MEMPHIS, Tenn., Jan. 18, 2006 (PRIMEZONE) -- First Horizon National Corporation (NYSE:FHN) announced fourth quarter 2005 earnings of $113.0 million or $.87 diluted earnings per share before the cumulative effect of a change in accounting principle, net of taxes. Earnings including the $3.1 million unfavorable cumulative effect were $109.9 million or $.85 diluted earnings per share for fourth quarter 2005. Fourth quarter 2004 earnings were $103.1 million or $.81 diluted earnings per share. Highlights for the quarter included:
-- Retail/Commercial Banking pre-tax income increased 16 percent
to $133.5 million
-- Commercial loans grew 31 percent and retail loans grew 9
percent over fourth quarter 2004
-- Retail/Commercial Banking deposits grew 14 percent over
fourth quarter 2004 to $11.4 billion
-- Mortgage banking revenues grew 10 percent, reflecting a
similar increase in loans delivered to the secondary market
and improvements in servicing profitability
-- Home purchase-related originations grew 8 percent
-- Capital Markets fixed income revenues were constant compared
to the prior quarter for the first time since the Fed began
to increase rates, which we view as a potential sign of
stabilization
-- Revenues in Capital Markets from products other than fixed
income grew 18 percent over fourth quarter 2004
Return on average shareholders' equity and return on average assets including the cumulative effect were 19.4 percent and 1.16 percent, respectively, for fourth quarter 2005. Excluding the cumulative effect, return on average shareholders' equity and return on average assets were 19.9 percent and 1.19 percent, respectively, compared to 20.8 percent and 1.40 percent for fourth quarter 2004.
Fourth quarter results include a charge of $3.1 million, net of taxes, reflecting the cumulative effect of a change in accounting principle related to the adoption of FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations." FIN No. 47 requires recognition of a liability at the time of acquisition or construction for assets that will require certain remediation expenditures when the assets are removed from service. The adoption of FIN No. 47 is not expected to have a material effect on earnings in 2006.
"Earnings growth resumed in the second half of 2005, as our fourth quarter earnings came in line with expectations," said Ken Glass, chairman and CEO of FHN. "Our earnings growth was led by the performance of our retail/commercial banking business, as we continued to execute our strategic plans for long-term growth in the interests of our shareholders."
For the twelve months ended December 31, 2005, earnings were $438.0 million or $3.40 diluted earnings per share, including the cumulative effect adjustment. Earnings before the cumulative effect were $441.1 million or $3.42 diluted earnings per share compared to $454.4 million or $3.54 diluted earnings per share for 2004.
For the twelve months ended December 31, 2005, return on average shareholders' equity and return on average assets were 20.4 percent and 1.20 percent, respectively. Excluding the cumulative effect, return on average shareholders' equity and return on average assets were 20.6 percent and 1.21 percent, respectively, compared to 23.9 percent and 1.66 percent for the same period in 2004.
Total assets were $36.6 billion and shareholders' equity was $2.3 billion on December 31, 2005, compared to $29.8 billion and $2.0 billion, respectively, on December 31, 2004.
PERFORMANCE HIGHLIGHTS
Retail/Commercial Banking
Pre-tax income for Retail/Commercial Banking increased 16 percent to $133.5 million for fourth quarter 2005, compared to $115.2 million for fourth quarter 2004. Retail/Commercial Banking contributed 83 percent of total pre-tax income in fourth quarter 2005 compared to 78 percent in fourth quarter 2004. Total revenues increased 12 percent to $363.4 million for fourth quarter 2005 compared to $323.9 million for fourth quarter 2004.
Net interest income increased 18 percent to $227.2 million in fourth quarter 2005 from $193.3 million in fourth quarter 2004. The increase in net interest income is primarily attributable to 18 percent loan growth, with commercial loans growing 31 percent to $9.5 billion from $7.3 billion and retail loans growing 8 percent to $10.3 billion from $9.5 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. Deposits increased 14 percent or $1.4 billion over fourth quarter 2004. Net interest margin in Retail/Commercial Banking was 4.19 percent in the fourth quarter and has remained stable compared to last year.
Noninterest income increased 4 percent to $136.2 million in fourth quarter 2005 from $130.6 million in fourth quarter 2004. Fees from deposit services charges increased 12 percent or $4.5 million compared to fourth quarter 2004 due to the deposit growth and pricing initiatives. Results for fourth quarter 2005 included a divestiture gain of $7.0 million from the sale of three financial centers, and for fourth quarter 2004 included $3.2 million from the sale of an insurance subsidiary and an earn-out from the sale of certain merchant relationships. Merchant processing income increased 13 percent, or $2.5 million, in fourth quarter 2005, reflecting increased volume from existing customers as well as an expanded customer base.
Provision for loan losses increased to $16.0 million in fourth quarter 2005 from $11.8 million last year, reflecting the growth in the loan portfolio. The stable risk profile of both the commercial and retail loan portfolios was demonstrated as the net charge-off ratio continued to remain at low levels with 22 basis points in fourth quarter 2005 compared to 26 basis points in fourth quarter 2004.
Noninterest expense was $214.0 million in fourth quarter 2005 compared to $196.9 million last year. The growth in noninterest expense was primarily due to higher personnel costs which were impacted by national expansion initiatives. As total revenue grew 12 percent and noninterest expense grew 9 percent, the efficiency ratio improved to 58.9 percent in fourth quarter 2005 from 60.7 percent in fourth quarter 2004.
Mortgage Banking
Pre-tax income for Mortgage Banking increased 14 percent to $40.4 million for fourth quarter 2005, compared to $35.5 million for fourth quarter 2004. Total revenues were $154.4 million in fourth quarter 2005, an increase of 10 percent from $140.8 million in fourth quarter 2004.
Net interest income decreased 11 percent to $34.6 million in fourth quarter 2005 from $38.9 million in fourth quarter 2004. The warehouse grew 9 percent; however, the flattening of the yield curve resulted in compression of the spread on the warehouse. Spread on the warehouse was 2.06 percent in fourth quarter 2005 compared to 3.58 percent for the same period in 2004.
Noninterest income increased 18 percent to $119.8 million in fourth quarter 2005 compared to $101.9 million in fourth quarter 2004. 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 fourth quarter 2005 were $8.0 billion compared to $7.8 billion in 2004, as home purchase-related originations grew 8 percent from fourth quarter 2004. The increase in home purchase originations demonstrates FHN's success in executing its strategy to grow the purchase market and reflects a sales force of 2,600, which increased by 200, or 9 percent, from 2004. Refinance activity represented 41 percent of total originations during fourth quarter 2005 compared to 44 percent last year. Loans delivered into the secondary market increased 11 percent to $7.9 billion. Net revenue from mortgage loans sold increased 14 percent to $87.5 million from $76.6 million in fourth quarter 2004.
The mortgage-servicing portfolio grew 10 percent to $95.3 billion on December 31, 2005, from $86.6 billion on December 31, 2004. Total fees associated with mortgage servicing increased 18 percent to $74.3 million from $62.7 million, reflecting this growth. The growth in the servicing portfolio and rising interest rates led to a 26 percent increase in capitalized mortgage servicing rights and a 16 percent, or $6.7 million, increase in amortization expense compared to 2004. Net servicing revenues also include a favorable $8.1 million impact from a decline in MSR impairment charges due to the impact rising interest rates had on the fair value of MSR. In addition, net servicing revenues were unfavorably impacted by net hedge losses of $4.4 million in fourth quarter 2005 compared to net hedge gains of $3.8 million in fourth 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 8 percent to $113.8 million in fourth quarter 2005 compared to $105.4 million in fourth quarter 2004 due to costs associated with the increased volume of loans delivered into the secondary market. As total revenue grew 10 percent, the efficiency ratio decreased to 73.7 percent in fourth quarter 2005 compared to 74.9 percent in fourth quarter 2004.
Capital Markets
Pre-tax earnings declined from $11.0 million in fourth quarter 2004 to $3.4 million in fourth quarter 2005 primarily due to a decrease in net interest income. Total revenues were $78.9 million in fourth quarter 2005 compared to $80.5 million in fourth quarter 2004.
Revenues from fixed income sales decreased $1.5 million from fourth quarter 2004, while revenues from other fee sources increased $6.2 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 48 percent of total noninterest income in fourth quarter 2005 compared to 43 percent in fourth quarter 2004 and increased 18 percent to $40.4 million from $34.2 million, primarily due to increased fees from investment banking and loan sales activities.
Net interest income decreased $6.3 million, reflecting a $4.9 million incremental cost of equity charge, largely related to the capital requirements of the acquisition of the fixed income business of Spear, Leeds & Kellogg (SLK) in first quarter 2005 and the compression of the spread on Capital Markets securities inventory resulting from the flattening of the yield curve.
Noninterest expense increased 8 percent, or $6.0 million, primarily due to amortization and other increased costs resulting from the acquisition in 2005 of SLK.
Corporate
The Corporate segment's results yielded a pre-tax loss of $16.0 million in fourth quarter 2005 compared to a pre-tax loss of $14.6 million in fourth quarter 2004. The fourth quarter 2005 results include $3.8 million in dividend expense on $300 million of noncumulative perpetual preferred stock issued in first quarter 2005.
AVERAGE BALANCE SHEET
Total average assets increased 29 percent to $37.7 billion for fourth quarter 2005. Total loans increased 19 percent to $20.0 billion as commercial loans grew 31 percent and retail loans increased 9 percent. Loans held for sale increased 23 percent to $5.8 billion. Interest-bearing core deposits increased 13 percent. Total core deposits increased 12 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 47 percent to $18.6 billion. Average shareholders' equity increased 14 percent in fourth quarter 2005.
The consolidated net interest margin was 3.06 percent for fourth quarter 2005 compared to 3.57 percent for fourth quarter 2004. This compression in the margin occurred as the net interest spread decreased to 2.52 percent in 2005 from 3.23 percent in 2004 while average earning assets increased 30 percent and net interest income increased 12 percent. The decline in margin 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 as Capital Markets' balance sheet grew $3.2 billion compared to last year. The flattening of the yield curve also negatively impacted the spread on Capital Markets' inventory. Although the mortgage warehouse grew 9 percent from 2004, the flattening of the yield curve decreased spread on the warehouse by 152 basis points to 2.06 percent, which also had a negative impact on the corporate margin this quarter.
ASSET QUALITY
FHN's key asset quality ratios improved in fourth quarter 2005. The net charge-off ratio was 22 basis points in fourth quarter 2005 compared to 26 basis points in fourth quarter 2004 as net charge-offs remained stable at $11.0 million compared to $10.8 million during a period of strong loan growth. The nonperforming assets ratio was 33 basis points in fourth quarter 2005 compared to 42 basis points last year, with nonperforming assets of $79.7 million on December 31, 2005, compared to $77.3 million on December 31, 2004. Provision for loan losses was $16.2 million in fourth quarter 2005 compared to $11.7 million in fourth quarter 2004. 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 we look to 2006, we are encouraged about the opportunities in our business, even in this flat yield curve environment," said Glass. "The retail/commercial bank should maintain its current strong double-digit growth. Mortgage banking will continue to expand its sales force and improve servicing portfolio profitability. And finally, after the demand for fixed income stabilized for the fourth quarter, capital markets earnings are expected to grow again in 2006 as other products continue to be added. By executing on our core strategies, combined with the achievement of additional earnings enhancements, we should create earnings growth in 2006."
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 including the slope of the yield curve, competition, investor responses to these conditions, ability to execute business plans, geopolitical developments, natural disasters, 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 Jan. 19 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 Jan. 19 by dialing 1-800-289-0743 (international participants dial 1-913-981-5546). The conference will also be webcast live through the investor relations section of FHN's website. To access the webcast, visit http://www.shareholder.com/fhnc/medialist.cfm. A replay of the call will be available from 10:30 a.m. Central Time Jan. 19 until 11 p.m. Tuesday, Jan. 31, 2006, by calling 1-888-203-1112 or 1-719-457-0820 for international participants. The passcode is 4902637. The event will be archived and made available by 1 p.m. Central Time Jan. 23 on FHN's website 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
December 31
--------------
Growth
(Thousands) 2005 2004 Rate(%)
-------------------------------------------------------------------
Interest income $ 1,840,174 $ 1,166,802 57.7 +
Less interest
expense 856,147 310,491 175.7 +
-------------------------------------------------------------------
Net interest income 984,027 856,311 14.9 +
Provision for loan losses 67,678 48,348 40.0 +
-------------------------------------------------------------------
Net interest income
after provision for
loan losses 916,349 807,963 13.4 +
Noninterest income:
Mortgage banking 482,950 444,758 8.6 +
Capital markets 353,005 376,558 6.3 --
Deposit transactions
and cash management 156,190 148,514 5.2 +
Merchant processing 88,581 75,086 18.0 +
Insurance commissions 54,091 56,109 3.6 --
Revenue from loan sales
and securitizations 47,575 23,115 105.8 +
Trust services and
investment management 44,614 47,274 5.6 --
Gains on divestitures 7,029 7,000 .4 +
Securities (losses)/
gains, net (578) 20,748 NM
Other 166,299 164,024 1.4 +
-------------------------------------------------------------------
Total noninterest
income 1,399,756 1,363,186 2.7 +
-------------------------------------------------------------------
Adjusted gross income
after provision for
loan losses 2,316,105 2,171,149 6.7 +
Noninterest expense:
Employee compensation,
incentives and benefits 998,180 914,947 9.1 +
Occupancy 106,038 89,402 18.6 +
Operations services 79,551 67,523 17.8 +
Equipment rentals,
depreciation,and
maintenance 77,117 72,695 6.1 +
Communications
and courier 56,106 49,590 13.1 +
Amortization of
intangible assets 13,734 9,541 43.9 +
Other 340,206 300,642 13.2 +
-------------------------------------------------------------------
Total noninterest
expense 1,670,932 1,504,340 11.1 +
-------------------------------------------------------------------
Pre-tax income 645,173 666,809 3.2 --
Provision for income
taxes 204,075 212,401 3.9 --
-------------------------------------------------------------------
Income before cumulative
effect 441,098 454,408 2.9 --
Cumulative effect of
changes in accounting
principle (3,098) - NM
-------------------------------------------------------------------
Net income $ 438,000 $ 454,408 3.6 --
========================
-------------------------------------------------------------------
Diluted earnings
per share before
cumulative effect $ 3.42 $ 3.54 3.4 --
Diluted earnings
per common share $ 3.40 $ 3.54 4.0 --
Dividends declared $ 1.74 $ 1.63
SELECTED FINANCIAL RATIOS:
-------------------------
Return on average assets 1.20% 1.66%
Return on average
shareholders' equity 20.4 23.9
-------------------------------------------------------------------
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
December 31
---------------
Growth
(Thousands) 2005 2004 Rate(%)
-------------------------------------------------------------------
Interest income $ 519,474 $ 334,789 55.2 +
Less interest expense 264,663 106,343 148.9 +
-------------------------------------------------------------------
Net interest income 254,811 228,446 11.5 +
Provision for loan
losses 16,175 11,783 37.3 +
-------------------------------------------------------------------
Net interest income
after provision for
loan losses 238,636 216,663 10.1 +
Noninterest income:
Mortgage banking 114,713 94,771 21.0 +
Capital markets 80,896 76,522 5.7 +
Deposit transactions
and cash management 42,196 37,695 11.9 +
Merchant processing 22,202 19,679 12.8 +
Insurance commissions 13,144 11,649 12.8 +
Revenue from loan
sales and securitiza-
tions 13,146 14,151 7.1 --
Trust services and
investment management 10,873 11,741 7.4 --
Gains on divestitures 7,029 3,200 119.7 +
Securities losses, net (181) (3,734) 95.2 +
Other 39,416 47,474 17.0 --
------------------------------------------------------------------
Total noninterest
income 343,434 313,148 9.7 +
------------------------------------------------------------------
Adjusted gross income
after provision for
loan losses 582,070 529,811 9.9 +
Noninterest expense:
Employee compensation,
incentives and
benefits 245,224 228,206 7.5 +
Occupancy 28,427 22,875 24.3 +
Operations services 20,086 18,379 9.3 +
Equipment rentals,
depreciation,and
maintenance 19,958 18,633 7.1 +
Communications and
courier 14,720 12,446 18.3 +
Amortization of
intangible assets 3,414 3,014 13.3 +
Other 88,998 79,135 12.5 +
-------------------------------------------------------------------
Total noninterest
expense 420,827 382,688 10.0 +
------------------------------------------------------------------
Pre-tax income 161,243 147,123 9.6 +
Provision for income
taxes 48,256 43,971 9.7 +
------------------------------------------------------------------
Income before cumulative
effect 112,987 103,152 9.5 +
Cumulative effect of
changes in accounting
principle (3,098) -- NM
------------------------------------------------------------------
Net income $ 109,889 $ 103,152 6.5 +
========================
-------------------------------------------------------------------
Diluted earnings
per share before
cumulative effect $ .87 $ .81 7.4 +
Diluted earnings
per common share $ .85 $ .81 4.9 +
Dividends declared
per common share $ .45 $ .43
SELECTED FINANCIAL RATIOS:
-------------------------
Return on average assets 1.16% 1.40%
Return on average
shareholders' equity 19.4 20.8
------------------------------------------------------------------
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
December 31
--------------
Growth
(Thousands) 2005 2004 Rate(%)
--------------------------------------------------------------------
Loans, net of unearned
income:
Commercial:
Commercial, financial
and industrial $ 5,979,877 $ 4,845,559 23.4 +
Real estate commercial 1,116,449 959,330 16.4 +
Real estate construction 1,642,379 895,603 83.4 +
-------------------------------------------------------------------
Total commercial loans 8,738,705 6,700,492 30.4 +
Retail:
Real estate residential 7,660,997 7,533,036 1.7 +
Real estate construction 1,488,873 714,608 108.3 +
Other retail 164,960 186,298 11.5 -
Credit card receivables 240,875 250,216 3.7 -
-------------------------------------------------------------------
Total retail loans 9,555,705 8,684,158 10.0 +
--------------------------------------------------------------------
Total loans, net of
unearned income 18,294,410 15,384,650 18.9 +
Investment securities 2,879,965 2,449,074 17.6 +
Loans held for sale 6,020,398 4,179,360 44.1 +
Other earning assets 4,755,214 1,705,235 178.9 +
--------------------------------------------------------------------
Total earning assets 31,949,987 23,718,319 34.7 +
Cash and due from banks 752,245 739,203 1.8 +
Other assets 3,858,204 2,848,311 35.5 +
--------------------------------------------------------------------
Total assets $36,560,436 $27,305,833 33.9 +
=========================
Certificates of deposit
under $100,000 and
other time $ 2,242,837 $ 1,947,025 15.2 +
Other interest-bearing
deposits 4,613,617 4,139,904 11.4 +
--------------------------------------------------------------------
Total interest-bearing
core deposits 6,856,454 6,086,929 12.6 +
Demand deposits 1,896,082 1,805,610 5.0 +
Other noninterest-bearing
deposits 3,367,047 2,867,709 17.4 +
--------------------------------------------------------------------
Total core deposits 12,119,583 10,760,248 12.6 +
Certificates of deposit
$100,000 and more 10,896,283 6,875,347 58.5 +
--------------------------------------------------------------------
Total deposits 23,015,866 17,635,595 30.5 +
Short-term borrowed
funds 7,096,287 4,348,840 63.2 +
Term borrowings 2,560,085 2,247,985 13.9 +
Other liabilities 1,514,869 1,167,458 29.8 +
Preferred stock of
subsidiary 229,912 453 NM
Shareholders' equity 2,143,417 1,905,502 12.5 +
--------------------------------------------------------------------
Total liabilities and
shareholders' equity $36,560,436 $27,305,833 33.9 +
=========================
--------------------------------------------------------------------
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
December 31
---------------
Growth
(Thousands) 2005 2004 Rate(%)
-------------------------------------------------------------------
Loans, net of
unearned income:
Commercial:
Commercial,
financial and
industrial $ 6,356,977 $ 5,213,599 21.9 +
Real estate
commercial 1,208,945 929,707 30.0 +
Real estate
construction 1,973,121 1,132,131 74.3 +
-------------------------------------------------------------------
Total commercial
loans 9,539,043 7,275,437 31.1 +
Retail:
Real estate
residential 8,123,581 8,204,466 1.0 --
Real estate
construction 1,874,831 939,823 99.5 +
Other retail 170,470 172,627 1.2 --
Credit card
receivables 244,161 244,095 NM
-------------------------------------------------------------------
Total retail
loans 10,413,043 9,561,011 8.9 +
-------------------------------------------------------------------
Total loans, net
of unearned
income 19,952,086 16,836,448 18.5 +
Investment
securities 2,858,410 2,150,573 32.9 +
Loans held for
sale 5,758,831 4,696,065 22.6 +
Other earning
assets 4,622,451 1,895,711 143.8 +
-------------------------------------------------------------------
Total earning
assets 33,191,778 25,578,797 29.8 +
Cash and due from
banks 781,178 779,235 .2 +
Other assets 3,747,454 2,951,866 27.0 +
-------------------------------------------------------------------
Total assets $37,720,410 $29,309,898 28.7 +
============================----------------
Certificates of
deposit under
$100,000 and
other time $ 2,402,900 $ 2,065,806 16.3 +
Other interest-
bearing deposits 4,694,876 4,228,402 11.0 +
-------------------------------------------------------------------
Total interest-
bearing core
deposits 7,097,776 6,294,208 12.8 +
Demand deposits 2,018,721 1,879,669 7.4 +
Other noninterest-
bearing deposits 3,409,202 3,034,024 12.4 +
-------------------------------------------------------------------
Total core
deposits 12,525,699 11,207,901 11.8 +
Certificates of
deposit $100,000
and more 11,393,018 8,078,961 41.0 +
-------------------------------------------------------------------
Total deposits 23,918,717 19,286,862 24.0 +
Short-term
borrowed funds 7,164,720 4,506,807 59.0 +
Term borrowings 2,665,867 2,385,133 11.8 +
Other liabilities 1,426,259 1,157,443 23.2 +
Preferred stock
of subsidiary 295,274 455 NM
Shareholders'
equity 2,249,573 1,973,198 14.0 +
-------------------------------------------------------------------
Total liabilities
and shareholders'
equity $37,720,410 $29,309,898 28.7 +
============================----------------
-------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-4
FIRST HORIZON NATIONAL CORPORATION
PERIOD-END STATEMENTS OF CONDITION
(Unaudited)
December 31
-------------
Growth
(Thousands) 2005 2004 Rate (%)
--------------------------------------------------------------------
Loans, net of
unearned income:
Commercial:
Commercial,
financial and
industrial $ 6,578,130 $ 5,560,736 18.3 +
Real estate
commercial 1,213,052 960,178 26.3 +
Real estate
construction 2,108,121 1,208,703 74.4 +
--------------------------------------------------------------------
Total commercial
loans 9,899,303 7,729,617 28.1 +
Retail:
Real estate
residential 8,357,143 7,244,716 15.4 +
Real estate
construction 1,925,060 1,035,562 85.9 +
Other retail 168,413 168,806 .2 --
Credit card
receivables 251,016 248,972 .8 +
--------------------------------------------------------------------
Total retail loans 10,701,632 8,698,056 23.0 +
--------------------------------------------------------------------
Total loans, net
of unearned income 20,600,935 16,427,673 25.4 +
Investment
securities 2,912,486 2,680,997 8.6 +
Loans held for sale 4,435,343 5,167,981 14.2 -
Other earning assets 3,629,314 1,675,654 116.6 +
--------------------------------------------------------------------
Total earning assets 31,578,078 25,952,305 21.7 +
Cash and due from
banks 946,421 638,189 48.3 +
Other assets 4,054,562 3,181,189 27.5 +
--------------------------------------------------------------------
Total assets $36,579,061 $29,771,683 22.9 +
===============================
Certificates of
deposit under
$100,000 and other
time $ 2,478,946 $ 2,061,262 20.3 +
Other interest-
bearing deposits 4,705,072 4,510,207 4.3 +
--------------------------------------------------------------------
Total interest-
bearing core
deposits 7,184,018 6,571,469 9.3 +
Demand deposits 2,597,926 2,402,602 8.1 +
Other noninterest-
bearing deposits 2,724,131 2,591,920 5.1 +
--------------------------------------------------------------------
Total core deposits 12,506,075 11,565,991 8.1 +
Certificates of
deposit $100,000
and more 10,931,695 8,216,176 33.1 +
--------------------------------------------------------------------
Total deposits 23,437,770 19,782,167 18.5 +
Short-term borrowed
funds 5,331,397 3,813,167 39.8 +
Term borrowings 3,437,643 2,616,368 31.4 +
Other liabilities 1,764,666 1,518,540 16.2 +
Preferred stock of
subsidiary 295,274 458 NM
Shareholders' equity 2,312,311 2,040,983 13.3 +
--------------------------------------------------------------------
Total liabilities
and shareholders'
equity $36,579,061 $29,771,683 22.9 +
===============================
--------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-5
FIRST HORIZON NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Unaudited)
---------------------------------------------------------------------
(Thousands) 4Q05 3Q05 2Q05 1Q05 4Q04
---------------------------------------------------------------------
ALLOWANCE
FOR LOAN
LOSSES:
Beginning
Reserve $ 185,029 $ 169,697 $ 164,195 $ 158,159 $ 161,856
Provision 16,175 22,608 15,786 13,109 11,783
Transfers
to held
for sale -- -- -- -- (4,705)
Divesti-
tures/
acquisi-
tions (516) 1,902 -- -- --
Charge-offs (14,586) (12,900) (13,642) (11,022) (13,742)
Recoveries 3,603 3,722 3,358 3,949 2,967
-------------------------------------------------------------------
Ending
Balance $ 189,705 $ 185,029 $ 169,697 $ 164,195 $ 158,159
-------------======================================================
Reserve for
off-
balance
sheet
commitments $ 10,650 $ 9,034 $ 8,515 $ 8,212 $ 7,904
Total of
allowance
for loan
losses and
reserve for
off-balance
sheet
commitments $ 200,355 $ 194,063 $ 178,212 $ 172,407 $ 166,063
-------------------------------------------------------------------
NONPERFORMING
ASSETS:
RETAIL/
COMMERCIAL
BANKING:
Nonperform-
ing loans $ 40,771 $ 39,236 $ 39,792 $ 40,160 $ 41,102
Foreclosed
real estate 18,932 19,875 18,647 17,958 19,247
-------------------------------------------------------------------
Total Retail
/Commercial
Banking 59,703 59,111 58,439 58,118 60,349
-------------------------------------------------------------------
MORTGAGE
BANKING:
Nonperform-
ing loans-held
for sale 11,488 11,868 10,550 9,264 8,458
Foreclosed
real estate 8,478 7,981 8,490 7,737 8,531
-------------------------------------------------------------------
Total
Mortgage
Banking 19,966 19,849 19,040 17,001 16,989
-------------------------------------------------------------------
Total non-
performing
assets $ 79,669 $ 78,960 $ 77,479 $ 75,119 $ 77,338
======================================================
Loans past
due 90
days or
more (a) $ 217,900 $ 195,849 $ 191,458 $ 206,424 $ 213,596
Guaranteed
portion of
loans past
due 90
days or
more (a) 178,705 166,891 165,216 181,666 185,353
Period-end
loans, net
of unearned
income
(millions) $ 20,601 $ 19,212 $ 18,429 $ 17,184 $ 16,428
Insured
loans 827 667 831 801 666
--------------------------------------------------------------------
Loans
excluding
insured
loans $ 19,774 $ 18,545 $ 17,598 $ 16,383 $ 15,762
======================================================
Off-balance
sheet
commitments
(millions)
(b) $ 9,091 $ 8,751 $ 6,871 $ 6,465 $ 6,226
---------------------------------------------------------------------
(a) Includes loans held for sale.
(b) 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)
--------------------------------------------------------------------
4Q05 3Q05 2Q05 1Q05 4Q04
--------------------------------------------------------------------
FHN CONSOLIDATED:
Nonperforming
loans ratio (a) .20% .20% .22% .23% .25%
Nonperforming
assets ratio (b) .33 .35 .36 .38 .42
Allowance to total
loans .92 .96 .92 .96 .96
Allowance to loans
excluding insured
loans .96 1.00 .96 1.00 1.00
Allowance to non-
performing
loans (c) 465.29 471.58 426.46 408.85 384.80
Allowance to non-
performing
assets (d) 278.24 275.78 253.55 249.33 229.62
Net charge-off
ratio (e) .22 .20 .23 .17 .26
RETAIL/COMMERCIAL
BANKING:
Nonperforming
assets ratio (b) .29% .31% .32% .34% .37%
Allowance to non-
performing assets 317.75 313.02 290.38 282.52 262.07
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) 4Q05 3Q05 2Q05 1Q05 4Q04
---------------------------------------------------------------------
RETAIL/COMMERCIAL
BANKING
Total revenues(a) $363,375 $353,767 $333,431 $318,646 $324,045
Provision for loan
losses 15,897 22,428 15,667 13,069 11,798
Noninterest
expenses 214,006 212,403 207,800 192,868 196,836
-------------------------------------------------
Pre-tax income $133,472 $118,936 $109,964 $112,709 $115,411
Provision for
income taxes 40,247 36,566 33,723 36,085 34,414
-------------------------------------------------
Income before
cumulative effect
of changes in
accounting
principle $ 93,225 $ 82,370 $ 76,241 $ 76,624 $ 80,997
Cumulative effect
of changes in
accounting
principle, net
of tax (3,098) -- -- -- --
-------------------------------------------------
Net income $ 90,127 $ 82,370 $ 76,241 $ 76,624 $ 80,997
MORTGAGE BANKING
Total revenues(a) $154,399 $192,942 $155,341 $155,532 $140,708
Provision for loan
losses 278 180 119 40 (15)
Noninterest
expenses 113,763 131,031 112,568 108,630 105,451
-------------------------------------------------
Pre-tax income $ 40,358 $ 61,731 $ 42,654 $ 46,862 $ 35,272
Provision for
income taxes 12,639 22,301 15,273 16,818 12,699
-------------------------------------------------
Net income $ 27,719 $ 39,430 $ 27,381 $ 30,044 $ 22,573
CAPITAL MARKETS
Total revenues(a) $ 78,913 $ 78,415 $ 90,728 $ 91,248 $ 80,459
Noninterest
expenses 75,419 75,910 82,679 81,538 69,527
-------------------------------------------------
Pre-tax income $ 3,494 $ 2,505 $ 8,049 $ 9,710 $ 10,932
Provision for
income taxes 1,171 519 2,161 4,172 3,564
-------------------------------------------------
Net income $ 2,323 $ 1,986 $ 5,888 $ 5,538 $ 7,368
CORPORATE
Total revenues(a) $ 1,558 $ 4,574 $ 5,495 $ 5,419 $ (3,618)
Noninterest
expenses 17,639 16,875 15,984 11,819 10,874
-------------------------------------------------
Pre-tax
(loss)/income $(16,081) $(12,301) $(10,489) $ (6,400) $(14,492)
Income tax benefit (5,801) (4,712) (3,684) (3,403) (6,706)
-------------------------------------------------
Net (loss)/income $(10,280) $ (7,589) $ (6,805) $ (2,997) $ (7,786)
TOTAL CONSOLIDATED
Total revenues(a) $598,245 $629,698 $584,995 $570,845 $541,594
Provision for loan
losses 16,175 22,608 15,786 13,109 11,783
Total noninterest
expenses 420,827 436,219 419,031 394,855 382,688
-------------------------------------------------
Consolidated
pre-tax income $161,243 $170,871 $150,178 $162,881 $147,123
Provision for
income taxes 48,256 54,674 47,473 53,672 43,971
-------------------------------------------------
Income before
cumulative effect
of changes in
accounting
principle $112,987 $116,197 $102,705 $109,209 $103,152
Cumulative effect
of changes in
accounting
principle, net
of tax (3,098) -- -- -- --
-------------------------------------------------
Net income $109,889 $116,197 $102,705 $109,209 $103,152
=================================================
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
(a) Includes noninterest income and net interest income/(expense)
A-8