Note 17 – Restructuring, Repositioning, and Efficiency

Beginning in 2007, FHN conducted a company-wide review of business practices with the goal of improving its overall profitability and productivity. Such reviews continue throughout the organization. As a result of such reviews, FHN has exited or sold non-strategic businesses, eliminated layers of management, and consolidated functional areas.

Generally, restructuring, repositioning, and efficiency charges related to exited businesses are included in the non-strategic segment while charges related to corporate-driven actions are included in the corporate segment. Net costs recognized by FHN in the nine months ended September 30, 2011, related to restructuring, repositioning, and efficiency activities were $22.8 million. Of this amount, $14.8 million represented exit costs that were accounted for in accordance with the Exit or Disposal Cost Obligations Topic of the FASB Accounting Standards Codification ("ASC 420"). Significant expenses recognized year to date 2011 resulted from the following actions:

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Severance and other employee costs of $12.9 million primarily related to efficiency initiatives within corporate and bank services functions which are classified as Employee compensation, incentives, and benefits within noninterest expense.

•

Goodwill impairment of $10.1 million related to the contracted sale of FHI which is reflected in Income/(loss) from discontinued operations.

•

Gain on divestiture of $9.4 million relating to the sale of Msaver which is reflected in Income/(loss) from discontinued operations, net of tax.

•

Loss of $9.0 million related to the cancellation of a technology services contract which is reflected in All other expense.

•

Gain on divestiture of $1.2 million relating to the reversal of a mortgage subservicing guarantee liability which is reflected in All other income and commissions.

Net costs recognized by FHN in the nine months ended September 30, 2010, related to restructuring, repositioning, and efficiency activities were $11.8 million. Of this amount, $7.1 million represented exit costs that were accounted for in accordance with ASC 420. Significant expenses recognized through September 30, 2010, resulted from the following actions:

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Severance and other employee costs of $3.3 million primarily related to the exit of the institutional equity research business, which is included in Income/(loss) from discontinued operations, net of tax, and the 2009 sale of Louisville remittance processing operations.

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Goodwill impairment of $3.3 million and lease abandonment expense of $2.4 million primarily related to the closure of the institutional equity research business which is classified within Income/(loss) from discontinued operations, net of tax.

•

Loss of $1.0 million related to asset impairments which is reflected in All other expense.

Settlement of the obligations arising from current initiatives will be funded from operating cash flows. The effect of suspending depreciation on assets held-for-sale was immaterial to FHN's results of operations for all periods. Due to the broad nature of the actions being taken, substantially all components of expense have benefitted from past efficiency initiatives and are expected to benefit from the current efficiency initiatives.

Activity in the restructuring and repositioning liability for the three and nine months ended September 30, 2011 and 2010, is presented in the following table, along with other restructuring and repositioning expenses recognized. Generally, restructuring, repositioning, and efficiency charges related to exited businesses are included in the non-strategic segment while charges related to corporate-driven actions are included in the corporate segment.


	Three Months Ended September 30									Nine Months Ended September 30
	2011					2010				2011					2010
(Dollars in thousands)	Expense			Liability		Expense		Liability		Expense			Liability		Expense			Liability
Beginning balance		$ -			$15,362		$ -		$11,837		$ -			$9,108		$ -			$15,903
Severance and other employee related costs		2,619			2,619		778		778		12,855			12,855		3,318			3,318
Facility consolidation costs		1,031			1,031		39		39		1,870			1,870		2,350			2,350
Other exit costs, professional fees, and other	-			-		1		1		84			84		1,462			1,462
Total accrued		3,650			19,012		818		12,655		14,809			23,917		7,130			23,033
Payments related to:
Severance and other employee related costs					5,515				403					8,945					6,106
Facility consolidation costs					620				1,819					1,896					3,215
Other exit costs, professional fees, and other					-				11					87					1,388
Accrual reversals					1,485				-					1,597					1,902
Restructuring and repositioning reserve balance					$11,392				$10,422					$11,392					$10,422
Other restructuring and repositioning expense:
Expense on servicing sales		-					-				-					1,532
(Gains)/losses on divestitures		(10,642	)				-				(11,395	)				-
Impairment of premises and equipment		74					325				258					1,031
Impairment of intangible assets		-					-				10,100					3,348
Impairment of other assets		-					-				-					267
Other		-					-				9,040					(1,466	)
Other (gains)/losses from restructuring and repositioning initiatives		(10,568	)				325				8,003					4,712
Net impact from restructuring and repositioning initiatives		$(6,918	)				$1,143				$22,812					$11,842

FHN began initiatives related to restructuring in second quarter 2007. Consequently, the following table presents cumulative amounts incurred to date through September 30, 2011, for costs associated with FHN's restructuring, repositioning, and efficiency initiatives:


(Dollars in thousands)	Total Expense
Severance and other employee related costs		$74,037
Facility consolidation costs		40,611
Other exit costs, professional fees, and other		19,030
Other restructuring and repositioning expense:
Loan portfolio divestiture		7,672
Mortgage banking expense on servicing sales		21,175
Net loss on divestitures		1,113
Impairment of premises and equipment		22,155
Impairment of intangible assets		48,231
Impairment of other assets		40,492
Other		7,574
Total restructuring and repositioning charges incurred to date as of September 30, 2011		$282,090