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Restructuring, Repositioning, And Efficiency
 9 Months Ended
Sep. 30, 2012
Restructuring, Repositioning, And Efficiency [Abstract]  
Restructuring, Repositioning, And Efficiency

Note 16 – 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. Since 2007, in order to redeploy capital to higher-return businesses, FHN 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. During the nine months ended September 30, 2012, FHN recognized net charges of $6.2 million related to restructuring, repositioning, and efficiency activities. Of this amount, $4.7 million represent exit costs that were accounted for in accordance with the Exit of Disposal Cost Obligations Topic of the FASB Accounting Standards Codification (“ASC 420”). Significant expenses recognized during the nine months ended September 30, 2012 resulted from the following actions:

 

  • Severance and other employee costs of $4.8 million primarily related to efficiency initiatives within corporate and bank services functions which are classified as Employee compensation, incentives, and benefits within noninterest expense.
  • Expense of $2.3 million related to prior servicing sales which is reflected in Mortgage banking income.

Net charges recognized by FHN during 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 ASC 420. Significant expenses recognized during the nine months ended September 30, 2011 resulted from the following actions:

  • 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, net of tax.
  • 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 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.

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, 2012 and 2011 is presented in the following table, along with other restructuring and repositioning expenses recognized. 
                          
  Three Months Ended Nine Months Ended 
  September 30September 30
  2012 2011 2012 2011 
(Dollars in thousands)Expense Liability Expense Liability Expense Liability Expense Liability 
Beginning balance$ - $ 8,947 $ - $ 15,362 $ - $ 12,026 $ - $ 9,108 
Severance and other employee related costs  2,730   2,730   2,619   2,619   4,769   4,769   12,855   12,855 
Facility consolidation costs  41   41   1,031   1,031   (134)   (134)   1,870   1,870 
Other exit costs, professional fees, and other  -   -   -   -   111   111   84   84 
Total accrued  2,771   11,718   3,650   19,012   4,746   16,772   14,809   23,917 
Payments related to:                        
 Severance and other employee related costs     5,718      5,515      8,680      8,945 
 Facility consolidation costs     529      620      1,406      1,896 
 Other exit costs, professional fees, and other     -      -      15      87 
Accrual reversals     17      1,485      1,217      1,597 
 Restructuring and repositioning reserve balance   $ 5,454    $ 11,392    $ 5,454    $ 11,392 
                          
Other restructuring and repositioning expense:                        
 Mortgage banking expense on servicing sales  -      -      2,287      -    
 (Gains)/losses on divestitures  (180)      (10,642)      (865)      (11,395)    
 Impairment of premises and equipment  -      74      5      258    
 Impairment of intangible assets  -      -      -      10,100    
 Impairment of other assets  -      -      12      -    
 Other  -      -      -      9,040    
 Total other restructuring and repositioning expense  (180)      (10,568)      1,439      8,003    
Total restructuring and repositioning charges$ 2,591    $ (6,918)    $ 6,185    $ 22,812    

FHN began initiatives related to restructuring in second quarter 2007. Consequently, the following table presents cumulative amounts incurred to date through September 30, 2012 for costs associated with FHN’s restructuring, repositioning, and efficiency initiatives:
      
(Dollars in thousands)Total Expense 
Severance and other employee related costs  $ 82,565 
Facility consolidation costs  40,516 
Other exit costs, professional fees, and other   19,165 
Other restructuring and repositioning expense:    
 Loan portfolio divestiture   7,672 
 Mortgage banking expense on servicing sales  23,462 
 Net loss on divestitures   282 
 Impairment of premises and equipment  22,380 
 Impairment of intangible assets   48,231 
 Impairment of other assets  40,504 
 Other   7,574 
Total restructuring and repositioning charges incurred to date as of September 30, 2012 $292,351