-- FHN achieved earnings of $116.2 million or $.90 diluted earnings
per share for third quarter 2005
-- Retail/Commercial Banking pre-tax income increased 20 percent to
$118.9 million
-- Mortgage banking earnings reflect the realization of income from
delivery of a larger mortgage pipeline created at the end of
second quarter 2005
-- A flatter yield curve unfavorably impacted net interest margin
and demand for fixed income securities
-- Commercial loans grew 33 percent over third quarter 2004
-- Retail loans grew 7 percent over third quarter 2004
-- Retail/Commercial Banking deposits grew 13 percent over third
quarter 2004 to $10.9 billion
-- Home purchase-related originations grew 31 percent and represented
58 percent of total originations
-- Capital Markets fee income from other than fixed income grew 26
percent over third quarter 2004
MEMPHIS, Tenn., Oct. 17, 2005 (PRIMEZONE) -- First Horizon National Corporation (NYSE:FHN) announced earnings of $116.2 million, or $.90 diluted earnings per share for third quarter 2005. This compares to 2004's third quarter earnings of $113.6 million, or $.89 diluted earnings per share. For the nine months ended September 30, 2005, earnings were $328.1 million or $2.55 diluted earnings per share, compared to $351.3 million or $2.73 diluted earnings per share for 2004.
Two of FHN's segments have business operations in the areas impacted by Hurricanes Katrina and Rita and while it is too early to determine the full extent of any losses experienced on the Gulf Coast as a result of these hurricanes, management has been diligently reviewing any exposure that FHN might have in the region. Based on information currently available, third quarter 2005 results include $7.3 million of pre-tax hurricane related losses ($3.8 million in loan loss provision and $3.5 million in mortgage banking related losses). These estimates involve considerable judgment and are inherently imprecise due to a variety of factors, including the unprecedented nature of the disaster and the preliminary nature of the information used to prepare these estimates. Third quarter 2005 results also include a $7.7 million settlement received from an insurance company.
"This quarter's results show solid improvement from last quarter and from third quarter a year ago," said Ken Glass, chairman and CEO of FHN. "I am proud of our employees as they have continued the successful execution of our strategies and produced earnings growth in this difficult operating environment."
Return on average shareholders' equity and return on average assets were 21.1 percent and 1.21 percent, respectively, for third quarter 2005 compared to 23.7 percent and 1.63 percent for third quarter 2004. For the nine months ended September 30, 2005, return on average shareholders' equity and return on average assets were 20.8 percent and 1.21 percent, respectively, compared to 24.9 percent and 1.76 percent for the same period in 2004.
Total assets were $37.0 billion and shareholders' equity was $2.3 billion on September 30, 2005, compared to $28.3 billion and $2.0 billion, respectively, on September 30, 2004.
PERFORMANCE HIGHLIGHTS
Retail/Commercial Banking
Pre-tax income for Retail/Commercial Banking increased 20 percent to $118.9 million for third quarter 2005, compared to $99.4 million for third quarter 2004. Retail/Commercial Banking contributed 70 percent of total pre-tax income in third quarter 2005 compared to 58 percent in third quarter 2004. Total revenues increased 20 percent to $353.7 million for third quarter 2005 compared to $293.7 million for third quarter 2004.
Net interest income increased 26 percent to $224.3 million in third quarter 2005 from $178.7 million in third quarter 2004. The increase in 2005's net interest income is primarily attributable to 18 percent total loan growth with commercial loans growing 33 percent to $9.1 billion from $6.8 billion and retail loans growing 6 percent to $9.5 billion from $9.0 billion. This growth resulted from expansion of the sales force, which increased market share in the core bank, as well as cross-sell opportunities in FHN's national markets where we have a substantial mortgage presence. Total deposits increased 13 percent or $1.2 billion over third quarter 2004. Retail/Commercial Banking's net interest margin for third quarter 2005 was held stable compared to third quarter 2004 by minimizing loan rate spread compression caused by competitive pricing while successfully increasing spreads on deposits in conjunction with Federal Reserve rate increases.
Noninterest income increased 13 percent to $129.4 million in third quarter 2005 from $115.0 million in third quarter 2004. Noninterest income from sales and securitizations of real estate residential loans increased $8.6 million in third quarter 2005 including a $4.0 million reduction of securitized assets which prepaid faster than anticipated. Additionally, a charge of $3.9 million resulted from a write-off of net capitalized expenses on HELOCs held for sale which prepaid faster than anticipated. Merchant processing income increased 18 percent in third quarter 2005, or $3.4 million, reflecting increased volume from existing customers as well as an expanded customer base. Fees from deposit services charges increased $2.7 million compared to third quarter 2004.
The provision for loan losses increased to $22.4 million in third quarter 2005 from $10.1 million last year as the loan portfolio has grown by 18 percent since third quarter 2004. This increase also includes $3.8 million related to hurricane losses. The net charge-off ratio continued to remain at low levels with 20 basis points in third quarter 2005 compared to 22 basis points in third quarter 2004 reflecting the stable risk profile of both the commercial and retail loan portfolios.
Noninterest expense was $212.4 million in third quarter 2005 compared to $184.2 million last year. The growth in noninterest expense was due to higher personnel costs which were largely attributable to national expansion initiatives. As total revenue grew 20 percent and noninterest expense grew 15 percent, the efficiency ratio improved to 60.0 percent in third quarter 2005 from 62.7 percent in third quarter 2004.
Mortgage Banking
Pre-tax income for Mortgage Banking increased 48 percent to $61.7 million for third quarter 2005, compared to $41.6 million for third quarter 2004. Total revenues were $192.9 million in third quarter 2005, an increase of 31 percent from $146.9 million in third quarter 2004.
Net interest income increased 10 percent to $41.6 million in third quarter 2005 from $37.7 million in third quarter 2004 as the warehouse grew 42 percent. However, the flattening of the yield curve resulted in compression of the spread on the warehouse. Spread on the warehouse was 2.33 percent in third quarter 2005 compared to 3.93 percent for the same period in 2004.
Noninterest income increased 38 percent to $151.3 million in third quarter 2005 compared to $109.2 million in third quarter 2004. Noninterest income was negatively impacted in third quarter 2005 by $3.5 million due to hurricane-related losses. Noninterest income consists primarily of mortgage banking-related revenue, net of costs, from the origination and sale of mortgage loans, fees from mortgage servicing and mortgage servicing rights (MSR) net hedge gains or losses. Mortgage servicing noninterest income is net of amortization, impairment and other expenses related to MSR and related hedges.
Mortgage loan origination volumes in third quarter 2005 were $10.6 billion, compared to $6.8 billion in 2004, as refinance activity increased $2.3 billion and home purchase-related originations grew $1.4 billion from third quarter 2004. The increase in home purchase originations demonstrates FHN's success in executing its strategy to grow the purchase market and reflects an expanded sales force of 2,600 which increased 15 percent from 2004. Refinance activity represented 42 percent of total originations during third quarter 2005 compared to 31 percent last year. Loans delivered into the secondary market increased 62 percent to $10.6 billion. Net revenue from mortgage loans sold increased 69 percent to $115.6 million from $68.4 million in third quarter 2004.
The mortgage-servicing portfolio grew 15 percent to $93.6 billion on September 30, 2005, from $81.6 billion on September 30, 2004, including approximately $3 billion of loans for which the servicing rights were acquired in 2004. Total fees associated with mortgage servicing increased 17 percent to $69.7 million from $59.7 million, reflecting this growth. In addition, the growth in the servicing portfolio and rising interest rates led to a 17 percent increase in capitalized mortgage servicing rights and a 26 percent, or $9.8 million, increase in amortization expense compared to third quarter 2004. The total $7.7 million decrease in net servicing revenues consists of this and several other factors, including a favorable $13.4 million impact from MSR impairment charges due to the impact that rising interest rates had on the fair value of MSR. In addition, net servicing revenues were unfavorably impacted by net hedge losses of $3.9 million in third quarter 2005 compared to net hedge gains of $17.3 million in third quarter 2004 as the continued flattening of the yield curve negatively impacted income from hedges and rising interest rates led to increased option expense and reduced income from swap positions.
Noninterest expense increased 25 percent to $131.0 million in third quarter 2005 compared to $105.3 million in third quarter 2004 due to the increased production. However, expense efficiencies implemented in third quarter 2005 combined with the revenue from the increased origination activity created late in the second quarter contributed to improvement in the efficiency ratio, which decreased to 67.9 percent from 71.6 percent in third quarter 2004.
Capital Markets
Pre-tax earnings declined from $18.1 million in third quarter 2004 to $2.6 million in third quarter 2005 due to a reduction in fixed income securities sales and a decrease in net interest income. Significant uncertainties within the investment community regarding interest rates and other economic factors continued to cause fixed income investors to reduce their purchases. Total revenues were $78.5 million in third quarter 2005 compared to $82.8 million in third quarter 2004.
Revenues from fixed income sales fell $4.1 million while revenues from other fee sources increased $9.0 million. Revenues from other fee sources include fee income from activities such as loan sales, investment banking, equity research, portfolio advisory and the sale of bank-owned life insurance. Revenue from these other sources represented 51 percent of total noninterest income in third quarter 2005 compared to 43 percent in third quarter 2004 and increased 26 percent to $43.6 million from $34.6 million, primarily due to increased fees from investment banking and loan sales activities.
Net interest income decreased $9.2 million primarily due to an incremental cost of equity charge of $5.2 million which was largely related to the capital requirements of the acquisition of the fixed income business of Spear, Leeds & Kellogg (SLK) in first quarter 2005 and due to the flattening of the yield curve, resulting in compression of the spread on Capital Markets securities inventory.
Noninterest expense increased 17 percent, or $11.2 million, primarily due to amortization and other increased costs resulting from the SLK acquisition and the acquisition of assets of Alterity Partners, LLC on September 23, 2004.
Corporate
The Corporate segment's results yielded a pre-tax loss of $12.3 million in third quarter 2005 compared to a pre-tax gain of $11.1 million in third quarter 2004. The third quarter 2005 results include $3.4 million in dividend expense on $300 million of noncumulative perpetual preferred stock issued in first quarter 2005, while the third quarter 2004 results include $19.8 million in net security gains as the investment portfolio size was reduced to balance an increase in loans held for sale resulting from a delay in the closing of a securitization and net gains due to the liquidation of a holding company investment.
AVERAGE BALANCE SHEET
Total average assets increased 37 percent to $38.1 billion for third quarter 2005. Total loans increased 18 percent to $18.7 billion as commercial loans grew 33 percent and retail loans increased 7 percent. Loans held for sale increased 72 percent to $6.9 billion. Interest-bearing core deposits increased 12 percent. Total core deposits increased 17 percent to $12.5 billion, reflecting expansion strategies which emphasize a focus on convenient hours, free checking and targeted financial center expansion. Purchased funds increased 67 percent to $19.3 billion. Average shareholders' equity increased 15 percent in third quarter 2005.
The consolidated net interest margin was 3.09 percent for third quarter 2005 compared to 3.60 percent for third quarter 2004. This compression in the margin occurred as the net interest spread decreased to 2.59 percent in 2005 from 3.32 percent in 2004 while average earning assets increased 39 percent and net interest income increased 19 percent. This decline is attributable to two items, the acquisition of SLK and a flatter yield curve. Capital Markets activities tend to compress the margin because of its strategy to reduce market risk by hedging its inventory in the cash markets, which reduces the term and accordingly the interest income earned on these transactions. The SLK acquisition increased this unfavorable impact on the corporate margin compared to last year as Capital Markets' balance sheet grew $3.7 billion and the flattening of the yield curve also negatively impacted the spread on Capital Markets' inventory. Although the mortgage warehouse grew 42 percent from 2004, the flattening of the yield curve decreased spread on the warehouse by 160 basis points to 2.33 percent, which also had a negative impact on the corporate margin this quarter.
ASSET QUALITY
FHN's key asset quality ratios improved in third quarter 2005. The net charge-off ratio was 20 basis points in third quarter 2005 compared to 22 basis points in third quarter 2004 as strong loan growth increased net charge-offs to $9.2 million from $8.6 million. Net charge-offs were impacted in third quarter 2005 by improvement in the consumer loan portfolios. The nonperforming assets ratio was 35 basis points in third quarter 2005 compared to 48 basis points last year, with nonperforming assets of $80.4 million on September 30, 2005, compared to $85.4 million on September 30, 2004. Provision for loan losses was $22.6 million in third quarter 2005 compared to $10.1 million in third quarter 2004. Included in third quarter provision is $3.8 million related to hurricane losses. An analytical model based on historical loss experience adjusted for current events, trends and economic conditions is used by management to determine the amount of provision to be recognized and to assess the adequacy of the loan loss allowance. (See the table on A-6 for an analysis of the allowance for loan losses and details on nonperforming assets and the table on A-7 for asset quality ratios).
OUTLOOK
"As these third quarter results show, FHN has returned to earnings growth. Looking forward there are some important factors to consider as we enter the fourth quarter," said Glass. "First and foremost," Glass continued, "strategic progress will continue. Secondly, the timing benefit to mortgage banking earnings realized this quarter will not be repeated. Thirdly, we will continue our emphasis on earnings enhancements. The combination of these factors without further deterioration of the current operating environment should produce earnings growth in fourth quarter over fourth quarter 2004."
This press release 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, competition, investor responses to these conditions, ability to execute business plans, geopolitical developments, and items already mentioned in this 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 factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
OTHER INFORMATION
FHN provides additional disclosure and discussion related to FHN's earnings and business segment performance through a financial supplement which is available on FHN's website at www.fhnc.com.
Management will also host a conference call at 8:00 a.m. Central Time today to review earnings and performance trends. Callers wishing to participate in the call may dial toll-free starting at 7:45 a.m. Central Time at 1-877-502-9276 (international participants dial 1-913-981-5591). The conference will be webcast live through the investor relations section of FHN's Web site. To access the webcast, visit http://www.shareholder.com/fhnc/medialist.cfm. A replay of the call will be available from 11 a.m. Central Time today until 11 p.m. Monday, October 31, 2005, by calling 1-888-203-1112 or 1-719-457-0820 for international participants. The passcode is 6939452. The event will be archived and made available by 1 p.m. Central Time today on FHN's Web site at www.fhnc.com. For four weeks from the press release date, FHN will respond to individual requests for clarification of the provided disclosures. However, we will make every effort not to provide, and you should not expect to receive, material non-public information as that term is defined in the SEC Regulation FD. Without limiting the foregoing, after the conference call and except for the guidance provided herein, we will not provide any earnings guidance, directly or indirectly, express or implied.
GENERAL INFORMATION
About First Horizon
The 13,000 employees of First Horizon National Corp. (NYSE:FHN) provide financial services to individuals and business customers through hundreds of offices located in more than 40 states. The corporation's three major brands -- FTN Financial, First Horizon and First Tennessee – provide customers with a broad range of products and services including:
-- Capital Markets, one of the nation's top underwriters of U.S.
government agency securities
-- Mortgage Banking, one of the nation's top 20 mortgage originators
and top 15 servicers, which earned a top-10 ranking in customer
satisfaction from J.D. Power and Associates
-- Retail/Commercial Banking, with the largest market share in
Tennessee and one of the highest customer retention rates of any
bank in the country
FHN companies have been recognized as some of the nation's best employers by AARP, Working Mother and Fortune magazines. FHN also was named one of the nation's 100 best corporate citizens by Business Ethics magazine. More information can be found at www.fhnc.com.
FIRST HORIZON NATIONAL CORPORATION
STATEMENTS OF INCOME
Yearly Growth
(Unaudited)
Year-to-date
September 30
--------------
Growth
(Thousands) 2005 2004 Rate (%)
---------------------------------------------------------------------
Interest income $ 1,320,700 $ 832,013 58.7 +
Less interest
expense 591,484 204,148 189.7 +
---------------------------------------------------------------------
Net interest income 729,216 627,865 16.1 +
Provision for loan losses 51,503 36,565 40.9 +
---------------------------------------------------------------------
Net interest income
after provision for
loan losses 677,713 591,300 14.6 +
Noninterest income:
Mortgage banking 368,237 349,987 5.2 +
Capital markets 272,109 300,036 9.3 --
Deposit transactions
and cash management 113,994 110,819 2.9 +
Merchant processing 66,379 55,407 19.8 +
Insurance commissions 40,947 44,460 7.9 --
Trust services and
investment management 33,741 35,533 5.0 --
Gains on divestitures -- 3,800 NM
Securities (losses)/
gains, net (397) 24,482 NM
Other 161,312 125,514 28.5 +
---------------------------------------------------------------------
Total noninterest
income 1,056,322 1,050,038 .6 +
---------------------------------------------------------------------
Adjusted gross income
after provision
for loan losses 1,734,035 1,641,338 5.6 +
Noninterest expense:
Employee compensation,
incentives
and benefits 752,956 686,741 9.6 +
Occupancy 77,611 66,527 16.7 +
Equipment rentals,
depreciation, and
maintenance 57,159 54,062 5.7 +
Operations services 59,465 49,144 21.0 +
Communications
and courier 41,386 37,144 11.4 +
Amortization of
intangible assets 10,320 6,527 58.1 +
Other 251,208 221,507 13.4 +
---------------------------------------------------------------------
Total noninterest
expense 1,250,105 1,121,652 11.5 +
---------------------------------------------------------------------
Pre-tax income 483,930 519,686 6.9 --
Provision for
income taxes 155,819 168,430 7.5 --
---------------------------------------------------------------------
Net income $ 328,111 $ 351,256 6.6 --
===========================
---------------------------------------------------------------------
Diluted earnings
per common share $ 2.55 $ 2.73 6.6 --
Dividends declared $ 1.29 $ 1.20
SELECTED FINANCIAL RATIOS:
-------------------------
Return on average assets 1.21% 1.76%
Return on average shareholders'
equity 20.8 24.9
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-1
FIRST HORIZON NATIONAL CORPORATION
STATEMENTS OF INCOME
Quarterly Growth
(Unaudited)
Quarter Ended
September 30
---------------
Growth
(Thousands) 2005 2004 Rate (%)
---------------------------------------------------------------------
Interest income $ 497,439 $ 300,183 65.7 +
Less interest expense 237,278 81,933 189.6 +
---------------------------------------------------------------------
Net interest income 260,161 218,250 19.2 +
Provision for loan
losses 22,608 10,044 125.1 +
---------------------------------------------------------------------
Net interest income
after provision for
loan losses 237,553 208,206 14.1 +
Noninterest income:
Mortgage banking 140,482 105,155 33.6 +
Capital markets 82,158 79,913 2.8 +
Deposit transactions
and cash management 41,268 38,624 6.8 +
Merchant processing 22,680 19,299 17.5 +
Insurance commissions 12,673 13,962 9.2 --
Trust services and
investment management 11,299 11,838 4.6 --
Securities (losses)/
gains, net (406) 20,383 NM
Other 59,383 38,440 54.5 +
---------------------------------------------------------------------
Total noninterest
income 369,537 327,614 12.8 +
---------------------------------------------------------------------
Adjusted gross income
after provision for
loan losses 607,090 535,820 13.3 +
Noninterest expense:
Employee compensation,
incentives and
benefits 261,906 210,089 24.7 +
Occupancy 26,547 23,865 11.2 +
Equipment rentals,
depreciation, and
maintenance 19,668 18,713 5.1 +
Operations services 20,660 17,801 16.1 +
Communications and
courier 14,809 12,118 22.2 +
Amortization of
intangible assets 3,598 2,165 66.2 +
Other 89,031 80,845 10.1 +
---------------------------------------------------------------------
Total noninterest
expense 436,219 365,596 19.3 +
---------------------------------------------------------------------
Pre-tax income 170,871 170,224 .4 +
Provision for income
taxes 54,674 56,623 3.4 --
---------------------------------------------------------------------
Net income $ 116,197 $ 113,601 2.3 +
========================
---------------------------------------------------------------------
Diluted earnings per
common share $ .90 $ .89 1.1 +
Dividends declared per
common share $ .43 $ .40
SELECTED FINANCIAL RATIOS:
-------------------------
Return on average assets 1.21% 1.63%
Return on average
shareholders' equity 21.1 23.7
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-2
FIRST HORIZON NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION
Yearly Growth
(Unaudited)
Year-to-date
September 30
------------
Growth
(Thousands) 2005 2004 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial,
financial
and industrial $ 5,852,796 $ 4,721,920 23.9 +
Real estate
commercial 1,085,278 969,276 12.0 +
Real estate
construction 1,530,920 816,248 87.6 +
---------------------------------------------------------------------
Total commercial
loans 8,468,994 6,507,444 30.1 +
Retail:
Real estate
residential 7,505,108 7,307,592 2.7 +
Real estate
construction 1,358,807 638,989 112.6 +
Other retail 163,103 190,888 14.6 --
Credit card
receivables 239,768 252,271 5.0 --
---------------------------------------------------------------------
Total retail loans 9,266,786 8,389,740 10.5 +
---------------------------------------------------------------------
Total loans, net of
unearned income 17,735,780 14,897,184 19.1 +
Investment securities 2,887,228 2,549,301 13.3 +
Loans held for sale 6,108,545 4,005,868 52.5 +
Other earning assets 4,799,955 1,641,280 192.5 +
---------------------------------------------------------------------
Total earning assets 31,531,508 23,093,633 36.5 +
Cash and due from banks 742,495 725,762 2.3 +
Other assets 3,895,526 2,813,540 38.5 +
---------------------------------------------------------------------
Total assets $36,169,529 $26,632,935 35.8 +
=========================
Certificates of deposit
under $100,000 and
other time $ 2,188,896 $ 1,907,143 14.8 +
Other interest-bearing
deposits 4,586,233 4,110,190 11.6 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 6,775,129 6,017,333 12.6 +
Demand deposits 1,854,753 1,780,743 4.2 +
Other noninterest-
bearing deposits 3,352,841 2,811,866 19.2 +
---------------------------------------------------------------------
Total core deposits 11,982,723 10,609,942 12.9 +
Certificates of deposit
$100,000 and more 10,728,885 6,471,214 65.8 +
---------------------------------------------------------------------
Total deposits 22,711,608 17,081,156 33.0 +
Short-term borrowed
funds 7,073,225 4,295,799 64.7 +
Term borrowings 2,524,437 2,201,935 14.6 +
Other liabilities 1,544,730 1,170,822 31.9 +
Preferred stock of
subsidiary 207,886 452 NM
Shareholders' equity 2,107,643 1,882,771 11.9 +
---------------------------------------------------------------------
Total liabilities
and shareholders'
equity $36,169,529 $26,632,935 35.8 +
=========================
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-3
FIRST HORIZON NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION
Quarterly Growth
(Unaudited)
Quarter Ended
September 30
----------------
Growth
(Thousands) 2005 2004 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial, financial
and industrial $ 6,176,194 $ 4,935,308 25.1 +
Real estate
commercial 1,163,199 960,210 21.1 +
Real estate
construction 1,735,883 945,102 83.7 +
---------------------------------------------------------------------
Total commercial
loans 9,075,276 6,840,620 32.7 +
Retail:
Real estate
residential 7,593,720 7,852,584 3.3 --
Real estate
construction 1,643,874 746,144 120.3 +
Other retail 167,475 180,037 7.0 --
Credit card
receivables 241,657 239,256 1.0 +
---------------------------------------------------------------------
Total retail
loans 9,646,726 9,018,021 7.0 +
---------------------------------------------------------------------
Total loans, net
of unearned
income 18,722,002 15,858,641 18.1 +
Investment securities 2,934,030 2,625,717 11.7 +
Loans held for sale 6,936,767 4,036,714 71.8 +
Other earning assets 4,969,239 1,687,628 194.5 +
---------------------------------------------------------------------
Total earning
assets 33,562,038 24,208,700 38.6 +
Cash and due from banks 769,813 739,980 4.0 +
Other assets 3,759,142 2,767,927 35.8 +
---------------------------------------------------------------------
Total assets $38,090,993 $27,716,607 37.4 +
==========================
Certificates of deposit
under $100,000 and
other time $ 2,278,094 $ 2,015,030 13.1 +
Other interest-bearing
deposits 4,576,869 4,128,600 10.9 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 6,854,963 6,143,630 11.6 +
Demand deposits 1,941,952 1,741,645 11.5 +
Other noninterest-
bearing deposits 3,717,097 2,800,576 32.7 +
---------------------------------------------------------------------
Total core
deposits 12,514,012 10,685,851 17.1 +
Certificates of deposit
$100,000 and more 11,467,752 6,971,121 64.5 +
---------------------------------------------------------------------
Total deposits 23,981,764 17,656,972 35.8 +
Short-term borrowed
funds 7,809,024 4,602,703 69.7 +
Term borrowings 2,374,568 2,340,558 1.5 +
Other liabilities 1,444,100 1,210,442 19.3 +
Preferred stock of
subsidiary 295,312 454 NM
Shareholders' equity 2,186,225 1,905,478 14.7 +
---------------------------------------------------------------------
Total liabilities
and shareholders'
equity $38,090,993 $27,716,607 37.4 +
==========================
---------------------------------------------------------------------
A-4
FIRST HORIZON NATIONAL CORPORATION
PERIOD-END STATEMENTS OF CONDITION
(Unaudited)
---------------------------------------------------------------------
September 30
--------------- Growth
(Thousands) 2005 2004 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial, financial
and industrial $ 6,354,815 $ 5,097,027 24.7 +
Real estate
commercial 1,171,606 931,450 25.8 +
Real estate
construction 1,849,075 1,027,206 80.0 +
---------------------------------------------------------------------
Total commercial
loans 9,375,496 7,055,683 32.9 +
Retail:
Real estate
residential 7,603,249 8,081,420 5.9 --
Real estate
construction 1,814,632 845,442 114.6 +
Other retail 170,684 175,605 2.8 --
Credit card
receivables 248,049 245,159 1.2 +
---------------------------------------------------------------------
Total retail loans 9,836,614 9,347,626 5.2 +
---------------------------------------------------------------------
Total loans, net
of unearned
income 19,212,110 16,403,309 17.1 +
Investment securities 2,842,016 1,772,303 60.4 +
Loans held for sale 5,158,103 3,893,279 32.5 +
Other earning assets 3,992,226 1,549,576 157.6 +
---------------------------------------------------------------------
Total earning
assets 31,204,455 23,618,467 32.1 +
Cash and due from
banks 1,037,352 810,541 28.0 +
Other assets 4,800,500 3,865,717 24.2 +
---------------------------------------------------------------------
Total assets $37,042,307 $28,294,725 30.9 +
=========================
Certificates of deposit
under $100,000 and
other time $ 2,338,365 $ 2,051,760 14.0 +
Other interest-
bearing deposits 4,620,547 4,113,040 12.3 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 6,958,912 6,164,800 12.9 +
Demand deposits 2,709,186 2,417,379 12.1 +
Other noninterest-
bearing deposits 3,182,293 2,538,881 25.3 +
---------------------------------------------------------------------
Total core deposits 12,850,391 11,121,060 15.6 +
Certificates of
deposit $100,000 and
more 12,497,183 7,801,248 60.2 +
---------------------------------------------------------------------
Total deposits 25,347,574 18,922,308 34.0 +
Short-term borrowed
funds 4,482,503 2,653,384 68.9 +
Term borrowings 2,000,113 2,453,510 18.5 --
Other liabilities 2,658,933 2,282,389 16.5 +
Preferred stock of
subsidiary 295,274 454 NM
Shareholders' equity 2,257,910 1,982,680 13.9 +
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $37,042,307 $28,294,725 30.9 +
=========================
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-5
FIRST HORIZON NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Unaudited)
--------------------------------------------------------------------
(Thousands) 3Q05 2Q05 1Q05 4Q04 3Q04
---------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES:
Beginning
Reserve $169,697 $164,195 $158,159 $161,856 $160,757
Provision 22,608 15,786 13,109 11,783 10,044
Transfers
to held
for sale -- -- -- (4,705) (351)
Acquisitions 1,902 -- -- -- --
Charge-offs (12,900) (13,642) (11,022) (13,742) (12,497)
Recoveries 3,722 3,358 3,949 2,967 3,903
---------------------------------------------------------------------
Ending
Balance $185,029 $169,697 $164,195 $158,159 $161,856
-----------------====================================================
Reserve for
off-balance
sheet
commitments $ 9,034 $ 8,515 $ 8,212 $ 7,904 $ 8,259
Total of allowance
for loan losses
and reserve for
off-balance
sheet
commitments $194,063 $178,212 $172,407 $166,063 $170,115
---------------------------------------------------------------------
NONPERFORMING ASSETS:
RETAIL/COMMERCIAL BANKING:
Nonperforming
loans $ 39,236 $ 39,792 $ 40,160 $ 41,102 $ 45,633
Foreclosed
real estate 19,875 18,647 17,958 19,247 22,582
---------------------------------------------------------------------
Total Retail/
Commercial
Banking 59,111 58,439 58,118 60,349 68,215
---------------------------------------------------------------------
MORTGAGE BANKING:
Nonperforming
loans - held
for sale 13,291 10,550 9,264 8,458 7,279
Foreclosed
real
estate 7,981 8,490 7,737 8,531 9,890
---------------------------------------------------------------------
Total Mortgage
Banking 21,272 19,040 17,001 16,989 17,169
---------------------------------------------------------------------
Total
nonperforming
assets $ 80,383 $ 77,479 $ 75,119 $ 77,338 $ 85,384
=====================================================
Loans past
due 90
days or
more $193,426 $189,090 $206,424 $213,596 $212,216
Guaranteed
portion
of loans
past due
90 days
or more 166,891 165,216 181,666 185,353 188,213
Period-end
loans, net
of unearned
income
(millions) $ 19,212 $ 18,429 $ 17,184 $ 16,428 $ 16,403
Insured loans 817 831 801 666 560
---------------------------------------------------------------------
Loans
excluding
insured
loans $ 18,395 $ 17,598 $ 16,383 $ 15,762 $ 15,843
====================================================
Off-balance
sheet
commitments
(millions)
(a) $ 8,751 $ 6,871 $ 6,465 $ 6,226 $ 5,848
---------------------------------------------------------------------
(a) Amount of off-balance sheet commitments for which a reserve has
been provided.
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-6
FIRST HORIZON NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Unaudited)
---------------------------------------------------------------------
3Q05 2Q05 1Q05 4Q04 3Q04
---------------------------------------------------------------------
FHN CONSOLIDATED:
Nonperforming
loans ratio (a) .20% .22% .23% .25% .28%
Nonperforming
assets ratio (b) .35 .36 .38 .42 .48
Allowance to
total loans .96 .92 .96 .96 .99
Allowance to
loans excluding
insured loans 1.01 .96 1.00 1.00 1.02
Allowance to
nonperforming
loans (c) 471.58 426.46 408.85 384.80 354.69
Allowance to
nonperforming
assets (d) 275.78 253.55 249.33 229.62 207.23
Net charge-off
ratio (e) .20 .23 .17 .26 .22
RETAIL/COMMERCIAL BANKING:
Nonperforming
assets ratio (b) .31% .32% .34% .37% .42%
Allowance to
nonperforming
assets 313.02 290.38 282.52 262.07 237.27
MORTGAGE BANKING:
Nonperforming
assets ratio (f) .02% .02% .02% .02% .02%
---------------------------------------------------------------------
(a) Ratio is nonperforming loans in the loan portfolio to total loans
(b) Ratio is nonperforming assets related to the loan portfolio to
total loans plus foreclosed real estate and other assets
(c) Ratio is allowance to nonperforming loans in the loan portfolio
(d) Ratio is allowance to nonperforming assets related to the loan
portfolio
(e) Ratio is annualized net charge-offs to average total loans
(f) Ratio is nonperforming assets to unpaid principal balance of
servicing portfolio
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-7
FIRST HORIZON NATIONAL CORPORATION
BUSINESS SEGMENT HIGHLIGHTS
(Unaudited)
----------------------------------------------------------------------
(Thousands) 3Q05 2Q05 1Q05 4Q04 3Q04
----------------------------------------------------------------------
RETAIL/COMMERCIAL BANKING
Total revenues(a) $353,767 $333,431 $318,646 $324,045 $293,741
Provision for
loan losses 22,428 15,667 13,069 11,798 10,044
Noninterest
expenses 212,403 207,800 192,868 196,836 184,268
--------------------------------------------------
Pre-tax income $118,936 $109,964 $112,709 $115,411 $ 99,429
Provision for
income taxes 37,747 34,975 36,085 34,414 31,727
--------------------------------------------------
Net income $ 81,189 $ 74,989 $ 76,624 $ 80,997 $ 67,702
MORTGAGE BANKING
Total revenues(a) $192,942 $155,341 $155,532 $140,708 $146,984
Provision for
loan losses 180 119 40 (15) --
Noninterest
expenses 131,031 112,568 108,630 105,451 105,237
--------------------------------------------------
Pre-tax income $ 61,731 $ 42,654 $ 46,862 $ 35,272 $ 41,747
Provision for
income taxes 22,301 15,273 16,818 12,699 15,192
--------------------------------------------------
Net income $ 39,430 $ 27,381 $ 30,044 $ 22,573 $ 26,555
CAPITAL MARKETS
Total revenues(a) $ 78,415 $ 90,728 $ 91,248 $ 80,459 $ 82,771
Noninterest
expenses 75,910 82,679 81,538 69,527 64,640
--------------------------------------------------
Pre-tax income $ 2,505 $ 8,049 $ 9,710 $ 10,932 $ 18,131
Provision for
income taxes 519 2,161 4,172 3,564 6,752
--------------------------------------------------
Net income $ 1,986 $ 5,888 $ 5,538 $ 7,368 $ 11,379
CORPORATE
Total revenues(a) $ 4,574 $ 5,495 $ 5,419 $ (3,618) $ 22,368
Noninterest
expenses 16,875 15,984 11,819 10,874 11,451
--------------------------------------------------
Pre-tax
(loss)/
income $(12,301) $(10,489) $ (6,400) $(14,492) $ 10,917
Provision for
(income tax
benefit)/income
taxes (5,893) (4,936) (3,403) (6,706) 2,952
--------------------------------------------------
Net (loss)/income $ (6,408) $ (5,553) $ (2,997) $ (7,786) $ 7,965
TOTAL CONSOLIDATED
Total revenues(a) $629,698 $584,995 $570,845 $541,594 $545,864
Provision
for loan
losses 22,608 15,786 13,109 11,783 10,044
Total
noninterest
expenses 436,219 419,031 394,855 382,688 365,596
--------------------------------------------------
Consolidated
pre-tax income $170,871 $150,178 $162,881 $147,123 $170,224
Provision for
income taxes 54,674 47,473 53,672 43,971 56,623
--------------------------------------------------
Net income $116,197 $102,705 $109,209 $103,152 $113,601
--------------------------------------------------
--------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
(a) Includes noninterest income and net interest income/(expense)
A-8