MEMPHIS, Tenn., July 19, 2006 (PRIMEZONE) -- First Horizon National Corporation (NYSE:FHN) announced second quarter 2006 earnings of $104.3 million or $.82 per diluted share. In 2005, second quarter earnings were $100.1 million or $.77 per diluted share.
Return on average shareholders' equity and return on average assets were 17.4 percent and 1.09 percent, respectively, for second quarter 2006. Return on average shareholders' equity and return on average assets were 18.8 percent and 1.11 percent, respectively, for second quarter 2005. Total assets were $37.5 billion and shareholders' equity was $2.4 billion on June 30, 2006, compared to $37.2 billion and $2.2 billion, respectively, on June 30, 2005. Highlights for the quarter included:
-- Commercial loans grew 20 percent and retail loans grew
21 percent over second quarter 2005
-- Retail/Commercial Banking deposits grew 11 percent over second
quarter 2005
-- Mortgage Banking pre-tax income declined $12.7 million compared
to second quarter 2005; however, on a sequential quarter basis
pre-tax income increased $34.6 million as margins on loans
delivered improved
-- Capital Markets noninterest revenues from products other than
fixed income grew 33 percent compared to second quarter 2005
"Our second quarter performance was solid, even though the operating environment continues to deteriorate," said Chairman and CEO, Ken Glass. "Our income from continuing operations represents an 8 percent increase over a year ago while the yield curve has flattened more than 100bps during that same time frame, drastically impacting our mortgage and fixed income businesses. Our employees continue to be our competitive advantage and it's to their credit that we've been able to produce growth in this difficult environment."
Including the impact of the merchant processing sale, diluted earnings per share were $2.49 and $1.60 for the six-months ended June 30, 2006 and 2005, respectively. For the six-months ended June 30, 2006, return on average shareholders' equity and return on average assets were 27.2 percent and 1.69 percent, respectively. Return on average shareholders' equity and return on average assets were 19.8 percent and 1.18 percent, respectively, for the six-months ended June 30, 2005.
PERFORMANCE HIGHLIGHTS
Retail/Commercial Banking
Total revenues for Retail/Commercial Banking increased 10 percent to $342.5 million for second quarter 2006 compared to $311.2 million for second quarter 2005.
Net interest income increased 9 percent to $230.7 million in second quarter 2006 from $211.4 million in second quarter 2005 as earning assets grew 11 percent, or $2.1 billion. Loans grew 19 percent or $3.4 billion while loans held for sale decreased 72 percent or $1.3 billion and deposits increased 11 percent or $1.2 billion over second quarter 2005. The Retail/Commercial Banking net interest margin was 4.27 percent in second quarter 2006 compared to 4.25 percent in first quarter 2006 and 4.34 percent in the second quarter of last year.
Noninterest income increased 12 percent to $111.8 million in second quarter 2006 from $99.8 million in second quarter 2005. In second quarter 2005, noninterest income was reduced by $5.2 million resulting from a write-off of the net capitalized expenses on HELOC held for sale that prepaid faster than anticipated. Fees from deposit transactions and cash management increased 8 percent or $3.3 million compared to second quarter 2005 due to deposit growth and pricing initiatives. Revenue from loan sales and securitizations increased 18 percent or $2.0 million in second quarter 2006 compared to second quarter 2005.
Provision for loan losses increased to $18.3 million in second quarter 2006 from $15.7 million last year, primarily reflecting loan growth and a trend away from the recently experienced low levels of net charge-offs.
Noninterest expense was $211.9 million in second quarter 2006 compared to $192.8 million last year. A previously identified pool of construction loans in which certain misrepresentations had been made experienced deterioration this quarter which resulted in a $7.9 million negative impact on noninterest expense. In addition, noninterest expense has increased $8.6 million due to national businesses within Retail/Commercial Banking.
Pre-tax income for Retail/Commercial Banking increased 9 percent to $112.3 million for second quarter 2006, compared to $102.7 million for second quarter 2005.
Mortgage Banking
Total revenues for Mortgage Banking were $139.1 million in second quarter 2006 compared to $155.6 million in second quarter 2005.
Net interest income decreased 34 percent to $25.1 million in second quarter 2006 from $37.9 million in second quarter 2005. The flattening of the yield curve resulted in compression of the spread on the warehouse, which was 1.44 percent in second quarter 2006 compared to 2.66 percent for the same period in 2005. Additionally, an 11 percent decrease in the warehouse negatively impacted net interest income.
Noninterest income decreased to $114.0 million in second quarter 2006 compared to $117.7 million in second quarter 2005. 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 prior to the adoption of SFAS No. 156 in first quarter 2006 was net of amortization, impairment and other expenses related to MSR and related hedges. Subsequent to the adoption of SFAS No. 156, mortgage servicing noninterest income reflects the change in fair value of MSR combined with hedging results, whether positive or negative.
Noninterest income from mortgage origination and servicing activities both increased this year over second quarter of last year. Loans sold increased 12 percent to $107.4 million from $95.7 million in second quarter 2005 as margins on loans sold improved 24 basis points while loans delivered into the secondary market decreased 15 percent to $7.4 billion. Total mortgage servicing fees increased 17 percent to $80.2 million from $68.4 million primarily reflecting mortgage servicing portfolio growth of 9 percent to $99.3 billion on June 30, 2006.
Servicing hedging activities and write-off of MSR values negatively impacted net servicing revenues this quarter as compared to a year ago. Changes in the value of MSR due to factors other than runoff net of hedge results reflected a net loss of $2.5 million in second quarter 2006 compared to a gain of $18.0 million during the same period last year. Additionally, although overall prepayments declined with lower refinance activity, this benefit was offset by the fact that MSR that prepaid this quarter were more valuable than a year ago, causing the change in MSR value due to runoff to increase to $72 million from $68 million last year. Trading asset performance and reduced option expense resulted in a $5.9 million increase in servicing income compared to 2005.
Other noninterest income decreased $8.4 million due in part to a deferred compensation plan which decreased $3.7 million from second quarter 2005. This decline in revenue was matched by a corresponding $3.8 million decrease in noninterest expense associated with this plan.
Noninterest expense decreased 4 percent or $4.0 million to $109.6 million in second quarter 2006 compared to $113.6 million in second quarter 2005. Contributing to this decrease are reductions in deferred compensation costs, discretionary spending and consolidation of certain back office functions.
Mortgage Banking had pre-tax income of $29.2 million for second quarter 2006, compared to $41.9 million for second quarter 2005.
Capital Markets
Total revenues for Capital Markets were $96.5 million in second quarter 2006 compared to $90.8 million in second quarter 2005.
Revenues from fixed income sales decreased 18 percent to $41.8 million in second quarter 2006 compared to $50.8 million in second quarter 2005. Revenues from other products were $62.2 million in second quarter 2006, an increase of $15.6 million, or 33 percent, from second quarter 2005. Revenues from other products include fee income from activities such as loan sales, investment banking, structured finance, equity research, portfolio advisory and the sale of bank-owned life insurance. These other sources of revenue represented 60 percent of total product revenues in second quarter 2006 compared to 48 percent in second quarter 2005. The increase from second quarter 2005 was primarily due to increased fees from investment banking and structured finance activities. Other non-product revenues relating to a deferred compensation plan decreased $5.6 million from second quarter 2005. This decline in revenue was offset by a related $5.8 million decrease in noninterest expense associated with this plan.
Net interest expense improved $4.9 million in second quarter 2006 compared to second quarter 2005 primarily due to improved execution that decreased nonearning assets.
Noninterest expense was $80.5 million in second quarter 2006 compared to $82.8 million in second quarter 2005. This decline was primarily due to a $5.8 million decrease related to the deferred compensation plan mentioned above.
Capital Markets pre-tax earnings were $16.0 million in second quarter 2006 compared to $8.0 million in second quarter 2005.
Corporate
The Corporate segment's results yielded a pre-tax loss of $10.5 million in second quarter 2006 compared to a pre-tax loss of $12.9 million in second quarter 2005. The second quarter 2006 results include $2.9 million of net securities gains.
AVERAGE BALANCE SHEET
Total average assets increased 6 percent to $38.5 billion for second quarter 2006. Total loans increased 21 percent to $21.4 billion as commercial loans grew 20 percent and retail loans increased 21 percent. Loans held for sale decreased 24 percent to $4.6 billion. Average earning assets increased 7 percent to $33.9 billion. Interest-bearing core deposits increased 17 percent. Total core deposits increased 10 percent to $13.1 billion, which reflects market share gains in Tennessee markets, new market expansion and improved national cross-sell efforts. Purchased funds decreased 10 percent to $16.0 billion. Average shareholders' equity increased 13 percent in second quarter 2006.
The consolidated net interest margin was 3.00 percent for second quarter 2006 compared to 3.06 percent for second quarter 2005. This compression in the margin occurred as the net interest spread decreased to 2.34 percent in 2006 from 2.66 percent in 2005 while the benefit from free funding increased to 66 basis points from 40 basis points. The decline in margin is attributable to a flatter yield curve which decreased spread on the warehouse by 122 basis points to 1.44 percent, creating a negative impact of 13 basis points on the overall corporate margin this quarter as compared to a year ago.
ASSET QUALITY
Provision for loan losses increased to $18.7 million in second quarter 2006 from $15.8 million in second quarter 2005, reflecting loan growth and a trend away from the recently experienced low levels of net charge-offs. Nonperforming assets were $112.7 million on June 30, 2006, compared to $77.5 million on June 30, 2005. However, as the loan portfolio experienced strong growth during this period, the nonperforming assets ratio only increased to 45 basis points in second quarter 2006 from 36 basis points last year. The nonperforming asset ratio was expected to experience some deterioration as the loan portfolio matured and the deterioration of a single commercial credit in our traditional lending markets added to this increase. The net charge-off ratio increased to 26 basis points in second quarter 2006 from 23 basis points in 2005 as net charge-offs grew to $13.8 million from $10.3 million during a period of strong loan growth. (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
"Going forward we will continue to remain focused on executing our strategies and implementing our efficiency initiatives. This will position us to realize additional improvement in our reported earnings once the yield curve stabilizes," Glass concluded.
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, customer and 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 in the investor relations section of FHN's website at www.fhnc.com.
Management will also host a conference call at 8:00 a.m. Central Time July 20 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 July 20 by dialing 1-800-289-0494 (international participants dial 1-913-981-5520). 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/MediaRegister.cfm. A replay of the call will be available from 11 a.m. Central Time July 20 until 10:59 p.m. July 30 by calling 1-888-203-1112 or 1-719-457-0820 for international participants. The passcode is 1609844. The event will be archived and made available by 1 p.m. Central Time July 20 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 expressed or implied herein, we will not provide any earnings guidance, directly or indirectly, express or implied.
GENERAL INFORMATION
About First Horizon
Over 12,000 employees of First Horizon National Corp. (NYSE:FHN) provide financial services to individuals and business customers through hundreds of offices located in 46 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 25 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
Quarterly Growth
(Unaudited)
Quarter Ended
June 30
-------------------
Growth
(Thousands) 2006 2005 Rate (%)
---------------------------------------------------------------------
Interest income $578,582 $438,385 32.0 +
Less interest expense 324,984 196,777 65.2 +
---------------------------------------------------------------------
Net interest income 253,598 241,608 5.0 +
Provision for loan losses 18,653 15,786 18.2 +
---------------------------------------------------------------------
Net interest income after provision
for loan losses 234,945 225,822 4.0 +
Noninterest income:
Mortgage banking 113,448 108,992 4.1 +
Capital markets 102,165 94,789 7.8 +
Deposit transactions and
cash management 42,756 39,471 8.3 +
Insurance commissions 12,461 13,525 7.9 -
Revenue from loan sales and
securitizations 12,212 10,317 18.4 +
Trust services and investment
management 10,824 11,278 4.0 -
Securities gains, net 2,893 75 NM
Other 35,228 41,666 15.5 -
---------------------------------------------------------------------
Total noninterest income 331,987 320,113 3.7 +
---------------------------------------------------------------------
Adjusted gross income after
provision for loan losses 566,932 545,935 3.8 +
Noninterest expense:
Employee compensation, incentives
and benefits 245,796 244,123 .7 +
Occupancy 27,525 26,068 5.6 +
Operations services 17,075 18,402 7.2 -
Equipment rentals, depreciation,
and maintenance 17,858 18,741 4.7 -
Communications and courier 13,409 13,189 1.7 +
Amortization of intangible assets 2,881 2,604 10.6 +
Other 95,442 83,095 14.9 +
---------------------------------------------------------------------
Total noninterest expense 419,986 406,222 3.4 +
---------------------------------------------------------------------
Pre-tax income 146,946 139,713 5.2 +
Provision for income taxes 43,013 43,567 1.3 -
---------------------------------------------------------------------
Income from continuing operations 103,933 96,146 8.1 +
Income from discontinued operations,
net of tax 376 3,858 NM
---------------------------------------------------------------------
Net income $104,309 $100,004 4.3 +
===================
---------------------------------------------------------------------
Diluted earnings per share from
continuing operations $ .82 $ .74 10.8 +
Diluted earnings per common share $ .82 $ .77 6.5 +
Dividends declared $ .45 $ .43
Diluted shares 127,280 129,428
SELECTED FINANCIAL RATIOS:
--------------------------
Return on average assets 1.09% 1.11%
Return on average
shareholders' equity 17.4 18.8
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-1
FIRST HORIZON NATIONAL CORPORATION
STATEMENTS OF INCOME
Yearly Growth
(Unaudited)
Year-to-date
June 30
------------------------
Growth
(Thousands) 2006 2005 Rate (%)
---------------------------------------------------------------------
Interest income $1,111,951 $ 823,261 35.1 +
Less interest expense 612,632 354,206 73.0 +
---------------------------------------------------------------------
Net interest income 499,319 469,055 6.5 +
Provision for loan losses 36,452 28,895 26.2 +
---------------------------------------------------------------------
Net interest income after
provision for loan losses 462,867 440,160 5.2 +
Noninterest income:
Mortgage banking 202,263 227,755 11.2 -
Capital markets 195,023 189,951 2.7 +
Deposit transactions and cash
management 80,779 72,726 11.1 +
Insurance commissions 27,147 28,274 4.0 -
Revenue from loan sales and
securitizations 23,569 23,551 .1 +
Trust services and investment
management 21,481 22,442 4.3 -
Securities (losses)/gains, net (77,388) 9 NM
Other 64,857 78,283 17.2 -
---------------------------------------------------------------------
Total noninterest income 537,731 642,991 16.4 -
---------------------------------------------------------------------
Adjusted gross income after
provision for loan losses 1,000,598 1,083,151 7.6 -
Noninterest expense:
Employee compensation, incentives
and benefits 505,937 484,420 4.4 +
Occupancy 57,627 50,079 15.1 +
Operations services 34,515 34,847 1.0 -
Equipment rentals, depreciation,
and maintenance 38,122 36,226 5.2 +
Communications and courier 28,321 25,657 10.4 +
Amortization of intangible assets 5,769 5,140 12.2 +
Other 192,910 154,390 24.9 +
---------------------------------------------------------------------
Total noninterest expense 863,201 790,759 9.2 +
---------------------------------------------------------------------
Pre-tax income 137,397 292,392 53.0 -
Provision for income taxes 30,054 93,431 67.8 -
---------------------------------------------------------------------
Income from continuing operations 107,343 198,961 46.0 -
Income from discontinued operations,
net of tax 210,649 6,873 NM
---------------------------------------------------------------------
Income before cumulative effect 317,992 205,834 54.5 +
Cumulative effect of changes in
accounting principle, net of tax 1,345 -- NM
---------------------------------------------------------------------
Net income $ 319,337 $ 205,834 55.1 +
========================
---------------------------------------------------------------------
Diluted earnings per share from
continuing operations $ .84 $ 1.55 45.8 -
Diluted earnings per share before
cumulative effect $ 2.48 $ 1.60 55.0 +
Diluted earnings per common share $ 2.49 $ 1.60 55.6 +
Dividends declared $ .90 $ .86
Diluted shares 128,185 128,734
SELECTED FINANCIAL RATIOS:
--------------------------
Return on average assets 1.69% 1.18%
Return on average
shareholders' equity 27.2 19.8
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
A-2
FIRST HORIZON NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION
Quarterly Growth
(Unaudited)
Quarter Ended
June 30
-----------------------
Growth
(Thousands) 2006 2005 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial, financial and
industrial $ 6,570,293 $ 5,894,439 11.5 +
Real estate commercial 1,259,416 1,086,327 15.9 +
Real estate construction 2,380,430 1,546,171 54.0 +
---------------------------------------------------------------------
Total commercial loans 10,210,139 8,526,937 19.7 +
Retail:
Real estate residential 8,544,548 7,533,472 13.4 +
Real estate construction 2,028,480 1,321,238 53.5 +
Other retail 162,573 161,073 .9 +
Credit card receivables 197,706 239,542 17.5 -
Real estate loans pledged
against other collateralized
borrowings (a) 286,170 -- NM
---------------------------------------------------------------------
Total retail loans 11,219,477 9,255,325 21.2 +
---------------------------------------------------------------------
Total loans, net of unearned
income 21,429,616 17,782,262 20.5 +
Investment securities 3,008,310 2,931,319 2.6 +
Loans held for sale 4,623,847 6,055,933 23.6 -
Other earning assets 4,884,614 4,849,702 .7 +
---------------------------------------------------------------------
Total earning assets 33,946,387 31,619,216 7.4 +
Cash and due from banks 794,019 727,429 9.2 +
Other assets 3,754,492 3,935,557 4.6 -
---------------------------------------------------------------------
Total assets $38,494,898 $36,282,202 6.1 +
=========================
Certificates of deposit under
$100,000 and other time $ 2,779,821 $ 2,184,264 27.3 +
Other interest-bearing deposits 5,146,322 4,613,876 11.5 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 7,926,143 6,798,140 16.6 +
Demand deposits 1,817,045 1,835,618 1.0 -
Other noninterest-bearing
deposits 3,379,079 3,331,828 1.4 +
---------------------------------------------------------------------
Total core deposits 13,122,267 11,965,586 9.7 +
Certificates of deposit $100,000
and more 8,859,178 10,557,321 16.1 -
---------------------------------------------------------------------
Total deposits 21,981,445 22,522,907 2.4 -
Short-term borrowed funds 7,094,945 7,239,754 2.0 -
Term borrowings 4,867,560 2,585,246 88.3 +
Other collateralized
borrowings (a) 293,050 -- NM
---------------------------------------------------------------------
Total long-term debt 5,160,610 2,585,246 99.6 +
Other liabilities 1,561,196 1,506,335 3.6 +
Preferred stock of subsidiary 295,274 295,432 .1 -
Shareholders' equity 2,401,428 2,132,528 12.6 +
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $38,494,898 $36,282,202 6.1 +
=========================
---------------------------------------------------------------------
(a) During first quarter 2006, FHN sold loans through an
on-balance sheet securitization, which is structured as a
financing for accounting purposes.
A-3
FIRST HORIZON NATIONAL CORPORATION
AVERAGE STATEMENTS OF CONDITION
Yearly Growth
(Unaudited)
Year-to-date
June 30
-------------------------
Growth
(Thousands) 2006 2005 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial, financial and
industrial $ 6,493,292 $ 5,688,417 14.1 +
Real estate commercial 1,242,327 1,045,671 18.8 +
Real estate construction 2,289,566 1,426,739 60.5 +
---------------------------------------------------------------------
Total commercial loans 10,025,185 8,160,827 22.8 +
Retail:
Real estate residential 8,586,725 7,460,067 15.1 +
Real estate construction 1,995,254 1,213,911 64.4 +
Other retail 163,564 160,880 1.7 +
Credit card receivables 217,786 238,808 8.8 -
Real estate loans pledged
against other collateralized
borrowings (a) 147,125 -- NM
---------------------------------------------------------------------
Total retail loans 11,110,454 9,073,666 22.4 +
---------------------------------------------------------------------
Total loans, net of
unearned income 21,135,639 17,234,493 22.6 +
Investment securities 3,017,320 2,863,440 5.4 +
Loans held for sale 4,699,689 5,687,570 17.4 -
Other earning assets 4,693,790 4,713,909 .4 -
---------------------------------------------------------------------
Total earning assets 33,546,438 30,499,412 10.0 +
Cash and due from banks 812,493 728,609 11.5 +
Other assets 3,735,504 3,964,853 5.8 -
---------------------------------------------------------------------
Total assets $38,094,435 $35,192,874 8.2 +
=========================
Certificates of deposit under
$100,000 and other time $ 2,691,690 $ 2,143,558 25.6 +
Other interest-bearing deposits 4,971,452 4,590,992 8.3 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 7,663,142 6,734,550 13.8 +
Demand deposits 1,764,936 1,810,430 2.5 -
Other noninterest-bearing
deposits 3,292,129 3,167,695 3.9 +
---------------------------------------------------------------------
Total core deposits 12,720,207 11,712,675 8.6 +
Certificates of deposit
$100,000 and more 9,737,752 10,353,328 5.9 -
---------------------------------------------------------------------
Total deposits 22,457,959 22,066,003 1.8 +
Short-term borrowed funds 6,955,891 6,699,227 3.8 +
Term borrowings 4,336,055 2,600,614 66.7 +
Other collateralized
borrowings (a) 150,647 -- NM
---------------------------------------------------------------------
Total long-term debt 4,486,702 2,600,614 72.5 +
Other liabilities 1,529,957 1,563,153 2.1 -
Preferred stock of subsidiary 295,274 163,448 80.7 +
Shareholders' equity 2,368,652 2,100,429 12.8 +
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $38,094,435 $35,192,874 8.2 +
=========================
---------------------------------------------------------------------
(a) During first quarter 2006, FHN sold loans through an
on-balance sheet securitization, which is structured as a
financing for accounting purposes.
A-4
FIRST HORIZON NATIONAL CORPORATION
PERIOD-END STATEMENTS OF CONDITION
(Unaudited)
June 30
------------------------- Growth
(Thousands) 2006 2005 Rate (%)
---------------------------------------------------------------------
Loans, net of unearned income:
Commercial:
Commercial, financial and
industrial $ 6,705,925 $ 6,181,598 8.5 +
Real estate commercial 1,276,278 1,128,164 13.1 +
Real estate construction 2,453,579 1,662,777 47.6 +
---------------------------------------------------------------------
Total commercial loans 10,435,782 8,972,539 16.3 +
Retail:
Real estate residential 8,545,198 7,549,881 13.2 +
Real estate construction 2,076,004 1,499,452 38.5 +
Other retail 163,121 163,848 .4 -
Credit card receivables 202,117 242,841 16.8 -
Real estate loans pledged
against other collateralized
borrowings (a) 277,507 -- NM
---------------------------------------------------------------------
Total retail loans 11,263,947 9,456,022 19.1 +
---------------------------------------------------------------------
Total loans, net of
unearned income 21,699,729 18,428,561 17.8 +
Investment securities 3,108,569 2,998,495 3.7 +
Loans held for sale 3,240,270 5,795,436 44.1 -
Other earning assets 3,831,148 3,980,666 3.8 -
---------------------------------------------------------------------
Total earning assets 31,879,716 31,203,158 2.2 +
Cash and due from banks 854,846 988,509 13.5 -
Discontinued assets 696 137,045 NM
Other assets 4,733,976 4,837,077 2.1 -
---------------------------------------------------------------------
Total assets $37,469,234 $37,165,789 .8 +
=========================
Certificates of deposit under
$100,000 and other time $ 2,819,597 $ 2,223,519 26.8 +
Other interest-bearing deposits 5,141,528 4,522,124 13.7 +
---------------------------------------------------------------------
Total interest-bearing
core deposits 7,961,125 6,745,643 18.0 +
Demand deposits 2,740,131 2,588,923 5.8 +
Other noninterest-bearing
deposits 2,939,067 3,288,812 10.6 -
---------------------------------------------------------------------
Total core deposits 13,640,323 12,623,378 8.1 +
Certificates of deposit
$100,000 and more 8,053,119 8,962,649 10.1 -
---------------------------------------------------------------------
Total deposits 21,693,442 21,586,027 .5 +
Short-term borrowed funds 5,038,632 7,823,562 35.6 -
Term borrowings 5,325,014 2,537,046 109.9 +
Other collateralized
borrowings (a) 281,280 -- NM
---------------------------------------------------------------------
Total long-term debt 5,606,294 2,537,046 121.0 +
Discontinued liabilities 8,422 109,883 NM
Other liabilities 2,384,977 2,597,082 8.2 -
Preferred stock of subsidiary 295,274 295,275 --
Shareholders' equity 2,442,193 2,216,914 10.2 +
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $37,469,234 $37,165,789 .8 +
=========================
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
(a) During first quarter 2006, FHN sold loans through an on-balance
sheet securitization, which is structured as a financing for
accounting purposes.
A-5
FIRST HORIZON NATIONAL CORPORATION
ASSET QUALITY HIGHLIGHTS
(Unaudited)
(Thousands) 2Q06 1Q06 4Q05 3Q05 2Q05
---------------------------------------------------------------------
ALLOWANCE FOR
LOAN LOSSES:
Beginning
Reserve $195,011 $189,705 $185,029 $169,697 $164,195
Provision 18,653 17,799 16,175 22,608 15,786
Divestitures/
acquisitions -- (1,195) (516) 1,902 --
Charge-offs (17,518) (14,791) (14,586) (12,900) (13,642)
Recoveries 3,689 3,493 3,603 3,722 3,358
---------------------------------------------------------------------
Ending Balance $199,835 $195,011 $189,705 $185,029 $169,697
-----------------====================================================
Reserve for off-
balance sheet
commitments $ 9,250 $ 9,420 $ 10,650 $ 9,034 $ 8,515
Total of allowance
for loan losses
and reserve for
off-balance sheet
commitments $209,085 $204,431 $200,355 $194,063 $178,212
---------------------------------------------------------------------
NONPERFORMING
ASSETS:
RETAIL/COMMERCIAL
BANKING:
Nonperforming
loans $ 61,358 $ 49,332 $ 40,771 $ 39,236 $ 39,792
Foreclosed real
estate 24,425 19,556 18,932 19,875 18,647
---------------------------------------------------------------------
Total Retail/
Commercial Banking 85,783 68,888 59,703 59,111 58,439
---------------------------------------------------------------------
MORTGAGE BANKING:
Nonperforming
loans - held for
sale 14,976 16,000 11,488 11,868 10,550
Foreclosed real
estate 11,899 9,538 8,478 7,981 8,490
---------------------------------------------------------------------
Total Mortgage
Banking 26,875 25,538 19,966 19,849 19,040
---------------------------------------------------------------------
Total nonper-
forming assets $112,658 $ 94,426 $ 79,669 $ 78,960 $ 77,479
================================================
Loans past due
90 days or
more (a) $165,759 $187,974 $213,658 $193,156 $189,819
Guaranteed portion
of loans past due
90 days or
more (a) 136,529 159,680 178,838 166,891 165,216
Period-end loans,
net of unearned
income (millions) $ 21,700 $ 21,187 $ 20,601 $ 19,212 $ 18,429
Insured loans 753 812 827 667 831
---------------------------------------------------------------------
Loans excluding
insured loans $ 20,947 $ 20,375 $ 19,774 $ 18,545 $ 17,598
================================================
Off-balance sheet
commitments
(millions) (b) $ 7,305 $ 7,787 $ 9,091 $ 8,751 $ 6,871
---------------------------------------------------------------------
(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)
2Q06 1Q06 4Q05 3Q05 2Q05
---------------------------------------------------------------------
FHN CONSOLIDATED:
Nonperforming
loans ratio (a) .28% .23% .20% .20% .22%
Nonperforming
assets ratio (b) .45 .37 .33 .35 .36
Allowance to
total loans .92 .92 .92 .96 .92
Allowance to
loans excluding
insured loans .95 .96 .96 1.00 .96
Allowance to
nonperforming
loans (c) 325.69 395.30 465.29 471.58 426.46
Allowance to
nonperforming
assets (d) 204.58 248.66 278.24 275.78 253.55
Net charge-off
ratio (e) .26 .22 .22 .20 .23
RETAIL/COMMERCIAL
BANKING:
Nonperforming
assets ratio (b) .40% .33% .29% .31% .32%
Allowance to
nonperforming
assets 232.95 283.08 317.75 313.02 290.38
MORTGAGE BANKING:
Nonperforming
assets ratio (f) .03% .03% .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) 2Q06 1Q06 4Q05 3Q05 2Q05
---------------------------------------------------------------------
RETAIL/COMMERCIAL
BANKING
Total
revenues(a) $342,552 $331,362 $341,409 $331,459 $311,124
Provision for
loan losses 18,361 18,026 15,897 22,428 15,667
Noninterest
expenses 211,873 215,555 203,154 199,653 192,738
----------------------------------------------------
Pre-tax income 112,318 97,781 122,358 109,378 102,719
Provision for
income taxes 29,193 27,899 36,109 33,008 31,029
----------------------------------------------------
Income from
continuing
operations 83,125 69,882 86,249 76,370 71,690
Income from
discontinued
operations, net
of tax 376 210,273 5,369 4,830 3,858
----------------------------------------------------
Income before
cumulative
effect 83,501 280,155 91,618 81,200 75,548
Cumulative effect
of changes in
accounting
principle, net
of tax -- 522 (3,098) -- --
----------------------------------------------------
Net income $ 83,501 $280,677 $ 88,520 $ 81,200 $ 75,548
MORTGAGE BANKING
Total revenues(a)$139,072 $120,119 $154,521 $193,023 $155,626
Provision for
loan losses 292 (227) 278 180 119
Noninterest
expenses 109,581 125,699 115,261 132,253 113,584
----------------------------------------------------
Pre-tax income/
(loss) 29,199 (5,353) 38,982 60,590 41,923
Provision/(benefit)
for income taxes 10,042 (2,114) 12,133 21,881 15,007
----------------------------------------------------
Income/(loss)
before cumulative
effect 19,157 (3,239) 26,849 38,709 26,916
Cumulative effect
of changes in
accounting
principle,
net of tax -- 414 -- -- --
----------------------------------------------------
Net income/
(loss) $ 19,157 $ (2,825) $ 26,849 $ 38,709 $ 26,916
CAPITAL MARKETS
Total
revenues (a) $ 96,464 $ 93,340 $ 79,005 $ 78,497 $ 90,806
Noninterest
expenses 80,553 86,379 75,759 76,093 82,757
----------------------------------------------------
Pre-tax income 15,911 6,961 3,246 2,404 8,049
Provision for
income taxes 7,023 1,745 1,076 481 2,161
----------------------------------------------------
Income before
cumulative
effect 8,888 5,216 2,170 1,923 5,888
Cumulative effect
of changes in
accounting
principle, net
of tax -- 179 -- -- --
----------------------------------------------------
Net income $ 8,888 $ 5,395 $ 2,170 $ 1,923 $ 5,888
CORPORATE
Total revenues(a)$ 7,497 $(93,356) $ 875 $ 3,780 $ 4,165
Noninterest
expenses 17,979 15,582 19,118 18,176 17,143
----------------------------------------------------
Pre-tax loss (10,482) (108,938) (18,243) (14,396) (12,978)
Income tax
benefit (3,245) (40,489) (6,623) (5,508) (4,630)
----------------------------------------------------
Loss before
cumulative
effect (7,237) (68,449) (11,620) (8,888) (8,348)
Cumulative effect
of changes
in accounting
principle, net
of tax -- 230 -- -- --
----------------------------------------------------
Net loss $ (7,237) $(68,219) $(11,620) $ (8,888) $ (8,348)
TOTAL CONSOLIDATED
Total
revenues(a) $585,585 $451,465 $575,810 $606,759 $561,721
Provision for
loan losses 18,653 17,799 16,175 22,608 15,786
Total noninterest
expenses 419,986 443,215 413,292 426,175 406,222
----------------------------------------------------
Consolidated pre-
tax income/
(loss) 146,946 (9,549) 146,343 157,976 139,713
Provision/
(benefit) for
income taxes 43,013 (12,959) 42,695 49,862 43,567
----------------------------------------------------
Income from
continuing
operations 103,933 3,410 103,648 108,114 96,146
Income from
discontinued
operations, net
of tax 376 210,273 5,369 4,830 3,858
----------------------------------------------------
Income before
cumulative
effect 104,309 213,683 109,017 112,944 100,004
Cumulative effect
of changes in
accounting
principle, net
of tax -- 1,345 (3,098) -- --
----------------------------------------------------
Net income $104,309 $215,028 $105,919 $112,944 $100,004
====================================================
---------------------------------------------------------------------
Certain previously reported amounts have been reclassified to agree
with current presentation.
(a) Includes noninterest income and net interest income/(expense)
A-8