EX-99 2 exh_991.htm EXHIBIT 99.1 Unassociated Document
 
 
FOURTH QUARTER 2006
FINANCIAL SUPPLEMENT


The following supplement is provided to assist in your financial analysis.
If you need further information, please contact:
 
Dave Miller, Investor Relations
901-523-4162
dwmiller@firsthorizon.com

First Horizon National Corporation
4Q 2006 Financial Supplement


Dear Investor,

In conjunction with the release of First Horizon National Corporation’s fourth quarter results for 2006, we have prepared this financial supplement to assist investors in understanding First Horizon National Corporation’s financial results.

This supplement compares current period results to earnings and other financial information from the previous four quarters.

Please feel free to call if you have any additional questions.

Regards,

Dave Miller, Investor Relations
901-523-4162
dwmiller@firsthorizon.com
 
CONSOLIDATED SUMMARY
            
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
    
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Net interest income
  
$
245,997
  
$
251,621
  
$
253,598
  
$
245,721
  
$
254,812
  
Noninterest income
    
313,342
   
309,170
   
332,119
   
277,891
   
315,724
 
Divestitures
    
-
    
-
   
-
   
-
   
7,029
 
Security gain/(loss)
    
3,002
    
8,757
   
2,893
   
(80,281
)
  
(181
)
Total revenue
    
562,341
    
569,548
   
588,610
   
443,331
   
577,384
 
Noninterest expense
    
431,630
   
452,899
   
423,011
   
435,081
   
414,866
 
Provision
    
22,983
   
23,694
   
18,653
   
17,799
   
16,175
 
Pretax income/(loss)
    
107,728
   
92,955
   
146,946
   
(9,549
)
  
146,343
 
Provision/(benefit) for income taxes
    
31,448
   
25,776
   
43,013
   
(12,959
)
  
42,695
 
Income from continuing operations
    
76,280
   
67,179
   
103,933
   
3,410
   
103,648
 
Income/(loss) from discontinued operations, net of tax
    
187
   
(69
)
  
376
   
210,273
   
5,369
 
Income before cumulative effect
    
76,467
   
67,110
   
104,309
   
213,683
   
109,017
 
Cumulative effect of changes in accounting
    
   
   
   
   
 
principle, net of tax
    
-
   
-
   
-
   
1,345
   
(3,098
)
Net income
  
$
76,467
  
$
67,110
  
$
104,309
  
$
215,028
  
$
105,919
  
                 
         
 
Tax rate
    
29.2
%
  
27.7
%
  
29.3
%
  
NM
    
29.2
%
Efficiency ratio
    
76.8
%
  
79.5
%
  
71.9
%
  
98.1
%
  
71.9
%
NM - Not meaningful
1

SELECTED FINANCIAL DATA
             
Quarterly, Unaudited
                       
                        
                        
(Dollars in thousands, except per share data)
    
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Income from continuing operations
  
$
76,280
  
$
67,179
  
$
103,933
  
$
3,410
  
$
103,648
  
Income/(loss) from discontinued operations,
                               
net of tax
    
187
   
(69
)
  
376
   
210,273
   
5,369
 
Cumulative effect of changes in accounting
                                
principle, net of tax
    
-
   
-
   
-
   
1,345
   
(3,098
)
Net income
    
76,467
   
67,110
   
104,309
   
215,028
   
105,919
 
Common Stock Data
                                
                                 
Diluted earnings per common share:
                                
Diluted EPS from continuing operations
  
$
.60
  
$
.53
  
$
.82
  
$
.03
  
$
.80
  
Diluted EPS before cumulative effect of
                               
changes in accounting principle
    
.60
   
.53
   
.82
   
1.66
   
.84
 
Diluted EPS
    
.60
   
.53
   
.82
   
1.67
   
.81
 
                                 
Diluted shares
    
127,784
   
127,523
   
127,280
   
129,100
   
130,043
 
Period-end shares outstanding
    
124,866
   
124,467
   
123,947
   
123,230
   
126,222
 
Dividends declared per share
  
$
.45
  
$
.45
  
$
.45
  
$
.45
  
$
.45
  
Selected Average Balances
                                
                                 
Total assets
  
$
39,327,781
  
$
39,519,765
  
$
38,494,898
  
$
37,689,523
  
$
37,720,410
  
Total loans, net of unearned income
    
21,894,032
   
21,808,787
   
21,445,153
   
20,853,947
   
19,977,924
 
Investment securities
    
3,952,007
   
3,805,160
   
3,008,310
   
3,026,429
   
2,858,410
 
Earning assets
    
34,313,781
   
34,627,512
   
33,946,387
   
33,142,044
   
33,191,778
 
Deposits
    
23,155,050
   
22,926,483
   
21,981,445
   
22,939,767
   
23,918,717
 
Total long-term debt
    
5,718,968
   
5,538,323
   
5,160,610
   
3,805,307
   
2,665,867
 
Shareholders' equity
    
2,510,752
   
2,442,030
   
2,401,428
   
2,335,512
   
2,284,400
 
Selected Period-End Balances
                                
                                 
Total assets
  
$
37,918,259
  
$
40,076,183
  
$
37,469,234
  
$
37,300,975
  
$
36,579,061
  
Total loans, net of unearned income
    
22,104,905
   
21,955,030
   
21,717,264
   
21,211,946
   
20,611,998
 
Investment securities
    
3,890,420
   
3,983,049
   
3,108,569
   
2,944,826
   
2,912,486
 
Earning assets
    
32,320,221
   
33,259,328
   
31,879,716
   
31,617,338
   
31,578,065
 
Deposits
    
20,213,232
   
25,284,541
   
21,693,442
   
21,517,047
   
23,317,557
 
Total long-term debt
    
5,836,360
   
5,487,188
   
5,606,294
   
4,599,339
   
3,437,643
 
Shareholders' equity
    
2,462,390
   
2,510,524
   
2,442,193
   
2,399,608
   
2,347,539
 
Selected Ratios and Other
                                
                                 
Return on average assets
    
.77
%
  
.67
%
  
1.09
%
  
2.31
%
  
1.11
%
Return on average equity
    
12.1
   
10.9
   
17.4
   
37.3
   
18.4
 
                                 
FTE employees
    
12,131
   
12,324
   
12,413
   
13,053
   
13,175
 
 
2

STATEMENTS OF INCOME
            
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Interest income
  
$
604,562
  
$
612,598
  
$
578,582
  
$
533,369
  
$
519,475
  
Less interest expense
    
358,565
   
360,977
   
324,984
   
287,648
   
264,663
 
Net interest income
    
245,997
   
251,621
   
253,598
   
245,721
   
254,812
 
Provision for loan losses
    
22,983
   
23,694
   
18,653
   
17,799
   
16,175
 
Net interest income after
                                
provision for loan losses 
    
223,014
   
227,927
   
234,945
   
227,922
   
238,637
 
Noninterest income:
                                
Capital markets
    
92,809
   
95,215
   
102,165
   
92,858
   
80,896
 
Mortgage banking
    
87,524
   
85,935
   
116,472
   
80,682
   
116,288
 
Deposit transactions
                                
and cash management 
    
43,317
   
44,503
   
42,756
   
38,023
   
42,196
 
Revenue from loan sales and securitizations
    
16,276
   
11,830
   
12,212
   
11,357
   
13,146
 
Insurance commissions
    
8,951
   
10,534
   
12,461
   
14,686
   
13,144
 
Trust services and investment
                                
management 
    
10,424
   
9,609
   
10,824
   
10,657
   
10,873
 
Gains on divestitures
    
-
   
-
   
-
   
-
   
7,029
 
Securities gains/(losses), net
    
3,002
   
8,757
   
2,893
   
(80,281
)
  
(181
)
Other
    
54,041
   
51,544
   
35,229
   
29,628
   
39,181
 
Total noninterest income
    
316,344
   
317,927
   
335,012
   
197,610
   
322,572
 
Adjusted gross income after
                                
provision for loan losses 
    
539,358
   
545,854
   
569,957
   
425,532
   
561,209
 
Noninterest expense:
                                
Employee compensation,
                                
incentives and benefits 
    
257,397
   
260,351
   
245,796
   
260,141
   
244,943
 
Occupancy
    
29,298
   
29,745
   
27,525
   
30,102
   
28,000
 
Equipment rentals, depreciation
                                
and maintenance 
    
17,867
   
17,893
   
17,858
   
20,264
   
19,108
 
Operations services
    
17,550
   
17,976
   
17,075
   
17,440
   
18,363
 
Communications and courier
    
11,978
   
12,950
   
13,409
   
14,912
   
14,379
 
Amortization of intangible assets
    
2,460
   
3,233
   
2,881
   
2,888
   
2,667
 
Other
    
95,080
   
110,751
   
98,467
   
89,334
   
87,406
 
Total noninterest expense
    
431,630
   
452,899
   
423,011
   
435,081
   
414,866
 
Pretax income/(loss)
    
107,728
   
92,955
   
146,946
   
(9,549
)
  
146,343
 
Provision/(benefit) for income taxes
    
31,448
   
25,776
   
43,013
   
(12,959
)
  
42,695
 
Income from continuing operations
    
76,280
   
67,179
   
103,933
   
3,410
   
103,648
 
Income/(loss) from discontinued operations,
                                
  net of tax
    
187
   
(69
)
  
376
   
210,273
   
5,369
 
Income before cumulative effect
    
76,467
   
67,110
   
104,309
   
213,683
   
109,017
 
Cumulative effect of changes in accounting
                                
principle, net of tax
    
-
   
-
   
-
   
1,345
   
(3,098
)
Net income
  
$
76,467
  
$
67,110
  
$
104,309
  
$
215,028
  
$
105,919
  
                                 
 
3

OTHER INCOME AND OTHER EXPENSE
            
 
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
All other income:
                                
Bankcard income
  
$
6,386
  
$
6,441
  
$
6,362
  
$
6,916
  
$
7,391
  
Other service charges
    
5,409
   
5,074
   
5,806
   
5,766
   
5,531
 
Remittance processing
    
3,576
   
3,525
   
3,642
   
3,994
   
3,926
 
Check clearing fees
    
1,386
   
1,593
   
1,679
   
1,727
   
1,801
 
Other
    
37,284
   
34,911
   
17,740
   
11,225
   
20,532
 
Total
  
$
54,041
  
$
51,544
  
$
35,229
  
$
29,628
  
$
39,181
  
All other expense:
                                
Advertising and public relations
  
$
11,162
  
$
13,272
  
$
10,998
  
$
11,995
  
$
11,066
  
Legal and professional fees
    
12,046
   
11,071
   
11,600
   
8,295
   
11,879
 
Computer software
    
8,608
   
8,959
   
8,827
   
7,987
   
7,374
 
Travel and entertainment
    
8,518
   
8,164
   
8,652
   
6,972
   
7,834
 
Contract employment
    
5,836
   
6,955
   
7,094
   
7,535
   
7,922
 
Distributions on preferred stock
    
4,769
   
4,874
   
4,453
   
4,050
   
3,806
 
Supplies
    
3,177
   
3,961
   
4,260
   
3,674
   
4,468
 
Fed services fees
    
1,445
   
1,613
   
1,736
   
1,749
   
1,852
 
Foreclosed real estate
   
1,675
   
(86
)
  
2,587
   
208
   
3,409
 
Deposit insurance premium
    
765
   
737
   
801
   
895
   
782
 
Charitable contributions
    
339
   
454
   
530
   
490
   
418
 
Other
    
36,740
   
50,777
   
36,929
   
35,484
   
26,596
 
Total
  
$
95,080
  
$
110,751
  
$
98,467
  
$
89,334
  
$
87,406
  
 
4

AVERAGE AND PERIOD-END LOANS
            
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
   
3Q06
    
2Q06
    
1Q06
    
4Q05
  
Average loans:
                                
Loans, net of unearned income:
                                
Commercial: 
                                
 Commercial, financial and industrial
  
$
6,903,708
  
$
6,803,461
  
$
6,570,293
  
$
6,415,436
  
$
6,356,977
  
 Real estate commercial
    
1,187,431
   
1,221,408
   
1,259,416
   
1,225,049
   
1,208,945
 
 Real estate construction
    
2,741,118
   
2,575,590
   
2,380,430
   
2,197,693
   
1,973,121
 
 Total commercial loans
    
10,832,257
   
10,600,459
   
10,210,139
   
9,838,178
   
9,539,043
 
Retail: 
                                
 Real estate residential
    
8,211,506
   
8,512,589
   
8,560,085
   
8,644,920
   
8,149,419
 
 Real estate construction
    
2,081,885
   
2,065,849
   
2,028,480
   
1,961,658
   
1,874,831
 
 Other retail
    
160,366
   
160,446
   
162,573
   
164,567
   
170,470
 
 Credit card receivables
    
201,092
   
201,319
   
197,706
   
238,089
   
244,161
 
 Real estate loans pledged against
                               
 other collateralized borrowings (a)
    
406,926
   
268,125
   
286,170
   
6,535
   
-
 
 Total retail loans
    
11,061,775
   
11,208,328
   
11,235,014
   
11,015,769
   
10,438,881
 
 Total loans, net of unearned income
  
$
21,894,032
  
$
21,808,787
  
$
21,445,153
  
$
20,853,947
  
$
19,977,924
  
                                 
                                 
                                 
Period-end loans:
                                
Loans, net of unearned income:
                                
Commercial: 
                                
 Commercial, financial and industrial
  
$
7,201,009
  
$
6,945,207
  
$
6,705,925
  
$
6,538,798
  
$
6,578,117
  
 Real estate commercial
    
1,136,590
   
1,199,084
   
1,276,278
   
1,232,021
   
1,213,052
 
 Real estate construction
    
2,753,458
   
2,660,415
   
2,453,579
   
2,277,825
   
2,108,121
 
 Total commercial loans
    
11,091,057
   
10,804,706
   
10,435,782
   
10,048,644
   
9,899,290
 
Retail: 
                                
 Real estate residential
    
7,973,313
   
8,428,652
   
8,562,733
   
8,511,300
   
8,368,219
 
 Real estate construction
    
2,085,133
   
2,096,440
   
2,076,004
   
2,001,916
   
1,925,060
 
 Other retail
    
161,178
   
163,134
   
163,121
   
161,617
   
168,413
 
 Credit card receivables
    
203,307
   
202,866
   
202,117
   
194,908
   
251,016
 
 Real estate loans pledged against
                               
 other collateralized borrowings (a)
    
590,917
   
259,232
   
277,507
   
293,561
   
-
 
 Total retail loans
    
11,013,848
   
11,150,324
   
11,281,482
   
11,163,302
   
10,712,708
 
 Total loans, net of unearned income
  
$
22,104,905
  
$
21,955,030
  
$
21,717,264
  
$
21,211,946
  
$
20,611,998
  
  (a) During 2006, FHN sold loans through on-balance sheet securitizations, which were structured as financings for accounting purposes.
 
5

PERIOD-END STATEMENTS OF CONDITION
            
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
   
3Q06
    
2Q06
    
1Q06
    
4Q05
  
Assets:
                                
Cash and due from banks
  
$
976,619
  
$
903,482
  
$
854,846
  
$
887,539
  
$
945,547
  
Federal funds sold and securities
                                
purchased under agreements to resell 
    
1,202,537
   
1,992,426
   
1,572,143
   
1,347,577
   
1,485,199
 
Total cash and cash equivalents 
    
2,179,156
   
2,895,908
   
2,426,989
   
2,235,116
   
2,430,746
 
Investment in bank time deposits
    
18,037
   
17,798
   
75,903
   
25,319
   
10,687
 
Trading securities
    
2,230,745
   
2,512,744
   
2,183,102
   
2,508,615
   
2,133,428
 
Loans held for sale
    
2,873,577
   
2,798,281
   
3,222,735
   
3,579,055
   
4,424,267
 
Investment Securities
    
3,890,420
   
3,983,049
   
3,108,569
   
2,944,826
   
2,912,486
 
Loans, net of unearned income
    
22,104,905
   
21,955,030
   
21,717,264
   
21,211,946
   
20,611,998
 
Less: Allowance for loan losses 
    
216,285
   
206,829
   
199,835
   
195,011
   
189,705
 
Total net loans 
    
21,888,620
   
21,748,201
   
21,517,429
   
21,016,935
   
20,422,293
 
Capital markets receivables
    
732,282
   
1,027,927
   
1,058,690
   
858,072
   
511,508
 
Mortgage servicing rights, net
    
1,533,942
   
1,498,341
   
1,595,413
   
1,475,448
   
1,314,629
 
Goodwill
    
275,582
   
274,534
   
281,909
   
281,475
   
281,440
 
Other intangible assets, net
    
64,530
   
70,546
   
75,056
   
76,666
   
76,647
 
Premises and equipment, net
    
451,708
   
441,659
   
431,385
   
422,346
   
408,539
 
Real estate acquired by foreclosure
    
63,519
   
65,224
   
60,577
   
48,959
   
27,410
 
Discontinued assets
    
416
   
939,728
   
696
   
56,712
   
163,545
 
Other assets
    
1,715,725
   
1,802,243
   
1,430,781
   
1,771,431
   
1,461,436
 
Total assets
  
$
37,918,259
  
$
40,076,183
  
$
37,469,234
  
$
37,300,975
  
$
36,579,061
  
                                 
Liabilities and shareholders' equity:
                                
Deposits:
                                
Savings 
  
$
3,354,180
  
$
3,256,680
  
$
3,246,821
  
$
3,218,206
  
$
2,795,723
  
Interest-bearing demand deposits 
    
1,969,700
   
1,742,276
   
1,894,707
   
1,904,235
   
1,909,349
 
Time deposits 
    
2,924,050
   
2,906,424
   
2,819,597
   
2,692,046
   
2,478,946
 
Certificates of deposit $100,000 and more 
    
6,517,629
   
11,920,226
   
8,053,119
   
8,228,543
   
10,931,695
 
 Total interest-bearing deposits
    
14,765,559
   
19,825,606
   
16,014,244
   
16,043,030
   
18,115,713
 
Noninterest-bearing deposits 
    
5,447,673
   
5,458,935
   
5,679,198
   
5,474,017
   
5,201,844
 
 Total deposits
    
20,213,232
   
25,284,541
   
21,693,442
   
21,517,047
   
23,317,557
 
Federal funds purchased and securities
                                
sold under agreements to repurchase 
    
4,961,799
   
2,416,974
   
3,387,711
   
4,337,243
   
3,735,742
 
Trading liabilities
    
789,957
   
847,453
   
929,694
   
766,479
   
793,638
 
Commercial paper and other short-term borrowings
    
1,258,513
   
926,292
   
721,227
   
749,979
   
802,017
 
Term borrowings
    
5,243,961
   
5,226,772
   
5,325,014
   
4,299,539
   
3,437,643
 
Other collateralized borrowings
    
592,399
   
260,416
   
281,280
   
299,800
   
-
 
Total long-term debt 
    
5,836,360
   
5,487,188
   
5,606,294
   
4,599,339
   
3,437,643
 
Capital markets payables
    
799,489
   
989,332
   
1,057,617
   
941,911
   
591,404
 
Discontinued liabilities
    
6,966
   
6,977
   
8,422
   
233,402
   
122,026
 
Other liabilities
    
1,294,283
   
1,311,628
   
1,327,360
   
1,460,693
   
1,136,221
 
Total liabilities 
    
35,160,599
   
37,270,385
   
34,731,767
   
34,606,093
   
33,936,248
 
Preferred stock of subsidiary
    
295,270
   
295,274
   
295,274
   
295,274
   
295,274
 
Shareholders' equity:
                                
Common stock
    
78,041
   
77,792
   
77,467
   
77,019
   
78,889
 
Capital surplus
    
312,521
   
301,857
   
282,563
   
269,564
   
404,964
 
Undivided profits
    
2,144,276
   
2,124,312
   
2,113,514
   
2,065,285
   
1,905,930
 
Accumulated other comprehensive (loss)/income, net
    
(72,448
)
  
6,563
   
(31,351
)
  
(12,260
)
  
(42,244
)
Total shareholders' equity 
    
2,462,390
   
2,510,524
   
2,442,193
   
2,399,608
   
2,347,539
 
Total liabilities and shareholders' equity
  
$
37,918,259
  
$
40,076,183
  
$
37,469,234
  
$
37,300,975
  
$
36,579,061
  
  Certain previously reported amounts have been reclassified to agree with current presentation.
 
6
 
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
      
Quarterly, Unaudited
                                          
                   
Interest
  
Percent
  
   
Average
  
Revenue/
  
Average
  
   
Balance
  
Expense
  
Rate/Yield
  
(Fully taxable equivalent)
                                                  
(Dollars in thousands)
    
4Q06
    
3Q06
    
2Q06
    
1Q06
    
4Q06
    
3Q06
    
2Q06
    
1Q06
    
4Q06
    
3Q06
    
2Q06
    
1Q06
  
Assets:
                                                                          
Earning assets:
                                                                          
Loans, net of unearned income*
  
$
21,894,032
  
$
21,808,787
  
$
21,445,153
  
$
20,853,947
  
$
417,261
  
$
416,980
  
$
393,546
  
$
363,577
    
7.56
%
  
7.59
%
  
7.36
%
  
7.07
%
Loans held for sale
    
3,796,828
   
4,192,558
   
4,608,310
   
4,760,823
   
63,852
   
72,135
   
75,832
   
76,342
   
6.73
   
6.88
   
6.58
   
6.41
 
Investment securities:
                                                                          
U.S. Treasuries
   
50,891
   
50,989
   
53,561
   
72,265
   
646
   
632
   
624
   
781
   
5.04
   
4.92
   
4.67
   
4.38
 
U.S. government agencies
    
3,652,056
   
3,512,162
   
2,731,213
   
2,736,495
   
52,107
   
50,262
   
38,211
   
32,676
   
5.71
   
5.72
   
5.60
   
4.78
 
States and municipalities
    
1,771
   
1,869
   
1,893
   
1,916
   
4
   
6
   
7
   
7
   
.98
   
1.28
   
1.39
   
1.37
 
Other
    
247,289
   
240,140
   
221,643
   
215,753
   
3,141
   
3,017
   
2,726
   
2,548
   
5.08
   
5.02
   
4.92
   
4.72
 
Total investment securities
    
3,952,007
   
3,805,160
   
3,008,310
   
3,026,429
   
55,898
   
53,917
   
41,568
   
36,012
   
5.66
   
5.67
   
5.53
   
4.76
 
Capital markets securities inventory
    
2,514,046
   
2,524,102
   
2,356,754
   
2,176,124
   
34,251
   
34,128
   
31,849
   
27,327
   
5.45
   
5.41
   
5.41
   
5.02
 
Mortgage banking trading securities
    
327,842
   
380,586
   
462,592
   
442,453
   
9,895
   
10,762
   
11,798
   
11,246
   
12.07
   
11.31
   
10.20
   
10.17
 
Other earning assets:
                                                                          
Federal funds sold and securities
                                                                         
purchased under agreements to resell
    
1,810,935
   
1,875,420
   
2,018,408
   
1,866,146
   
23,466
   
24,412
   
23,712
   
18,995
   
5.14
   
5.16
   
4.71
   
4.13
 
Investment in bank time deposits
    
18,091
   
40,899
   
46,860
   
16,122
   
230
   
544
   
580
   
179
   
5.04
   
5.27
   
4.96
   
4.51
 
Total other earning assets
    
1,829,026
   
1,916,319
   
2,065,268
   
1,882,268
   
23,696
   
24,956
   
24,292
   
19,174
   
5.14
   
5.17
   
4.72
   
4.13
 
Total earning assets/Interest income
    
34,313,781
   
34,627,512
   
33,946,387
   
33,142,044
 
$
604,853
  
$
612,878
  
$
578,885
  
$
533,678
    
7.01
%
  
7.04
%
  
6.83
%
  
6.50
%
Allowance for loan losses
    
(213,569
)
  
(206,871
)
  
(202,003
)
  
(196,316
)
                                                
Cash and due from banks
    
828,291
   
816,342
   
794,019
   
831,172
                                                 
Capital markets receivables
    
154,908
   
151,037
   
187,435
   
199,635
                                                 
Premises and equipment, net
    
446,556
   
436,027
   
427,213
   
418,882
                                                 
Other assets
    
3,797,814
   
3,695,718
   
3,341,847
   
3,294,106
                                                 
Total assets
  
$
39,327,781
  
$
39,519,765
  
$
38,494,898
  
$
37,689,523
                                                  
Liabilities and shareholders' equity:
                                                                          
Interest-bearing liabilities:
                                                                          
Interest-bearing deposits:
                                                                          
Interest-bearing demand deposits
  
$
1,792,484
  
$
1,822,558
  
$
1,886,392
  
$
1,892,382
  
$
6,006
  
$
6,561
  
$
6,362
  
$
5,550
    
1.33
%
  
1.43
%
  
1.35
%
  
1.19
%
Savings
    
3,327,576
   
3,270,211
   
3,259,930
   
2,902,257
   
26,253
   
25,084
   
21,826
   
15,347
   
3.13
   
3.04
   
2.69
   
2.14
 
Time deposits
    
2,921,197
   
2,873,451
   
2,779,821
   
2,602,581
   
33,732
   
32,090
   
29,116
   
25,338
   
4.58
   
4.43
   
4.20
   
3.95
 
Total interest-bearing core deposits
    
8,041,257
   
7,966,220
   
7,926,143
   
7,397,220
   
65,991
   
63,735
   
57,304
   
46,235
   
3.26
   
3.17
   
2.90
   
2.53
 
Certificates of deposit $100,000 and more
    
9,820,358
   
9,694,677
   
8,859,178
   
10,626,088
   
132,938
   
130,875
   
110,068
   
119,296
   
5.37
   
5.36
   
4.98
   
4.55
 
Federal funds purchased and securities
                                                                          
sold under agreements to repurchase
    
3,888,492
   
4,650,930
   
4,975,223
   
4,745,621
   
46,321
   
56,639
   
58,084
   
47,821
   
4.73
   
4.83
   
4.68
   
4.09
 
Capital markets trading liabilities
    
1,322,664
   
1,358,976
   
1,368,933
   
1,304,492
   
18,560
   
19,233
   
19,923
   
18,347
   
5.57
   
5.61
   
5.84
   
5.70
 
Commercial paper and other short-term
                                                                          
borrowings
    
889,802
   
773,038
   
750,789
   
765,178
   
12,099
   
10,232
   
9,296
   
8,423
   
5.39
   
5.25
   
4.97
   
4.46
 
Total long-term debt
    
5,718,968
   
5,538,323
   
5,160,610
   
3,805,307
   
82,655
   
80,263
   
70,309
   
47,526
   
5.79
   
5.80
   
5.46
   
5.00
 
Total interest-bearing liabilities/Interest
                                                                          
expense
    
29,681,541
   
29,982,164
   
29,040,876
   
28,643,906
 
$
358,564
  
$
360,977
  
$
324,984
  
$
287,648
    
4.80
%
  
4.79
%
  
4.49
%
  
4.06
%
Noninterest-bearing deposits
    
5,293,435
   
5,265,586
   
5,196,124
   
4,916,459
                                                 
Capital markets payables
    
247,738
   
213,104
   
236,481
   
229,867
                                                 
Other liabilities
    
1,299,041
   
1,321,607
   
1,324,715
   
1,268,505
                                                 
Preferred stock of subsidiary
    
295,274
   
295,274
   
295,274
   
295,274
                                                 
Shareholders' equity
    
2,510,752
   
2,442,030
   
2,401,428
   
2,335,512
                                                 
Total liabilities and shareholders' equity
  
$
39,327,781
  
$
39,519,765
  
$
38,494,898
  
$
37,689,523
                                                  
Net interest income-tax equivalent basis
                          
$
246,289
  
$
251,901
  
$
253,901
  
$
246,030
                          
Fully taxable equivalent adjustment
                            
(291
)
  
(279
)
  
(303
)
  
(309
)
                        
Net interest income
                          
$
245,998
  
$
251,622
  
$
253,598
  
$
245,721
                          
Net interest spread
                                                    
2.21
%
  
2.25
%
  
2.34
%
  
2.44
%
Effect of interest-free sources used to fund
                                                                          
earning assets
                                                    
.65
   
.65
   
.66
   
.55
 
Net interest margin
                                                    
2.86
%
  
2.90
%
  
3.00
%
  
2.99
%
* Includes loans on nonaccrual status.
Yields and corresponding income amounts are adjusted to a fully taxable equivalent. Earning assets yields are expressed net of unearned income. 
Rates are expressed net of unamortized debenture cost for long-term debt. Net interest margin is computed using total net interest income.
 
7

CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
                          
Quarterly, Unaudited
                                                  
                   
Interest
  
Percent
  
   
Average
 
Revenue/
  
Average
  
   
Balance
  
Expense
  
Rate/Yield
  
(Fully taxable equivalent)
                                                  
(Dollars in thousands)
    
4Q05
    
3Q05
    
2Q05
    
1Q05
    
4Q05
    
3Q05
    
2Q05
    
1Q05
    
4Q05
    
3Q05
    
2Q05
    
1Q05
  
Assets:
                                                                          
Earning assets:
                                                                          
Loans, net of unearned income*
  
$
19,977,924
  
$
18,767,408
  
$
17,830,988
  
$
16,721,879
  
$
338,113
  
$
299,199
  
$
264,919
  
$
231,645
    
6.72
%
  
6.33
%
  
5.96
%
  
5.62
%
Loans held for sale
    
5,732,993
   
6,891,361
   
6,007,207
   
5,273,877
   
93,327
   
111,573
   
93,897
   
79,085
   
6.51
   
6.48
   
6.25
   
6.00
 
Investment securities:
                                                                          
U.S. Treasuries
   
42,419
   
40,315
   
40,208
   
43,843
   
394
   
232
   
230
   
216
   
3.68
   
2.29
   
2.30
   
2.00
 
U.S. government agencies
    
2,608,478
   
2,690,823
   
2,691,954
   
2,548,693
   
29,079
   
29,109
   
29,348
   
27,559
   
4.46
   
4.33
   
4.36
   
4.33
 
States and municipalities
    
2,787
   
3,544
   
5,459
   
6,913
   
23
   
37
   
73
   
101
   
3.25
   
4.30
   
5.35
   
5.85
 
Other
    
204,726
   
199,348
   
193,698
   
195,356
   
2,463
   
2,177
   
2,083
   
1,988
   
4.81
   
4.37
   
4.30
   
4.07
 
Total investment securities
    
2,858,410
   
2,934,030
   
2,931,319
   
2,794,805
   
31,959
   
31,555
   
31,734
   
29,864
   
4.47
   
4.30
   
4.33
   
4.27
 
Capital markets securities inventory
    
2,160,676
   
2,158,334
   
2,069,131
   
2,235,004
   
27,126
   
27,029
   
22,714
   
24,528
   
5.02
   
5.01
   
4.39
   
4.39
 
Mortgage banking trading securities
    
360,891
   
271,915
   
292,301
   
288,387
   
10,148
   
8,716
   
9,226
   
9,144
   
11.25
   
12.82
   
12.63
   
12.68
 
Other earning assets:
                                                                          
Federal funds sold and securities
                                                                         
purchased under agreements to resell
    
2,086,401
   
2,532,662
   
2,482,568
   
2,047,342
   
18,939
   
19,604
   
16,135
   
10,851
   
3.60
   
3.07
   
2.61
   
2.15
 
Investment in bank time deposits
    
14,483
   
6,328
   
5,702
   
5,874
   
154
   
47
   
50
   
30
   
4.22
   
2.92
   
3.57
   
2.09
 
Total other earning assets
    
2,100,884
   
2,538,990
   
2,488,270
   
2,053,216
   
19,093
   
19,651
   
16,185
   
10,881
   
3.61
   
3.07
   
2.61
   
2.15
 
Total earning assets/Interest income
    
33,191,778
   
33,562,038
   
31,619,216
   
29,367,168
 
$
519,766
  
$
497,723
  
$
438,675
  
$
385,147
    
6.23
%
  
5.90
%
  
5.56
%
  
5.29
%
Allowance for loan losses
    
(190,805
)
  
(176,167
)
  
(169,427
)
  
(164,598
)
                                                
Cash and due from banks
    
781,178
   
769,813
   
727,429
   
729,802
                                                 
Capital markets receivables
    
288,292
   
393,513
   
742,190
   
880,462
                                                 
Premises and equipment, net
    
410,361
   
400,533
   
387,475
   
378,041
                                                 
Other assets
    
3,239,606
   
3,141,263
   
2,975,319
   
2,900,566
                                                 
Total assets
  
$
37,720,410
  
$
38,090,993
  
$
36,282,202
  
$
34,091,441
                                                  
Liabilities and shareholders' equity:
                                                                          
Interest-bearing liabilities:
                                                                          
Interest-bearing deposits:
                                                                          
Interest-bearing demand deposits
  
$
1,850,255
  
$
1,780,196
  
$
1,765,833
  
$
1,683,623
  
$
4,969
  
$
4,391
  
$
3,616
  
$
2,472
    
1.07
%
  
.98
%
  
.82
%
  
.60
%
Savings
    
2,844,621
   
2,796,673
   
2,848,043
   
2,884,230
   
13,597
   
11,870
   
10,157
   
8,811
   
1.90
   
1.68
   
1.43
   
1.24
 
Time deposits
    
2,402,900
   
2,278,094
   
2,184,264
   
2,102,399
   
22,642
   
20,466
   
18,733
   
17,172
   
3.74
   
3.56
   
3.44
   
3.31
 
Total interest-bearing core deposits
    
7,097,776
   
6,854,963
   
6,798,140
   
6,670,252
   
41,208
   
36,727
   
32,506
   
28,455
   
2.30
   
2.13
   
1.92
   
1.73
 
Certificates of deposit $100,000 and more
    
11,393,018
   
11,467,752
   
10,557,321
   
10,147,069
   
116,707
   
102,061
   
80,433
   
64,782
   
4.06
   
3.53
   
3.06
   
2.59
 
Federal funds purchased and securities
                                                                          
sold under agreements to repurchase
    
4,760,566
   
4,913,288
   
4,651,584
   
3,991,180
   
43,751
   
39,395
   
31,387
   
22,040
   
3.65
   
3.18
   
2.71
   
2.24
 
Capital markets trading liabilities
    
1,351,785
   
1,665,342
   
1,589,408
   
1,470,515
   
19,556
   
23,237
   
20,591
   
16,807
   
5.74
   
5.54
   
5.20
   
4.64
 
Commercial paper and other short-term
                                                                          
borrowings
    
1,052,369
   
1,230,394
   
998,762
   
691,000
   
11,668
   
11,224
   
7,911
   
4,560
   
4.40
   
3.62
   
3.18
   
2.68
 
Total long-term debt
    
2,665,867
   
2,374,568
   
2,585,246
   
2,616,152
   
31,773
   
24,634
   
23,949
   
20,785
   
4.77
   
4.16
   
3.71
   
3.18
 
Total interest-bearing liabilities/Interest
                                                                          
expense
    
28,321,381
   
28,506,307
   
27,180,461
   
25,586,168
   
264,663
   
237,278
   
196,777
   
157,429
   
3.71
   
3.31
   
2.90
   
2.49
 
Demand deposits
    
2,018,721
   
1,941,952
   
1,835,618
   
1,784,963
                                                 
Other noninterest-bearing deposits
    
3,409,202
   
3,717,097
   
3,331,828
   
3,001,739
                                                 
Capital markets payables
    
275,721
   
350,531
   
423,810
   
569,760
                                                 
Other liabilities
    
1,115,711
   
1,059,562
   
1,082,525
   
1,050,840
                                                 
Preferred stock of subsidiary
    
295,274
   
295,312
   
295,432
   
29,998
                                                 
Shareholders' equity
    
2,284,400
   
2,220,232
   
2,132,528
   
2,067,973
                                                 
Total liabilities and shareholders' equity
    
37,720,410
   
38,090,993
   
36,282,202
   
34,091,441
                                                 
Net interest income-tax equivalent basis
                          
$
255,103
  
$
260,445
  
$
241,898
  
$
227,718
                          
Fully taxable equivalent adjustment
                            
(291
)
  
(285
)
  
(290
)
  
(271
)
                        
Net interest income
                          
$
254,812
  
$
260,160
  
$
241,608
  
$
227,447
                          
Net interest spread
                                                    
2.52
%
  
2.59
%
  
2.66
%
  
2.80
%
Effect of interest-free sources used to fund
                                                                          
earning assets
                                                    
.54
   
.50
   
.40
   
.32
 
Net interest margin
                                                    
3.06
%
  
3.09
%
  
3.06
%
  
3.12
%
* Includes loans on nonaccrual status.
Yields and corresponding income amounts are adjusted to a fully taxable equivalent. Earning assets yields are expressed net of unearned income.
Rates are expressed net of unamortized debenture cost for long-term debt. Net interest margin is computed using total net interest income.
 
8
 
 

MORTGAGE SERVICING RIGHTS
                
Quarterly, Unaudited
                          
                           
(Thousands)
    
4Q06
   
3Q06
    
2Q06
    
1Q06
  
FIRST LIENS
                          
Fair value beginning balance
  
$
1,464,360
  
$
1,565,649
  
$
1,449,472
  
$
1,318,219
  
Addition of mortgage servicing rights
    
86,306
   
90,970
   
117,197
   
95,624
 
Reductions due to loan payments
    
(66,937
)
  
(60,328
)
  
(72,270
)
  
(58,641
)
Changes in fair value due to:
                          
Changes in current market interest rates
    
11,601
   
(131,646
)
  
70,933
   
94,249
 
Other changes in fair value
    
(115
)
  
(285
)
  
317
   
21
 
Fair value ending balance
  
$
1,495,215
  
$
1,464,360
  
$
1,565,649
  
$
1,449,472
  
                           
SECOND LIENS
                          
Fair value beginning balance
  
$
18,851
  
$
14,457
  
$
11,062
  
$
5,470
  
Addition of mortgage servicing rights
    
3,931
   
4,905
   
4,267
   
6,360
 
Reductions due to loan payments
    
(1,716
)
  
(1,172
)
  
(955
)
  
(797
)
Changes in fair value due to:
                          
Changes in current market interest rates
   
11
   
(61
)
  
46
   
49
 
Changes in assumptions
   
2,400
   
722
   
-
   
-
 
Other changes in fair value
    
614
   
-
   
37
   
(20
)
Fair value ending balance
  
$
24,091
  
$
18,851
  
$
14,457
  
$
11,062
  
                           
HELOC
                          
Fair value beginning balance
  
$
15,130
  
$
15,307
  
$
14,914
  
$
14,384
  
Addition of mortgage servicing rights
    
1,028
   
1,559
   
1,891
   
1,971
 
Reductions due to loan payments
    
(1,385
)
  
(1,805
)
  
(2,021
)
  
(2,317
)
Changes in fair value due to:
                          
Changes in current market interest rates
   
(1
)
  
61
   
523
   
506
 
Changes in assumptions
   
-
   
8
   
-
   
-
 
Other changes in fair value
    
(136
)
  
-
   
-
   
370
 
Fair value ending balance
  
$
14,636
  
$
15,130
  
$
15,307
  
$
14,914
  
                           
TOTAL CONSOLIDATED
                          
Fair value beginning balance
  
$
1,498,341
  
$
1,595,413
  
$
1,475,448
  
$
1,338,073
  
Addition of mortgage servicing rights
    
91,265
   
97,434
   
123,355
   
103,955
 
Reductions due to loan payments
    
(70,038
)
  
(63,305
)
  
(75,246
)
  
(61,755
)
Changes in fair value due to:
                          
Changes in current market interest rates
   
11,611
   
(131,646
)
  
71,502
   
94,804
 
Changes in assumptions
   
2,400
   
730
   
-
   
-
 
Other changes in fair value
    
363
   
(285
)
  
354
   
371
 
Fair value ending balance
  
$
1,533,942
  
$
1,498,341
  
$
1,595,413
  
$
1,475,448
  
  Effective first quarter 2006, FHN elected early adoption of SFAS No. 156, which requires servicing rights be initially measured at fair value.
  In 2005 these amounts were included at the lower of cost, net of accumulated amortization, or fair value.
 
9 
 
RETAIL/COMMERCIAL BANKING
             
 
Quarterly, Unaudited
                     
                       
(Thousands)
   
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Net interest income
 
$
228,034
  
$
231,932
  
$
230,678
  
$
224,851
  
$
227,682
  
Noninterest income
   
112,664
   
110,191
   
112,018
   
106,394
   
106,603
 
Divestitures
   
-
   
-
   
-
   
-
   
7,029
 
Security G/L
   
-
   
-
   
-
   
-
   
-
 
Total revenue
   
340,698
   
342,123
   
342,696
   
331,245
   
341,314
 
Total noninterest expense
   
209,143
   
203,365
   
211,973
   
215,004
   
202,624
 
Provision
   
23,264
   
23,550
   
18,361
   
18,026
   
15,897
 
Pretax income
 
$
108,291
  
$
115,208
  
$
112,362
  
$
98,215
  
$
122,793
  
                                 
Efficiency ratio
   
61
%
  
59
%
  
62
%
  
65
%
  
59
%
                                 
Balance Sheet
                                
Average loans (millions)
 
$
21,465
  
$
21,381
  
$
21,096
  
$
20,596
  
$
19,785
  
Other earning assets (millions)
   
429
   
491
   
589
   
878
   
1,599
 
Total earning assets (millions)
 
$
21,894
  
$
21,872
  
$
21,685
  
$
21,474
  
$
21,384
  
                                 
Total deposits
 
$
12,046
  
$
11,951
  
$
11,773
  
$
11,510
  
$
11,280
  
                                 
Net interest margin
   
4.13
%
  
4.21
%
  
4.27
%
  
4.25
%
  
4.22
%
                                 
Noninterest income
                                
Deposit transactions & cash mgmt
 
$
43,257
  
$
44,470
  
$
42,718
  
$
33,254
  
$
42,191
  
Insurance commissions
   
8,518
   
10,121
   
12,048
   
14,287
   
12,693
 
Trust services & investment mgmt
   
10,424
   
9,609
   
10,824
   
11,164
   
10,873
 
Bankcard Income
    
6,084
   
6,169
   
6,103
   
5,882
   
7,185
 
Other service charges
   
5,014
   
4,641
   
5,336
   
4,806
   
5,078
 
Check clearing fees
   
1,386
   
1,594
   
1,679
   
1,869
   
1,801
 
Revenue from loan sales and
                               
  securitizations (a)
   
13,886
   
10,068
   
10,548
   
8,238
   
10,630
 
Miscellaneous revenue
   
24,095
   
23,519
   
22,762
   
26,894
   
16,152
 
Total noninterest income
  
$
112,664
  
$
110,191
  
$
112,018
  
$
106,394
  
$
106,603
  
                                 
Key Statistics
                                
                                 
                                 
Locations
                                
Full-Service Financial Centers
                                
First Tennesee
    
197
   
194
   
192
   
192
   
191
 
First Horizon Bank
    
32
   
27
   
23
   
21
   
17
 
                                 
Other
                                
Trust total assets (millions)(b)
 
$
13,618
  
$
12,866
  
$
11,541
  
$
11,838
  
$
11,971
  
Trust total managed assets (millions)(b)
   
6,562
   
6,270
   
6,223
   
6,379
   
6,707
 
  (a) Includes gains from whole-loan sales and net revenue from asset securitizations
  (b) Current quarter is an estimate
  Certain previously reported amounts have been reclassified to agree with current presentation.
 
10

MORTGAGE BANKING
             
Quarterly, Unaudited
                     
                       
(Thousands)
   
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Net interest income
 
$
20,418
  
$
20,839
  
$
25,050
  
$
25,408
  
$
34,613
  
Noninterest income:
                                
Net origination fees
   
69,230
   
64,248
   
110,416
   
64,205
   
89,120
 
Net servicing fees
   
11,826
   
15,701
   
(727
)
  
10,717
   
20,175
 
Other fees
   
10,497
   
10,418
   
9,913
   
8,800
   
10,317
 
Total noninterest income
   
91,553
   
90,367
   
119,602
   
83,722
   
119,612
 
Total revenue
   
111,971
   
111,206
   
144,652
   
109,130
   
154,225
 
Noninterest expense
   
108,751
   
136,661
   
115,099
   
114,629
   
115,020
 
Provision
   
(281
)
  
144
   
292
   
(227
)
  
278
 
Pretax (loss)/income
  
$
3,501
  
$
(25,599
)
$
29,261
  
$
(5,272
)
$
38,927
  
                                 
Noninterest expense detail
                               
Commissions & incentives
 
$
47,428
  
$
50,090
  
$
54,831
  
$
53,385
  
$
62,946
  
FAS 91 cost deferral
   
(1,131
)
  
1,515
   
4,473
   
(1,743
)
  
4,813
 
Other salaries & benefits
   
56,462
   
56,584
   
50,420
   
63,708
   
58,646
 
Total salaries & benefits
   
102,759
   
108,189
   
109,724
   
115,350
   
126,405
 
Contract labor & outsourcing
   
3,103
   
4,025
   
4,170
   
4,771
   
4,938
 
Equipment & occupancy
   
17,362
   
17,095
   
16,074
   
17,953
   
17,633
 
Foreclosure provision
   
1,042
   
(698
)
  
2,379
   
(1,082
)
  
2,838
 
Other expenses
   
38,525
   
64,289
   
49,099
   
41,990
   
40,785
 
Total expenses before FAS 91 reclass
   
162,791
   
192,900
   
181,446
   
178,982
   
192,599
 
FAS 91 reclassification
   
(57,575
)
  
(59,480
)
  
(69,334
)
  
(67,178
)
  
(82,257
)
Total noninterest expense before
                               
segment allocations
   
105,216
   
133,420
   
112,112
   
111,804
   
110,342
 
Segment allocations
   
3,535
   
3,241
   
2,987
   
2,825
   
4,678
 
Total noninterest expense
 
$
108,751
  
$
136,661
  
$
115,099
  
$
114,629
  
$
115,020
  
                                 
Other information
                                
Efficiency ratio
   
97
%
  
123
%
  
80
%
  
105
%
  
75
%
                                 
Warehouse (millions)
 
$
3,124
  
$
3,173
  
$
3,598
  
$
3,524
  
$
3,828
  
Other earning assets (millions)
   
793
   
836
   
865
   
739
   
606
 
Total earning assets (millions)
 
$
3,917
  
$
4,009
  
$
4,463
  
$
4,263
  
$
4,434
  
                                 
Escrow balances
 
$
2,000
  
$
1,965
  
$
1,903
  
$
1,641
  
$
2,034
  
                                 
Net interest margin
   
2.07
%
  
2.06
%
  
2.25
%
  
2.42
%
  
3.10
%
                                 
Warehouse Spread
   
1.24
%
  
1.18
%
  
1.44
%
  
1.77
%
  
2.06
%
Certain previously reported amounts have been reclassified to agree with current presentation.
*See Note 1 - Financial Glossary
 
11

MORTGAGE BANKING
              
Quarterly, Unaudited
                      
                       
(Thousands)
    
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
ORIGINATION INCOME
                                
Origination Fees
  
$
63,255
  
$
65,132
  
$
77,174
  
$
67,043
  
$
79,808
  
FAS 91 Fee Deferral
    
(225
)
  
1,318
   
1,523
   
(126
)
  
4,932
 
Appraisal, Final Inspection,
                               
Credit Report Fees
    
6,840
   
7,119
   
7,901
   
6,778
   
7,574
 
  Total origination fees
    
69,870
   
73,569
   
86,598
   
73,695
   
92,314
 
                                 
Secondary Marketing Income:
                                
  Prime:
                                
OMSR, SRP
    
68,373
   
72,323
   
90,933
   
74,603
   
88,996
 
Marketing G/L (Trading Gains)
   
25,897
   
13,915
   
37,906
   
22,281
   
21,237
 
Concessions
    
(33,293
)
  
(34,233
)
  
(41,355
)
  
(34,020
)
  
(35,803
)
LOCOM
    
(1,629
)
  
(288
)
  
(398
)
  
665
   
613
 
Subtotal Prime
    
59,348
   
51,717
   
87,086
   
63,529
   
75,043
 
                                 
  Non-Prime:
                                
OMSR, SRP
    
2,264
   
3,839
   
1,226
   
3,633
   
4,017
 
LOCOM
    
(2,164
)
  
(1,940
)
  
1,817
   
(1,340
)
  
(1,572
)
Recourse Provision*
    
(2,513
)
  
(3,457
)
  
3,023
   
(8,134
)
  
1,575
 
Subtotal Non-Prime
    
(2,413
)
  
(1,558
)
  
6,066
   
(5,841
)
  
4,020
 
Total Secondary Marketing Fees -
                                
Mortgage
    
56,935
   
50,159
   
93,152
   
57,688
   
79,063
 
                                 
FAS 91 Reclassification
    
(57,575
)
  
(59,480
)
  
(69,334
)
  
(67,178
)
  
(82,257
)
                                 
Total Origination Income
  
$
69,230
  
$
64,248
  
$
110,416
  
$
64,205
  
$
89,120
  
                                 
Margins:
                                
Marketing Margin on Deliveries (bps):
                                
Prime:
                                
OMSR, SRP
    
113
   
116
   
129
   
117
   
119
 
Marketing G/L (Trading Gains)
   
43
   
22
   
54
   
35
   
28
 
Concessions
    
(55
)
  
(55
)
  
(59
)
  
(53
)
  
(48
)
LOCOM
    
(3
)
  
-
   
(1
)
  
1
   
1
 
Total Prime
    
98
   
83
   
123
   
100
   
100
 
  Non-Prime:
                                
OMSR, SRP
    
118
   
164
   
37
   
83
   
98
 
LOCOM
    
(113
)
  
(83
)
  
56
   
(31
)
  
(38
)
Recourse Provision*
    
(131
)
  
(148
)
  
93
   
(186
)
  
38
 
Total Non-Prime
    
(126
)
  
(67
)
  
186
   
(134
)
  
98
 
                                 
Total Marketing Margin on Deliveries
    
91
   
77
   
126
   
85
   
100
 
  *Represents the reclassification from expense to secondary marketing income of expected loss provisions related to the recourse obligation on sales of non-prime loans.
 
12

MORTGAGE BANKING
              
Quarterly, Unaudited
                      
                       
($ in millions)
    
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
KEY ORIGINATION METRICS
                                
                                 
Production:
                                
First Lien Production
  
$
6,417
  
$
6,351
  
$
7,482
  
$
6,865
  
$
7,991
  
                                 
Breakdown by Product Type:
                                
Government
    
7
%
  
6
%
  
6
%
  
5
%
  
4
%
Conventional Fixed
    
60
%
  
55
%
  
55
%
  
51
%
  
44
%
Conventional ARM
    
9
%
  
13
%
  
15
%
  
19
%
  
19
%
Jumbo Fixed
    
11
%
  
10
%
  
10
%
  
10
%
  
14
%
Jumbo ARM
    
10
%
  
11
%
  
11
%
  
10
%
  
14
%
Other
    
1
%
  
1
%
  
1
%
  
1
%
  
1
%
Non Prime
    
2
%
  
4
%
  
2
%
  
4
%
  
4
%
                                 
Breakdown by Payment Type:
                                
Fully amortizing
    
70
%
  
70
%
  
69
%
  
66
%
  
66
%
Interest Only - Fixed
    
14
%
  
10
%
  
10
%
  
11
%
  
8
%
Interest Only - ARM
    
15
%
  
18
%
  
17
%
  
19
%
  
22
%
Option ARM's
    
1
%
  
2
%
  
4
%
  
4
%
  
4
%
                                 
Production Refinanced %
    
44
%
  
33
%
  
33
%
  
41
%
  
41
%
Production Purchased %
    
56
%
  
67
%
  
67
%
  
59
%
  
59
%
                                 
ARMs % (Excluding Gov't ARMS)
    
21
%
  
27
%
  
28
%
  
33
%
  
37
%
                                 
Total Sales Force
    
2,440
   
2,495
   
2,467
   
2,609
   
2,630
 
                                 
Warehouse/Pipeline Balance:
                                
Ending Warehouse Balance
  
$
2,347
  
$
2,286
  
$
2,587
  
$
2,788
  
$
2,931
  
Ending Pipeline Balance (Locked)
    
3,074
   
3,384
   
3,645
   
3,691
   
3,119
 
                                 
Loan Sales (Deliveries):
                                
Prime
    
6,062
   
6,257
   
7,066
   
6,371
   
7,481
 
Non-Prime
    
192
   
233
   
325
   
436
   
409
 
Total Loan Sales
    
6,254
   
6,490
   
7,391
   
6,807
   
7,890
 
 
13

MORTGAGE BANKING
                          
Quarterly, Unaudited
                                        
                                         
 
   4Q06          
3Q06
         
2Q06
         
1Q06
         
4Q05
       
(Thousands)
 
$
  
bps
$
  
bps
 
$
  
bps
 
$
  
bps
$
  
bps
SERVICING INCOME
                                                            
Gross Service Fees
$
99,852
    
39
  
$
98,594
    
40
  
$
95,043
    
39
  
$
93,454
    
39
  
$
91,735
    
39
  
Guarantee Fees
  
(18,630
)
  
(7
)
  
(15,778
)
  
(7
)
  
(17,348
)
  
(7
)
  
(18,876
)
  
(8
)
  
(18,980
)
  
(8
)
Sub-Service Fee Income
  
7
   
-
   
29
   
-
   
71
   
-
   
64
   
-
   
144
   
-
 
Lender Paid MI
  
(13
)
        
(24
)
  
-
   
(20
)
  
-
   
108
   
-
   
(168
)
  
-
 
Net Service Fees
  
81,216
   
32
   
82,821
   
33
   
77,746
   
32
   
74,750
   
31
   
72,731
   
31
 
                                                             
Early Payoff Interest Expense
  
(4,791
)
  
(2
)
  
(3,718
)
  
(2
)
  
(4,324
)
  
(2
)
  
(3,838
)
  
(2
)
  
(5,164
)
  
(2
)
Ancillary Fees
  
7,521
   
3
   
7,112
   
3
   
6,820
   
3
   
6,934
   
3
   
6,698
   
3
 
Total Service Fees
  
83,946
   
33
   
86,215
   
34
   
80,242
   
33
   
77,846
   
32
   
74,265
   
32
 
                                                             
MSR Asset - Value Changes
                                                            
Change in MSR Value - Runoff
  
(66,937
)
        
(60,326
)
        
(72,270
)
        
(58,836
)
        
(71,669
)
      
Change in MSR Value - Other than Runoff
  
10,351
         
(133,067
)
        
69,564
         
95,961
         
55,684
       
MSR Hedge Gains/(Losses)
  
(7,171
)
        
127,240
         
(72,104
)
        
(98,290
)
        
(32,673
)
      
Total Net Change MSR Value
  
(63,757
)
        
(66,153
)
        
(74,810
)
        
(61,165
)
        
(48,658
)
      
                                                             
Trading Asset & Associated Derivatives:
                                                            
Change in Trading Asset Value
  
12
         
(13,628
)
        
3,044
         
8,467
         
3,720
       
Trading Asset Hedge Gains/(Losses)
  
(844
)
        
13,940
         
(4,438
)
        
(10,932
)
        
(5,722
)
      
Total Trading Asset & Associated Derivatives
  
(832
)
        
312
         
(1,394
)
        
(2,465
)
        
(2,002
)
      
                                                             
Option Expense on Servicing Hedges
  
(7,531
)
        
(4,673
)
        
(4,765
)
        
(3,499
)
        
(3,430
)
      
                                                             
Total Servicing Income
  
11,826
         
15,701
         
(727
)
        
10,717
         
20,175
       
                                                             
KEY SERVICING METRICS - ($ in millions)
                                                            
Beginning Servicing Portfolio
$
100,246
        
$
99,304
        
$
97,303
        
$
95,284
        
$
93,589
        
Additions to portfolio
  
6,333
         
6,238
         
7,332
         
6,797
         
7,772
       
Prepayments
  
(3,909
)
        
(3,476
)
        
(3,725
)
        
(3,278
)
        
(4,418
)
      
Amortization
  
(687
)
        
(692
)
        
(687
)
        
(688
)
        
(676
)
      
Service Release Sales
  
(613
)
        
(1,128
)
        
(919
)
        
(812
)
        
(983
)
      
End. Servicing Portfolio (Owned)
$
101,370
        
$
100,246
        
$
99,304
        
$
97,303
        
$
95,284
        
                                                             
Avg. Servicing Portfolio (Owned)
$
100,811
        
$
99,484
        
$
98,342
        
$
96,147
        
$
94,388
        
Average Loans Serviced (#)
  
633,293
         
629,897
         
626,527
         
620,476
         
616,649
       
                                                             
Product Mix (Average)
                                                           
Product Mix (%)
                                                            
GNMA
  
8
%
        
8
%
        
8
%
        
9
%
        
9
%
      
FNMA/FHLMC
  
64
%
        
64
%
        
65
%
        
65
%
        
65
%
      
Private
  
25
%
        
25
%
        
24
%
        
23
%
        
22
%
      
Sub-Total
  
97
%
        
97
%
        
97
%
        
97
%
        
96
%
      
Warehouse
  
3
%
        
3
%
        
3
%
        
3
%
        
4
%
      
Total
  
100
%
        
100
%
        
100
%
        
100
%
        
100
%
      
                                                             
Other Statistics
                                                            
(Annualized)
                                                            
Ancillary Income per Loan
$
47.51
        
$
45.16
        
$
43.54
        
$
44.70
        
$
43.45
        
Servicing Cost per Loan
$
49.45
        
$
49.36
        
$
50.60
        
$
53.01
        
$
51.96
        
                                                             
Portfolio Data
                                                            
(in millions)
                                                            
Average Servicing Asset **
  
1,452
          
1,532
          
1,503
          
1,350
          
1,262
        
Valuation Reserve (Ending Balance)
  
-
         
-
         
-
         
-
         
1
        
Servicing Book Value (bps)
  
144
          
154
          
153
          
140
          
134
        
                                                             
Change in MSR Asset /
                                                           
Average Servicing Asset
  
18
%
        
17
%
        
20
%
        
18
%
        
15
%
      
                                                             
Run-Off Rate
  
18
%
        
17
%
        
18
%
        
17
%
        
22
%
      
                                                             
** Includes valuation reserve/MSRs only
  
 
14

CAPITAL MARKETS
             
Quarterly, Unaudited
                     
                       
(Thousands)
   
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Net interest income/(expense)
  
$
764
  
$
2,900
  
$
115
  
$
(722
)
$
(1,074
)
Incremental cost of equity
    
(4,260
)
  
(4,437
)
  
(4,769
)
  
(4,969
)
  
(4,856
)
Net interest expense
   
(3,496
)
  
(1,537
)
  
(4,654
)
  
(5,691
)
  
(5,930
)
Noninterest income:
                               
Fixed income
   
46,235
   
41,503
   
41,843
   
50,602
   
44,397
 
Other product revenue
    
49,877
   
56,997
   
62,278
   
45,999
   
39,991
 
Total noninterest income
   
96,112
   
98,500
   
104,121
   
96,601
   
84,388
 
Total revenue
   
92,616
   
96,963
   
99,467
   
90,910
   
78,458
 
Noninterest expense
   
84,082
   
81,786
   
83,710
   
82,613
   
74,182
 
Pretax income
 
$
8,534
  
$
15,177
  
$
15,757
  
$
8,297
  
$
4,276
  
                                 
                                 
Efficiency ratio
   
91
%
  
84
%
  
84
%
  
91
%
  
95
%
                                 
Trading inventory (millions)
 
$
2,513
  
$
2,523
  
$
2,356
  
$
2,175
  
$
2,160
  
Other earning assets (millions)
   
1,889
   
2,231
   
2,262
   
2,149
   
2,285
 
Total earning assets (millions)
 
$
4,402
  
$
4,754
  
$
4,618
  
$
4,324
  
$
4,445
  
                                 
                                 
Net interest margin
   
(.32
)%
  
(.13
)%
  
(.40
)%
  
(.53
)%
  
(.53
)%
  Certain previously reported amounts have been reclassified to agree with current presentation.
 
15

CORPORATE
           
Quarterly, Unaudited
                     
                       
(Thousands)
   
4Q06
   
3Q06
   
2Q06
   
1Q06
   
4Q05
 
Net interest income
  
$
900
  
$
280
  
$
2,358
  
$
1,006
  
$
(1,693
)
Net interest income from
                               
deferred compensation
    
141
   
107
   
166
   
147
   
140
 
Total net interest income
    
1,041
   
387
   
2,524
   
1,153
   
(1,553
)
                                 
Noninterest income
    
4,825
   
3,274
   
2,254
   
(14,076
)
  
2,749
 
Noninterest income from
                               
deferred compensation
    
8,188
   
6,838
   
(5,876
)
  
5,250
   
2,372
 
Total noninterest income
    
13,013
   
10,112
   
(3,622
)
  
(8,826
)
  
5,121
 
                                 
Security gain/(loss)
    
3,002
   
8,757
   
2,893
   
(80,281
)
  
(181
)
Total revenue
   
17,056
   
19,256
   
1,795
   
(87,954
)
  
3,387
 
                                 
Noninterest expense
    
19,486
   
22,371
   
17,979
   
15,582
   
19,118
 
Deferred compensation expense
    
10,168
   
8,716
   
(5,750
)
  
7,253
   
3,922
 
Total noninterest expense
    
29,654
   
31,087
   
12,229
   
22,835
   
23,040
 
Pretax loss
  
$
(12,598
)
$
(11,831
)
$
(10,434
)
$
(110,789
)
$
(19,653
)
  Certain previously reported amounts have been reclassified to agree with current presentation.
  See the following table for the impact of deferred compensation plans on each of the segments for the periods presented.

Impact of Deferred
              
Compensation
    
4Q06
    
3Q06
    
2Q06
    
1Q06
    
4Q05
 
                                 
Capital Markets
                                
Revenue
    
(3,429
)
  
(3,146
)
  
3,003
   
(2,430
)
  
(547
)
Expense
    
(5,093
)
  
(4,490
)
  
3,157
   
(3,766
)
  
(1,577
)
                                 
Retail/Commercial Banking
                                
Revenue
    
(541
)
  
(273
)
  
151
   
(111
)
  
(94
)
Expense
    
(678
)
  
(736
)
  
109
   
(544
)
  
(522
)
                                 
Mortgage Banking
                                
Revenue
    
(4,359
)
  
(3,526
)
  
2,556
   
(2,856
)
  
(1,871
)
Expense
    
(4,397
)
  
(3,490
)
  
2,484
   
(2,943
)
  
(1,823
)
 
16

CAPITAL HIGHLIGHTS
              
Quarterly, Unaudited
                     
                       
(Dollars in millions, except per share amounts)
    
4Q06
   
3Q06
    
2Q06
    
1Q06
    
4Q05
  
Tier 1 Capital (a)
  
$
2,693.8
  
$
2,660.2
  
$
2,612.2
  
$
2,558.3
  
$
2,524.2
  
Tier 2 Capital (a)
    
1,320.1
   
1,338.2
   
1,331.2
   
1,344.5
   
1,090.5
 
Total Capital (a)
  
$
4,013.9
  
$
3,998.4
  
$
3,943.4
  
$
3,902.8
  
$
3,614.7
  
                                 
Risk-Adjusted Assets (a)
  
$
30,833.7
  
$
31,568.6
  
$
30,016.3
  
$
29,166.8
  
$
29,111.9
  
                                 
Tier 1 Ratio (a)
    
8.74
%
  
8.43
%
  
8.70
%
  
8.77
%
  
8.67
%
Tier 2 Ratio (a)
    
4.28
   
4.24
   
4.44
   
4.61
   
3.75
 
Total Capital Ratio (a)
    
13.02
%
  
12.67
%
  
13.14
%
  
13.38
%
  
12.42
%
                                 
Leverage Ratio (a)
    
6.94
%
  
6.80
%
  
6.86
%
  
6.86
%
  
6.76
%
                                 
Shareholders' Equity/Assets Ratio (b)
   
6.49
   
6.26
   
6.52
   
6.43
   
6.42
 
                                 
Book Value
  
$
19.61
  
$
20.06
  
$
19.59
  
$
19.36
  
$
18.46
  
(a) Current quarter is an estimate
(b) Calculated on period-end balances
 
17
 
 Note 1 □ Financial Glossary    
 
Appraisal Fees: A fee charged to the borrower for the cost of appraising a property.

Concessions: The net amount of the discount or premium pricing charged to borrowers upon loan origination. This also includes the servicing release premium paid to correspondents to purchase loans. Discount pricing is used to competitively price mortgage loans.

Credit Report Fee: A fee charged to the borrower for the cost of obtaining the borrower’s credit report.

FAS 91 Fee Deferral: The timing difference between collecting and recognizing origination fees on a loan. For loans held for sale, origination fees are recognized at the time the loan is sold, not at the time the loan is originated.

FAS 91 Reclassification: The reclassification of the cost of originating the loans sold during the period.

Final Inspection Fee: A fee charged to the borrower to inspect a property.

Lower of Cost or Market (LOCOM): A method of accounting for certain assets by recording them at the lower of their historical cost or their current market value.

Marketing G/L (Trading Gains): The net result of hedging activities.

Originated Mortgage Servicing Rights (OMSR): The retained right to service a mortgage loan when a mortgage loan is sold on a servicing-retained basis. Represents the present value of the amount by which the estimated future net cash flows from servicing mortgage loans exceeds the cost of servicing mortgage loans.

Origination Fees: A fee charged to the borrower by the lender to originate a loan. Usually stated as a percentage of the face value of the loan.

Servicing Released Premium (SRP): The premium received for selling loans on a servicing released basis.