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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): April 13, 2018
 
 
First Horizon National Corporation
(Exact Name of Registrant as Specified in Charter)
 
 
TN
001-15185
62-0803242
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
 
165 MADISON AVENUE
 
MEMPHIS, TENNESSEE
38103
(Address of principal executive office)
(Zip Code)
 
Registrant’s telephone number, including area code: (901) 523-4444
 
 
(Former name or former address, if changed from last report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
 
 
 
o Emerging growth company
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


 
 
 









ITEM 2.02. Results of Operations and Financial Condition.
ITEM 7.01. Regulation FD Disclosure.
 
Furnished as Exhibit 99.1 is a copy of the First Horizon National Corporation (“FHN”) Financial Supplement and Exhibit 99.2 is a copy of the Investor Slide Presentation for the quarter ended March 31, 2018, which was released today.
 
The foregoing information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition” and Item 7.01, “Regulation FD Disclosure.” The exhibit speaks as of the date thereof and FHN does not assume any obligation to update in the future the information therein.
 
Use of Non-GAAP Measures and Regulatory Measures that are not GAAP in the Exhibits
 
Certain measures are included in the exhibits 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 the 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 financial condition, capital position, and financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and directors through various internal reports.
 
Presentation of regulatory measures, some of which follow regulatory definitions rather than GAAP, provides a meaningful base for comparability to other financial institutions subject to the same regulations as FHN. Such measures are used by the various banking regulators in reviewing the performance, stability, and capital adequacy of financial institutions they regulate. 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 the exhibits include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; 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; 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, excluding securities gains/(losses).
 
The non-GAAP measures presented in the exhibits include: return on average tangible common equity (“ROTCE”); tangible common equity (“TCE”) to tangible assets (“TA”); tangible book value ("TBV") per common share; adjusted ROTCE; earnings per share measures reported at the segment level; and various consolidated and segment results and performance measures and ratios adjusted for notable items identified in the exhibits.
 
Reconciliations of non-GAAP to GAAP measures and presentation of the most comparable GAAP items are presented near the end (immediately before the Glossary) of the Financial Supplement and at the end of the Investor Slide Presentation.

Forward-Looking Statements

This financial supplement and investor slide presentation contain 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, investor slide presentation and in FHN's most recent earnings 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.












ITEM 9.01. Financial Statements and Exhibits.
 
(d)
Exhibits

The following exhibits are furnished pursuant to Items 2.02 and 7.01, are not to be considered “filed” under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and shall not be incorporated by reference into any of FHN’s previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act.
 
Exhibit #
 
Description
 
 
 
 
 


















































SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
First Horizon National Corporation
 
 
 
 
 
 
Date: April 13, 2018
By: 
/s/ William C. Losch III
 
 
William C. Losch III
 
 
Executive Vice President and Chief Financial Officer















































(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 FINANCIAL SUPPLEMENT)

Exhibit




1







393011741_fhna02.jpg




FIRST QUARTER 2018
 
FINANCIAL SUPPLEMENT

 
If you need further information, please contact:
Aarti Bowman, Investor Relations
901-523-4017
[email protected]




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
 
 
Non-GAAP to GAAP Reconciliation
21
 
 
Glossary of Terms
22
 
 
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 earnings 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 financial condition, capital position, and financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.
 
Presentation of regulatory measures, some of which follow regulatory definitions rather than GAAP, provides a meaningful base for comparability to other financial institutions subject to the same regulations as FHN. Such measures are used by the various banking regulators in reviewing the performance, stability, and capital adequacy of financial institutions they regulate. 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: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; 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; 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, excluding securities gains/(losses).
 
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”), and tangible book value ("TBV") per common share.
 
Refer to the tabular reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items on page 21 of this financial supplement.

2





FIRST HORIZON NATIONAL CORPORATION SEGMENT STRUCTURE
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3




FHN PERFORMANCE HIGHLIGHTS
 
 
Summary of First Quarter 2018 Notable Items
Segment
 
Item
 
Income Statement
 
Amount Favorable/
(Unfavorable)
 
Comments
Corporate
 
Acquisition expenses
 
Noninterest expense: various
 
$(31.4) million
 
Pre-tax acquisition-related expenses primarily associated with the Capital Bank Financial Corp. ("CBF") acquisition
 
 
 
 
 
 
 
 
 
Corporate
 
Property sale
 
Noninterest income: other
 
$3.3 million
 
Pre-tax gain on the sale of a building
 
 
 
 
 
 
 
 
 
First Quarter 2018 vs. Fourth Quarter 2017

Consolidated
Net income available to common shareholders was $90.6 million, or $.27 per diluted share in 1Q18 compared to net loss available to common shareholders of $52.8 million, or $.20 loss per diluted share in 4Q17
Net interest income (“NII”) increased to $301.2 million in 1Q18 from $242.1 million in 4Q17
The increase in NII in 1Q18 was primarily driven by the full quarter impact of loan and deposit growth including accretion associated with the CBF acquisition (compared with one month in 4Q17)
NII was also favorably impacted in 1Q18 by higher average balances of other commercial loans, accelerated accretion due to loan pay-offs, and the positive impact of higher interest rates, but was negatively impacted by fewer days in 1Q18 relative to 4Q17 and lower average balances of loans to mortgage companies
Net Interest Margin (“NIM”) improved to 3.43 percent in 1Q18 from 3.27 percent in 4Q17
The improvement in NIM was also largely the result of deposit and loan growth and accretion associated with the CBF acquisition
The provision for loan losses was a credit of $1.0 million in 1Q18 compared to provision expense of $3.0 million in 4Q17
Noninterest income (including securities gains) increased to $136.0 million in 1Q18 from $133.2 million in 4Q17
Noninterest expense decreased to $313.3 million in 1Q18 from $346.7 million in 4Q17
The expense decrease was largely driven by the following items:
$30.0 million decrease in loss accruals related to legal matters
$15.3 million decrease in acquisition-related expenses associated with the CBF acquisition
Lower variable compensation and other personnel-related expenses in 1Q18 compared to 4Q17
These expense decreases were somewhat offset by a full quarter of expenses related to the inclusion of Capital Bank in 1Q18 compared with one month of expenses in 4Q17
Provision for income taxes decreased to $29.9 million in 1Q18 from $74.0 million in 4Q17
1Q18 includes $1.6 million of unfavorable discrete items related to CBF purchase accounting adjustments
4Q17 includes the effects of the Tax Cuts and Jobs Act ("The Tax Reform Act") somewhat mitigated by a favorable effective tax rate adjustment associated with the reversal of a capital loss deferred tax valuation allowance

Regional Banking
Pre-tax income increased to $167.0 million in 1Q18 from $126.2 million in 4Q17; PPNR was $172.4 million and $135.9 million in 1Q18 and 4Q17, respectively
Average loans increased to $25.7 billion in 1Q18 from $21.1 billion in 4Q17; period-end loans decreased 1 percent to $26.0 billion in 1Q18
Average deposits increased to $27.1 billion in 1Q18 from $22.4 billion in 4Q17, respectively; period-end deposits remained consistent at $27.7 billion
The increase in average loans and deposits was primarily driven by loans and deposits added through the CBF acquisition late in 4Q17
NII increased 22 percent to $298.7 million in 1Q18 from $244.0 million in 4Q17 primarily due to the full quarter impact of loan and deposit growth and accretion associated with the CBF acquisition (compared with one month in 4Q17)
Provision expense decreased to $5.3 million in 1Q18 from $9.7 million in 4Q17
Noninterest income increased 12 percent to $78.9 million in 1Q18 from $70.5 million in 4Q17 largely driven by increases in bankcard fee income, other service charges, and deposit fee income, as well as other increases due to the full quarter impact of CBF activities in 1Q18 compared with one month of CBF activities in 4Q17
Noninterest expense was $205.2 million in 1Q18, up 15 percent from $178.6 million in 4Q17
1Q18 expense includes a $29.5 million increase in expenses attributable to CBF activities, inclusive of a $12.4 million increase in personnel-related expenses (primarily due to the full quarter impact of CBF activities in 1Q18 compared with one month in 4Q17)

Fixed Income
Pre-tax income was $3.5 million in 1Q18 compared to $6.0 million in 4Q17
NII increased to $8.5 million in 1Q18 from $5.9 million in 4Q17
Noninterest income decreased to $45.6 million in 1Q18 from $55.3 million in 4Q17
Fixed income product revenue was $38.0 million in 1Q18 compared to $40.6 million in 4Q17
Fixed income product average daily revenue (“ADR”) was $624 thousand and $655 thousand in 1Q18 and 4Q17, respectively
Other product revenue was $7.6 million in 1Q18 compared to $14.6 million in 4Q17 due to a decrease in fees from loan sales
Noninterest expense was $50.5 million in 1Q18 compared to $55.2 million in 4Q17 driven by a decrease in variable compensation expense somewhat offset by the seasonal first quarter FICA reset

4




FHN PERFORMANCE HIGHLIGHTS (continued)
 
 
First Quarter 2018 vs. Fourth Quarter 2017 (continued)
 
 
 
 
Corporate
Pre-tax loss was $54.8 million in 1Q18 compared to pre-tax loss of $82.9 million in 4Q17
NII was negative $13.2 million and negative $15.6 million in 1Q18 and 4Q17, respectively
Estimated effective duration of the securities portfolio was 4.5 years in 1Q18 and 3.7 years in 4Q17
Noninterest income (including net securities gains) was $9.5 million in 1Q18, up from $6.7 million in 4Q17
1Q18 includes a $3.3 million gain on the sale of a building
Noninterest expense decreased to $51.1 million in 1Q18 from $74.0 million in 4Q17
1Q18 includes a $15.3 million decrease in acquisition-related expenses primarily associated with the CBF acquisition, as well as lower personnel-related expenses relative to 4Q17
4Q17 expense also includes a $5.6 million charitable contribution to the First Tennessee Foundation, somewhat offset by $4.3 million of deferred compensation BOLI gains

Non-Strategic
Pre-tax income was $9.2 million in 1Q18 compared to pre-tax loss of $23.7 million in 4Q17
NII was $7.2 million and $7.8 million in 1Q18 and 4Q17, respectively
The provision credit was $6.3 million in 1Q18 compared to a provision credit of $6.7 million in 4Q17
Noninterest expense decreased to $6.4 million in 1Q18 from $38.9 million in 4Q17
4Q17 expense includes $32.0 million of pre-tax loss accruals related to legal matters

Asset Quality
Allowance for loan losses decreased to $187.2 million in 1Q18 from $189.6 million in 4Q17; the allowance to loans ratio remained at 69 bps
Net charge-offs were $1.4 million in 1Q18 compared to $8.3 million in 4Q17
Regional banking net charge-offs were $3.6 million compared to $11.6 million in 4Q17
4Q17 was primarily due to a single larger credit within the C&I portfolio as a result of borrower fraud
Non-strategic net recoveries were $2.2 million compared to $3.3 million in 4Q17
Nonperforming loans (“NPLs”), excluding loans held-for-sale, increased to $132.0 million in 1Q18 from $130.6 million in 4Q17
30+ delinquencies decreased $13.1 million to $79.4 million in 1Q18 from $92.5 million in 4Q17
The decrease was primarily driven by favorable resolutions across the commercial and consumer portfolios

Taxes
The effective tax rates for 1Q18 and 4Q17 were 23.96 percent and 288.93 percent, respectively
1Q18 was favorably affected by the decrease in the federal tax rate from 35 percent to 21 percent, non-deductible expenses related to FDIC premium and executive compensation offset a portion of the benefit from the rate decrease
1Q18 includes $1.6 million of unfavorable discrete items related to CBF purchase accounting adjustments
4Q17 effective rate was negatively impacted by the estimated effects of the Tax Reform Act primarily associated with a decrease in the valuation of the net deferred tax asset balance
4Q17 effective rate was favorably impacted by the reversal of a capital loss deferred tax valuation allowance
The rates also reflect the favorable net effect from permanent benefits. Permanent benefits primarily consist of tax credit investments, life insurance, and tax-exempt interest. The permanent benefits in 2018 are offset by non-deductibility (under Tax Reform) of a portion of FDIC premiums and executive compensation expenses

Capital and Liquidity
Declared $.12 per common share quarterly dividend in 1Q18, aggregating $39.2 million, which was paid on April 2, 2018
Declared aggregate preferred quarterly dividend of $1.6 million in 1Q18 which was paid on April 10, 2018
There were no repurchases of shares in 1Q18 (other than those related to employee stock award programs). In January 2018, FHN announced board approval of a new $250 million common share purchase program that will expire January 31, 2020, replacing an old program scheduled to expire January 31, 2018
Capital ratios (regulatory capital ratios calculated under the Basel III risk-based capital rules as phased-in; current quarter is an estimate)
Total equity to total assets (GAAP) of 11.30 percent in 1Q18 compared to 11.06 percent in 4Q17
Tangible common equity to tangible assets (Non-GAAP) of 6.71 percent in 1Q18 compared to 6.57 percent in 4Q17
Common Equity Tier 1 of 8.98 percent in 1Q18 compared to 8.88 percent in 4Q17
Tier 1 of 9.98 percent in 1Q18 compared to 9.83 percent in 4Q17
Total Capital of 11.25 percent in 1Q18 compared to 11.10 percent in 4Q17
Leverage of 8.50 percent in 1Q18 compared to 10.31 percent in 4Q17; 1Q18 decrease is driven by an increase in average assets for leverage (ratio denominator) due to the timing of the CBF acquisition late in 4Q17 (full quarter average impact in 1Q18 compared to one month in 4Q17)

5




FHN CONSOLIDATED INCOME STATEMENT
Quarterly, Unaudited
 
         (a)
 
 

 
 

 
 

 
 

 
1Q18 Changes vs.
(Dollars in thousands, except per share data)
1Q18

 
4Q17

 
3Q17

 
2Q17

 
1Q17

 
4Q17
1Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
363,355

 
$
287,633

 
$
248,145

 
$
235,341

 
$
218,811

 
26

%
66

%
Less: interest expense
62,182

 
45,545

 
38,328

 
34,640

 
29,103

 
37

%
NM

 
Net interest income
301,173

 
242,088

 
209,817

 
200,701

 
189,708

 
24

%
59

%
Provision/(provision credit) for loan losses
(1,000
)
 
3,000

 

 
(2,000
)
 
(1,000
)
 
NM

 
*

 
Net interest income after provision for loan losses
302,173

 
239,088

 
209,817

 
202,701

 
190,708

 
26

%
58

%
Noninterest income:
 

 
 

 
 

 
 

 
 

 


 


 
Fixed income
45,506

 
55,079

 
55,758

 
55,110

 
50,678

 
(17
)
%
(10
)
%
Deposit transactions and cash management
31,162

 
30,158

 
28,011

 
27,858

 
24,565

 
3

%
27

%
Brokerage, management fees and commissions
13,483

 
12,642

 
11,937

 
12,029

 
11,906

 
7

%
13

%
Trust services and investment management
7,277

 
7,116

 
6,953

 
7,698

 
6,653

 
2

%
9

%
Bankcard income
11,267

 
8,237

 
6,170

 
5,605

 
5,455

 
37

%
NM

 
Bank-owned life insurance
3,993

 
3,987

 
3,539

 
4,351

 
3,247

 
*

 
23

%
Securities gains/(losses), net
86

 
137

 
6

 
405

 
44

 
(37
)
%
95

%
Other (b)
23,243

 
15,834

 
43

 
14,617

 
14,391

 
47

%
62

%
Total noninterest income
136,017

 
133,190

 
112,417

 
127,673

 
116,939

 
2

%
16

%
Adjusted gross income after provision for loan losses
438,190

 
372,278

 
322,234

 
330,374

 
307,647

 
18

%
42

%
Noninterest expense:
 

 
 

 
 

 
 

 
 

 


 


 
Employee compensation, incentives, and benefits (c)
171,254

 
177,312

 
137,383

 
138,276

 
134,494

 
(3
)
%
27

%
Repurchase and foreclosure provision (d)
(72
)
 
53

 
(609
)
 
(21,733
)
 
(238
)
 
NM

 
70

%
Legal fees
2,345

 
1,245

 
2,052

 
3,496

 
5,283

 
88

%
(56
)
%
Professional fees (e)
12,272

 
26,958

 
6,566

 
9,659

 
4,746

 
(54
)
%
NM

 
Occupancy
20,451

 
15,887

 
13,619

 
12,800

 
12,340

 
29

%
66

%
Computer software
15,132

 
13,157

 
11,993

 
12,285

 
10,799

 
15

%
40

%
Contract employment and outsourcing (f)
4,053

 
5,979

 
2,762

 
3,255

 
2,958

 
(32
)
%
37

%
Operations services
15,561

 
10,619

 
10,805

 
11,524

 
10,875

 
47

%
43

%
Equipment rentals, depreciation, and maintenance
10,018

 
9,530

 
6,626

 
7,036

 
6,351

 
5

%
58

%
FDIC premium expense
8,614

 
9,090

 
6,062

 
5,927

 
5,739

 
(5
)
%
50

%
Advertising and public relations
3,599

 
5,313

 
5,205

 
4,095

 
4,601

 
(32
)
%
(22
)
%
Communications and courier
8,232

 
5,379

 
4,328

 
4,117

 
3,800

 
53

%
NM

 
Amortization of intangible assets
6,474

 
3,568

 
1,964

 
1,964

 
1,232

 
81

%
NM

 
Other (b)
35,332

 
62,580

 
28,113

 
25,216

 
19,225

 
(44
)
%
84

%
Total noninterest expense
313,265

 
346,670

 
236,869

 
217,917

 
222,205

 
(10
)
%
41

%
Income before income taxes
124,925

 
25,608

 
85,365

 
112,457

 
85,442

 
NM

 
46

%
Provision for income taxes (g)
29,931

 
73,989

 
13,596

 
17,253

 
27,054

 
(60
)
%
11

%
Net income/(loss)
94,994

 
(48,381
)
 
71,769

 
95,204

 
58,388

 
NM

 
63

%
Net income attributable to noncontrolling interest
2,820

 
2,910

 
2,883

 
2,852

 
2,820

 
(3
)
%
*

 
Net income/(loss) attributable to controlling interest
92,174

 
(51,291
)
 
68,886

 
92,352

 
55,568

 
NM

 
66

%
Preferred stock dividends
1,550

 
1,550

 
1,550

 
1,550

 
1,550

 
*

 
*

 
Net income/(loss) available to common shareholders
$
90,624

 
$
(52,841
)
 
$
67,336

 
$
90,802

 
$
54,018

 
NM

 
68

%
Common Stock Data
 

 
 

 
 

 
 

 
 

 


 


 
EPS
$
0.28

 
$
(0.20
)
 
$
0.29

 
$
0.39

 
$
0.23

 
NM

 
22

%
Basic shares (thousands)
326,489

 
265,169

 
233,749

 
233,482

 
233,076

 
23

%
40

%
Diluted EPS
$
0.27

 
$
(0.20
)
 
$
0.28

 
$
0.38

 
$
0.23

 
NM

 
17

%
Diluted shares (thousands)
330,344

 
265,169

 
236,340

 
236,263

 
236,855

 
25

%
39

%
Key Ratios & Other
 
 
 

 
 

 
 

 
 

 
 

 
 
 
Return on average assets (annualized) (h)
0.95
%
 
(0.58
)%
 
0.99
%
 
1.32
%
 
0.82
%
 
 

 
 

 
Return on average common equity (“ROE”) (annualized) (g)
8.79
%
 
(6.73
)%
 
10.79
%
 
15.26
%
 
9.40
%
 
 

 
 

 
Return on average tangible common equity (“ROTCE”) (annualized) (h) (i)
14.06
%
 
(8.78
)%
 
12.17
%
 
17.30
%
 
10.33
%
 
 

 
 

 
Fee income to total revenue (h)
31.10
%
 
35.47
%
 
34.89
%
 
38.80
%
 
38.13
%
 
 

 
 

 
Efficiency ratio (h)
71.67
%
 
92.41
%
 
73.51
%
 
66.44
%
 
72.47
%
 
 

 
 

 
Average full time equivalent employees
5,835

 
4,792

 
4,277

 
4,328

 
4,258

 
 

 
 

 
Certain previously reported amounts have been revised to reflect the retroactive effect of the adoption of ASU 2017-07 "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" effective January 1, 2018.
NM - Not meaningful
* Amount is less than one percent.
(a) 1Q18 includes three months of activity related to the CBF acquisition compared with one month of activity in 4Q17.
(b) Refer to the Other Income and Other Expense table on page 7 for additional information.
(c) 1Q18 and 4Q17 include $3.9 million and $16.8 million, respectively of acquisition-related expenses associated with the CBF acquisition.
(d) Expense reversals driven by the settlements/recoveries of certain repurchase claims.
(e) 1Q18 and 4Q17 include $5.4 million and $20.3 million, respectively of acquisition-related expenses associated with the CBF acquisition; 3Q17 and 2Q17 increases largely driven by acquisition-related expenses primarily associated with the CBF and Coastal acquisitions.
(f) 1Q18 and 4Q17 include $1.4 million and $.9 million, respectively of acquisition-related expenses associated with the CBF acquisition.
(g) 1Q18 includes $1.6 million of unfavorable discrete tax adjustments related to CBF purchase accounting adjustments; 4Q17 increase primarily associated with the effects of the Tax Act; 4Q17, 3Q17 and 2Q17 include the impact of a favorable effective tax rate adjustment associated with the reversal of a capital loss deferred tax valuation allowance.
(h) See Glossary of Terms for definitions of Key Ratios.
(i) This non-GAAP measure is reconciled to ROE (GAAP) in the Non-GAAP to GAAP reconciliation on page 21 of this financial supplement.

6




FHN OTHER INCOME AND OTHER EXPENSE
Quarterly, Unaudited
 
 
                 (a)
 
 
 
 
 
 
 
 
 
1Q18 Changes vs.
(Thousands)
 
1Q18

 
4Q17

 
3Q17

 
2Q17

 
1Q17

 
4Q17
1Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
ATM and interchange fees
 
$
3,267

 
$
3,427

 
$
3,137

 
$
3,083

 
$
2,778

 
(5
)
%
18

%
Dividend income (b)
 
2,249

 

 

 

 

 
NM

 
NM

 
Electronic banking fees
 
1,204

 
1,171

 
1,282

 
1,306

 
1,323

 
3

%
(9
)
%
Letter of credit fees
 
1,249

 
1,292

 
1,211

 
1,122

 
1,036

 
(3
)
%
21

%
Mortgage banking
 
1,770

 
766

 
1,354

 
1,268

 
1,261

 
NM


40

%
Deferred compensation (c)
 
451

 
1,876

 
1,128

 
1,491

 
1,827

 
(76
)
%
(75
)
%
Insurance commissions
 
757

 
472

 
567

 
592

 
883

 
60

%
(14
)
%
Other service charges
 
5,124

 
3,485

 
2,954

 
3,109

 
2,984

 
47

%
72

%
Gain/(loss) on extinguishment of debt (d)
 

 

 
(14,329
)
 

 

 
NM

 
NM

 
Other (e)
 
7,172

 
3,345

 
2,739

 
2,646

 
2,299

 
NM


NM

 
Total
 
$
23,243

 
$
15,834

 
$
43

 
$
14,617

 
$
14,391

 
47

%
62

%
 
 
 
 
 
 
 
 
 
 
 
 





 
Other Expense
 
 
 
 

 
 

 
 

 
 

 





 
Litigation and regulatory matters
 
$
2,134

 
$
32,114

 
$
8,162

 
$
533

 
$
(292
)
 
(93
)
%
NM

 
Tax credit investments
 
1,137

 
822

 
762

 
942

 
942

 
38

%
21

%
Travel and entertainment
 
2,983

 
3,154

 
2,798

 
3,162

 
2,348

 
(5
)
%
27

%
Employee training and dues
 
1,779

 
1,357

 
1,198

 
1,453

 
1,543

 
31

%
15

%
Customer relations
 
1,063

 
1,510

 
1,361

 
1,543

 
1,336

 
(30
)
%
(20
)
%
Miscellaneous loan costs
 
1,142

 
673

 
757

 
699

 
622

 
70

%
84

%
Supplies
 
1,836

 
1,222

 
928

 
1,093

 
863

 
50

%
NM

 
OREO
 
108

 
53

 
303

 
446

 
204

 
NM


(47
)
%
Other insurance and taxes
 
2,665

 
2,457

 
2,396

 
2,443

 
2,390

 
8

%
12

%
Non-service components of net periodic pension and post retirement cost
 
504

 
363

 
454

 
851

 
477

 
39

%
6

%
Other (f)
 
19,981

 
18,855

 
8,994

 
12,051

 
8,792

 
6

%
NM

 
Total
 
$
35,332

 
$
62,580

 
$
28,113

 
$
25,216

 
$
19,225

 
(44
)
%
84

%
Certain previously reported amounts have been revised to reflect the retroactive effect of the adoption of ASU 2017-07 "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" effective January 1, 2018.
NM - Not meaningful
(a) 1Q18 includes three months of activity related to the CBF acquisition compared to one month of activity in 4Q17.
(b) Effective 1/1/18 FHN adopted ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" and began recording dividend income from FRB and FHLB holdings in other income. Prior to 1Q18 these amounts were included in Interest income on the Income Statement.
(c) Amounts driven by market conditions and are mirrored by changes in deferred compensation expense which is included in employee compensation expense.
(d) 3Q17 includes a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction.
(e) 1Q18 includes a $3.3 million gain on the sale of a building.
(f) 1Q18 includes $17.0 million of acquisition-related expenses associated with the CBF acquisition; 4Q17 includes a $5.6 million charitable contribution to the First Tennessee Foundation and $6.2 million of acquisition-related expenses associated with the CBF acquisition; 2Q17 includes a $3.2 million charitable contribution to the First Tennessee Foundation.

















                        

7




FHN CONSOLIDATED PERIOD-END BALANCE SHEET
Quarterly, Unaudited 
 
 
 
 
 
 
 
 
 
 
 
1Q18 Changes vs.
(Thousands)
1Q18

 
4Q17

 
3Q17

 
2Q17

 
1Q17

 
4Q17
1Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

 
Investment securities (a)
$
4,836,155

 
$
5,180,255

 
$
3,973,138

 
$
3,959,592

 
$
3,953,632

 
(7
)
%
22

%
Loans held-for-sale (b)
770,412

 
699,377

 
339,780

 
432,771

 
105,456

 
10

%
NM

 
Loans, net of unearned income
27,249,793

 
27,658,929

 
20,166,091

 
19,989,319

 
19,090,074

 
(1
)
%
43

%
Federal funds sold
62,541

 
87,364

 
76,316

 
34,036

 
31,495

 
(28
)
%
99

%
Securities purchased under agreements to resell
910,670

 
725,609

 
663,637

 
657,991

 
835,222

 
26

%
9

%
Interest-bearing cash (c)
309,351

 
1,185,600

 
604,326

 
573,666

 
2,106,597

 
(74
)
%
(85
)
%
Trading securities
1,759,430

 
1,416,345

 
1,469,402

 
1,315,891

 
1,167,310

 
24

%
51

%
Total earning assets
35,898,352

 
36,953,479

 
27,292,690

 
26,963,266

 
27,289,786

 
(3
)
%
32

%
Cash and due from banks
459,820

 
639,073

 
347,802

 
387,053

 
369,290

 
(28
)
%
25

%
Fixed income receivables (d)
94,036

 
68,693

 
68,750

 
127,724

 
168,315

 
37

%
(44
)
%
Goodwill (e)
1,398,501

 
1,386,853

 
236,335

 
236,335

 
191,371

 
1

%
NM

 
Other intangible assets, net (e)
174,415

 
184,389

 
43,157

 
45,121

 
19,785

 
(5
)
%
NM

 
Premises and equipment, net
531,981

 
532,251

 
293,393

 
292,463

 
290,497

 
*

 
83

%
Other real estate owned ("OREO")
35,715

 
43,382

 
12,522

 
11,901

 
15,144

 
(18
)
%
NM

 
Allowance for loan losses
(187,194
)
 
(189,555
)
 
(194,867
)
 
(197,257
)
 
(201,968
)
 
(1
)
%
(7
)
%
Derivative assets
114,348

 
81,634

 
80,976

 
91,653

 
98,120

 
40

%
17

%
Other assets (a)
1,943,221

 
1,723,189

 
1,441,878

 
1,411,697

 
1,378,260

 
13

%
41

%
Total assets
$
40,463,195

 
$
41,423,388

 
$
29,622,636

 
$
29,369,956

 
$
29,618,600

 
(2
)
%
37

%
 
 
 
 
 
 
 
 
 
 
 


 


 
Liabilities and Equity:
 
 
 

 
 

 
 

 
 

 


 


 
Deposits:
 
 
 

 
 

 
 

 
 

 


 


 
Consumer interest
$
12,674,251

 
$
12,877,955

 
$
9,164,017

 
$
9,429,788

 
$
9,367,537

 
(2
)
%
35

%
Commercial interest
5,816,992

 
5,469,868

 
2,915,446

 
3,285,931

 
3,275,599

 
6

%
78

%
Market-indexed (f)
4,346,862

 
4,249,536

 
3,534,546

 
3,315,045

 
4,481,085

 
2

%
(3
)
%
Total interest-bearing deposits
22,838,105

 
22,597,359

 
15,614,009

 
16,030,764

 
17,124,221

 
1

%
33

%
Noninterest-bearing deposits
7,980,846

 
8,023,003

 
6,485,245

 
6,302,585

 
6,355,620

 
(1
)
%
26

%
Total deposits
30,818,951

 
30,620,362

 
22,099,254

 
22,333,349

 
23,479,841

 
1

%
31

%
Federal funds purchased
392,714

 
399,820

 
292,650

 
314,892

 
504,805

 
(2
)
%
(22
)
%
Securities sold under agreements to repurchase
672,154

 
656,602

 
516,867

 
743,684

 
406,354

 
2

%
65

%
Trading liabilities
827,362

 
638,515

 
579,028

 
555,793

 
848,190

 
30

%
(2
)
%
Other short-term borrowings (g)
1,332,141

 
2,626,213

 
1,637,419

 
1,044,658

 
79,454

 
(49
)
%
NM

 
Term borrowings (h)
1,214,967

 
1,218,097

 
1,059,507

 
1,033,329

 
1,035,036

 
*

 
17

%
Fixed income payables (d)
6,167

 
48,996

 
44,304

 
28,571

 
21,116

 
(87
)
%
(71
)
%
Derivative liabilities
121,394

 
85,061

 
83,146

 
92,717

 
101,347

 
43

%
20

%
Other liabilities
504,817

 
549,234

 
426,910

 
396,075

 
401,997

 
(8
)
%
26

%
Total liabilities
35,890,667

 
36,842,900

 
26,739,085

 
26,543,068

 
26,878,140

 
(3
)
%
34

%
Equity:
 
 
 

 
 

 
 

 
 

 


 


 
Common stock
204,496

 
204,211

 
146,395

 
146,336

 
146,177

 
*

 
40

%
Capital surplus
3,155,407

 
3,147,613

 
1,401,359

 
1,395,797

 
1,391,777

 
*

 
NM

 
Undivided profits
1,211,655

 
1,160,434

 
1,177,126

 
1,131,162

 
1,061,409

 
4

%
14

%
Accumulated other comprehensive loss, net (i)
(390,085
)
 
(322,825
)
 
(232,384
)
 
(237,462
)
 
(249,958
)
 
21

%
56

%
Preferred stock
95,624

 
95,624

 
95,624

 
95,624

 
95,624

 
*

 
*

 
Noncontrolling interest (j)
295,431

 
295,431

 
295,431

 
295,431

 
295,431

 
*

 
*

 
Total equity
4,572,528

 
4,580,488

 
2,883,551

 
2,826,888

 
2,740,460

 
*

 
67

%
Total liabilities and equity
$
40,463,195

 
$
41,423,388

 
$
29,622,636

 
$
29,369,956

 
$
29,618,600

 
(2
)
%
37

%
Certain previously reported amounts have been reclassified to reflect the early adoption of ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" effective December 31, 2017.
NM - Not meaningful
*Amount is less than one percent.
(a) Effective 1/1/18 FHN adopted ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" which resulted in the reclassification of all equity investments from investment securities to other assets.
(b) 4Q17 increase driven by loans acquired from CBF that have been classified as held-for-sale; 2Q17 increase driven by the Coastal acquisition.
(c) Includes excess balances held at Fed; 4Q17 increase driven by the CBF acquisition; 2Q17 decrease due to loan growth and the Coastal acquisition; 1Q17 level largely driven by an inflow of customer deposits.
(d) Period-end balances fluctuate based on the level of pending unsettled trades.
(e) 4Q17 increase driven by the CBF acquisition; 2Q17 increase driven by the Coastal acquisition.
(f) Market-indexed deposits are tied to an index not administered by FHN and are comprised of insured network deposits, correspondent banking deposits, and trust/sweep deposits.
(g) Balance fluctuates largely based on the level of FHLB borrowings as a result of loan demand and deposit levels.
(h) 4Q17 increase driven by the CBF acquisition.
(i) 1Q18 increase primarily driven by an increase in unrealized losses on AFS securities.
(j) Consists of preferred stock of subsidiaries.




8




FHN CONSOLIDATED AVERAGE BALANCE SHEET
Quarterly, Unaudited 
 
                 (a)
 
 
 
 
 
 
 
 
 
1Q18 Changes vs.
(Thousands)
1Q18

 
4Q17

 
3Q17

 
2Q17

 
1Q17

 
4Q17
1Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

 
Earning assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

 
Loans, net of unearned income:
 
 
 

 
 

 
 

 
 

 
 

 
 

 
Commercial, financial, and industrial (C&I)
$
15,535,621

 
$
13,756,024

 
$
12,474,188

 
$
11,830,942

 
$
11,381,258

 
13

%
37

%
Commercial real estate
4,230,217

 
2,892,949

 
2,211,831

 
2,175,733

 
2,176,355

 
46

%
94

%
Consumer real estate
6,302,365

 
5,029,588

 
4,398,550

 
4,431,591

 
4,491,786

 
25

%
40

%
Permanent mortgage
389,732

 
400,991

 
405,287

 
408,202

 
415,916

 
(3
)
%
(6
)
%
Credit card and other
594,130

 
439,057

 
354,807

 
355,123

 
348,123

 
35

%
71

%
Total loans, net of unearned income (b)
27,052,065

 
22,518,609

 
19,844,663

 
19,201,591

 
18,813,438

 
20

%
44

%
Loans held-for-sale (c)
726,978

 
504,577

 
540,121

 
320,698

 
110,726

 
44

%
NM

 
Investment securities:
 

 
 

 
 

 
 

 
 

 


 


 
U.S. treasuries
98

 
99

 
109

 
100

 
100

 
(1
)
%
(2
)
%
U.S. government agencies
4,792,709

 
4,042,844

 
3,762,180

 
3,755,818

 
3,735,472

 
19

%
28

%
States and municipalities
51

 
182

 

 

 
4,350

 
(72
)
%
(99
)
%
Corporate bonds
65,634

 
29,904

 
10,000

 
10,000

 
10,000

 
NM

 
NM

 
Other (d)
5,153

 
203,395

 
188,361

 
188,229

 
186,670

 
(97
)
%
(97
)
%
Total investment securities
4,863,645

 
4,276,424

 
3,960,650

 
3,954,147

 
3,936,592

 
14

%
24

%
Trading securities
1,711,776

 
1,439,152

 
1,125,033

 
1,283,212

 
929,545

 
19

%
84

%
Other earning assets:
 

 
 

 
 

 
 

 
 

 


 


 
Federal funds sold
27,797

 
24,980

 
29,852

 
36,936

 
17,015

 
11

%
63

%
Securities purchased under agreements to resell
881,429

 
818,887

 
664,208

 
833,253

 
691,469

 
8

%
27

%
Interest-bearing cash (e)
482,060

 
459,868

 
392,274

 
970,853

 
2,117,498

 
5

%
(77
)
%
Total other earning assets
1,391,286

 
1,303,735

 
1,086,334

 
1,841,042

 
2,825,982

 
7

%
(51
)
%
Total earning assets
35,745,750

 
30,042,497

 
26,556,801

 
26,600,690

 
26,616,283

 
19

%
34

%
Allowance for loan losses
(190,420
)
 
(194,859
)
 
(196,631
)
 
(200,534
)
 
(202,618
)
 
(2
)
%
(6
)
%
Cash and due from banks
563,555

 
437,604

 
355,626

 
350,832

 
367,136

 
29

%
54

%
Fixed income receivables
61,757

 
79,162

 
54,286

 
64,779

 
41,688

 
(22
)
%
48

%
Premises and equipment, net
537,359

 
367,196

 
293,286

 
291,769

 
289,202

 
46

%
86

%
Derivative assets
79,292

 
68,692

 
74,453

 
74,974

 
84,419

 
15

%
(6
)
%
Other assets (d)
3,553,431

 
2,305,962

 
1,737,006

 
1,693,840

 
1,609,996

 
54

%
NM

 
Total assets
$
40,350,724

 
$
33,106,254

 
$
28,874,827

 
$
28,876,350

 
$
28,806,106

 
22

%
40

%
 
 
 
 
 
 
 
 
 
 
 
 
 


 
Liabilities and equity:
 
 
 

 
 

 
 

 
 

 


 


 
Interest-bearing liabilities:
 
 
 

 
 

 
 

 
 

 


 


 
Interest-bearing deposits:
 
 
 

 
 

 
 

 
 

 


 


 
Consumer interest
$
12,586,843

 
$
10,279,937

 
$
9,244,021

 
$
9,330,990

 
$
9,003,550

 
22

%
40

%
Commercial interest
5,540,090

 
3,684,643

 
2,876,398

 
3,086,139

 
3,097,922

 
50

%
79

%
Market-indexed (f)
4,238,128

 
3,958,224

 
3,523,450

 
3,809,281

 
4,666,292

 
7

%
(9
)
%
Total interest-bearing deposits
22,365,061

 
17,922,804

 
15,643,869

 
16,226,410

 
16,767,764

 
25

%
33

%
Federal funds purchased
464,300

 
425,900

 
376,150

 
435,854

 
552,820

 
9

%
(16
)
%
Securities sold under agreements to repurchase
756,487

 
595,275

 
680,366

 
616,837

 
419,131

 
27

%
80

%
Trading liabilities
822,815

 
741,063

 
597,269

 
762,667

 
642,456

 
11

%
28

%
Other short-term borrowings (g)
1,698,490

 
1,246,087

 
655,599

 
221,472

 
80,939

 
36

%
NM

 
Term borrowings
1,219,916

 
1,121,268

 
1,112,735

 
1,034,020

 
1,039,719

 
9

%
17

%
Total interest-bearing liabilities
27,327,069