Company Quick10K Filing
Quick10K
First Horizon National
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$14.77 316 $4,660
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-16 Earnings, Regulation FD, Exhibits
8-K 2019-07-16 Earnings, Regulation FD, Exhibits
8-K 2019-06-11 Regulation FD, Regulation FD, Other Events
8-K 2019-04-23 Shareholder Vote
8-K 2019-04-16 Earnings, Regulation FD, Exhibits
8-K 2019-04-16 Earnings, Regulation FD, Exhibits
8-K 2019-01-28 Officers, Amend Bylaw, Exhibits
8-K 2019-01-18 Earnings, Regulation FD, Exhibits
8-K 2019-01-18 Earnings, Regulation FD, Exhibits
8-K 2018-10-23 Amend Bylaw, Exhibits
8-K 2018-10-16 Earnings, Regulation FD, Exhibits
8-K 2018-10-16 Earnings, Regulation FD, Exhibits
8-K 2018-09-05 Regulation FD, Other Events, Regulation FD
8-K 2018-07-24 Amend Bylaw, Exhibits
8-K 2018-07-17 Earnings, Regulation FD, Exhibits
8-K 2018-07-17 Earnings, Regulation FD, Exhibits
8-K 2018-04-24 Amend Bylaw, Shareholder Vote, Other Events, Exhibits
8-K 2018-04-13 Earnings, Regulation FD, Exhibits
8-K 2018-01-23 Amend Bylaw, Exhibits
8-K 2018-01-19 Earnings, Regulation FD, Exhibits
8-K 2018-01-08 Earnings, Regulation FD, Other Events
TTM Tata Motors 9,070
ICLR Icon 7,450
HQY Healthequity 4,360
I Intelsat 2,930
STAA Staar Surgical 1,210
ARLO Arlo Technologies 297
VALU Value Line 207
CMFN CM Finance 100
TAT Transatlantic Petroleum 37
CCGN Consumer Capital Group 0
FHN 2019-03-31
Part I.
Item 1. Financial Statements
Note 1 - Financial Information
Note 2 - Acquisitions and Divestitures
Note 3 - Investment Securities
Note 4 - Loans
Note 5 - Allowance for Loan Losses
Note 6 - Intangible Assets
Note 7 - Leases
Note 8 - Other Income and Other Expense
Note 9 - Components of Other Comprehensive Income/(Loss)
Note 10 - Earnings per Share
Note 11 - Contingencies and Other Disclosures
Note 12 - Pension, Savings, and Other Employee Benefits
Note 13 - Business Segment Information
Note 14 - Variable Interest Entities
Note 15 - Derivatives
Note 16 - Master Netting and Similar Agreements-Repurchase, Reverse Repurchase, and Securities Borrowing Transactions
Note 17 - Fair Value of Assets & Liabilities
Note 18 - Restructuring, Repositioning, and Efficiency
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II.
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 5 Other Information
Item 6. Exhibits
EX-10.1 exhibit1011q19.htm
EX-10.2 exhibit1021q19.htm
EX-10.3 exhibit1031q19.htm
EX-10.4 exhibit1041q19.htm
EX-31.A exhibit31a1q19.htm
EX-31.B exhibit31b1q19.htm
EX-32.A exhibit32a1q19.htm
EX-32.B exhibit32b1q19.htm

First Horizon National Earnings 2019-03-31

FHN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fhnq1fy2019document.htm 10-Q Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________  
FORM 10-Q
 ______________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to                     
Commission File Number 001-15185
____________________________________ 
First Horizon National Corporation
(Exact name of registrant as specified in its charter)
 ______________________________________  
TN
 
62-0803242
(State or other jurisdiction
incorporation of organization)
 
(IRS Employer
Identification No.)
 
 
165 MADISON AVENUE
MEMPHIS, TENNESSEE
 
38103
(Address of principal executive office)
 
(Zip Code)
(Registrant’s telephone number, including area code) (901) 523-4444

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
  
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
  
Emerging Growth Company
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Exchange on which Registered
$0.625 Par Value Common Capital Stock
 FHN
New York Stock Exchange, Inc.
Depositary Shares, each representing a 1/4,000th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A

FHN PR A
New York Stock Exchange, Inc.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
Class
  
Outstanding on March 31, 2019
Common Stock, $.625 par value
  
315,361,125
 
 
 
 
 




Table of Contents
FIRST HORIZON NATIONAL CORPORATION
INDEX
 




PART I.
FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 
 
This financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial condition and results of operations for the interim periods presented.


1



CONSOLIDATED CONDENSED STATEMENTS OF CONDITION
 
 
First Horizon National Corporation
 
 
(Unaudited)
 
December 31
 
 
March 31
 
(Dollars in thousands, except per share amounts)
 
2019
 
2018
Assets:
 
 
 
 
Cash and due from banks
 
$
570,589

 
$
781,291

Federal funds sold
 
167,602

 
237,591

Securities purchased under agreements to resell (Note 16)
 
474,679

 
386,443

Total cash and cash equivalents
 
1,212,870

 
1,405,325

Interest-bearing cash
 
1,013,254

 
1,277,611

Trading securities
 
1,681,727

 
1,448,168

Loans held-for-sale (a)
 
594,662

 
679,149

Securities available-for-sale (Note 3)
 
4,616,322

 
4,626,470

Securities held-to-maturity (Note 3)
 
10,000

 
10,000

Loans, net of unearned income (Note 4) (b)
 
27,990,048

 
27,535,532

Less: Allowance for loan losses (Note 5)
 
184,911

 
180,424

Total net loans
 
27,805,137

 
27,355,108

Goodwill (Note 6)
 
1,432,787

 
1,432,787

Other intangible assets, net (Note 6)
 
148,818

 
155,034

Fixed income receivables
 
46,782

 
38,861

Premises and equipment, net (March 31, 2019 and December 31, 2018 include $16.0 million and $19.6 million, respectively, classified as held-for-sale)
 
484,494

 
494,041

Other real estate owned (“OREO”) (c)
 
23,396

 
25,290

Derivative assets (Note 15)
 
118,128

 
81,475

Other assets
 
1,910,626

 
1,802,939

Total assets
 
$
41,099,003

 
$
40,832,258

Liabilities and equity:
 
 
 
 
Deposits:
 
 
 
 
Savings
 
$
11,651,750

 
$
12,064,072

Time deposits, net
 
4,454,622

 
4,105,777

Other interest-bearing deposits
 
8,393,468

 
8,371,826

Interest-bearing
 
24,499,840

 
24,541,675

Noninterest-bearing
 
7,963,048

 
8,141,317

Total deposits
 
32,462,888

 
32,682,992

Federal funds purchased
 
339,360

 
256,567

Securities sold under agreements to repurchase (Note 16)
 
745,788

 
762,592

Trading liabilities
 
429,669

 
335,380

Other short-term borrowings
 
140,832

 
114,764

Term borrowings
 
1,177,926

 
1,170,963

Fixed income payables
 
100,290

 
9,572

Derivative liabilities (Note 15)
 
107,123

 
133,713

Other liabilities
 
748,606

 
580,335

Total liabilities
 
36,252,482

 
36,046,878

Equity:
 
 
 
 
First Horizon National Corporation Shareholders’ Equity:
 
 
 
 
Preferred stock - Series A, non-cumulative perpetual, no par value, liquidation preference of $100,000 per share - (shares authorized - 1,000; shares issued - 1,000 on March 31, 2019 and December 31, 2018)
 
95,624

 
95,624

Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 315,361,125 on March 31, 2019 and 318,573,400 on December 31, 2018)
 
197,101

 
199,108

Capital surplus
 
2,983,948

 
3,029,425

Undivided profits
 
1,595,568

 
1,542,408

Accumulated other comprehensive loss, net (Note 9)
 
(321,151
)
 
(376,616
)
Total First Horizon National Corporation Shareholders’ Equity
 
4,551,090

 
4,489,949

Noncontrolling interest
 
295,431

 
295,431

Total equity
 
4,846,521

 
4,785,380

Total liabilities and equity
 
$
41,099,003

 
$
40,832,258

See accompanying notes to consolidated condensed financial statements.
(a)
March 31, 2019 and December 31, 2018 include $8.0 million and $8.4 million, respectively, of held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure.
(b)
March 31, 2019 and December 31, 2018 include $24.1 million and $28.6 million, respectively, of held-to-maturity consumer mortgage loans secured by residential real estate in process of foreclosure.
(c)
March 31, 2019 and December 31, 2018 include $10.1 million and $9.7 million, respectively, of foreclosed residential real estate.



2



CONSOLIDATED CONDENSED STATEMENTS OF INCOME
 
First Horizon National Corporation
 
Three Months Ended
March 31
(Dollars and shares in thousands except per share data, unless otherwise noted) (Unaudited)
2019
 
2018
Interest income:
 
 
 
Interest and fees on loans
$
331,938

 
$
299,493

Interest on investment securities available-for-sale
31,843

 
32,847

Interest on investment securities held-to-maturity
131

 
131

Interest on loans held-for-sale
9,877

 
12,144

Interest on trading securities
13,548

 
14,408

Interest on other earning assets
13,278

 
4,332

Total interest income
400,615

 
363,355

Interest expense:
 
 
 
Interest on deposits:
 
 
 
Savings
39,914

 
14,900

Time deposits
20,254

 
9,525

Other interest-bearing deposits
22,042

 
10,608

Interest on trading liabilities
2,816

 
5,124

Interest on short-term borrowings
6,744

 
10,042

Interest on term borrowings
14,337

 
11,983

Total interest expense
106,107

 
62,182

Net interest income
294,508

 
301,173

Provision/(provision credit) for loan losses
9,000

 
(1,000
)
Net interest income after provision/(provision credit) for loan losses
285,508

 
302,173

Noninterest income:
 
 
 
Fixed income
53,749

 
45,506

Deposit transactions and cash management
31,621

 
35,984

Brokerage, management fees and commissions
12,633

 
13,483

Trust services and investment management

7,026

 
7,277

Bankcard income
6,015

 
6,445

Bank-owned life insurance ("BOLI")
4,402

 
3,993

Debt securities gains/(losses), net (Note 3 and Note 9)

 
52

Equity securities gains/(losses), net (Note 3)
31

 
34

All other income and commissions (Note 8)
25,568

 
23,243

Total noninterest income
141,045

 
136,017

Adjusted gross income after provision/(provision credit) for loan losses
426,553

 
438,190

Noninterest expense:
 
 
 
Employee compensation, incentives, and benefits
177,925

 
171,254

Occupancy
20,693

 
20,451

Computer software
15,139

 
15,132

Professional fees
12,299

 
12,272

Operations services
11,488

 
15,561

Equipment rentals, depreciation, and maintenance
8,829

 
10,018

Advertising and public relations
7,242

 
3,599

Communications and courier
6,453

 
8,232

Amortization of intangible assets
6,216

 
6,474

FDIC premium expense
4,273

 
8,614

Contract employment and outsourcing
3,371

 
4,053

Legal fees
2,831

 
2,345

Repurchase and foreclosure provision/(provision credit)
(455
)
 
(72
)
All other expense (Note 8)
19,786

 
35,332

Total noninterest expense
296,090

 
313,265

Income/(loss) before income taxes
130,463

 
124,925

Provision/(benefit) for income taxes
27,058

 
29,931

Net income/(loss)
$
103,405

 
$
94,994

Net income attributable to noncontrolling interest
2,820

 
2,820

Net income/(loss) attributable to controlling interest
$
100,585

 
$
92,174

Preferred stock dividends
1,550

 
1,550

Net income/(loss) available to common shareholders
$
99,035

 
$
90,624

Basic earnings/(loss) per share (Note 10)
$
0.31

 
$
0.28

Diluted earnings/(loss) per share (Note 10)
$
0.31

 
$
0.27

Weighted average common shares (Note 10)
317,435

 
326,489

Diluted average common shares (Note 10)
319,581

 
330,344

Cash dividends declared per common share
$
0.14

 
$
0.12

Certain previously reported amounts have been reclassified to agree with current presentation.
See accompanying notes to consolidated condensed financial statements.


3



CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
 
 
First Horizon National Corporation
 
Three Months Ended
March 31
(Dollars in thousands) (Unaudited)
2019
 
2018
Net income/(loss)
$
103,405

 
$
94,994

Other comprehensive income/(loss), net of tax:
 
 
 
Net unrealized gains/(losses) on securities available-for-sale
48,615

 
(59,543
)
Net unrealized gains/(losses) on cash flow hedges
5,387

 
(8,793
)
Net unrealized gains/(losses) on pension and other postretirement plans
1,463

 
1,287

Other comprehensive income/(loss)
55,465

 
(67,049
)
Comprehensive income
158,870

 
27,945

Comprehensive income attributable to noncontrolling interest
2,820

 
2,820

Comprehensive income attributable to controlling interest
$
156,050

 
$
25,125

Income tax expense/(benefit) of items included in Other comprehensive income:
 
 
 
Net unrealized gains/(losses) on securities available-for-sale
$
15,958

 
$
(19,543
)
Net unrealized gains/(losses) on cash flow hedges
1,768

 
(2,887
)
Net unrealized gains/(losses) on pension and other postretirement plans
480

 
422

See accompanying notes to consolidated condensed financial statements.


4



CONSOLIDATED CONDENSED STATEMENTS OF EQUITY 

Three months ended March 31, 2019
(Dollars and shares in thousands, except per share data) (unaudited)
 
Common
Shares
 
     Total
 
Preferred
Stock
 
Common
Stock
 
Capital
Surplus
 
Undivided
Profits
 
Accumulated
Other
Comprehensive
Income/(Loss) (a)
 
Noncontrolling Interest
Balance, December 31, 2018
 
318,573

 
4,785,380

 
95,624

 
199,108

 
3,029,425

 
1,542,408

 
(376,616
)
 
295,431

Adjustment to reflect adoption of ASU 2016-02
 

 
(1,011
)
 

 

 

 
(1,011
)
 

 

Beginning balance, as adjusted
 
318,573

 
4,784,369

 
95,624

 
199,108

 
3,029,425

 
1,541,397

 
(376,616
)
 
295,431

Net income/(loss)
 

 
103,405

 

 

 

 
100,585

 

 
2,820

Other comprehensive income/(loss)
 

 
55,465

 

 

 

 

 
55,465

 

Comprehensive income/(loss)
 

 
158,870

 

 

 

 
100,585

 
55,465

 
2,820

Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock ($1,550 per share)
 

 
(1,550
)
 

 

 

 
(1,550
)
 

 

Common stock ($.14 per share)
 

 
(44,864
)
 

 

 

 
(44,864
)
 

 

Common stock repurchased (b)
 
(3,594
)
 
(53,436
)
 

 
(2,246
)
 
(51,190
)
 

 

 

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options and restricted stock - equity awards
 
382

 
520

 

 
239

 
281

 

 

 

Stock-based compensation expense
 

 
5,432

 

 

 
5,432

 

 

 

Dividends declared - noncontrolling interest of subsidiary preferred stock
 

 
(2,820
)
 

 

 

 

 

 
(2,820
)
Balance, March 31, 2019
 
315,361

 
$
4,846,521

 
$
95,624

 
$
197,101

 
$
2,983,948

 
$
1,595,568

 
$
(321,151
)
 
$
295,431


See accompanying notes to consolidated condensed financial statements.
(a)
Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of Other comprehensive income/(loss) have been attributed solely to FHN as the controlling interest holder.
(b)
Includes $51.5 million repurchased under share repurchase programs.

Three months ended March 31, 2018
(Dollars and shares in thousands, except per share data) (unaudited)
 
Common
Shares
 
     Total
 
Preferred
Stock
 
Common
Stock
 
Capital
Surplus
 
Undivided
Profits
 
Accumulated
Other
Comprehensive
Income/(Loss) (a)
 
Noncontrolling Interest
Balance, December 31, 2017
 
326,736

 
4,580,488

 
95,624

 
204,211

 
3,147,613

 
1,102,888

 
(265,279
)
 
295,431

Adjustment to reflect adoption of ASU 2018-02
 

 

 

 

 

 
57,546

 
(57,546
)
 

Balance, December 31, 2017, as adjusted
 
326,736

 
4,580,488

 
95,624

 
204,211

 
3,147,613

 
1,160,434

 
(322,825
)
 
295,431

Adjustment to reflect adoption of ASU 2016-01 and 2017-12
 

 
67

 

 

 

 
278

 
(211
)
 

Beginning balance, as adjusted
 
326,736

 
4,580,555

 
95,624

 
204,211

 
3,147,613

 
1,160,712

 
(323,036
)
 
295,431

Net income/(loss)
 

 
94,994

 

 

 

 
92,174

 

 
2,820

Other comprehensive income/(loss)
 

 
(67,049
)
 

 

 

 

 
(67,049
)
 

Comprehensive income/(loss)
 

 
27,945

 

 

 

 
92,174

 
(67,049
)
 
2,820

Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock ($1,550 per share)
 

 
(1,550
)
 

 

 

 
(1,550
)
 

 

Common stock ($.12 per share)
 

 
(39,681
)
 

 

 

 
(39,681
)
 

 

Common stock repurchased
 
(110
)
 
(2,185
)
 

 
(70
)
 
(2,115
)
 

 

 

Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options and restricted stock - equity awards
 
569

 
4,376

 

 
356

 
4,020

 

 

 

Acquisition equity adjustment
 
(1
)
 
(18
)
 

 
(1
)
 
(17
)
 

 

 

Stock-based compensation expense
 

 
5,906

 

 

 
5,906

 

 

 

Dividends declared - noncontrolling interest of subsidiary preferred stock
 

 
(2,820
)
 

 

 

 

 

 
(2,820
)
Balance, March 31, 2018
 
327,194

 
$
4,572,528

 
$
95,624

 
$
204,496

 
$
3,155,407

 
$
1,211,655

 
$
(390,085
)
 
$
295,431

See accompanying notes to consolidated condensed financial statements.
(a)
Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of Other comprehensive income/(loss) have been attributed solely to FHN as the controlling interest holder.

5



CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
 
 
First Horizon National Corporation
 
 
Three months ended March 31
(Dollars in thousands) (Unaudited)
 
2019
 
2018
Operating Activities
 
 
 
 
Net income/(loss)
 
$
103,405

 
$
94,994

Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:
 
 
 
 
Provision/(provision credit) for loan losses
 
9,000

 
(1,000
)
Provision/(benefit) for deferred income taxes
 
7,238

 
20,309

Depreciation and amortization of premises and equipment
 
11,400

 
11,978

Amortization of intangible assets
 
6,217

 
6,474

Net other amortization and accretion
 
1,257

 
(1,613
)
Net (increase)/decrease in derivatives
 
(51,821
)
 
(14,549
)
Fair value adjustment on interest-only strips
 
1,258

 
(1,592
)
(Gains)/losses and write-downs on OREO, net
 
(290
)
 
216

Litigation and regulatory matters
 

 
671

Stock-based compensation expense
 
5,432

 
5,906

Equity securities (gains)/losses, net
 
(31
)
 
(34
)
Debt securities (gains)/losses, net
 

 
(52
)
Net (gains)/losses on sale/disposal of fixed assets
 
(42
)
 
(3,202
)
(Gain)/loss on BOLI
 
(1,032
)
 

Loans held-for-sale:
 
 
 
 
Purchases and originations
 
(513,788
)
 
(574,735
)
Gross proceeds from settlements and sales
 
135,855

 
152,209

(Gain)/loss due to fair value adjustments and other
 
19,291

 
3,651

Net (increase)/decrease in:
 
 
 
 
Trading securities
 
192,101

 
(9,843
)
Fixed income receivables
 
(7,921
)
 
(25,343
)
Interest receivable
 
(5,970
)
 
(2,990
)
Other assets
 
56,984

 
44,468

Net increase/(decrease) in:
 
 
 
 
Trading liabilities
 
94,289

 
188,847

Fixed income payables
 
90,718

 
(42,829
)
Interest payable
 
16,570

 
10,030

Other liabilities
 
(47,631
)
 
(66,349
)
Total adjustments
 
19,084

 
(299,372
)
Net cash provided/(used) by operating activities
 
122,489

 
(204,378
)
Investing Activities
 
 
 
 
Available-for-sale securities:
 
 
 
 
Sales
 
13,012

 
13,104

Maturities
 
157,502

 
152,800

Purchases
 
(83,512
)
 
(159,951
)
Premises and equipment:
 
 
 
 
Sales
 
4,080

 
2,619

Purchases
 
(6,995
)
 
(18,020
)
Proceeds from sales of OREO
 
3,791

 
10,527

Proceeds from BOLI
 
3,208

 
494

Net (increase)/decrease in:
 
 
 
 
Loans
 
(448,321
)
 
418,174

Interests retained from securitizations classified as trading securities
 
148

 
241

Interest-bearing cash
 
264,357

 
876,249

Cash paid related to divestitures
 

 
(27,599
)
Cash paid/(received) for acquisitions, net
 

 
(18
)
Net cash provided/(used) by investing activities
 
(92,730
)
 
1,268,620

Financing Activities
 
 
 
 
Common stock:
 
 
 
 
Stock options exercised
 
520

 
4,327

Cash dividends paid
 
(38,759
)
 
(21,353
)
Repurchase of shares (a)
 
(53,436
)
 
(2,184
)
Cash dividends paid - preferred stock - noncontrolling interest
 
(2,883
)
 
(2,883
)
Cash dividends paid - Series A preferred stock
 
(1,550
)
 
(1,550
)

6



Term borrowings:
 
 
 
 
Payments/maturities
 
(1,179
)
 
(2,625
)
Increases in restricted and secured term borrowings
 
3,120

 
159

Net increase/(decrease) in:
 
 
 
 
Deposits
 
(220,104
)
 
228,478

Short-term borrowings
 
92,057

 
(1,285,626
)
Net cash provided/(used) by financing activities
 
(222,214
)
 
(1,083,257
)
Net increase/(decrease) in cash and cash equivalents
 
(192,455
)
 
(19,015
)
Cash and cash equivalents at beginning of period
 
1,405,325

 
1,452,046

Cash and cash equivalents at end of period
 
$
1,212,870

 
$
1,433,031

Supplemental Disclosures
 
 
 
 
Total interest paid
 
$
88,774

 
$
51,418

Total taxes paid
 
1,008

 
4,066

Total taxes refunded
 
27,522

 
90

Transfer from loans to OREO
 
1,607

 
3,076

Transfer from loans HFS to trading securities
 
425,808

 
333,483

Certain previously reported amounts have been reclassified to agree with current presentation.
See accompanying notes to consolidated condensed financial statements.
(a) 2019 includes $51.5 million repurchased under share repurchase programs.
 



7



Notes to the Consolidated Condensed Financial Statements (Unaudited)

Note 1 – Financial Information

Basis of Accounting. The unaudited interim consolidated condensed financial statements of First Horizon National Corporation (“FHN”), including its subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which it operates. This preparation requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions are based on information available as of the date of the financial statements and could differ from actual results. In the opinion of management, all necessary adjustments have been made for a fair presentation of financial position and results of operations for the periods presented. These adjustments are of a normal recurring nature unless otherwise disclosed in this Quarterly Report on Form 10-Q. The operating results for the interim 2019 period are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2018.

Revenues. Revenue is recognized when the performance obligations under the terms of a contract with a customer are satisfied in an amount that reflects the consideration FHN expects to be entitled. FHN derives a significant portion of its revenues from fee-based services. Noninterest income from transaction-based fees is generally recognized immediately upon completion of the transaction. Noninterest income from service-based fees is generally recognized over the period in which FHN provides the service. Any services performed over time generally require that FHN render services each period and therefore FHN measures progress in completing these services based upon the passage of time and recognizes revenue as invoiced.

See Note 1– Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2018, for a discussion of FHN's key revenues.

Contract Balances. As of March 31, 2019, accounts receivable related to products and services on non-interest income were $7.9 million. For the three months ended March 31, 2019, FHN had no material impairment losses on non-interest accounts receivable and there were no material contract assets, contract liabilities or deferred contract costs recorded on the Consolidated Condensed Statements of Condition as of March 31, 2019.

Transaction Price Allocated to Remaining Performance Obligations. For the three months ended March 31, 2019, revenue recognized from performance obligations related to prior periods was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less and contracts where revenue is recognized as invoiced, is not material.

Refer to Note 13– Business Segment Information for a reconciliation of disaggregated revenue by major product line and reportable segment.
Leases. At inception, all arrangements are evaluated to determine if they contain a lease, which is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control is deemed to exist when a lessor has granted and a lessee has received both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use.
Lessee. As a lessee, FHN recognizes lease (right-of-use) assets and lease liabilities for all leasing arrangements with lease terms that are greater than one year. The lease asset and lease liability are recognized at the present value of estimated future lease payments, including estimated renewal periods, with the discount rate reflecting a fully-collateralized rate matching the estimated lease term. Renewal options are included in the estimated lease term if they are considered reasonably certain of exercise. Periods covered by termination options are included in the lease term if it is reasonably certain they will not be exercised. Additionally, prepaid or accrued lease payments, lease incentives and initial direct costs related to lease arrangements are recognized within the right-of-use asset. Each lease is classified as a financing or operating lease which depends on the relationship of the lessee’s rights to the economic value of the leased asset. For finance leases, interest on the lease liability is recognized separately from amortization of the right-of-use asset in earnings, resulting in higher expense in the earlier portion of the lease term. For operating leases, a single lease cost is calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. Substantially all of FHN’s lessee arrangements are classified as operating leases. For leases with a term of 12 months or less, FHN does not to recognize lease assets and lease liabilities and expense is generally recognized on a straight-line basis over the lease term.

8



Note 1 – Financial Information (Continued)

Lease assumptions and classification are reassessed upon the occurrence of events that result in changes to the estimated lease term or consideration. Modifications to lease contracts are evaluated to determine 1) if a right to use an additional asset has been obtained, 2) if only the lease term and/or consideration have been revised or 3) if a full or partial termination has occurred. If an additional right-of use-asset has been obtained, the modification is treated as a separate contract and its classification is evaluated as a new lease arrangement. If only the lease term or consideration are changed, the lease liability is revalued with an offset to the lease asset and the lease classification is re-assessed. If a modification results in a full or partial termination of the lease, the lease liability is revalued through earnings along with a proportionate reduction in the value of the related lease asset and subsequent expense recognition is similar to a new lease arrangement.
Lease assets are evaluated for impairment when triggering events occur, such as a change in management intent regarding the continued occupation of the leased space. If a lease asset is impaired, it is written down to the present value of estimated future cash flows and the prospective expense recognition for that lease follows the accelerated expense recognition methodology applicable to finance leases, even if it remains classified as an operating lease.
Sublease arrangements are accounted for consistent with the lessor accounting described below. Sublease arrangements are evaluated to determine if changes to estimates for the primary lease are warranted or if the sublease terms reflect impairment of the related lease asset.
Lease assets are recognized in Other assets and lease liabilities are recognized in Other liabilities in the Consolidated Condensed Statements of Condition. Since substantially all of its leasing arrangements relate to real estate, FHN records lease expense, and any related sublease income, within Occupancy expense in the Consolidated Condensed Statements of Income.
Lessor. As a lessor, FHN also evaluates its lease arrangements to determine whether a finance lease or an operating lease exists and utilizes the rate implicit in the lease arrangement as the discount rate to calculate the present value of future cash flows. Depending upon the terms of the individual agreements, finance leases represent either sales-type or direct financing leases, both of which require de-recognition of the asset being leased with offsetting recognition of a lease receivable that is evaluated for impairment similar to loans. Currently, all of FHN’s lessor arrangements are considered operating leases.
Lease income for operating leases is recognized over the life of the lease, generally on a straight line basis. Lease incentives and initial direct costs are capitalized and amortized over the estimated life of the lease. Lease income is not significant for any reporting periods and is classified as a reduction of Occupancy expense in the Consolidated Condensed Statements of Income.

Summary of Accounting Changes. In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires a lessee to recognize in its statement of condition a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 leaves lessor accounting largely unchanged from prior standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. All other leases must be classified as financing or operating leases which depends on the relationship of the lessee’s rights to the economic value of the leased asset. For finance leases, interest on the lease liability is recognized separately from amortization of the right-of-use asset in earnings, resulting in higher expense in the earlier portion of the lease term. For operating leases, a single lease cost is calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.
In July 2018, the FASB issued ASU 2018-11, “Leases - Targeted Improvements,” which provides an election for a cumulative effect adjustment to retained earnings upon initial adoption of ASU 2016-02. Alternatively, under the initial guidance of ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. Both adoption alternatives include a number of optional practical expedients that entities may elect to apply, which would result in continuing to account for leases that commence before the effective date in accordance with previous requirements (unless the lease is modified) except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous requirements. ASU 2016-02 also requires expanded qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from lease arrangements. ASU 2016-02 and ASU 2018-11 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Upon adoption, FHN utilized the cumulative effect transition alternative provided by ASU 2018-11. FHN utilized the lease classification practical expedients and the short-term lease exemption upon adoption. FHN also has elected to determine the discount rate on leases as of the effective date and elected to use hindsight in determining lease terms as well as impairments of lease assets resulting from lease abandonments upon adoption. The table below summarizes the impact of adopting ASU 2016-02 as of January 1, 2019, for line items in the Consolidated Condensed Statements of Condition. Lease assets of approximately $185 million are included in Other Assets. Lease liabilities of

9



Note 1 – Financial Information (Continued)

approximately $204 million are included in Other Liabilities. The after-tax decrease in Undivided Profits reflects the recognition of deferred gains associated with prior sale-leaseback transactions, revisions to the estimated useful lives of leasehold improvements and adjustments of lease expense to reflect revised lease duration estimates.
 
 
(Dollars in thousands)
 
January 1, 2019
 
 
 
Loans, net of unearned income
 
$
3,450

Premises and equipment, net
 
2,718

Other assets
 
183,884

Other liabilities
 
(191,010
)
Undivided profits
 
1,011


In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Capitalized implemented costs are required to be expensed over the term of the hosting arrangement which includes the non-cancellable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the customer is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the customer is reasonably certain not to exercise the termination option, and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor. ASU 2018-15 also requires application of the impairment guidance applicable to long-lived assets to the capitalized implementation costs. Amortization expense related to capitalized implementation costs must be presented in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and payments for capitalized implementation costs will be classified in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. Capitalized implementation costs will be presented in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. Adoption may be either fully retrospective or prospective only. FHN elected early adoption of ASU 2018-15 effective January 1, 2019 using the prospective transition method and the effects of adoption were not significant.

Accounting Changes Issued but Not Currently Effective

In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which makes several revisions and clarifications to the accounting for these items. The revisions related to ASU 2016-03 (Topic 326) are discussed below. ASU 2019-04 clarifies several aspects of fair hedge accounting, including the application to partial term fair value hedges. ASU 2019-04 provides an election regarding the timing for amortization of basis adjustments to hedged items in fair value hedges, indicating that amortization may, but is not required to, commence prior to the end of the hedge relationship. ASU 2019-04 also provides additional guidance related to the application of the hypothetical derivative method and first-payments-received method in cash flow hedges. Further, ASU 2019-04 indicates that remeasurement of an equity security without a readily determinable fair value when an orderly transaction is identified for an identical or similar investment of the same issuer represents a non-recurring fair value measurement and the related disclosure requirements apply to the remeasurement event. The hedging updates are effective at the beginning of the first annual reporting period after issuance with early adoption permitted. The financial instruments measurement and disclosure changes are effective for fiscal years and interim periods beginning after December 15, 2019 with early adoption permitted. FHN will early adopt these portions of ASU 2019-04 in second quarter 2019 and the effects will not be significant based on its existing accounting practices.
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” which revises the measurement and recognition of credit losses for assets measured at amortized cost (e.g., held-to-maturity (“HTM”) loans and debt securities) and available-for-sale (“AFS”) debt securities. Under ASU 2016-13, for assets measured at amortized cost, the current expected credit loss (“CECL”) is measured as the difference between amortized cost and the net amount expected to be collected. This represents a departure from existing GAAP as the “incurred loss” methodology for recognizing credit losses delays recognition until it is probable a loss has been incurred. Under CECL the full amount of expected credit losses will be recognized at the time of loan origination. The measurement of current expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Additionally, current disclosures of credit quality indicators in relation to the amortized

10



Note 1 – Financial Information (Continued)

cost of financing receivables will be further disaggregated by year of origination. ASU 2016-13 leaves the methodology for measuring credit losses on AFS debt securities largely unchanged, with the maximum credit loss representing the difference between amortized cost and fair value. However, such credit losses will be recognized through an allowance for credit losses, which permits recovery of previously recognized credit losses if circumstances change.

ASU 2016-13 also revises the recognition of credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”). For PCD assets, the initial allowance for credit losses is added to the purchase price. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for PCD assets. Interest income for PCD assets will be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. Currently, credit losses for purchased credit-impaired assets are included in the initial basis of the assets with subsequent declines in credit resulting in expense while subsequent improvements in credit are reflected as an increase in the future yield from the assets. For non-PCD assets, expected credit losses will be recognized through earnings upon acquisition and the entire premium of discount will be accreted to interest income over the remaining life of the loan.

The provisions of ASU 2016-13 will be generally adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in the year of adoption. Prospective implementation is required for debt securities for which an other-than-temporary-impairment (“OTTI”) had been previously recognized. Amounts previously recognized in accumulated other comprehensive income (“AOCI”) as of the date of adoption that relate to improvements in cash flows expected to be collected will continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption will be recorded in earnings when received. A prospective transition approach will be used for existing PCD assets where, upon adoption, the amortized cost basis will be adjusted to reflect the addition of the allowance for credit losses. Thus, an entity will not be required to reassess its purchased financial assets that exist as of the date of adoption to determine whether they would have met at acquisition the new criteria of more-than-insignificant credit deterioration since origination. An entity will accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income at the effective interest rate at the adoption date.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. FHN continues to evaluate the impact of ASU 2016-13, and is not currently able to reasonably estimate the impact the adoption will have on its consolidated financial position, results of operations, or cash flows. Adoption of ASU 2016-13 is likely to lead to significant changes in accounting policies and procedures related to FHN’s ALLL, and it is possible that the impact of the adoption could be material to FHN’s consolidated financial position and results of operations. To date, the Company has completed a gap analysis, established a formal governance structure for the project, selected loss estimation methodologies for material portfolio segments, selected a software solution to serve as its CECL platform, and is engaged in model development activities. FHN intends to perform parallel calculations and analysis in the latter half of 2019.

ASU 2019-04 provides an election to either not measure or measure separately an allowance for credit losses for accrued interest receivable (“AIR"). Entities electing to not measure an allowance for AIR must write off uncollectible interest in a timely manner. Additionally, an election is provided for the write off of uncollectible interest to be recorded either as a reversal of interest income or a charge against the allowance for credit losses or a combination of both. Disclosures are required depending upon which elections are made.
ASU 2019-04 also clarifies that when loans and securities are transferred between balance sheet categories (e.g., loans from held-for-investment to held-for-sale or securities from held-to-maturity to available-for-sale) the associated allowance for credit losses should be reversed to income and prospective accounting follows the requirements for the new classification. Further, ASU 2019-04 clarifies that recoveries should be incorporated within the estimation of the allowance for credit losses. Expected recoveries should not exceed the aggregate amount of prior write offs and expected future write offs. Additionally, for collateral dependent financial assets, the allowance for credit losses that is added to the amortized cost basis should not exceed amounts previously written off.
ASU 2019-04 also makes several changes when a discounted cash flow approach is used to measure expected credit losses. ASU 2019-04 removes ASU 2016-03’s prohibition of using projections of future interest rate environments when using a discounted cash flow method to measure expected credit losses on variable-rate financial instruments. If an entity uses projections or expectations of future interest rate environments in estimating expected cash flows, the same assumptions should be used in determining the effective interest rate used to discount those expected cash flows. The effective interest rate should also be adjusted to consider the effects of expected prepayments on the timing of expected future cash flows. ASU 2019-04 provides an election to adjust the effective interest rate used in discounting expected cash flows to isolate credit risk in

11



Note 1 – Financial Information (Continued)

measuring the allowance for credit losses. Further, the discount rate should not be adjusted for subsequent changes in expected prepayments if a financial asset is restructured in a troubled debt restructuring.
Related to collateral-dependent financial assets, ASU 2019-04 requires inclusion of estimated costs to sell in the measurement of expected credit losses in situations where the entity intends to sell rather than operate the collateral. Additionally, the estimated costs to sell should be undiscounted when the entity intends to sell rather than operate the collateral.

Finally, ASU 2019-04 specifies that contractual renewal or extension options, except those treated as derivatives, should be included in the determination of the contractual term for a financial asset when included in the original or modified contract as of the reporting date if they are not unconditionally cancellable by the entity.

The effective date and transition requirements for these components of ASU 2019-04 are consistent with the requirements for ASU 2016-13 and FHN is incorporating these changes and revisions within its implementation efforts. Based on its current practices for the timely write off uncollectible AIR, FHN intends to not measure an allowance for credit losses for AIR and to continue recognition of related write offs as a reversal of interest income.


12



Note 2 – Acquisitions and Divestitures
On November 30, 2017, FHN completed its acquisition of Capital Bank Financial Corporation ("CBF") and its subsidiaries, including Capital Bank Corporation for an aggregate of 92,042,232 shares of FHN common stock and $423.6 million in cash in a transaction valued at $2.2 billion. In second quarter 2018, FHN canceled 2,373,220 common shares which had been issued but set aside for certain shareholders of CBF who have commenced a dissenters' appraisal process resulting in a reduction in equity consideration and an increase in cash consideration of $46.0 million. The final appraisal or resolution amount, as applicable, may differ from current estimates. CBF operated 178 branches in North and South Carolina, Tennessee, Florida and Virginia at the time of closing. In relation to the acquisition, FHN acquired approximately $9.9 billion in assets, including approximately $7.3 billion in loans and $1.2 billion in AFS securities, and assumed approximately $8.1 billion of CBF deposits. FHN recorded goodwill of approximately $1.2 billion, representing the excess of acquisition consideration over the estimated fair value of net assets acquired.
On March 23, 2018, FHN divested two branches, including approximately $30 million of deposits and $2 million of loans. The branches, both in Greeneville, Tennessee, were divested in connection with First Horizon's agreement with the U.S. Department of Justice and commitments to the Board of Governors of the Federal Reserve System, which were entered into in connection with a customary review of FHN's merger with CBF.

In second quarter 2018, FHN sold approximately $120 million UPB of its subprime auto loans. These loans, originally acquired as part of the CBF acquisition, did not fit within FHN's risk profile. Based on the sales price, a measurement period adjustment to the acquisition-date fair value of the subprime auto loans was recorded in second quarter 2018. A measurement period adjustment was made in fourth quarter 2018 for other consumer loans acquired from CBF based on pricing information received from potential buyers.

See Note 2- Acquisitions and Divestitures in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2018, for additional information about the CBF acquisition and other acquisitions.
Expenses related to FHN's merger and integration activities are recorded in FHN's Corporate segment.
Total merger and integration expense recognized for the three months ended March 31, 2019 and 2018 are presented in the table below:
 
 
Three Months Ended
March 31
(Dollars in thousands)
 
2019
 
2018
Professional fees (a)
 
$
1,867

 
$
5,633

Employee compensation, incentives and benefits (b)
 
1,517

 
5,237

Contract employment and outsourcing (c)
 

 
1,399

Miscellaneous expense (d)
 
1,187

 
2,064

All other expense (e)
 
1,089

 
17,041

Total
 
$
5,660

 
$
31,374

(a) Primarily comprised of fees for legal, accounting, and merger consultants.
(b) Primarily comprised of fees for severance and retention.
(c) Primarily relates to fees for temporary assistance for merger and integration activities.
(d) Consists of fees for communications and courier, operations services, equipment rentals, depreciation, and maintenance,
supplies, travel and entertainment, computer software, advertising and public relations, and occupancy.
(e) Primarily relates to contract termination charges, lease buyouts, costs of shareholder matters and asset impairments related to the integration, as well as other miscellaneous expenses.
In addition to the transactions mentioned above, FHN acquires or divests assets from time to time in transactions that are considered business combinations or divestitures but are not material to FHN individually or in the aggregate. In April 2019, FHN sold Superior Financial Services, Inc., a subsidiary acquired as part of the CBF acquisition. The sale will result in the removal of approximately $25 million UPB of subprime consumer loans from Loans held-for-sale on FHN's Consolidated Condensed Statements of Condition.

13



Note 3 – Investment Securities
The following tables summarize FHN’s investment securities on March 31, 2019 and December 31, 2018:
 
 
March 31, 2019
(Dollars in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. treasuries
 
$
100

 
$

 
$
(1
)
 
$
99

Government agency issued mortgage-backed securities (“MBS”)
 
2,398,177

 
8,992

 
(21,360
)
 
2,385,809

Government agency issued collateralized mortgage obligations (“CMO”)
 
1,958,529

 
2,020

 
(28,765
)
 
1,931,784

Other U.S. government agencies
 
189,067

 
1,761

 

 
190,828

Corporates and other debt
 
55,266

 
302

 
(384
)
 
55,184

States and municipalities
 
38,028

 
1,395

 

 
39,423

 
 
$
4,639,167

 
$
14,470

 
$
(50,510
)
 
4,603,127

AFS debt securities recorded at fair value through earnings:

 
 
 
 
 
 
 
 
SBA-interest only strips (a)
 
 
 
 
 
 
 
13,195

Total securities available-for-sale (b)
 
 
 
 
 
 
 
$
4,616,322

Securities held-to-maturity:
 
 
 
 
 
 
 
 
Corporates and other debt
 
$
10,000

 
$

 
$
(111
)
 
$
9,889

Total securities held-to-maturity
 
$
10,000

 
$

 
$
(111
)
 
$
9,889

 
(a)
SBA-interest only strips are recorded at elected fair value. See Note 17 - Fair Value for additional information.
(b)
Includes $3.9 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
 
 
December 31, 2018
(Dollars in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. treasuries
 
$
100

 
$

 
$
(2
)
 
$
98

Government agency issued MBS
 
2,473,687

 
4,819

 
(58,400
)
 
2,420,106

Government agency issued CMO
 
2,006,488

 
888

 
(48,681
)
 
1,958,695

Other U.S. government agencies
 
149,050

 
809

 
(73
)
 
$
149,786

Corporates and other debt
 
55,383

 
388

 
(461
)
 
55,310

State and municipalities
 
32,473

 
314

 
(214
)
 
32,573

 
 
$
4,717,181

 
$
7,218

 
$
(107,831
)
 
4,616,568

AFS securities recorded at fair value through earnings:
 
 
 
 
 
 
 
 
SBA-interest only strips (a)
 
 
 
 
 
 
 
9,902

Total securities available-for-sale (b)
 
 
 
 
 
 
 
$
4,626,470

Securities held-to-maturity:
 
 
 
 
 
 
 
 
Corporates and other debt
 
$
10,000

 
$

 
$
(157
)
 
$
9,843

Total securities held-to-maturity
 
$
10,000

 
$

 
$
(157
)
 
$
9,843

 
(a)
SBA-interest only strips are recorded at elected fair value. See Note 17 - Fair Value of Assets and Liabilities for additional information.
(b)
Includes $3.8 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


14


Note 3 – Investment Securities (Continued)

The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturity debt securities portfolios on March 31, 2019 are provided below:
 
 
 
Held-to-Maturity
 
Available-for-Sale
(Dollars in thousands)
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Within 1 year
 
$

 
$

 
$
15,060

 
$
14,998

After 1 year; within 5 years
 

 

 
229,373

 
231,160

After 5 years; within 10 years
 
10,000

 
9,889

 
755

 
3,825

After 10 years
 

 

 
37,273

 
48,746

Subtotal
 
10,000

 
9,889

 
282,461

 
298,729

Government agency issued MBS and CMO (a)
 

 

 
4,356,706

 
4,317,593

Total
 
$
10,000

 
$
9,889

 
$
4,639,167

 
$
4,616,322

 
(a)
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The table below provides information on gross gains and gross losses from debt investment securities for the three months ended March 31, 2019 and 2018.
 
 
Three Months Ended
March 31
(Dollars in thousands)
2019
 
2018
Gross gains on sales of securities
$

 
$
52

Gross (losses) on sales of securities

 

Net gain/(loss) on sales of securities (a)
$

 
$
52

 
(a)
Cash proceeds for the three months ended March 31, 2018 were not material.

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of March 31, 2019 and December 31, 2018:

 
 
As of March 31, 2019
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
U.S. treasuries
 
$

 
$

 
$
99

 
$
(1
)
 
$
99

 
$
(1
)
Government agency issued MBS
 
1,542

 
(13
)
 
1,948,718

 
(21,347
)
 
1,950,260

 
(21,360
)
Government agency issued CMO
 
863

 

 
1,699,529

 
(28,765
)
 
1,700,392

 
(28,765
)
Corporates and other debt
 

 

 
40,065

 
(384
)
 
40,065

 
(384
)
Total temporarily impaired securities
 
$
2,405

 
$
(13
)
 
$
3,688,411

 
$
(50,497
)
 
$
3,690,816

 
$
(50,510
)
 

15


Note 3 – Investment Securities (Continued)

 
 
As of December 31, 2018
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
U.S. treasuries
 
$

 
$

 
$
98

 
$
(2
)
 
$
98

 
$
(2
)
Government agency issued MBS
 
597,008

 
(12,335
)
 
1,537,106

 
(46,065
)
 
2,134,114

 
(58,400
)
Government agency issued CMO
 
290,863

 
(2,860
)
 
1,560,420

 
(45,821
)
 
1,851,283

 
(48,681
)
Other U.S. government agencies
 
29,776

 
(73
)
 

 

 
$
29,776

 
$
(73
)
Corporates and other debt
 
25,114

 
(344
)
 
15,008

 
(117
)
 
40,122

 
(461
)
States and municipalities
 
17,292

 
(214
)
 

 

 
17,292

 
(214
)
Total temporarily impaired securities
 
$
960,053

 
$
(15,826
)
 
$
3,112,632

 
$
(92,005
)
 
$
4,072,685

 
$
(107,831
)
FHN has reviewed debt investment securities that were in unrealized loss positions in accordance with its accounting policy for OTTI and does not consider them other-than-temporarily impaired. For debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. The decline in value is primarily attributable to changes in interest rates and not credit losses.
The carrying amount of equity investments without a readily determinable fair value was $22.2 million and $21.3 million at March 31, 2019 and December 31, 2018, respectively. The year-to-date 2019 and 2018 gross amounts of upward and downward valuation adjustments were not significant.
Unrealized gains of $3.4 million and $.3 million were recognized in the three months ended March 31, 2019 and 2018, respectively, for equity investments with readily determinable fair values.



16



Note 4 – Loans
The following table provides the balance of loans, net of unearned income, by portfolio segment as of March 31, 2019 and December 31, 2018:
 
 
March 31
 
December 31
(Dollars in thousands)
 
2019
 
2018
Commercial:
 
 
 
 
Commercial, financial, and industrial
 
$
17,176,112

 
$
16,514,328

Commercial real estate
 
3,946,943

 
4,030,870

Consumer:
 
 
 
 
Consumer real estate (a)
 
6,151,503

 
6,249,516

Permanent mortgage
 
209,260

 
222,448

Credit card & other
 
506,230

 
518,370

Loans, net of unearned income
 
$
27,990,048

 
$
27,535,532

Allowance for loan losses
 
184,911

 
180,424

Total net loans
 
$
27,805,137

 
$
27,355,108

 
(a)
Balances as of March 31, 2019 and December 31, 2018, include $15.0 million and $16.2 million of restricted real estate loans, respectively. See Note 14—Variable Interest Entities for additional information.
COMPONENTS OF THE LOAN PORTFOLIO
The loan portfolio is disaggregated into segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally determined based on the initial measurement attribute (i.e., amortized cost or purchased credit-impaired), risk characteristics of the loan, and FHN’s method for monitoring and assessing credit risk. Commercial loan portfolio segments include commercial, financial and industrial (“C&I”) and commercial real estate ("CRE"). Commercial classes within C&I include general C&I, loans to mortgage companies, the trust preferred loans (“TRUPS”) (i.e. long-term unsecured loans to bank and insurance-related businesses) portfolio and purchased credit-impaired (“PCI”) loans. Loans to mortgage companies include commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Commercial classes within CRE include income CRE, residential CRE and PCI loans. Consumer loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio. Consumer classes include home equity lines of credit (“HELOCs”), real estate (“R/E”) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other.
Concentrations
FHN has a concentration of residential real estate loans (23 percent of total loans), the majority of which is in the consumer real estate segment (22 percent of total loans). Loans to finance and insurance companies total $2.6 billion (15 percent of the C&I portfolio, or 9 percent of the total loans). FHN had loans to mortgage companies totaling $2.3 billion (13 percent of the C&I segment, or 8 percent of total loans) as of March 31, 2019. As a result, 28 percent of the C&I segment is sensitive to impacts on the financial services industry.









17


Note 4 – Loans (Continued)

Purchased Credit-Impaired Loans
The following table presents a rollforward of the accretable yield for the three months ended March 31, 2019 and 2018:
 
 
Three Months Ended
March 31
(Dollars in thousands)
 
2019
 
2018
Balance, beginning of period
 
$
13,375

 
$
15,623

Accretion
 
(1,673
)
 
(2,137
)
Adjustment for payoffs
 
(462
)
 
(612
)
Adjustment for charge-offs
 
(176
)
 
(551
)
Increase/(decrease) in accretable yield (a)
 
2,718

 
3,178

Other
 

 
(178
)
Balance, end of period
 
$
13,782

 
$
15,323

 
(a)
Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing and amounts of the cash flows.
At March 31, 2019, the ALLL related to PCI loans was $3.4 million compared to $4.0 million at December 31, 2018. A loan loss provision credit related to PCI loans of $.4 million was recognized during the three months ended March 31, 2019, compared to a loan loss provision expense of $.8 million during the three months ended March 31, 2018.
The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of March 31, 2019 and December 31, 2018:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
Carrying value
 
Unpaid balance
 
Carrying value
 
Unpaid balance
Commercial, financial and industrial
 
$
34,619

 
$
38,575

 
$
38,873

 
$
44,259

Commercial real estate
 
8,402

 
9,301

 
15,197

 
17,232

Consumer real estate
 
28,723

 
32,464

 
30,723

 
34,820

Credit card and other
 
1,127

 
1,377

 
1,627

 
1,879

Total
 
$
72,871

 
$
81,717

 
$
86,420

 
$
98,190












18


Note 4 – Loans (Continued)

Impaired Loans
The following tables provide information at March 31, 2019 and December 31, 2018, by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment in a loan, excluding any valuation allowance but including any direct write-down of the investment. For purposes of this disclosure, PCI loans and the TRUPS valuation allowance have been excluded.
 
 
March 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Impaired loans with no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
General C&I
 
$
68,629

 
$
71,101

 
$

 
$
42,902

 
$
45,387

 
$

Income CRE
 
1,522

 
1,522

 

 
1,589

 
1,589

 

Total
 
$
70,151

 
$
72,623

 
$

 
$
44,491

 
$
46,976

 
$

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
HELOC (a)
 
$
6,548

 
$
13,869

 
$

 
$
8,645

 
$
16,648

 
$

R/E installment loans (a)
 
5,910

 
6,693

 

 
4,314

 
4,796

 

Permanent mortgage (a)
 
3,449

 
5,851

 

 
3,601

 
6,003

 

Total
 
$
15,907

 
$
26,413

 
$

 
$
16,560

 
$
27,447

 
$

Impaired loans with related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
General C&I
 
$
11,786

 
$
11,786

 
$
2,512

 
$
2,802

 
$
2,802

 
$
149

TRUPS
 
2,838

 
3,700

 
925

 
2,888

 
3,700

 
925

Income CRE
 
357

 
357

 

 
377

 
377

 

Total
 
$
14,981