XML 44 R23.htm IDEA: XBRL DOCUMENT v3.3.1.900
Regulatory Capital and Restrictions
 12 Months Ended
Dec. 31, 2015
Regulatory Capital Requirements [Abstract]  
Regulatory Capital And Restrictions

Note 12 – Regulatory Capital and Restrictions

Regulatory Capital. FHN is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on FHN's financial statements. The Basel III risk-based capital regulations, which increase minimum capital ratio requirements and modify risk-weighting definitions, became effective January 1, 2015 for FHN and FTBNA. The revised standards create a new emphasis on Common Equity Tier 1 capital, restrict eligibility criteria for regulatory capital instruments, and make more stringent the methodology for calculating risk-weighted assets. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain derivatives as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgment by the regulators such as capital components, asset risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (“Leverage”). Additionally, beginning in 2015, FHN is required to maintain a minimum ratio of Common Equity Tier 1 to risk-weighted assets. Management believes that, as of December 31, 2015, FHN met all capital adequacy requirements to which it was subject.

The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. Prior to implementation of Basel III in 2015, FTBNA was required to also calculate its capital ratios after excluding financial subsidiaries as defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation, Total Capital, Tier 1 Capital, and Leverage ratios were 16.59 percent, 15.77 percent, and 12.41 percent, respectively, on December 31, 2014. Under current guidance, these ratios exclude financial subsidiaries as reported.

First Horizon NationalFirst Tennessee Bank
CorporationNational Association
(Dollars in thousands)AmountRatioAmountRatio
On December 31, 2015
Actual:
Total Capital $2,836,71513.01%$2,768,62513.09%
Tier 1 Capital2,572,14111.792,525,91211.95
Common Equity Tier 12,278,58010.452,284,64610.81
Leverage2,572,1419.852,525,91210.06
Minimum Requirement for Capital Adequacy Purposes:
Total Capital 1,744,9618.001,691,4778.00
Tier 1 Capital1,308,7216.001,268,6086.00
Common Equity Tier 1981,5414.50951,4564.50
Leverage1,044,3784.001,004,2074.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital 2,114,34610.00
Tier 1 Capital1,691,4778.00
Common Equity Tier 11,374,3256.50
Leverage1,255,2585.00
On December 31, 2014
Actual:
Total Capital $3,148,33616.18%$3,441,31517.86%
Tier 1 Capital2,813,50314.463,107,40716.12
Leverage2,813,50311.433,107,40712.72
Minimum Requirement for Capital Adequacy Purposes:
Total Capital 1,556,2138.001,541,8378.00
Tier 1 Capital778,1064.00770,9184.00
Leverage985,0334.00977,3744.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital 1,927,29610.00
Tier 1 Capital1,156,3786.00
Leverage1,221,7175.00
2014 Regulatory capital balances and ratios are presented as originally reported, consistent with regulatory reporting rules which prohibit the retroactive restatement of prior years' Reports of Condition and Income due to the adoption of new accounting standards. As a result, 2014 was not restated to reflect the adoption of ASU 2014-01 related to Low Income Housing Tax Credit Investments.

Restrictions on cash and due from banks. Under the Federal Reserve Act and Regulation D, FTBNA is required to maintain a certain amount of cash reserves. On December 31, 2015 and 2014, FTBNA’s net required reserves were $188.3 million and $125.9 million, respectively, after the consideration of $146.6 million and $150.8 million in average vault cash. The remaining net reserve requirement for each year was met with Federal Reserve Bank deposits. Vault cash is reflected in Cash and due from banks on the Consolidated Statements of Condition and Federal Reserve Bank deposits are reflected as Interest-bearing cash.

Restrictions on dividends. Cash dividends are paid by FHN from its assets, which are mainly provided by dividends from its subsidiaries. Certain regulatory restrictions exist regarding the ability of FTBNA to transfer funds to FHN in the form of cash, dividends, loans, or advances. As of December 31, 2015, FTBNA had undivided profits of $829.2 million, of which none was available for distribution to FHN as dividends without prior regulatory approval. At any given time, the pertinent portions of those regulatory restrictions allow FTBNA to declare preferred or common dividends without prior regulatory approval in an amount equal to FTBNA’s retained net income for the two most recent completed years plus the current year to date. For any period, FTBNA’s ‘retained net income’ generally is equal to FTBNA’s regulatory net income reduced by the preferred and common dividends declared by FTBNA. Excess dividends in either of the two most recent completed years may be offset with available retained net income in the two years immediately preceding it. Applying the applicable rules, FTBNA’s total amount available for dividends was negative $192.8 million at December 31, 2015 and negative $142.0 million on January 1, 2016. FTBNA applied for and received approval from the OCC to declare and pay common dividends to the parent company in the amount of $50.0 million in first quarter 2016, $325.0 million in 2015, and $180.0 million in 2014. During 2015 and 2014, FTBNA declared and paid dividends on its preferred stock quarterly, with OCC approval as necessary. Additionally, FTBNA’s Board has received approval from the OCC to declare and pay and has declared dividends on its preferred stock outstanding payable in April 2016.

The payment of cash dividends by FHN and FTBNA may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines and debt covenants. For example, beginning in 2016, the ability to pay dividends would be restricted if capital ratios fell below regulatory minimums plus a prescribed capital conservation buffer. Furthermore, the Federal Reserve and the OCC have issued policy statements generally requiring insured banks and bank holding companies only to pay dividends out of current operating earnings. Consequently, the decision of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results.

Restrictions on intercompany transactions. Under current Federal banking law, FTBNA may not enter into covered transactions with any affiliate including the parent company and certain financial subsidiaries in excess of 10 percent of the bank’s capital stock and surplus, as defined, or $313.1 million, on December 31, 2015. Covered transactions include a loan or extension of credit to an affiliate, a purchase of or an investment in securities issued by an affiliate and the acceptance of securities issued by the affiliate as collateral for any loan or extension of credit. The equity investment, including retained earnings, in certain of a bank's financial subsidiaries is also treated as a covered transaction. The parent company had covered transactions of $1.0 million from FTBNA and the bank's financial subsidiary, FTN Financial Securities Corp., had a total equity investment from FTBNA of $362.0 million on December 31, 2015. Since the equity investment FTBNA has in FTN Financial Securities Corp. exceeds the 10 percent per affiliate limit, FTBNA cannot engage in any additional covered transactions with this affiliate and the banking regulators could require FTBNA to reduce its equity investment so that it is within the limit. In addition, the aggregate amount of covered transactions with all affiliates, as defined, is limited to 20 percent of the bank’s capital stock and surplus, as defined, or $626.1 million, on December 31, 2015. FTBNA’s total covered transactions with all affiliates including the parent company on December 31, 2015 were $363.0 million.