Common
Stock, $.625 par value
|
126,387,854
|
|
CONSOLIDATED
CONDENSED STATEMENTS OF CONDITION
|
First
Horizon National Corporation
|
|||||||
September
30
|
December
31
|
|||||||
(Dollars
in thousands)(Unaudited)
|
2007
|
2006
|
2006
|
|||||
Assets:
|
||||||||
Cash
and due from banks
|
$ 936,707
|
$ 872,528
|
$ 943,555
|
|||||
Federal
funds sold and securities
|
||||||||
purchased
under agreements to resell
|
1,096,624
|
1,992,426
|
1,202,537
|
|||||
Total
cash and cash equivalents
|
2,033,331
|
2,864,954
|
2,146,092
|
|||||
Investment
in bank time deposits
|
30,993
|
17,798
|
18,037
|
|||||
Trading
securities
|
1,734,653
|
2,512,744
|
2,230,745
|
|||||
Loans
held for sale
|
2,900,464
|
2,798,281
|
2,873,577
|
|||||
Loans
held for sale-divestiture
|
565,492
|
-
|
-
|
|||||
Securities
available for sale
|
3,076,120
|
4,013,634
|
3,923,215
|
|||||
Securities
held to maturity (fair value of $241 on September 30, 2007; $373
on
|
||||||||
September
30, 2006; and $272 on December 31, 2006)
|
240
|
369
|
269
|
|||||
Loans,
net of unearned income
|
21,973,004
|
21,955,030
|
22,104,905
|
|||||
Less: Allowance
for loan losses
|
236,611
|
206,829
|
216,285
|
|||||
Total
net loans
|
21,736,393
|
21,748,201
|
21,888,620
|
|||||
Mortgage
servicing rights, net
|
1,470,589
|
1,498,341
|
1,533,942
|
|||||
Goodwill
|
267,228
|
274,534
|
275,582
|
|||||
Other
intangible assets, net
|
58,738
|
70,546
|
64,530
|
|||||
Capital
markets receivables
|
1,219,720
|
1,027,927
|
732,282
|
|||||
Premises
and equipment, net
|
411,515
|
441,659
|
451,708
|
|||||
Real
estate acquired by foreclosure
|
75,656
|
65,224
|
63,519
|
|||||
Discontinued
assets
|
-
|
939,728
|
416
|
|||||
Other
assets
|
1,874,497
|
1,802,243
|
1,715,725
|
|||||
Other
assets-divestiture
|
22,623
|
-
|
-
|
|||||
Total
assets
|
$
37,478,252
|
$
40,076,183
|
$
37,918,259
|
|||||
Liabilities
and shareholders' equity:
|
||||||||
Deposits:
|
||||||||
Savings
|
$ 3,592,732
|
$ 3,256,680
|
$ 3,354,180
|
|||||
Time
deposits
|
2,822,792
|
2,906,424
|
2,924,050
|
|||||
Other
interest-bearing deposits
|
1,674,624
|
1,742,276
|
1,969,700
|
|||||
Interest-bearing
deposits-divestiture
|
361,368
|
-
|
-
|
|||||
Certificates
of deposit $100,000 and more
|
5,142,169
|
11,920,226
|
6,517,629
|
|||||
Certificates
of deposit $100,000 and more-divestiture
|
41,037
|
-
|
-
|
|||||
Interest-bearing
|
13,634,722
|
19,825,606
|
14,765,559
|
|||||
Noninterest-bearing
|
4,928,233
|
5,458,935
|
5,447,673
|
|||||
Noninterest-bearing-divestiture
|
72,404
|
-
|
-
|
|||||
Total
deposits
|
18,635,359
|
25,284,541
|
20,213,232
|
|||||
Federal
funds purchased and securities
|
||||||||
sold
under agreements to repurchase
|
4,039,827
|
2,416,974
|
4,961,799
|
|||||
Trading
liabilities
|
543,060
|
847,453
|
789,957
|
|||||
Commercial
paper and other short-term borrowings
|
2,396,316
|
926,292
|
1,258,513
|
|||||
Term
borrowings
|
6,015,954
|
5,226,772
|
5,243,961
|
|||||
Other
collateralized borrowings
|
784,599
|
260,416
|
592,399
|
|||||
Total
long-term debt
|
6,800,553
|
5,487,188
|
5,836,360
|
|||||
Capital
markets payables
|
1,053,349
|
989,332
|
799,489
|
|||||
Discontinued
liabilities
|
-
|
6,977
|
6,966
|
|||||
Other
liabilities
|
1,253,295
|
1,311,628
|
1,294,283
|
|||||
Other
liabilities-divestiture
|
39,389
|
-
|
-
|
|||||
Total
liabilities
|
34,761,148
|
37,270,385
|
35,160,599
|
|||||
Preferred
stock of subsidiary
|
295,277
|
295,274
|
295,270
|
|||||
Shareholders'
equity
|
||||||||
Preferred
stock - no par value (5,000,000 shares authorized, but
unissued)
|
-
|
-
|
-
|
|||||
Common
stock - $.625 par value (shares authorized - 400,000,000;
|
||||||||
shares
issued and outstanding - 126,387,854 on September 30,
2007;
|
||||||||
124,467,143 on September 30, 2006; and 124,865,982 on December
31,
2006)
|
78,992
|
77,792
|
78,041
|
|||||
Capital
surplus
|
360,016
|
301,857
|
312,521
|
|||||
Undivided
profits
|
2,048,689
|
2,124,312
|
2,144,276
|
|||||
Accumulated
other comprehensive (loss)/ income, net
|
(65,870
|
) |
6,563
|
(72,448
|
) | |||
Total
shareholders' equity
|
2,421,827
|
2,510,524
|
2,462,390
|
|||||
Total
liabilities and shareholders' equity
|
$
37,478,252
|
$
40,076,183
|
$
37,918,259
|
|||||
See
accompanying notes to consolidated condensed financial
statements. Certain previously reported amounts have been reclassified to agree with current presentation. |
CONSOLIDATED CONDENSED STATEMENTS OF INCOME |
First
Horizon National Corporation
|
|||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(Dollars
in thousands except per share data)(Unaudited)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Interest
income:
|
||||||||||||||||
Interest
and fees on loans
|
$ |
413,275
|
$ |
416,898
|
$ |
1,236,956
|
$ |
1,173,832
|
||||||||
Interest
on investment securities
|
44,990
|
54,138
|
146,365
|
132,024
|
||||||||||||
Interest
on loans held for sale
|
66,570
|
72,135
|
191,338
|
224,309
|
||||||||||||
Interest
on trading securities
|
41,898
|
44,850
|
132,530
|
126,963
|
||||||||||||
Interest
on other earning assets
|
16,002
|
24,577
|
53,634
|
67,421
|
||||||||||||
Total
interest income
|
582,735
|
612,598
|
1,760,823
|
1,724,549
|
||||||||||||
Interest
expense:
|
||||||||||||||||
Interest
on deposits:
|
||||||||||||||||
Savings
|
29,140
|
25,083
|
85,090
|
62,256
|
||||||||||||
Time
deposits
|
34,745
|
32,090
|
101,337
|
86,544
|
||||||||||||
Other
interest-bearing deposits
|
6,179
|
6,562
|
19,876
|
18,474
|
||||||||||||
Certificates
of deposit $100,000 and more
|
92,557
|
130,875
|
309,463
|
360,239
|
||||||||||||
Interest
on trading liabilities
|
10,295
|
19,233
|
40,928
|
57,503
|
||||||||||||
Interest
on short-term borrowings
|
75,114
|
66,871
|
211,210
|
190,495
|
||||||||||||
Interest
on long-term debt
|
96,901
|
80,263
|
278,264
|
198,098
|
||||||||||||
Total
interest expense
|
344,931
|
360,977
|
1,046,168
|
973,609
|
||||||||||||
Net
interest income
|
237,804
|
251,621
|
714,655
|
750,940
|
||||||||||||
Provision
for loan losses
|
43,352
|
23,694
|
116,246
|
60,146
|
||||||||||||
Net
interest income after provision for loan losses
|
194,452
|
227,927
|
598,409
|
690,794
|
||||||||||||
Noninterest
income:
|
||||||||||||||||
Capital
markets
|
63,722
|
95,215
|
235,889
|
290,238
|
||||||||||||
Mortgage
banking
|
39,022
|
85,935
|
183,419
|
283,089
|
||||||||||||
Deposit
transactions and cash management
|
44,863
|
44,503
|
127,300
|
125,282
|
||||||||||||
Revenue
from loan sales and securitizations
|
4,774
|
11,830
|
24,052
|
35,399
|
||||||||||||
Insurance
commissions
|
6,747
|
10,534
|
24,210
|
37,681
|
||||||||||||
Trust
services and investment management
|
9,922
|
9,609
|
30,238
|
31,090
|
||||||||||||
Equity
securities gains, net
|
-
|
8,757
|
2,967
|
10,271
|
||||||||||||
Debt
securities gains/(losses), net
|
-
|
-
|
6,292
|
(78,902 | ) | |||||||||||
All
other income and commissions
|
34,425
|
51,544
|
132,595
|
116,401
|
||||||||||||
Total
noninterest income
|
203,475
|
317,927
|
766,962
|
850,549
|
||||||||||||
Adjusted
gross income after provision for loan losses
|
397,927
|
545,854
|
1,365,371
|
1,541,343
|
||||||||||||
Noninterest
expense:
|
||||||||||||||||
Employee
compensation, incentives and benefits
|
236,683
|
260,351
|
741,217
|
766,288
|
||||||||||||
Occupancy
|
34,778
|
29,745
|
96,964
|
87,372
|
||||||||||||
Equipment
rentals, depreciation and maintenance
|
17,270
|
17,893
|
56,674
|
56,015
|
||||||||||||
Operations
services
|
18,774
|
17,976
|
54,052
|
52,491
|
||||||||||||
Communications
and courier
|
10,959
|
12,950
|
33,245
|
41,271
|
||||||||||||
Amortization
of intangible assets
|
2,647
|
3,233
|
8,095
|
9,002
|
||||||||||||
Goodwill impairment | 13,010 | - | 13,010 | - | ||||||||||||
All
other expense
|
87,501
|
110,751
|
278,617
|
298,552
|
||||||||||||
Total
noninterest expense
|
421,622
|
452,899
|
1,281,874
|
1,310,991
|
||||||||||||
(Loss)/
income before income taxes
|
(23,695 | ) |
92,955
|
83,497
|
230,352
|
|||||||||||
(Benefit)/provision
for income taxes
|
(9,330 | ) |
25,776
|
5,611
|
55,830
|
|||||||||||
(Loss)/
income from continuing operations
|
(14,365 | ) |
67,179
|
77,886
|
174,522
|
|||||||||||
Income/
(loss) from discontinued operations, net of tax
|
209
|
(69 | ) |
628
|
210,580
|
|||||||||||
(Loss)/ income before cumulative effect of changes in accounting principle | (14,156 | ) |
67,110
|
78,514
|
385,102
|
|||||||||||
Cumulative
effect of changes in accounting principle, net of tax
|
-
|
-
|
-
|
1,345
|
||||||||||||
Net
(loss)/ income
|
$ | (14,156 | ) | $ |
67,110
|
$ |
78,514
|
$ |
386,447
|
|||||||
(Loss)/
earnings per common share from continuing operations
|
$ | (.11 | ) | $ |
.54
|
$ |
.62
|
$ |
1.40
|
|||||||
Earnings
per common share from discontinued operations, net of tax
|
-
|
-
|
-
|
1.69
|
||||||||||||
Earnings per common share from cumulative effect of changes in accounting principle |
-
|
-
|
-
|
.02
|
||||||||||||
(Loss)/
earnings per common share (Note 7)
|
$ | (.11 | ) | $ |
.54
|
$ |
.62
|
$ |
3.11
|
|||||||
(Loss)/
diluted earnings per common share from continuing
operations
|
$ | (.11 | ) | $ |
.53
|
$ |
.61
|
$ |
1.36
|
|||||||
Diluted
earnings per common share from discontinued operations, net of
tax
|
-
|
-
|
-
|
1.65
|
||||||||||||
Diluted earnings per common share from cumulative effect of changes in accounting principle |
-
|
-
|
-
|
.01
|
||||||||||||
(Loss)/
diluted earnings per common share (Note
7)
|
$ | (.11 | ) | $ |
.53
|
$ |
.61
|
$ |
3.02
|
|||||||
Weighted
average common shares (Note 7)
|
126,058
|
124,150
|
125,760
|
124,431
|
||||||||||||
Diluted
average common shares (Note 7)
|
126,058
|
127,523
|
127,823
|
127,962
|
||||||||||||
See
accompanying notes to consolidated condensed financial
statements.
Certain previously reported amounts have been reclassified to agree with current presentation. |
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY |
First
Horizon National Corporation
|
|||||||
(Dollars
in thousands)(Unaudited)
|
2007
|
2006
|
||||||
Balance,
January 1
|
$2,462,390
|
$2,347,539
|
||||||
Adjustment
to reflect change in accounting for tax benefits (FIN 48)
|
(862 | ) |
-
|
|||||
Adjustment
to reflect adoption of measurement date provisions for SFAS No.
158
|
6,233
|
-
|
||||||
Adjustment
to reflect change in accounting for purchases of life
insurance
|
||||||||
(EITF
Issue No. 06-5)
|
(548 | ) |
-
|
|||||
Net
income
|
78,514
|
386,447
|
||||||
Other
comprehensive income:
|
||||||||
Unrealized
fair value adjustments, net of tax:
|
||||||||
Cash
flow hedges
|
(268 | ) |
434
|
|||||
Securities
available for sale
|
(5,591 | ) |
48,373
|
|||||
Recognized
pension and other employee benefit plans net periodic benefit
costs
|
4,127
|
-
|
||||||
Comprehensive
income
|
76,782
|
435,254
|
||||||
Cash
dividends declared
|
(170,620 | ) | (168,065 | ) | ||||
Common
stock repurchased
|
(1,099 | ) | (165,569 | ) | ||||
Common
stock issued for:
|
||||||||
Stock
options and restricted stock
|
34,243
|
49,432
|
||||||
Acquisitions
|
-
|
486
|
||||||
Excess
tax benefit from stock-based compensation arrangements
|
6,261
|
3,592
|
||||||
Adjustment
to reflect change in accounting for employee stock option
forfeitures
|
-
|
(1,780 | ) | |||||
Stock-based
compensation expense
|
9,016
|
9,635
|
||||||
Other
|
31
|
-
|
||||||
Balance,
September 30
|
$2,421,827
|
$2,510,524
|
||||||
See
accompanying notes to consolidated condensed financial
statements.
|
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
First
Horizon National Corporation
|
||||||||
Nine
Months Ended September 30
|
|||||||||
(Dollars
in thousands)(Unaudited)
|
2007
|
2006
|
|||||||
Operating
|
Net
income
|
$
78,514
|
$
386,447
|
||||||
Activities
|
Adjustments
to reconcile net income to net cash provided/(used) by operating
activities:
|
||||||||
Provision
for loan losses
|
116,246
|
60,146
|
|||||||
Provision
for deferred income tax
|
5,611
|
55,830
|
|||||||
Depreciation
and amortization of premises and equipment
|
44,286
|
39,787
|
|||||||
Amortization
of intangible assets
|
8,095
|
9,227
|
|||||||
Net
other amortization and accretion
|
48,978
|
61,137
|
|||||||
Decrease
in derivatives, net
|
(103,163 | ) | (164,317 | ) | |||||
Market
value adjustment on mortgage servicing rights
|
258
|
(35,830 | ) | ||||||
Provision
for foreclosure reserve
|
4,144
|
9,266
|
|||||||
Cumulative
effect of changes in accounting principle, net of tax
|
-
|
(1,345 | ) | ||||||
Gain
on divestiture
|
-
|
(208,581 | ) | ||||||
Stock-based
compensation expense
|
9,016
|
9,635
|
|||||||
Excess
tax benefit from stock-based compensation arrangements
|
(6,261 | ) | (3,592 | ) | |||||
Equity
securities gains, net
|
(2,967 | ) | (10,271 | ) | |||||
Debt
securities (gains)/losses, net
|
(6,292 | ) |
78,902
|
||||||
Net
losses on disposal of fixed assets
|
1,093
|
3,193
|
|||||||
Net
(increase)/decrease in:
|
|||||||||
Trading
securities
|
496,092
|
(379,316 | ) | ||||||
Loans
held for sale
|
(26,887 | ) |
1,619,378
|
||||||
Capital
markets receivables
|
(487,438 | ) | (516,419 | ) | |||||
Interest
receivable
|
3,466
|
(22,284 | ) | ||||||
Other
assets
|
24,965
|
(1,132,665 | ) | ||||||
Net
increase/(decrease) in:
|
|||||||||
Capital
markets payables
|
253,860
|
398,005
|
|||||||
Interest
payable
|
4,984
|
49,066
|
|||||||
Other
liabilities
|
(74,502 | ) |
40,448
|
||||||
Trading
liabilities
|
(246,897 | ) |
53,815
|
||||||
Total
adjustments
|
66,687
|
13,215
|
|||||||
Net
cash provided by operating activities
|
145,201
|
399,662
|
|||||||
Investing
|
Held
to
maturity securities:
|
||||||||
Activities
|
Maturities
|
29
|
15
|
||||||
Available
for sale securities:
|
|||||||||
Sales
|
636,188
|
2,286,850
|
|||||||
Maturities
|
765,601
|
514,301
|
|||||||
Purchases
|
(543,545 | ) | (3,854,017 | ) | |||||
Premises
and equipment:
|
|||||||||
Sales
|
-
|
44
|
|||||||
Purchases
|
(24,194 | ) | (75,967 | ) | |||||
Net
increase in loans
|
(581,368 | ) | (1,499,550 | ) | |||||
Net
increase in investment in bank time deposits
|
(12,952 | ) | (7,111 | ) | |||||
Proceeds
from divestitures, net of cash and cash equivalents
|
-
|
280,041
|
|||||||
Acquisitions,
net of cash and cash equivalents acquired
|
-
|
(487 | ) | ||||||
Net
cash provided/(used) by investing activities
|
239,759
|
(2,355,881 | ) | ||||||
Financing
|
Common
stock:
|
||||||||
Activities
|
Exercise
of stock options
|
34,450
|
49,448
|
||||||
Cash
dividends paid
|
(168,506 | ) | (167,551 | ) | |||||
Repurchase
of shares
|
(1,099 | ) | (165,569 | ) | |||||
Excess
tax benefit from stock-based compensation arrangements
|
6,261
|
3,592
|
|||||||
Long-term
debt:
|
|||||||||
Issuance
|
1,222,431
|
2,234,160
|
|||||||
Payments
|
(265,056 | ) | (189,667 | ) | |||||
Issuance
of preferred stock of subsidiary
|
8
|
-
|
|||||||
Repurchase
of preferred stock of subsidiary
|
(1 | ) |
-
|
||||||
Net
increase/(decrease) in:
|
|||||||||
Deposits
|
(1,577,872 | ) |
1,848,370
|
||||||
Short-term
borrowings
|
251,663
|
(1,194,493 | ) | ||||||
Net
cash (used)/provided by financing activities
|
(497,721 | ) |
2,418,290
|
||||||
Net
(decrease)/increase in cash and cash equivalents
|
(112,761 | ) |
462,071
|
||||||
Cash
and cash equivalents at beginning of period
|
2,146,092
|
2,402,883
|
|||||||
Cash
and cash equivalents at end of period
|
$2,033,331
|
$2,864,954
|
|||||||
Cash
and cash equivalents from discontinued operations at beginning
of period,
included above
|
$
-
|
$
874
|
|||||||
Total
interest paid
|
1,039,828
|
923,139
|
|||||||
Total
income taxes paid
|
14,016
|
105,779
|
|||||||
See
accompanying notes to consolidated condensed financial
statements.
Certain
previously reported amounts have been reclassified to agree with
current
presentation.
|
Note
3 - Loans
|
||||||||||||||||
The
composition of the loan portfolio is detailed below:
|
||||||||||||||||
September
30
|
December
31
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2006
|
|||||||||||||
Commercial:
|
||||||||||||||||
Commercial,
financial and industrial
|
$ |
6,978,643
|
$ |
6,945,207
|
$ |
7,201,009
|
||||||||||
Real
estate commercial
|
1,326,261
|
1,199,084
|
1,136,590
|
|||||||||||||
Real
estate construction
|
2,828,545
|
2,660,415
|
2,753,458
|
|||||||||||||
Retail:
|
||||||||||||||||
Real
estate residential
|
7,544,048
|
8,428,652
|
7,973,313
|
|||||||||||||
Real
estate construction
|
2,160,593
|
2,096,440
|
2,085,133
|
|||||||||||||
Other
retail
|
144,526
|
163,134
|
161,178
|
|||||||||||||
Credit
card receivables
|
196,967
|
202,866
|
203,307
|
|||||||||||||
Real
estate loans pledged against other collateralized
|
||||||||||||||||
borrowings
|
793,421
|
259,232
|
590,917
|
|||||||||||||
Loans,
net of unearned income
|
21,973,004
|
21,955,030
|
22,104,905
|
|||||||||||||
Allowance
for loan losses
|
236,611
|
206,829
|
216,285
|
|||||||||||||
Total
net loans
|
$ |
21,736,393
|
$ |
21,748,201
|
$ |
21,888,620
|
||||||||||
Certain
previously reported amounts have been reclassified to agree with
current
presentation.
|
||||||||||||||||
Nonperforming
loans consist of loans which management has identified as impaired,
other
nonaccrual loans and loans which have been
|
||||||||||||||||
restructured. On
September 30, 2007 and 2006, there were no outstanding commitments
to
advance additional funds to customers whose
|
||||||||||||||||
loans
had been restructured. The following table presents nonperforming
loans on:
|
||||||||||||||||
September
30
|
December
31
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2006
|
|||||||||||||
Impaired
loans
|
$ |
181,010
|
$ |
60,372
|
$ |
76,340
|
||||||||||
Other
nonaccrual loans*
|
27,296
|
14,072
|
17,290
|
|||||||||||||
Total
nonperforming loans
|
$ |
208,306
|
$ |
74,444
|
$ |
93,630
|
||||||||||
*
On
September 30, 2007 and 2006, and on December 31, 2006, other nonaccrual
loans included $18.5 million, $10.5 million,
|
||||||||||||||||
and
$10.8 million, respectively, of loans held for sale.
|
||||||||||||||||
Generally,
interest payments received on impaired loans are applied to
principal. Once all principal has been received, additional
payments
|
||||||||||||||||
are
recognized as interest income on a cash basis. The following table
presents information concerning impaired loans:
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Total
interest on impaired loans
|
$ |
152
|
$ |
538
|
$ |
646
|
$ |
882
|
||||||||
Average
balance of impaired loans
|
158,373
|
54,227
|
112,857
|
48,945
|
||||||||||||
Activity
in the allowance for loan losses related to non-impaired loans,
impaired
loans, and for the total allowance for the nine months
ended
|
||||||||||||||||
September
30, 2007 and 2006, is summarized as follows:
|
||||||||||||||||
(Dollars
in thousands)
|
Non-impaired
|
Impaired
|
Total
|
|||||||||||||
Balance
on December 31, 2005
|
$ |
179,635
|
$ |
10,070
|
$ |
189,705
|
||||||||||
Provision
for loan losses
|
35,255
|
24,891
|
60,146
|
|||||||||||||
Divestitures/acquisitions/transfers
|
(1,470 | ) |
-
|
(1,470 | ) | |||||||||||
Charge-offs
|
(29,414 | ) | (22,677 | ) | (52,091 | ) | ||||||||||
Recoveries
|
7,687
|
2,852
|
10,539
|
|||||||||||||
Net
charge-offs
|
(21,727 | ) | (19,825 | ) | (41,552 | ) | ||||||||||
Balance
on September 30, 2006
|
$ |
191,693
|
$ |
15,136
|
$ |
206,829
|
||||||||||
Balance
on December 31, 2006
|
$ |
200,827
|
$ |
15,458
|
$ |
216,285
|
||||||||||
Provision
for loan losses
|
50,773
|
65,473
|
116,246
|
|||||||||||||
Divestitures/acquisitions/transfers
|
(16,237 | ) |
1,290
|
(14,947 | ) | |||||||||||
Charge-offs
|
(35,476 | ) | (56,540 | ) | (92,016 | ) | ||||||||||
Recoveries
|
6,893
|
4,150
|
11,043
|
|||||||||||||
Net
charge-offs
|
(28,583 | ) | (52,390 | ) | (80,973 | ) | ||||||||||
Balance
on September 30, 2007
|
$ |
206,780
|
$ |
29,831
|
$ |
236,611
|
||||||||||
First
|
Second
|
|||||||||||
(Dollars
in thousands)
|
Liens
|
Liens
|
HELOC
|
|||||||||
Fair
value on January 1, 2006
|
$ |
1,318,219
|
$ |
5,470
|
$ |
14,384
|
||||||
Addition
of mortgage servicing rights
|
303,791
|
15,532
|
5,421
|
|||||||||
Reductions
due to loan payments
|
(191,239 | ) | (2,924 | ) | (6,143 | ) | ||||||
Changes
in fair value due to:
|
||||||||||||
Changes
in current market interest rates
|
33,536
|
34
|
1,090
|
|||||||||
Changes
in assumptions
|
-
|
722
|
8
|
|||||||||
Other
changes in fair value
|
53
|
17
|
370
|
|||||||||
Fair
value on September 30, 2006
|
$ |
1,464,360
|
$ |
18,851
|
$ |
15,130
|
||||||
Fair
value on January 1, 2007
|
$ |
1,495,215
|
$ |
24,091
|
$ |
14,636
|
||||||
Addition
of mortgage servicing rights
|
282,341
|
11,582
|
1,919
|
|||||||||
Reductions
due to loan payments
|
(173,323 | ) | (7,106 | ) | (3,961 | ) | ||||||
Changes
in fair value due to:
|
||||||||||||
Changes
in current market interest rates
|
(387 | ) |
98
|
(39 | ) | |||||||
Reclassification
to trading assets
|
(174,547 | ) |
-
|
-
|
||||||||
Other
changes in fair value
|
(54 | ) |
82
|
42
|
||||||||
Fair
value on September 30, 2007
|
$ |
1,429,245
|
$ |
28,747
|
$ |
12,597
|
Other
|
||||||||
Intangible
|
||||||||
(Dollars
in thousands)
|
Goodwill
|
Assets*
|
||||||
December
31, 2005
|
$ |
281,440
|
$ |
76,647
|
||||
Amortization
expense
|
-
|
(9,002 | ) | |||||
Additions
|
4,871
|
6,124
|
||||||
Divestitures
|
(11,777 | ) | (3,223 | ) | ||||
September
30, 2006
|
$ |
274,534
|
$ |
70,546
|
||||
December
31, 2006
|
$ |
275,582
|
$ |
64,530
|
||||
Amortization
expense
|
-
|
(8,095 | ) | |||||
Impairment**
|
(13,010 | ) | (910 | ) | ||||
Divestitures
|
-
|
(93 | ) | |||||
Additions***
|
4,656
|
3,306
|
||||||
September
30, 2007
|
$ |
267,228
|
$ |
58,738
|
||||
* Represents customer lists, acquired contracts, premium on purchased
deposits, covenants not to compete and assets related to the minimum
pension liability.
|
||||||||
**
See Note 2 - Acquisition/Divestitures for further details.
|
||||||||
***
Preliminary purchase price allocations on acquisitions are based
upon
estimates of fair value and are subject to change.
|
Retail/
|
||||||||||||||||
Commercial
|
Mortgage
|
Capital
|
||||||||||||||
(Dollars
in thousands)
|
Banking
|
Banking
|
Markets
|
Total
|
||||||||||||
December
31, 2005
|
$ |
104,781
|
$ |
61,593
|
$ |
115,066
|
$ |
281,440
|
||||||||
Divestitures
|
(11,777 | ) |
-
|
-
|
(11,777 | ) | ||||||||||
Additions
|
1,272
|
3,599
|
-
|
4,871
|
||||||||||||
September
30, 2006
|
$ |
94,276
|
$ |
65,192
|
$ |
115,066
|
$ |
274,534
|
||||||||
December
31, 2006
|
$ |
94,276
|
$ |
66,240
|
$ |
115,066
|
$ |
275,582
|
||||||||
Impairment
|
(13,010 | ) |
-
|
-
|
(13,010 | ) | ||||||||||
Additions*
|
-
|
4,656
|
-
|
4,656
|
||||||||||||
September
30, 2007
|
$ |
81,266
|
$ |
70,896
|
$ |
115,066
|
$ |
267,228
|
||||||||
*
Preliminary purchase price allocations on acquisitions are based
upon
estimates of fair value and are subject to change.
|
First
Horizon National
|
First
Tennessee Bank
|
|||||||||||||||||
Corporation
|
National
Association
|
|||||||||||||||||
(Dollars
in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||
On
September 30, 2007:
|
||||||||||||||||||
Actual:
|
||||||||||||||||||
Total
Capital
|
$ |
3,988,233
|
12.85 | % | $ |
3,796,610
|
12.38 | % | ||||||||||
Tier
1
Capital
|
2,666,834
|
8.59
|
2,575,210
|
8.39
|
||||||||||||||
Leverage
|
2,666,834
|
7.12
|
2,575,210
|
6.93
|
||||||||||||||
For
Capital Adequacy Purposes:
|
||||||||||||||||||
Total
Capital
|
2,483,350
|
>
|
8.00
|
2,454,189
|
>
|
8.00
|
||||||||||||
Tier
1
Capital
|
1,241,675
|
>
|
4.00
|
1,227,094
|
>
|
4.00
|
||||||||||||
Leverage
|
1,498,359
|
>
|
4.00
|
1,486,043
|
>
|
4.00
|
||||||||||||
To
Be
Well Capitalized Under Prompt
|
||||||||||||||||||
Corrective
Action Provisions:
|
||||||||||||||||||
Total
Capital
|
3,067,736
|
>
|
10.00
|
|||||||||||||||
Tier
1
Capital
|
1,840,642
|
>
|
6.00
|
|||||||||||||||
Leverage
|
1,857,554
|
>
|
5.00
|
|||||||||||||||
On
September 30, 2006:
|
||||||||||||||||||
Actual:
|
||||||||||||||||||
Total
Capital
|
$ |
3,998,431
|
12.66 | % | $ |
3,806,220
|
12.14 | % | ||||||||||
Tier
1
Capital
|
2,660,264
|
8.42
|
2,568,052
|
8.19
|
||||||||||||||
Leverage
|
2,660,264
|
6.80
|
2,568,052
|
6.62
|
||||||||||||||
For
Capital Adequacy Purposes:
|
||||||||||||||||||
Total
Capital
|
2,526,690
|
>
|
8.00
|
2,507,515
|
>
|
8.00
|
||||||||||||
Tier
1
Capital
|
1,263,345
|
>
|
4.00
|
1,253,757
|
>
|
4.00
|
||||||||||||
Leverage
|
1,564,438
|
>
|
4.00
|
1,552,664
|
>
|
4.00
|
||||||||||||
To
Be
Well Capitalized Under Prompt
|
||||||||||||||||||
Corrective
Action Provisions:
|
||||||||||||||||||
Total
Capital
|
3,134,393
|
>
|
10.00
|
|||||||||||||||
Tier
1
Capital
|
1,880,636
|
>
|
6.00
|
|||||||||||||||
Leverage
|
1,940,830
|
>
|
5.00
|
|||||||||||||||
Certain
previously reported amounts have been reclassified to agree with
current
presentation.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(In
thousands, except per share data)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Net
(loss)/income from continuing operations
|
$ (14,365 | ) |
$
67,179
|
$
77,886
|
$
174,522
|
|||||||||||
Income/(loss)
from discontinued operations, net of tax
|
209
|
(69 | ) |
628
|
210,580
|
|||||||||||
Cumulative
effect of changes in accounting
|
||||||||||||||||
principle,
net of tax
|
-
|
-
|
-
|
1,345
|
||||||||||||
Net
(loss)/income
|
$ (14,156 | ) |
$
67,110
|
$
78,514
|
$
386,447
|
|||||||||||
Weighted
average common shares
|
126,058
|
124,150
|
125,760
|
124,431
|
||||||||||||
Effect
of dilutive securities
|
-
|
3,373
|
2,063
|
3,531
|
||||||||||||
Diluted
average common shares
|
126,058
|
127,523
|
127,823
|
127,962
|
||||||||||||
Earnings
per common share:
|
||||||||||||||||
Net
(loss)/income from continuing operations
|
$ (.11 | ) |
$
.54
|
$
.62
|
$
1.40
|
|||||||||||
Income
from discontinued operations, net of tax
|
-
|
-
|
-
|
1.69
|
||||||||||||
Cumulative
effect of changes in accounting
|
||||||||||||||||
principle,
net of tax
|
-
|
-
|
-
|
.02
|
||||||||||||
Net
(loss)/income
|
$ (.11 | ) |
$
.54
|
$
.62
|
$
3.11
|
|||||||||||
Diluted
earnings per common share:
|
||||||||||||||||
Net
(loss)/income from continuing operations
|
$ (.11 | ) |
$
.53
|
$
.61
|
$
1.36
|
|||||||||||
Income
from discontinued operations, net of tax
|
-
|
-
|
-
|
1.65
|
||||||||||||
Cumulative
effect of changes in accounting
|
||||||||||||||||
principle,
net of tax
|
-
|
-
|
-
|
.01
|
||||||||||||
Net
(loss)/income
|
$ (.11 | ) |
$
.53
|
$
.61
|
$
3.02
|
Equity
awards of 17,811 and 6,730 with a weighted average exercise price
of
$34.76 and $42.34 per share for the three months ended September
30, 2007
and
2006 and of 9,876 and 6,174 with weighted average exercise prices
of
$37.81 and $42.56 per share for the nine months ended September
30, 2007
and
2006, respectively, were not included in the computation of
diluted earnings per common share because such shares would have
had an
antidilutive effect on
earnings per common share.
|
In
first quarter 2006, FHN purchased four million shares of its
common stock.
This share repurchase program was concluded for an adjusted
purchase price of $165.1 million in second quarter
2006.
|
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Components
of net periodic benefit cost/(benefit)
|
||||||||||||||||
Service
cost
|
$
4,324
|
$
4,521
|
$
74
|
$
83
|
||||||||||||
Interest
cost
|
6,153
|
5,485
|
278
|
279
|
||||||||||||
Expected
return on plan assets
|
(10,638 | ) | (8,945 | ) | (440 | ) | (421 | ) | ||||||||
Amortization
of prior service cost/(benefit)
|
220
|
211
|
(44 | ) | (44 | ) | ||||||||||
Recognized
losses/(gains)
|
2,226
|
1,769
|
(177 | ) | (141 | ) | ||||||||||
Amortization
of transition obligation
|
-
|
-
|
247
|
248
|
||||||||||||
Net
periodic cost/(benefit)
|
$
2,285
|
$
3,041
|
$ (62 | ) |
$
4
|
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Components
of net periodic benefit cost/(benefit)
|
||||||||||||||||
Service
cost
|
$
12,978
|
$
13,561
|
$
224
|
$
249
|
||||||||||||
Interest
cost
|
18,461
|
16,456
|
834
|
837
|
||||||||||||
Expected
return on plan assets
|
(31,912 | ) | (26,834 | ) | (1,322 | ) | (1,262 | ) | ||||||||
Amortization
of prior service cost/(benefit)
|
660
|
633
|
(132 | ) | (132 | ) | ||||||||||
Recognized
losses/(gains)
|
5,846
|
5,306
|
(533 | ) | (422 | ) | ||||||||||
Amortization
of transition obligation
|
-
|
-
|
741
|
742
|
||||||||||||
Net
periodic cost/(benefit)
|
$
6,033
|
$
9,122
|
$ (188 | ) |
$
12
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Total
Consolidated
|
||||||||||||||||
Net
interest income
|
$
237,804
|
$
251,621
|
$
714,655
|
$
750,940
|
||||||||||||
Provision
for loan losses
|
43,352
|
23,694
|
116,246
|
60,146
|
||||||||||||
Noninterest
income
|
203,475
|
317,927
|
766,962
|
850,549
|
||||||||||||
Noninterest
expense
|
421,622
|
452,899
|
1,281,874
|
1,310,991
|
||||||||||||
Pre-tax
(loss)/income
|
(23,695 | ) |
92,955
|
83,497
|
230,352
|
|||||||||||
(Benefit)/provision
for income taxes
|
(9,330 | ) |
25,776
|
5,611
|
55,830
|
|||||||||||
(Loss)/income
from continuing operations
|
(14,365 | ) |
67,179
|
77,886
|
174,522
|
|||||||||||
Income/(loss)
from discontinued operations, net of tax
|
209
|
(69 | ) |
628
|
210,580
|
|||||||||||
(Loss)/income
before cumulative effect of changes
|
||||||||||||||||
in
accounting principle
|
(14,156 | ) |
67,110
|
78,514
|
385,102
|
|||||||||||
Cumulative
effect of changes in
|
||||||||||||||||
accounting
principle, net of tax
|
-
|
-
|
-
|
1,345
|
||||||||||||
Net
(loss)/income
|
$ (14,156 | ) |
$
67,110
|
$
78,514
|
$ 386,447
|
|||||||||||
Average
assets
|
$
37,754,038
|
$
39,519,765
|
$
38,487,137
|
$
38,574,766
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Retail/Commercial
Banking
|
||||||||||||||||
Net
interest income
|
$ |
219,579
|
$ |
232,830
|
$ |
661,591
|
$ |
691,066
|
||||||||
Provision
for loan losses
|
43,349
|
23,549
|
108,689
|
59,936
|
||||||||||||
Noninterest
income
|
95,397
|
111,594
|
305,005
|
333,317
|
||||||||||||
Noninterest
expense
|
193,269
|
205,416
|
597,681
|
638,526
|
||||||||||||
Pre-tax
income
|
78,358
|
115,459
|
260,226
|
325,921
|
||||||||||||
Provision
for income taxes
|
27,792
|
35,470
|
80,824
|
92,680
|
||||||||||||
Income
from continuing operations
|
50,566
|
79,989
|
179,402
|
233,241
|
||||||||||||
Income/(loss)
from discontinued operations, net of tax
|
209
|
(69 | ) |
628
|
210,580
|
|||||||||||
Income
before cumulative effect
|
50,775
|
79,920
|
180,030
|
443,821
|
||||||||||||
Cumulative
effect of changes in
|
||||||||||||||||
accounting
principle, net of tax
|
-
|
-
|
-
|
522
|
||||||||||||
Net
income
|
$ |
50,775
|
$ |
79,920
|
$ |
180,030
|
$ |
444,343
|
||||||||
Average
assets
|
$ |
23,782,612
|
$ |
23,419,421
|
$ |
23,723,556
|
$ |
23,136,168
|
||||||||
Mortgage
Banking
|
||||||||||||||||
Net
interest income
|
$ |
20,590
|
$ |
21,266
|
$ |
62,286
|
$ |
72,598
|
||||||||
Provision
for loan losses
|
3
|
145
|
(115 | ) |
210
|
|||||||||||
Noninterest
income
|
42,158
|
90,376
|
193,859
|
293,711
|
||||||||||||
Noninterest
expense
|
108,580
|
136,804
|
329,476
|
366,715
|
||||||||||||
Pre-tax
loss
|
(45,835 | ) | (25,307 | ) | (73,216 | ) | (616 | ) | ||||||||
Benefit
from income taxes
|
(16,612 | ) | (10,283 | ) | (36,887 | ) | (1,685 | ) | ||||||||
(Loss)/income
before cumulative effect
|
(29,223 | ) | (15,024 | ) | (36,329 | ) |
1,069
|
|||||||||
Cumulative
effect of changes in
|
||||||||||||||||
accounting
principle, net of tax
|
-
|
-
|
-
|
414
|
||||||||||||
Net
(loss)/income
|
$ | (29,223 | ) | $ | (15,024 | ) | $ | (36,329 | ) | $ |
1,483
|
|||||
Average
assets
|
$ |
6,663,005
|
$ |
6,333,165
|
$ |
6,578,956
|
$ |
6,387,233
|
||||||||
Capital
Markets
|
||||||||||||||||
Net
interest expense
|
$ | (2,169 | ) | $ | (1,531 | ) | $ | (11,871 | ) | $ | (11,867 | ) | ||||
Noninterest
income
|
61,847
|
98,498
|
241,193
|
299,229
|
||||||||||||
Noninterest
expense
|
67,339
|
81,778
|
220,911
|
248,008
|
||||||||||||
Pre-tax
(loss)/income
|
(7,661 | ) |
15,189
|
8,411
|
39,354
|
|||||||||||
(Benefit)/provision
for income taxes
|
(2,957 | ) |
5,682
|
3,001
|
14,681
|
|||||||||||
(Loss)/income
before cumulative effect
|
(4,704 | ) |
9,507
|
5,410
|
24,673
|
|||||||||||
Cumulative
effect of changes in
|
||||||||||||||||
accounting
principle, net of tax
|
-
|
-
|
-
|
179
|
||||||||||||
Net
(loss)/ income
|
$ | (4,704 | ) | $ |
9,507
|
$ |
5,410
|
$ |
24,852
|
|||||||
Average
assets
|
$ |
3,441,451
|
$ |
5,183,369
|
$ |
4,081,671
|
$ |
5,014,073
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(Dollars
in thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Corporate
|
||||||||||||||||
Net
interest (expense)/income
|
$ (196 | ) | $ (944 | ) |
$
2,649
|
$ (857 | ) | |||||||||
Provision
for loan losses
|
-
|
-
|
7,672
|
-
|
||||||||||||
Noninterest
income/(expense)
|
4,073
|
17,459
|
26,905
|
(75,708 | ) | |||||||||||
Noninterest
expense
|
52,434
|
28,901
|
133,806
|
57,742
|
||||||||||||
Pre-tax
loss
|
(48,557 | ) | (12,386 | ) | (111,924 | ) | (134,307 | ) | ||||||||
Benefit
from income taxes
|
(17,553 | ) | (5,093 | ) | (41,327 | ) | (49,846 | ) | ||||||||
Loss
before cumulative effect
|
(31,004 | ) | (7,293 | ) | (70,597 | ) | (84,461 | ) | ||||||||
Cumulative
effect of changes in
|
||||||||||||||||
accounting
principle, net of tax
|
-
|
-
|
-
|
230
|
||||||||||||
Net
loss
|
$ (31,004 | ) | $ (7,293 | ) | $ (70,597 | ) | $ (84,231 | ) | ||||||||
Average
assets
|
$ 3,866,970
|
$ 4,583,810
|
$ 4,102,954
|
$
4,037,292
|
·
|
Expense
of $18.8 million associated with organizational and compensation
changes
for right sizing operating segments and consolidating functional
areas.
|
·
|
Non-core
business repositioning costs of $17.4 million, including costs associated
with the exit of the collectible coin merchandising business and
the
transition of the non-prime mortgage origination business to a broker
model.
|
·
|
Expense
of $14.3 million related to other restructuring, repositioning, and
efficiency initiatives, including facilities consolidation, procurement
centralization, multi-sourcing and the divestiture of certain loan
portfolios.
|
·
|
Costs
of $18.0 million related to the divestiture of 34 full-service First
Horizon Bank locations in Virginia, Maryland, Georgia, and Texas,
including $13.9 million for the writedown of
intangibles.
|
·
|
Expense
of $3.6 million related to the restructuring of mortgage operations
through office closures, associated sales force decreases, and the
reduction of management and support staff and downsizing of national
lending operations through the reduction of consumer and construction
sales forces and decreasing management, support staff and back-office
costs.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||
(Dollars
in thousands)
|
September
30, 2007
|
September
30, 2007
|
||||||
Charged
to
|
Charged
to
|
|||||||
Expense
|
Liability
|
Expense
|
Liability
|
|||||
Beginning
Balance
|
$ -
|
$
10,849
|
$
-
|
$
-
|
||||
Severance
and other employee related costs*
|
9,258
|
9,258
|
17,255
|
17,255
|
||||
Facility
consolidation costs
|
2,836
|
2,836
|
6,624
|
6,624
|
||||
Other
exit costs, professional fees and other
|
2,933
|
2,933
|
5,902
|
5,902
|
||||
Total
Accrued
|
15,027
|
25,876
|
29,781
|
29,781
|
||||
Payments**
|
-
|
8,690
|
-
|
12,595
|
||||
Accrual
Reversals
|
-
|
294
|
-
|
294
|
||||
Restructuring
& Repositioning Reserve Balance
|
$
15,027
|
$
16,892
|
$
29,781
|
$
16,892
|
||||
Other
Restructuring & Repositioning Expenses:
|
||||||||
Loan
Portfolio Divestiture
|
-
|
7,672
|
||||||
Impairment
of Premises and Equipment
|
3,876
|
9,035
|
||||||
Impairment
of Intangible Assets
|
13,919
|
13,919
|
||||||
Impairment
of Other Assets
|
-
|
11,733
|
||||||
Total
Other Restructuring & Repositioning Expenses
|
17,795
|
42,359
|
||||||
Total
Charged to Expense
|
$ 32,822
|
$
72,140
|
*
Includes $1.2 million of deferred severance-related payments that
will be
paid after 2008.
|
|||||||||
**
Includes payments related to:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||
September
30, 2007
|
September
30, 2007
|
||||||||
Severance
and other employee related costs
|
$
5,001
|
$
7,338
|
|||||||
Facility
consolidation costs
|
1,157
|
1,207
|
|||||||
Other
exit costs, professional fees and other
|
2,532
|
4,050
|
|||||||
$
8,690
|
$12,595
|
§
|
Retail/Commercial
Banking offers financial products and services, including traditional
lending and deposit-taking, to retail and commercial
customers. Additionally, the retail/commercial bank provides
investments, insurance, financial planning, trust services and asset
management, credit card, cash management, check clearing, and
correspondent services. On March 1, 2006, FHN sold its national merchant
processing business. The divestiture which was included in the
Retail/Commercial Banking segment was accounted for as a discontinued
operation.
|
§
|
Mortgage
Banking helps provide home ownership through First Horizon Home Loans,
a
division of First Tennessee Bank National Association (FTBNA), which
operates offices in 44 states and is one of the top 20 mortgage servicers
and top 20 originators of mortgage loans to consumers. This
segment consists of core mortgage banking elements including originations
and servicing and the associated ancillary revenues related to these
businesses.
|
§
|
Capital
Markets provides a broad spectrum of financial services for the investment
and banking communities through the integration of traditional capital
markets securities activities, structured finance, equity research,
investment banking, loan sales, portfolio advisory, and the sale
of
bank-owned life insurance.
|
§
|
Corporate
consists of unallocated corporate expenses including restructuring,
repositioning and efficiency charges, 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 and venture
capital.
|
·
|
Expense
associated with organizational and compensation changes for right
sizing
operating segments and consolidating functional
areas.
|
·
|
Non-core
business repositioning costs including costs associated with the
exit of
the collectible coin merchandising business and the transition of
the
non-prime mortgage origination business to a broker
model.
|
·
|
Expense
related to other restructuring, repositioning, and efficiency initiatives,
including facilities consolidation, procurement centralization,
multi-sourcing and the divestiture of certain loan
portfolios.
|
·
|
Costs
related to the divestiture of 34 full-service First Horizon Bank
locations
in Virginia, Maryland, Georgia, and Texas, including $13.9 million
for the
writedown of intangibles.
|
·
|
Expense
related to the restructuring of mortgage operations through office
closures, associated sales force decreases, and the reduction of
management and support staff and downsizing of national lending operations
through the reduction of consumer and construction sales forces and
decreasing management, support staff and back-office
costs.
|
·
|
Expense
of $18.8 million associated with organizational and compensation
changes
for right sizing operating segments and consolidating functional
areas.
|
·
|
Non-core
business repositioning costs of $17.4 million, including costs associated
with the exit of the collectible coin merchandising business and
the
transition of the non-prime mortgage origination business to a broker
model.
|
·
|
Expense
of $14.3 million related to other restructuring, repositioning, and
efficiency initiatives, including facilities consolidation, procurement
centralization, multi-sourcing and the divestiture of certain loan
portfolios.
|
·
|
Costs
of $18.0 million related to the divestiture of 34 full-service First
Horizon Bank locations in Virginia, Maryland, Georgia, and Texas,
including $13.9 million for the writedowns of
intangibles.
|
·
|
Expense
of $3.6 million related to the restructuring of mortgage operations
through office closures, associated sales force decreases, and the
reduction of management and support staff and downsizing of national
lending operations through the reduction of consumer and construction
sales forces and decreasing management, support staff and back-office
costs.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||
September
30
|
September
30
|
|||||||
(Dollars
in thousands)
|
2007
|
2007
|
||||||
Provision
for loan losses
|
$
-
|
$ 7,672
|
||||||
Noninterest
expense:
|
||||||||
Employee
compensation, incentives and benefits
|
9,269
|
17,266
|
||||||
Occupancy
|
5,074
|
8,800
|
||||||
Equipment
rentals, depreciation and maintenance
|
846
|
6,067
|
||||||
Operations
services
|
25
|
25
|
||||||
Communications
and courier
|
27
|
27
|
||||||
Goodwill
impairment
|
13,010 | 13,010 | ||||||
All
other expense
|
4,571
|
19,273
|
||||||
Total
noninterest expense
|
32,822
|
64,468
|
||||||
Loss
before income taxes
|
$
32,822
|
$
72,140
|
Three
Months Ended
|
||||||||
September
30
|
||||||||
2007
|
2006
|
|||||||
Consolidated
yields and rates:
|
||||||||
Loans,
net of unearned income
|
7.39 | % | 7.59 | % | ||||
Loans
held for sale
|
6.72
|
6.88
|
||||||
Investment
securities
|
5.57
|
5.66
|
||||||
Capital
markets securities inventory
|
5.59
|
5.41
|
||||||
Mortgage
banking trading securities
|
12.21
|
11.31
|
||||||
Other
earning assets
|
5.02
|
5.09
|
||||||
Yields
on earning assets
|
7.02
|
7.03
|
||||||
Interest-bearing
core deposits
|
3.40
|
3.17
|
||||||
Certificates
of deposits $100,000 and more
|
5.40
|
5.36
|
||||||
Federal
funds purchased and securities sold under agreements to
repurchase
|
4.82
|
4.83
|
||||||
Capital
markets trading liabilities
|
5.28
|
5.61
|
||||||
Commercial
paper and other short-term borrowings
|
5.05
|
5.25
|
||||||
Long-term
debt
|
5.84
|
5.80
|
||||||
Rates
paid on interest-bearing liabilities
|
4.81
|
4.79
|
||||||
Net
interest spread
|
2.21
|
2.24
|
||||||
Effect
of interest-free sources
|
.66
|
.65
|
||||||
FHN
- NIM
|
2.87 | % | 2.89 | % |
Three
Months Ended
|
Percent
|
Nine
Months Ended
|
Percent
|
||||
September
30
|
Change
|
September
30
|
Change
|
||||
2007
|
2006
|
(%)
|
2007
|
2006
|
(%)
|
||
Noninterest
income (thousands):
|
|||||||
Origination
(loss)/ income
|
$ (17,494)
|
$ 64,248
|
NM
|
$ 113,428
|
$ 238,869
|
52.5 -
|
|
Servicing
income
|
49,738
|
15,701
|
216.8 +
|
49,250
|
25,691
|
91.7 +
|
|
Other
|
6,778
|
5,986
|
13.2 +
|
20,741
|
18,529
|
11.9 +
|
|
Total
mortgage banking noninterest income
|
$ 39,022
|
$ 85,935
|
54.6 -
|
$ 183,419
|
$ 283,089
|
35.2 -
|
|
Mortgage
banking statistics (millions):
|
|||||||
Refinance
originations
|
$ 2,067.1
|
$ 2,091.8
|
1.2 -
|
$ 7,909.8
|
$ 7,389.2
|
7.0 +
|
|
Home-purchase
originations
|
4,605.2
|
4,258.7
|
8.1 +
|
13,157.3
|
13,308.1
|
1.1 -
|
|
Mortgage
loan originations
|
$ 6,672.3
|
$ 6,350.5
|
5.1 +
|
$ 21,067.1
|
$ 20,697.3
|
1.8 +
|
|
Servicing
portfolio
|
$108,400.8
|
$100,245.7
|
8.1 +
|
$108,400.8
|
$100,245.7
|
8.1 +
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||
September
30
|
Growth
|
September
30
|
Growth
|
|||||||
(Dollars
in thousands)
|
2007
|
2006
|
Rate
(%)
|
2007
|
2006
|
Rate
(%)
|
||||
Noninterest
income:
|
||||||||||
Fixed
income
|
$46,003
|
$41,503
|
10.8 +
|
$140,574
|
$133,948
|
4.9 +
|
||||
Other
product revenue
|
17,719
|
53,712
|
67.0 -
|
95,315
|
156,290
|
39.0 -
|
||||
Total
capital markets noninterest income
|
$63,722
|
$95,215
|
33.1 -
|
$235,889
|
$290,238
|
18.7 -
|
Three
Months Ended
|
||||||||
September
30
|
||||||||
2007
|
2006
|
|||||||
Total
commercial
|
.55 | % | .28 | % | ||||
Retail
real estate
|
.50
|
.25
|
||||||
Other
retail
|
3.59
|
2.71
|
||||||
Credit
card receivables
|
3.01
|
1.99
|
||||||
Total
net charge-offs
|
.57
|
.30
|
* Net
charge-off ratios are calculated based in average loans, net of unearned
income.
|
Table
7
provides information on the relative size of each loan
portfolio.
|
Third
Quarter
|
||||||||
(Dollars
in thousands)
|
2007
|
2006
|
||||||
Allowance
for loan losses:
|
||||||||
Beginning
balance on June 30
|
$
229,919
|
$
199,835
|
||||||
Provision
for loan losses
|
43,352
|
23,694
|
||||||
Divestitures/acquisitions/transfers
|
(5,276 | ) | (275 | ) | ||||
Charge-offs
|
(35,858 | ) | (19,782 | ) | ||||
Recoveries
|
4,474
|
3,357
|
||||||
Ending
balance on September 30
|
$
236,611
|
$
206,829
|
||||||
Reserve
for off-balance sheet commitments
|
9,002
|
9,230
|
||||||
Total
allowance for loan losses and reserve for off-balance sheet
commitments
|
$
245,613
|
$ 216,059
|
||||||
September
30
|
||||||||
2007
|
2006
|
|||||||
Retail/Commercial
Banking:
|
||||||||
Nonperforming
loans
|
$
189,798
|
$
63,956
|
||||||
Foreclosed
real estate
|
37,796
|
29,947
|
||||||
Total
Retail/Commercial Banking
|
227,594
|
93,903
|
||||||
Mortgage
Banking:
|
||||||||
Nonperforming
loans - held for sale
|
18,508
|
10,488
|
||||||
Foreclosed
real estate
|
22,250
|
13,598
|
||||||
Total
Mortgage Banking
|
40,758
|
24,086
|
||||||
Total
nonperforming assets
|
$ 268,352
|
$ 117,989
|
||||||
Total
loans, net of unearned income
|
$21,973,004
|
$21,955,030
|
||||||
Insured
loans
|
(928,238 | ) | (730,453 | ) | ||||
Loans
excluding insured loans
|
$21,044,766
|
$21,224,577
|
||||||
Foreclosed
real estate from GNMA loans
|
$
15,610
|
$
21,679
|
||||||
Potential
problem assets*
|
171,426
|
148,356
|
||||||
Loans
30 to 89 days past due
|
179,014
|
104,957
|
||||||
Loans
30 to 89 days past due - guaranteed portion**
|
157
|
179
|
||||||
Loans
90 days past due
|
42,515
|
28,246
|
||||||
Loans
90 days past due - guaranteed portion**
|
179
|
185
|
||||||
Loans
held for sale 30 to 89 days past due
|
38,233
|
30,288
|
||||||
Loans
held for sale 30 to 89 days past due - guaranteed
portion**
|
31,804
|
24,226
|
||||||
Loans
held for sale 90 days past due
|
164,145
|
132,416
|
||||||
Loans
held for sale 90 days past due - guaranteed portion**
|
158,601
|
130,188
|
||||||
Off-balance
sheet commitments***
|
7,106,326
|
7,415,880
|
||||||
Allowance
to total loans
|
1.08 | % | .94 | % | ||||
Allowance
to loans excluding insured loans
|
1.12
|
.97
|
||||||
Allowance
to nonperforming loans in the loan portfolio
|
125
|
323
|
||||||
Nonperforming
assets to loans, foreclosed real estate and other assets
|
||||||||
(Retail/Commercial
Banking)
|
1.05
|
.44
|
||||||
Nonperforming
assets to unpaid principal balance of servicing portfolio (Mortgage
Banking)
|
.04
|
.02
|
||||||
Allowance
to annualized net charge-offs
|
1.88
|
x |
3.15
|
x |
Three
Months Ended
|
||||||||||||||||||||
September
30
|
||||||||||||||||||||
Percent
|
Growth
|
Percent
|
||||||||||||||||||
(Dollars
in millions)
|
2007
|
of
Total
|
|
Rate
|
2006
|
of
Total
|
||||||||||||||
Commercial:
|
||||||||||||||||||||
Commercial,
financial and industrial
|
$ 7,061.1
|
32 | % | 3.8 | % |
$ 6,803.5
|
31 | % | ||||||||||||
Real
estate commercial (a)
|
1,363.4
|
6
|
11.6
|
1,221.4
|
6
|
|||||||||||||||
Real
estate construction (b)
|
2,875.3
|
13
|
11.6
|
2,575.6
|
12
|
|||||||||||||||
Total
commercial
|
11,299.8
|
51
|
6.6
|
10,600.5
|
49
|
|||||||||||||||
Retail:
|
||||||||||||||||||||
Real
estate residential (c)
|
7,601.4
|
34
|
(10.7 | ) |
8,512.6
|
39
|
||||||||||||||
Real
estate construction (d)
|
2,144.9
|
10
|
3.8
|
2,065.9
|
9
|
|||||||||||||||
Other
retail
|
149.7
|
1
|
(6.7 | ) |
160.4
|
1
|
||||||||||||||
Credit
card receivables
|
194.4
|
1
|
(3.4 | ) |
201.3
|
1
|
||||||||||||||
Real
estate loans pledged
|
||||||||||||||||||||
against
other collateralized borrowings (e)
|
808.2
|
3
|
NM
|
268.1
|
1
|
|||||||||||||||
Total
retail
|
10,898.6
|
49
|
(2.8 | ) |
11,208.3
|
51
|
||||||||||||||
Total
loans, net of unearned
|
$
22,198.4
|
100 | % | 1.8 | % |
$
21,808.8
|
100 | % |
Certain
previously reported amounts have been reclassified to agree with
current
presentation.
|
(a)
Includes nonconstruction income property loans
|
(b)
Includes homebuilder, condominium, and income property construction
loans
|
(c)
Includes primarily home equity loans and lines of credit (average
for
third quarter 2007 and 2006 - $3.7 billion and $4.8 billion,
respectively)
|
(d)
Includes one-time close product
|
(e)
Includes on-balance sheet securitizations of home equity
loans
|
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
|
||||||||||||
2007
|
||||||||||||||||
July
1
to July 31
|
-
|
-
|
-
|
30,402
|
||||||||||||
August
1 to August 31
|
*
|
39.20
|
*
|
30,402
|
||||||||||||
September
1 to September 30
|
*
|
30.37
|
*
|
30,402
|
||||||||||||
Total
|
*
|
$
35.90
|
*
|
*
Amount is less than 1,000 shares
|
|
Compensation
Plan Programs:
|
|
-
|
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
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 September 30, 2007, the maximum
number
|
|
of
shares that may be purchased under the program was 28.8 million
shares.
|
|
Other
Programs:
|
|
-
|
A
non-stock option plan-related authority was announced on October
18, 2000,
authorizing the purchase of up to 9.5 million shares. On
October 16,
|
2001,
it was announced that FHN's board of directors extended the expiration
date of this program from June 30, 2002, until December 31,
2004.
|
|
On
October 19, 2004, the board of directors extended the authorization
until
December 31, 2007. On September 30, 2007, the maximum
number
|
|
of
shares that may be purchased under the program was 1.6 million
shares.
|
|
See
also Subsequent Events section of the
MD&A.
|
Three
Months Ended
|
||||||||
September
30
|
||||||||
2007
|
2006
|
|||||||
Prepayment
speeds
|
||||||||
Actual
|
13.3 | % | 16.8 | % | ||||
Estimated*
|
14.7
|
15.0
|
(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.
|
(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 44.
|
Exhibit
No.
|
Description
|
|
3.2
|
Bylaws
of the Corporation, as amended and restated as of October 16, 2007,
incorporated herein by reference to Exhibit 3.2 to the Corporation’s
Current Report on Form 8-K dated October 16,
2007.
|
|
4
|
Instruments
defining the rights of security holders, including
indentures.*
|
|
10.1(a3)**
|
Form
of
Amendment to Directors and Executives Deferred Compensation
Plan.
|
|
10.1(c)**
|
Form
of
First Horizon National Corporation Deferred Compensation Plan as
Amended
and Restated.
|
|
10.1(i)**
|
Form
of
First Horizon Deferred Compensation Plan as Amended and
Restated.
|
|
10.1(j)**
|
Form
of
FTN Financial Deferred Compensation Plan Amended and Restated Effective
January 1, 2008.
|
|
10.2(b2)**
|
Amendment
to 1992 Restricted Stock Incentive
Plan.
|
|
10.2(e2)**
|
Amendment
to 2000 Employee Stock Option Plan.
|
|
10.2(f2)**
|
Amendment
to 2003 Equity Compensation Plan.
|
|
10.6(a2)**
|
Amendment
to 2002 Management Incentive Plan.
|
10.6(c2)**
|
Amendment
to Capital Markets Incentive Compensation
Plan.
|
|
10.7(a3)**
|
Form
of
Amendment to pre-2007 form of change-in-control severance agreement
between the registrant and its executive officers. This is an amendment
to
exhibit 10.7(a1) to the registrant’s annual report on Form 10-K for the
year ended December 31, 2006.
|
|
10.7(a4)**
|
Form
of
Amendment to 2007 form of change-in-control severance agreement between
the registrant and its executive officers. This is an amendment to
exhibit
10.7(a2) to the registrant’s annual report on Form 10-K for the year ended
December 31, 2006.
|
|
10.7(a5)**
|
October
16, 2007 form of change-in-control severance agreement offered to
executive officers.
|
|
10.7(e)**
|
Form
of
Pension Restoration Plan (amended and restated as of January 1,
2008).
|
|
10.7(i)**
|
Description
of Certain Benefits Available to Executive
Officers
|
|
10.7(k2)**
|
Form
of
Amendment to Limited Confidentiality and Non-Compete Agreement with
Mr.
Jim L. Hughes .
|
|
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 23-25 and
page 108
in the Corporation’s 2006 Annual Report to shareholders furnished to
shareholders in connection with the Annual Meeting of Shareholders
on
April 17, 2007, 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.
|
FIRST
HORIZON NATIONAL CORPORATION
(Registrant)
|
|
DATE: November
7, 2007
|
By:
/s/ D. Bryan Jordan
D. Bryan Jordan
Executive Vice President and Chief
Financial Officer (Duly Authorized
Officer and Principal Financial
Officer)
|
Exhibit
No.
|
Description
|
|
3.2
|
Bylaws
of the Corporation, as amended and restated as of October 16, 2007,
incorporated herein by reference to Exhibit 3.2 to the Corporation’s
Current Report on Form 8-K dated October 16,
2007.
|
|
4
|
Instruments
defining the rights of security holders, including
indentures.*
|
|
10.1(a3)**
|
Form
of
Amendment to Directors and Executives Deferred Compensation
Plan.
|
|
10.1(c)**
|
Form
of
First Horizon National Corporation Deferred Compensation Plan as
Amended
and Restated.
|
|
10.1(i)**
|
Form
of
First Horizon Deferred Compensation Plan as Amended and
Restated.
|
|
10.1(j)**
|
Form
of
FTN Financial Deferred Compensation Plan Amended and Restated Effective
January 1, 2008.
|
|
10.2(b2)**
|
Amendment
to 1992 Restricted Stock Incentive
Plan.
|
|
10.2(e2)**
|
Amendment
to 2000 Employee Stock Option Plan.
|
|
10.2(f2)**
|
Amendment
to 2003 Equity Compensation Plan.
|
|
10.6(a2)**
|
Amendment
to 2002 Management Incentive Plan.
|
|
10.6(c2)**
|
Amendment
to Capital Markets Incentive Compensation
Plan.
|
|
10.7(a3)**
|
Form
of
Amendment to pre-2007 form of change-in-control severance agreement
between the registrant and its executive officers. This is an amendment
to
exhibit 10.7(a1) to the registrant’s annual report on Form 10-K for the
year ended December 31, 2006.
|
|
10.7(a4)**
|
Form
of
Amendment to 2007 form of change-in-control severance agreement between
the registrant and its executive officers. This is an amendment to
exhibit
10.7(a2) to the registrant’s annual report on Form 10-K for the year ended
December 31, 2006.
|
|
10.7(a5)**
|
October
16, 2007 form of change-in-control severance agreement offered to
executive officers.
|
|
10.7(e)**
|
Form
of
Pension Restoration Plan (amended and restated as of January 1,
2008).
|
|
10.7(i)**
|
Description
of Certain Benefits Available to Executive
Officers
|
|
10.7(k2)**
|
Form
of
Amendment to Limited Confidentiality and Non-Compete Agreement with
Mr.
Jim L. Hughes .
|
|
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 23-25 and
page 108
in the Corporation’s 2006 Annual Report to shareholders furnished to
shareholders in connection with the Annual Meeting of Shareholders
on
April 17, 2007, 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.
|