||
States and municipalities | - | 13,788 | - | 13,788 | ||||||||||||
Corporate and other debt | - | 180,640 | 259 | 180,899 | ||||||||||||
Equity, mutual funds, and other | 710 | 1,909 | 12 | 2,631 | ||||||||||||
Total trading securities — capital markets | 710 | 766,120 | 271 | 767,101 | ||||||||||||
Trading securities — mortgage banking | - | 12,166 | 154,049 | 166,215 | ||||||||||||
Loans held for sale | - | 67,768 | 240,700 | 308,468 | ||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. Treasuries | - | 48,502 | - | 48,502 | ||||||||||||
Government agency issued MBS | - | 1,205,963 | - | 1,205,963 | ||||||||||||
Government agency issued CMO | - | 1,271,545 | - | 1,271,545 | ||||||||||||
Other U.S. government agencies | - | 22,630 | 110,481 | 133,111 | ||||||||||||
States and municipalities | - | 60,720 | 1,518 | 62,238 | ||||||||||||
Corporate and other debt | 793 | - | 1,364 | 2,157 | ||||||||||||
Equity, mutual funds, and other | 42,809 | 56,659 | 23,970 | 123,438 | ||||||||||||
Total securities available for sale | 43,602 | 2,666,019 | 137,333 | 2,846,954 | ||||||||||||
Mortgage servicing rights | - | - | 381,024 | 381,024 | ||||||||||||
Other assets | 58,639 | 408,962 | - | 467,601 | ||||||||||||
Total assets | $102,951 | $3,921,035 | $913,377 | $4,937,363 | ||||||||||||
Trading liabilities — capital markets: | ||||||||||||||||
U.S. Treasuries | $- | $26,131 | $- | $26,131 | ||||||||||||
Government agency issued MBS | - | 148 | - | 148 | ||||||||||||
Government agency issued CMO | - | 5,136 | - | 5,136 | ||||||||||||
Other U.S. government agencies | - | 10,809 | - | 10,809 | ||||||||||||
Corporate and other debt | - | 245,805 | - | 245,805 | ||||||||||||
Total trading liabilities — capital markets | - | 288,029 | - | 288,029 | ||||||||||||
Other short-term borrowings and commercial paper | - | - | 143,377 | 143,377 | ||||||||||||
Other liabilities | 229 | 268,856 | - | 269,085 | ||||||||||||
Total liabilities | $229 | $556,885 | $143,377 | $700,491 | ||||||||||||
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In first quarter 2009, FHN changed the fair value methodology for certain loans held for sale. The methodology change had a minimal effect on the valuation of the applicable loans. Consistent with this change, the applicable amounts are presented as a transfer into Level 3 loans held for sale in the following first quarter 2009 rollforward. See Determination of Fair Value for a detailed discussion of the changes in valuation methodology.
Three Months Ended March 31, 2010 | ||||||||||||||||||||||||
Securities available for sale | Mortgage | Other short-term | ||||||||||||||||||||||
Trading | Loans held | Investment | Venture | servicing | borrowings and | |||||||||||||||||||
(Dollars in thousands) | securities | (a) | for sale | portfolio(h) | Capital | rights, net | commercial paper | |||||||||||||||||
Balance on December 31, 2009 | $56,132 | $206,227 | $99,173 | $15,743 | $302,611 | $39,662 | ||||||||||||||||||
Adjustment due to adoption of amendments to ASC 810 | (4,776 | ) | - | - | - | (2,293 | ) | - | ||||||||||||||||
Total net gains/(losses) included in: | ||||||||||||||||||||||||
Net income/(losses) | 2,017 | (1,038 | ) | - | - | (26,038 | ) | (3,482 | ) | |||||||||||||||
Other comprehensive income | - | - | (349 | ) | - | - | - | |||||||||||||||||
Purchases, sales, issuances, and settlements, net | (5,962 | ) | 4,483 | (4,496 | ) | 398 | (9,321 | ) | - | |||||||||||||||
Balance on March 31, 2010 | $47,411 | $209,672 | $94,328 | $16,141 | $264,959 | $36,180 | ||||||||||||||||||
Net unrealized gains/(losses) included in net income | $794 | (b) | $(1,038 | ) (b) | $- | $- | (c) | $(26,038 | ) (d) | $(3,482 | ) (b) | |||||||||||||
Three Months Ended March 31, 2009 | ||||||||||||||||||||||||||||
Securities available for sale | Mortgage | Net derivative | Other short-term | |||||||||||||||||||||||||
Trading | Loans held | Investment | Venture | servicing | assets and | borrowings and | ||||||||||||||||||||||
(Dollars in thousands) | securities | (a) | for sale | portfolio(h) | Capital | rights, net | liabilities | (g) | commercial paper | |||||||||||||||||||
Balance on December 31, 2008 | $153,542 | $11,330 | $111,840 | $25,307 | $376,844 | $233 | $27,957 | |||||||||||||||||||||
Total net gains/(losses) included in: | ||||||||||||||||||||||||||||
Net income/(loss) | 19,059 | 1,777 | - | (2 | ) | (25,217 | ) | - | (1,662 | ) | ||||||||||||||||||
Other comprehensive income | - | - | 3,246 | - | - | - | - | |||||||||||||||||||||
Purchases, sales, issuances, and settlements, net | (18,281 | ) | (13,953 | ) | (3,088 | ) | 30 | 29,397 | (233 | ) | 117,082 | |||||||||||||||||
Net transfers into/(out of) Level 3 | - | 241,546 | - | - | - | - | - | |||||||||||||||||||||
Balance on March 31, 2009 | $154,320 | $240,700 | $111,998 | $25,335 | $381,024 | $- | $143,377 | |||||||||||||||||||||
Net unrealized gains/(losses) included in net income | $14,510 | (e) | $(1,777 | ) (b) | $- | $(2 | ) (c) | $(25,166 | ) (f) | $- | $(1,662 | ) (b) | ||||||||||||||||
(a) | Primarily represents certificated interest only strips and excess interest mortgage banking trading securities. Capital markets Level 3 trading securities are not significant. | |
(b) | Included in mortgage banking income | |
(c) | Represents recognized gains and losses attributable to venture capital investments classified within securities available for sale that are included in Securities gains/(losses) in noninterest income. | |
(d) | Includes $(25.5) million included in mortgage banking noninterest income and $(.5) million included in other income and commissions. | |
(e) | Includes $(1.9) million included in capital markets noninterest income, $16.7 million included in mortgage banking noninterest income, and $(.3) million in other income and commissions. | |
(f) | Includes $(22.4) million in mortgage banking noninterest income and $(2.7) million included in other income and commissions. | |
(g) | Represents interest rate lock commitments related to legacy mortgage banking operations. | |
(h) | Primarily represents other U .S. government agencies. States and municipalities are not significant. |
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From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of LOCOM accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheet at March 31, 2010 and 2009, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment, the related carrying value, and the fair value adjustments recorded during the respective periods.
Three Months Ended | ||||||||||||||||||||
Carrying value at March 31, 2010 | March 31, 2010 | |||||||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | Net losses/(gains) | |||||||||||||||
Loans held for sale - SBAs | $- | $12,037 | $- | $12,037 | $(41 | ) | ||||||||||||||
Loans held for sale - first mortgages | - | - | 21,200 | 21,200 | 2,694 | |||||||||||||||
Loans, net of unearned income (a) | - | - | 351,695 | 351,695 | 67,751 | |||||||||||||||
Real estate acquired by foreclosure (b) | - | - | 122,060 | 122,060 | 6,011 | |||||||||||||||
Other assets (c) | - | - | 102,802 | 102,802 | 2,533 | |||||||||||||||
$78,948 | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Carrying value at March 31, 2009 | March 31, 2009 | |||||||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | Total losses | |||||||||||||||
Loans held for sale | $- | $44,287 | $52,610 | $96,897 | $37 | |||||||||||||||
Loans, net of unearned income (a) | - | - | 492,747 | 492,747 | 73,572 | |||||||||||||||
Real estate acquired by foreclosure (b) | - | - | 132,653 | 132,653 | 10,033 | |||||||||||||||
Other assets (c) | - | - | 111,936 | 111,936 | 2,289 | |||||||||||||||
$85,931 | ||||||||||||||||||||
(a) | Represents carrying value of loans for which adjustments are based on the appraised value of the collateral. Writedowns on these loans are recognized as part of provision. | |
(b) | Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. | |
(c) | Represents low income housing investments. |
FHN elected the fair value option on a prospective basis for almost all types of mortgage loans originated for sale purposes under the Financial Instruments Topic (ASC 825). FHN determined that the election reduced certain timing differences and better matched changes in the value of such loans with changes in the value of derivatives used as economic hedges for these assets.
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March 31,2010 | ||||||||||||
Fair value carrying | ||||||||||||
Fair value carrying | Aggregate unpaid | amount less aggregate | ||||||||||
(Dollars in thousands) | amount | principal | unpaid principal | |||||||||
Loans held for sale reported at fair value: | ||||||||||||
Total loans | $243,953 | $292,245 | $(48,292 | ) | ||||||||
Nonaccrual loans | 22,997 | 46,214 | (23,217 | ) | ||||||||
Loans 90 days or more past due and still accruing | 8,547 | 19,701 | (11,154 | ) | ||||||||
March 31,2009 | ||||||||||||
Fair value carrying | ||||||||||||
Fair value carrying | Aggregate unpaid | amount less aggregate | ||||||||||
(Dollars in thousands) | amount | principal | unpaid principal | |||||||||
Loans held for sale reported at fair value: | ||||||||||||
Total loans | $308,468 | $343,560 | $(35,092 | ) | ||||||||
Nonaccrual loans | 6,578 | 11,796 | (5,218 | ) | ||||||||
Loans 90 days or more past due and still accruing | 4,355 | 9,814 | (5,459 | ) | ||||||||
Three Months Ended March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Changes in fair value included in net income: | ||||||||
Mortgage banking noninterest income | ||||||||
Loans held for sale | $3,436 | $1,177 | ||||||
Other short-term borrowings and commercial paper | (3,482 | ) | (1,662 | ) | ||||
Estimated changes in fair value due to credit risk (loans held for sale) | 2,517 | (8,841 | ) | |||||
In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments and MSR recorded at fair value in the Consolidated Condensed Statements of Condition and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.
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March 31, 2010 | ||||||||
Book | Fair | |||||||
(Dollars in thousands) | Value | Value | ||||||
Assets: | ||||||||
Loans, net of unearned income and allowance for loan losses | $16,640,164 | $15,420,984 | ||||||
Short-term financial assets | 906,808 | 906,808 | ||||||
Trading securities | 964,800 | 964,800 | ||||||
Loans held for sale | 505,794 | 505,794 | ||||||
Securities available for sale | 2,697,719 | 2,697,719 | ||||||
Derivative assets | 236,958 | 236,958 | ||||||
Other assets | 128,789 | 128,789 | ||||||
Nonearning assets | 1,120,672 | 1,120,672 | ||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Defined maturity | $2,177,709 | $2,238,609 | ||||||
Undefined maturity | 12,891,991 | 12,891,991 | ||||||
Total deposits | 15,069,700 | 15,130,600 | ||||||
Trading liabilities | 357,919 | 357,919 | ||||||
Short-term financial liabilities | 2,802,931 | 2,802,931 | ||||||
Long-term debt | 2,932,524 | 2,590,261 | ||||||
Derivative liabilities | 173,022 | 173,022 | ||||||
Other noninterest-bearing liabilities | 789,308 | 789,308 | ||||||
Contractual | Fair | |||||||
Amount | Value | |||||||
Off-Balance Sheet Commitments: | ||||||||
Loan commitments | $8,285,383 | $1,109 | ||||||
Other commitments | 539,699 | 5,253 | ||||||
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• | Severance and related employee costs of $3.0 million related to the institutional equity research business and the 2009 sale of Louisville remittance processing operations. | |
• | Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million related to the closure of the institutional equity research business. | |
• | Loss of $.7 million related to asset impairments from institutional equity research. |
• | Transaction costs of $1.1 million from the contracted sale of mortgage servicing rights. | |
• | Severance and related employee costs of $2.7 million related to discontinuation of national lending operations. | |
• | Loss of $.8 million related to asset impairments from branch closures. |
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Three Months Ended | ||||||||||||||||
March 31 | ||||||||||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||||||||||
Charged to | Charged to | |||||||||||||||
Expense | Liability | Expense | Liability | |||||||||||||
Beginning Balance | $- | $15,903 | $- | $24,167 | ||||||||||||
Severance and other employee related costs | 3,048 | 3,048 | 2,702 | 2,702 | ||||||||||||
Facility consolidation costs | 2,290 | 2,290 | - | - | ||||||||||||
Other exit costs, professional fees, and other | 1,489 | 1,489 | 64 | 64 | ||||||||||||
Total Accrued | 6,827 | 22,730 | 2,766 | 26,933 | ||||||||||||
Payments related to: | ||||||||||||||||
Severance and other employee related costs | 5,490 | 4,074 | ||||||||||||||
Facility consolidation costs | 566 | 1,560 | ||||||||||||||
Other exit costs, professional fees, and other | 958 | 73 | ||||||||||||||
Accrual reversals | 63 | - | ||||||||||||||
Restructuring and Repositioning Reserve Balance | $15,653 | $21,226 | ||||||||||||||
Other Restructuring and Repositioning Expense: | ||||||||||||||||
Mortgage banking expense on servicing sales | - | 1,142 | ||||||||||||||
All other income and commissions | 19 | - | ||||||||||||||
Impairment of premises and equipment | 706 | 831 | ||||||||||||||
Impairment of intangible assets | 3,348 | - | ||||||||||||||
Impairment of other assets | 231 | - | ||||||||||||||
Total Other Restructuring and Repositioning Expense | 4,304 | 1,973 | ||||||||||||||
Total Restructuring and Repositioning Charges | $11,131 | $4,739 | ||||||||||||||
Charged to | ||||
(Dollars in thousands) | Expense | |||
Severance and other employee related costs* | $58,592 | |||
Facility consolidation costs | 38,683 | |||
Other exit costs, professional fees, and other | 18,967 | |||
Other restructuring and repositioning (income) and expense: | ||||
Loan portfolio divestiture | 7,672 | |||
Mortgage banking expense on servicing sales | 19,643 | |||
Net loss on divestitures | 12,527 | |||
Impairment of premises and equipment | 18,517 | |||
Impairment of intangible assets | 38,131 | |||
Impairment of other assets | 40,456 | |||
Total Restructuring and Repositioning Charges Incurred to Date as of March 31, 2010 | $253,188 | |||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
§ | Regional banking offers financial products and services including traditional lending and deposit-taking to retail and commercial customers in Tennessee and surrounding markets. Additionally, regional banking provides investments, insurance, financial planning, trust services and asset management, credit card, cash management, check clearing services, and correspondent banking services. | ||
§ | Capital markets provides a broad spectrum of financial services for the investment and banking communities through the integration of traditional capital markets securities activities, loan sales, portfolio advisory services, and derivative sales. | ||
§ | Corporate consists of unallocated corporate income/expenses including gains and losses on repurchases of debt, expense on subordinated debt issuances and preferred stock, bank-owned life insurance, unallocated interest income associated with excess equity, net impact of raising incremental capital, revenue and expense associated with deferred compensation plans, funds management, low income housing investment activities, and certain charges related to restructuring, repositioning, and efficiency initiatives. | ||
§ | Non-strategic includes exited businesses and loan portfolios, other discontinued products and service lines, and certain charges related to restructuring, repositioning, and efficiency initiatives. |
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§ | Sold 34 full-service First Horizon Bank branches in national banking markets. | ||
§ | Discontinued national homebuilder and commercial real estate lending through First Horizon Construction Lending. | ||
§ | Sold components of national mortgage banking business including origination pipeline, related hedges, certain fixed assets, servicing assets and associated custodial deposits. | ||
§ | Exited the institutional equity research business. | ||
§ | Sold various other non-strategic businesses including Louisville remittance processing operations (FERP) and the Atlanta insurance business. |
§ | Severance and related employee costs of $3.0 million related to the institutional equity research business and the 2009 sale of Louisville remittance processing operations. | ||
§ | Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million related to the closure of the institutional equity research business. | ||
§ | Loss of $.7 million related to asset impairments from institutional equity research. |
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§ | Transaction costs of $1.1 million from the contracted sale of mortgage servicing rights. | ||
§ | Severance and related employee costs of $2.7 million related to discontinuation of national lending operations. | ||
§ | Loss of $.8 million related to asset impairments from branch closures. |
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Noninterest income: | ||||||||
Mortgage banking | $- | $ | (1,142 | ) | ||||
All other income and commissions | (19 | ) | - | |||||
Total noninterest income | (19 | ) | (1,142 | ) | ||||
Noninterest expense: | ||||||||
Employee compensation, incentives, and benefits | 628 | 2,702 | ||||||
Occupancy | 53 | - | ||||||
Legal and professional fees | 105 | 62 | ||||||
All other expense | 231 | 833 | ||||||
Total noninterest expense | 1,017 | 3,597 | ||||||
Loss before income taxes | (1,036 | ) | (4,739 | ) | ||||
Loss from discontinued operations | (10,095 | ) | - | |||||
Net loss from restructuring, repositioning, and efficiency initiatives | $ | (11,131 | ) | $ | (4,739 | ) | ||
Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Beginning Balance: January 1 | $ | 15,903 | $ | 24,167 | ||||
Severance and other employee related costs | 3,048 | 2,702 | ||||||
Facility consolidation costs | 2,290 | - | ||||||
Other exit costs, professional fees, and other | 1,489 | 64 | ||||||
Total Accrued | 22,730 | 26,933 | ||||||
Payments related to: | ||||||||
Severance and other employee related costs | 5,490 | 4,074 | ||||||
Facility consolidation costs | 566 | 1,560 | ||||||
Other exit costs, professional fees, and other | 958 | 73 | ||||||
Accrual Reversals | 63 | - | ||||||
Restructuring and Repositioning Reserve Balance: March 31 | $ | 15,653 | $ | 21,226 | ||||
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Three Months Ended | ||||||||
March 31 | ||||||||
2010 | 2009 | |||||||
Consolidated yields and rates: | ||||||||
Loans, net of unearned income | 3.98 | % | 3.97 | % | ||||
Loans held for sale | 4.05 | 4.94 | ||||||
Investment securities | 4.65 | 5.20 | ||||||
Capital markets securities inventory | 3.75 | 3.65 | ||||||
Mortgage banking trading securities | 10.75 | 12.79 | ||||||
Other earning assets | 0.12 | 0.24 | ||||||
Yields on earning assets | 3.88 | 3.98 | ||||||
Interest-bearing core deposits | 0.85 | 1.63 | ||||||
Certificates of deposit $100,000 and more | 2.57 | 2.54 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | 0.23 | 0.21 | ||||||
Capital markets trading liabilities | 3.72 | 3.85 | ||||||
Short-term borrowings and commercial paper | 0.41 | 0.30 | ||||||
Long-term debt | 1.06 | 1.83 | ||||||
Rates paid on interest-bearing liabilities | 0.93 | 1.38 | ||||||
Net interest spread | 2.95 | 2.60 | ||||||
Effect of interest-free sources | 0.24 | 0.29 | ||||||
FHN - NIM | 3.19 | % | 2.89 | % | ||||
The major component of revenue in the Capital Markets segment is generated from the purchase and sale of securities as both principal and agent, and from other fee sources including loan sales, portfolio advisory, and derivative sales. Securities inventory positions are generally procured for distribution to customers by the sales staff. A portion of the inventory is hedged to protect against movements in fair value due to changes in interest rates.
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Three Months Ended | ||||||||||||
March 31 | Percent | |||||||||||
(Dollars in thousands) | 2010 | 2009 | Change (%) | |||||||||
Noninterest income: | ||||||||||||
Fixed income | $105,270 | $196,985 | 46.6 | - | ||||||||
Other product revenue | 9,301 | 8,715 | 6.7 | + | ||||||||
Total capital markets noninterest income | $114,571 | $205,700 | 44.3 | - | ||||||||
Deposit transactions and cash management income declined $3.3 million primarily due to lower consumer non-sufficient funds fee income as a result of lower transaction volume. Insurance income was down $1.7 million primarily because 2009 included income attributable to the Atlanta insurance business which was sold in fourth quarter 2009. Securities losses were $1.9 million in first quarter 2010 which reflected losses related to a venture capital investment.
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Other income: | ||||||||
Gain on repurchases of debt | $17,060 | $60 | ||||||
Bank owned life insurance | 6,469 | 4,131 | ||||||
Bankcard income | 4,548 | 4,896 | ||||||
ATM interchange fees | 3,657 | 2,205 | ||||||
Other service charges | 2,383 | 3,521 | ||||||
Electronic banking fees | 1,725 | 1,609 | ||||||
Letter of credit fees | 1,639 | 1,360 | ||||||
Deferred compensation | 1,030 | (2,743 | ) | |||||
Reinsurance fees | 863 | 2,796 | ||||||
Remittance processing | 621 | 3,143 | ||||||
Consumer loan repurchases | (12 | ) | (9,950 | ) | ||||
Other | 6,172 | 7,469 | ||||||
Total | $46,155 | $18,497 | ||||||
Total noninterest expense decreased 16 percent to $342.7 million in first quarter 2010 from 2009.
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Other expense: | ||||||||
Low income housing expense | 5,466 | 5,125 | ||||||
Advertising and public relations | 5,279 | 5,813 | ||||||
Other insurance and taxes | 3,257 | 2,899 | ||||||
Travel and entertainment | 2,449 | 2,334 | ||||||
Customer relations | 1,967 | 2,288 | ||||||
Employee training and dues | 1,487 | 1,425 | ||||||
Supplies | 1,168 | 270 | ||||||
Bank examination costs | 1,142 | 1,248 | ||||||
Federal services fees | 907 | 1,367 | ||||||
Loan insurance expense | (2,874 | ) | 1,912 | |||||
Other | 8,088 | 26,722 | ||||||
Total | $28,336 | $51,403 | ||||||
During 2010, there were several items which positively affected the effective tax rate. Tax credits reduced taxes by $5.9 million and non-taxable gains resulting from the increase in the cash surrender value of life insurance reduced taxes by $2.5 million.
As a result of the first quarter 2010 closure of the institutional equity research business, the results of operations, net of tax, for FTN ECM are classified as discontinued operations on the Consolidated Condensed Statements of Income for all periods presented within the non-strategic segment. In first quarter 2010, loss from discontinued operations was $7.3 million and includes a $3.3 million (pre-tax) goodwill impairment, severance and contract terminations costs, and asset write-offs.
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Earning assets consist of loans, loans held for sale, investment securities, trading securities and other earning assets. Earning assets averaged $22.9 billion and $27.4 billion for first quarter 2010 and 2009, respectively. A more detailed discussion of the major line items follows.
Average loans declined 16 percent from first quarter 2009 as a result of the continued wind down of the non-strategic portfolios combined with weak loan demand. In first quarter 2010, FHN prospectively adopted amendments to ASC 810 which resulted in the consolidation of $245.2 million of loans (primarily HELOC) that were securitized which FHN retained a significant interest subsequent to the securitization. These loans, along with HELOCs that were already recognized on FHN’s balance sheet which collateralize borrowings of securitization trusts, are reflected as Restricted real estate loans below. Additionally, these loans are presented parenthetically on the Consolidated Condensed Statements of Condition.
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Three Months Ended March 31 | ||||||||||||||||||||
Percent | Percent | Percent | ||||||||||||||||||
(Dollars in millions) | 2010 | of Total | Change | 2009 | of Total | |||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial, financial, and industrial | $6,733.5 | 38 | % | (13.5 | )% | $7,781.7 | 37 | % | ||||||||||||
Real estate commercial (a) | 1,457.8 | 8 | (2.3 | ) | 1,492.9 | 7 | ||||||||||||||
Real estate construction (b) | 857.4 | 5 | (49.3 | ) | 1,689.9 | 8 | ||||||||||||||
Total commercial | 9,048.7 | 51 | (17.5 | ) | 10,964.5 | 52 | ||||||||||||||
Retail: | ||||||||||||||||||||
Real estate residential (c) | 7,259.9 | 41 | (10.3 | ) | 8,095.1 | 39 | ||||||||||||||
Real estate construction (d) | 166.8 | 1 | (81.1 | ) | 880.5 | 4 | ||||||||||||||
Other retail | 118.6 | 1 | (12.5 | ) | 135.6 | 1 | ||||||||||||||
Credit card receivables | 185.8 | 1 | * | 184.3 | 1 | |||||||||||||||
Restricted real estate loans (e) | 890.4 | 5 | 25.6 | 709.1 | 3 | |||||||||||||||
Total retail | 8,621.5 | 49 | (13.8 | ) | 10,004.6 | 48 | ||||||||||||||
Total loans, net of unearned | $17,670.2 | 100 | % | (15.7 | )% | $20,969.1 | 100 | % | ||||||||||||
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Three months ended March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Allowance for loan losses: | ||||||||
Beginning balance on December 31 | $896,914 | $849,210 | ||||||
Adjustment due to adoption of amendments to ASC 810 | 24,578 | - | ||||||
Provision for loan losses | 105,000 | 300,000 | ||||||
Charge-offs | (193,955 | ) | (217,161 | ) | ||||
Recoveries | 11,523 | 8,883 | ||||||
Ending balance on March 31 (Restricted - $59.8 million) | $844,060 | $940,932 | ||||||
Reserve for off-balance sheet commitments | 18,737 | 19,511 | ||||||
Total allowance for loan losses and reserve for off-balance sheet commitments | $862,797 | $960,443 | ||||||
March 31 | ||||||||
Nonperforming Assets by Segment | 2010 | 2009 | ||||||
Regional Banking: | ||||||||
Nonperforming loans | $329,600 | $219,199 | ||||||
Foreclosed real estate | 27,934 | 31,140 | ||||||
Total Regional Banking | 357,534 | 250,339 | ||||||
Non-Strategic: | ||||||||
Nonperforming loans (a) | 598,608 | 913,909 | ||||||
Foreclosed real estate | 85,072 | 87,905 | ||||||
Total Non-Strategic | 683,680 | 1,001,814 | ||||||
Total nonperforming assets | $1,041,214 | $1,252,153 | ||||||
Total loans, net of unearned income | $17,484,224 | $20,572,477 | ||||||
Insured loans | (270,639 | ) | (528,025 | ) | ||||
Loans excluding insured loans | $17,213,585 | $20,044,452 | ||||||
Foreclosed real estate from GNMA loans | $9,054 | $13,607 | ||||||
Potential problem assets (b) | 1,300,788 | 1,399,899 | ||||||
Loans 30 to 89 days past due | 267,840 | 404,739 | ||||||
Loans 30 to 89 days past due - guaranteed portion (c) | 85 | 98 | ||||||
Loans 90 days past due | 117,692 | 203,746 | ||||||
Loans 90 days past due - guaranteed portion (c) | 234 | 245 | ||||||
Loans held for sale 30 to 89 days past due | 25,027 | 44,170 | ||||||
Loans held for sale 30 to 89 days past due - guaranteed portion (c) | 25,027 | 43,577 | ||||||
Loans held for sale 90 days past due | 49,499 | 47,055 | ||||||
Loans held for sale 90 days past due - guaranteed portion (c) | 46,723 | 39,960 | ||||||
Off-balance sheet commitments (d) | $5,203,994 | $6,076,977 | ||||||
Allowance to total loans | 4.83% | 4.57% | ||||||
Allowance to nonperforming loans in the loan portfolio | 0.96x | 0.84x | ||||||
Allowance to loans excluding insured loans | 4.90% | 4.69% | ||||||
Allowance to annualized net charge-offs | 1.16x | 1.13x | ||||||
Nonperforming assets to loans and foreclosed real estate (e) | 5.63% | 5.98% | ||||||
Nonperforming loans in the loan portfolio to total loans, net of unearned income | 5.02% | 5.44% | ||||||
Total commercial net charge-offs (f) | 3.45% | 3.73% | ||||||
Retail real estate net charge-offs (f) | 4.85% | 4.21% | ||||||
Other retail net charge-offs (f) | 2.89% | 3.66% | ||||||
Credit card receivables net charge-offs (f) | 5.76% | 6.06% | ||||||
Total annualized net charge-offs to average loans (f) | 4.13% | 3.97% | ||||||
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March 31 | ||||||||
2010 | 2009 | |||||||
Key Portfolio Details | ||||||||
Commercial (C&I & Other) | ||||||||
Period-end loans ($ millions) | $6,856 | $7,676 | ||||||
30+ Delinq. % (a) | 1.02 | % | 1.53 | % | ||||
NPL % | 2.86 | 1.35 | ||||||
Charge-offs % (qtr. annualized) | 1.67 | 1.55 | ||||||
Allowance / Loans % | 4.28 | % | 2.97 | % | ||||
Allowance / Charge-offs | 2.60 | x | 1.89 | x | ||||
Income CRE (Income-producing Commercial Real Estate) | ||||||||
Period-end loans ($ millions) | $1,674 | $1,938 | ||||||
30+ Delinq. % (a) | 3.11 | % | 4.23 | % | ||||
NPL % | 10.81 | 6.30 | ||||||
Charge-offs % (qtr. annualized) | 4.37 | 3.36 | ||||||
Allowance / Loans % | 8.62 | % | 5.21 | % | ||||
Allowance / Charge-offs | 1.94 | x | 1.53 | x | ||||
Residential CRE (Homebuilder and Condominium Construction) | ||||||||
Period-end loans ($ millions) | $528 | $1,133 | ||||||
30+ Delinq. % (a) | 3.89 | % | 10.43 | % | ||||
NPL % | 49.38 | 36.34 | ||||||
Charge-offs % (qtr. annualized) | 21.19 | 18.10 | ||||||
Allowance / Loans % | 9.69 | % | 8.59 | % | ||||
Allowance / Charge-offs | 0.41 | x | 0.44 | x | ||||
Consumer Real Estate (Home Equity Installment and HELOC) | ||||||||
Period-end loans ($ millions) | $6,084 | $7,609 | ||||||
30+ Delinq. % (a) | 2.21 | % | 2.01 | % | ||||
NPL % | 0.30 | 0.07 | ||||||
Charge-offs % (qtr. annualized) | 2.91 | 2.38 | ||||||
Allowance / Loans % | 2.87 | % | 3.06 | % | ||||
Allowance / Charge-offs | 0.97 | x | 1.27 | x | ||||
Permanent Mortgage | ||||||||
Period-end loans ($ millions) | $1,068 | $1,109 | ||||||
30+ Delinq. % (a) | 6.29 | % | 10.11 | % | ||||
NPL % | 11.09 | 4.48 | ||||||
Charge-offs % (qtr. annualized) | 10.44 | 3.47 | ||||||
Allowance / Loans % | 7.86 | % | 7.06 | % | ||||
Allowance / Charge-offs | 0.75 | x | 2.04 | x | ||||
OTC, Credit Card, and Other (b) | ||||||||
Period-end loans ($ millions) | $403 | $1,108 | ||||||
30+ Delinq. % (a) | 2.12 | % | 2.68 | % | ||||
NPL % | 24.91 | 38.51 | ||||||
Charge-offs % (qtr. annualized) | 17.52 | 16.61 | ||||||
Allowance / Loans % | 9.21 | % | 18.39 | % | ||||
Allowance / Charge-offs | 0.45 | x | 1.01 | x | ||||
Restricted real estate loans (c) | ||||||||
Period-end loans ($ millions) (d) | $870 | N/A | ||||||
30+ Delinq. % (a) | 3.72 | % | N/A | |||||
NPL % | 0.19 | N/A | ||||||
Charge-offs % (qtr. annualized) | 4.78 | N/A | ||||||
Allowance / Loans % | 6.87 | % | N/A | |||||
Allowance / Charge-offs | 1.40 | x | N/A | |||||
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Total Number of | Maximum Number | ||||||||||||||||
Total Number | Shares Purchased | of Shares that May | |||||||||||||||
of Shares | Average Price | as Part of Publicly | Yet Be Purchased | ||||||||||||||
(Volume in thousands) | Purchased | Paid per Share | Announced Programs | Under the Programs | |||||||||||||
2010 | |||||||||||||||||
January 1 to January 31 | * | $13.45 | * | 40,933 | |||||||||||||
February 1 to February 28 | - | NA | - | 40,933 | |||||||||||||
March 1 to March 31 | - | NA | - | 40,933 | |||||||||||||
Total | * | $13.45 | * | ||||||||||||||
* | Amount is less than 500 shares |
- | A consolidated compensation plan share purchase program was announced on August 6, 2004. This plan consolidated into a single share purchase program all of the previously authorized compensation plan share programs as well as the renewal of the authorization to purchase shares for use in connection with two compensation plans for which the share purchase authority had expired. The total amount originally authorized under this consolidated compensation plan share purchase program is 25.1 million shares. On April 24, 2006, an increase to the authority under this purchase program of 4.5 million shares was announced for a new total authorization of 29.6 million shares. The authority has been increased to reflect the stock dividends distributed through January 1, 2010. The shares may be purchased over the option exercise period of the various compensation plans on or before December 31, 2023. Stock options granted after January 2, 2004, must be exercised no later than the tenth anniversary of the grant date. On March 31, 2010, the maximum number of shares that may be purchased under the program was 32.5 million shares. |
- | On October 16, 2007, the board of directors approved a 7.5 million share purchase authority that will expire on December 31, 2010. The authority has been increased to reflect the stock dividends distributed through January 1, 2010. Purchases will be made in the open market or through privately negotiated transactions and will be subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory constraints. Until the third anniversary of the sale of the preferred shares issued in the CPP, FHN may not repurchase common or other equity shares (subject to certain limited exceptions) without the UST’s approval. This authority is not tied to any compensation plan, and replaces an older non-plan share purchase authority which was terminated. On March 31, 2010, the maximum number of shares that may be purchased under the program was 8.4 million shares. |
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Three Months Ended | ||||||||
March 31 | ||||||||
2010 | 2009 | |||||||
Prepayment speeds | ||||||||
Actual | 18.8 | % | 23.8 | % | ||||
Estimated* | 24.9 | 49.1 | ||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Beginning balance | $105,732 | $36,956 | ||||||
Provision for foreclosure and repurchase losses | 40,675 | 8,845 | ||||||
Transfers* | - | 41 | ||||||
Charge-offs | (21,409 | ) | (8,154 | ) | ||||
Recoveries and other | 1,002 | 148 | ||||||
Ending balance | $126,000 | $37,836 | ||||||
* | Primarily represents reserves established against servicing advances for which the related MSR has been legally sold. Amounts are transferred to the foreclosure reserve when the advances are delivered to the buyer but recourse to FHN remains. |
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures. FHN’s management, with the participation of FHN’s chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of FHN’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based on that evaluation, the chief executive officer and chief financial officer have concluded that FHN’s disclosure controls and procedures are effective to ensure that material information relating to FHN and FHN’s consolidated subsidiaries is made known to such officers by others within these entities, particularly during the period this quarterly report was prepared, in order to allow timely decisions regarding required disclosure. | |
(b) | Changes in Internal Control over Financial Reporting. There have not been any changes in FHN’s internal control over financial reporting during FHN’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, FHN’s internal control over financial reporting. |
Item 4(T). | Controls and Procedures |
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Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) | None | ||
(b) | Not applicable | ||
(c) | The Issuer Purchase of Equity Securities Table is incorporated herein by reference to the table included in Item 2 of Part I — First Horizon National Corporation — Management’s Discussion and Analysis of Financial Condition and Results of Operations at page 59. |
Item 4 | [Reserved] |
Item 6 | Exhibits |
(a) | Exhibits. |
Exhibit No. | Description | |
3.1 | Articles of Amendment to the Restated Charter of First Horizon National Corporation, incorporated herein by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K dated April 20, 2010. | |
4 | Instruments defining the rights of security holders, including indentures.* | |
10.2(f)** | 2003 Equity Compensation Plan (as amended and restated April 20, 2010 and as adjusted for all stock dividends through April 1, 2010), incorporated by reference to Appendix A to the Corporation’s Proxy Statement for its annual meeting on April 20, 2010. | |
10.4(d)** | Form of Performance Stock Units Grant Notice [2010]. | |
10.5(r)** | Form of Executive Restricted Stock Grant Notice [2010]. | |
13 | The “Risk Management-Interest Rate Risk Management” subsection of the Management’s Discussion and Analysis section and the “Interest Rate Risk Management” subsection of Note 25 to the Corporation’s consolidated financial statements, contained, respectively, at pages 31-34 and pages 151-152 in the Corporation’s 2009 Annual Report to shareholders furnished to shareholders in connection with the Annual Meeting of Shareholders on April 20, 2010, and incorporated herein by reference. Portions of the Annual Report not incorporated herein by reference are deemed not to be “filed” with the Commission with this report. | |
31(a) | Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) |
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31(b) | Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) | |
32(a) | 18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) | |
32(b) | 18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
* | The Corporation agrees to furnish copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries to the Securities and Exchange Commission upon request. | ||
** | This is a management contract or compensatory plan required to be filed as an exhibit. |
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FIRST HORIZON NATIONAL CORPORATION | ||||
(Registrant) | ||||
DATE: May 6, 2010 | By: | /s/ William C. Losch III | ||
Name: | William C. Losch III | |||
Title: | Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
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Exhibit No. | Description | |
3.1 | Articles of Amendment to the Restated Charter of First Horizon National Corporation, incorporated herein by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K dated April 20, 2010. | |
4 | Instruments defining the rights of security holders, including indentures.* | |
10.2(f)** | 2003 Equity Compensation Plan (as amended and restated April 20, 2010 and as adjusted for all stock dividends through April 1, 2010), incorporated by reference to Appendix A to the Corporation’s Proxy Statement for its annual meeting on April 20, 2010. | |
10.4(d)** | Form of Performance Stock Units Grant Notice [2010]. | |
10.5(r)** | Form of Executive Restricted Stock Grant Notice [2010]. | |
13 | The “Risk Management-Interest Rate Risk Management” subsection of the Management’s Discussion and Analysis section and the “Interest Rate Risk Management” subsection of Note 25 to the Corporation’s consolidated financial statements, contained, respectively, at pages 31-34 and pages 151-152 in the Corporation’s 2009 Annual Report to shareholders furnished to shareholders in connection with the Annual Meeting of Shareholders on April 20, 2010, and incorporated herein by reference. Portions of the Annual Report not incorporated herein by reference are deemed not to be “filed” with the Commission with this report. | |
31(a) | Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) | |
31(b) | Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) | |
32(a) | 18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) | |
32(b) | 18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
* | The Corporation agrees to furnish copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries to the Securities and Exchange Commission upon request. | ||
** | This is a management contract or compensatory plan required to be filed as an exhibit. |
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Date of Grant: | Governing Plan: | 2003 Equity Compensation Plan | |||||
Number of PSUs Granted*: | Performance Periods: | [4 consecutive yearsstarting with year of grant] | |||||
Vesting Dates of PSUs*: | 50% of shares on each of [3rd and 4th anniv. of grant], in each case subject to delay or forfeiture if performance goals are not met as provided in this Notice |
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Date of Grant | — | |||||
Governing Plan | — | 2003 Equity Compensation Plan | ||||
Total Number of RS Shares Granted* | — | |||||
Vesting Date of First 50% of Shares* | — | [3rd anniv. of grant] | ||||
Vesting Date of Second 50% of Shares* | — | [4th anniv. of grant] | ||||
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