EX-99.2 30 c82797_ex99-2.htm

Exhibit 99.2

FHN TABLE OF CONTENTS

 

   
  Page
   
First Horizon National Corporation Segment Structure 3
   
Performance Highlights 4
   
Consolidated Results  
Income Statement  
Income Statement 6
Other Income and Other Expense 7
Balance Sheet  
Period End Balance Sheet 8
Average Balance Sheet 9
Net Interest Income 10
Average Balance Sheet: Yields and Rates 11
   
Capital Highlights 12
   
Business Segment Detail  
Segment Highlights 13
Regional Banking 14
Fixed Income and Corporate 15
Non-Strategic 16
   
Asset Quality  
Asset Quality: Consolidated 17
Asset Quality: Regional Banking and Corporate 19
Asset Quality: Non-Strategic 20
Portfolio Metrics 21
   
Non-GAAP to GAAP Reconciliation 22
   
Glossary of Terms 23

 

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 Corporation’s (“FHN”) most recent press release, as well as critical accounting estimates and other factors described in FHN’s recent filings with the SEC. FHN disclaims any obligation to update any such forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements to reflect future events or developments.

 

Use of Non-GAAP Measures and Regulatory Measures that are not GAAP

Certain measures are included in this financial supplement that are “non-GAAP,” meaning (under U.S. financial reporting rules) they are not presented in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the capital position or financial results of FHN. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

 

Presentation of regulatory measures, even those which are not GAAP, provides a meaningful base for comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by the various banking regulators in reviewing the capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory standards. Regulatory measures used in this financial supplement include: tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; common equity tier 1 capital (for periods after fourth quarter 2014), generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; risk weighted assets (“RWA”), which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios; and pre-provision net revenue (“PPNR”), calculated by adding the provision/(provision credit) for loan losses to income before income taxes. The regulatory common equity tier 1 capital used in 2015 and later periods is not the same as the non-regulatory, non-GAAP tier 1 common capital commonly used prior to 2015; comparisons between the two are not meaningful.

 

The non-GAAP measures presented in this financial supplement are return on average tangible common equity (“ROTCE”), tangible common equity (“TCE”) to tangible assets (“TA”), tangible book value per common share, and tier 1 common to RWA (for periods prior to first quarter 2015).

 

Refer to the tabular reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items on page 22 of this financial supplement.

 
FIRST HORIZON NATIONAL CORPORATION SEGMENT STRUCTURE  
   

 

3
FHN PERFORMANCE HIGHLIGHTS  
 
                     
Summary of Third Quarter 2015 Notable Items  
  Segment   Item   Income Statement   Amount   Comments  
                     
· Various, primarily Regional Bank   Employee benefit plan amendment   Employee compensation, incentives, and benefits   $8.3 million   Pre-tax gains related to an amendment of certain employee benefit plans.  
                     
· Corporate   Gain on call of trust preferred debt   Gains on extinguishment of debt   $5.8 million   Pre-tax gain on the extinguishment of junior subordinated notes underlying $200 million of trust preferred debt.  
                     
· Corporate   Discrete tax benefit and decrease in capital loss carryover   Provision/(benefit) for income taxes   $(4.5) million   After-tax benefits related to discrete items and the utilization of capital loss carryover against estimated capital gains from future building sales.  
                     
                     
Third Quarter 2015 vs. Second Quarter 2015  

 

Consolidated

·Net income available to common shareholders was $67.2 million, or $.29 per diluted share in third quarter, compared to $50.6 million, or $.22 per diluted share in second quarter
·Net interest income (“NII”) was $163.6 million in third quarter compared to $166.6 million in second quarter; net interest margin (“NIM”) was 2.85 percent in third quarter compared to 2.92 percent in prior quarter
·The decrease in NII was primarily driven by lower average balances of loans to mortgage companies, a decrease in cash basis interest income, and lower commercial loan fees relative to the prior quarter, partially offset by more days in third quarter compared to second quarter
·The decrease in NIM was largely the result of an increase in average excess cash held at the Fed during the quarter, a decrease in cash basis interest income, and lower commercial loan fees relative to the prior quarter, somewhat mitigated by lower fixed income trading balances
·Noninterest income (including securities gains) was $125.1 million in third quarter compared to $130.3 million in prior quarter
·Noninterest expense was $203.9 million in third quarter compared to $218.4 million in second quarter primarily due to lower personnel expense due in large part to gains associated with an employee benefit plan amendment
·Period-end loans were $16.7 billion and $16.9 billion in third quarter and second quarter, respectively; average loans declined 1 percent to $16.6 billion in third quarter
·Period-end core deposits increased to $18.6 billion in third quarter from $18.3 billion in prior quarter; average core deposits increased 2 percent linked quarter to $18.5 billion in third quarter

 

Regional Banking

·Pre-tax income was $85.6 million in third quarter compared to $70.6 million in second quarter; pre-provision net revenue was $92.3 million and $87.7 million in third and second quarters, respectively including third quarter expense benefit allocation related to an employee benefit plan amendment
·Average loans were $14.3 billion in third and second quarters; period-end loans decreased 1 percent to $14.5 billion in third quarter
·Decrease in period-end loans was driven by lower balances of loans to mortgage companies, partially offset by increases in other commercial loans and real estate lending
·Average and period-end core deposits increased 1 percent to $17.0 billion in third quarter from $16.8 billion in second quarter
·NII was $165.3 million in third quarter compared to $165.9 million in second quarter; NIM deceased to 4.63 percent in third quarter from 4.69 percent in second quarter
·Provision expense declined to $6.7 million in third quarter compared to $17.1 million in the prior quarter
·Decline in provision expense was attributable to overall continued strong performance within the regional bank portfolios including a quarterly decline in nonperforming loans and historically low net charge-offs, as well as lower loan balances in third quarter relative to the prior quarter
·Prior quarter included provision associated with a single larger credit related to fraud
·Noninterest income was $62.8 million in third quarter compared to $66.0 million in second quarter
·The decrease was driven by lower brokerage, trust, cash management and bankcard fee income, partially offset by an increase in fees from non-sufficient funds (“NSF”)
·Noninterest expense decreased to $135.8 million in third quarter from $144.2 million in prior quarter
·Expense decrease primarily driven by lower allocated personnel expenses due in large part to gains recognized in third quarter related to an employee benefit plan amendment

 

Fixed Income

·Pre-tax income was $6.6 million in third quarter compared to $9.1 million in second quarter
·Fixed income product revenue was $43.0 million in third quarter down from $46.7 million in prior quarter
·Fixed income product average daily revenue (“ADR”) was $671 thousand and $729 thousand in third quarter and second quarter, respectively
·Noninterest expense was $48.2 million in third quarter compared to $51.2 million in the prior quarter
·Third quarter decline was driven by lower variable compensation costs

 

Corporate

·Pre-tax loss was $22.0 million in third quarter compared to pre-tax loss of $27.2 million in prior quarter
·NII was negative $19.0 million in third quarter compared to negative $17.4 million in second quarter
·Estimated effective duration of the securities portfolio was 2.8 years in third quarter compared to 3.5 years in second quarter
·Estimated modified duration of the securities portfolio was 3.8 years in third quarter compared to 4.2 years in prior quarter
·Noninterest income was $8.6 million in third quarter, up from $3.9 million in second quarter
·Increase primarily relates to a $5.8 million gain on the extinguishment of debt, partially offset by lower deferred compensation income driven by market conditions; changes in deferred compensation income are mirrored by changes in deferred compensation expense
·Noninterest expense decreased to $11.5 million in third quarter from $13.8 million in second quarter
4
FHN PERFORMANCE HIGHLIGHTS (continued)
       
       
Third Quarter 2015 vs. Second Quarter 2015 (continued)

 

Non-Strategic

·Pre-tax income was $13.7 million in third quarter compared to $24.1 million in second quarter
·NII was $14.3 million in third quarter compared to $13.8 million in prior quarter
·The non-strategic segment had a provision credit of $5.7 million in third quarter compared to a provision credit of $15.1 million in second quarter
·Provision credit reflects continued wind-down of the non-strategic portfolio and sustained levels of low net charge offs, a continuation of positive delinquency trends, and continued stabilization/improvement of property values
·Noninterest income was $2.0 million in third quarter compared to $4.4 million in prior quarter
·Second quarter included a $2.7 million pre-tax gain on the sale of property
·Noninterest expense declined to $8.4 million in third quarter from $9.2 million in second quarter due in large part to a $.9 million net expense reversal in litigation losses related to legal matters

 

Asset Quality

·Allowance for loan losses declined to $210.8 million in third quarter from $221.4 million in second quarter; the allowance to loans ratio was 126 basis points in third quarter compared to 131 basis points in second quarter
·The decline in the allowance was driven by a $7.1 million reduction in consumer real estate reserves and a $3.4 million reduction in commercial reserves
·Net charge-offs (“NCOs”) were $11.5 million in third quarter compared to $9.0 million in second quarter; annualized net charge-offs increased to 28 basis points of average loans in third quarter from 21 basis points in prior quarter
·Within the Regional Bank, net charge-offs were $10.5 million and $10.3 million in the third quarter and second quarter, respectively
·Charge-offs included a net recovery within the non-strategic segment in the second quarter
·Nonperforming loans (“NPLs”) in the portfolio were $184.0 million in the third quarter compared to $203.1 million in the second quarter
·Commercial NPLs decreased $17.6 million from the second quarter primarily driven by the pay down of three large loans and charge-off of the larger credit affected by borrower fraud disclosed last quarter.
·Nonperforming assets (“NPAs”), including loans held-for-sale, decreased to $217.2 million in third quarter from $238.5 million in the prior quarter
·The decrease in NPAs largely corresponded to the decrease in NPLs
·Total 30+ delinquencies increased to $73.1 million in third quarter compared to $71.4 million in prior quarter
·Commercial delinquencies increased in third quarter relative to the prior quarter – due to 2 purchased credit impaired loans, but were somewhat mitigated by a decline in consumer delinquencies driven by improvement in permanent mortgage and consumer real estate
·Troubled debt restructurings (“TDRs”) decreased to $377.3 million in third quarter from $391.4 million in prior quarter

 

Taxes

·The effective tax rates (“ETR”) for third quarter and second quarter were 14.46 percent and 28.21 percent, respectively. The rates reflect the favorable effect from permanent benefits and the effect from discrete taxes/benefits
·Permanent benefits primarily consist of benefits from life insurance, tax-exempt income, utilization of capital loss carryover, and tax credit investments
·Third quarter tax expense includes a discrete benefit of $3.3 million and $1.1 million of benefit related to the utilization of capital loss carryover against estimated capital gains from future building sales (the capital loss carryover DTA had been offset by a valuation allowance)
·Second quarter tax expense includes $2.9 million of discrete tax expenses and $3.4 million of tax expense to reduce the first quarter tax benefit (associated with FHN’s pre-tax loss through the first quarter) to the lower effective tax rate projected for the year

 

Capital and Liquidity

·Paid $0.06 per common share quarterly dividend ($14.0 million) on October 1, 2015
·Paid aggregate preferred quarterly dividend of $1.6 million on October 13, 2015
·No shares were repurchased in third quarter under the $100 million share repurchase program announced in January 2014 due to restrictions related to the acquisition of TrustAtlantic Financial Corporation which closed in early October 2015
·Cumulative shares repurchased since the program’s inception are $54.3 million with a volume weighted average price of $12.79 per share (before $.02 per share broker commission)
·Capital ratios (regulatory capital ratios based on period-end balances under the Basel III risk-based capital rules as phased-in) (current quarter is an estimate)
·Tangible common equity to tangible assets of 8.04 percent in third quarter compared to 7.80 percent in prior quarter
·Common Equity Tier 1 of 10.76 percent in third quarter compared to 10.41 percent in prior quarter
·Tier 1 of 12.16 percent in third quarter compared to 11.98 percent in prior quarter
·Total Capital of 13.44 percent in third quarter compared to 14.00 percent in prior quarter
·Leverage of 9.99 percent in third quarter compared to 9.87 percent in prior quarter
5

FHN CONSOLIDATED INCOME STATEMENT

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Dollars in thousands, except per share data)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Interest income  $183,687   $187,030   $178,068   $179,448   $178,858    (2)%   3%
Less: interest expense   20,125    20,390    21,202    20,398    19,317    (1)%   4%
Net interest income   163,562    166,640    156,866    159,050    159,541    (2)%   3%
Provision for loan losses   1,000    2,000    5,000    6,000    6,000    (50)%   (83)%
Net interest income after provision for loan losses   162,562    164,640    151,866    153,050    153,541    (1)%   6%
Noninterest income:                                   
Fixed income   51,804    56,241    61,619    48,486    47,589    (8)%   9%
Deposit transactions and cash management   28,911    28,430    26,551    29,038    28,546    2%   1%
Brokerage, management fees and commissions   11,620    12,456    11,399    11,647    12,333    (7)%   (6)%
Mortgage banking (a)   761    376    1,584    1,808    41,559    NM    (98)%
Trust services and investment management   6,590    7,416    6,698    6,945    6,779    (11)%   (3)%
Bankcard income   5,561    5,884    5,186    5,737    5,521    (5)%   1%
Bank-owned life insurance   4,135    3,391    3,462    3,503    3,547    22%   17%
Other service charges   2,968    3,043    2,848    2,830    3,064    (2)%   (3)%
Insurance commissions   608    654    596    616    593    (7)%   3%
Securities gains/(losses), net   (345)   8    276    —    (862)   NM    60%
Other (b)   12,490    12,402    9,470    8,988    9,146    1%   37%
Total noninterest income   125,103    130,301    129,689    119,598    157,815    (4)%   (21)%
Adjusted gross income after provision for loan losses   287,665    294,941    281,555    272,648    311,356    (2)%   (8)%
Noninterest expense:                                   
Employee compensation, incentives, and benefits (c)   116,219    127,970    131,444    118,529    120,742    (9)%   (4)%
Repurchase and foreclosure provision (d)   —    —    —    —    (4,300)   NM    NM 
Legal fees   3,626    4,509    3,551    5,633    4,276    (20)%   (15)%
Professional fees   5,139    5,218    3,706    6,919    6,187    (2)%   (17)%
Occupancy   13,282    11,764    12,218    12,077    12,405    13%   7%
Computer software   11,010    11,340    10,942    10,574    10,614    (3)%   4%
Contract employment and outsourcing   3,414    3,337    4,584    4,578    5,199    2%   (34)%
Operations services   10,130    10,033    9,337    8,417    9,044    1%   12%
Equipment rentals, depreciation, and maintenance   7,093    7,983    7,220    7,523    7,150    (11)%   (1)%
FDIC premium expense   4,529    4,952    3,448    2,881    3,456    (9)%   31%
Advertising and public relations   4,832    4,349    4,733    4,077    4,386    11%   10%
Communications and courier   4,054    3,801    3,876    4,274    3,628    7%   12%
Foreclosed real estate   431    1,329    (131)   492    788    (68)%   (45)%
Amortization of intangible assets   1,298    1,298    1,298    1,225    982    *    32%
Other (b)   18,796    20,511    179,995    20,110    59,459    (8)%   (68)%
Total noninterest expense   203,853    218,394    376,221    207,309    244,016    (7)%   (16)%
Income/(loss) before income taxes   83,812    76,547    (94,666)   65,339    67,340    9%   24%
Provision/(benefit) for income taxes   12,107    21,590    (22,261)   13,699    16,842    (44)%   (28)%
Net income/(loss)   71,705    54,957    (72,405)   51,640    50,498    30%   42%
Net income attributable to noncontrolling interest   2,977    2,851    2,758    2,980    2,875    4%   4%
Net income/(loss) attributable to controlling interest   68,728    52,106    (75,163)   48,660    47,623    32%   44%
Preferred stock dividends   1,550    1,550    1,550    1,550    1,550    *    * 
Net income/(loss) available to common shareholders  $67,178   $50,556   $(76,713)  $47,110   $46,073    33%   46%
Common Stock Data                              
EPS  $0.29   $0.22   $(0.33)  $0.20   $0.20    32%   45%
Basic Shares (thousands) (e)   233,111    232,800    232,816    233,693    235,329    *    (1)%
Diluted EPS  $0.29   $0.22   $(0.33)  $0.20   $0.19    32%   53%
Diluted shares (thousands)   235,058    234,669    232,816    235,448    236,862    *    (1)%
Key Ratios & Other                                   
Return on average assets (annualized) (f)   1.12%   0.87%   (1.15)%   0.83%   0.84%          
Return on average common equity (annualized) (f)   12.37%   9.56%   (14.04)%   8.27%   8.16%          
Return on average tangible common equity (annualized) (f) (g)   13.45%   10.41%   (15.24)%   8.92%   8.79%          
Fee income to total revenue (f)   43.41%   43.88%   45.21%   42.92%   49.86%          
Efficiency ratio (f)   70.53%   73.55%   NM    74.40%   76.68%          
Full time equivalent employees   4,202    4,212    4,226    4,250    4,193           

NM - Not meaningful

* Amount is less than one percent.

(a) 3Q14 includes a $39.7 million gain on the sales of mortgage loans HFS.
(b) Refer to the Other Income and Other Expense table on page 7 for additional information.
(c) 3Q15 includes $8.3 million of gains associated with an employee benefit plan amendment.
(d) 3Q14 expense reversal associated with the settlement of certain repurchase claims.
(e) In periods prior to 2Q15, decreases primarily relate to shares purchased under share repurchase programs.
(f) See Glossary of Terms for definitions of Key Ratios.
(g) Refer to the Non-GAAP to GAAP reconciliation on page 22 of this financial supplement.
6

FHN OTHER INCOME AND OTHER EXPENSE

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Other Income                                   
ATM and interchange fees  $2,998   $3,025   $2,761   $2,961   $2,739    (1)%   9%
Electronic banking fees   1,479    1,459    1,428    1,561    1,560    1%   (5)%
Letter of credit fees   978    1,532    1,123    1,111    917    (36)%   7%
Deferred compensation (a)   (2,309)   (35)   1,033    242    (41)   NM    NM 
Gain on extinguishment of debt (b)   5,794    —    —    184    —    NM    NM 
Other (c)   3,550    6,421    3,125    2,929    3,971    (45)%   (11)%
Total  $12,490   $12,402   $9,470   $8,988   $9,146    1%   37%
                                    
Other Expense                                   
Litigation and regulatory matters (d)  $(650)  $—   $162,500   $—   $35,390    NM    NM 
Other insurance and taxes   3,283    3,455    3,329    2,722    3,909    (5)%   (16)%
Tax credit investments   439    549    395    589    311    (20)%   41%
Travel and entertainment   2,451    2,632    1,614    2,462    2,164    (7)%   13%
Employee training and dues   1,272    1,449    1,132    1,258    1,194    (12)%   7%
Customer relations   1,477    1,505    1,314    1,397    1,406    (2)%   5%
Miscellaneous loan costs   726    734    361    540    597    (1)%   22%
Supplies   974    880    927    1,046    779    11%   25%
Other (e)   8,824    9,307    8,423    10,096    13,709    (5)%   (36)%
Total  $18,796   $20,511   $179,995   $20,110   $59,459    (8)%   (68)%

NM - Not meaningful

(a) Amounts driven by market conditions and are mirrored by changes in deferred compensation expense which is included in employee compensation expense.
(b) 3Q15 gain related to the extinguishment of $206 million of junior subordinated notes underlying $200 million of trust preferred debt.
(c) 2Q15 includes $2.9 million of pre-tax gains on the sale of properties.
(d) 3Q15 includes $1.2 million of expense reversals associated with the settlement of a legal matter; 1Q15 loss accruals relate to the settlement of potential claims related to FHN’s underwriting and origination of FHA-insured mortgage loans; 3Q14 includes $50.0 million of loss accruals related to legal matters, partially offset by $15.0 million of expense reversals associated with agreements with insurance companies for the recovery of expenses FHN incurred related to litigation losses in previous periods.
(e) 3Q14 includes $3.2 million of negative valuation adjustments associated with derivatives related to prior sales of Visa Class B shares.
7

FHN CONSOLIDATED PERIOD-END BALANCE SHEET

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Assets:                                   
Investment securities  $3,677,954   $3,653,166   $3,676,630   $3,560,905   $3,538,957    1%   4%
Loans held-for-sale   124,308    127,196    133,958    141,285    151,915    (2)%   (18)%
Loans, net of unearned income   16,725,492    16,936,772    16,732,123    16,230,166    15,812,017    (1)%   6%
Federal funds sold   64,438    77,039    43,052    63,080    55,242    (16)%   17%
Securities purchased under agreements to resell   793,098    816,991    831,541    659,154    561,802    (3)%   41%
Interest-bearing cash (a)   596,689    344,944    438,633    1,621,967    275,485    73%   NM 
Trading securities   1,229,180    1,133,490    1,532,463    1,194,391    1,338,022    8%   (8)%
Total earning assets   23,211,159    23,089,598    23,388,400    23,470,948    21,733,440    1%   7%
Cash and due from banks   256,342    274,256    282,800    349,171    292,687    (7)%   (12)%
Fixed income receivables (b)   83,547    91,069    190,662    42,488    197,507    (8)%   (58)%
Goodwill (c)   145,932    145,932    145,932    145,932    141,943    *    3%
Other intangible assets, net (c)   25,624    26,922    28,220    29,518    19,044    (5)%   35%
Premises and equipment, net (c) (d)   269,332    269,507    301,069    302,996    295,833    *    (9)%
Real estate acquired by foreclosure   35,332    40,268    39,776    39,922    47,996    (12)%   (26)%
Allowance for loan losses   (210,814)   (221,351)   (228,328)   (232,448)   (238,641)   (5)%   (12)%
Derivative assets   152,548    115,230    148,153    134,088    137,742    32%   11%
Other assets   1,415,107    1,408,336    1,419,204    1,385,572    1,355,046    *    4%
Total assets  $25,384,109   $25,239,767   $25,715,888   $25,668,187   $23,982,597    1%   6%
                                    
Liabilities and Equity:                                   
Deposits:                                   
Savings  $7,554,338   $7,462,642   $7,428,000   $7,455,354   $6,371,156    1%   19%
Other interest-bearing deposits   4,885,601    4,675,742    4,939,240    4,140,991    3,955,152    4%   24%
Time deposits   743,158    769,132    792,914    831,666    767,699    (3)%   (3)%
Total interest-bearing core deposits   13,183,097    12,907,516    13,160,154    12,428,011    11,094,007    2%   19%
Noninterest-bearing deposits   5,391,385    5,366,936    5,060,897    5,195,656    4,603,826    *    17%
Total core deposits (e)   18,574,482    18,274,452    18,221,051    17,623,667    15,697,833    2%   18%
Certificates of deposit $100,000 and more   290,738    400,021    417,503    445,272    446,938    (27)%   (35)%
Total deposits   18,865,220    18,674,473    18,638,554    18,068,939    16,144,771    1%   17%
Federal funds purchased   520,992    556,862    703,352    1,037,052    928,159    (6)%   (44)%
Securities sold under agreements to repurchase   332,329    311,760    309,297    562,214    479,384    7%   (31)%
Trading liabilities   788,563    732,564    813,141    594,314    532,234    8%   48%
Other short-term borrowings (f)   99,887    150,350    158,745    157,218    790,080    (34)%   (87)%
Term borrowings (g)   1,341,186    1,557,647    1,573,215    1,880,105    1,491,138    (14)%   (10)%
Fixed income payables (b)   95,346    54,301    91,176    18,157    329,960    76%   (71)%
Derivative liabilities   140,965    109,815    133,273    119,239    123,442    28%   14%
Other liabilities   611,003    574,090    795,878    649,359    551,615    6%   11%
Total liabilities   22,795,491    22,721,862    23,216,631    23,086,597    21,370,783    *    7%
Equity:                                   
Common stock (h)   146,398    146,263    145,937    146,387    147,030    *    * 
Capital surplus (h)   1,377,731    1,371,712    1,370,711    1,380,809    1,390,081    *    (1)%
Undivided profits   850,110    797,123    760,713    851,585    816,483    7%   4%
Accumulated other comprehensive loss, net   (176,676)   (188,248)   (169,159)   (188,246)   (132,835)   (6)%   33%
Preferred stock   95,624    95,624    95,624    95,624    95,624    *    * 
Noncontrolling interest (i)   295,431    295,431    295,431    295,431    295,431    *    * 
Total equity   2,588,618    2,517,905    2,499,257    2,581,590    2,611,814    3%   (1)%
Total liabilities and equity  $25,384,109   $25,239,767   $25,715,888   $25,668,187   $23,982,597    1%   6%

NM - Not meaningful

* Amount is less than one percent.

(a) Includes excess balances held at Fed. 4Q14 increase driven by inflow of customer deposits and proceeds from the issuance of senior notes.
(b) Period-end balances fluctuate based on the level of pending unsettled trades.
(c) 4Q14 increase related to the acquisition of bank branches.
(d) 2Q15 decrease related to sale of property.
(e) 3Q15 average core deposits were $18.5 billion.
(f) 3Q14 includes increased FHLB borrowings as a result of loan growth and deposit fluctuations.
(g) In 3Q15 FHN called $206 million of junior subordinated notes underlying $200 million of trust preferred debt. In 1Q15 $304 million of FTBNA subordinated notes matured. In 4Q14 FTBNA issued $400 million of senior bank notes.
(h) In periods prior to 2Q15, decreases primarily relate to shares purchased under share repurchase programs.
(i) Consists of preferred stock of subsidiaries.
8

FHN CONSOLIDATED AVERAGE BALANCE SHEET

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Assets:                            
Earning assets:                                   
Loans, net of unearned income:                                   
Commercial, financial, and industrial (C&I)  $9,539,650   $9,675,107   $8,965,657   $8,584,065   $8,395,553    (1)%   14%
Commercial real estate   1,425,528    1,371,207    1,290,246    1,287,816    1,260,715    4%   13%
Consumer real estate   4,838,984    4,893,285    4,988,532    5,087,104    5,173,088    (1)%   (6)%
Permanent mortgage   475,684    500,093    526,616    552,065    581,876    (5)%   (18)%
Credit card and other   353,148    350,247    351,503    357,321    352,133    1%   * 
Total loans, net of unearned income (a)   16,632,994    16,789,939    16,122,554    15,868,371    15,763,365    (1)%   6%
Loans held-for-sale (b)   126,072    129,519    138,373    144,061    318,743    (3)%   (60)%
Investment securities:                                   
U.S. treasuries   100    100    100    100    26,764    *    NM 
U.S. government agencies   3,482,658    3,505,033    3,391,297    3,363,053    3,345,739    (1)%   4%
States and municipalities   13,673    14,074    14,410    14,493    17,458    (3)%   (22)%
Other   181,817    181,749    181,858    181,806    184,934    *    (2)%
Total investment securities   3,678,248    3,700,956    3,587,665    3,559,452    3,574,895    (1)%   3%
Trading securities   1,137,877    1,363,165    1,371,514    1,182,762    1,060,123    (17)%   7%
Other earning assets:                                   
Federal funds sold   35,191    31,765    23,710    26,543    37,274    11%   (6)%
Securities purchased under agreements to resell   762,744    760,338    777,989    672,764    644,022    *    18%
Interest-bearing cash (c)   806,648    465,596    1,451,826    1,011,983    288,192    73%   NM 
Total other earning assets   1,604,583    1,257,699    2,253,525    1,711,290    969,488    28%   66%
Total earning assets   23,179,774    23,241,278    23,473,631    22,465,936    21,686,614    *    7%
Allowance for loan losses   (216,833)   (227,765)   (232,655)   (238,850)   (240,433)   (5)%   (10)%
Cash and due from banks   308,409    315,730    342,512    341,338    321,427    (2)%   (4)%
Fixed income receivables   59,470    51,913    48,937    63,384    55,937    15%   6%
Premises and equipment, net (d)   268,061    292,874    301,989    301,512    297,636    (8)%   (10)%
Derivative assets   113,927    138,935    139,086    141,146    154,988    (18)%   (26)%
Other assets   1,601,953    1,601,083    1,571,104    1,538,791    1,526,165    *    5%
Total assets  $25,314,761   $25,414,048   $25,644,604   $24,613,257   $23,802,334    *    6%
                                    
Liabilities and equity:                                   
Interest-bearing liabilities:                                   
Interest-bearing deposits:                                   
Savings  $7,578,288   $7,437,016   $7,377,045   $6,929,750   $6,327,556    2%   20%
Other interest-bearing deposits   4,806,813    4,741,920    4,483,907    3,895,022    3,697,854    1%   30%
Time deposits   756,397    780,355    812,749    830,412    785,154    (3)%   (4)%
Total interest-bearing core deposits   13,141,498    12,959,291    12,673,701    11,655,184    10,810,564    1%   22%
Certificates of deposit $100,000 and more   354,376    405,696    423,480    451,669    464,792    (13)%   (24)%
Federal funds purchased   529,156    649,464    1,079,531    1,137,909    1,028,852    (19)%   (49)%
Securities sold under agreements to repurchase   330,114    339,874    474,448    471,712    406,219    (3)%   (19)%
Trading liabilities   722,031    713,133    728,553    634,375    621,880    1%   16%
Other short-term borrowings (e)   138,698    227,650    165,408    302,353    1,093,014    (39)%   (87)%
Term borrowings (f)   1,461,173    1,570,953    1,621,983    1,664,924    1,499,959    (7)%   (3)%
Total interest-bearing liabilities   16,677,046    16,866,061    17,167,104    16,318,126    15,925,280    (1)%   5%
Noninterest-bearing deposits   5,392,294    5,189,939    5,098,361    4,974,748    4,602,292    4%   17%
Fixed income payables   26,220    27,608    34,800    40,273    36,762    (5)%   (29)%
Derivative liabilities   105,644    123,397    124,305    124,530    130,997    (14)%   (19)%
Other liabilities   568,013    695,114    612,513    503,851    475,162    (18)%   20%
Total liabilities   22,769,217    22,902,119    23,037,083    21,961,528    21,170,493    (1)%   8%
Equity:                                   
Common stock (g)   146,324    146,146    146,225    146,789    147,820    *    (1)%
Capital surplus (g)   1,374,195    1,370,653    1,377,178    1,387,116    1,408,682    *    (2)%
Undivided profits   818,909    775,881    868,605    846,656    810,164    6%   1%
Accumulated other comprehensive loss, net   (184,939)   (171,806)   (175,542)   (119,887)   (125,880)   8%   47%
Preferred stock   95,624    95,624    95,624    95,624    95,624    *    * 
Noncontrolling interest (h)   295,431    295,431    295,431    295,431    295,431    *    * 
Total equity   2,545,544    2,511,929    2,607,521    2,651,729    2,631,841    1%   (3)%
Total liabilities and equity  $25,314,761   $25,414,048   $25,644,604   $24,613,257   $23,802,334    *    6%

NM - Not meaningful

* Amount is less than one percent.

(a) Includes loans on nonaccrual status.
(b) 4Q14 decrease related to the sale of mortgage loans HFS in third quarter.
(c) Includes excess balances held at Fed. 1Q15 and 4Q14 increase driven by inflow of customer deposits and proceeds from the issuance of senior notes in fourth quarter.
(d) 2Q15 and 3Q15 decrease related to sale of property in second quarter.
(e) 3Q14 includes increased FHLB borrowings as a result of loan growth and deposit fluctuations.
(f) In 3Q15 FHN called $206 million of junior subordinated notes underlying $200 million of trust preferred debt. In 1Q15 $304 million of FTBNA subordinated notes matured. In 4Q14 FTBNA issued $400 million of senior bank notes.
(g) Decreases primarily relate to shares purchased under share repurchase programs.
(h) Consists of preferred stock of subsidiaries.

9

FHN CONSOLIDATED NET INTEREST INCOME (a)

Quarterly, Unaudited

 

                       3Q15 Changes vs. 
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Interest Income:                                   
Loans, net of unearned income (b)  $152,795   $155,565   $146,192   $148,078   $146,931    (2)%   4%
Loans held-for-sale   1,311    1,350    1,491    1,483    3,263    (3)%   (60)%
Investment securities:                                   
U.S. treasuries   —    —    —    —    5    NM    NM 
U.S. government agencies   21,366    21,432    20,955    21,317    21,376    *    * 
States and municipalities   97    97    125    159    109    *    (11)%
Other   1,864    1,853    1,876    1,875    1,866    1%   * 
Total investment securities   23,327    23,382    22,956    23,351    23,356    *    * 
Trading securities   8,476    9,289    9,281    8,701    7,944    (9)%   7%
Other earning assets:                                   
Federal funds sold   88    79    57    69    92    11%   (4)%
Securities purchased under agreements to resell (c)   (112)   (254)   (252)   (217)   (363)   56%   69%
Interest-bearing cash   490    267    874    611    134    84%   NM 
Total other earning assets   466    92    679    463    (137)   NM    NM 
Interest income  $186,375   $189,678   $180,599   $182,076   $181,357    (2)%   3%
                                    
Interest Expense:                                   
Interest-bearing deposits:                                   
Savings  $2,785   $2,970   $3,307   $3,087   $2,600    (6)%   7%
Other interest-bearing deposits   1,118    1,104    957    760    754    1%   48%
Time deposits   1,230    1,324    1,432    1,742    1,786    (7)%   (31)%
Total interest-bearing core deposits   5,133    5,398    5,696    5,589    5,140    (5)%   * 
Certificates of deposit $100,000 and more   756    830    882    513    685    (9)%   10%
Federal funds purchased   338    408    673    729    654    (17)%   (48)%
Securities sold under agreements to repurchase   32    42    95    83    63    (24)%   (49)%
Trading liabilities   4,258    3,770    3,914    3,950    3,782    13%   13%
Other short-term borrowings   294    276    278    388    548    7%   (46)%
Term borrowings (d)   9,314    9,666    9,664    9,146    8,445    (4)%   10%
Interest expense   20,125    20,390    21,202    20,398    19,317    (1)%   4%
Net interest income - tax equivalent basis   166,250    169,288    159,397    161,678    162,040    (2)%   3%
Fully taxable equivalent adjustment   (2,688)   (2,648)   (2,531)   (2,628)   (2,499)   (2)%   (8)%
Net interest income  $163,562   $166,640   $156,866   $159,050   $159,541    (2)%   3%

NM - Not meaningful

* Amount is less than one percent.

(a) Net interest income adjusted to a fully taxable equivalent (“FTE”) basis assuming a statutory federal income tax of 35 percent and, where applicable, state income taxes.
(b) Includes interest on loans in nonaccrual status.
(c) Driven by negative market rates on reverse repurchase agreements.
(d) 4Q14 increase related to the issuance of $400 million of senior notes.
10

FHN CONSOLIDATED AVERAGE BALANCE SHEET: YIELDS AND RATES

Quarterly, Unaudited

 

                     
   3Q15   2Q15   1Q15   4Q14   3Q14 
                          
Assets:                         
Earning assets (a):                         
Loans, net of unearned income (b):                         
Commercial loans   3.50%   3.60%   3.50%   3.55%   3.51%
Retail loans   3.94    3.94    3.96    3.97    4.01 
Total loans, net of unearned income (c)   3.65    3.71    3.67    3.71    3.70 
Loans held-for-sale   4.16    4.17    4.31    4.12    4.09 
Investment securities:                         
U.S. treasuries   NM    NM    NM    NM    0.07 
U.S. government agencies   2.45    2.45    2.47    2.54    2.56 
States and municipalities   2.84    2.77    3.46    4.38    2.50 
Other   4.10    4.08    4.13    4.13    4.04 
Total investment securities   2.54    2.53    2.56    2.62    2.61 
Trading securities   2.98    2.73    2.71    2.94    3.00 
Other earning assets:                         
Federal funds sold   1.00    1.00    0.97    1.02    0.98 
Securities purchased under agreements to resell (d)   (0.06)   (0.13)   (0.13)   (0.13)   (0.22)
Interest-bearing cash   0.24    0.23    0.24    0.24    0.19 
Total other earning assets   0.12    0.03    0.12    0.11    (0.06)
Interest income/total earning assets   3.20%   3.27%   3.11%   3.22%   3.33%
                          
Liabilities:                         
Interest-bearing liabilities:                         
Interest-bearing deposits:                         
Savings   0.15%   0.16%   0.18%   0.18%   0.16%
Other interest-bearing deposits   0.09    0.09    0.09    0.08    0.08 
Time deposits   0.65    0.68    0.71    0.83    0.90 
Total interest-bearing core deposits   0.15    0.17    0.18    0.19    0.19 
Certificates of deposit $100,000 and more   0.85    0.82    0.84    0.45    0.59 
Federal funds purchased   0.25    0.25    0.25    0.25    0.25 
Securities sold under agreements to repurchase   0.04    0.05    0.08    0.07    0.06 
Trading liabilities   2.34    2.12    2.18    2.47    2.41 
Other short-term borrowings   0.84    0.49    0.68    0.51    0.20 
Term borrowings (e)   2.55    2.47    2.39    2.20    2.25 
Interest expense/total interest-bearing liabilities   0.48    0.48    0.50    0.50    0.48 
Net interest spread   2.72%   2.79%   2.61%   2.72%   2.85%
Effect of interest-free sources used to fund earning assets   0.13    0.13    0.13    0.14    0.12 
Net interest margin   2.85%   2.92%   2.74%   2.86%   2.97%

Yields are adjusted to a FTE basis assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

NM - Not meaningful

(a) Earning assets yields are expressed net of unearned income.
(b) Includes loan fees and cash basis interest income.
(c) Includes loans on nonaccrual status.
(d) Driven by negative market rates on reverse repurchase agreements.
(e) Rates are expressed net of unamortized debenture cost for term borrowings.
11

FHN CAPITAL HIGHLIGHTS

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Dollars and shares in thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                                    
Common equity tier 1 capital (a) (c)  $2,234,562   $2,172,768   $2,133,554    N/A    N/A    3%   NM 
Tier 1 capital (a) (b) (c)  $2,524,418   $2,500,612   $2,452,297   $2,813,503   $2,783,147    1%   (9)%
Total capital (a) (d)  $2,789,383   $2,922,582   $2,912,671   $3,148,336   $3,121,359    (5)%   (11)%
                                    
Risk-weighted assets (“RWA”) (a)  $20,758,700   $20,869,862   $20,707,078   $19,452,656   $19,238,109    (1)%   8%
Average assets for leverage (a) (c)  $25,281,704   $25,347,048   $25,570,905   $24,625,820   $23,748,667    *    6%
                                    
Common equity tier 1 ratio (a) (c)   10.76%   10.41%   10.30%   N/A    N/A           
Tier 1 ratio (a) (c)   12.16%   11.98%   11.84%   14.46%   14.47%          
Total capital ratio (a)   13.44%   14.00%   14.07%   16.18%   16.22%          
Leverage ratio (a) (c)   9.99%   9.87%   9.59%   11.43%   11.72%          
                                    
Tier 1 common to risk-weighted assets (c) (e)   N/A    N/A    N/A    11.43%   11.40%          
Total equity to total assets   10.20%   9.98%   9.72%   10.06%   10.89%          
Tangible common equity/tangible assets (“TCE/TA”) (e)   8.04%   7.80%   7.57%   7.90%   8.65%          
Period-end shares outstanding (f)   234,237    234,021    233,499    234,220    235,249    *    * 
Cash dividends declared per common share  $0.06   $0.06   $0.06   $0.05   $0.05    *    20%
Book value per common share  $9.38   $9.09   $9.03   $9.35   $9.44           
Tangible book value per common share (e)  $8.65   $8.35   $8.28   $8.60   $8.76           
Market capitalization (millions)  $3,321.5   $3,667.1   $3,336.7   $3,180.7   $2,888.9           

Certain previously reported amounts have been reclassified to agree with current presentation.

NM - Not Meaningful

* Amount is less than one percent.

(a) Current quarter is an estimate. All quarters in 2015 reflect revisions to regulatory capital definitions under the Basel III risk-based capital rules as phased-in.  
(b) FHN’s outstanding trust preferred securities were redeemed in 3Q15. 2Q15 and 1Q15 include $50 million of Tier 1 qualifying trust preferred securities. All periods in 2014 include $200 million of Tier 1 qualifying trust preferred securities.
(c) See Glossary of Terms for definition of ratio.
(d) FHN’s outstanding trust preferred securities were redeemed in 3Q15. 2Q15 and 1Q15 include $150 million of Tier 2 qualifying trust preferred which are excluded from Tier 1 under Basel III.
(e) Refer to the Non-GAAP to GAAP reconciliation on page 22 of this financial supplement.
(f) In periods prior to 2Q15, decreases primarily relate to shares purchased under share repurchase programs.
12

FHN BUSINESS SEGMENT HIGHLIGHTS

Quarterly, Unaudited

 

                       3Q15 Changes vs.
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                                    
Regional Banking                                   
Net interest income  $165,258   $165,908   $154,409   $157,557   $153,868    *    7%
Noninterest income   62,773    65,989    60,204    64,331    64,155    (5)%   (2)%
Total revenues   228,031    231,897    214,613    221,888    218,023    (2)%   5%
Provision for loan losses   6,696    17,078    4,915    5,568    2,204    (61)%   NM 
Noninterest expense   135,776    144,203    135,780    137,546    135,903    (6)%   * 
Income before income taxes   85,559    70,616    73,918    78,774    79,916    21%   7%
Provision for income taxes   30,809    24,996    26,381    28,057    28,561    23%   8%
 Net income  $54,750   $45,620   $47,537   $50,717   $51,355    20%   7%
                                    
Fixed Income                                   
Net interest income  $3,008   $4,297   $4,323   $3,675   $2,950    (30)%   2%
Noninterest income   51,756    56,001    61,565    48,506    49,896    (8)%   4%
Total revenues   54,764    60,298    65,888    52,181    52,846    (9)%   4%
Noninterest expense   48,200    51,214    54,683    46,218    47,915    (6)%   1%
Income before income taxes   6,564    9,084    11,205    5,963    4,931    (28)%   33%
Provision for income taxes   2,115    3,171    4,167    2,059    1,696    (33)%   25%
 Net income  $4,449   $5,913   $7,038   $3,904   $3,235    (25)%   38%
                                    
Corporate                                   
Net interest income/(expense)  $(19,037)  $(17,376)  $(16,084)  $(18,038)  $(14,246)   (10)%   (34)%
Noninterest income   8,559    3,901    5,385    4,400    4,139    NM    NM 
Total revenues   (10,478)   (13,475)   (10,699)   (13,638)   (10,107)   22%   (4)%
Noninterest expense   11,521    13,770    14,169    14,017    16,511    (16)%   (30)%
 Loss before income taxes   (21,999)   (27,245)   (24,868)   (27,655)   (26,618)   19%   17%
Benefit for income taxes   (26,105)   (15,882)   (11,640)   (19,601)   (16,928)   (64)%   (54)%
 Net income/(loss)  $4,106   $(11,363)  $(13,228)  $(8,054)  $(9,690)   NM    NM 
                                    
Non-Strategic                                   
Net interest income  $14,333   $13,811   $14,218   $15,856   $16,969    4%   (16)%
Noninterest income (a)   2,015    4,410    2,535    2,361    39,625    (54)%   (95)%
Total revenues   16,348    18,221    16,753    18,217    56,594    (10)%   (71)%
Provision/(provision credit) for loan losses   (5,696)   (15,078)   85    432    3,796    62%   NM 
Noninterest expense (b)   8,356    9,207    171,589    9,528    43,687    (9)%   (81)%
Income/(loss) before income taxes   13,688    24,092    (154,921)   8,257    9,111    (43)%   50%
Provision/(benefit) for income taxes   5,288    9,305    (41,169)   3,184    3,513    (43)%   51%
 Net income/(loss)  $8,400   $14,787   $(113,752)  $5,073   $5,598    (43)%   50%
                                    
Total Consolidated                                   
Net interest income  $163,562   $166,640   $156,866   $159,050   $159,541    (2)%   3%
Noninterest income   125,103    130,301    129,689    119,598    157,815    (4)%   (21)%
Total revenues   288,665    296,941    286,555    278,648    317,356    (3)%   (9)%
Provision for loan losses   1,000    2,000    5,000    6,000    6,000    (50)%   (83)%
Noninterest expense   203,853    218,394    376,221    207,309    244,016    (7)%   (16)%
Income/(loss) before income taxes   83,812    76,547    (94,666)   65,339    67,340    9%   24%
Provision/(benefit) for income taxes   12,107    21,590    (22,261)   13,699    16,842    (44)%   (28)%
 Net income/(loss)  $71,705   $54,957   $(72,405)  $51,640   $50,498    30%   42%

NM - Not meaningful

* Amount is less than one percent.

(a) 3Q14 includes $39.7 million of gains on the sales of HFS mortgage loans.  
(b) 1Q15 includes $162.5 million of loss accruals related to the settlement of potential claims related to FHN’s underwriting and origination of FHA-insured mortgage loans; 3Q14 includes $50.0 million of loss accruals related to legal matters, partially offset by $15.0 million of expense reversals related to agreements with insurance companies for the recovery of expenses FHN incurred related to litigation losses in previous periods.
13

FHN REGIONAL BANKING

Quarterly, Unaudited

 

                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                                    
Income Statement (thousands)                                   
Net interest income  $165,258   $165,908   $154,409   $157,557   $153,868    *    7%
Provision for loan losses   6,696    17,078    4,915    5,568    2,204    (61)%   NM 
Noninterest income:                                   
NSF / Overdraft fees (a)   11,678    10,664    9,144    11,619    11,425    10%   2%
Cash management fees   8,482    8,884    8,878    8,719    8,522    (5)%   * 
Debit card income   3,318    3,327    3,064    3,117    2,945    *    13%
Other   4,398    4,538    4,537    4,655    4,705    (3)%   (7)%
Total deposit transactions and cash management   27,876    27,413    25,623    28,110    27,597    2%   1%
Brokerage, management fees and commissions   11,620    12,456    11,399    11,647    12,333    (7)%   (6)%
Trust services and investment management   6,605    7,432    6,713    6,960    6,794    (11)%   (3)%
Bankcard income   5,269    5,562    4,915    5,469    5,224    (5)%   1%
Other service charges   2,562    2,637    2,422    2,395    2,630    (3)%   (3)%
Miscellaneous revenue   8,841    10,489    9,132    9,750    9,577    (16)%   (8)%
Total noninterest income   62,773    65,989    60,204    64,331    64,155    (5)%   (2)%
Noninterest expense:                                   
Employee compensation, incentives, and benefits   49,078    49,692    48,272    46,175    46,259    (1)%   6%
Other (b)   86,698    94,511    87,508    91,371    89,644    (8)%   (3)%
Total noninterest expense   135,776    144,203    135,780    137,546    135,903    (6)%   * 
Income before income taxes  $85,559   $70,616   $73,918   $78,774   $79,916    21%   7%
PPNR (c)   92,255    87,694    78,833    84,342    82,120    5%   12%
Efficiency ratio (d)   59.54%   62.18%   63.27%   61.99%   62.33%          
                                    
Balance Sheet (millions)                                   
Average loans  $14,312   $14,326   $13,513   $13,129   $12,886    *    11%
Average other earning assets   58    55    48    52    63    5%   (8)%
Total average earning assets   14,370    14,381    13,561    13,181    12,949    *    11%
Average core deposits   16,976    16,752    16,263    15,335    14,639    1%   16%
Average other deposits   354    406    423    452    464    (13)%   (24)%
Total average deposits   17,330    17,158    16,686    15,787    15,103    1%   15%
Total period-end deposits   17,287    17,226    17,240    16,373    15,119    *    14%
Total period-end assets   15,163    15,264    14,894    14,350    13,695    (1)%   11%
Net interest margin (e)   4.63%   4.69%   4.68%   4.78%   4.74%          
Net interest spread   3.33    3.35    3.37    3.36    3.41           
Loan yield   3.45    3.48    3.51    3.50    3.56           
Deposit average yield   0.12    0.13    0.14    0.14    0.15           
                                    
Key Statistics                                   
Financial center locations (f)   174    175    178    178    172    (1)%   1%

NM - Not meaningful

* Amount is less than one percent.

(a) 1Q15 levels primarily attributable to seasonality in NSF fees.
(b) 3Q15 decrease primarily driven by lower allocated personnel expenses due in large part to gains recognized in third quarter related to an employee benefit plan amendment.
(c) Pre-provision net revenue is not a GAAP number but is used in regulatory stress test reporting. The presentation of PPNR in this Financial Supplement follows the regulatory definition.
(d) Noninterest expense divided by total revenue.
(e) Net interest margin is computed using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.
(f) 4Q14 increase related to the acquisition of bank branches. The five branches of TrustAtlantic Bank were not included at September 30, 2015, but are expected to be First Tennessee Bank branches by close of business on October 16, 2015.
14

FHN FIXED INCOME

Quarterly, Unaudited

 

                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                                    
Income Statement (thousands)                                   
Net interest income  $3,008   $4,297   $4,323   $3,675   $2,950    (30)%   2%
Noninterest income:                                   
Fixed income product revenue   42,969    46,685    53,510    39,030    41,216    (8)%   4%
Other   8,787    9,316    8,055    9,476    8,680    (6)%   1%
Total noninterest income   51,756    56,001    61,565    48,506    49,896    (8)%   4%
Noninterest expense   48,200    51,214    54,683    46,218    47,915    (6)%   1%
Income before income taxes  $6,564   $9,084   $11,205   $5,963   $4,931    (28)%   33%
                                    
Efficiency ratio (a)   88.01%   84.93%   82.99%   88.57%   90.67%          
Fixed income product average daily revenue  $671   $729   $877   $630   $644    (8)%   4%
                                    
Balance Sheet (millions)                                   
Average trading inventory  $1,133   $1,358   $1,366   $1,177   $1,054    (17)%   7%
Average other earning assets   763    761    781    677    648    *    18%
Total average earning assets   1,896    2,119    2,147    1,854    1,702    (11)%   11%
Total period-end assets   2,361    2,273    2,808    2,138    2,338    4%   1%
Net interest margin (b)   0.73%   0.87%   0.83%   0.85%   0.75%          

* Amount is less than one percent.

(a) Noninterest expense divided by total revenue.
(b) Net interest margin is computed using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

 

FHN CORPORATE

Quarterly, Unaudited

 

                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                                    
Income Statement (thousands)                                   
Net interest income/(expense)  $(19,037)  $(17,376)  $(16,084)  $(18,038)  $(14,246)   (10)%   (34)%
Noninterest income excluding securities gains/(losses) (a)   8,904    3,893    5,109    4,400    4,005    NM    NM 
Securities gains/(losses), net   (345)   8    276    —    134    NM    NM 
Noninterest expense   11,521    13,770    14,169    14,017    16,511    (16)%   (30)%
Loss before income taxes  $(21,999)  $(27,245)  $(24,868)  $(27,655)  $(26,618)   19%   17%
                                    
Average Balance Sheet (millions)                                   
Average loans  $120   $128   $138   $148   $153    (6)%   (22)%
Total earning assets  $4,592   $4,282   $5,162   $4,703   $3,999    7%   15%
Net interest margin (b)   (1.63)%   (1.63)%   (1.28)%   (1.40)%   (1.25)%          

NM - Not meaningful

(a) 3Q15 includes a $5.8 million gain related to the extinguishment of debt.
(b) Net interest margin is computed using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.
15

FHN NON-STRATEGIC

Quarterly, Unaudited

 

                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15    3Q14  
                             
Income Statement (thousands)                                   
Net interest income  $14,333   $13,811   $14,218   $15,856   $16,969    4%   (16)%
Noninterest income:                                   
Mortgage warehouse valuation (a)   698    270    1,228    1,240    41,287    NM    (98)%
Miscellaneous revenue (b)   1,317    4,140    1,307    1,121    (667)   (68)%   NM 
Total noninterest income excluding securities gains/(losses)   2,015    4,410    2,535    2,361    40,620    (54)%   (95)%
Securities gains/(losses), net   —    —    —    —    (995)   NM    NM 
Noninterest expense:                                   
Repurchase and foreclosure provision (c)   —    —    —    —    (4,300)   NM    NM 
Other expenses (d)   8,356    9,207    171,589    9,528    47,987    (9)%   (83)%
Total noninterest expense   8,356    9,207    171,589    9,528    43,687    (9)%   (81)%
Provision/(provision credit) for loan losses   (5,696)   (15,078)   85    432    3,796    62%   NM 
Income/(loss) before income taxes  $13,688   $24,092   $(154,921)  $8,257   $9,111    (43)%   50%
                                    
Average Balance Sheet (millions)                                   
Loans  $2,201   $2,337   $2,472   $2,592   $2,724    (6)%   (19)%
Loans held-for-sale (e)   113    115    120    125    298    (2)%   (62)%
Trading securities   5    5    5    6    6    *    (17)%
Allowance for loan losses   (87)   (99)   (105)   (110)   (111)   (12)%   (22)%
Other assets   14    51    63    72    78    (73)%   (82)%
Total assets   2,246    2,409    2,555    2,685    2,995    (7)%   (25)%
Net interest margin (f)   2.46%   2.25%   2.19%   2.32%   2.23%          
Efficiency ratio (g)   51.11%   50.53%   NM    52.30%   75.86%          
                                    
Mortgage Warehouse - Period-end (millions)                                  
Ending warehouse balance (loans held-for-sale)  $104   $106   $108   $115   $120    (2)%   (13)%
Key Servicing Metric                                   
Ending servicing portfolio (millions) (h)  $879   $922   $966   $1,013   $1,090    (5)%   (19)%

NM - Not meaningful
* Amount is less than one percent.
(a) 3Q14 includes $39.7 million of gains on the sale of HFS mortgage loans.
(b) 2Q15 includes a $2.7 million pre-tax gain on sale of property.
(c) 3Q14 expense reversal associated with the settlement of certain repurchase claims.
(d) 1Q15 includes $162.5 million of loss accruals related to the settlement of potential claims related to FHN’s underwriting and origination of FHA-insured mortgage loans; 3Q14 includes $50.0 million of loss accruals related to legal matters, partially offset by $15.0 million of expense reversals associated with agreements with insurance companies for the recovery of expenses FHN incurred related to litigation losses in previous periods.
(e) 4Q14 decrease relates to the sale of mortgage loans HFS late in third quarter.
(f) Net interest margin is computed using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.
(g) Noninterest expense divided by total revenue excluding securities gains/(losses).
(h) Includes mortgage loans serviced from FHN's legacy mortgage banking business, legacy equity lending serviced for others, and mortgage loans in portfolio and warehouse.
16

FHN ASSET QUALITY: CONSOLIDATED

Quarterly, Unaudited

                     
               3Q15 Changes vs.
(Thousands)  3Q15   2Q15   1Q15   4Q14   3Q14   2Q15    3Q14  
                                   
Allowance for Loan Losses Walk-Forward                                  
Beginning reserve  $221,351   $228,328   $232,448   $238,641   $243,628    (3)%   (9)%
Provision   1,000    2,000    5,000    6,000    6,000    (50)%   (83)%
Charge-offs   (21,810)   (19,434)   (17,999)   (23,306)   (23,684)   12%   (8)%
Recoveries   10,273    10,457    8,879    11,113    12,697    (2)%   (19)%
Ending balance  $210,814   $221,351   $228,328   $232,448   $238,641    (5)%   (12)%
Reserve for unfunded commitments   6,231    5,561    4,135    4,770    2,313    12%   NM 
Total allowance for loan losses plus reserve for unfunded commitments  $217,045   $226,912   $232,463   $237,218   $240,954    (4)%   (10)%
                                    
Allowance for Loan Losses                                   
Regional Banking  $128,942   $132,741   $125,982   $126,812   $127,873    (3)%   1%
Non-Strategic   81,872    88,610    102,346    105,636    110,768    (8)%   (26)%
Total allowance for loan losses  $210,814   $221,351   $228,328   $232,448   $238,641    (5)%   (12)%
                                    
Nonperforming Assets                                   
Regional Banking                                   
Nonperforming loans  $50,986   $69,094   $63,620   $64,654   $70,805    (26)%   (28)%
Foreclosed real estate (a)   17,042    19,230    19,704    20,451    25,404    (11)%   (33)%
Total Regional Banking  $68,028   $88,324   $83,324   $85,105   $96,209    (23)%   (29)%
Non-Strategic                                   
Nonperforming loans  $129,951   $130,894   $133,804   $135,740   $139,038    (1)%   (7)%
Nonperforming loans held-for-sale after fair value adjustments   7,347    6,372    6,888    7,643    7,931    15%   (7)%
Foreclosed real estate (a)   8,830    9,879    9,977    9,979    9,857    (11)%   (10)%
Total Non-Strategic  $146,128   $147,145   $150,669   $153,362   $156,826    (1)%   (7)%
Corporate                                   
Nonperforming loans  $3,043   $3,079   $2,805   $3,045   $3,903    (1)%   (22)%
Total nonperforming assets  $217,199   $238,548   $236,798   $241,512   $256,938    (9)%   (15)%
                                    
Net Charge-Offs                                   
Regional Banking  $10,495   $10,318   $5,745   $6,629   $6,132    2%   71%
Non-Strategic   1,042    (1,341)   3,375    5,564    4,855    NM    (79)%
Total net charge-offs  $11,537   $8,977   $9,120   $12,193   $10,987    29%   5%
                                    
Consolidated Key Ratios (b)                                   
NPL %   1.10%   1.20%   1.20%   1.25%   1.35%          
NPA %   1.25    1.37    1.37    1.44    1.57           
Net charge-offs %   0.28    0.21    0.23    0.30    0.28           
Allowance / loans   1.26    1.31    1.36    1.43    1.51           
Allowance / NPL   1.15x   1.09x   1.14x   1.14x   1.12x          
Allowance / NPA   1.00x   0.95x   0.99x   0.99x   0.96x          
Allowance / net charge-offs   4.61x   6.15x   6.17x   4.81x   5.47x          
                                    
Other                                   
Loans past due 90 days or more (c)  $38,455   $39,077   $46,889   $50,699   $57,786    (2)%   (33)%
Guaranteed portion (c)   16,856    16,221    18,552    24,036    27,020    4%   (38)%
Foreclosed real estate from government insured loans   9,460    11,159    10,096    9,492    12,735    (15)%   (26)%
Period-end loans, net of unearned income (millions)   16,725    16,937    16,732    16,230    15,812    (1)%   6%
NM - Not meaningful
* Amount is less than one percent.
(a) Excludes foreclosed real estate from government-insured mortgages.
(b) See Glossary of Terms for definitions of Consolidated Key Ratios.
(c) Includes loans held-for-sale.
17

FHN ASSET QUALITY: CONSOLIDATED

Quarterly, Unaudited

                         
                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15    3Q14  
                                    
Key Portfolio Details                                   
C&I                                    
Period-end loans ($ millions)  $9,610   $9,833   $9,638   $9,007   $8,477    (2)%   13%
30+ Delinq. % (a)   0.09%   0.08%   0.07%   0.05%   0.10%          
NPL %   0.31    0.44    0.35    0.36    0.49           
Charge-offs % (qtr. annualized)   0.26    0.17    0.07    0.19    NM           
Allowance / loans %   0.74%   0.80%   0.70%   0.74%   0.82%          
Allowance / charge-offs   2.83x   4.85x   10.41x   4.05x   NM           
                                    
Commercial Real Estate                                   
Period-end loans ($ millions)  $1,488   $1,401   $1,321   $1,278   $1,278    6%   16%
30+ Delinq. % (a)(b)   0.43%   0.23%   0.33%   0.14%   0.33%          
NPL %   0.54    0.84    1.01    1.20    1.11           
Charge-offs % (qtr. annualized)   NM    0.22    0.03    NM    0.47           
Allowance / loans %   1.70%   1.53%   1.34%   1.45%   1.21%          
Allowance / charge-offs   NM    7.29x   45.37x   NM    2.64x          
                                    
Consumer Real Estate                                   
Period-end loans ($ millions)  $4,814   $4,870   $4,923   $5,048   $5,131    (1)%   (6)%
30+ Delinq. % (a)   0.92%   0.94%   0.98%   1.10%   1.04%          
NPL %   2.32    2.35    2.43    2.39    2.41           
Charge-offs % (qtr. annualized)   0.18    NM    0.31    0.38    0.60           
Allowance / loans %   1.71%   1.75%   2.22%   2.24%   2.31%          
Allowance / charge-offs   9.41x   NM    7.06x   5.85x   3.83x          
                                    
Permanent Mortgage                                   
Period-end loans ($ millions)  $464   $488   $512   $539   $573    (5)%   (19)%
30+ Delinq. % (a)   2.01%   2.26%   2.76%   1.72%   2.73%          
NPL %   7.30    6.66    6.43    6.32    5.93           
Charge-offs % (qtr. annualized)   0.67    0.11    0.44    1.00    0.25           
Allowance / loans %   4.33%   4.59%   3.94%   3.55%   3.53%          
Allowance / charge-offs   6.25x   40.53x   8.79x   3.46x   14.17x          
                                    
Credit Card and Other                                   
Period-end loans ($ millions)  $349   $346   $338   $358   $353    1%   (1)%
30+ Delinq. % (a)   1.19%   1.09%   1.20%   1.42%   1.44%          
NPL %   0.21    0.22    0.22    0.21    0.20           
Charge-offs % (qtr. annualized)   2.79    5.73    3.51    3.33    3.19           
Allowance / loans %   3.28%   3.84%   4.01%   4.11%   4.17%          
Allowance / charge-offs   1.16x   0.66x   1.10x   1.24x   1.31x          
NM - Not meaningful
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.  
(b) 3Q15 increase was due to 2 purchased credit impaired loans from the 2013 MNB acquisition.  
18

FHN ASSET QUALITY: REGIONAL BANKING

Quarterly, Unaudited

                             
                       3Q15 Changes vs.
    3Q15    2Q15    1Q15   4Q14   3Q14   2Q15    3Q14  
                                    
Total Regional Banking                                   
Period-end loans ($ millions)  $14,483   $14,556   $14,200   $13,568   $13,002    (1)%   11%
30+ Delinq. % (a)   0.25%   0.21%   0.24%   0.22%   0.29%          
NPL %   0.35    0.47    0.45    0.48    0.54           
Charge-offs % (qtr. annualized)   0.29    0.29    0.17    0.20    0.19           
Allowance / loans %   0.89%   0.91%   0.89%   0.93%   0.98%          
Allowance / charge-offs   3.10x   3.21x   5.41x   4.82x   5.26x          
                                    
Key Portfolio Details                                   
C&I                                   
Period-end loans ($ millions)  $9,178   $9,398   $9,185   $8,553   $8,022    (2)%   14%
30+ Delinq. % (a)   0.10%   0.08%   0.07%   0.05%   0.09%          
NPL %   0.18    0.32    0.24    0.24    0.37           
Charge-offs % (qtr. annualized)   0.33    0.18    0.08    0.21    NM           
Allowance / loans %   0.72%   0.78%   0.68%   0.72%   0.81%          
Allowance / charge-offs   2.21x   4.48x   9.42x   3.62x   NM           
                                    
Commercial Real Estate                                   
Period-end loans ($ millions)  $1,488   $1,400   $1,320   $1,273   $1,274    6%   17%
30+ Delinq. % (a)(b)   0.43%   0.23%   0.32%   0.14%   0.33%          
NPL %   0.54    0.84    1.00    1.14    1.04           
Charge-offs % (qtr. annualized)   NM    0.22    0.03    NM    0.49           
Allowance / loans %   1.70%   1.53%   1.33%   1.43%   1.18%          
Allowance / charge-offs   NM    7.22x   52.33x   NM    2.46x          
                                    
Consumer Real Estate                                   
Period-end loans ($ millions)  $3,469   $3,413   $3,358   $3,385   $3,356    2%   3%
30+ Delinq. % (a)   0.48%   0.47%   0.55%   0.57%   0.61%          
NPL %   0.75    0.78    0.84    0.86    0.83           
Charge-offs % (qtr. annualized)   0.11    0.08    0.15    0.11    0.39           
Allowance / loans %   0.79%   0.73%   0.97%   0.95%   0.99%          
Allowance / charge-offs   7.62x   9.73x   6.45x   8.55x   2.55x          
                                    
Credit Card, Permanent Mortgage, and Other                                   
Period-end loans ($ millions)  $348   $345   $337   $357   $351    1%   (1)%
30+ Delinq. % (a)   1.33%   1.18%   1.29%   1.51%   1.49%          
NPL %   0.14    0.14    0.15    0.14    0.15           
Charge-offs % (qtr. annualized)(c)   2.49    5.57    3.22    3.00    3.01           
Allowance / loans %   3.00%   3.72%   3.88%   4.06%   4.07%          
Allowance / charge-offs   1.19x   0.66x   1.16x   1.36x   1.36x          
                                    
ASSET QUALITY: CORPORATE                                   
                                    
Permanent Mortgage                                   
Period-end loans ($ millions)  $107   $113   $123   $136   $147    (5)%   (27)%
30+ Delinq. % (a)   2.95%   2.51%   3.41%   2.32%   2.24%          
NPL %   2.85    2.72    2.29    2.25    2.65           
Charge-offs % (qtr. annualized)   NM    NM    NM    NM    NM           
Allowance / loans %   NM    NM    NM    NM    NM           
Allowance / charge-offs   NM    NM    NM    NM    NM           
NM - Not meaningful
(a) 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.
(b) 3Q15 increase was due to 2 purchased credit impaired loans from the 2013 MNB acquisition.
(c) 2Q15 increase was primarily driven by charge-offs in a sub segment of the credit card portfolio which had previously been reserved for.
19

FHN ASSET QUALITY: NON-STRATEGIC

Quarterly, Unaudited

 

                       3Q15 Changes vs.
   3Q15   2Q15   1Q15   4Q14   3Q14   2Q15   3Q14 
                             
Total Non-Strategic                                   
Period-end loans ($ millions)  $2,135   $2,268   $2,409   $2,527   $2,663    (6)%   (20)%
30+ Delinq. % (a)   1.57%   1.67%   1.67%   1.67%   1.73%          
NPL %   6.08    5.77    5.55    5.37    5.22           
Charge-offs % (qtr. annualized)   0.19    NM    0.55    0.85    0.71           
Allowance / loans %   3.83%   3.91%   4.25%   4.18%   4.16%          
Allowance / charge-offs   19.80 x   NM    7.48 x   4.79 x   5.75 x          
                                    
Key Portfolio Details                                    
C&I                                   
Period-end loans ($ millions)  $432   $434   $453   $454   $456    *    (5)%
30+ Delinq. % (a)   0.02%   0.02%   0.08%   0.05%   0.23%          
NPL %   3.08    3.07    2.68    2.64    2.64           
Charge-offs % (qtr. annualized)   NM    NM    NM    NM    NM           
Allowance / loans %   1.35%   1.23%   1.09%   1.10%   1.01%          
Allowance / charge-offs   NM    NM    NM    NM    NM           
                                    
Commercial Real Estate                                   
Period-end loans ($ millions)  $—   $—   $1   $5   $5    NM    (100)%
30+ Delinq. % (a)   — %   — %   14.87%   — %   —%          
NPL %   —    —    18.31    17.47    20.01           
Charge-offs % (qtr. annualized)   NM    NM    2.64    6.91    NM           
Allowance / loans %   5.86%   7.36%   8.22%   9.25%   9.36%          
Allowance / charge-offs   NM    NM    1.06 x    1.27 x    NM           
                                    
Consumer Real Estate                                   
Period-end loans ($ millions)  $1,345   $1,458   $1,565   $1,663   $1,775    (8)%   (24)%
30+ Delinq. % (a)   2.07%   2.06%   1.92%   2.17%   1.84%          
NPL %   6.36    6.03    5.83    5.51    5.40           
Charge-offs % (qtr. annualized)   0.37    NM    0.64    0.91    0.98           
Allowance / loans %   4.09%   4.14%   4.90%   4.86%   4.79%          
Allowance / charge-offs   10.67 x   NM    7.36 x   5.19 x   4.76 x          
                                    
Permanent Mortgage                                   
Period-end loans ($ millions)  $348   $365   $379   $393   $415    (5)%   (16)%
30+ Delinq. % (a)   1.58%   2.12%   2.50%   1.40%   2.88%          
NPL %   8.71    7.92    7.82    7.78    7.13           
Charge-offs % (qtr. annualized)   0.90    0.14    0.59    1.44    0.29           
Allowance / loans %   5.75%   6.11%   5.32%   4.83%   4.84%          
Allowance / charge-offs   6.23 x   44.22 x   8.82 x   3.30 x   16.57 x          
                                    
Other Consumer                                   
Period-end loans ($ millions)  $10   $11   $11   $12   $12    (9)%   (17)%
30+ Delinq. % (a)   1.77%   1.31%   1.40%   2.48%   2.24%          
NPL %   7.09    6.86    6.66    6.22    5.38           
Charge-offs % (qtr. annualized)   10.22    5.97    9.24    8.21    6.74           
Allowance / loans %   10.34%   4.95%   4.69%   3.43%   4.48%          
Allowance / charge-offs   0.98 x   0.81 x   0.49 x   0.41 x   0.63 x          

NM - Not meaningful

* Amount is less than one percent.

(a) 30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

20

FHN: PORTFOLIO METRICS

Unaudited

 

 

C&I Portfolio: $9.6 Billion (57.5% of Total Loans) as of September 30, 2015

 

          % OS  
  General Corporate, Commercial, and Business Banking Loans         79 %  
  Loans to Mortgage Companies         17 %  
  Trust Preferred Loans         3 %  
  Bank Holding Company Loans         1 %  

 

Consumer Real Estate (primarily Home Equity) Portfolio: $4.8 Billion (28.8% of Total Loans)

 

Origination LTV and FICO for Portfolio as of September 30, 2015 Loan-to-Value  
(excludes whole loan insurance) <=60% >60% - <=80% >80% - 90%   >90%  
  FICO score greater than or equal to 740 11%   23%   17%   10%  
  FICO score 720-739 1%   4%   4%   3%  
  FICO score 700-719 1%   4%   4%   2%  
  FICO score 660-699 1%   4%   3%   3%  
  FICO score 620-659 —%   1%   1%   1%  
  FICO score less than 620 —%   1%   —%   1%  

 

Origination LTV and FICO for Portfolio - Regional Bank as of September 30, 2015 Loan-to-Value  
(excludes whole loan insurance) <=60% >60% - <=80% >80% - 90%   >90%  
  FICO score greater than or equal to 740 12%   24%   18%   13%  
  FICO score 720-739 1%   4%   4%   3%  
  FICO score 700-719 1%   3%   2%   2%  
  FICO score 660-699 1%   3%   3%   2%  
  FICO score 620-659 —%   1%   1%   —%  
  FICO score less than 620 —%   1%   —%   1%  

 

Origination LTV and FICO for Portfolio - Non-Strategic as of September 30, 2015 Loan-to-Value  
(excludes whole loan insurance) <=60% >60% - <=80% >80% - 90%   >90%  
  FICO score greater than or equal to 740 8%   21%   15%   5%  
  FICO score 720-739 2%   6%   6%   2%  
  FICO score 700-719 2%   5%   6%   2%  
  FICO score 660-699 2%   5%   4%   4%  
  FICO score 620-659 —%   1%   2%   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   164   78%   702   41%   30%  
  2003 $0.1   147   77%   717   30%   36%  
  2004 $0.3   134   80%   719   19%   28%  
  2005 $0.4   122   82%   726   15%   15%  
  2006 $0.4   111   79%   731   21%   18%  
  2007 $0.5   99   81%   736   26%   19%  
  2008 $0.2   88   75%   745   72%   50%  
  2009 $0.1   76   72%   748   86%   56%  
  2010 $0.2   62   79%   752   92%   72%  
  2011 $0.3   50   77%   760   89%   86%  
  2012 $0.6   39   77%   763   89%   91%  
  2013 $0.6   27   78%   756   86%   85%  
  2014 $0.5   15   81%   757   86%   89%  
  2015 $0.5   4   80%   759   84%   90%  
  Total $4.8   64   79%   747 (a)   63%   61%  
(a)  747 average portfolio origination FICO; 742 weighted average portfolio FICO (refreshed).    
21

FHN NON-GAAP TO GAAP RECONCILIATION

Quarterly, Unaudited

 

                          
(Dollars and shares in thousands, except per share data)   3Q15   2Q15    1Q15    4Q14    3Q14 
Tangible Common Equity (Non-GAAP)                         
(A) Total equity (GAAP)  $2,588,618   $2,517,905   $2,499,257   $2,581,590   $2,611,814 
Less: Noncontrolling interest (a)   295,431    295,431    295,431    295,431    295,431 
Less: Preferred stock   95,624    95,624    95,624    95,624    95,624 
(B) Total common equity  $2,197,563   $2,126,850   $2,108,202   $2,190,535   $2,220,759 
Less: Intangible assets (GAAP) (b)   171,556    172,854    174,152    175,450    160,987 
(C) Tangible common equity (Non-GAAP)  $2,026,007   $1,953,996   $1,934,050   $2,015,085   $2,059,772 
                          
Tangible Assets (Non-GAAP)                         
(D) Total assets (GAAP)  $25,384,109   $25,239,767   $25,715,888   $25,668,187   $23,982,597 
Less: Intangible assets (GAAP) (b)   171,556    172,854    174,152    175,450    160,987 
(E) Tangible assets (Non-GAAP)  $25,212,553   $25,066,913   $25,541,736   $25,492,737   $23,821,610 
                          
Average Tangible Common Equity (Non-GAAP)                         
(F) Average total equity (GAAP)  $2,545,544   $2,511,929   $2,607,521   $2,651,729   $2,631,841 
Less: Average noncontrolling interest (a)   295,431    295,431    295,431    295,431    295,431 
Less: Average preferred stock   95,624    95,624    95,624    95,624    95,624 
(G) Total average common equity  $2,154,489   $2,120,874   $2,216,466   $2,260,674   $2,240,786 
Less: Average intangible assets (GAAP) (b)   172,191    173,486    174,787    165,769    161,467 
(H) Average tangible common equity (Non-GAAP)  $1,982,298   $1,947,388   $2,041,679   $2,094,905   $2,079,319 
                          
Annualized Net Income/(Loss) Available to Common Shareholders                         
(I) Net income/(loss) available to common shareholders (annualized)  $266,521   $202,780   $(311,114)  $186,904   $182,790 
                          
Period-end Shares Outstanding                         
(J) Period-end shares outstanding   234,237    234,021    233,499    234,220    235,249 
                          
Tier 1 Common (Non-GAAP)                         
(K) Tier 1 capital (c)   (f)    (f)    (f)   $2,813,503   $2,783,147 
Less: Noncontrolling interest - FTBNA  preferred stock (d)   (f)    (f)    (f)    294,816    294,816 
Less: Preferred Stock   (f)    (f)    (f)    95,624    95,624 
Less: Trust preferred (e)   (f)    (f)    (f)    200,000    200,000 
(L) Tier 1 common (Non-GAAP)   (f)    (f)    (f)   $2,223,063   $2,192,707 
                          
Risk Weighted Assets                         
(M) Risk weighted assets (c)   (f)    (f)    (f)   $19,452,656   $19,238,109 
                          
Ratios                         
(I)/(H) Return on average tangible common equity (“ROTCE”) (Non-GAAP)   13.45%   10.41%   (15.24)%   8.92%   8.79%
(I)/(G) Return on common equity (GAAP)   12.37%   9.56%   (14.04)%   8.27%   8.16%
(C)/(E) Tangible common equity to tangible assets (“TCE/TA”) (Non-GAAP)   8.04%   7.80%   7.57%   7.90%   8.65%
(A)/(D) Total equity to total assets (GAAP)   10.20%   9.98%   9.72%   10.06%   10.89%
(C)/(J) Tangible book value per common share (Non-GAAP)  $8.65   $8.35   $8.28   $8.60   $8.76 
(B)/(J) Book value per common share (GAAP)  $9.38   $9.09   $9.03   $9.35   $9.44 
(L)/(M) Tier 1 common to risk weighted assets (Non-GAAP)   (f)     (f)    (f)    11.43%   11.40%
(K)/(D) Tier 1 capital to total assets (GAAP)   (f)    (f)    (f)    10.96%   11.60%
(a) Included in Total equity on the Consolidated Balance Sheet.
(b) Includes goodwill and other intangible assets, net of amortization.
(c) Defined by and calculated in conformity with bank regulations.
(d) Represents FTBNA preferred stock included in noncontrolling interest.
(e) Included in Term borrowings on the Consolidated Balance Sheet.
(f) In periods prior to 1Q15, these measures were used to reconcile non-GAAP to GAAP information.
22

FHN GLOSSARY OF TERMS

 

 

 

 

Average Assets for Leverage: The amount of assets a company uses to calculate the leverage ratio, which includes average total assets less disallowed portions of goodwill, other intangibles, and deferred tax assets, as well as certain other regulatory adjustments made to tier 1 capital.

 

Common Equity Tier 1: A measure of a company’s capital position under U.S. Basel III capital rules first applicable to FHN in 2015, which includes common equity less goodwill, other intangibles and certain other required regulatory deductions as defined in those rules. Common Equity Tier 1 capital under U.S. Basel III in 2015 is not the same as the non-regulatory Tier 1 Common capital commonly used prior to 2015; comparisons between the two are not meaningful.

 

Core Businesses: Management considers regional banking, fixed income, and corporate as FHN’s core businesses. Non-strategic has significant legacy assets and operations that are being wound down.

 

Fully Taxable Equivalent (“FTE”): Reflects the amount of tax-exempt income adjusted to a level that would yield the same after-tax income had that income been subject to taxation.

 

Tier 1 Capital Ratio: Ratio consisting of shareholders’ equity adjusted for certain unrealized gains/(losses) on available-for-sale securities, reduced by goodwill, certain other intangible assets, the disallowable portion of mortgage servicing rights and other disallowed assets divided by risk-adjusted assets. The components of Tier 1 capital, including the risk-adjustment of assets, changed significantly for FHN beginning in 2015 so that comparisons of a Tier 1 capital ratio after 2014 with a ratio prior to 2015 may not be meaningful.

 

Tier 1 Common: A measure of a company’s capital position associated with U.S. capital rules applicable to FHN prior to 2015, which includes Tier 1 capital as then defined less preferred stock amounts.

 

Troubled Debt Restructuring (“TDR”): A restructuring of debt whereby a creditor for economic or legal reasons related to the borrower’s 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 creditor’s investment as possible by increasing the probability of repayment.

 

 

Key Ratios

 

Return on Average Assets: Ratio is annualized net income to average total assets.

 

Return on Average Common Equity: Ratio is annualized net income available to common shareholders to average common equity.

 

Return on Average Tangible Common Equity: Ratio is annualized net income available to common shareholders to average tangible common equity.

 

Fee Income to Total Revenue: Ratio is fee income excluding securities gains/(losses) to total revenue excluding securities gains/(losses).

 

Efficiency Ratio: Ratio is noninterest expense to total revenue excluding securities gains/(losses).

 

Leverage Ratio: Ratio is tier 1 capital to average assets for leverage.

 

 

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.

 

23