Section 1: 8-K (8-K)

Document


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): January 18, 2019
 
 
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
 
 
 
 
 
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”) Fourth Quarter 2018 Financial Supplement and as Exhibit 99.2 is a copy of the Investor Slide Presentation for the quarter and year ended December 31, 2018, both of which were 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 Exhibit
 
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; and various 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
 
 
 
99.1

 
99.2

 


















































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: January 18, 2019
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







image.aspx?n=396409425_fhna15.jpg&f=396409425&k=396409425




FOURTH QUARTER 2018
 
FINANCIAL SUPPLEMENT

 
If you need further information, please contact:
Aarti Bowman, Investor Relations
901-523-4017
aagoorha@firsthorizon.com





FHN TABLE OF CONTENTS
 
 
 
Page
 
 
First Horizon National Corporation Segment Structure
3
 
 
Performance Highlights
4
 
 
Consolidated Results
 
       Income Statement
 
             Income Statement
7
             Other Income and Other Expense
8
       Balance Sheet
 
            Period End Balance Sheet
9
            Average Balance Sheet
10
            Net Interest Income
11
            Average Balance Sheet: Yields and Rates
12
 
 
Capital Highlights
13
 
 
Business Segment Detail
 
         Segment Highlights
14
         Regional Banking
15
         Fixed Income and Corporate
16
         Non-Strategic
17
 
 
Asset Quality
 
          Asset Quality: Consolidated
18
 
 
Non-GAAP to GAAP Reconciliation
20
 
 
Glossary of Terms
21
 
 
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 20 of this financial supplement.


2




FIRST HORIZON NATIONAL CORPORATION SEGMENT STRUCTURE
image.aspx?n=396409425_a21jpga22.gif&f=396409425&k=396409425
 
 
image.aspx?n=396409425_slide1a10.jpg&f=396409425&k=396409425

3




FHN PERFORMANCE HIGHLIGHTS
 
 
Summary of Fourth Quarter 2018 Notable Items
Segment
 
Item
 
Income Statement
 
Amount Favorable/
(Unfavorable)
 
Comments
Corporate
 
Acquisition-related items
 
Noninterest expense: various
 
$(11.6) million
 
Pre-tax acquisition-related expenses primarily associated with the Capital Bank Financial Corp. ("CBF") acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income: other
 
$(1.8) million
 
Pre-tax valuation adjustment on Held-For-Sale ("HFS") consumer loans included in the Non-Strategic segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$(13.4) million
 
Total acquisition-related items
 
 
 
 
 
 
 
 
 
Regional Banking
 
Excess fees on debit card transactions
 
Noninterest income: deposit transactions and cash management
 
$(8.7) million
 
Pre-tax adjustment related to the return of excess fees received from Capital Bank debit card transactions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fourth Quarter 2018 vs. Third Quarter 2018

Consolidated
 
 
 
 
 
 
 - 4Q18 diluted EPS of $.30 compared to $.83 in 3Q18; 3Q18 includes Visa gain

 - NII down from lower cash basis interest income, seasonal decline in loans to mortgage companies & decreased loan accretion, partially offset by deposit growth

 - NIM of 3.38% in 4Q18 compared to 3.44%; decrease due to increase in interest bearing cash & factors affecting NII

 - Provision increase primarily driven by charge-offs associated with 2 credits in C&I, partially offset by reductions in commercial and permanent mortgage

 - 4Q18 fee income includes unfavorable adjustment for Capital Bank debit card transactions & lower deferred compensation income

 - Expense decrease driven by lower deferred compensation expense & FDIC premium expenses

- Average deposits up 3%
 
 
 
 
 
 
 
 
(Thousands)
4Q18

 
3Q18

 
Change
 
Net interest income
$
302,512

 
$
305,700

 
(1
)
%
 
Noninterest income
110,274

 
348,972

 
(68
)
%
 
      Total revenues
412,786

 
654,672

 
(37
)
%
 
Provision for loan losses
6,000

 
2,000

 
NM

 
 
Noninterest expense
281,932

 
294,031

 
(4
)
%
 
      Income before income taxes
124,854

 
358,641

 
(65
)
%
 
Provision for income taxes
24,049

 
83,925

 
(71
)
%
 
     Net income/(loss)
$
100,805

 
$
274,716

 
(63
)
%
 
NM - Not meaningful
 
 
 
 
 
 
 
Regional Banking
 
 
 
 
 
 
 - 4Q18 decrease largely driven by unfavorable adjustment for Capital Bank debit card transactions & lower NII

 - Provision expense decreased 2%, reflecting stable credit trends

 - Period-end loans up 1%; Period-end deposits up 6%

 
 
 
 
 
 
 
 
(Thousands)
4Q18

 
3Q18

 
Change
 
Net interest income
$
299,659

 
$
302,485

 
(1
)
%
 
Noninterest income
69,218

 
79,855

 
(13
)
%
 
     Total revenues
368,877

 
382,340

 
(4
)
%
 
Provision for loan losses
7,849

 
8,045

 
(2
)
%
 
Noninterest expense
206,177

 
207,606

 
(1
)
%
 
     Income before income taxes
$
154,851

 
$
166,689

 
(7
)
%
 
Fixed Income
 
 
 
 
 
 
 - 4Q18 decrease driven by lower ADR, somewhat offset by increase in other product revenue
 
 
 
 
 
 
 
 
(Thousands)
4Q18

 
3Q18

 
Change
 
Net interest income
$
9,007

 
$
9,053

 
(1
)
%
 
Noninterest income
39,676

 
41,123

 
(4
)
%
 
     Total revenues
48,683

 
50,176

 
(3
)
%
 
Noninterest expense
46,962

 
47,047

 
*

 
 
     Income before income taxes
$
1,721

 
$
3,129

 
(45
)
%
 
* Amount is less than one percent
 
 
 
 
 
 
 
 


4




FHN PERFORMANCE HIGHLIGHTS (continued)
 
 
Fourth Quarter 2018 vs. Third Quarter 2018 (continued)
Corporate
 
 
 
 
 
 
 - 4Q18 decrease primarily driven by 3Q18 Visa gain

- Fee income down from lower deferred compensation income & $1.8 million negative valuation adjustment on acquisition-related HFS consumer loans

 - Expense down due to a decrease in deferred compensation expense

 - Estimated effective duration of securities portfolio 4.1 years in 4Q18 & 4.8 years in 3Q18

 
 
 
 
 
 
 
 
(Thousands)
4Q18

 
3Q18

 
Change
 
Net interest income
$
(15,355
)
 
$
(15,457
)
 
1

%
 
Noninterest income
(1,414
)
 
222,619

 
NM

 
 
     Total revenues
(16,769
)
 
207,162

 
NM

 
 
Noninterest expense
23,136

 
33,569

 
(31
)
%
 
     Income before income taxes
$
(39,905
)
 
$
173,593

 
NM

 
 
NM - Not meaningful
 
 
 
 
 
 
 
 
Non-Strategic
 
 
 
 
 
 
 - 4Q18 decrease driven by smaller provision credit and lower fee income

 - Level of provision continues to reflect declining balances & stable performance in the legacy portfolios

 - 3Q18 fee income favorably impacted by $3.8 million gain from reversal of prior valuation adjustment due to sales of TRUPs loans

 
 
 
 
 
 
 
 
(Thousands)
4Q18

 
3Q18

 
Change
 
Net interest income
$
9,201

 
$
9,619

 
(4
)
%
 
Noninterest income
2,794

 
5,375

 
(48
)
%
 
     Total revenues
11,995

 
14,994

 
(20
)
%
 
Provision for loan losses
(1,849
)
 
(6,045
)
 
69

%
 
Noninterest expense
5,657

 
5,809

 
(3
)
%
 
     Income before income taxes
$
8,187

 
$
15,230

 
(46
)
%
 

Asset Quality
ALLL decreased to $180.4 million in 4Q18 from $186.0 million in 3Q18; the allowance to loans ratio decreased 2 bps to 66 bps in 4Q18
Regional banking decreased $4.7 million to $156.1 million due primarily to one credit within C&I
Non-strategic decreased $.8 million to $24.3 million
Net charge-offs were $11.5 million in 4Q18 compared to $1.5 million in 3Q18
Regional banking net charge-offs were $12.6 million in 4Q18 primarily driven by two credits within the C&I portfolio; one due to fraud (disclosed and reserved for in 3Q18) and the other due to the loss of the customer's largest client
Non-strategic net recoveries were $1.1 million in 4Q18
Nonperforming loans (“NPLs”), excluding loans held-for-sale, were $147.7 million in 4Q18 compared to $146.4 million in 3Q18
Regional banking NPLs were $81.0 million in 4Q18 compared to $77.9 million in 3Q18
Non-strategic NPLs were $66.7 million in 4Q18 compared to $68.5 million in 3Q18
30+ delinquencies were $75.2 million in 4Q18 compared to $95.1 million in 3Q18 with improvement evident across all portfolios
Regional banking decreased $18.3 million to $51.3 million
Non-strategic decreased $1.6 million to $23.9 million

Taxes
The effective tax rates for 4Q18 and 3Q18 were 19.26 percent and 23.40 percent, respectively
The decrease in effective tax rate in 4Q18 primarily reflects an increase in discrete benefits from 3Q18
4Q18 includes $4.4 million of discrete tax benefits
3Q18 includes $.6 million of discrete tax expense
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, offset by non-deductibility of a portion of FDIC premiums and executive compensation expenses

Capital and Liquidity
Declared $.12 per common share quarterly dividend in 4Q18 ($38.4 million in the aggregate) which was paid on January 2, 2019
Declared aggregate preferred quarterly dividend of $1.6 million in 4Q18 which was paid on January 10, 2019
Repurchased 5.4 million shares costing $80.5 million in 4Q18 with a weighted average price of $15.00; $150.6 million remaining authorization under the stock purchase authorization announced in January 2018, scheduled to expire January 31, 2020
Capital ratios (regulatory capital ratios calculated under the Basel III risk-based capital rules as phased-in; current quarter is an estimate)
Common Equity Tier 1 of 9.75 percent in 4Q18 compared to 9.84 percent in 3Q18
Tier 1 of 10.79 percent in 4Q18 compared to 10.86 percent in 3Q18
Total Capital of 11.92 percent in 4Q18 compared to 12.02 percent in 3Q18
Leverage of 9.09 percent in 4Q18 compared to 9.21 percent in 3Q18


5




FHN PERFORMANCE HIGHLIGHTS (continued)
 
 
Consolidated Results for Fiscal Year 2018 vs. 2017


Consolidated
 
 
 
 
 
 
 - 2018 diluted EPS of $1.65 compared to $.65 in 2017; 2018 includes benefits of CBF acquisition and Visa gain

 - NII up from loans added through CBF acquisition (including accretion), favorable funding due to CBF deposits and organic growth, increases in trading securities, and higher market rates

 - NIM improved to 3.45% from 3.12% due to CBF loan accretion, higher market rates, and improved funding due to deposit growth

 - 2018 fee income up from Visa gain and full year inclusion of Capital Bank, somewhat offset by lower fixed income sales revenue

 - 2018 expense increase due to full year inclusion of Capital Bank, higher acquisition-related expenses, and 2017 repurchase and foreclosure provision expense reversal, offset by lower loss accruals related to legal matters

- Effective tax rate of 19% in 2018 compared to 23% in 2017

- Loans and deposits increased due to the CBF acquisition and FHN's strategic focus on growing deposits

 
 
 
 
 
 
 
 
(Thousands)
2018

 
2017

 
Change
 
Net interest income
$
1,220,317

 
$
842,314

 
45

%
 
Noninterest income
722,788

 
490,219

 
47

%
 
    Total revenues
1,943,105

 
1,332,533

 
46

%
 
Provision for loan losses
7,000

 

 
NM


 
Noninterest expense
1,221,996

 
1,023,661

 
19

%
 
    Income before income taxes
714,109

 
308,872

 
NM


 
Provision for income taxes
157,602

 
131,892

 
19

%
 
    Net income/(loss)
$
556,507

 
$
176,980

 
NM


 
 
 
 
 
 
 
 
 
Period-end loans
$
27,535,532

 
$
27,658,929

 
*

 
 
Period-end deposits
32,682,992

 
30,620,362

 
7

%
 
Average loans
27,213,828

 
20,104,042

 
35

%
 
Average deposits
30,903,092

 
23,072,136

 
34

%
 
NM - Not meaningful
 
 
 
 
 
 
 
* Amount is less than one percent
 
 
 
 
 
 
 
 



6




FHN CONSOLIDATED INCOME STATEMENT
Quarterly/Annually, Unaudited
 
 
 
 

 
 

 
 

 
(a)

4Q18 Changes vs.
 
Twelve Months Ended
 
2018 vs.
(Dollars in thousands, except per share data)
4Q18

 
3Q18

 
2Q18

 
1Q18

 
4Q17

 
3Q18
4Q17
 
2018
 
2017 (a)
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
401,186

 
$
393,669

 
$
387,811

 
$
363,355

 
$
287,633

 
2

%
39

%
 
$
1,546,021

 
$
989,930

 
56

%
Less: interest expense
98,674

 
87,969

 
76,879

 
62,182

 
45,545

 
12

%
NM

 
 
325,704

 
147,616

 
NM

 
Net interest income
302,512

 
305,700

 
310,932

 
301,173

 
242,088

 
(1
)
%
25

%
 
1,220,317

 
842,314

 
45

%
Provision/(provision credit) for loan losses
6,000

 
2,000

 

 
(1,000
)
 
3,000

 
NM

 
NM

 
 
7,000

 

 
NM

 
Net interest income after provision for loan losses
296,512

 
303,700

 
310,932

 
302,173

 
239,088

 
(2
)
%
24

%
 
1,213,317

 
842,314

 
44

%
Noninterest income:
 
 
 

 
 

 
 

 
 

 


 


 
 
 
 
 
 


 
Fixed income (b)
39,866

 
44,813

 
37,697

 
45,506

 
55,079

 
(11
)
%
(28
)
%
 
167,882

 
216,625

 
(23
)
%
Deposit transactions and cash management (c)
25,422

 
35,792

 
36,083

 
35,984

 
30,158

 
(29
)
%
(16
)
%
 
133,281

 
110,592

 
21

%
Brokerage, management fees and commissions
13,380

 
14,200

 
13,740

 
13,483

 
12,642

 
(6
)
%
6

%
 
54,803

 
48,514

 
13

%
Trust services and investment management
6,959

 
7,438

 
8,132

 
7,277

 
7,116

 
(6
)
%
(2
)
%
 
29,806

 
28,420

 
5

%
Bankcard income
6,760

 
6,878

 
6,635

 
6,445

 
8,237

 
(2
)
%
(18
)
%
 
26,718

 
25,467

 
5

%
Bank-owned life insurance
4,852

 
4,337

 
5,773

 
3,993

 
3,987

 
12

%
22

%
 
18,955

 
15,124

 
25

%
Securities gains/(losses), net (d)
(28
)
 
212,859

 
31

 
86

 
137

 
NM

 
NM

 
 
212,948

 
592

 
NM

 
Other (e)
13,063

 
22,655

 
19,434

 
23,243

 
15,834

 
(42
)
%
(18
)
%
 
78,395

 
44,885

 
75

%
Total noninterest income
110,274

 
348,972

 
127,525

 
136,017

 
133,190

 
(68
)
%
(17
)
%
 
722,788

 
490,219

 
47

%
Adjusted gross income after provision for loan losses
406,786

 
652,672

 
438,457

 
438,190

 
372,278

 
(38
)
%
9

%
 
1,936,105

 
1,332,533

 
45

%
Noninterest expense:
 

 
 

 
 

 
 

 
 

 


 


 
 
 
 
 
 


 
Employee compensation, incentives, and benefits (f)
156,240

 
164,839

 
165,890

 
171,254

 
177,312

 
(5
)
%
(12
)
%
 
658,223

 
587,465

 
12

%
Repurchase and foreclosure provision (g)
(153
)
 
(562
)
 
(252
)
 
(72
)
 
53

 
73

%
NM

 
 
(1,039
)
 
(22,527
)
 
95

%
Legal fees
3,479

 
2,541

 
2,784

 
2,345

 
1,245

 
37

%
NM

 
 
11,149

 
12,076

 
(8
)
%
Professional fees
8,842

 
9,270

 
15,415

 
12,272

 
26,958

 
(5
)
%
(67
)
%
 
45,799

 
47,929

 
(4
)
%
Occupancy
22,053

 
20,002

 
22,503

 
20,451

 
15,887

 
10

%
39

%
 
85,009

 
54,646

 
56

%
Computer software
14,656

 
15,693

 
15,123

 
15,132

 
13,157

 
(7
)
%
11

%
 
60,604

 
48,234

 
26

%
Contract employment and outsourcing
4,248

 
4,314

 
5,907

 
4,053

 
5,979

 
(2
)
%
(29
)
%
 
18,522

 
14,954

 
24

%
Operations services
12,945

 
13,121

 
14,653

 
15,561

 
10,619

 
(1
)
%
22

%
 
56,280

 
43,823

 
28

%
Equipment rentals, depreciation, and maintenance
8,983

 
9,423

 
10,708

 
10,018

 
9,530

 
(5
)
%
(6
)
%
 
39,132

 
29,543

 
32

%
FDIC premium expense (h)
5,200

 
7,850

 
9,978

 
8,614

 
9,090

 
(34
)
%
(43
)
%
 
31,642

 
26,818

 
18

%
Advertising and public relations
7,718

 
8,365

 
5,070

 
3,599

 
5,313

 
(8
)
%
45

%
 
24,752

 
19,214

 
29

%
Communications and courier
7,256

 
7,014

 
7,530

 
8,232

 
5,379

 
3

%
35

%
 
30,032

 
17,624

 
70

%
Amortization of intangible assets
6,461

 
6,460

 
6,460

 
6,474

 
3,568

 
*

 
81

%
 
25,855

 
8,728

 
NM

 
Other (e)
24,004

 
25,701

 
50,999

 
35,332

 
62,580

 
(7
)
%
(62
)
%
 
136,036

 
135,134

 
1

%
Total noninterest expense
281,932

 
294,031

 
332,768

 
313,265

 
346,670

 
(4
)
%
(19
)
%
 
1,221,996

 
1,023,661

 
19

%
Income before income taxes
124,854

 
358,641

 
105,689

 
124,925

 
25,608

 
(65
)
%
NM

 
 
714,109

 
308,872

 
NM

 
Provision for income taxes (i)
24,049

 
83,925

 
19,697

 
29,931

 
73,989

 
(71
)
%
(67
)
%
 
157,602

 
131,892

 
19

%
Net income/(loss)
100,805

 
274,716

 
85,992

 
94,994

 
(48,381
)
 
(63
)
%
NM

 
 
556,507

 
176,980

 
NM

 
Net income attributable to noncontrolling interest
2,910

 
2,883

 
2,852

 
2,820

 
2,910

 
1

%
*

 
 
11,465

 
11,465

 
*

 
Net income/(loss) attributable to controlling interest
97,895

 
271,833

 
83,140

 
92,174

 
(51,291
)
 
(64
)
%
NM

 
 
545,042

 
165,515

 
NM

 
Preferred stock dividends
1,550

 
1,550

 
1,550

 
1,550

 
1,550

 
*

 
*

 
 
6,200

 
6,200

 
*

 
Net income/(loss) available to common shareholders
$
96,345

 
$
270,283

 
$
81,590

 
$
90,624

 
$
(52,841
)
 
(64
)
%
NM

 
 
$
538,842

 
$
159,315

 
NM

 
Common Stock Data
 

 
 

 
 

 
 

 
 

 


 


 
 
 
 
 
 


 
EPS (d)
$
0.30

 
$
0.83

 
$
0.25

 
$
0.28

 
$
(0.20
)
 
(64
)
%
NM

 
 
$
1.66

 
$
0.66

 
NM

 
Basic shares (thousands)
321,505

 
324,406

 
325,153

 
326,489

 
265,169

 
(1
)
%
21

%
 
324,375

 
241,436

 
34

%
Diluted EPS
$
0.30

 
$
0.83

 
$
0.25

 
$
0.27

 
$
(0.20
)
 
(64
)
%
NM

 
 
$
1.65

 
$
0.65

 
NM

 
Diluted shares (thousands)
323,885

 
327,252

 
328,426

 
330,344

 
265,169

 
(1
)
%
22

%
 
327,445

 
244,453

 
34

%
Key Ratios & Other
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Return on average assets (quarters are annualized) (d) (j)
0.99
%
 
2.72
%
 
0.86
%
 
0.95
%
 
(0.58
)%
 
 

 
 

 
 
1.38
%
 
0.59
%
 
 
 
Return on average common equity (“ROCE”) (quarters are annualized) (d) (j)
8.81
%
 
25.41
%
 
7.86
%
 
8.79
%
 
(6.73
)%
 
 

 
 

 
 
12.75
%
 
6.18
%
 
 
 
Return on average tangible common equity (“ROTCE”)(quarters are annualized) (d) (j) (k)
13.80
%
 
40.51
%
 
12.63
%
 
14.06
%
 
(8.78
)%
 
 

 
 

 
 
20.28
%
 
7.23
%
 
 
 
Fee income to total revenue (j)
26.72
%
 
30.81
%
 
29.08
%
 
31.10
%
 
35.47
%
 
 

 
 

 
 
29.47
%
 
36.76
%
 
 
 
Efficiency ratio (j)
68.30
%
 
66.55
%
 
75.90
%
 
71.67
%
 
92.41
%
 
 

 
 

 
 
70.63
%
 
76.85
%
 
 
 
Average full time equivalent employees
5,563

 
5,623

 
5,873

 
5,835

 
4,792

 
 

 
 

 
 
5,723

 
4,415

 
 
 
NM - Not meaningful
* Amount is less than one percent.
(a)
4Q17 and 2017 include one month of activity related to the CBF acquisition.
(b)
3Q18 includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPS loans.
(c)
4Q18 includes an $8.7 million unfavorable adjustment related to the return of excess fees received on Capital Bank debit card transactions.
(d)
3Q18 includes a pre-tax gain of $212.9 million from the sale of Visa Class B Shares which impacts certain performance measures in 3Q18 and 2018.
(e)
Refer to the Other Income and Other Expense table on page 8 for additional information.
(f)
4Q17 includes $9.9 million of special employee bonuses, somewhat offset by $4.3 million of deferred compensation BOLI gains.
(g)
Expense reversals driven by the settlements/recoveries of certain repurchase claims.
(h)
4Q18 decrease due to the end of the FDIC assessment surcharge.
(i)
3Q18 reflects the tax effect on the gain on the sale of Visa Class B Shares; 4Q17 includes the effects of the Tax Cuts and Jobs Act ("the Tax Act"), somewhat offset by a favorable effective tax rate adjustment associated with the reversal of a capital loss deferred tax valuation allowance.
(j)
See Glossary of Terms for definitions of Key Ratios.
(k)
This non-GAAP measure is reconciled to ROCE (GAAP) in the Non-GAAP to GAAP reconciliation on page 20 of this financial supplement.

7




FHN OTHER INCOME AND OTHER EXPENSE
Quarterly/Annually, Unaudited

 
 
 
 
 
 
 
 
 
 
(a)

 
4Q18 Changes vs.
Twelve Months Ended
 
2018 vs.
(Thousands)
 
4Q18

 
3Q18

 
2Q18

 
1Q18

 
4Q17

 
3Q18
4Q17
 
2018
 
2017 (a)
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
ATM and interchange fees
 
$
3,411

 
$
3,263

 
$
3,413

 
$
3,267

 
$
3,427

 
5

%
*

 
 
$
13,354

 
$
12,425

 
7

%
Dividend income (b)
 
2,425

 
2,757

 
3,124

 
2,249

 

 
(12
)
%
NM

 
 
10,555

 

 
NM

 
Electronic banking fees
 
1,393

 
1,309

 
1,228

 
1,204

 
1,171

 
6

%
19

%
 
5,134

 
5,082

 
1

%
Letter of credit fees
 
1,447

 
1,307

 
1,295

 
1,249

 
1,292

 
11

%
12

%
 
5,298

 
4,661

 
14

%
Mortgage banking
 
3,077

 
2,533

 
2,431

 
2,546

 
766

 
21

%
NM

 
 
10,587

 
4,649

 
NM

 
Deferred compensation (c)
 
(6,124
)
 
1,458

 
991

 
451

 
1,876

 
NM


NM

 
 
(3,224
)
 
6,322

 
NM

 
Insurance commissions
 
467

 
396

 
476

 
757

 
472

 
18

%
(1
)
%
 
2,096

 
2,514

 
(17
)
%
Other service charges
 
3,513

 
3,758

 
3,728

 
4,123

 
3,485

 
(7
)
%
1

%
 
15,122

 
12,532

 
21

%
Gain/(loss) on extinguishment of debt (d)
 
(14
)
 
(1
)
 

 

 

 
NM

 
NM

 
 
(15
)
 
(14,329
)
 
NM

 
Other (e)
 
3,468

 
5,875

 
2,748

 
7,397

 
3,345

 
(41
)
%
4

%
 
19,488

 
11,029

 
77

%
Total
 
$
13,063

 
$
22,655

 
$
19,434

 
$
23,243

 
$
15,834

 
(42
)
%
(18
)
%
 
$
78,395

 
$
44,885

 
75

%
 
 
 
 
 
 
 
 
 
 
 
 





 
 
 
 
 
 


 
Other Expense
 
 
 
 

 
 

 
 

 
 

 





 
 
 
 
 
 


 
Litigation and regulatory matters (f)
 
$
35

 
$
(1,541
)
 
$
16

 
$
2,134

 
$
32,114

 
NM


NM

 
 
$
644

 
$
40,517

 
(98
)
%
Tax credit investments
 
1,126

 
1,370

 
1,079

 
1,137

 
822

 
(18
)
%
37

%
 
4,712

 
3,468

 
36

%
Travel and entertainment
 
4,340

 
3,988

 
5,131

 
2,983

 
3,154

 
9

%
38

%
 
16,442

 
11,462

 
43

%
Employee training and dues
 
1,908

 
1,682

 
1,849

 
1,779

 
1,357

 
13

%
41

%
 
7,218

 
5,551

 
30

%
Customer relations
 
1,834

 
1,328

 
1,358

 
1,063

 
1,510

 
38

%
21

%
 
5,583

 
5,750

 
(3
)
%
Miscellaneous loan costs
 
1,012

 
543

 
1,035

 
1,142

 
673

 
86

%
50

%
 
3,732

 
2,751

 
36

%
Supplies
 
1,459

 
1,635

 
1,987

 
1,836

 
1,222

 
(11
)
%
19

%
 
6,917

 
4,106

 
68

%
OREO
 
456

 
1,256

 
810

 
108

 
53

 
(64
)
%
NM

%
 
2,630

 
1,006

 
NM

 
Other insurance and taxes
 
1,506

 
2,761

 
2,752

 
2,665

 
2,457

 
(45
)
%
(39
)
%
 
9,684

 
9,686

 
*

 
Non-service components of net periodic pension and post retirement cost (g)
 
1,632

 
1,585

 
1,530

 
504

 
362

 
3

%
NM

 
 
5,251

 
2,144

 
NM

 
Other (h)
 
8,696

 
11,094

 
33,452

 
19,981

 
18,856

 
(22
)
%
(54
)
%
 
73,223

 
48,693

 
50

%
Total
 
$
24,004

 
$
25,701

 
$
50,999

 
$
35,332

 
$
62,580

 
(7
)
%
(62
)
%
 
$
136,036

 
$
135,134

 
1

%
Certain previously reported amounts have been reclassified.
NM - Not meaningful
* Amount is less than one percent.
(a)
4Q17 and 2017 include one month of activity related to the CBF acquisition.
(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)
2017 includes a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction.
(e)
4Q18 includes a $1.8 million negative valuation adjustment on HFS consumer loans included in the Non-Strategic segment; 3Q18 and 1Q18 include $.8 million and $3.3 million, respectively, of gains on the sales of buildings.
(f)
3Q18 includes a $1.6 million expense reversal related to a recovery of prior litigation losses within the Regional Banking segment.
(g)
1Q18 includes a $1.0 million favorable adjustment related to benefits received.
(h)
2Q18 includes $4.1 million of valuation adjustments associated with derivatives related to prior sales of Visa Class B shares; 4Q17 includes a $5.6 million charitable contribution to the First Tennessee Foundation.









                        

8




FHN CONSOLIDATED PERIOD-END BALANCE SHEET
Quarterly, Unaudited 
 
 
 
 
 
 
 
 
 
 
 
4Q18 Changes vs.
(Thousands)
4Q18

 
3Q18

 
2Q18

 
1Q18

 
4Q17

 
3Q18
4Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

 
Investment securities (a)
$
4,636,470

 
$
4,618,383

 
$
4,734,411

 
$
4,836,155

 
$
5,180,255

 
*

 
(10
)
%
Loans held-for-sale (b)
679,149

 
725,651

 
692,659

 
770,412

 
699,377

 
(6
)
%
(3
)
%
Loans, net of unearned income
27,535,532

 
27,350,214

 
27,701,740

 
27,249,793

 
27,658,929

 
1

%
*

 
Federal funds sold
237,591

 
113,722

 
91,303

 
62,541

 
87,364

 
NM

 
NM

 
Securities purchased under agreements to resell
386,443

 
687,437

 
782,765

 
910,670

 
725,609

 
(44
)
%
(47
)
%
Interest-bearing cash (c)
1,277,611

 
531,681

 
750,634

 
309,351

 
1,185,600

 
NM

 
8

%
Trading securities
1,448,168

 
1,930,991

 
1,649,470

 
1,759,430

 
1,416,345

 
(25
)
%
2

%
Total earning assets
36,200,964

 
35,958,079

 
36,402,982

 
35,898,352

 
36,953,479

 
1

%
(2
)
%
Cash and due from banks
781,291

 
642,051

 
602,952

 
459,820

 
639,073

 
22

%
22

%
Fixed income receivables (d)
38,861

 
177,802

 
68,148

 
94,036

 
68,693

 
(78
)
%
(43
)
%
Goodwill
1,426,324

 
1,409,822

 
1,409,276

 
1,398,501

 
1,386,853

 
1

%
3

%
Other intangible assets, net
155,034

 
161,495

 
167,955

 
174,415

 
184,389

 
(4
)
%
(16
)
%
Premises and equipment, net
494,041

 
506,453

 
525,175

 
531,981

 
532,251

 
(2
)
%
(7
)
%
Other real estate owned ("OREO")
25,290

 
28,628

 
29,712

 
35,715

 
43,382

 
(12
)
%
(42
)
%
Allowance for loan losses
(180,424
)
 
(185,959
)
 
(185,462
)
 
(187,194
)
 
(189,555
)
 
(3
)
%
(5
)
%
Derivative assets
81,475

 
54,476

 
122,056

 
114,348

 
81,634

 
50

%
*

 
Other assets (a)
1,810,261

 
1,883,077

 
1,934,001

 
1,943,221

 
1,723,189

 
(4
)
%
5

%
Total assets
$
40,833,117

 
$
40,635,924

 
$
41,076,795

 
$
40,463,195

 
$
41,423,388

 
*

 
(1
)
%
 
 
 
 
 
 
 
 
 
 
 


 


 
Liabilities and Equity:
 
 
 

 
 

 
 

 
 

 


 


 
Deposits:
 
 
 

 
 

 
 

 
 

 


 


 
Consumer interest
$
13,327,104

 
$
12,800,892

 
$
12,780,195

 
$
12,674,251

 
$
12,877,955

 
4

%
3

%
Commercial interest
6,172,159

 
5,735,486

 
5,547,510

 
5,816,992

 
5,469,868

 
8

%
13

%
Market-indexed (e)
5,042,412

 
4,445,826

 
4,412,272

 
4,346,862

 
4,249,536

 
13

%
19