UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 19, 2013
First Horizon National Corporation
(Exact Name of Registrant as Specified in Charter)
TN | 001-15185 | 62-0803242 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
165 MADISON AVENUE MEMPHIS, TENNESSEE |
38103 | |
(Address of principal executive office) | (Zip Code) |
Registrants telephone number, including area code - (901) 523-4444
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 7.01. Regulation FD Disclosure.
Furnished as Exhibit 99.1 is a copy of First Horizon National Corporation Financial Supplement and Investor Slide Presentation for the quarter ended June 30, 2013, which were released today.
ITEM 9.01. Financial Statements and Exhibits.
(c) | Exhibits |
The following exhibit is furnished pursuant to Item 7.01, is not to be considered filed under the Securities Exchange Act of 1934, as amended (Exchange Act), and shall not be incorporated by reference into any of First Horizon National Corporations (Corporation) previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act.
Exhibit |
Description | |
99.1 | First Horizon National Corporation Financial Supplement and Investor Slide Presentation for the quarter ended June 30, 2013. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First Horizon National Corporation | ||||||
(Registrant) | ||||||
Date: July 19, 2013 | By: | /s/ William C. Losch III | ||||
William C. Losch III | ||||||
Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
The following exhibit is furnished pursuant to Item 7.01, is not to be considered filed under the Exchange Act, and shall not be incorporated by reference into any of the Corporations previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act.
Exhibit |
Description | |
99.1 | First Horizon National Corporation Financial Supplement and Investor Slide Presentation for the quarter ended June 30, 2013. |
Exhibit 99.1
SECOND QUARTER 2013
FINANCIAL SUPPLEMENT
If you need further information, please contact:
Aarti Bowman, Investor Relations
901-523-4017
aagoorha@firsthorizon.com
FHN TABLE OF CONTENTS
Page | ||||
First Horizon National Corporation Segment Structure |
3 | |||
Performance Highlights |
4 | |||
Consolidated Results |
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Income Statement |
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Summary Results |
6 | |||
Income Statement |
7 | |||
Other Income and Other Expense |
8 | |||
Balance Sheet |
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Period End Balance Sheet |
9 | |||
Average Balance Sheet |
10 | |||
Net Interest Income |
11 | |||
Average Balance Sheet: Yields and Rates |
12 | |||
Charges for Restructuring, Repositioning, & Efficiency Initiatives |
13 | |||
Mortgage Servicing Rights |
14 | |||
Business Segment Detail |
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Segment Highlights |
15 | |||
Regional Banking |
16 | |||
Capital Markets |
17 | |||
Corporate |
18 | |||
Non-Strategic |
19 | |||
Capital Highlights |
20 | |||
Asset Quality |
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Asset Quality: Consolidated |
21 | |||
Asset Quality: Regional Banking and Corporate |
23 | |||
Asset Quality: Non-Strategic |
24 | |||
Rollforwards of Nonperforming Loans and ORE Inventory |
25 | |||
Portfolio Metrics |
26 | |||
Non-GAAP to GAAP Reconciliation |
27 | |||
Glossary of Terms |
28 |
Other Information
This financial supplement contains forward-looking statements involving significant risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking information. Those factors include general economic and financial market conditions, including expectations of and actual timing and amount of interest rate movements including the slope of the yield curve, competition, customer and investor responses to these conditions, ability to execute business plans, geopolitical developments, recent and future legislative and regulatory developments, natural disasters, and items mentioned in this financial supplement and in First Horizon National Corporations (FHN) most recent press release, as well as critical accounting estimates and other factors described in FHNs recent filings with the SEC. FHN disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.
Use of Non-GAAP Measures
Certain ratios are included in this financial supplement that are non-GAAP, meaning they are not presented in accordance with generally accepted accounting principles (GAAP) in the U.S. FHNs management believes such ratios are relevant to understanding the capital position and results of the Company. The non-GAAP ratios presented in this financial supplement are tangible common equity to tangible assets, tangible book value per common share, tier 1 common to risk weighted assets, adjusted tangible common equity to risk weighted assets, and net interest margin adjusted for fully taxable equivalent (FTE). These ratios are reported to FHNs management and Board of Directors through various internal reports. Additionally, disclosure of non-GAAP capital ratios provides a meaningful base for comparability to other financial institutions as demonstrated by their use by the various banking regulators in reviewing the capital adequacy of financial institutions. Non-GAAP measures are not formally defined by GAAP or codified in the federal banking regulations, and other entities may use calculation methods that differ from those used by FHN. Tier 1 capital is a regulatory term and is generally defined as the sum of core capital (including common equity and instruments that can not be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations. Also a regulatory term, risk weighted assets includes total assets adjusted for credit risk and is used to determine regulatory capital ratios. Refer to the tabular reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items on page 27 of this financial supplement.
2
FIRST HORIZON NATIONAL CORPORATION SEGMENT STRUCTURE |
3
FHN PERFORMANCE HIGHLIGHTS
(Second Quarter 2013 vs. First Quarter 2013)
Consolidated
| Net income available to common shareholders was $40.8 million, or $.17 per diluted share, compared to $41.0 million, or $.17 per diluted share in prior quarter |
| Net interest income (NII) decreased in second quarter to $160.0 million from $161.4 million; Net interest margin (NIM) increased slightly to 2.96 percent from 2.95 percent in the prior quarter |
| The decrease in NII is primarily attributable to a decline in average loan balances (non-strategic loan portfolios and loans to mortgage companies), partially offset by the impact of day variance from prior quarter, declining rates on deposits, and an increase in loan fees |
| The increase in NIM is driven by a decrease in average excess cash held at the Fed, partially offset by declining yields on the investment portfolio and continued run-off of the non-strategic portfolio |
| Noninterest income (including securities gains) was $142.6 million in second quarter compared to $156.4 million in first quarter |
| Decrease largely driven by lower fixed income sales revenue within capital markets and a decline in mortgage banking income in second quarter |
| Noninterest expense was $227.4 million in second quarter compared to $240.5 million in first quarter |
| Decrease primarily driven by lower personnel expense in the corporate and capital markets segments and a reduction in losses from litigation and regulatory matters, partially offset by increased professional fees related to various consulting projects |
| Average loans were $15.9 billion in second quarter compared to $16.1 billion in first quarter; period-end loans increased 2 percent to $16.2 billion |
| Increase in the period-end loan portfolio driven by loan growth in the regional bank, partially offset by continued run-off within the non-strategic portfolios |
| Average core deposits were $15.7 billion in second and first quarters; period-end increased 5 percent to $16.4 billion primarily driven by an increase in Promontory funds and approximately $235 million in core deposits associated with the acquisition of substantially all of the assets and liabilities of Mountain National Bank (MNB) from the FDIC |
Regional Banking
| NII was $147.3 million in second quarter compared to $146.1 million in first quarter |
| The increase in NII is primarily attributable to the impact of day variance from prior quarter, an increase in loan fees, and declining rates on deposits, partially offset by lower cash basis NII and lower average loan balances (primarily loans to mortgage companies) |
| NIM was flat in second quarter relative to the prior quarter |
| Period-end loans increased 4 percent, or $506.0 million to $12.6 billion in second quarter |
| Increase primarily driven by loans to mortgage companies and consumer real estate installment loans, coupled with the addition of approximately $215 million in loans associated with the MNB acquisition |
| Provision was $13.2 million in second quarter compared to a provision credit of $2.5 million in prior quarter |
| Provision reflects continued slower pace of favorable grade migration, reduction in pace of improvement for loss rates, and stabilizing asset quality metrics |
| Noninterest income increased slightly to $61.9 million in second quarter from $59.1 million in first quarter |
| Noninterest expense decreased to $128.9 million in second quarter from $130.3 million the prior quarter |
Capital Markets
| Fixed income revenue decreased to $58.5 million in second quarter from $68.0 million in first quarter |
| Fixed income average daily revenue (ADR) was $.9 million in second quarter compared to $1.1 million in prior quarter, reflecting significant market volatility and increase in interest rates in the latter part of the second quarter |
| Noninterest expenses decreased to $59.9 million in second quarter from $61.7 million in first quarter |
| The expense decrease was due to a decline in variable compensation costs, partially offset by an increase in legal and professional fees |
Corporate
| NII was negative $10.0 million in second quarter compared to negative $8.6 million in first quarter |
| Estimated effective duration of the securities portfolio was 3.2 years in second quarter compared to 1.9 years in first quarter |
| Estimated modified duration of the securities portfolio was 4.0 years in second quarter compared to 3.9 years in prior quarter |
| Noninterest income was $3.8 million in second quarter compared to $7.9 million in first quarter |
| Decrease resulting from lower deferred compensation driven by market conditions and a reduction in BOLI driven by lower policy benefits relative to prior quarter; changes in deferred compensation income are mirrored by changes in deferred compensation expense |
Non-Strategic
| NII decreased to $18.6 million in second quarter from $20.0 million in first quarter due to continued run-off of the loan portfolio |
| Provision expense decreased to $1.8 million in second quarter from $17.5 million in prior quarter |
| Provision reflects runoff of the consumer portfolio as well as overall improved performance compared to first quarter |
| Noninterest income was $8.7 million in second quarter compared to $12.8 million in first quarter |
| Largely driven by negative mortgage warehouse valuation due to the effect of interest rate increases on performing fixed mortgages |
| Second and first quarters include a gain of $1.0 million and $2.4 million, respectively, from the reversal of a previous LOCOM adjustment associated with TRUP loan payoff/sales |
| Noninterest expense was $21.5 million in second quarter, compared to $30.9 million in the prior quarter |
| Second quarter includes a $.9 million loss accrual related to pending legal matters compared to a $5.2 million loss accrual in first quarter |
| Remaining decline largely driven by reductions consistent with the wind-down of legacy businesses |
| The active repurchase pipeline decreased to $234.7 million in second quarter from $258.9 million in first quarter |
| The pipeline of repurchase/make whole requests, primarily composed of requests from Fannie/Freddie, was $177.0 million as of the end of the second quarter, down from $200.6 million in prior quarter |
4
FHN PERFORMANCE HIGHLIGHTS (continued)
(Second Quarter 2013 vs. First Quarter 2013)
Asset Quality
| Allowance as a percentage of loans ratio was 162 basis points in second quarter compared to 167 basis points in prior quarter |
| Total reserves decreased to $261.9 million from $265.2 million in first quarter |
| The net decline in reserves was driven by the consumer portfolio, somewhat offset by reserve increases in the commercial portfolio |
| The commercial allowance reflects continued slower pace of improvement in loan grades and declining loss rates, as well as stabilization of asset quality metrics |
| Increase in nonperforming loans (NPLs) did not have a material effect on the allowance as estimated loss content associated with the stand-alone second liens had been contemplated in prior quarters |
| Provision expense was flat at $15.0 million in second quarter |
| Net charge-offs were $18.3 million in second quarter compared to $26.7 million in prior quarter |
| Annualized net charge-offs decreased to 46 basis points of average loans from 67 basis points in prior quarter |
| Net charge-off decline driven by improvement in the consumer portfolio |
| Total 30+ delinquencies were $100.1 million in second quarter compared to $106.6 million in prior quarter |
| Consumer real estate loans was the major contributor to this decline |
| Nonperforming assets (NPAs), including loans held-for-sale, increased to $506.7 million in second quarter from $418.4 million in prior quarter |
| NPLs increased in second quarter as a result of placing approximately $56 million of second liens on nonaccrual based on information received from a third party on the performance status of non-FHN serviced first liens in second quarter |
| Foreclosed real estate increased to $51.8 million in second quarter compared to $32.7 million in the prior quarter due to the MNB acquisition |
| Troubled debt restructurings (TDRs) were $584.5 million at the end of second quarter compared with $550.9 million in prior quarter |
Taxes
| Second quarter includes $8.2 million of positive effect from permanent tax benefits |
| $1.5 million benefit related to discrete period tax items, specifically a decrease in unrecognized tax benefits |
| $6.7 million in permanent tax benefits primarily related to tax credit investments, life insurance, and tax exempt interest |
Capital and Liquidity
| Paid $0.05 per common share dividend July 1, 2013 |
| Repurchased shares costing $8.0 million in second quarter under the $300 million share repurchase program |
| Repurchased shares costing $213.0 million since the programs inception in fourth quarter 2011 |
| Volume weighted average price for all share repurchases under the stock repurchase program of $8.86 per share (before $.03 per share broker commission) |
| Prepaid $40.0 million under a prepaid share repurchase arrangement related to the 2011 program; the final number of shares purchased under the arrangement will depend on FHNs stock price during the arrangements term and will be delivered in third quarter 2013 when completed |
| Paid preferred quarterly dividend of $1.6 million on July 10, 2013 |
| $250.0 million of subordinated notes and $100.0 million of subordinated capital notes that matured |
| Capital ratios (regulatory capital ratios estimated based on period-end balances) |
| 7.95 percent for tangible common equity to tangible assets |
| 13.20 percent for Tier 1 |
| 15.46 percent for Total Capital |
| 10.33 percent for Tier 1 Common |
| 11.07 percent for Leverage |
5
FHN CONSOLIDATED SUMMARY RESULTS
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Income Statement Highlights |
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Net interest income |
$ | 160,019 | $ | 161,382 | $ | 170,598 | $ | 173,465 | $ | 172,675 | (1 | )% | (7 | )% | ||||||||||||||
Noninterest income |
142,983 | 156,403 | 151,143 | 163,538 | 153,842 | (9 | )% | (7 | )% | |||||||||||||||||||
Securities gains/(losses), net |
(351 | ) | 24 | (4,700 | ) | | 5,065 | NM | NM | |||||||||||||||||||
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Total revenue |
302,651 | 317,809 | 317,041 | 337,003 | 331,582 | (5 | )% | (9 | )% | |||||||||||||||||||
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Noninterest expense |
227,408 | 240,540 | 271,361 | 263,169 | 527,177 | (5 | )% | (57 | )% | |||||||||||||||||||
Provision for loan losses |
15,000 | 15,000 | 15,000 | 40,000 | 15,000 | * | * | |||||||||||||||||||||
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Income/(loss) before income taxes |
60,243 | 62,269 | 30,680 | 33,834 | (210,595 | ) | (3 | )% | NM | |||||||||||||||||||
Provision/(benefit) for income taxes |
15,008 | 17,730 | (12,914 | ) | 5,260 | (88,178 | ) | (15 | )% | NM | ||||||||||||||||||
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Income/(loss) from continuing operations |
45,235 | 44,539 | 43,594 | 28,574 | (122,417 | ) | 2 | % | NM | |||||||||||||||||||
Income/(loss) from discontinued operations, net of tax |
1 | 430 | (12 | ) | 108 | 487 | NM | NM | ||||||||||||||||||||
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Net income/(loss) |
45,236 | 44,969 | 43,582 | 28,682 | (121,930 | ) | 1 | % | NM | |||||||||||||||||||
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Net income attributable to noncontrolling interest |
2,843 | 2,813 | 2,901 | 2,875 | 2,844 | 1 | % | * | ||||||||||||||||||||
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Net income/(loss) attributable to controlling interest |
42,393 | 42,156 | 40,681 | 25,807 | (124,774 | ) | 1 | % | NM | |||||||||||||||||||
Preferred stock dividends |
1,550 | 1,188 | | | | 30 | % | NM | ||||||||||||||||||||
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Net income/(loss) available to common shareholders |
$ | 40,843 | $ | 40,968 | $ | 40,681 | $ | 25,807 | $ | (124,774 | ) | * | NM | |||||||||||||||
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Common Stock Data |
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Diluted EPS from continuing operations |
$ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.10 | $ | (0.50 | ) | * | NM | |||||||||||||||
Diluted EPS |
$ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.10 | $ | (0.50 | ) | * | NM | |||||||||||||||
Diluted shares (thousands) |
240,891 | 242,799 | 246,132 | 248,306 | 249,104 | (1 | )% | (3 | )% | |||||||||||||||||||
Period-end shares outstanding (thousands) |
240,555 | 241,225 | 243,598 | 247,134 | 248,810 | * | (3 | )% | ||||||||||||||||||||
Cash dividends declared per share |
$ | 0.05 | $ | 0.05 | $ | 0.01 | $ | 0.01 | $ | 0.01 | * | NM | ||||||||||||||||
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Balance Sheet Highlights (Period-End) |
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Total loans, net of unearned income (Restricted - $.1 billion) (a) |
$ | 16,197,046 | $ | 15,889,670 | $ | 16,708,582 | $ | 16,523,783 | $ | 16,185,763 | 2 | % | * | |||||||||||||||
Total deposits |
17,011,884 | 16,204,467 | 16,629,709 | 16,228,111 | 16,117,443 | 5 | % | 6 | % | |||||||||||||||||||
Total assets (Restricted - $.1 billion) (a) |
25,133,274 | 25,166,427 | 25,520,140 | 25,739,830 | 25,492,955 | * | (1 | )% | ||||||||||||||||||||
Total liabilities (Restricted - $.1 billion) (a) |
22,586,923 | 22,566,700 | 23,010,934 | 23,207,942 | 22,978,549 | * | (2 | )% | ||||||||||||||||||||
Total equity |
2,546,351 | 2,599,727 | 2,509,206 | 2,531,888 | 2,514,406 | (2 | )% | 1 | % | |||||||||||||||||||
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Asset Quality Highlights |
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Allowance for loan losses (Restricted - $3.8 million) (a) |
$ | 261,934 | $ | 265,218 | $ | 276,963 | $ | 281,744 | $ | 321,051 | (1 | )% | (18 | )% | ||||||||||||||
Allowance / period-end loans |
1.62 | % | 1.67 | % | 1.66 | % | 1.71 | % | 1.98 | % | ||||||||||||||||||
Net charge-offs |
$ | 18,284 | $ | 26,745 | $ | 19,781 | $ | 79,307 | $ | 39,965 | (32 | )% | (54 | )% | ||||||||||||||
Net charge-offs (annualized) / average loans |
0.46 | % | 0.67 | % | 0.48 | % | 1.92 | % | 1.01 | % | ||||||||||||||||||
Non-performing assets (NPA) (b) |
$ | 506,732 | $ | 418,385 | $ | 419,369 | $ | 450,391 | $ | 466,873 | 21 | % | 9 | % | ||||||||||||||
NPA % (b) (c) |
2.25 | % | 1.81 | % | 1.84 | % | 2.15 | % | 2.32 | % | ||||||||||||||||||
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Key Ratios & Other |
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Return on average assets (annualized) (d) |
0.74 | % | 0.73 | % | 0.69 | % | 0.45 | % | (1.96 | )% | ||||||||||||||||||
Return on average common equity (annualized) (e) |
7.46 | % | 7.48 | % | 7.20 | % | 4.59 | % | (21.06 | )% | ||||||||||||||||||
Net interest margin (f) (g) |
2.96 | % | 2.95 | % | 3.09 | % | 3.15 | % | 3.16 | % | ||||||||||||||||||
Fee income to total revenue (h) |
47.19 | % | 49.22 | % | 46.98 | % | 48.53 | % | 47.12 | % | ||||||||||||||||||
Efficiency ratio (i) |
75.05 | % | 75.69 | % | 84.34 | % | 78.09 | % | 161.45 | % | ||||||||||||||||||
Book value per common share (j) |
$ | 8.96 | $ | 9.16 | $ | 9.09 | $ | 9.05 | $ | 8.92 | ||||||||||||||||||
Tangible book value per common share (g) (j) |
$ | 8.25 | $ | 8.51 | $ | 8.44 | $ | 8.41 | $ | 8.28 | ||||||||||||||||||
Adjusted tangible common equity to risk weighted assets (g) (k) |
9.61 | % | 9.91 | % | 9.93 | % | 10.03 | % | 9.97 | % | ||||||||||||||||||
Market capitalization (millions) |
$ | 2,694.2 | $ | 2,576.3 | $ | 2,414.1 | $ | 2,379.9 | $ | 2,152.2 | ||||||||||||||||||
Full time equivalent employees |
4,296 | 4,381 | 4,507 | 4,585 | 4,619 | |||||||||||||||||||||||
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NM - Not meaningful
* | Amount is less than one percent. |
(a) | Restricted balances parenthetically presented are as of June 30, 2013. |
(b) | 2Q13 increase includes approximately $56 million of second liens placed on nonaccrual based on information received from a third party on the performance status of non-FHN serviced first liens and approximately $23 million MNB foreclosed real estate. |
(c) | NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other assets. |
(d) | Calculated using net income. |
(e) | Calculated using net income available to common shareholders. |
(f) | Net interest margin is computed using total net interest income adjusted to a fully taxable equivalent (FTE) basis. |
(g) | Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this financial supplement. |
(h) | Ratio excludes securities gains/(losses). |
(i) | Noninterest expense divided by total revenue excluding securities gains/(losses). |
(j) | 2Q13 decrease due to $40 million prepaid share repurchase agreement, shares will be delivered in 3Q13 when completed. |
(k) | Current quarter is an estimate. |
6
FHN CONSOLIDATED INCOME STATEMENT
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Interest income |
$ | 183,991 | $ | 186,399 | $ | 196,199 | $ | 200,516 | $ | 200,735 | (1 | )% | (8 | )% | ||||||||||||||
Less: interest expense |
23,972 | 25,017 | 25,601 | 27,051 | 28,060 | (4 | )% | (15 | )% | |||||||||||||||||||
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Net interest income |
160,019 | 161,382 | 170,598 | 173,465 | 172,675 | (1 | )% | (7 | )% | |||||||||||||||||||
Provision for loan losses (a) |
15,000 | 15,000 | 15,000 | 40,000 | 15,000 | * | * | |||||||||||||||||||||
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Net interest income after provision for loan losses |
145,019 | 146,382 | 155,598 | 133,465 | 157,675 | (1 | )% | (8 | )% | |||||||||||||||||||
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Noninterest income: |
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Capital markets (b) |
69,265 | 79,163 | 72,483 | 80,773 | 74,913 | (13 | )% | (8 | )% | |||||||||||||||||||
Mortgage banking |
5,589 | 9,373 | 8,287 | 10,373 | 9,889 | (40 | )% | (43 | )% | |||||||||||||||||||
Deposit transactions and cash management |
28,254 | 27,656 | 30,952 | 30,352 | 30,123 | 2 | % | (6 | )% | |||||||||||||||||||
Trust services and investment management |
6,950 | 6,328 | 5,979 | 6,055 | 6,477 | 10 | % | 7 | % | |||||||||||||||||||
Brokerage, management fees and commissions |
10,540 | 9,348 | 8,980 | 8,699 | 8,759 | 13 | % | 20 | % | |||||||||||||||||||
Insurance commissions |
730 | 600 | 804 | 946 | 830 | 22 | % | (12 | )% | |||||||||||||||||||
Securities gains/(losses), net (c) |
(351 | ) | 24 | (4,700 | ) | | 5,065 | NM | NM | |||||||||||||||||||
Other (d) |
21,655 | 23,935 | 23,658 | 26,340 | 22,851 | (10 | )% | (5 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total noninterest income |
142,632 | 156,427 | 146,443 | 163,538 | 158,907 | (9 | )% | (10 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjusted gross income after provision for loan losses |
287,651 | 302,809 | 302,041 | 297,003 | 316,582 | (5 | )% | (9 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Noninterest expense: |
||||||||||||||||||||||||||||
Employee compensation, incentives, and benefits |
130,500 | 139,184 | 161,813 | 153,970 | 149,616 | (6 | )% | (13 | )% | |||||||||||||||||||
Repurchase and foreclosure provision (e) |
| | | | 250,000 | NM | NM | |||||||||||||||||||||
Operations services |
8,842 | 8,070 | 8,123 | 8,702 | 9,477 | 10 | % | (7 | )% | |||||||||||||||||||
Occupancy |
11,785 | 12,822 | 12,363 | 13,059 | 11,486 | (8 | )% | 3 | % | |||||||||||||||||||
Legal and professional fees |
14,065 | 11,171 | 11,971 | 12,295 | 8,417 | 26 | % | 67 | % | |||||||||||||||||||
FDIC premium expense |
5,037 | 6,011 | 7,299 | 7,532 | 6,801 | (16 | )% | (26 | )% | |||||||||||||||||||
Computer software |
9,608 | 10,076 | 10,333 | 10,260 | 9,960 | (5 | )% | (4 | )% | |||||||||||||||||||
Contract employment and outsourcing |
8,581 | 9,039 | 9,052 | 10,187 | 10,844 | (5 | )% | (21 | )% | |||||||||||||||||||
Equipment rentals, depreciation, and maintenance |
7,597 | 7,820 | 7,910 | 7,931 | 7,789 | (3 | )% | (2 | )% | |||||||||||||||||||
Foreclosed real estate |
1,287 | 1,439 | 1,995 | 2,968 | 1,908 | (11 | )% | (33 | )% | |||||||||||||||||||
Communications and courier |
4,531 | 4,437 | 4,613 | 4,722 | 4,484 | 2 | % | 1 | % | |||||||||||||||||||
Miscellaneous loan costs |
1,163 | 996 | 924 | 577 | 1,298 | 17 | % | (10 | )% | |||||||||||||||||||
Amortization of intangible assets |
928 | 928 | 979 | 979 | 979 | * | (5 | )% | ||||||||||||||||||||
Other (d) |
23,484 | 28,547 | 33,986 | 29,987 | 54,118 | (18 | )% | (57 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
227,408 | 240,540 | 271,361 | 263,169 | 527,177 | (5 | )% | (57 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Income/(loss) before income taxes |
60,243 | 62,269 | 30,680 | 33,834 | (210,595 | ) | (3 | )% | NM | |||||||||||||||||||
Provision/(benefit) for income taxes (f) |
15,008 | 17,730 | (12,914 | ) | 5,260 | (88,178 | ) | (15 | )% | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Income/(loss) from continuing operations |
45,235 | 44,539 | 43,594 | 28,574 | (122,417 | ) | 2 | % | NM | |||||||||||||||||||
Income/(loss) from discontinued operations, net of tax |
1 | 430 | (12 | ) | 108 | 487 | NM | NM | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) |
45,236 | 44,969 | 43,582 | 28,682 | (121,930 | ) | 1 | % | NM | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to noncontrolling interest |
2,843 | 2,813 | 2,901 | 2,875 | 2,844 | 1 | % | * | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income attributable to controlling interest |
42,393 | 42,156 | 40,681 | 25,807 | (124,774 | ) | 1 | % | NM | |||||||||||||||||||
Preferred stock dividends |
1,550 | 1,188 | | | | 30 | % | NM | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) available to common shareholders |
$ | 40,843 | $ | 40,968 | $ | 40,681 | $ | 25,807 | $ | (124,774 | ) | * | NM | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM - Not meaningful
* | Amount is less than one percent. |
(a) | 3Q12 includes approximately $30 million associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(b) | 2Q13 and 1Q13 include a gain of $1.0 million and $2.4 million, respectively, from a LOCOM reversal associated with a TRUP loan payoff within the non-strategic segment. |
(c) | 4Q12 includes a $4.7 million negative valuation adjustment related to an equity investment. 2Q12 includes a $5.1 million gain on sale of venture capital investment. |
(d) | Refer to the Other Income and Other Expense table on page 8 for additional information. |
(e) | 2Q12 includes a $250.0 million charge to the repurchase and foreclosure provision primarily related to a revision in estimate based on information received from Fannie Mae. |
(f) | 4Q12 includes $17.0 million in tax benefits related to discrete period tax items. |
7
FHN OTHER INCOME AND OTHER EXPENSE
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Other Income |
||||||||||||||||||||||||||||
Bank owned life insurance |
$ | 3,946 | $ | 5,472 | $ | 5,081 | $ | 4,293 | $ | 4,659 | (28 | )% | (15 | )% | ||||||||||||||
Bankcard income |
5,299 | 4,882 | 5,766 | 5,298 | 5,705 | 9 | % | (7 | )% | |||||||||||||||||||
ATM and interchange fees |
2,627 | 2,384 | 2,724 | 2,579 | 2,669 | 10 | % | (2 | )% | |||||||||||||||||||
Other service charges |
3,503 | 3,086 | 3,167 | 3,263 | 3,212 | 14 | % | 9 | % | |||||||||||||||||||
Electronic banking fees |
1,585 | 1,562 | 1,610 | 1,589 | 1,632 | 1 | % | (3 | )% | |||||||||||||||||||
Letter of credit fees |
1,196 | 1,499 | 1,192 | 1,072 | 1,560 | (20 | )% | (23 | )% | |||||||||||||||||||
Deferred compensation (a) |
(278 | ) | 1,593 | 396 | 1,966 | (1,020 | ) | NM | 73 | % | ||||||||||||||||||
Other |
3,777 | 3,457 | 3,722 | 6,280 | 4,434 | 9 | % | (15 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 21,655 | $ | 23,935 | $ | 23,658 | $ | 26,340 | $ | 22,851 | (10 | )% | (5 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other Expense |
||||||||||||||||||||||||||||
Litigation and regulatory matters |
$ | 900 | $ | 5,170 | $ | 4,300 | $ | 6,760 | $ | 22,100 | (83 | )% | (96 | )% | ||||||||||||||
Advertising and public relations |
4,121 | 3,947 | 5,915 | 4,121 | 3,153 | 4 | % | 31 | % | |||||||||||||||||||
Tax credit investments (b) |
2,989 | 2,972 | 4,198 | 5,635 | 4,214 | 1 | % | (29 | )% | |||||||||||||||||||
Other insurance and taxes (c) |
3,076 | 3,046 | 3,078 | 1,327 | 3,130 | 1 | % | (2 | )% | |||||||||||||||||||
Travel and entertainment |
2,372 | 1,848 | 2,058 | 2,009 | 2,435 | 28 | % | (3 | )% | |||||||||||||||||||
Customer relations |
1,255 | 1,278 | 1,348 | 1,027 | 1,348 | (2 | )% | (7 | )% | |||||||||||||||||||
Employee training and dues |
1,229 | 1,254 | 1,171 | 1,032 | 1,230 | (2 | )% | * | ||||||||||||||||||||
Supplies |
705 | 1,055 | 1,021 | 881 | 817 | (33 | )% | (14 | )% | |||||||||||||||||||
Bank examination costs |
829 | 828 | 816 | 816 | 800 | * | 4 | % | ||||||||||||||||||||
Loan insurance expense |
503 | 540 | 552 | 578 | 636 | (7 | )% | (21 | )% | |||||||||||||||||||
Federal services fees |
282 | 282 | 27 | 323 | 328 | * | (14 | )% | ||||||||||||||||||||
Other (d) |
5,223 | 6,327 | 9,502 | 5,478 | 13,927 | (17 | )% | (62 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 23,484 | $ | 28,547 | $ | 33,986 | $ | 29,987 | $ | 54,118 | (18 | )% | (57 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM - Not meaningful
* | Amount is less than one percent. |
(a) | Amounts driven by market conditions and are mirrored by changes in deferred compensation expense which is included in employee compensation expense. |
(b) | 3Q12 includes a $1.5 million impairment of an investment. |
(c) | 3Q12 includes a $1.8 million positive adjustment to franchise taxes. |
(d) | 3Q12 includes a $1.8 million gain related to clean-up calls for first lien securitizations. 2Q12 includes a $3.4 million increase in ancillary expenses associated with legacy mortgage wind-down activities and $2.8 million related to the write-off of unrecoverable servicing advances. |
8
FHN CONSOLIDATED PERIOD-END BALANCE SHEET
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Investment securities |
$ | 3,229,071 | $ | 3,190,219 | $ | 3,061,808 | $ | 3,123,629 | $ | 3,264,866 | 1 | % | (1 | )% | ||||||||||||||
Loans held-for-sale |
385,105 | 390,874 | 401,937 | 410,550 | 424,051 | (1 | )% | (9 | )% | |||||||||||||||||||
Loans, net of unearned income (Restricted - $.1 billion) (a) |
16,197,046 | 15,889,670 | 16,708,582 | 16,523,783 | 16,185,763 | 2 | % | * | ||||||||||||||||||||
Federal funds sold |
52,169 | 33,738 | 34,492 | 12,425 | 44,961 | 55 | % | 16 | % | |||||||||||||||||||
Securities purchased under agreements to resell |
602,126 | 732,696 | 601,891 | 517,263 | 480,543 | (18 | )% | 25 | % | |||||||||||||||||||
Interest-bearing cash (b) |
344,150 | 431,182 | 353,373 | 440,916 | 484,430 | (20 | )% | (29 | )% | |||||||||||||||||||
Trading securities |
1,267,348 | 1,397,746 | 1,262,720 | 1,204,366 | 1,361,717 | (9 | )% | (7 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total earning assets |
22,077,015 | 22,066,125 | 22,424,803 | 22,232,932 | 22,246,331 | * | (1 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cash and due from banks (Restricted- $1.2 million) (a) |
382,601 | 275,262 | 469,879 | 355,978 | 330,931 | 39 | % | 16 | % | |||||||||||||||||||
Capital markets receivables |
429,801 | 533,306 | 303,893 | 791,190 | 377,496 | (19 | )% | 14 | % | |||||||||||||||||||
Mortgage servicing rights, net |
113,853 | 109,102 | 114,311 | 120,537 | 129,291 | 4 | % | (12 | )% | |||||||||||||||||||
Goodwill (c) |
147,762 | 134,242 | 134,242 | 134,242 | 134,242 | 10 | % | 10 | % | |||||||||||||||||||
Other intangible assets, net |
23,144 | 21,772 | 22,700 | 23,679 | 24,659 | 6 | % | (6 | )% | |||||||||||||||||||
Premises and equipment, net |
310,016 | 299,740 | 303,273 | 305,346 | 311,753 | 3 | % | (1 | )% | |||||||||||||||||||
Real estate acquired by foreclosure (d) |
70,368 | 54,672 | 60,690 | 70,779 | 69,603 | 29 | % | 1 | % | |||||||||||||||||||
Allowance for loan losses (Restricted - $3.8 million) (a) |
(261,934 | ) | (265,218 | ) | (276,963 | ) | (281,744 | ) | (321,051 | ) | (1 | )% | (18 | )% | ||||||||||||||
Derivative assets |
235,759 | 274,332 | 292,472 | 334,025 | 340,810 | (14 | )% | (31 | )% | |||||||||||||||||||
Other assets (Restricted - $1.7 million) (a) |
1,604,889 | 1,663,092 | 1,670,840 | 1,652,866 | 1,848,890 | (3 | )% | (13 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets (Restricted - $.1 billion) (a) |
$ | 25,133,274 | $ | 25,166,427 | $ | 25,520,140 | $ | 25,739,830 | $ | 25,492,955 | * | (1 | )% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Liabilities and Equity: |
||||||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||||||
Savings |
$ | 6,928,447 | $ | 6,498,832 | $ | 6,705,496 | $ | 6,608,534 | $ | 5,979,874 | 7 | % | 16 | % | ||||||||||||||
Other interest-bearing deposits |
3,825,235 | 3,740,257 | 3,798,313 | 3,468,367 | 3,565,873 | 2 | % | 7 | % | |||||||||||||||||||
Time deposits |
1,051,327 | 988,375 | 1,019,938 | 1,063,380 | 1,109,163 | 6 | % | (5 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total interest-bearing core deposits |
11,805,009 | 11,227,464 | 11,523,747 | 11,140,281 | 10,654,910 | 5 | % | 11 | % | |||||||||||||||||||
Noninterest-bearing deposits |
4,603,954 | 4,454,045 | 4,602,472 | 4,569,113 | 4,833,994 | 3 | % | (5 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total core deposits (e) |
16,408,963 | 15,681,509 | 16,126,219 | 15,709,394 | 15,488,904 | 5 | % | 6 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Certificates of deposit $100,000 and more |
602,921 | 522,958 | 503,490 | 518,717 | 628,539 | 15 | % | (4 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total deposits |
17,011,884 | 16,204,467 | 16,629,709 | 16,228,111 | 16,117,443 | 5 | % | 6 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Federal funds purchased |
1,142,749 | 1,361,670 | 1,351,023 | 1,350,806 | 1,417,590 | (16 | )% | (19 | )% | |||||||||||||||||||
Securities sold under agreements to repurchase |
433,761 | 488,010 | 555,438 | 443,370 | 363,400 | (11 | )% | 19 | % | |||||||||||||||||||
Trading liabilities |
596,869 | 781,306 | 564,429 | 516,970 | 470,631 | (24 | )% | 27 | % | |||||||||||||||||||
Other short-term borrowings (f) |
446,909 | 186,898 | 441,201 | 856,958 | 1,094,179 | NM | (59 | )% | ||||||||||||||||||||
Term borrowings (Restricted - $.1 billion) (a) (g) |
1,800,255 | 2,197,864 | 2,226,482 | 2,263,238 | 2,294,224 | (18 | )% | (22 | )% | |||||||||||||||||||
Capital markets payables |
368,372 | 461,333 | 296,450 | 574,201 | 203,548 | (20 | )% | 81 | % | |||||||||||||||||||
Derivative liabilities |
198,489 | 199,999 | 202,269 | 225,084 | 235,490 | (1 | )% | (16 | )% | |||||||||||||||||||
Other liabilities |
587,635 | 685,153 | 743,933 | 749,204 | 782,044 | (14 | )% | (25 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total liabilities (Restricted - $.1 billion) (a) |
22,586,923 | 22,566,700 | 23,010,934 | 23,207,942 | 22,978,549 | * | (2 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Equity: |
||||||||||||||||||||||||||||
Common stock (h) |
150,347 | 150,766 | 152,249 | 154,459 | 155,506 | * | (3 | )% | ||||||||||||||||||||
Capital surplus (h) (i) |
1,416,563 | 1,461,292 | 1,488,463 | 1,517,488 | 1,528,161 | (3 | )% | (7 | )% | |||||||||||||||||||
Undivided profits |
777,108 | 748,427 | 719,672 | 681,460 | 658,157 | 4 | % | 18 | % | |||||||||||||||||||
Accumulated other comprehensive loss, net (j) |
(188,665 | ) | (151,639 | ) | (146,343 | ) | (116,684 | ) | (122,583 | ) | 24 | % | 54 | % | ||||||||||||||
Preferred stock |
95,624 | 95,624 | | | | * | NM | |||||||||||||||||||||
Noncontrolling interest (k) |
295,374 | 295,257 | 295,165 | 295,165 | 295,165 | * | * | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total equity |
2,546,351 | 2,599,727 | 2,509,206 | 2,531,888 | 2,514,406 | (2 | )% | 1 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total liabilities and equity |
$ | 25,133,274 | $ | 25,166,427 | $ | 25,520,140 | $ | 25,739,830 | $ | 25,492,955 | * | (1 | )% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM - Not meaningful
* | Amount is less than one percent. |
(a) | Restricted balances parenthetically presented are as of June 30, 2013. |
(b) | Includes excess balances held at Fed. |
(c) | 2Q13 increase driven by the MNB acquisition. |
(d) | 2Q13 includes $18.6 million of foreclosed assets related to government insured mortgages. |
(e) | 2Q13 average core deposits were $15.7 billion. |
(f) | 3Q12 and 2Q12 include increased FHLB borrowings as a result of deposit fluctuations and an increase in loans to mortgage companies. |
(g) | In 2Q13 $250.0 million of subordinated notes and $100.0 million of subordinated capital notes matured. |
(h) | Decrease relates to shares purchased under the share repurchase program. |
(i) | 2Q13 decrease related to $40.0 million prepaid share repurchase agreement. |
(j) | 4Q12 change primarily driven by annual benefit plan remeasurement. |
(k) | Consists of preferred stock of subsidiary. |
9
FHN CONSOLIDATED AVERAGE BALANCE SHEET
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Earning assets: |
||||||||||||||||||||||||||||
Loans, net of unearned income: |
||||||||||||||||||||||||||||
Commercial, financial, and industrial (C&I) |
$ | 8,121,219 | $ | 8,199,249 | $ | 8,330,961 | $ | 8,237,939 | $ | 7,712,551 | (1 | )% | 5 | % | ||||||||||||||
Income CRE |
1,084,470 | 1,105,669 | 1,174,127 | 1,192,905 | 1,236,016 | (2 | )% | (12 | )% | |||||||||||||||||||
Residential CRE |
49,798 | 55,798 | 63,647 | 79,107 | 94,531 | (11 | )% | (47 | )% | |||||||||||||||||||
Consumer real estate |
5,561,689 | 5,644,275 | 5,757,724 | 5,819,620 | 5,864,713 | (1 | )% | (5 | )% | |||||||||||||||||||
Permanent mortgage |
771,253 | 801,000 | 788,428 | 805,580 | 776,440 | (4 | )% | (1 | )% | |||||||||||||||||||
Credit card and other |
304,561 | 291,221 | 288,412 | 277,154 | 276,017 | 5 | % | 10 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total loans, net of unearned income (Restricted - $.1 billion) (a) (b) |
15,892,990 | 16,097,212 | 16,403,299 | 16,412,305 | 15,960,268 | (1 | )% | * | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Loans held-for-sale |
389,273 | 392,272 | 403,750 | 413,625 | 425,176 | (1 | )% | (8 | )% | |||||||||||||||||||
Investment securities: |
||||||||||||||||||||||||||||
U.S. treasuries |
40,815 | 44,107 | 43,909 | 42,551 | 42,424 | (7 | )% | (4 | )% | |||||||||||||||||||
U.S. government agencies |
2,924,012 | 2,818,958 | 2,774,175 | 2,894,104 | 2,981,090 | 4 | % | (2 | )% | |||||||||||||||||||
States and municipalities |
15,390 | 15,255 | 17,169 | 17,970 | 18,005 | 1 | % | (15 | )% | |||||||||||||||||||
Other |
218,701 | 216,860 | 222,058 | 220,324 | 223,924 | 1 | % | (2 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investment securities |
3,198,918 | 3,095,180 | 3,057,311 | 3,174,949 | 3,265,443 | 3 | % | (2 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Capital markets securities inventory |
1,310,044 | 1,308,969 | 1,250,423 | 1,189,852 | 1,327,596 | * | (1 | )% | ||||||||||||||||||||
Mortgage banking trading securities |
16,398 | 17,486 | 18,844 | 20,112 | 22,841 | (6 | )% | (28 | )% | |||||||||||||||||||
Other earning assets: |
||||||||||||||||||||||||||||
Federal funds sold |
26,698 | 24,173 | 24,701 | 28,229 | 25,465 | 10 | % | 5 | % | |||||||||||||||||||
Securities purchased under agreements to resell |
705,129 | 754,630 | 586,258 | 531,914 | 606,554 | (7 | )% | 16 | % | |||||||||||||||||||
Interest-bearing cash (c) |
401,236 | 653,712 | 522,529 | 402,378 | 518,124 | (39 | )% | (23 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other earning assets |
1,133,063 | 1,432,515 | 1,133,488 | 962,521 | 1,150,143 | (21 | )% | (1 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total earnings assets (Restricted - $.1 billion) (a) |
21,940,686 | 22,343,634 | 22,267,115 | 22,173,364 | 22,151,467 | (2 | )% | (1 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Allowance for loan losses (Restricted - $3.8 million) (a) |
(260,944 | ) | (270,385 | ) | (306,583 | ) | (309,810 | ) | (336,642 | ) | (3 | )% | (22 | )% | ||||||||||||||
Cash and due from banks (Restricted - $1.7 million) (a) |
342,053 | 348,581 | 349,002 | 339,098 | 337,366 | (2 | )% | 1 | % | |||||||||||||||||||
Capital markets receivables |
113,806 | 121,891 | 114,771 | 168,806 | 100,408 | (7 | )% | 13 | % | |||||||||||||||||||
Premises and equipment, net |
302,263 | 299,846 | 303,921 | 306,709 | 312,313 | 1 | % | (3 | )% | |||||||||||||||||||
Derivative assets |
257,181 | 286,243 | 317,076 | 325,917 | 338,408 | (10 | )% | (24 | )% | |||||||||||||||||||
Other assets (Restricted - $1.7 million) (a) |
1,903,727 | 1,948,417 | 1,925,664 | 2,085,670 | 2,111,315 | (2 | )% | (10 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets (Restricted - $.1 billion) (a) |
$ | 24,598,772 | $ | 25,078,227 | $ | 24,970,966 | $ | 25,089,754 | $ | 25,014,635 | (2 | )% | (2 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Liabilities and equity: |
||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||||||||||
Savings |
$ | 6,516,889 | $ | 6,593,590 | $ | 6,529,453 | $ | 6,106,767 | $ | 6,290,143 | (1 | )% | 4 | % | ||||||||||||||
Other interest-bearing deposits |
3,645,674 | 3,709,988 | 3,469,711 | 3,426,864 | 3,512,390 | (2 | )% | 4 | % | |||||||||||||||||||
Time deposits |
998,762 | 1,004,887 | 1,038,672 | 1,085,368 | 1,125,738 | (1 | )% | (11 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total interest-bearing core deposits |
11,161,325 | 11,308,465 | 11,037,836 | 10,618,999 | 10,928,271 | (1 | )% | 2 | % | |||||||||||||||||||
Certificates of deposit $100,000 and more |
542,244 | 516,785 | 514,543 | 570,415 | 675,688 | 5 | % | (20 | )% | |||||||||||||||||||
Federal funds purchased |
1,224,070 | 1,479,316 | 1,538,970 | 1,448,347 | 1,523,974 | (17 | )% | (20 | )% | |||||||||||||||||||
Securities sold under agreements to repurchase |
480,960 | 572,666 | 457,493 | 388,208 | 355,278 | (16 | )% | 35 | % | |||||||||||||||||||
Capital markets trading liabilities |
718,309 | 779,409 | 597,402 | 544,422 | 602,344 | (8 | )% | 19 | % | |||||||||||||||||||
Other short-term borrowings (d) |
525,493 | 209,376 | 272,578 | 967,303 | 377,075 | NM | 39 | % | ||||||||||||||||||||
Term borrowings (Restricted - $.1 billion) (a) (e) |
2,007,372 | 2,221,297 | 2,254,445 | 2,279,344 | 2,317,247 | (10 | )% | (13 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total interest-bearing liabilities |
16,659,773 | 17,087,314 | 16,673,267 | 16,817,038 | 16,779,877 | (3 | )% | (1 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Noninterest-bearing deposits |
4,493,440 | 4,441,411 | 4,770,935 | 4,660,529 | 4,696,844 | 1 | % | (4 | )% | |||||||||||||||||||
Capital markets payables |
74,389 | 91,539 | 81,941 | 116,680 | 73,312 | (19 | )% | 1 | % | |||||||||||||||||||
Derivative liabilities |
184,192 | 194,892 | 211,598 | 220,309 | 230,440 | (5 | )% | (20 | )% | |||||||||||||||||||
Other liabilities |
598,854 | 683,596 | 689,782 | 744,871 | 556,446 | (12 | )% | 8 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total liabilities (Restricted - $.1 billion) (a) |
22,010,648 | 22,498,752 | 22,427,523 | 22,559,427 | 22,336,919 | (2 | )% | (1 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Equity: |
||||||||||||||||||||||||||||
Common stock |
150,468 | 151,613 | 153,691 | 155,232 | 156,774 | (1 | )% | (4 | )% | |||||||||||||||||||
Capital surplus |
1,430,998 | 1,476,797 | 1,507,087 | 1,526,772 | 1,543,931 | (3 | )% | (7 | )% | |||||||||||||||||||
Undivided profits |
771,953 | 742,070 | 705,835 | 671,073 | 802,215 | 4 | % | (4 | )% | |||||||||||||||||||
Accumulated other comprehensive loss, net |
(156,178 | ) | (150,093 | ) | 765,510 | (117,915 | ) | (120,369 | ) | (4 | )% | (30 | )% | |||||||||||||||
Preferred stock |
95,624 | 63,831 | | | | 50 | % | NM | ||||||||||||||||||||
Noncontrolling interest |
295,259 | 295,257 | 295,165 | 295,165 | 295,165 | * | * | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total equity |
2,588,124 | 2,579,475 | 2,543,443 | 2,530,327 | 2,677,716 | * | (3 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total liabilities and equity |
$ | 24,598,772 | $ | 25,078,227 | $ | 24,970,966 | $ | 25,089,754 | $ | 25,014,635 | (2 | )% | (2 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM - Not meaningful
* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | Restricted balances parenthetically presented are quarterly averages as of June 30, 2013. |
(b) | Includes loans on nonaccrual status. |
(c) | Includes excess balances held at Fed. |
(d) | 2Q12 and 3Q12 include increased FHLB borrowings as a result of deposit fluctuations and an increase in loans to mortgage companies. |
(e) | In 2Q13 $250.0 million of subordinated notes and $100.0 million of subordinated capital notes that matured. |
10
FHN CONSOLIDATED NET INTEREST INCOME (a)
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Interest Income: |
||||||||||||||||||||||||||||
Loans, net of unearned income (b) |
$ | 153,070 | $ | 154,955 | $ | 163,693 | $ | 165,368 | $ | 162,698 | (1 | )% | (6 | )% | ||||||||||||||
Loans held-for-sale |
3,169 | 3,502 | 3,732 | 3,808 | 3,628 | (10 | )% | (13 | )% | |||||||||||||||||||
Investment securities: |
||||||||||||||||||||||||||||
U.S. treasuries |
11 | 8 | 11 | 11 | 39 | 38 | % | (72 | )% | |||||||||||||||||||
U.S. government agencies |
18,321 | 18,507 | 19,536 | 21,759 | 23,562 | (1 | )% | (22 | )% | |||||||||||||||||||
States and municipalities |
25 | 23 | 6 | 65 | 63 | 9 | % | (60 | )% | |||||||||||||||||||
Other |
2,315 | 2,332 | 2,495 | 2,323 | 2,324 | (1 | )% | * | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investment securities |
20,672 | 20,870 | 22,048 | 24,158 | 25,988 | (1 | )% | (20 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Capital markets securities inventory |
8,467 | 7,901 | 7,565 | 7,998 | 9,204 | 7 | % | (8 | )% | |||||||||||||||||||
Mortgage banking trading securities |
452 | 489 | 534 | 569 | 578 | (8 | )% | (22 | )% | |||||||||||||||||||
Other earning assets: |
||||||||||||||||||||||||||||
Federal funds sold |
66 | 61 | 64 | 71 | 64 | 8 | % | 3 | % | |||||||||||||||||||
Securities purchased under agreements to resell (c) |
(189 | ) | 44 | 118 | 94 | 51 | NM | NM | ||||||||||||||||||||
Interest-bearing cash |
197 | 364 | 287 | 202 | 280 | (46 | )% | (30 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other earning assets |
74 | 469 | 469 | 367 | 395 | (84 | )% | (81 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest income |
$ | 185,904 | $ | 188,186 | $ | 198,041 | $ | 202,268 | $ | 202,491 | (1 | )% | (8 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest Expense: |
||||||||||||||||||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||||||||||
Savings |
$ | 3,689 | $ | 4,397 | $ | 4,617 | $ | 4,764 | $ | 4,744 | (16 | )% | (22 | )% | ||||||||||||||
Other interest-bearing deposits |
1,013 | 1,145 | 1,268 | 1,455 | 1,655 | (12 | )% | (39 | )% | |||||||||||||||||||
Time deposits |
4,064 | 4,217 | 4,639 | 5,169 | 5,541 | (4 | )% | (27 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total interest-bearing core deposits |
8,766 | 9,759 | 10,524 | 11,388 | 11,940 | (10 | )% | (27 | )% | |||||||||||||||||||
Certificates of deposit $100,000 and more |
1,550 | 1,561 | 1,725 | 1,975 | 2,305 | (1 | )% | (33 | )% | |||||||||||||||||||
Federal funds purchased |
777 | 932 | 985 | 929 | 963 | (17 | )% | (19 | )% | |||||||||||||||||||
Securities sold under agreements to repurchase |
134 | 268 | 211 | 167 | 151 | (50 | )% | (11 | )% | |||||||||||||||||||
Capital markets trading liabilities |
3,354 | 3,196 | 2,536 | 2,556 | 2,843 | 5 | % | 18 | % | |||||||||||||||||||
Other short-term borrowings |
245 | 106 | 132 | 347 | 36 | NM | NM | |||||||||||||||||||||
Term borrowings |
9,146 | 9,195 | 9,488 | 9,689 | 9,822 | (1 | )% | (7 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest expense |
23,972 | 25,017 | 25,601 | 27,051 | 28,060 | (4 | )% | (15 | )% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net interest income - tax equivalent basis |
161,932 | 163,169 | 172,440 | 175,217 | 174,431 | (1 | )% | (7 | )% | |||||||||||||||||||
Fully taxable equivalent adjustment |
(1,913 | ) | (1,787 | ) | (1,842 | ) | (1,752 | ) | (1,756 | ) | (7 | )% | (9 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net interest income |
$ | 160,019 | $ | 161,382 | $ | 170,598 | $ | 173,465 | $ | 172,675 | (1 | )% | (7 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM - Not meaningful
* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | Net interest income adjusted to a FTE basis. |
(b) | Includes loans on nonaccrual status. |
(c) | 2Q13 driven by negative market rates on reverse repurchase agreements. |
11
FHN CONSOLIDATED AVERAGE BALANCE SHEET: YIELDS AND RATES
Quarterly, Unaudited
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | ||||||||||||||||
Assets: |
||||||||||||||||||||
Earning assets (a): |
||||||||||||||||||||
Loans, net of unearned income: |
||||||||||||||||||||
Commercial loans |
3.68 | % | 3.70 | % | 3.83 | % | 3.81 | % | 3.92 | % | ||||||||||
Retail loans |
4.12 | 4.16 | 4.18 | 4.30 | 4.33 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total loans, net of unearned income (b) |
3.86 | 3.89 | 3.98 | 4.01 | 4.09 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans held-for-sale |
3.26 | 3.57 | 3.70 | 3.68 | 3.41 | |||||||||||||||
Investment securities: |
||||||||||||||||||||
U.S. treasuries |
0.11 | 0.07 | 0.10 | 0.11 | 0.37 | |||||||||||||||
U.S. government agencies |
2.51 | 2.63 | 2.82 | 3.01 | 3.16 | |||||||||||||||
States and municipalities |
0.65 | 0.59 | 0.13 | 1.44 | 1.39 | |||||||||||||||
Other |
4.23 | 4.30 | 4.49 | 4.22 | 4.15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investment securities |
2.58 | 2.70 | 2.88 | 3.04 | 3.18 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Capital markets securities inventory |
2.59 | 2.41 | 2.42 | 2.69 | 2.77 | |||||||||||||||
Mortgage banking trading securities |
11.02 | 11.19 | 11.34 | 11.31 | 10.12 | |||||||||||||||
Other earning assets: |
||||||||||||||||||||
Federal funds sold |
0.99 | 1.02 | 1.02 | 1.00 | 1.02 | |||||||||||||||
Securities purchased under agreements to resell (c) |
(0.11 | ) | 0.02 | 0.08 | 0.07 | 0.03 | ||||||||||||||
Interest-bearing cash |
0.20 | 0.23 | 0.22 | 0.20 | 0.22 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other earning assets |
0.03 | 0.13 | 0.16 | 0.15 | 0.14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Interest income/total earning assets |
3.40 | % | 3.40 | % | 3.55 | % | 3.64 | % | 3.67 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities: |
||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||
Savings |
0.23 | % | 0.27 | % | 0.28 | % | 0.31 | % | 0.30 | % | ||||||||||
Other interest-bearing deposits |
0.11 | 0.13 | 0.15 | 0.17 | 0.19 | |||||||||||||||
Time deposits |
1.63 | 1.70 | 1.78 | 1.89 | 1.98 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total interest-bearing core deposits |
0.32 | 0.35 | 0.38 | 0.43 | 0.44 | |||||||||||||||
Certificates of deposit $100,000 and more |
1.15 | 1.23 | 1.33 | 1.38 | 1.37 | |||||||||||||||
Federal funds purchased |
0.25 | 0.26 | 0.25 | 0.26 | 0.25 | |||||||||||||||
Securities sold under agreements to repurchase |
0.11 | 0.19 | 0.18 | 0.17 | 0.17 | |||||||||||||||
Capital markets trading liabilities |
1.87 | 1.66 | 1.69 | 1.87 | 1.90 | |||||||||||||||
Other short-term borrowings |
0.19 | 0.21 | 0.19 | 0.14 | 0.04 | |||||||||||||||
Term borrowings (d) |
1.82 | 1.66 | 1.69 | 1.70 | 1.70 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Interest expense/total interest-bearing liabilities |
0.58 | 0.59 | 0.61 | 0.64 | 0.67 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net interest spread |
2.82 | % | 2.81 | % | 2.94 | % | 3.00 | % | 3.00 | % | ||||||||||
Effect of interest-free sources used to fund earning assets |
0.14 | 0.14 | 0.15 | 0.15 | 0.16 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net interest margin |
2.96 | % | 2.95 | % | 3.09 | % | 3.15 | % | 3.16 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
Yields are adjusted to a FTE basis. Refer to the Non-GAAP to GAAP Reconciliation on page 27 for reconciliation of net interest income (GAAP) to net interest income adjusted for impact of FTE - (non-GAAP).
(a) | Earning assets yields are expressed net of unearned income. |
(b) | Includes loans on nonaccrual status. |
(c) | 2Q13 driven by negative market rates on reverse repurchase agreements. |
(d) | Rates are expressed net of unamortized debenture cost for term borrowings. |
12
FHN CHARGES FOR RESTRUCTURING, REPOSITIONING, & EFFICIENCY INITIATIVES
Quarterly, Unaudited
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | |||||||||||||||
By Income Statement Impact |
||||||||||||||||||||
Noninterest income |
||||||||||||||||||||
Mortgage banking (a) |
$ | | $ | | $ | (348 | ) | $ | | $ | (2,287 | ) | ||||||||
Noninterest expense |
||||||||||||||||||||
Employee compensation, incentives, and benefits (b) |
641 | 819 | 18,128 | 2,730 | 2,191 | |||||||||||||||
Occupancy |
(60 | ) | 438 | 180 | 41 | (219 | ) | |||||||||||||
All other expense |
| | 17 | | 12 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
Total loss before income taxes |
(581 | ) | (1,257 | ) | (18,673 | ) | (2,771 | ) | (4,271 | ) | ||||||||||
Income from discontinued operations (c) |
| 735 | | 180 | 485 | |||||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||
Net impact resulting from restructuring, repositioning, and efficiency initiatives |
$ | (581 | ) | $ | (522 | ) | $ | (18,673 | ) | $ | (2,591 | ) | $ | (3,786 | ) | |||||
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(a) | Reflects adjustment due to contingencies associated with prior mortgage servicing sales. |
(b) | Includes severance associated with the Voluntary Separation Program (VSP) during 1Q13 and 4Q12. |
(c) | Includes amounts related to Msaver, First Horizon Insurance, and Highland Capital. |
13
FHN MORTGAGE SERVICING RIGHTS
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
First Liens |
||||||||||||||||||||||||||||
Fair value beginning balance |
$ | 106,191 | $ | 111,314 | $ | 117,440 | $ | 126,085 | $ | 139,676 | ||||||||||||||||||
Reductions due to loan payments |
(5,617 | ) | (5,374 | ) | (5,592 | ) | (6,050 | ) | (6,665 | ) | ||||||||||||||||||
Reductions due to exercise of cleanup calls |
| (495 | ) | | (494 | ) | | |||||||||||||||||||||
Changes in fair value due to: |
||||||||||||||||||||||||||||
Changes in valuation model inputs or assumptions (a) |
10,496 | 834 | (569 | ) | (2,107 | ) | (6,855 | ) | ||||||||||||||||||||
Other changes in fair value |
6 | (88 | ) | 35 | 6 | (71 | ) | |||||||||||||||||||||
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Fair value ending balance |
$ | 111,076 | $ | 106,191 | $ | 111,314 | $ | 117,440 | $ | 126,085 | 5 | % | (12 | )% | ||||||||||||||
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Second Liens |
||||||||||||||||||||||||||||
Fair value beginning balance |
$ | 193 | $ | 196 | $ | 205 | $ | 215 | $ | 222 | ||||||||||||||||||
Reductions due to loan payments |
(21 | ) | (48 | ) | (9 | ) | (10 | ) | (7 | ) | ||||||||||||||||||
Changes in fair value due to: |
||||||||||||||||||||||||||||
Other changes in fair value |
| 45 | | | | |||||||||||||||||||||||
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|||||||||||||||
Fair value ending balance |
$ | 172 | $ | 193 | $ | 196 | $ | 205 | $ | 215 | (11 | )% | (20 | )% | ||||||||||||||
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HELOC |
||||||||||||||||||||||||||||
Fair value beginning balance |
$ | 2,718 | $ | 2,801 | $ | 2,892 | $ | 2,991 | $ | 3,058 | ||||||||||||||||||
Reductions due to loan payments |
(113 | ) | (125 | ) | (91 | ) | (102 | ) | (79 | ) | ||||||||||||||||||
Changes in fair value due to: |
||||||||||||||||||||||||||||
Other changes in fair value |
| 42 | | 3 | 12 | |||||||||||||||||||||||
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|||||||||||||||
Fair value ending balance |
$ | 2,605 | $ | 2,718 | $ | 2,801 | $ | 2,892 | $ | 2,991 | (4 | )% | (13 | )% | ||||||||||||||
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|||||||||||||||
Total Consolidated |
||||||||||||||||||||||||||||
Fair value beginning balance |
$ | 109,102 | $ | 114,311 | $ | 120,537 | $ | 129,291 | $ | 142,956 | ||||||||||||||||||
Reductions due to loan payments |
(5,751 | ) | (5,547 | ) | (5,692 | ) | (6,162 | ) | (6,751 | ) | ||||||||||||||||||
Reductions due to exercise of cleanup calls |
| (495 | ) | | (494 | ) | | |||||||||||||||||||||
Changes in fair value due to: |
||||||||||||||||||||||||||||
Changes in valuation model inputs or assumptions (a) |
10,496 | 834 | (569 | ) | (2,107 | ) | (6,855 | ) | ||||||||||||||||||||
Other changes in fair value |
6 | (1 | ) | 35 | 9 | (59 | ) | |||||||||||||||||||||
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Fair value ending balance |
$ | 113,853 | $ | 109,102 | $ | 114,311 | $ | 120,537 | $ | 129,291 | 4 | % | (12 | )% | ||||||||||||||
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(a) | Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. |
14
FHN BUSINESS SEGMENT HIGHLIGHTS
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Regional Banking |
||||||||||||||||||||||||||||
Net interest income |
$ | 147,324 | $ | 146,068 | $ | 153,889 | $ | 151,136 | $ | 148,599 | 1 | % | (1 | )% | ||||||||||||||
Noninterest income |
61,900 | 59,144 | 64,074 | 64,235 | 65,037 | 5 | % | (5 | )% | |||||||||||||||||||
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|
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|
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|
|
|
|||||||||||||||
Total revenues |
209,224 | 205,212 | 217,963 | 215,371 | 213,636 | 2 | % | (2 | )% | |||||||||||||||||||
Provision/(provision credit) for loan losses |
13,201 | (2,485 | ) | (1,227 | ) | 2,927 | 4,828 | NM | NM | |||||||||||||||||||
Noninterest expense |
128,948 | 130,337 | 144,031 | 141,576 | 143,322 | (1 | )% | (10 | )% | |||||||||||||||||||
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|
|||||||||||||||
Income before income taxes |
67,075 | 77,360 | 75,159 | 70,868 | 65,486 | (13 | )% | 2 | % | |||||||||||||||||||
Provision for income taxes |
24,051 | 28,100 | 27,290 | 25,727 | 23,630 | (14 | )% | 2 | % | |||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
$ | 43,024 | $ | 49,260 | $ | 47,869 | $ | 45,141 | $ | 41,856 | (13 | )% | 3 | % | ||||||||||||||
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|||||||||||||||
Capital Markets |
||||||||||||||||||||||||||||
Net interest income |
$ | 4,031 | $ | 3,900 | $ | 4,248 | $ | 4,753 | $ | 5,608 | 3 | % | (28 | )% | ||||||||||||||
Noninterest income |
68,199 | 76,612 | 72,432 | 80,817 | 74,968 | (11 | )% | (9 | )% | |||||||||||||||||||
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|
|||||||||||||||
Total revenues |
72,230 | 80,512 | 76,680 | 85,570 | 80,576 | (10 | )% | (10 | )% | |||||||||||||||||||
Noninterest expense |
59,926 | 61,669 | 57,541 | 64,602 | 60,936 | (3 | )% | (2 | )% | |||||||||||||||||||
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|
|||||||||||||||
Income before income taxes |
12,304 | 18,843 | 19,139 | 20,968 | 19,640 | (35 | )% | (37 | )% | |||||||||||||||||||
Provision for income taxes |
4,586 | 7,143 | 7,182 | 7,899 | 7,403 | (36 | )% | (38 | )% | |||||||||||||||||||
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|
|
|
|||||||||||||||
Net income |
$ | 7,718 | $ | 11,700 | $ | 11,957 | $ | 13,069 | $ | 12,237 | (34 | )% | (37 | )% | ||||||||||||||
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|||||||||||||||
Corporate |
||||||||||||||||||||||||||||
Net interest income/(expense) |
$ | (9,963 | ) | $ | (8,621 | ) | $ | (8,998 | ) | $ | (6,096 | ) | $ | (5,538 | ) | (16 | )% | (80 | )% | |||||||||
Noninterest income |
3,811 | 7,855 | 6,015 | 7,904 | 3,825 | (51 | )% | * | ||||||||||||||||||||
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Total revenues |
(6,152 | ) | (766 | ) | (2,983 | ) | 1,808 | (1,713 | ) | NM | NM | |||||||||||||||||
Noninterest expense (a) |
17,070 | 17,585 | 36,109 | 21,538 | 19,143 | (3 | )% | (11 | )% | |||||||||||||||||||
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Income/(loss) before income taxes |
(23,222 | ) | (18,351 | ) | (39,092 | ) | (19,730 | ) | (20,856 | ) | (27 | )% | (11 | )% | ||||||||||||||
Benefit for income taxes |
(15,201 | ) | (11,518 | ) | (37,944 | ) | (13,632 | ) | (13,388 | ) | (32 | )% | (14 | )% | ||||||||||||||
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|||||||||||||||
Net loss |
$ | (8,021 | ) | $ | (6,833 | ) | $ | (1,148 | ) | $ | (6,098 | ) | $ | (7,468 | ) | (17 | )% | (7 | )% | |||||||||
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Non-Strategic |
||||||||||||||||||||||||||||
Net interest income |
$ | 18,627 | $ | 20,035 | $ | 21,459 | $ | 23,672 | $ | 24,006 | (7 | )% | (22 | )% | ||||||||||||||
Noninterest income |
8,722 | 12,816 | 3,922 | 10,582 | 15,077 | (32 | )% | (42 | )% | |||||||||||||||||||
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|||||||||||||||
Total revenues |
27,349 | 32,851 | 25,381 | 34,254 | 39,083 | (17 | )% | (30 | )% | |||||||||||||||||||
Provision for loan losses |
1,799 | 17,485 | 16,227 | 37,073 | 10,172 | (90 | )% | (82 | )% | |||||||||||||||||||
Noninterest expense (b) |
21,464 | 30,949 | 33,680 | 35,453 | 303,776 | (31 | )% | (93 | )% | |||||||||||||||||||
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Income/(loss) before income taxes |
4,086 | (15,583 | ) | (24,526 | ) | (38,272 | ) | (274,865 | ) | NM | NM | |||||||||||||||||
Provision/(benefit) for income taxes |
1,572 | (5,995 | ) | (9,442 | ) | (14,734 | ) | (105,823 | ) | NM | NM | |||||||||||||||||
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Income/(loss) from continuing operations |
2,514 | (9,588 | ) | (15,084 | ) | (23,538 | ) | (169,042 | ) | NM | NM | |||||||||||||||||
Income/(loss) from discontinued operations, net of tax |
1 | 430 | (12 | ) | 108 | 487 | NM | NM | ||||||||||||||||||||
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Net income/(loss) |
$ | 2,515 | $ | (9,158 | ) | $ | (15,096 | ) | $ | (23,430 | ) | $ | (168,555 | ) | NM | NM | ||||||||||||
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Total Consolidated |
||||||||||||||||||||||||||||
Net interest income |
$ | 160,019 | $ | 161,382 | $ | 170,598 | $ | 173,465 | $ | 172,675 | (1 | )% | (7 | )% | ||||||||||||||
Noninterest income |
142,632 | 156,427 | 146,443 | 163,538 | 158,907 | (9 | )% | (10 | )% | |||||||||||||||||||
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Total revenues |
302,651 | 317,809 | 317,041 | 337,003 | 331,582 | (5 | )% | (9 | )% | |||||||||||||||||||
Provision for loan losses |
15,000 | 15,000 | 15,000 | 40,000 | 15,000 | * | * | |||||||||||||||||||||
Noninterest expense |
227,408 | 240,540 | 271,361 | 263,169 | 527,177 | (5 | )% | (57 | )% | |||||||||||||||||||
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|||||||||||||||
Income/(loss) before income taxes |
60,243 | 62,269 | 30,680 | 33,834 | (210,595 | ) | (3 | )% | NM | |||||||||||||||||||
Provision/(benefit) for income taxes |
15,008 | 17,730 | (12,914 | ) | 5,260 | (88,178 | ) | (15 | )% | NM | ||||||||||||||||||
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Income/(loss) from continuing operations |
45,235 | 44,539 | 43,594 | 28,574 | (122,417 | ) | 2 | % | NM | |||||||||||||||||||
Income/(loss) from discontinued operations, net of tax |
1 | 430 | (12 | ) | 108 | 487 | NM | NM | ||||||||||||||||||||
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Net income/(loss) |
$ | 45,236 | $ | 44,969 | $ | 43,582 | $ | 28,682 | $ | (121,930 | ) | 1 | % | NM | ||||||||||||||
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NM - Not meaningful
* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | 4Q12 includes $18.3 million related to Restructuring, Repositioning, and Efficiency initiatives, primarily severance related costs associated with the VSP. |
(b) | 2Q12 includes $250.0 million charge to the repurchase and foreclosure provision primarily related to a revision in estimate based on information received from Fannie Mae. |
15
FHN REGIONAL BANKING
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Income Statement (thousands) |
||||||||||||||||||||||||||||
Net interest income |
$ | 147,324 | $ | 146,068 | $ | 153,889 | $ | 151,136 | $ | 148,599 | 1 | % | (1 | )% | ||||||||||||||
Provision/(provision credit) for loan losses |
13,201 | (2,485 | ) | (1,227 | ) | 2,927 | 4,828 | NM | NM | |||||||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
NSF / Overdraft fees (a) |
10,250 | 10,031 | 13,586 | 13,038 | 12,265 | 2 | % | (16 | )% | |||||||||||||||||||
Cash management fees |
9,133 | 9,330 | 9,092 | 8,915 | 9,179 | (2 | )% | (1 | )% | |||||||||||||||||||
Debit card income |
2,737 | 2,534 | 2,437 | 2,670 | 2,780 | 8 | % | (2 | )% | |||||||||||||||||||
Other |
5,183 | 4,909 | 4,912 | 4,770 | 4,925 | 6 | % | 5 | % | |||||||||||||||||||
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Total deposit transactions and cash management |
27,303 | 26,804 | 30,027 | 29,393 | 29,149 | 2 | % | (6 | )% | |||||||||||||||||||
Brokerage, management fees and commissions |
10,540 | 9,348 | 8,979 | 8,700 | 8,758 | 13 | % | 20 | % | |||||||||||||||||||
Trust services and investment management |
6,966 | 6,343 | 5,995 | 6,071 | 6,493 | 10 | % | 7 | % | |||||||||||||||||||
Bankcard income |
5,051 | 4,691 | 5,556 | 5,029 | 5,504 | 8 | % | (8 | )% | |||||||||||||||||||
Other service charges |
3,255 | 2,873 | 2,951 | 3,060 | 3,021 | 13 | % | 8 | % | |||||||||||||||||||
Miscellaneous revenue |
8,785 | 9,085 | 10,566 | 11,982 | 12,112 | (3 | )% | (27 | )% | |||||||||||||||||||
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Total noninterest income |
61,900 | 59,144 | 64,074 | 64,235 | 65,037 | 5 | % | (5 | )% | |||||||||||||||||||
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Noninterest expense: |
||||||||||||||||||||||||||||
Employee compensation, incentives, and benefits |
50,679 | 50,590 | 51,014 | 50,526 | 50,957 | * | (1 | )% | ||||||||||||||||||||
Other (b) |
78,269 | 79,747 | 93,017 | 91,050 | 92,365 | (2 | )% | (15 | )% | |||||||||||||||||||
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Total noninterest expense |
128,948 | 130,337 | 144,031 | 141,576 | 143,322 | (1 | )% | (10 | )% | |||||||||||||||||||
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Income before income taxes |
$ | 67,075 | $ | 77,360 | $ | 75,159 | $ | 70,868 | $ | 65,486 | (13 | )% | 2 | % | ||||||||||||||
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Efficiency ratio (c) |
61.63 | % | 63.51 | % | 66.08 | % | 65.74 | % | 67.09 | % | ||||||||||||||||||
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Balance Sheet (millions) |
||||||||||||||||||||||||||||
Average loans |
$ | 12,225 | $ | 12,237 | $ | 12,397 | $ | 12,221 | $ | 11,650 | * | 5 | % | |||||||||||||||
Average other earning assets |
53 | 53 | 58 | 69 | 63 | * | (16 | )% | ||||||||||||||||||||
Total average earning assets |
12,278 | 12,290 | 12,455 | 12,290 | 11,713 | * | 5 | % | ||||||||||||||||||||
Average core deposits |
14,624 | 14,560 | 14,445 | 14,295 | 14,396 | * | 2 | % | ||||||||||||||||||||
Average other deposits |
542 | 517 | 515 | 570 | 676 | 5 | % | (20 | )% | |||||||||||||||||||
Total average deposits |
15,166 | 15,077 | 14,960 | 14,865 | 15,072 | 1 | % | 1 | % | |||||||||||||||||||
Total period-end deposits |
15,562 | 15,225 | 15,142 | 14,783 | 15,183 | 2 | % | 2 | % | |||||||||||||||||||
Total period-end assets |
13,497 | 12,844 | 13,754 | 13,246 | 12,758 | 5 | % | 6 | % | |||||||||||||||||||
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Net interest margin (d) |
4.87 | % | 4.87 | % | 4.97 | % | 4.95 | % | 5.15 | % | ||||||||||||||||||
Net interest spread |
3.46 | 3.46 | 3.53 | 3.54 | 3.55 | |||||||||||||||||||||||
Loan yield |
3.72 | 3.75 | 3.83 | 3.88 | 3.91 | |||||||||||||||||||||||
Deposit average yield |
0.26 | 0.29 | 0.30 | 0.34 | 0.36 | |||||||||||||||||||||||
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Key Statistics |
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Financial center locations (e) |
183 | 171 | 171 | 173 | 173 | 7 | % | 6 | % | |||||||||||||||||||
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NM - Not meaningful
* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | 1Q13 decline primarily attributable to seasonality in NSF fees. |
(b) | 1Q13 decrease largely attributable to a decline in allocated Pension expense resulting from the freeze of the pension plans on December 31, 2012. |
(c) | Noninterest expense divided by total revenue. |
(d) | Net interest margin is computed using total net interest income adjusted for FTE. Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this supplement. |
(e) | 2Q13 increase of 12 branches is related to the MNB acquisition. |
16
FHN CAPITAL MARKETS
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Income Statement (thousands) |
||||||||||||||||||||||||||||
Net interest income |
$ | 4,031 | $ | 3,900 | $ | 4,248 | $ | 4,753 | $ | 5,608 | 3 | % | (28 | )% | ||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
Fixed income |
58,535 | 67,953 | 65,560 | 74,488 | 68,399 | (14 | )% | (14 | )% | |||||||||||||||||||
Other |
9,664 | 8,659 | 6,872 | 6,329 | 6,569 | 12 | % | 47 | % | |||||||||||||||||||
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Total noninterest income |
68,199 | 76,612 | 72,432 | 80,817 | 74,968 | (11 | )% | (9 | )% | |||||||||||||||||||
Noninterest expense |
59,926 | 61,669 | 57,541 | 64,602 | 60,936 | (3 | )% | (2 | )% | |||||||||||||||||||
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Income before income taxes |
$ | 12,304 | $ | 18,843 | $ | 19,139 | $ | 20,968 | $ | 19,640 | (35 | )% | (37 | )% | ||||||||||||||
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Efficiency ratio (a) |
82.97 | % | 76.60 | % | 75.04 | % | 75.50 | % | 75.63 | % | ||||||||||||||||||
Fixed income average daily revenue |
$ | 915 | $ | 1,133 | $ | 1,093 | $ | 1,182 | $ | 1,086 | (19 | )% | (16 | )% | ||||||||||||||
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Balance Sheet (millions) |
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Average trading inventory |
$ | 1,310 | $ | 1,309 | $ | 1,250 | $ | 1,190 | $ | 1,328 | * | (1 | )% | |||||||||||||||
Average other earning assets |
714 | 770 | 618 | 576 | 669 | (7 | )% | 7 | % | |||||||||||||||||||
Total average earning assets |
2,024 | 2,079 | 1,868 | 1,766 | 1,997 | (3 | )% | 1 | % | |||||||||||||||||||
Total period-end assets |
2,577 | 2,956 | 2,466 | 2,848 | 2,554 | (13 | )% | 1 | % | |||||||||||||||||||
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Net interest margin (b) |
0.82 | % | 0.76 | % | 0.95 | % | 1.12 | % | 1.15 | % | ||||||||||||||||||
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* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | Noninterest expense divided by total revenue. |
(b) | Net interest margin is computed using total net interest income adjusted for FTE. Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this supplement. |
17
FHN CORPORATE
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Income Statement (thousands) |
||||||||||||||||||||||||||||
Net interest income/(expense) |
$ | (9,963 | ) | $ | (8,621 | ) | $ | (8,998 | ) | $ | (6,096 | ) | $ | (5,538 | ) | (16 | )% | (80 | )% | |||||||||
Noninterest income |
4,174 | 7,825 | 6,015 | 7,904 | 3,825 | (47 | )% | 9 | % | |||||||||||||||||||
Securities gains/(losses), net |
(363 | ) | 30 | | | | NM | NM | ||||||||||||||||||||
Noninterest expense (a) |
17,070 | 17,585 | 36,109 | 21,538 | 19,143 | (3 | )% | (11 | )% | |||||||||||||||||||
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Loss before income taxes |
$ | (23,222 | ) | $ | (18,351 | ) | $ | (39,092 | ) | $ | (19,730 | ) | $ | (20,856 | ) | (27 | )% | (11 | )% | |||||||||
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Average Balance Sheet (millions) |
||||||||||||||||||||||||||||
Average loans |
$ | 217 | $ | 226 | $ | 189 | $ | 183 | $ | 124 | (4 | )% | 75 | % | ||||||||||||||
Total earning assets |
$ | 3,802 | $ | 3,959 | $ | 3,751 | $ | 3,735 | $ | 3,884 | (4 | )% | (2 | )% | ||||||||||||||
Net interest margin (b) |
(1.06 | )% | (.92 | )% | (.94 | )% | (.63 | )% | (.59 | )% | ||||||||||||||||||
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NM - Not meaningful
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | 4Q12 includes $18.3 million related to Restructuring, Repositioning, and Efficiency initiatives, primarily severance related costs associated with the VSP. |
(b) | Net interest margin is computed using total net interest income adjusted for FTE. Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this supplement. |
18
FHN NON-STRATEGIC
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Income Statement (thousands) |
||||||||||||||||||||||||||||
Net interest income |
$ | 18,627 | $ | 20,035 | $ | 21,459 | $ | 23,672 | $ | 24,006 | (7 | )% | (22 | )% | ||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
Mortgage warehouse valuation |
(2,454 | ) | 259 | (1,850 | ) | (3,470 | ) | 626 | NM | NM | ||||||||||||||||||
Service fees |
12,266 | 12,145 | 12,967 | 13,778 | 14,984 | 1 | % | (18 | )% | |||||||||||||||||||
Change in MSR value - runoff |
(5,616 | ) | (5,375 | ) | (5,592 | ) | (6,049 | ) | (6,665 | ) | (4 | )% | 16 | % | ||||||||||||||
Net hedging results |
1,358 | 1,982 | 2,097 | 4,486 | 1,833 | (31 | )% | (26 | )% | |||||||||||||||||||
Miscellaneous revenue (a) |
3,164 | 3,811 | 1,000 | 1,837 | (766 | ) | (17 | )% | NM | |||||||||||||||||||
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Total noninterest income |
8,718 | 12,822 | 8,622 | 10,582 | 10,012 | (32 | )% | (13 | )% | |||||||||||||||||||
Securities gains/(losses), net (b) |
4 | (6 | ) | (4,700 | ) | | 5,065 | NM | NM | |||||||||||||||||||
Noninterest expense: |
||||||||||||||||||||||||||||
Repurchase and foreclosure provision (c) |
| | | | 250,000 | * | NM | |||||||||||||||||||||
Other expenses (d) |
21,464 | 30,949 | 33,680 | 35,453 | 53,776 | (31 | )% | (60 | )% | |||||||||||||||||||
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Total noninterest expense |
21,464 | 30,949 | 33,680 | 35,453 | 303,776 | (31 | )% | (93 | )% | |||||||||||||||||||
Provision for loan losses (e) |
1,799 | 17,485 | 16,227 | 37,073 | 10,172 | (90 | )% | (82 | )% | |||||||||||||||||||
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Income/(loss) before income taxes |
$ | 4,086 | $ | (15,583 | ) | $ | (24,526 | ) | $ | (38,272 | ) | $ | (274,865 | ) | NM | NM | ||||||||||||
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Average Balance Sheet (millions) |
||||||||||||||||||||||||||||
Loans |
$ | 3,451 | $ | 3,634 | $ | 3,817 | $ | 4,008 | $ | 4,186 | (5 | )% | (18 | )% | ||||||||||||||
Loans held-for-sale |
360 | 354 | 344 | 333 | 330 | 2 | % | 9 | % | |||||||||||||||||||
Trading securities |
16 | 17 | 19 | 20 | 23 | (6 | )% | (30 | )% | |||||||||||||||||||
Mortgage servicing rights |
108 | 113 | 118 | 126 | 137 | (4 | )% | (21 | )% | |||||||||||||||||||
Other assets |
232 | 257 | 266 | 286 | 304 | (10 | )% | (24 | )% | |||||||||||||||||||
Total assets |
4,167 | 4,375 | 4,564 | 4,773 | 4,980 | (5 | )% | (16 | )% | |||||||||||||||||||
Net interest margin (f) |
1.94 | % | 2.00 | % | 2.04 | % | 2.16 | % | 2.11 | % | ||||||||||||||||||
Efficiency ratio (g) |
78.49 | % | 94.19 | % | 111.96 | % | 103.50 | % | NM | |||||||||||||||||||
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Mortgage Warehouse - Period-end (millions) |
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Ending warehouse balance (loans held-for-sale) |
$ | 358 | $ | 362 | $ | 353 | $ | 339 | $ | 336 | (1 | )% | 7 | % | ||||||||||||||
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Key Servicing Metrics (h) |
||||||||||||||||||||||||||||
Ending servicing portfolio (millions) (i) |
$ | 16,025 | $ | 17,055 | $ | 18,071 | $ | 19,149 | $ | 20,331 | (6 | )% | (21 | )% | ||||||||||||||
Average servicing portfolio (millions) (i) |
16,537 | 17,560 | 18,607 | 19,728 | 20,978 | (6 | )% | (21 | )% | |||||||||||||||||||
Average number of loans serviced (i) |
98,972 | 104,874 | 110,175 | 115,987 | 121,818 | (6 | )% | (19 | )% | |||||||||||||||||||
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Portfolio Product Mix (average) |
||||||||||||||||||||||||||||
GNMA (Ginnie) |
2 | % | 2 | % | 2 | % | 2 | % | 3 | % | ||||||||||||||||||
FNMA/FHLMC (Fannie/Freddie) |
30 | 31 | 32 | 33 | 35 | |||||||||||||||||||||||
Private |
60 | 60 | 59 | 59 | 57 | |||||||||||||||||||||||
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Sub-total |
92 | 93 | 93 | 94 | 95 | |||||||||||||||||||||||
FHN permanent mortgage portfolio and warehouse |
8 | 7 | 7 | 6 | 5 | |||||||||||||||||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
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Other Portfolio Statistics |
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Servicing cost per loan (annualized) (j) |
$ | 282.18 | $ | 294.41 | $ | 279.08 | $ | 288.21 | $ | 280.71 | ||||||||||||||||||
Servicing book value (bps) (k) (l) |
75 | 69 | 68 | 68 | 68 | |||||||||||||||||||||||
90+ delinquency rate, excluding foreclosures (m) |
11.20 | % | 11.20 | % | 10.89 | % | 10.61 | % | 10.94 | % | ||||||||||||||||||
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|
NM - Not meaningful
* | Amount is less than one percent. |
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | 2Q13 and 1Q13 include a gain of $1.0 million and $2.4 million, respectively, from a LOCOM reversal associated with a TRUP loan payoff; 2Q12 includes a $2.3 million negative adjustment made as a result of contingencies related to prior servicing sales. |
(b) | 4Q12 includes a $4.7 million negative valuation adjustment related to an equity investment. 2Q12 includes a $5.1 million gain on sale of venture capital investment. |
(c) | 2Q12 represents $250.0 million charge to the repurchase and foreclosure provision primarily related to a revision in estimate based on new information received from Fannie Mae. |
(d) | 2Q12 includes a $22.0 million loss accrual related to pending legal matters. |
(e) | 3Q12 increase largely associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(f) | Net interest margin is computed using total net interest income adjusted for FTE. Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this supplement. |
(g) | Noninterest expense divided by total revenue excluding securities gains/(losses). |
(h) | Includes servicing of first liens, second liens, and HELOCs. |
(i) | Includes mortgage loans serviced from FHNs legacy mortgage banking business, legacy equity lending serviced for others, and mortgage loans in portfolio and warehouse. Excludes UPB of loans transferred that did not qualify for sales treatment. |
(j) | Calculated based on fees charged by subservicer divided by average number of loans serviced during the quarter. |
(k) | Includes MSR and mortgage trading securities divided by total servicing portfolio. |
(l) | For purposes of this calculation, MSR excludes servicing transferred that did not qualify for sales treatment due to certain recourse provisions. |
(m) | Excludes delinquent second liens and HELOCs. |
19
FHN CAPITAL HIGHLIGHTS
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Tier 1 capital (a) (b) |
$ | 2,712,398 | $ | 2,738,558 | $ | 2,640,776 | $ | 2,641,392 | $ | 2,626,688 | (1 | )% | 3 | % | ||||||||||||||
Tier 2 capital (a) |
$ | 465,360 | $ | 511,340 | $ | 571,232 | $ | 570,429 | $ | 570,159 | (9 | )% | (18 | )% | ||||||||||||||
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Total capital (a) (b) |
$ | 3,177,758 | $ | 3,249,898 | $ | 3,212,008 | $ | 3,211,821 | $ | 3,196,847 | (2 | )% | (1 | )% | ||||||||||||||
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Risk weighted assets (RWA) (a) |
$ | 20,550,720 | $ | 20,231,850 | $ | 20,153,430 | $ | 20,082,979 | $ | 20,022,430 | 2 | % | 3 | % | ||||||||||||||
Tier 1 ratio (a) |
13.20 | % | 13.54 | % | 13.10 | % | 13.15 | % | 13.12 | % | ||||||||||||||||||
Tier 2 ratio (a) |
2.26 | % | 2.52 | % | 2.84 | % | 2.84 | % | 2.85 | % | ||||||||||||||||||
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Total capital ratio (a) |
15.46 | % | 16.06 | % | 15.94 | % | 15.99 | % | 15.97 | % | ||||||||||||||||||
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Tier 1 common ratio to risk weighted assets (a) (c) |
10.33 | % | 10.62 | % | 10.65 | % | 10.69 | % | 10.65 | % | ||||||||||||||||||
Leverage ratio (a) |
11.07 | 10.97 | 10.63 | 10.58 | 10.56 | |||||||||||||||||||||||
Total equity to total assets |
10.13 | 10.33 | 9.83 | 9.84 | 9.86 | |||||||||||||||||||||||
Adjusted tangible common equity to risk weighted assets (TCE/RWA) (a) (c) (d) |
9.61 | 9.91 | 9.93 | 10.03 | 9.97 | |||||||||||||||||||||||
Tangible common equity/tangible assets (TCE/TA) (c) (e) |
7.95 | 8.21 | 8.11 | 8.13 | 8.13 | |||||||||||||||||||||||
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Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | Current quarter is an estimate. |
(b) | All quarters presented include $200 million of tier 1 qualifying trust preferred securities. |
(c) | Refer to the Non-GAAP to GAAP Reconciliation on page 27 of this financial supplement. |
(d) | See Glossary of Terms for definition of ratio. |
(e) | Calculated using period-end balances. |
20
FHN ASSET QUALITY: CONSOLIDATED
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | |||||||||||||||||||||
Allowance for Loan Losses Walk-Forward |
||||||||||||||||||||||||||||
Beginning reserve |
$ | 265,218 | $ | 276,963 | $ | 281,744 | $ | 321,051 | $ | 346,016 | (4 | )% | (23 | )% | ||||||||||||||
Provision (a) |
15,000 | 15,000 | 15,000 | 40,000 | 15,000 | * | * | |||||||||||||||||||||
Charge-offs (b) (c) |
(30,272 | ) | (36,100 | ) | (31,177 | ) | (87,022 | ) | (49,728 | ) | (16 | )% | (39 | )% | ||||||||||||||
Recoveries |
11,988 | 9,355 | 11,396 | 7,715 | 9,763 | 28 | % | 23 | % | |||||||||||||||||||
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Ending balance (Restricted - $3.8 million) (d) |
$ | 261,934 | $ | 265,218 | $ | 276,963 | $ | 281,744 | $ | 321,051 | (1 | )% | (18 | )% | ||||||||||||||
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Reserve for unfunded commitments |
2,976 | 3,439 | 4,145 | 4,572 | 4,434 | (13 | )% | (33 | )% | |||||||||||||||||||
Total allowance for loan losses plus reserve for unfunded commitments |
$ | 264,910 | $ | 268,657 | $ | 281,108 | $ | 286,316 | $ | 325,485 | (1 | )% | (19 | )% | ||||||||||||||
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Allowance for Loan Losses |
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Regional Banking |
$ | 124,627 | $ | 120,161 | $ | 128,210 | $ | 142,060 | $ | 156,060 | 4 | % | (20 | )% | ||||||||||||||
Non-Strategic |
137,307 | 145,057 | 148,753 | 139,684 | 164,991 | (5 | )% | (17 | )% | |||||||||||||||||||
Corporate (e) |
NM | NM | NM | NM | NM | NM | NM | |||||||||||||||||||||
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Total allowance for loan losses |
$ | 261,934 | $ | 265,218 | $ | 276,963 | $ | 281,744 | $ | 321,051 | (1 | )% | (18 | )% | ||||||||||||||
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Nonperforming Assets |
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Regional Banking |
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Nonperforming loans (f) |
$ | 135,902 | $ | 124,824 | $ | 131,834 | $ | 152,477 | $ | 178,650 | 9 | % | (24 | )% | ||||||||||||||
Foreclosed real estate (g) (h) |
$ | 35,028 | 13,142 | 13,726 | 16,000 | 17,334 | NM | NM | ||||||||||||||||||||
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Total Regional Banking |
$ | 170,930 | $ | 137,966 | $ | 145,560 | $ | 168,477 | $ | 195,984 | 24 | % | (13 | )% | ||||||||||||||
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Non-Strategic |
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Nonperforming loans (f) |
173,705 | $ | 129,240 | $ | 133,286 | $ | 150,635 | $ | 149,564 | 34 | % | 16 | % | |||||||||||||||
Nonperforming loans held-for-sale before fair value adjustments (i) |
140,790 | 129,730 | 110,567 | 94,265 | 89,535 | 9 | % | 57 | % | |||||||||||||||||||
Foreclosed real estate (g) |
16,781 | 19,513 | 28,041 | 34,589 | 31,583 | (14 | )% | (47 | )% | |||||||||||||||||||
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Total Non-Strategic |
$ | 331,276 | $ | 278,483 | $ | 271,894 | $ | 279,489 | $ | 270,682 | 19 | % | 22 | % | ||||||||||||||
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Corporate |
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Nonperforming loans |
$ | 4,526 | $ | 1,936 | $ | 1,915 | $ | 2,426 | $ | 207 | NM | NM | ||||||||||||||||
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Total nonperforming assets |
$ | 506,732 | $ | 418,385 | $ | 419,369 | $ | 450,392 | $ | 466,873 | 21 | % | 9 | % | ||||||||||||||
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Net Charge-Offs |
||||||||||||||||||||||||||||
Regional Banking |
$ | 8,735 | $ | 5,564 | $ | 12,623 | $ | 16,927 | $ | 14,883 | 57 | % | (41 | )% | ||||||||||||||
Non-Strategic |
9,549 | 21,181 | 7,158 | 62,380 | 25,082 | (55 | )% | (62 | )% | |||||||||||||||||||
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Total net charge-offs (b) (c) |
$ | 18,284 | $ | 26,745 | $ | 19,781 | $ | 79,307 | $ | 39,965 | (32 | )% | (54 | )% | ||||||||||||||
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Consolidated Key Ratios (j) |
||||||||||||||||||||||||||||
NPL % (f) |
1.94 | % | 1.61 | % | 1.60 | % | 1.85 | % | 2.03 | % | ||||||||||||||||||
NPA % (f) (h) |
2.25 | 1.81 | 1.84 | 2.15 | 2.32 | |||||||||||||||||||||||
Net charge-offs % (b) (c) |
0.46 | 0.67 | 0.48 | 1.92 | 1.01 | |||||||||||||||||||||||
Allowance / loans |
1.62 | 1.67 | 1.66 | 1.71 | 1.98 | |||||||||||||||||||||||
Allowance / NPL |
0.83 | x | 1.04 | x | 1.04 | x | 0.92 | x | 0.98 | x | ||||||||||||||||||
Allowance / NPA |
0.72 | x | 0.92 | x | 0.90 | x | 0.79 | x | 0.85 | x | ||||||||||||||||||
Allowance / charge-offs (b) (c) |
3.57 | x | 2.45 | x | 3.52 | x | 0.89 | x | 2.00 | x | ||||||||||||||||||
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Other |
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Loans past due 90 days or more (k) |
$ | 73,027 | $ | 87,177 | $ | 86,017 | $ | 82,953 | $ | 89,214 | (16 | )% | (18 | )% | ||||||||||||||
Guaranteed portion (k) |
38,123 | 40,117 | 36,633 | 35,397 | 38,758 | (5 | )% | (2 | )% | |||||||||||||||||||
Foreclosed real estate from government insured loans |
18,560 | 22,017 | 18,923 | 20,190 | 20,687 | (16 | )% | (10 | )% | |||||||||||||||||||
Period-end loans, net of unearned income (millions) |
16,197 | 15,890 | 16,709 | 16,524 | 16,186 | 2 | % | * | ||||||||||||||||||||
Remaining unfunded commitments (millions) |
8,425 | 8,487 | 7,993 | 7,891 | 7,869 | (1 | )% | 7 | % | |||||||||||||||||||
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NM - Not meaningful
* | Amount is less than one percent. |
(a) | 3Q12 includes approximately $30 million of loan loss provision associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(b) | 4Q12 charge-offs reflect lower loss estimate for discharged bankruptcies based on the loan-level data obtained from new appraisals in fourth quarter. |
(c) | 3Q12 includes approximately $40 million of charge-offs associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(d) | Restricted balances parenthetically presented are as of June 30, 2013. See Glossary of Terms for definition of restricted balances. |
(e) | The valuation adjustment taken upon exercise of clean-up calls includes expected losses. |
(f) | 2Q13 NPLs increased by $58.1 million largely due to the impact of placing second liens on nonaccrual based on 3rd party data obtained on the performance status of non-FHN serviced first liens. |
(g) | Excludes foreclosed real estate from government-insured mortgages. |
(h) | 2Q13 includes approximately $23 million of MNB foreclosed real estate. |
(i) | The average negative fair value mark was approximately 52% of unpaid principal balance as of 2Q13. |
(j) | See Glossary of Terms for definitions of Consolidated Key Ratios. |
(k) | Includes loans held for sale. |
21
FHN ASSET QUALITY: CONSOLIDATED
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Key Portfolio Details |
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C&I |
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Period-end loans ($ millions) |
$ | 8,367 | $ | 8,091 | $ | 8,797 | $ | 8,466 | $ | 7,982 | 3 | % | 5 | % | ||||||||||||||
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30+ Delinq. % (a) |
0.13 | % | 0.17 | % | 0.22 | % | 0.30 | % | 0.29 | % | ||||||||||||||||||
NPL % |
1.45 | 1.40 | 1.39 | 1.78 | 1.97 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.14 | 0.10 | 0.24 | 0.25 | 0.42 | |||||||||||||||||||||||
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Allowance / loans % |
1.12 | % | 1.06 | % | 1.09 | % | 1.26 | % | 1.39 | % | ||||||||||||||||||
Allowance / charge-offs |
8.34 | x | 10.94 | x | 4.84 | x | 5.17 | x | 3.44 | x | ||||||||||||||||||
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Income CRE |
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Period-end loans ($ millions) (b) |
$ | 1,172 | $ | 1,063 | $ | 1,110 | $ | 1,162 | $ | 1,225 | 10 | % | (4 | )% | ||||||||||||||
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30+ Delinq. % (a) |
0.55 | % | 0.44 | % | 0.41 | % | 0.21 | % | 0.53 | % | ||||||||||||||||||
NPL % |
1.99 | 2.53 | 2.97 | 4.04 | 4.67 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.06 | 0.37 | 0.30 | 0.79 | 0.52 | |||||||||||||||||||||||
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Allowance / loans % (c) |
0.94 | % | 1.11 | % | 1.43 | % | 1.94 | % | 2.39 | % | ||||||||||||||||||
Allowance / charge-offs |
18.24 | x | 2.88 | x | 4.48 | x | 2.40 | x | 4.53 | x | ||||||||||||||||||
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Residential CRE |
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Period-end loans ($ millions) |
$ | 47 | $ | 54 | $ | 58 | $ | 69 | $ | 89 | (13 | )% | (47 | )% | ||||||||||||||
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30+ Delinq. % (a) |
0.44 | % | | % | | % | 1.19 | % | 6.69 | % | ||||||||||||||||||
NPL % (d) |
21.83 | 21.98 | 21.63 | 24.46 | 43.53 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | 4.29 | 5.74 | |||||||||||||||||||||||
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Allowance / loans % (d) |
6.24 | % | 6.36 | % | 7.01 | % | 7.00 | % | 13.69 | % | ||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | 1.42 | x | 2.25 | x | |||||||||||||||||||||
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Consumer Real Estate |
||||||||||||||||||||||||||||
Period-end loans ($ millions) |
$ | 5,549 | $ | 5,590 | $ | 5,689 | $ | 5,735 | $ | 5,855 | (1 | )% | (5 | )% | ||||||||||||||
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30+ Delinq. % (a) |
1.10 | % | 1.21 | % | 1.36 | % | 1.46 | % | 1.39 | % | ||||||||||||||||||
NPL % (e) |
2.15 | 1.21 | 1.13 | 0.96 | 0.70 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) (f) (g) |
0.96 | 1.33 | 0.68 | 4.54 | 1.64 | |||||||||||||||||||||||
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Allowance / loans % |
2.18 | % | 2.35 | % | 2.27 | % | 2.02 | % | 2.28 | % | ||||||||||||||||||
Allowance / charge-offs (f) (g) |
2.26 | x | 1.75 | x | 3.31 | x | 0.44 | x | 1.38 | x | ||||||||||||||||||
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Permanent Mortgage |
||||||||||||||||||||||||||||
Period-end loans ($ millions) (h) |
$ | 746 | $ | 793 | $ | 766 | $ | 806 | $ | 756 | (6 | )% | (1 | )% | ||||||||||||||
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30+ Delinq. % (a) |
2.51 | % | 2.16 | % | 2.28 | % | 2.86 | % | 1.64 | % | ||||||||||||||||||
NPL % |
5.14 | 4.37 | 4.27 | 4.22 | 4.26 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.62 | 1.64 | 0.95 | 1.06 | 1.26 | |||||||||||||||||||||||
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Allowance / loans % |
3.63 | % | 3.21 | % | 3.26 | % | 3.17 | % | 3.85 | % | ||||||||||||||||||
Allowance / charge-offs |
5.64 | x | 1.93 | x | 3.32 | x | 2.98 | x | 2.99 | x | ||||||||||||||||||
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Credit Card and Other |
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Period-end loans ($ millions) |
$ | 316 | $ | 299 | $ | 289 | $ | 286 | $ | 279 | 6 | % | 13 | % | ||||||||||||||
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30+ Delinq. % (a) |
1.00 | % | 1.25 | % | 1.45 | % | 1.43 | % | 1.28 | % | ||||||||||||||||||
NPL % |
0.54 | 0.57 | 0.59 | 0.64 | 0.74 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
2.22 | 3.25 | 4.00 | 3.37 | 3.82 | |||||||||||||||||||||||
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Allowance / loans % |
2.07 | % | 2.38 | % | 2.39 | % | 2.22 | % | 2.27 | % | ||||||||||||||||||
Allowance / charge-offs |
0.97 | x | 0.75 | x | 0.60 | x | 0.68 | x | 0.60 | x | ||||||||||||||||||
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NM - Not meaningful
(a) | 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest. |
(b) | 2Q13 includes $144.2 million related to the acquisition of MNB. |
(c) | 2Q13 decline is related to MNB loans that were acquired at fair value and that do not carry an allowance. |
(d) | 3Q12 decline is primarily driven by a large relationship that was upgraded to accrual status. |
(e) | NPL levels affected by the implementation of regulatory guidance related to discharged bankruptcies in 3Q12 as well as the impact of placing second liens on nonaccrual based on 3rd party data obtained on the performance status of non-FHN serviced first liens in 2Q13. |
(f) | 4Q12 charge-offs reflect favorable adjustment for lower loss estimate for discharged bankruptcies based on the loan-level data obtained from new appraisals in fourth quarter. |
(g) | 3Q12 includes the impact of charge-offs associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(h) | 1Q13 and 3Q12 increases relate to exercise of cleanup calls. |
22
FHN ASSET QUALITY: REGIONAL BANKING
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Total Regional Banking |
||||||||||||||||||||||||||||
Period-end loans ($ millions) |
$ | 12,633 | $ | 12,127 | $ | 12,819 | $ | 12,462 | $ | 11,962 | 4 | % | 6 | % | ||||||||||||||
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30+ Delinq. % (a) |
0.31 | % | 0.36 | % | 0.38 | % | 0.45 | % | 0.51 | % | ||||||||||||||||||
NPL % |
1.08 | 1.03 | 1.03 | 1.22 | 1.49 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.29 | 0.18 | 0.41 | 0.55 | 0.51 | |||||||||||||||||||||||
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Allowance / loans % |
0.99 | % | 0.99 | % | 1.00 | % | 1.14 | % | 1.30 | % | ||||||||||||||||||
Allowance / charge-offs |
3.56 | x | 5.32 | x | 2.55 | x | 2.11 | x | 2.61 | x | ||||||||||||||||||
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Key Portfolio Details |
||||||||||||||||||||||||||||
C&I |
||||||||||||||||||||||||||||
Period-end loans ($ millions) |
$ | 7,864 | $ | 7,580 | $ | 8,262 | $ | 7,929 | $ | 7,441 | 4 | % | 6 | % | ||||||||||||||
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30+ Delinq. % (a) |
0.13 | % | 0.17 | % | 0.23 | % | 0.32 | % | 0.31 | % | ||||||||||||||||||
NPL % |
0.96 | 0.89 | 0.85 | 0.97 | 1.11 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.27 | 0.10 | 0.26 | 0.29 | 0.45 | |||||||||||||||||||||||
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Allowance / loans % |
0.99 | % | 0.92 | % | 0.95 | % | 1.05 | % | 1.14 | % | ||||||||||||||||||
Allowance / charge-offs |
3.81 | x | 8.71 | x | 3.87 | x | 3.71 | x | 2.64 | x | ||||||||||||||||||
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Income CRE |
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Period-end loans ($ millions) (b) |
$ | 1,159 | $ | 1,048 | $ | 1,095 | $ | 1,141 | $ | 1,183 | 11 | % | (2 | )% | ||||||||||||||
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30+ Delinq. % (a) |
0.55 | % | 0.45 | % | 0.41 | % | 0.21 | % | 0.55 | % | ||||||||||||||||||
NPL % |
1.85 | 2.32 | 2.78 | 3.78 | 4.34 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.21 | 0.40 | 0.37 | 0.83 | 0.53 | |||||||||||||||||||||||
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Allowance / loans % (c) |
0.83 | % | 1.00 | % | 1.33 | % | 1.81 | % | 2.14 | % | ||||||||||||||||||
Allowance / charge-offs |
4.29 | x | 2.42 | x | 3.38 | x | 2.12 | x | 3.99 | x | ||||||||||||||||||
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Residential CRE |
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Period-end loans ($ millions) |
$ | 43 | $ | 50 | $ | 53 | $ | 61 | $ | 79 | (14 | )% | (46 | )% | ||||||||||||||
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30+ Delinq. % (a) |
0.47 | % | | % | | % | 1.34 | % | 7.53 | % | ||||||||||||||||||
NPL % (d) |
16.62 | 17.66 | 17.59 | 19.08 | 40.77 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | 5.07 | 2.26 | |||||||||||||||||||||||
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Allowance / loans % (d) |
6.54 | % | 6.64 | % | 7.19 | % | 7.32 | % | 14.72 | % | ||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | 1.26 | x | 6.24 | x | |||||||||||||||||||||
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Consumer Real Estate |
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Period-end loans ($ millions) |
$ | 3,253 | $ | 3,152 | $ | 3,121 | $ | 3,047 | $ | 2,981 | 3 | % | 9 | % | ||||||||||||||
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30+ Delinq. % (a) |
0.58 | % | 0.68 | % | 0.65 | % | 0.75 | % | 0.76 | % | ||||||||||||||||||
NPL % (e) |
0.97 | 0.74 | 0.67 | 0.63 | 0.39 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) (f) |
0.31 | 0.07 | 0.51 | 0.78 | 0.38 | |||||||||||||||||||||||
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Allowance / loans % |
0.87 | % | 0.96 | % | 0.81 | % | 0.91 | % | 0.94 | % | ||||||||||||||||||
Allowance / charge-offs (f) |
2.85 | x | 13.36 | x | 1.59 | x | 1.18 | x | 2.48 | x | ||||||||||||||||||
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Credit Card, Permanent Mortgage, and Other |
||||||||||||||||||||||||||||
Period-end loans ($ millions) |
$ | 314 | $ | 297 | $ | 288 | $ | 284 | $ | 278 | 6 | % | 13 | % | ||||||||||||||
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30+ Delinq. % (a) |
1.14 | % | 1.40 | % | 1.45 | % | 1.40 | % | 1.32 | % | ||||||||||||||||||
NPL % |
0.20 | 0.34 | 0.35 | 0.37 | 0.15 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
2.03 | 2.94 | 3.42 | 2.92 | 2.99 | |||||||||||||||||||||||
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Allowance / loans % |
2.02 | % | 2.26 | % | 2.21 | % | 2.13 | % | 2.26 | % | ||||||||||||||||||
Allowance / charge-offs |
1.03 | x | 0.79 | x | 0.65 | x | 0.75 | x | 0.76 | x | ||||||||||||||||||
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ASSET QUALITY: CORPORATE |
||||||||||||||||||||||||||||
Permanent Mortgage |
||||||||||||||||||||||||||||
Period-end loans ($ millions) (g) |
$ | 205 | $ | 229 | $ | 180 | $ | 201 | $ | 119 | (10 | )% | 72 | % | ||||||||||||||
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30+ Delinq. % (a) |
1.83 | % | 2.55 | % | 1.83 | % | 2.12 | % | 0.49 | % | ||||||||||||||||||
NPL % |
2.21 | 0.84 | 1.06 | 1.21 | 0.17 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | NM | NM | |||||||||||||||||||||||
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Allowance / loans % |
NM | NM | NM | NM | NM | |||||||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | NM | NM | |||||||||||||||||||||||
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NM - Not meaningful
(a) | 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest. |
(b) | 2Q13 includes $144.2 million related to the acquisition of MNB. |
(c) | 2Q13 decline is related to MNB loans that were acquired at fair value and that do not carry an allowance. |
(d) | 3Q12 decline is primarily driven by a large relationship that was upgraded to accrual status. |
(e) | NPL levels affected by the implementation of regulatory guidance related to discharged bankruptcies in 3Q12 as well as the impact of placing second liens on nonaccrual based on 3rd party data obtained on the performance status of non-FHN serviced first liens in 2Q13. |
(f) | 3Q12 includes the impact of charge-offs associated with the implementation of regulatory guidance related to discharged bankruptcies. |
(g) | 1Q13 and 3Q12 increases relate to exercise of cleanup calls. |
23
FHN ASSET QUALITY: NON-STRATEGIC
Quarterly, Unaudited
2Q13 Changes vs. | ||||||||||||||||||||||||||||
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | 1Q13 | 2Q12 | ||||||||||||||||||||||
Total Non-Strategic |
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Period-end loans ($ millions) |
$ | 3,359 | $ | 3,534 | $ | 3,710 | $ | 3,861 | $ | 4,105 | (5 | )% | (18 | )% | ||||||||||||||
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30+ Delinq. % (a) |
1.70 | % | 1.62 | % | 1.92 | % | 2.06 | % | 1.72 | % | ||||||||||||||||||
NPL % (b) |
5.17 | 3.66 | 3.59 | 3.90 | 3.64 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
1.11 | 2.36 | 0.75 | 6.19 | 2.41 | |||||||||||||||||||||||
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Allowance / loans % |
4.09 | % | 4.10 | % | 4.01 | % | 3.62 | % | 4.02 | % | ||||||||||||||||||
Allowance / charge-offs |
3.58 | x | 1.69 | x | 5.22 | x | 0.56 | x | 1.64 | x | ||||||||||||||||||
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Key Portfolio Details |
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C&I |
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Period-end loans ($ millions) |
$ | 503 | $ | 512 | $ | 535 | $ | 537 | $ | 541 | (2 | )% | (7 | )% | ||||||||||||||
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30+ Delinq. % (a) |
0.04 | % | 0.08 | % | | % | * | | % | |||||||||||||||||||
NPL % |
9.13 | 8.95 | 9.82 | 13.65 | 13.77 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | NM | * | |||||||||||||||||||||||
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Allowance / loans % |
3.14 | % | 3.24 | % | 3.37 | % | 4.37 | % | 4.78 | % | ||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | NM | NM | |||||||||||||||||||||||
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Income CRE |
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Period-end loans ($ millions) |
$ | 13 | $ | 15 | $ | 15 | $ | 20 | $ | 42 | (13 | )% | (69 | )% | ||||||||||||||
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30+ Delinq. % (a) |
| % | | % | | % | | % | | % | ||||||||||||||||||
NPL % |
14.02 | 17.34 | 17.16 | 18.84 | 14.07 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | NM | 0.30 | |||||||||||||||||||||||
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Allowance / loans % |
11.37 | % | 8.84 | % | 9.02 | % | 9.64 | % | 9.51 | % | ||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | NM | 31.70 | x | ||||||||||||||||||||||
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Residential CRE |
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Period-end loans ($ millions) |
$ | 3 | $ | 4 | $ | 5 | $ | 8 | $ | 10 | (25 | )% | (70 | )% | ||||||||||||||
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30+ Delinq. % (a) |
| % | | % | | % | 0.07 | % | | % | ||||||||||||||||||
NPL % |
91.47 | 80.40 | 63.63 | 65.97 | 65.64 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
NM | NM | NM | NM | 30.43 | |||||||||||||||||||||||
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Allowance / loans % |
2.22 | % | 2.49 | % | 5.13 | % | 4.58 | % | 5.40 | % | ||||||||||||||||||
Allowance / charge-offs |
NM | NM | NM | NM | 0.15 | x | ||||||||||||||||||||||
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Consumer Real Estate |
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Period-end loans ($ millions) |
$ | 2,297 | $ | 2,438 | $ | 2,568 | $ | 2,689 | $ | 2,874 | (6 | )% | (20 | )% | ||||||||||||||
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30+ Delinq. % (a) |
1.84 | % | 1.89 | % | 2.23 | % | 2.26 | % | 2.04 | % | ||||||||||||||||||
NPL % (b) |
3.84 | 1.83 | 1.69 | 1.34 | 1.01 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) (c) (d) |
1.84 | 2.90 | 0.86 | 8.58 | 2.90 | |||||||||||||||||||||||
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Allowance / loans % |
4.03 | % | 4.15 | % | 4.04 | % | 3.28 | % | 3.67 | % | ||||||||||||||||||
Allowance / charge-offs (c) (d) |
2.12 | x | 1.39 | x | 4.51 | x | 0.37 | x | 1.24 | x | ||||||||||||||||||
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Permanent Mortgage |
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Period-end loans ($ millions) |
$ | 527 | $ | 548 | $ | 569 | $ | 588 | $ | 619 | (4 | )% | (15 | )% | ||||||||||||||
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30+ Delinq. % (a) |
2.70 | % | 1.91 | % | 2.40 | % | 3.09 | % | 1.79 | % | ||||||||||||||||||
NPL % |
6.31 | 5.78 | 5.23 | 5.20 | 5.14 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
0.89 | 2.35 | 1.29 | 1.42 | 1.54 | |||||||||||||||||||||||
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Allowance / loans % |
5.10 | % | 4.62 | % | 4.36 | % | 4.32 | % | 4.64 | % | ||||||||||||||||||
Allowance / charge-offs |
5.58 | x | 1.93 | x | 3.30 | x | 2.96 | x | 2.95 | x | ||||||||||||||||||
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Other Consumer |
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Period-end loans ($ millions) |
$ | 16 | $ | 17 | $ | 18 | $ | 19 | $ | 19 | (6 | )% | (16 | )% | ||||||||||||||
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30+ Delinq. % (a) |
1.99 | % | 2.26 | % | 2.82 | % | 3.59 | % | 3.52 | % | ||||||||||||||||||
NPL % |
10.02 | 9.61 | 9.23 | 9.41 | 9.32 | |||||||||||||||||||||||
Charge-offs % (qtr. annualized) |
3.72 | 5.44 | 9.49 | 6.92 | 11.66 | |||||||||||||||||||||||
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Allowance / loans % |
2.85 | % | 2.78 | % | 3.64 | % | 2.37 | % | 2.13 | % | ||||||||||||||||||
Allowance / charge-offs |
0.75 | x | 0.50 | x | 0.38 | x | 0.35 | x | 0.18 | x | ||||||||||||||||||
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NM - Not meaningful
* | Amount is less than one percent. |
(a) | 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest. |
(b) | NPL levels affected by the implementation of regulatory guidance related to discharged bankruptcies in 3Q12 as well as the impact of placing second liens on nonaccrual based on 3rd party data obtained on the performance status of non-FHN serviced first liens in 2Q13. |
(c) | 4Q12 charge-offs reflect favorable adjustment for lower loss estimate for discharged bankruptcies based on the loan-level data obtained from new appraisals in fourth quarter. |
(d) | 3Q12 includes the impact of charge-offs associated with the implementation of regulatory guidance related to discharged bankruptcies. |
24
FHN ROLLFORWARDS OF NONPERFORMING LOANS AND ORE INVENTORY
Unaudited
(Millions) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | |||||||||||||||
Commercial NPL Rollforward |
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Beginning NPLs |
$ | 152 | $ | 168 | $ | 214 | $ | 253 | $ | 268 | ||||||||||
+ Additions |
14 | 9 | 10 | 5 | 21 | |||||||||||||||
+ Principal increase |
| | | | 1 | |||||||||||||||
- Resolutions and payments |
(9 | ) | (22 | ) | (29 | ) | (18 | ) | (20 | ) | ||||||||||
- Net charge-offs |
(2 | ) | (2 | ) | (5 | ) | (8 | ) | (12 | ) | ||||||||||
- Transfer to ORE |
| (1 | ) | | (2 | ) | (1 | ) | ||||||||||||
- Upgrade to accrual |
| | (22 | ) | (16 | ) | (4 | ) | ||||||||||||
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Ending NPLs |
$ | 155 | $ | 152 | $ | 168 | $ | 214 | $ | 253 | ||||||||||
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(Millions) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | |||||||||||||||
ORE Inventory Rollforward (a) |
||||||||||||||||||||
Beginning balance |
$ | 32.7 | $ | 41.8 | $ | 50.6 | $ | 48.9 | $ | 59.1 | ||||||||||
Valuation adjustments |
(1.9 | ) | (1.0 | ) | (1.5 | ) | (2.7 | ) | (2.1 | ) | ||||||||||
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Adjusted balance |
30.8 | 40.8 | 49.1 | 46.2 | 57.0 | |||||||||||||||
+ New ORE |
4.0 | 1.2 | 7.5 | 11.9 | 6.0 | |||||||||||||||
+ Acquired ORE |
22.8 | | | | | |||||||||||||||
+ Capitalized expenses |
| | 0.1 | 0.2 | 0.2 | |||||||||||||||
Disposals: |
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- Single transactions |
(5.8 | ) | (9.3 | ) | (13.6 | ) | (7.7 | ) | (12.6 | ) | ||||||||||
- Bulk sales |
| | (1.3 | ) | | (1.7 | ) | |||||||||||||
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Ending balance |
$ | 51.8 | $ | 32.7 | $ | 41.8 | $ | 50.6 | $ | 48.9 | ||||||||||
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(a) | ORE excludes foreclosed assets related to government insured mortgages. |
25
FHN: PORTFOLIO METRICS
Unaudited
C&I Portfolio: $8.4 Billion (51.7% of Total Loans) as of June 30, 2013
% OS | ||||
General Corporate, Commercial, and Business Banking Loans |
78 | % | ||
Loans to Mortgage Companies |
16 | % | ||
Trust Preferred Loans |
5 | % | ||
Bank Holding Company Loans |
1 | % |
Consumer Real Estate (primarily Home Equity) Portfolio: $5.5 Billion (34.3% of Total Loans)
Origination LTV and FICO for Portfolio as of June 30, 2013 | Loan-to-Value | |||||||||||||||
(excludes whole loan insurance) |
<=60% | 60% - <=80% | 80% - 90% | >90% | ||||||||||||
FICO score greater than or equal to 740 |
11 | % | 23 | % | 17 | % | 7 | % | ||||||||
FICO score 720-739 |
2 | % | 4 | % | 4 | % | 2 | % | ||||||||
FICO score 700-719 |
1 | % | 4 | % | 4 | % | 2 | % | ||||||||
FICO score 660-699 |
2 | % | 4 | % | 4 | % | 3 | % | ||||||||
FICO score 620-659 |
| % | 1 | % | 1 | % | 1 | % | ||||||||
FICO score less than 620 |
| % | 1 | % | | % | 1 | % |
Origination LTV and FICO for Portfolio - Regional Banking as of June 30, 2013 | Loan-to-Value | |||||||||||||||
(excludes whole loan insurance) |
<=60% | 60% - <=80% | 80% - 90% | >90% | ||||||||||||
FICO score greater than or equal to 740 |
13 | % | 24 | % | 18 | % | 9 | % | ||||||||
FICO score 720-739 |
1 | % | 4 | % | 3 | % | 2 | % | ||||||||
FICO score 700-719 |
1 | % | 3 | % | 2 | % | 2 | % | ||||||||
FICO score 660-699 |
1 | % | 4 | % | 3 | % | 2 | % | ||||||||
FICO score 620-659 |
1 | % | 1 | % | 1 | % | 1 | % | ||||||||
FICO score less than 620 |
1 | % | 1 | % | 1 | % | 1 | % |
Origination LTV and FICO for Portfolio - Non-Strategic as of June 30, 2013 | Loan-to-Value | |||||||||||||||
(excludes whole loan insurance) |
<=60% | 60% - <=80% | 80% - 90% | >90% | ||||||||||||
FICO score greater than or equal to 740 |
8 | % | 22 | % | 15 | % | 5 | % | ||||||||
FICO score 720-739 |
2 | % | 6 | % | 5 | % | 2 | % | ||||||||
FICO score 700-719 |
2 | % | 6 | % | 6 | % | 2 | % | ||||||||
FICO score 660-699 |
2 | % | 5 | % | 4 | % | 3 | % | ||||||||
FICO score 620-659 |
| % | 1 | % | 1 | % | 1 | % | ||||||||
FICO score less than 620 |
| % | | % | | % | 1 | % |
Consumer Real Estate Portfolio Detail:
Origination Characteristics | ||||||||||||||||||||||||
Vintage |
Balances ($B) | W/A Age (mo.) | CLTV | FICO | % TN | % 1st lien | ||||||||||||||||||
pre-2003 |
$ | 0.1 | 139 | 78 | % | 706 | 44 | % | 32 | % | ||||||||||||||
2003 |
$ | 0.3 | 120 | 76 | % | 726 | 32 | % | 37 | % | ||||||||||||||
2004 |
$ | 0.5 | 107 | 79 | % | 724 | 21 | % | 27 | % | ||||||||||||||
2005 |
$ | 0.7 | 95 | 81 | % | 729 | 17 | % | 16 | % | ||||||||||||||
2006 |
$ | 0.6 | 84 | 78 | % | 732 | 22 | % | 17 | % | ||||||||||||||
2007 |
$ | 0.7 | 72 | 80 | % | 737 | 25 | % | 18 | % | ||||||||||||||
2008 |
$ | 0.3 | 61 | 76 | % | 745 | 72 | % | 51 | % | ||||||||||||||
2009 |
$ | 0.2 | 49 | 72 | % | 749 | 87 | % | 58 | % | ||||||||||||||
2010 |
$ | 0.3 | 35 | 80 | % | 750 | 92 | % | 74 | % | ||||||||||||||
2011 |
$ | 0.5 | 23 | 77 | % | 760 | 90 | % | 86 | % | ||||||||||||||
2012 |
$ | 0.9 | 12 | 76 | % | 760 | 89 | % | 91 | % | ||||||||||||||
2013 |
$ | 0.4 | 3 | 76 | % | 759 | 88 | % | 90 | % | ||||||||||||||
Total |
$ | 5.5 | 62 | 78 | % | 742 | (a) | 52 | % | 48 | % |
(a) | 742 average portfolio origination FICO; 735 weighted average portfolio FICO (refreshed). |
Permanent Mortgage Portfolio: $.7 Billion (4.6% of Total Loans) (a) (b)
Loan-to-Value | ||||||||||||||||
<= 60% | 60% - <=80% | 80% - 90% | >90% | |||||||||||||
Origination LTV for Portfolio as of June 30, 2013 : |
19 | % | 71 | % | 5 | % | 5 | % |
(a) | Documentation type: 72% full doc; 23% stated; 5% other. |
(b) | Product type: 72% jumbo; 11% Alt A; 17% other. |
26
FHN NON-GAAP TO GAAP RECONCILIATION
Quarterly, Unaudited
(Thousands) |
2Q13 | 1Q13 | 4Q12 | 3Q12 | 2Q12 | |||||||||||||||
Tangible Common Equity (Non-GAAP) |
||||||||||||||||||||
(A) Total equity (GAAP) |
$ | 2,546,351 | $ | 2,599,727 | $ | 2,509,206 | $ | 2,531,888 | $ | 2,514,406 | ||||||||||
Less: Noncontrolling interest (a) |
295,374 | 295,257 | 295,165 | 295,165 | 295,165 | |||||||||||||||
Less: Preferred stock |
95,624 | 95,624 | | | | |||||||||||||||
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(B) Total common equity |
$ | 2,155,353 | $ | 2,208,846 | $ | 2,214,041 | $ | 2,236,723 | $ | 2,219,241 | ||||||||||
Less: Intangible assets (GAAP) (b) |
170,906 | 156,014 | 156,942 | 157,921 | 158,901 | |||||||||||||||
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(C) Tangible common equity (Non-GAAP) |
$ | 1,984,447 | $ | 2,052,832 | $ | 2,057,099 | $ | 2,078,802 | $ | 2,060,340 | ||||||||||
Less: Unrealized gains on AFS securities, net of tax |
9,439 | 48,591 | 55,250 | 63,923 | 63,679 | |||||||||||||||
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(D) Adjusted tangible common equity (Non-GAAP) (c) |
$ | 1,975,008 | $ | 2,004,241 | $ | 2,001,849 | $ | 2,014,879 | $ | 1,996,661 | ||||||||||
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Tangible Assets (Non-GAAP) |
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(E) Total assets (GAAP) |
$ | 25,133,274 | $ | 25,166,427 | $ | 25,520,140 | $ | 25,739,830 | $ | 25,492,955 | ||||||||||
Less: Intangible assets (GAAP) (b) |
170,906 | 156,014 | 156,942 | 157,921 | 158,901 | |||||||||||||||
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(F) Tangible assets (Non-GAAP) |
$ | 24,962,368 | $ | 25,010,413 | $ | 25,363,198 | $ | 25,581,909 | $ | 25,334,054 | ||||||||||
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Period-end Shares Outstanding |
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(G) Period-end shares outstanding |
240,555 | 241,225 | 243,598 | 247,134 | 248,810 | |||||||||||||||
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Tier 1 Common (Non-GAAP) |
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(H) Tier 1 capital (d) (e) |
$ | 2,712,398 | $ | 2,738,558 | $ | 2,640,776 | $ | 2,641,392 | $ | 2,626,688 | ||||||||||
Less: Noncontrolling interest - FTBNA preferred stock (a) (f) |
294,816 | 294,816 | 294,816 | 294,816 | 294,816 | |||||||||||||||
Less: Preferred Stock |
95,624 | 95,624 | | | | |||||||||||||||
Less: Trust preferred (g) |
200,000 | 200,000 | 200,000 | 200,000 | 200,000 | |||||||||||||||
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(I) Tier 1 common (Non-GAAP) |
$ | 2,121,958 | $ | 2,148,118 | $ | 2,145,960 | $ | 2,146,576 | $ | 2,131,872 | ||||||||||
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Risk Weighted Assets |
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(J) Risk weighted assets (d) (e) |
$ | 20,550,720 | $ | 20,231,850 | $ | 20,153,430 | $ | 20,082,979 | $ | 20,022,430 | ||||||||||
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Ratios |
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(C)/(F) Tangible common equity to tangible assets (TCE/TA) (Non-GAAP) |
7.95 | % | 8.21 | % | 8.11 | % | 8.13 | % | 8.13 | % | ||||||||||
(A)/(E) Total equity to total assets (GAAP) |
10.13 | % | 10.33 | % | 9.83 | % | 9.84 | % | 9.86 | % | ||||||||||
(C)/(G) Tangible book value per common share (Non-GAAP) |
$ | 8.25 | $ | 8.51 | $ | 8.44 | $ | 8.41 | $ | 8.28 | ||||||||||
(B)/(G) Book value per common share (GAAP) |
$ | 8.96 | $ | 9.16 | $ | 9.09 | $ | 9.05 | $ | 8.92 | ||||||||||
(I)/(J) Tier 1 common to risk weighted assets (Non-GAAP) (d) |
10.33 | % | 10.62 | % | 10.65 | % | 10.69 | % | 10.65 | % | ||||||||||
(H)/(E) Tier 1 capital to total assets (GAAP) (d) |
10.79 | % | 10.88 | % | 10.35 | % | 10.26 | % | 10.30 | % | ||||||||||
(D)/(J) Adjusted tangible common equity to risk weighted assets (TCE/RWA) (Non-GAAP) (c) (d) |
9.61 | % | 9.91 | % | 9.93 | % | 10.03 | % | 9.97 | % | ||||||||||
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Net interest income adjusted for impact of fully taxable equivalent (FTE) (Non-GAAP) |
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Regional Banking |
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Net interest income (GAAP) |
$ | 147,324 | $ | 146,068 | $ | 153,889 | $ | 151,136 | $ | 148,599 | ||||||||||
FTE adjustment |
1,756 | 1,670 | 1,645 | 1,555 | 1,580 | |||||||||||||||
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Net interest income adjusted for impact of FTE (Non-GAAP) |
$ | 149,080 | $ | 147,738 | $ | 155,534 | $ | 152,691 | $ | 150,179 | ||||||||||
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Capital Markets |
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Net interest income (GAAP) |
$ | 4,031 | $ | 3,900 | $ | 4,248 | $ | 4,753 | $ | 5,608 | ||||||||||
FTE adjustment |
149 | 109 | 186 | 175 | 160 | |||||||||||||||
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Net interest income adjusted for impact of FTE (Non-GAAP) |
$ | 4,180 | $ | 4,009 | $ | 4,434 | $ | 4,928 | $ | 5,768 | ||||||||||
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Corporate |
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Net interest income (GAAP) |
$ | (9,963 | ) | $ | (8,621 | ) | $ | (8,998 | ) | $ | (6,096 | ) | $ | (5,538 | ) | |||||
FTE adjustment |
8 | 8 | 11 | 22 | 16 | |||||||||||||||
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Net interest income adjusted for impact of FTE (Non-GAAP) |
$ | (9,955 | ) | $ | (8,613 | ) | $ | (8,987 | ) | $ | (6,074 | ) | $ | (5,522 | ) | |||||
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Non-Strategic |
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Net interest income (GAAP) |
$ | 18,627 | $ | 20,035 | $ | 21,459 | $ | 23,672 | $ | 24,006 | ||||||||||
FTE adjustment |
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Net interest income adjusted for impact of FTE (Non-GAAP) |
$ | 18,627 | $ | 20,035 | $ | 21,459 | $ | 23,672 | $ | 24,006 | ||||||||||
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Total Consolidated |
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Net interest income (GAAP) |
$ | 160,019 | $ | 161,382 | $ | 170,598 | $ | 173,465 | $ | 172,675 | ||||||||||
FTE adjustment |
1,913 | 1,787 | 1,842 | 1,752 | 1,756 | |||||||||||||||
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Net interest income adjusted for impact of FTE (Non-GAAP) |
$ | 161,932 | $ | 163,169 | $ | 172,440 | $ | 175,217 | $ | 174,431 | ||||||||||
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Certain previously reported amounts have been reclassified to agree with current presentation.
(a) | Included in Total equity on the Consolidated Balance Sheet. |
(b) | Includes goodwill and other intangible assets, net of amortization. |
(c) | See Glossary of Terms for definition of ratio. |
(d) | Current quarter is an estimate. |
(e) | Defined by and calculated in conformity with bank regulations. |
(f) | Represents FTBNA preferred stock included in noncontrolling interest. |
(g) | Included in Term borrowings on the Consolidated Balance Sheet. |
27
FHN GLOSSARY OF TERMS
Adjusted Tangible Common Equity to Risk Weighted Assets: Common equity excluding intangible assets and unrealized gains/losses on available-for-sale securities divided by risk weighted assets.
Core Businesses: Management treats regional banking, capital markets, and corporate as FHNs core businesses. Non-strategic has significant legacy assets and operations that are being wound down.
Discharged Bankruptcies: Residential real estate secured loans where the borrower has been discharged from personal liability through bankruptcy proceedings. Such loans that have not been reaffirmed by the borrower are charged down to estimated collateral value less disposition costs (net realizable value) and are reported as nonaccuring TDRs.
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.
Restricted Real Estate Loans: Restricted loans that are assets of a consolidated variable interest entity that can be used only to settle obligations of the consolidated variable interest entity.
Troubled Debt Restructuring (TDR): A restructuring of debt whereby a creditor for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider. Such concession is granted in an attempt to protect as much of the creditors investment as possible by increasing the probability of repayment.
Asset Quality - Consolidated Key Ratios
NPL %: Ratio is nonperforming loans in the loan portfolio to total period-end loans.
NPA %: Ratio is nonperforming assets related to the loan portfolio to total period-end loans plus foreclosed real estate and other assets.
Net charge-offs %: Ratio is annualized net charge-offs to total average loans.
Allowance / loans: Ratio is allowance for loan losses to total period-end loans.
Allowance / NPL: Ratio is allowance for loan losses to nonperforming loans in the loan portfolio.
Allowance / NPA: Ratio is allowance for loan losses to nonperforming assets related to the loan portfolio.
Allowance / charge-offs: Ratio is allowance for loan losses to annualized net charge-offs.
28
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Searchable text for slide0001:
First Horizon National Corporation Second Quarter 2013 Earnings July 19, 2013
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Searchable text for slide0002:
2 Portions of this presentation use non-GAAP financial information. Each of those portions is so noted, and a reconciliation of that non-GAAP information to comparable GAAP information is provided in a footnote or in the appendix at the end of this presentation. This presentation contains forward-looking statements, which may include guidance, involving significant risks and uncertainties which will be identified by words such as believe,expect,anticipate,intend,estimate, should,is likely,will,going forward and other expressions that indicate future events and trends and may be followed by or reference cautionary statements. A number of factors could cause actual results to differ materially from those in the forward-looking information. These factors are outlined in our recent earnings and other press releases and in more detail in the most current 10-Q and 10-K. FHN disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.
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Searchable text for slide0003:
Mortgage repurchase provision of $0 in the past 4 quarters No change in outlook for future loss content Consolidated expenses declined 11%, excluding the $250mm addition to mortgage repurchase reserve and $22mm of legal accruals in 2Q123 Annualized target of less than $925mm of total expenses by year end 2013 Regional Banking efficiency ratio improved 546bps to 62% Regional Banking revenue per FTE up 3% 3 2Q13 Accomplishments Results Improve from Realization of Efficiency Initiatives Revenue Declines Due to Interest Rate Environment Optimize Business Mix for Profitability & Returns Improve Productivity & Efficiency All data is 2Q13 compared to 2Q12 unless otherwise noted. All non-GAAP numbers are reconciled in the appendix. 1Core Businesses include the Regional Banking, Capital Markets, and Corporate segments. Core ROTCE and ROA are annualized, non-GAAP, and an average of quarters 3Q12-2Q13. 2Pre-tax pre-provision net revenue is a non-GAAP number. 3Adjusted noninterest expense decline is non-GAAP. 4Tier 1 and Tier 1 Common: current quarter is estimate; Tier 1 Common is a non-GAAP number. 5Does not include an average $0.02 per share broker commission paid in 2Q13 and an average $0.03 per share broker commission paid since October 2011. Tier 1 ratio at 13.2% Tier 1 Common at 10.3% Final impact of Basel III estimated at ~50bps Acquired substantially all of the assets and liabilities of Mountain National Bank (MNB) on June 7, 2013 from the FDIC Repurchased $8.0mm or 770 thousand common shares in 2Q13, resulting in $213mm or 24 million total shares repurchased since October 2011 Also entered into a $40mm repurchase arrangement, which will be completed in 3Q13 Volume weighted average price per share of $10.33 in 2Q13 and $8.86 since October 20115 Core Businesses ROTCE at 11.8% and ROA at 1.02%1 Regional Banking pre-tax pre-provision net revenue at $80mm, up 14%2 Regional Banking average loans up 5% and average core deposits up 2% Consolidated average loans flat, despite Non-Strategic run-off of 18% FTN Financial fixed income average daily revenues at $0.9mm Adversely impacted by the challenging market environment in the latter part of 2Q13 Net charge-offs declined 54% Deploy Capital In Disciplined Manner4
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Searchable text for slide0004:
4 Core Business Relative Positioning Core Businesses Continue to Deliver Solid Results Balance Sheet Positioned to Benefit from Rising Rates TTM Returns Key TTM Bonefish Metrics ROTCE2 ROA2 Capital ratios remain above normalized Bonefish capital levels NIM2 NCO %2 Fee Income % Efficiency Ratio In line with long-term Bonefish targets FTN Financial significant differentiator vs peers In line with long-term Bonefish targets Core efficiency ratio of 76% A 200bps rise in rates would have resulted in an efficiency ratio of 70%4 Core Businesses1 Significant latent income embedded in balance sheet A 200bps rise in rates would have improved NII by ~$70mm annually4 All non-GAAP numbers are reconciled in the appendix. 1Core Businesses include Regional Banking, Capital Markets, and Corporate. All core data is non-GAAP. Trailing 12 Months (TTM) is an average of quarters 3Q12-2Q13, which is non-GAAP. 2ROTCE, ROA, NIM, and NCO/Average Loans are annualized. ROTCE is a non-GAAP number. 3Asset weighted last four quarter average as of 1Q13. Peers defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. defined in appendix. 4All else equal, a 200bps rate shock results in ~$70mm increase in Core Businesses annual NII (see slide 10), as Non-Strategic is interest rate neutral. Core estimates are non-GAAP. FHN Favorable Peers3 FHN Unfavorable
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Searchable text for slide0005:
Financial Results 5
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Searchable text for slide0006:
Net income available to common shareholders at $41mm, with diluted EPS of $0.17 Pre-tax, pre-provision net revenue down slightly from $77mm to $75mm1 Revenue decreased $15mm or 5% FTN Financial revenue down $8mm or 10% due to market volatility and the spike in interest rates in the latter part of 2Q13 Mortgage banking noninterest income down $4mm or 40%, driven by negative mortgage warehouse valuation adjustment NII relatively stable and NIM up 1bp Expense decreased 5% from broad improvement in most categories Efficiency ratio improved to 75% from 76% Total provision stable at $15mm Net charge-offs down 32% to $18mm Regional Banking NCOs of $9mm or 29bps2 Total average loans down 1% Loans to mortgage companies down 6% Non-Strategic loans down 5% 6 Linked Quarter Comparison Numbers and percentages may not add to total due to rounding. All data is 2Q13 compared to 1Q13 unless otherwise noted. 1PPNR: Pre-tax pre-provision net revenue is a non-GAAP number and is reconciled to pre-tax income in the table. 2Net charge-off % is annualized. NM Not meaningful. *Amount is less than 1%. 2Q13 Consolidated Results Net Income Steady at $41mm; Continued Expense Reduction Mostly Offsetting Sustained Environmental Pressure on Revenue
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Searchable text for slide0007:
2Q13 Segment Highlights Core Businesses Results Remain Solid 7 Core Businesses include the Regional Banking, Capital Markets, and Corporate segments. 1Corporate, Core Businesses, and Consolidated show net income available to common, which reflects $3mm of noncontrolling interest in each quarter and $1mm and $2mm of preferred stock dividends in 1Q13 and 2Q13, respectively. 2Segment EPS impacts are non-GAAP numbers and reconciled in the table. EPS impacts are calculated using the 2Q13 net income column divided by the 241mm diluted common shares outstanding. 3Revenue and expense are as of 2Q13. Revenue includes securities gain / losses. 4LQ: Linked quarter; 2Q13 compared to 1Q13. Numbers may not add to total due to rounding. Drivers and Impacts Revenue3 Expense Net Income1 LQ Change4 $ in millions $mm % 2Q13 Per Share Impact2 $209 $129 $72 $60 $(6) $17 $27 $21 $275 $206 $303 $227 $4 -$8 -$5 -$6 -$10 -$15 -$1 -$2 -$1 -$4 -$9 -$13 Regional Banking Capital Markets Corporate1 Core Businesses1 Non- Strategic Total1 2Q13 $43 $8 $(12) $38 $3 $41 1Q13 $49 $12 $(11) $50 $(9) $41 2Q12 $42 $12 $(10) $44 $(169) $(125) 2% -10% NM -17% -3% -5% -1% -3% -3% -2% -31% -5% $0.18 $0.03 $(0.05) $0.16 $0.01 $0.17 Provision: 2Q13 of $2mm vs $17mm in 1Q13 Mortgage warehouse valuation: $(2.5)mm in 2Q13 vs $0.3mm in 1Q13 Fixed income ADR at $0.9mm 2Q13 vs $1.1mm in 1Q13 Pre-tax income of $4mm in 2Q13 vs $(16)mm in 1Q13 Decrease driven by realization of efficiency initiatives. 2Q13 provision expense of $13mm vs provision credit of $2mm in 1Q13 Lower variable expenses somewhat offset by higher legal and professional fees in 2Q13 Increase primarily driven by 5% higher noninterest income NII down from lower yields on securities portfolio. Fee income decreased from reduction in BOLI income
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Searchable text for slide0008:
8 Numbers/percentages may not add due to rounding. (CHART) Regional Banking Commercial Loan Pipeline & Fundings Regional Banking Total Average Loans & Deposits Regional Banking Total Average Loans & Deposits $1.2B $16B 1% 5% Regional Banking Average Loans (CHART) Consumer CRE C&I ( Loans to Mortgage Companies) $15B Regional Banking Balance Sheet Average Loans Increased 5% Year Over Year Total average loans relatively steady linked quarter Strength in consumer loans Added $58mm of loans in the MNB acquisition Average loans to mortgage companies down 6% linked quarter, but period end balances up 23% Utilization rates remain low Competitive lending environment Commercial fundings up 32% linked quarter but down 1% year over year
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Searchable text for slide0009:
(CHART) 9 Numbers may not add to total due to rounding. 1Spread is loan yield minus core deposit rate. 2Duration is estimated as of 6.30.13. 3Other is primarily composed of FHLB and Federal Reserve Bank stock. Not included in duration calculations. Consolidated Balance Sheet Trends Uptick in Long End Interest Rates Impacting Unrealized Gains in the Securities Portfolio; Net Interest Spread Remains Steady Securities Portfolio Securities portfolio of $3.2B at 6/30/13 Effective duration of 3.2 years in 2Q13 compared to 1.9 years the prior quarter2 Modified duration of 4.0 years in 2Q13 and 3.9 years in 1Q132 Net unrealized gain of $16mm in 2Q13 vs $80mm in the prior quarter Net unamortized premium of $22mm in 2Q13 vs $24mm in 1Q13 (CHART) 450bps Consolidated Yields and Rates Net interest spread steady at 354bps in 2Q13 Floating rate loans comprise 67% vs fixed rate loans at 33% In 2Q13, FHN repaid $100mm of subordinated capital notes FTBNA repaid $250mm of subordinated notes in this quarter Balance Sheet Highlights
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Searchable text for slide0010:
(CHART) 10 Numbers may not add to total due to rounding. 1Data is as of 6.30.13 and is non-GAAP. Analysis uses FHNs balance sheet as of 6.30.13. Long End +50bps assumes yield curve spreads widen ~50bps. Long end -50bps assumes yield curve spreads compress ~50bps. Bps impact assumes increase in Fed Funds rate. Non-Strategic is interest rate neutral, thus nearly all the sensitivity impact would be allocated to the Core Businesses. Net Interest Income Sensitivity Impact1 Net Interest Margin Low Rate Environment Pressuring Net Interest Margin, However Balance Sheet Poised to Benefit from Rising Rates Quarterly NIM expectation in range of 2.85%-2.95% by 4Q13unchanged from earlier outlook Continued modest loan yield declines Decline somewhat offset by deposit costs Earning assets relatively stable No expected material actions to reduce asset sensitivity 2013 NIM Outlook (CHART) Net Interest Income and Margin $200mm NII down $1mm linked quarter to $160mm NIM up slightly linked quarter to 2.96% from 2.95% Improvement from lower cash balances held at Fed and higher day count, somewhat offset by lower average loan balances
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Searchable text for slide0011:
11 Agency Mortgage Repurchase-Related Expenses Fourth Consecutive Quarter of Zero Repurchase Provision Continue to Expect Future GSE Repurchase Provision to be Immaterial Data as of 2Q13. Numbers may not add due to rounding. 1Based on UPB. The pipeline represents active investor claims and mortgage insurance (MI) cancellations under review, both of which could occur on the same loan. Excludes MI cancellation notices that have been reviewed and coverage has been lost. MI cancellations that have resulted in lost coverage are included in managements assessment of the adequacy of repurchase reserves. Total Pipeline of Repurchase Requests1 Received 5th update of data in June from Fannie and still expect future repurchase provision to be immaterial Pipeline declined 9% linked quarter and down 45% year over year to $235mm New requests up 24% linked quarter reflecting anticipated acceleration of requests; total expected aggregate requests remain unchanged Sold mortgage origination platform in August 2008 (CHART) $500mm Key Assumptions Assumption 2Q13 Metrics Rescission Rates 45%55% 49% No material change from Fannie in the scope of their loans selected for repurchase/make-whole review Loss Severity 50%60% 52% Mortgage Repurchase Reserve ($ in millions) Beginning Balance Net Realized Losses Ending Balance Provision 2Q12 $161 $(51) $360 $250 3Q12 $360 $(68) $292 $0 4Q12 $292 $(60) $232 $0 1Q13 $232 $(48) $184 $0 2Q13 $184 $(61) $123 $0 Fannie / Freddie Mix 73% / 27% 87% / 13%
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Searchable text for slide0012:
12 Numbers/percentages may not add due to rounding. 12Q12 excludes $250mm of GSE-related mortgage repurchase expense and $22mm of legal accruals. 2010Y is an annual number, therefore is not annualized; 2010Y also excludes $190mm of GSE-related mortgage repurchase expense. These are non-GAAP numbers and a reconciliation is provided in the appendix. Annualized noninterest expense declined 5% linked quarter and 11% year over year from broad-based improvement in most categories1 Reduction in compensation, occupancy, FDIC premiums, foreclosed real estate costs, and subservicing fees Goal of less than $925mm of annualized run-rate of consolidated expenses by year end 2013 Consolidated efficiency ratio improved to 75% from 76% in 1Q13 Improving Productivity and Efficiency FHN Continues to Deliver on Efficiency Goals Targeting Below $925mm of Annualized Consolidated Expenses by End of 2013 Annualized Consolidated Noninterest Expense (CHART) $1.2B -21%1
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Searchable text for slide0013:
13 Non-Performing Assets 2Q13 net charge-offs of $18mm compared to $40mm in 2Q12 Regional Banking NCOs down $6mm or 41% 2Q12 NCOs of $9mm or 0.29%3 Non-Strategic NCOs down $16mm or 62% 2Q12 NCOs of $10mm or 1.11%3 (CHART) $1.0B (4)% (7)% 21% (2)% (11)% (9)% (0)% (9)% (22)% (2)% Reserves and Net Charge-Offs Reserves and Net Charge-Offs $80mm Incremental Charge-offs Associated with Bankruptcies2 $40 Numbers may not add due to rounding. All data is 2Q13 compared to 2Q12 unless otherwise noted. 14Q12 charge-offs included a favorable adjustment for lower loss estimate for discharged bankruptcies. 23Q12 had $40mm of charge-offs related to discharged bankruptcies per regulatory guidance. 3Net charge-off % is annualized. 2Q12 3Q12 4Q121 1Q13 2Q13 NPAs at $507mm ORE at $52mm in 2Q13 vs $33mm in 1Q13, increase driven by MNB acquisition NPL levels at $455mm ~$56mm of 2Q13 NPLs are related to compliance with regulatory guidance associated with the liens junior to first liens with performance issues Commercial NPLs of $155mm up 2% linked quarter, but down 39% year over year 2Q13 NPLs include $141mm of held for sale loans that carry an average negative fair value mark of ~52% Asset Quality Trends Continued Decline in Net Charge-Offs Non-Performing Assets Impacted by 2Q13 Events
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Searchable text for slide0014:
14 Basel III Final Rule Expect Minimal Impact on FHNs Strong Tier 1 Common Ratio Tier 1 Common ratio of 10.3%1 Tier 1 Leverage ratio of 11.1% 2Q13 Actual 2Q13 Under Fully Phased in Basel III Final Rule2 2Q13 Under Fully Phased In Original Basel III Proposal2 Basel III Final Rules negative impact on Tier 1 Common is approximately 50bps Under fully phased-in Basel III Final Rule, estimated 2Q13 Tier 1 Common ratio is 9.8%, above the 7% threshold (Basel III minimum plus capital conservation buffer) Estimated Tier 1 Leverage of 9.0%, above 4% Basel III minimum Under original Basel III proposal, negative impact to Tier 1 Common was approximately 220bps Estimated Tier 1 Common of 8.1% Estimated Tier 1 Leverage of 8.3% Originally proposed change to risk weighting on residential mortgages would have negatively impacted Tier 1 Common by about 90bps, however this change was not included in the Basel III Final Rule 12Q13 Actual Tier 1 Common ratio is an estimate. 2Proforma impacts calculated as if Basel III was fully implemented.
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Searchable text for slide0015:
15 Trailing Twelve Months1 Consolidated Core Businesses4 Long-Term Targets ROTCE2 7.19% 11.75% 15.00 20.00% ROA2 0.65% 1.02% 1.251.45% NIM2 3.04% 3.26% 3.504.00% Tier 1 Common3 10.57% 8.00 9.00% NCO / Average Loans2 0.88% 0.35% 0.300.70% Fee Income / Revenue 48% 50% 4050% Efficiency Ratio 78% 76% 6065% All non-GAAP numbers are reconciled in the appendix. 1Average of quarters 3Q12-2Q13 for each metric, which is a non-GAAP number. 2ROTCE, ROA, NIM, and NCO / Average Loans are annualized. ROTCE is a non-GAAP number. 3Tier 1 Common: current quarter is an estimate and a non-GAAP number. 4Core Businesses include Regional Banking, Capital Markets, and Corporate segment. Core data is non-GAAP. Building Long-Term Earnings Power: Bonefish Targets Focused on Growing Our Company Selectively and Profitably While Positioning Our Balance Sheet for Sustainable, Higher Returns in the Long Term
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Searchable text for slide0016:
16 Building a Foundation for Long-Term Earnings Power FHN is successfully executing on key priorities: Building foundation for strong balance sheet Reducing risk profile Optimizing business mix Maintaining asset sensitivity for long-term Expanding and deepening customer relationships Improving productivity and efficiency Smartly managing capital Controlling what we can control in challenging environment Successfully Executing on Key Priorities FHN Is Well Positioned For Long-Term Earnings Power
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Searchable text for slide0017:
Appendix 17
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Searchable text for slide0018:
18 2Q13 Credit Quality Summary by Portfolio Numbers may not add to total due to rounding. Data as of 2Q13. NM: Not meaningful. 1Credit card, Permanent Mortgage, and Other. 2Credit card, OTC, and Other Consumer. 3Net charge-offs are annualized. 4Exercised clean-up calls on jumbo securitizations in 1Q13, 3Q12, 2Q11, and 4Q10, which are now on balance sheet in the Corporate segment.
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Searchable text for slide0019:
19 C&I and Income CRE Portfolio Detail C&I: TRUPs and Bank-Related Loans C&I: Loans to Mortgage Companies Data as of 2Q13. Numbers may not add to total due to rounding. 1Reserve coverage includes $29.9mm of LOCOM on TRUPs. 2Net of LOCOM. 3Net charge-off ratios are annualized. (CHART) $2.0B $8.4B portfolio, diversified by industry, managed primarily in Regional Banking Net charge-offs down 65% year over year to $3mm C&I consolidated reserves of 1.12% at 6/30/13 $504mm balances in TRUPs and bank-related loans One TRUP loan payoff occurred in 2Q13 $256mm whole-loan TRUPs to banks $156mm whole-loan TRUPs to insurance companies $91mm loans to bank holding companies and loans secured by bank stock Reserve coverage of 9.25%1 Six TRUPs totaling $46mm on deferral at 6/30/132 C&I: Overview (CHART) Income CRE: Asset Quality
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Searchable text for slide0020:
20 Home Equity: Performance and Characteristics Portfolio Characteristics Geographic Distribution 30+ Delinquency: Key Drivers Data as of 2Q13. Numbers and percentages may not add due to rounding. FICO Score-Origination Lien Position Channel (CHART) (CHART) 58% % of portfolio 12% 11% 13% 6% (CHART) 88% 12% % of portfolio (CHART) 48% 52% % of portfolio
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Searchable text for slide0021:
(CHART) 21 Consumer Real Estate Portfolio 30+ Delinquency Net Charge-Offs Non-Strategic Portfolio Run-Off 1Source: McDash industry data as of April 2013. 23Q12 includes $38mm of charge-offs related to regulatory guidance on discharged bankruptcies. 4Q12 charge-offs include a favorable adjustment for lower loss estimate for discharged bankruptcies based on loan-level data obtained from new appraisals in 4Q12. (CHART) Industry1 = 6.22% Industry1 = 6.22% $4B $662 $18 $13 $24 $75mm $102
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Searchable text for slide0022:
22 Agency & Non-Agency: Mortgage Origination & Loan Data Agency and Pipeline ~$70B of Agency originations from 2005 to 2008 Received ~$2.5B1 of Agency-related repurchase requests to date or 3.6% of originations Represent 89% of all active repurchase/make whole requests in pipeline at 6/30/132 Pipeline of requests at $235mm in 2Q13, down 9% from $259mm in 1Q13 $157mm of Agency-related repurchase claims $23mm of mortgage insurer-related cancellations $21mm of non-Agency whole loan-related claims $34mm of other non-repurchase requests Data as of 2Q13. 1Requests include MI cancellation notices. 2Agencies account for 89% of all actual repurchase/make-whole requests in the pipeline as of 2Q13 and 84% of the active pipeline inclusive of PMI cancellation notices and all other claims. 3FHA insurance claims made after 3/31/12 may be added to investigation Other Whole Loan Sales and Non-Agency Represent 11% of all active repurchase/make whole requests in 2Q13 pipeline Some non-Agency FHN loans were bundled with other companies loans and securitized by the purchasers A trustee for a bundler has commenced a legal action seeking repurchase of FHN loans Certain purchasers have requested indemnity related to FHN loans included in their securitizations Loan file review process regarding certain bundled FHN loans has been initiated Non-Agency HUD/FHA Investigation Fannie Freddie Total GSE Loans Sold Ginnie Loans Sold Total Agency Loans Sold Total Demands (Request Rate) Resolved Cumulative Average Rescission Rate Average Loss Severity Realized Losses through 2Q13 Remaining Reserve at 6/30/13 Cumulative Total Losses plus Reserve GSE Aggregate Expected Loss Ratio Originations: 2005-2008 Amount $39.6B $18.0B $57.6B $11.9B $69.5B $2.4B / 3.5% $2.3B 4555% 5060% ~$627mm $123mm ~$750mm 1.3% HUD and the US DOJ are investigating FHA insurance claims on insured loans originated by FHN; initial period covers 1/1/06 through 3/31/123 During that period FHN originated ~50,000 loans with original UPB of ~$8.6B Approximately ~48,000 of those originations occurred prior to 9/1/08 FHN had an initial meeting with HUD and DOJ in 2Q13 HUD has reviewed a small sample of loans from the covered period, and its investigation remains incomplete; FHN has commenced its own review HUD and DOJ have made no demands but could seek up to treble and special damages under the False Claims Act and other laws FHN does not have the ability now to estimate a reserve or a range of reasonably possible losses
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Searchable text for slide0023:
(CHART) (CHART) 23 Private Label Securitization Exposure Manageable All data refers to the active 2005-2007 FHN branded private securitizations, unless otherwise noted. Data as of June 2013 with July remits. Source for all data, except where noted, is LoanPerformance, CPRCDR, Intex, PolyPaths, Bloomberg with company analysis. Cohort (Industry) = Loans of similar type/vintage relevant reference group. 1Industry source: KDS Global. Includes all deals from 2005-2007. 2Performance determined by comparing 60D+ and Cumulative Loss ratios at the deal level. 60D+ balances are current UPB. Cumulative loss balances are original UPB. Originated and securitized $27B of First Horizon branded private label mortgages from 2005-2007 If any private label securitization (PLS) losses occur, they should be significantly less than the GSE experience More limited reps and warranties Statutes of limitations 100% of active PLS are older than 5 years, with 95% older than 6 years Strong relative performance vs industry cohorts No subprime securitizations Smaller average securitization size Origination Mix (CHART) FHN Industry1 Securitization Performance2 Repurchase Risk Differs For Private Label vs GSEs Most private label reps and warranties are not as comprehensive as GSE whole-loan reps and warranties More difficult for most non-agency investors to access loan files Generally requires a coordinated investor effort to compel trustees to investigate and pursue repurchase claims Investor interests are not necessarily aligned Trustee may initiate loan review and repurchase process on its own 60 Day+ Delinquencies (CHART) Cumulative Loss Outperforming Industry Cohort Underperforming Industry Cohort Average Deal Size: $342mm $891mm Key Points
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Searchable text for slide0024:
FHFA Litigation Securitizations FHFA Litigation Certificate Breakdown Numbers and percentages may not add to total due to rounding. Data source: June 2013 Trustee Reports and the FHFA lawsuit filed on 9/2/11. 1In April 2007, the GSEs purchased the remaining $161mm of UPB in the FHAMS 2005-AA12 IIA1 tranche, as reported in the FHFA lawsuit. This tranche had an origination balance of $213mm. 260D+ Delinquent defined as a delinquency status of 60 days or more and also bankruptcies, foreclosures and REO in such status for 60 days or more. 24 $1.0B $874mm* *The original balance related to the FHFA lawsuit is $874mm, plus an additional $9mm of cost over par, totaling $883mm
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Searchable text for slide0025:
Non-FHFA Litigation Securitizations Non-FHFA Litigation Certificate Breakdown Non-FHFA Litigation Certificate Breakdown 25 $576mm Numbers & percentages may not add to total due to rounding. Data source: June 2013 Trustee Reports. FHN settled an outstanding complaint with FHLB Chicago 2Q13. 1The complainants only purchased a portion of these tranches. Original UPB estimated based on the purchase price stated in the complaints. All other metrics prorated based on the ratio of purchase price to the total original UPB of the entire tranche. 2Royal Park is asking for indemnification on $100mm of the $190mm tranche as stated in the indemnification request. 360D+ Delinquent defined as a delinquency status of 60 days or more and also bankruptcies, foreclosures and REO in such status for 60 days or more.
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Searchable text for slide0026:
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of net income, assets, net interest income, charge-offs, revenue, noninterest income and expense, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) & is reconciled to GAAP information below. 26 Numbers may not add to total due to rounding. 1ROA and Net Charge-offs / Average loans are annualized. 2Average of quarters 3Q12-2Q13.
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Searchable text for slide0027:
Reconciliation to GAAP Financials 27 Slides in this presentation use non-GAAP information of risk weighted assets, tangible common equity, net income, non-controlling interest, average common equity, intangibles, and various ratios using those measures. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Numbers may not add to total due to rounding. 1Estimated by applying risk based capital regulations to period end assets. 2Core Businesses include the Regional Banking, Capital Markets, and Corporate segments. 3Applies the quarterly consolidated Tier 1 Common ratio to the Non-Strategic risk weighted assets. The 2Q13 Tier 1 Common ratio is an estimate. 4Average of quarters 3Q12-2Q13.
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Searchable text for slide0028:
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of net interest income, FTE adjustments, revenue, noninterest expense, FTEs, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) & is reconciled to GAAP information below. 28 Numbers may not add to total due to rounding. 1Core Businesses include the Regional Banking, Capital Markets, and Corporate segments.
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Searchable text for slide0029:
Reconciliation to GAAP Financials 29 Slides in this presentation use non-GAAP information of equity, assets, tier 1 capital, risk weighted assets, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Numbers may not add to total due to rounding. 1Includes goodwill and other intangible assets, net of amortization. 2Current quarter is an estimate. 3Average of quarters 3Q12-2Q13.
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Searchable text for slide0030:
Reconciliation to GAAP Financials 30 Slides in this presentation use non-GAAP information of tangible common equity, net income, risk weighted assets, FTEs, revenue, expense, and various ratios using those measures. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Numbers may not add to total due to rounding. 1Core Businesses include the Regional Banking, Capital Markets, and Corporate segments. Peer group includes UBSI, ONB, TRMK, IBKC, BXS, UMBF, BOH, VLY, FULT, WTFC, TCB, SUSQ, HBHC, WBS, CBSH, CFR, ASBC, SNV, BOKF, FNFG. Peer data is a four quarter average of each metric from 2Q12-1Q13.
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