Exhibit 99.1
First Horizon National Corporation Reports Financial Results for First Quarter 2007
* Earnings per diluted share of $.55 for first quarter 2007 * Bank's market-leading Tennessee footprint strengthened and national specialty sales force expansion continues * Asset quality remains solid as nonperformers declined due to charge-off of previous problem loans * Hedging costs rise over prior quarter * Consolidation initiative offsets expected seasonal decline * Downsized securities portfolio in anticipation of rebound in mortgage production * Mortgage Alt-A and nonprime show minimal adverse impact * Additional opportunities for efficiency above and beyond those previously announced
MEMPHIS, Tenn., April 18, 2007 (PRIME NEWSWIRE) -- First Horizon National Corporation (NYSE:FHN) announced first quarter 2007 earnings of $70.5 million or $.55 per diluted share. Earnings for fourth quarter 2006 were $76.5 million or $.60 per diluted share. Results for first quarter 2007 reflected an expected seasonal decline in addition to a $15 million negative impact on mortgage hedging results. Two items partially offsetting the seasonal and hedging impacts that occurred this quarter were a $7.5 million reduction in tax expense as we received approval to consolidate our mortgage company into our bank and $10.3 million of net securities gains recognized as the investment portfolio was reduced to compensate for loan growth.
"While this quarter's earnings were lower than expected as a result of some industry-wide disruptions related to the softening housing market," said Jerry Baker, CEO of FHN, "we remain focused on our strategic vision and direction. We have made progress in building our core franchise in Tennessee and we continue to gain market share. In addition, we are exporting that banking expertise to key national markets by adding banking specialists. Our mortgage and capital markets businesses continue to be important levers in that banking expansion."
"We are working hard to return mortgage to historical levels of profitability through our strategy of building our prime, retail origination business," Baker continued. "Accordingly, we have made the decision to no longer underwrite, process and fund nonprime loans. Our nonprime business, which represents less than two percent of our mortgage loan production, has resulted in a reasonable level of repurchase activity for which we have adequate reserves to cover estimated remaining losses. However, reduced investor appetite for this product has diminished gain-on-sale margins drastically; therefore, we believe market risk no longer justifies the modest potential rewards and believe it is better to service retail customer needs through broker relationships. In contrast, our Alt-A business, which represented 20 percent of our first-lien production in first quarter 2007, has prime-type credit characteristics despite the non-standard loan structures, with an average FICO of over 715 and continues to price appropri ately. The majority of our Alt-A production is securitized and to-date, no residual or credit support structures have been retained and we have not seen any material repurchase activity from these loans."
Return on average shareholders' equity and return on average assets were 11.6 percent and .74 percent, respectively, for first quarter 2007. Return on average shareholders' equity and return on average assets were 12.1 percent and .77 percent, respectively, for fourth quarter 2006. Total assets were $38.8 billion and shareholders' equity was $2.5 billion on March 31, 2007, compared to $37.9 billion and $2.5 billion, respectively, on December 31, 2006.
PERFORMANCE HIGHLIGHTS
Retail/Commercial Banking
Pre-tax income for Retail/Commercial Banking was $100.4 million for first quarter 2007, compared to $108.5 million for fourth quarter 2006. Total revenues for Retail/Commercial Banking were $327.1 million for first quarter 2007 compared to $343.3 million for fourth quarter 2006.
Net interest income decreased to $224.1 million in first quarter 2007 from $228.9 million in fourth quarter 2006 due to variance in the number of days. Net interest margin remained relatively stable at 4.10 percent in first quarter 2007 compared to 4.15 percent in fourth quarter 2006. The Retail/Commercial Bank showed continued momentum in product growth as both loans and deposits grew 5 percent over first quarter 2006.
Noninterest income was $103.0 million in first quarter 2007 compared to $114.4 million in fourth quarter 2006. Fees from deposit transactions and cash management decreased $4.0 million compared to fourth quarter 2006 due primarily to lower overdraft and NSF charges per customer. Revenue from loan sales and securitizations decreased $5.4 million due to lower execution margins and a decline in the volume of loans delivered into the secondary markets.
Provision for loan losses increased to $28.5 million in first quarter 2007 from $23.3 million in fourth quarter 2006, primarily reflecting an increase in both homebuilder and one-time-close construction loans on the watch list.
Noninterest expense decreased to $198.2 million in first quarter 2007 compared to $211.5 million in fourth quarter 2006. The decrease in noninterest expense primarily reflects the net positive impact of a third-party settlement in first quarter 2007 compared to other losses recognized in fourth quarter 2006. Other expense results continue to reflect a heightened focus on containing expense growth as expenses were relatively flat in first quarter 2007 compared to fourth quarter 2006. The efficiency ratio improved to 60.6 percent from 61.6 percent in fourth quarter 2006.
Mortgage Banking
Mortgage Banking had a pre-tax loss of $11.3 million for first quarter 2007, compared to pre-tax income of $3.8 million for fourth quarter 2006. Total revenues for Mortgage Banking were $94.0 million in first quarter 2007 compared to $112.4 million in fourth quarter 2006.
Net interest income was $17.3 million in first quarter 2007 compared to $20.8 million in fourth quarter 2006. An inverted yield curve resulted in compression of the spread on the warehouse, which was 1.12 percent in first quarter 2007 compared to 1.24 percent in fourth quarter 2006.
Noninterest income was $76.7 million in first quarter 2007 compared to $91.6 million in fourth quarter 2006. Noninterest income consists primarily of mortgage banking-related revenue, net of costs, from the origination and sale of mortgage loans, fees from mortgage servicing and changes in fair value of mortgage servicing rights (MSR) net of hedge gains or losses.
Noninterest income from mortgage origination and servicing activities declined this quarter over fourth quarter of last year. Net origination income decreased to $63.6 million in first quarter 2007 from $69.2 million in fourth quarter 2006 as loans delivered into the secondary market decreased to $6.1 billion in first quarter 2007 from $6.3 billion in fourth quarter 2006. Total mortgage servicing fees increased to $84.7 million in first quarter 2007 from $83.9 million in fourth quarter 2006, reflecting mortgage servicing portfolio growth of 6 percent on an annualized sequential quarter basis to $102.8 billion on March 31, 2007.
Servicing hedging activities and changes other than runoff in the value of capitalized servicing assets negatively impacted net revenues by $14.8 million this quarter as compared to fourth quarter 2006 due to interest rate volatility, fluctuations in MSR values and continued higher costs to hedge under an inverted yield curve. At the same time, prepayment rates slowed, lowering the change in value of MSR due to runoff to $61.7 million in first quarter 2007 from $66.9 million in fourth quarter 2006.
Noninterest expense decreased to $105.3 million in first quarter 2007 from $108.9 million in fourth quarter 2006 primarily due to the contraction in origination activities.
Capital Markets
Pre-tax earnings for Capital Markets were $3.4 million in first quarter 2007 compared to $8.6 million in fourth quarter 2006. Total revenues for Capital Markets were $83.1 million in first quarter 2007 compared to $92.7 million in fourth quarter 2006.
Revenues from fixed income sales were $46.3 million in first quarter 2007 compared to $46.2 million in fourth quarter 2006. Revenues from other products were $42.6 million in first quarter 2007 compared to $49.8 million in fourth quarter 2006. Revenues from other products include fee income from activities such as structured finance, equity research, investment banking, loan sales, portfolio advisory and the sale of bank-owned life insurance. These other sources of revenue represented 48 percent of total product revenues in first quarter 2007 compared to 52 percent in fourth quarter 2006. The decrease from fourth quarter 2006 was due to decreased fees from structured finance activities primarily as a result of a smaller pooled trust preferred transaction in first quarter 2007.
Noninterest expense decreased $4.4 million to $79.7 million in first quarter 2007 from $84.1 million in fourth quarter 2006 primarily due to a decrease in compensation expense partially offset by seasonal expense.
Corporate
The Corporate segment's results yielded a pre-tax loss of $3.4 million in first quarter 2007 compared to a pre-tax loss of $13.1 million in fourth quarter 2006. The first quarter 2007 results include $10.3 million of net securities gains as the investment portfolio was reduced to compensate for loan growth, compared to $3.0 million of net securities gains in fourth quarter 2006. Noninterest income decreased $7.0 million to $4.3 million in first quarter 2007 from $11.3 million in 2006, while noninterest expense decreased $7.3 million to $19.8 million in first quarter 2007 from $27.1 million in fourth quarter 2006. The declines in both noninterest income and noninterest expense were primarily related to deferred compensation plans.
Income Taxes
The effective corporate tax rate this quarter was 21.1 percent. Provision for income taxes was favorably impacted by $7.5 million during first quarter 2007 due to the planned consolidation of the mortgage company into the bank, a transaction designed to promote efficiencies and enhance the use of our national bank charter in our mortgage lending business.
AVERAGE BALANCE SHEET
Total average assets decreased to $38.6 billion for first quarter 2007 from $39.3 billion for fourth quarter 2006, but were up 3 percent from $37.7 billion for first quarter 2006. Total loans increased to $22.0 billion for first quarter 2007 from $21.9 billion for fourth quarter 2006 and grew 6 percent from $20.9 billion as commercial loans grew 13 percent and retail loans decreased 1 percent for first quarter 2006. Loans held for sale decreased to $3.6 billion in first quarter 2007 from $3.8 billion in fourth quarter 2006 and $4.8 billion in first quarter 2006. Average earning assets decreased to $33.8 billion in first quarter 2007 from $34.3 billion in fourth quarter 2006. Interest-bearing core deposits increased to $8.2 billion in first quarter 2007 from $8.0 billion in fourth quarter 2006 and increased 11 percent from $7.4 billion in first quarter 2006. Total core deposits increased 8 percent to $13.3 billion in first quarter 2007 from $12.3 billion in first quarter 2006, reflecting expansion strategies, which emphasize a focus on convenient hours and targeted financial center expansion. Purchased funds decreased to $14.7 billion in first quarter 2007 from $15.9 billion in fourth quarter 2006 and $17.4 billion in first quarter 2006. Average shareholders' equity was $2.5 billion in first quarter 2007, an increase of 6 percent from $2.3 billion in first quarter 2006.
The consolidated net interest margin remained stable at 2.84 percent for first quarter 2007 compared to 2.86 percent for fourth quarter 2006. The net interest spread also remained stable at 2.21 percent for first quarter 2007 and fourth quarter 2006. The decline in margin is primarily attributable to a tighter spread on the warehouse, which decreased by 12 basis points to 1.12 percent for first quarter 2007, creating a negative impact on the overall corporate margin this quarter as compared to fourth quarter 2006.
ASSET QUALITY
Provision for loan losses increased to $28.5 million in first quarter 2007 from $23.0 million in fourth quarter 2006, primarily reflecting an increase in both homebuilder and one-time-close construction loans on the watch list. The net charge-off ratio increased to 48 basis points in first quarter 2007 from 25 basis points in fourth quarter 2006 as net charge-offs grew to $26.6 million from $13.5 million in fourth quarter 2006, driven mainly by a few commercial and industrial loans in our traditional banking markets and residential real estate construction loans. A significant portion of these loans had been previously reserved and thus the increase seen in provision was less than half the increase in net charge-offs. The nonperforming assets ratio related to the loan portfolio decreased to 56 basis points in first quarter 2007 from 58 basis points in fourth quarter 2006 due to the resolution of these previously identified problem loans and as overall low levels in the retail and commercial loans portfolios outweighed the expected increase in construction lending. The allowance to loans ratio was 99 basis points in first quarter 2007 compared to 98 basis points in fourth quarter 2006. Nonperforming assets were $135.9 million on March 31, 2007, compared to $139.0 million on December 31, 2006. (See the table on A-4 for an analysis of the allowance for loan losses and details on nonperforming assets and the table on A-5 for asset quality ratios).
OUTLOOK
"Looking ahead, while the first quarter's unfavorable impact of seasonality should subside, we expect the operating environment to remain difficult," said Baker. "Our objective is to improve quarterly earnings over the remainder of 2007 significantly above our current run-rate by continuing to enhance our strategies and accelerating our efficiency initiatives. While we are going to have to do a few things differently, I believe this return to earnings growth is realistic."
"First we are fine-tuning our strategies to maximize earnings and reduce interest-rate sensitivity. We will continue to devote resources to developing our Tennessee banking market. The focus in mortgage will be on increasing prime, retail originations by growing the sales force through recruiting and targeted acquisitions and improving their productivity through dedicated sales management. Capital markets will continue to evolve as we expand other products and add international offices."
"Additionally, we are accelerating our productivity and efficiency initiatives and intend to move more aggressively to restructure our company beginning in the second quarter. As a result we will be consolidating functional areas, reducing management-to-staff ratios, closing unprofitable locations, exiting non-core businesses like nonprime lending, and refinancing portions of our capital. While we anticipate one time costs, primarily in the second and third quarters, associated with implementing these initiatives, we see the total benefits of these further efforts amounting to at least another $50 million of annualized savings in our run-rate by the end of this year, over and above the $40 million in efficiencies we currently expect to achieve."
"We are maintaining our focus on disciplined asset quality management with tightened guidelines in both retail and construction lending. We still expect asset quality to be solid for the full year of 2007 with net charge-offs averaging between 30 and 40 basis points for the year."
This press release contains forward-looking statements involving significant risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking information. Those factors include general economic and financial market conditions, including expectations of and actual timing and amount of interest rate movements including the slope of the yield curve, competition, customer and investor responses to these conditions, ability to execute business plans, geopolitical developments, natural disasters, and items already mentioned in this press release, as well as critical accounting estimates and other factors described in FHN's recent filings with the SEC. FHN disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.
OTHER INFORMATION
FHN provides additional disclosure and discussion related to FHN's earnings and business segment performance through a financial supplement, which is available on FHN's Web site at www.fhnc.com. Management will also host a conference call at 8:00 a.m. Central Time April 19 to review earnings and performance trends. Callers wishing to participate in the call may dial toll-free starting at 7:45 a.m. Central Time April 19 by dialing 1-800-565-5442 (international participants dial 1-913-312-1298). The conference will also be webcast live through First Horizon's Web site. To access the webcast, visit the investor relations section of www.fhnc.com. A replay of the call will be available from 11 a.m. Central Time April 19 until 11 p.m. May 3 by calling 1-888-203-1112 or 1-719-457-0820 for international participants. The passcode is 8499476. The event will be archived and made available by 1 p.m. Central Time April 19 in the investor relations section of First Horizon's Web site at www.fhnc.com. For four weeks fr om the press release date, FHN will respond to individual requests for clarification of the provided disclosures. However, we will make every effort not to provide, and you should not expect to receive, material non-public information as that term is defined in the SEC Regulation FD. Without limiting the foregoing, after the conference call and except for the guidance expressed or implied herein or therein, we will not provide any earnings guidance, directly or indirectly, express or implied.
GENERAL INFORMATION
About First Horizon
The 12,000 employees of First Horizon National Corp. (NYSE:FHN) provide financial services to individuals and business customers through hundreds of offices located in more than 40 states. The corporation's three major brands -- FTN Financial, First Horizon and First Tennessee -- provide customers with a broad range of products and services including:
* Capital markets, one of the nation's top underwriters of U.S. government agency securities * Mortgage banking, one of the nation's top mortgage originators and recipient of consecutive awards for servicing excellence from Fannie Mae and Freddie Mac * Retail/commercial banking, with the largest market share in Tennessee and one of the highest customer retention rates of any bank in the country
FHN companies have been recognized as some of the nation's best employers by AARP, Working Mother and Fortune magazines. FHN also was named one of the nation's 100 best corporate citizens by CRO magazine. More information can be found at www.fhnc.com.
FIRST HORIZON NATIONAL CORPORATION STATEMENTS OF INCOME Yearly Growth (Unaudited) --------------------------------------------------------------------- Year-to-date March 31 -------------------- Growth (Thousands) 2007 2006 Rate (%) --------------------------------------------------------------------- Interest income $583,185 $533,369 9.3 + Less interest expense 345,766 287,648 20.2 + --------------------------------------------------------------------- Net interest income 237,419 245,721 3.4 - Provision for loan losses 28,486 17,799 60.0 + --------------------------------------------------------------------- Net interest income after provision for loan losses 208,933 227,922 8.3 - Noninterest income: Capital markets 87,113 92,858 6.2 - Mortgage banking 73,097 80,682 9.4 - Deposit transactions and cash management 39,358 38,023 3.5 + Revenue from loan sales and securitizations 9,663 11,357 14.9 - Insurance commissions 9,789 14,686 33.3 - Trust services and investment management 9,688 10,657 9.1 - Securities gains/(losses), net 10,273 (80,281) NM All other income and commissions 44,207 29,628 49.2 + --------------------------------------------------------------------- Total noninterest income 283,188 197,610 43.3 + --------------------------------------------------------------------- Adjusted gross income after provision for loan losses 492,121 425,532 15.6 + Noninterest expense: Employee compensation, incentives and benefits 246,343 260,141 5.3 - Occupancy 28,784 30,102 4.4 - Equipment rentals, depreciation and maintenance 17,613 20,264 13.1 - Operations services 17,821 17,440 2.2 + Communications and courier 11,540 14,912 22.6 - Amortization of intangible assets 2,825 2,888 2.2 - All other expense 78,086 89,334 12.6 - --------------------------------------------------------------------- Total noninterest expense 403,012 435,081 7.4 - --------------------------------------------------------------------- Pre-tax income/(loss) 89,109 (9,549) NM Provision/(benefit) for income taxes 18,802 (12,959) NM --------------------------------------------------------------------- Income from continuing operations 70,307 3,410 NM Income from discontinued operations, net of tax 240 210,273 99.9 - --------------------------------------------------------------------- Income before cumulative effect of changes in accounting principle 70,547 213,683 67.0 - Cumulative effect of changes in accounting principle, net of tax -- 1,345 NM --------------------------------------------------------------------- Net income $ 70,547 $215,028 67.2 - ==================== --------------------------------------------------------------------- Diluted earnings per common share from continuing operations $ .55 $ .03 NM Diluted earnings per common share before cumulative effect of changes in accounting principle .55 1.66 66.9 - Diluted earnings per common share .55 1.67 67.1 - Dividends declared .45 .45 Diluted shares 128,704 129,100 SELECTED FINANCIAL RATIOS: -------------------------- Return on average assets .74% 2.31% Return on average shareholders' equity 11.6 37.3 --------------------------------------------------------------------- A-1 FIRST HORIZON NATIONAL CORPORATION AVERAGE STATEMENTS OF CONDITION Yearly Growth (Unaudited) --------------------------------------------------------------------- Year-to-date March 31 ------------------------- Growth (Thousands) 2007 2006 Rate (%) --------------------------------------------------------------------- Loans, net of unearned income: Commercial: Commercial, financial and industrial $ 7,131,102 $ 6,415,436 11.2 + Real estate commercial 1,157,711 1,225,049 5.5 - Real estate construction 2,843,263 2,197,693 29.4 + --------------------------------------------------------------------- Total commercial loans 11,132,076 9,838,178 13.2 + Retail: Real estate residential 7,908,039 8,644,920 8.5 - Real estate construction 2,045,952 1,961,658 4.3 + Other retail 153,651 164,567 6.6 - Credit card receivables 195,209 238,089 18.0 - Real estate loans pledged against other collateralized borrowings (a) 572,284 6,535 NM --------------------------------------------------------------------- Total retail loans 10,875,135 11,015,769 1.3 - --------------------------------------------------------------------- Total loans, net of unearned income 22,007,211 20,853,947 5.5 + Investment securities 3,817,015 3,026,429 26.1 + Loans held for sale 3,646,252 4,760,823 23.4 - Other earning assets 4,280,052 4,500,845 4.9 - --------------------------------------------------------------------- Total earning assets 33,750,530 33,142,044 1.8 + Cash and due from banks 880,002 831,172 5.9 + Other assets 4,016,512 3,716,307 8.1 + --------------------------------------------------------------------- Total assets $38,647,044 $37,689,523 2.5 + ========================= Savings $ 3,413,592 $ 2,902,257 17.6 + Interest-bearing demand deposits 1,927,573 1,892,382 1.9 + Time deposits 2,893,963 2,602,581 11.2 + --------------------------------------------------------------------- Total interest-bearing core deposits 8,235,128 7,397,220 11.3 + Noninterest-bearing deposits 5,104,695 4,916,459 3.8 + --------------------------------------------------------------------- Total core deposits 13,339,823 12,313,679 8.3 + Certificates of deposit $100,000 and more 8,040,937 10,626,088 24.3 - --------------------------------------------------------------------- Total deposits 21,380,760 22,939,767 6.8 - Short-term borrowed funds 6,660,465 6,815,291 2.3 - Term borrowings 5,807,925 3,798,645 52.9 + Other collateralized borrowings (a) 581,030 6,662 NM --------------------------------------------------------------------- Total long-term debt 6,388,955 3,805,307 67.9 + Other liabilities 1,457,684 1,498,372 2.7 - Preferred stock of subsidiary 295,277 295,274 -- Shareholders' equity 2,463,903 2,335,512 5.5 + --------------------------------------------------------------------- Total liabilities and shareholders' equity $38,647,044 $37,689,523 2.5 + ========================= --------------------------------------------------------------------- (a) During 2006, FHN sold loans through on-balance sheet securitizations, which were structured as financings for accounting purposes. A-2 FIRST HORIZON NATIONAL CORPORATION PERIOD-END STATEMENTS OF CONDITION (Unaudited) --------------------------------------------------------------------- March 31 ------------------------- Growth (Thousands) 2007 2006 Rate (%) --------------------------------------------------------------------- Loans, net of unearned income: Commercial: Commercial, financial and industrial $ 7,371,873 $ 6,538,798 12.7 + Real estate commercial 1,144,086 1,232,021 7.1 - Real estate construction 2,931,183 2,277,825 28.7 + --------------------------------------------------------------------- Total commercial loans 11,447,142 10,048,644 13.9 + Retail: Real estate residential 7,856,197 8,511,300 7.7 - Real estate construction 2,073,293 2,001,916 3.6 + Other retail 151,959 161,617 6.0 - Credit card receivables 187,658 194,908 3.7 - Real estate loans pledged against other collateralized borrowings (a) 551,941 293,561 88.0 + --------------------------------------------------------------------- Total retail loans 10,821,048 11,163,302 3.1 - --------------------------------------------------------------------- Total loans, net of unearned income 22,268,190 21,211,946 5.0 + Investment securities 3,276,312 2,944,826 11.3 + Loans held for sale 2,921,629 3,579,055 18.4 - Other earning assets 4,216,446 3,881,511 8.6 + --------------------------------------------------------------------- Total earning assets 32,682,577 31,617,338 3.4 + Cash and due from banks 896,182 887,539 1.0 + Discontinued assets 358 56,712 99.4 - Other assets 5,249,649 4,739,386 10.8 + --------------------------------------------------------------------- Total assets $38,828,766 $37,300,975 4.1 + ========================= Savings $ 3,607,674 $ 3,218,206 12.1 + Interest-bearing demand deposits 1,941,422 1,904,235 2.0 + Time deposits 2,876,257 2,692,046 6.8 + --------------------------------------------------------------------- Total interest-bearing core deposits 8,425,353 7,814,487 7.8 + Noninterest-bearing deposits 5,506,791 5,474,017 .6 + --------------------------------------------------------------------- Total core deposits 13,932,144 13,288,504 4.8 + Certificates of deposit $100,000 and more 8,559,807 8,228,543 4.0 + --------------------------------------------------------------------- Total deposits 22,491,951 21,517,047 4.5 + Short-term borrowed funds 4,672,040 5,853,701 20.2 - Term borrowings 5,968,789 4,299,539 38.8 + Other collateralized borrowings (a) 559,226 299,800 86.5 + --------------------------------------------------------------------- Total long-term debt 6,528,015 4,599,339 41.9 + Discontinued liabilities 32,608 233,402 86.0 - Other liabilities 2,294,199 2,402,604 4.5 - Preferred stock of subsidiary 295,277 295,274 -- Shareholders' equity 2,514,676 2,399,608 4.8 + --------------------------------------------------------------------- Total liabilities and shareholders' equity $38,828,766 $37,300,975 4.1 + ========================= --------------------------------------------------------------------- (a) During 2006, FHN sold loans through on-balance sheet securitizations, which were structured as financings for accounting purposes. A-3 FIRST HORIZON NATIONAL CORPORATION ASSET QUALITY HIGHLIGHTS (Unaudited) ---------------------------------------------------------------------- (Thousands) 1Q07 4Q06 3Q06 2Q06 1Q06 ---------------------------------------------------------------------- ALLOWANCE FOR LOAN LOSSES: Beginning Reserve $216,285 $206,829 $199,835 $195,011 $189,705 Provision 28,486 22,983 23,694 18,653 17,799 Divestitures/ acquisitions/ transfers 2,655 -- (275) -- (1,195) Charge-offs (29,665) (16,535) (19,782) (17,518) (14,791) Recoveries 3,045 3,008 3,357 3,689 3,493 ---------------------------------------------------------------------- Ending Balance $220,806 $216,285 $206,829 $199,835 $195,011 ---------------------================================================= Reserve for off-balance sheet commitments $ 9,406 $ 9,378 $ 9,230 $ 9,250 $ 9,420 Total of allowance for loan losses and reserve for off-balance sheet commitments $230,212 $225,663 $216,059 $209,085 $204,431 ---------------------------------------------------------------------- NONPERFORMING ASSETS: RETAIL/COMMERCIAL BANKING: Nonperforming loans $ 73,620 $ 82,837 $ 63,956 $61,358 $49,332 Foreclosed real estate 35,388 31,230 29,947 24,425 19,556 ---------------------------------------------------------------------- Total Retail/ Commercial Banking 109,008 114,067 93,903 85,783 68,888 ---------------------------------------------------------------------- MORTGAGE BANKING: Nonperforming loans - held for sale 10,347 10,793 10,488 14,976 16,000 Foreclosed real estate 16,569 14,168 13,598 11,899 9,538 ---------------------------------------------------------------------- Total Mortgage Banking 26,916 24,961 24,086 26,875 25,538 ---------------------------------------------------------------------- Total nonperforming assets $135,924 $139,028 $117,989 $112,658 $ 94,426 ================================================= Loans past due 90 days or more (a) $169,840 $167,192 $160,662 $165,759 $187,974 Guaranteed portion of loans past due 90 days or more (a) 123,461 128,869 130,373 136,529 159,680 Foreclosed real estate from GNMA loans 16,655 18,121 21,679 24,253 19,865 Period-end loans, net of unearned income (millions) $ 22,268 $ 22,105 $ 21,955 $ 21,717 $ 21,212 Insured loans 847 730 730 753 812 ---------------------------------------------------------------------- Loans excluding insured loans $ 21,421 $ 21,375 $ 21,225 $ 20,964 $ 20,400 ================================================= Off-balance sheet commitments (millions) (b) $ 7,586 $ 7,587 $ 7,416 $ 7,305 $ 7,787 ---------------------------------------------------------------------- (a) Includes loans held for sale. (b) Amount of off-balance sheet commitments for which a reserve has been provided. A-4 FIRST HORIZON NATIONAL CORPORATION ASSET QUALITY HIGHLIGHTS (Unaudited) ---------------------------------------------------------------------- 1Q07 4Q06 3Q06 2Q06 1Q06 ---------------------------------------------------------------------- FHN CONSOLIDATED: Nonperforming loans ratio (a) .33% .37% .29% .28% .23% Nonperforming assets ratio (b) .56 .58 .49 .45 .37 Allowance to total loans .99 .98 .94 .92 .92 Allowance to loans excluding insured loans 1.03 1.01 .97 .95 .96 Allowance to nonperforming loans (c) 299.93 261.10 323.39 325.69 395.30 Allowance to nonperforming assets (d) 175.83 168.66 192.40 204.58 248.66 Net charge-off ratio (e) .48 .25 .30 .26 .22 Coverage ratio (g) 2.07x 4.00x 3.15x 3.61x 4.32x RETAIL/COMMERCIAL BANKING: Nonperforming assets ratio (b) .50% .52% .44% .40% .33% Allowance to nonperforming assets 202.56 189.61 220.26 232.95 283.08 MORTGAGE BANKING: Nonperforming assets ratio (f) .03% .02% .02% .03% .03% HELOC AND REAL ESTATE SECURED INSTALLMENT LOAN HELD TO MATURITY ORIGINATIONS: Whole-loan credit insured 9.22% 8.17% .90% .94% 2.37% Not insured 90.78 91.83 99.10 99.06 97.63 FICO score distribution (not insured) Greater than or equal to 700 83.60% 83.07% 80.80% 82.48% 80.62% 660 to 699 11.51 11.96 13.35 13.16 14.52 620 to 659 3.38 4.07 4.71 3.55 4.04 Less than 620 1.52 .90 1.13 .81 .82 Average FICO score (not insured) 746 745 742 744 740 Cumulative LTV distribution (not insured) Less than or equal to 80% 63.13% 60.14% 56.71% 58.44% 61.96% 80.1% to 90.0% 25.49 28.21 25.09 23.33 24.12 Greater than 90% 11.39 11.65 18.20 18.23 13.92 Average CLTV (not insured) 72.95% 73.82% 75.79% 76.40% 75.07% ---------------------------------------------------------------------- (a) Ratio is nonperforming loans in the loan portfolio to total loans (b) Ratio is nonperforming assets related to the loan portfolio to total loans plus foreclosed real estate and other assets (c) Ratio is allowance to nonperforming loans in the loan portfolio (d) Ratio is allowance to nonperforming assets related to the loan portfolio (e) Ratio is annualized net charge-offs to average total loans (f) Ratio is nonperforming assets to unpaid principal balance of servicing portfolio (g) Ratio is allowance to annualized net charge-offs A-5 FIRST HORIZON NATIONAL CORPORATION BUSINESS SEGMENT HIGHLIGHTS (Unaudited) --------------------------------------------------------------------- (Thousands) 1Q07 4Q06 3Q06 2Q06 1Q06 --------------------------------------------------------------------- RETAIL/COMMERCIAL BANKING Total revenues(a) $327,075 $343,294 $344,424 $346,480 $ 333,479 Provision for loan losses 28,493 23,263 23,549 18,361 18,026 Noninterest expenses 198,195 211,509 205,416 214,744 218,366 ------------------------------------------------- Pre-tax income 100,387 108,522 115,459 113,375 97,087 Provision for income taxes 30,258 33,682 35,470 29,581 27,629 ------------------------------------------------- Net income from continuing operations 70,129 74,840 79,989 83,794 69,458 Income/(loss) from discontinued operations, net of tax 240 187 (69) 376 210,273 ------------------------------------------------- Income before cumulative effect 70,369 75,027 79,920 84,170 279,731 Cumulative effect of changes in accounting principle, net of tax -- -- -- -- 522 ------------------------------------------------- Net income $ 70,369 $ 75,027 $ 79,920 $ 84,170 $ 280,253 MORTGAGE BANKING Total revenues(a) $ 94,077 $112,419 $111,642 $145,102 $ 109,565 Provision for loan losses (7) (280) 145 292 (227) Noninterest expenses 105,331 108,925 136,804 115,155 114,756 ------------------------------------------------- Pre-tax (loss)/income (11,247) 3,774 (25,307) 29,655 (4,964) (Benefit)/provision for income taxes (11,782) 319 (10,283) 10,392 (1,794) ------------------------------------------------- Income/(loss) before cumulative effect 535 3,455 (15,024) 19,263 (3,170) Cumulative effect of changes in accounting principle, net of tax -- -- -- -- 414 ------------------------------------------------- Net income/(loss) $ 535 $ 3,455 $(15,024) $ 19,263 $ (2,756) CAPITAL MARKETS Total revenues(a) $ 83,092 $ 92,634 $ 96,967 $ 99,483 $ 90,912 Noninterest expenses 79,726 84,075 81,778 83,629 82,601 ------------------------------------------------- Pre-tax income 3,366 8,559 15,189 15,854 8,311 Provision for income taxes 1,217 3,180 5,682 5,924 3,075 ------------------------------------------------- Income before cumulative effect 2,149 5,379 9,507 9,930 5,236 Cumulative effect of changes in accounting principle, net of tax -- -- -- -- 179 ------------------------------------------------- Net income $ 2,149 $ 5,379 $ 9,507 $ 9,930 $ 5,415 CORPORATE Total revenues(a) $ 16,363 $ 13,994 $ 16,515 $ (2,455) $ (90,625) Noninterest expenses 19,760 27,121 28,901 9,483 19,358 ------------------------------------------------- Pre-tax loss (3,397) (13,127) (12,386) (11,938) (109,983) Income tax benefit (891) (5,733) (5,093) (2,884) (41,869) ------------------------------------------------- Loss before cumulative effect (2,506) (7,394) (7,293) (9,054) (68,114) Cumulative effect of changes in accounting principle, net of tax -- -- -- -- 230 ------------------------------------------------- Net loss $ (2,506) $ (7,394) $ (7,293) $ (9,054) $ (67,884) TOTAL CONSOLIDATED Total revenues(a) $520,607 $562,341 $569,548 $588,610 $ 443,331 Provision for loan losses 28,486 22,983 23,694 18,653 17,799 Total noninterest expenses 403,012 431,630 452,899 423,011 435,081 ------------------------------------------------- Consolidated pre-tax income/(loss) 89,109 107,728 92,955 146,946 (9,549) Provision/(benefit) for income taxes 18,802 31,448 25,776 43,013 (12,959) ------------------------------------------------- Net income from continuing operations 70,307 76,280 67,179 103,933 3,410 Income/(loss) from discontinued operations, net of tax 240 187 (69) 376 210,273 ------------------------------------------------- Income before cumulative effect 70,547 76,467 67,110 104,309 213,683 Cumulative effect of changes in accounting principle, net of tax -- -- -- -- 1,345 ------------------------------------------------- Net income $ 70,547 $ 76,467 $ 67,110 $104,309 $ 215,028 --------------------------------------------------------------------- Certain previously reported amounts have been reclassified to agree with current presentation. (a) Includes noninterest income and net interest income/(expense) A-6
CONTACT: First Horizon National Corporation Media Information: Kim Cherry (901) 523-4726 Investor Relations: Dave Miller (901) 523-4162