Certain previously reported amounts have been reclassified to agree with current presentation.
Certain previously reported amounts have been reclassified to agree with current presentation.
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 2016 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 FHNs Annual Report on Form 10-K for the year ended December 31, 2015.
Summary of Accounting Changes.
Effective January 1, 2016, FHN early adopted the provisions of ASU 2016-05, Effect of Derivative
Contract Novations on Existing Hedge Accounting Relationships, on a prospective basis. ASU 2016-05 clarifies that a change in the counterparty of a derivative instrument that has been designated as the hedging instrument in an accounting hedge
relationship does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. FHN considers the revised guidance to better reflect the nature of hedge accounting
relationships by clarifying that, when considered solely, the counterparty is not a critical term in a hedge relationship. Because FHN has applied specific SEC staff guidance for novation (to facilitate central clearing requirements) of derivatives
to prior and existing accounting hedge relationships, adoption of ASU 2016-05 had no effect on FHN.
Effective January 1, 2016, FHN early adopted the
provisions of ASU 2016-06, Contingent Put and Call Options in Debt Instruments, which resolves diversity in practice for the bifurcation assessment when a contingent put or call option is embedded within a hybrid debt instrument. ASU
2016-06 clarifies that an entity is not required to assess whether the triggering event is related to interest rate or credit risks when performing the bifurcation analysis. FHNs existing bifurcation assessment process conforms to the
methodology outlined in ASU 2016-06.
Effective January 1, 2016, FHN adopted the provisions of ASU 2014-12, Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service
period, be treated as a performance condition in determining expense recognition for the award. Thus, compensation cost is recognized over the requisite service period based on the probability of achievement of the performance condition. Expense is
adjusted after the requisite service period for changes in the probability of achievement. The adoption of ASU 2014-12 had no effect on FHN.
Effective
January 1, 2016, FHN adopted the provisions of ASU 2015-02, Amendments to the Consolidation Analysis. ASU 2015-02 revises current consolidation guidance to modify the evaluation of whether limited partnerships and similar legal
entities are variable interest entities. ASU 2015-02 also eliminates the presumption that a general partner should consolidate a limited partnership, revises the consolidation analysis for reporting entities that have fee arrangements and related
party relationships with variable interest entities, and provides a scope exception for entities with interests in registered money market funds. FHN has evaluated the provisions of ASU 2015-02 on its consolidation assessments and there was not a
significant effect upon adoption.
Effective January 1, 2016, FHN adopted the provisions of ASU 2015-03, Simplifying the Presentation of Debt
Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented as a direct reduction from the carrying value of that debt liability, consistent with debt discounts. ASU 2015-03 requires
application on a retrospective basis, with prior periods revised to reflect the effects of adoption. Consistent with prior requirements, FHN previously classified debt issuance costs within Other assets in the Consolidated Condensed Statements of
Condition. The adoption of ASU 2015-03 had no effect on FHNs recognition of interest expense. The effects of the retrospective application of the change in recognition of debt issuance costs are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31
|
|
|
As of December 31
|
|
(Dollars in thousands, except per share amounts)
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
Increase/(decrease) to previously reported Consolidated Statements of Condition amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
(2,569
|
)
|
|
$
|
(2,499
|
)
|
|
|
(2,764
|
)
|
Term Borrowings
|
|
|
(2,569
|
)
|
|
|
(2,499
|
)
|
|
|
(2,764
|
)
|
Accounting Changes Issued but Not Currently Effective
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 does not change revenue recognition for financial
instruments. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the
7
Note 1 Financial Information (Continued)
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This is
accomplished through a five-step recognition framework involving 1) the identification of contracts with customers, 2) identification of performance obligations, 3) determination of the transaction price, 4) allocation of the transaction price to
the performance obligations and 5) recognition of revenue as performance obligations are satisfied. Additionally, qualitative and quantitative information is required for disclosure regarding the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. In February 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations, which provides additional guidance on whether an entity should recognize revenue on a gross or net basis,
based on which party controls the specified good or service before that good or service is transferred to a customer. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which clarifies the
original guidance included in ASU 2014-09 for identification of the goods or services provided to customers and enhances the implementation guidance for licensing arrangements. The effective date of these ASUs has been deferred to annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016, and associated interim periods. Transition to
the new requirements may be made by retroactively revising prior financial statements (with certain practical expedients permitted) or by a cumulative effect through retained earnings. If the latter option is selected, additional disclosures are
required for comparability. FHN is evaluating the effects of these ASUs on its revenue recognition practices.
In August 2014, the FASB issued ASU
2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern. ASU 2014-15 requires an entitys management to evaluate whether there are conditions or events, considered in the aggregate, that
raise substantial doubt about the entitys ability to continue as a going concern within one year after the date that the financial statements are issued. If such events or conditions exist, additional disclosures are required and management
should evaluate whether its plans sufficiently alleviate the substantial doubt. ASU 2014-15 is effective for the annual period ending after December 15, 2016 and all interim and annual periods thereafter. The provisions of ASU 2014-15 are not
anticipated to affect FHN.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities. ASU 2016-01 makes several revisions to the accounting, presentation and disclosure for financial instruments. Equity investments (except those accounted for under the equity method or those that result in consolidation of the
investee) are required to be measured at fair value with changes in fair value recognized in net income. An entity may elect to measure equity investments that do not have readily determinable market values at cost minus impairment, if any, plus or
minus changes resulting from observable price changes in orderly transactions for the identical or similar instruments from the same issuer. ASU 2016-01 also requires a qualitative impairment review for equity investments without readily
determinable fair values, with measurement at fair value required if impairment is determined to exist. For liabilities for which fair value has been elected, ASU 2016-01 revises current accounting to record the portion of fair value changes
resulting from instrument-specific credit risk within other comprehensive income rather than earnings. Additionally, ASU 2016-01 clarifies that the need for a valuation allowance on a deferred tax asset related to available-for-sale securities
should be assessed in combination with all other deferred tax assets rather than being assessed in isolation. ASU 2016-01 also makes several changes to existing fair value presentation and disclosure requirements, including a provision that all
disclosures must use an exit price concept in the determination of fair value. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. FHN is evaluating the impact of ASU
2016-01 on its current accounting and disclosure practices.
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 lessees 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
transition to ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes 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 is effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. FHN is evaluating the impact of ASU 2016-02 on its current accounting and disclosure practices.
8
Note 1 Financial Information (Continued)
In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage of Certain Prepaid Stored-Value
Products which indicates that liabilities related to the sale of prepaid-stored value products are considered financial liabilities and should have a breakage estimate applied for estimated unused funds. ASU 2016-04 does not apply to
stored-value products that can only be redeemed for cash, are subject to escheatment or are linked to a segregated bank account. ASU 2016-04 is effective for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted. FHN is evaluating the impact of ASU 2016-04 on its current accounting and disclosure practices.
In March 2016,
the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting which makes several revisions to equity compensation accounting. Under the new guidance all excess tax benefits and deficiencies that occur when an
award vests, is exercised, or expires will be recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies
will no longer be included within estimated proceeds when performing the treasury stock method for calculation of diluted earnings per share. Excess tax benefits will also be recognized at the time an award is exercised or vests compared to the
current requirement to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows will shift to an operating activity from the current classification as a financing activity.
ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur rather than the current requirement to estimate
forfeitures from inception. Further, ASU 2016-09 permits employers to use a net-settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Under
current guidance, withholding of equity awards in excess of the minimum statutory requirement results in liability classification for the entire award. The related cash remittance by the employer for employee taxes will be treated as a financing
activity in the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Transition to the new guidance will be
accomplished through a combination of retrospective, cumulative-effect adjustment to equity and prospective methodologies. FHN is evaluating the impact of ASU 2016-09 on its current equity compensation accounting and disclosure practices.
9
Note 2 Acquisitions and Divestitures
On October 2, 2015, FHN completed its acquisition of TrustAtlantic Financial Corporation (TrustAtlantic Financial or
TAF), and its wholly-owned bank subsidiary TrustAtlantic Bank (TAB), for an aggregate of 5,093,657 shares of FHN common stock and $23.9 million in cash in a transaction valued at $96.7 million. Prior to the acquisition TAF
and TAB were headquartered in Raleigh, North Carolina, where TAB had five branches located in the communities of Raleigh, Cary and Greenville. In relation to the acquisition, FHN acquired approximately $400 million in assets, including approximately
$282 million in loans, and assumed approximately $344 million of TAB deposits. FHN recorded $45.4 million in goodwill associated with the acquisition, representing the excess of acquisition consideration over the estimated fair value of net assets
acquired.
See Note 2 Acquisitions and Divestitures in the Notes to Consolidated Financial Statements on Form 10-K for the year ended
December 31, 2015, for additional information about the TAF acquisition.
In addition to the transaction mentioned above, FHN acquires or divests
assets from time to time in transactions that are considered business combination or divestitures but are not material to FHN individually or in the aggregate.
10
Note 3 Investment Securities
The following tables summarize FHNs investment securities on March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Securities available-for-sale (AFS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100
|
|
Government agency issued mortgage-backed securities (MBS)
|
|
|
1,839,702
|
|
|
|
47,804
|
|
|
|
(84
|
)
|
|
|
1,887,422
|
|
Government agency issued collateralized mortgage obligations (CMO)
|
|
|
1,916,942
|
|
|
|
24,922
|
|
|
|
(3,643
|
)
|
|
|
1,938,221
|
|
States and municipalities
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
Equity and other (a)
|
|
|
187,172
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
187,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale (b)
|
|
$
|
3,945,416
|
|
|
$
|
72,726
|
|
|
$
|
(3,737
|
)
|
|
$
|
4,014,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity (HTM):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
4,326
|
|
|
$
|
414
|
|
|
$
|
|
|
|
$
|
4,740
|
|
Corporate bonds
|
|
|
10,000
|
|
|
|
281
|
|
|
|
|
|
|
|
10,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held-to-maturity
|
|
$
|
14,326
|
|
|
$
|
695
|
|
|
$
|
|
|
|
$
|
15,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million. The remainder is money market and cost method investments.
|
(b)
|
Includes $3.1 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100
|
|
Government agency issued MBS
|
|
|
727,828
|
|
|
|
35,718
|
|
|
|
(696
|
)
|
|
|
762,850
|
|
Government agency issued CMO
|
|
|
2,691,544
|
|
|
|
35,030
|
|
|
|
(10,427
|
)
|
|
|
2,716,147
|
|
Other U.S. government agencies
|
|
|
1,655
|
|
|
|
36
|
|
|
|
|
|
|
|
1,691
|
|
States and municipalities
|
|
|
9,905
|
|
|
|
|
|
|
|
|
|
|
|
9,905
|
|
Equity and other (a)
|
|
|
181,834
|
|
|
|
|
|
|
|
(196
|
)
|
|
|
181,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale (b)
|
|
$
|
3,612,866
|
|
|
$
|
70,784
|
|
|
$
|
(11,319
|
)
|
|
$
|
3,672,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
4,299
|
|
|
$
|
1,152
|
|
|
$
|
|
|
|
$
|
5,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held-to-maturity
|
|
$
|
4,299
|
|
|
$
|
1,152
|
|
|
$
|
|
|
|
$
|
5,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $66.0 million. The remainder is money market and cost method investments.
|
(b)
|
Includes $3.2 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
|
The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturity securities portfolios on March 31, 2016, are
provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
Available-for-Sale
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
Within 1 year
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
After 1 year; within 5 years
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
After 5 years; within 10 years
|
|
|
10,000
|
|
|
|
10,281
|
|
|
|
|
|
|
|
|
|
After 10 years
|
|
|
4,326
|
|
|
|
4,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
14,326
|
|
|
|
15,021
|
|
|
|
1,600
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agency issued MBS and CMO (a)
|
|
|
|
|
|
|
|
|
|
|
3,756,644
|
|
|
|
3,825,643
|
|
Equity and other
|
|
|
|
|
|
|
|
|
|
|
187,172
|
|
|
|
187,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,326
|
|
|
$
|
15,021
|
|
|
$
|
3,945,416
|
|
|
$
|
4,014,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
11
Note 3 Investment Securities (Continued)
The table below provides information on gross gains and gross losses from investment securities for the three
months ended March 31:
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
Gross gains on sales of securities
|
|
$
|
3,837
|
|
|
$
|
276
|
|
Gross (losses) on sales of securities
|
|
|
(2,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) on sales of securities (a)
|
|
$
|
1,574
|
|
|
$
|
276
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Cash proceeds for the three months ended March 31, 2016 and 2015 were $1.0 million and $.3 million, respectively. 2016 includes a $1.7 million gain from an exchange of approximately $294 million of AFS debt
securities.
|
The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as
of March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
Government agency issued CMO
|
|
$
|
18,904
|
|
|
$
|
(214
|
)
|
|
$
|
310,888
|
|
|
$
|
(3,429
|
)
|
|
$
|
329,792
|
|
|
$
|
(3,643
|
)
|
Government agency issued MBS
|
|
|
42,106
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
42,106
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
61,010
|
|
|
|
(298
|
)
|
|
|
310,888
|
|
|
|
(3,429
|
)
|
|
|
371,898
|
|
|
|
(3,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
260
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
260
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
61,270
|
|
|
$
|
(308
|
)
|
|
$
|
310,888
|
|
|
$
|
(3,429
|
)
|
|
$
|
372,158
|
|
|
$
|
(3,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2015
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
Government agency issued CMO
|
|
$
|
417,267
|
|
|
$
|
(1,729
|
)
|
|
$
|
485,053
|
|
|
$
|
(8,698
|
)
|
|
$
|
902,320
|
|
|
$
|
(10,427
|
)
|
Government agency issued MBS
|
|
|
25,712
|
|
|
|
(79
|
)
|
|
|
34,853
|
|
|
|
(617
|
)
|
|
|
60,565
|
|
|
|
(696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
442,979
|
|
|
|
(1,808
|
)
|
|
|
519,906
|
|
|
|
(9,315
|
)
|
|
|
962,885
|
|
|
|
(11,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
887
|
|
|
|
(161
|
)
|
|
|
9
|
|
|
|
(35
|
)
|
|
|
896
|
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
443,866
|
|
|
$
|
(1,969
|
)
|
|
$
|
519,915
|
|
|
$
|
(9,350
|
)
|
|
$
|
963,781
|
|
|
$
|
(11,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHN has reviewed investment securities that were in unrealized loss positions in accordance with its accounting policy for
other-than-temporary impairment (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. For equity securities, FHN has both the ability and intent to hold these securities for the time necessary to recover
the amortized cost.
12
Note 4 Loans
The following table provides the balance of loans by portfolio segment as of March 31, 2016 and 2015, and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and industrial
|
|
$
|
10,239,183
|
|
|
$
|
9,638,355
|
|
|
$
|
10,436,390
|
|
Commercial real estate
|
|
|
1,848,569
|
|
|
|
1,320,897
|
|
|
|
1,674,935
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate (a)
|
|
|
4,690,230
|
|
|
|
4,922,817
|
|
|
|
4,766,518
|
|
Permanent mortgage
|
|
|
442,791
|
|
|
|
511,708
|
|
|
|
454,123
|
|
Credit card & other
|
|
|
354,221
|
|
|
|
338,346
|
|
|
|
354,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
$
|
17,574,994
|
|
|
$
|
16,732,123
|
|
|
$
|
17,686,502
|
|
Allowance for loan losses
|
|
|
204,034
|
|
|
|
228,328
|
|
|
|
210,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net loans
|
|
$
|
17,370,960
|
|
|
$
|
16,503,795
|
|
|
$
|
17,476,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Balances as of March 31, 2016 and 2015, and December 31, 2015, include $47.8 million, $71.6 million, and $52.8 million of restricted real estate loans, respectively. See Note 13Variable 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 FHNs 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 insurancerelated 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 borrowers sale of those
mortgage loans to third party investors. Commercial classes within CRE include income CRE, residential CRE and PCI loans. Retail loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio.
Retail classes include HELOC, 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 (29 percent of total loans), the majority of which is in the consumer real estate segment (27 percent of total loans). Loans to finance and insurance companies total $2.2 billion (21 percent of the C&I portfolio, or 12 percent
of the total loans). FHN had loans to mortgage companies totaling $1.5 billion (15 percent of the C&I segment, or 9 percent of total loans) as of March 31, 2016. As a result, 36 percent of the C&I segment was sensitive to impacts on the
financial services industry.
Acquisition
On
October 2, 2015, FHN completed its acquisition of TAF, and its wholly-owned bank subsidiary TAB. The acquisition included $298.1 million in unpaid principal balance of loans with a fair value of $281.9 million. Generally, the fair value for the
acquired loans is estimated using a discounted cash flow analysis with significant unobservable inputs (Level 3) including adjustments for expected credit losses, prepayment speeds, current market rates for similar loans, and an adjustment for
investor-required yield given product-type and various risk characteristics. See Note 2Acquisitions and Divestitures for additional information.
At
acquisition, FHN designated certain loans as PCI with the remaining loans accounted for under ASC 310-20, Nonrefundable Fees and Other Costs. For loans accounted for under ASC 310-20, the difference between each loans book value to
TAB and the estimated fair value at the time of the acquisition will be accreted into interest income over its remaining contractual life and the subsequent accounting and reporting will be similar to a loan in FHNs originated portfolio.
13
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, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
Balance, beginning of period
|
|
$
|
8,542
|
|
|
$
|
14,714
|
|
Accretion
|
|
|
(1,151
|
)
|
|
|
(3,371
|
)
|
Adjustment for payoffs
|
|
|
(1,777
|
)
|
|
|
(1,336
|
)
|
Adjustment for charge-offs
|
|
|
(663
|
)
|
|
|
|
|
Increase in accretable yield (a)
|
|
|
4,007
|
|
|
|
461
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
8,958
|
|
|
$
|
10,468
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing of the cash flows.
|
At March 31, 2016, the ALLL related to PCI loans was $1.1 million compared to $3.1 million at March 31, 2015. The loan loss provision expense for
the three months ended March 31, 2016 was not material. There was a loan loss provision credit of $.2 million recognized during the three months ended March 31, 2015. The following table reflects the outstanding principal balance and
carrying amounts of the acquired PCI loans as of March 31, 2016 and 2015, and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
|
Carrying
value
|
|
|
Unpaid
balance
|
|
|
Carrying
value
|
|
|
Unpaid
balance
|
|
|
Carrying
value
|
|
|
Unpaid
balance
|
|
Commercial, financial and industrial
|
|
$
|
12,917
|
|
|
$
|
14,953
|
|
|
$
|
4,665
|
|
|
$
|
5,437
|
|
|
$
|
16,063
|
|
|
$
|
18,573
|
|
Commercial real estate
|
|
|
12,645
|
|
|
|
16,700
|
|
|
|
23,013
|
|
|
|
29,205
|
|
|
|
19,929
|
|
|
|
25,504
|
|
Consumer real estate
|
|
|
3,491
|
|
|
|
4,512
|
|
|
|
1,910
|
|
|
|
2,897
|
|
|
|
3,672
|
|
|
|
4,533
|
|
Credit card and other
|
|
|
53
|
|
|
|
74
|
|
|
|
9
|
|
|
|
12
|
|
|
|
52
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,106
|
|
|
$
|
36,239
|
|
|
$
|
29,597
|
|
|
$
|
37,551
|
|
|
$
|
39,716
|
|
|
$
|
48,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Note 4 Loans (Continued)
Impaired Loans
The following tables provide information at March 31, 2016 and 2015, by class related to individually impaired loans and consumer TDRs. Recorded
investment is defined as the amount of the investment in a loan, before valuation allowance but which does reflect any direct write-down of the investment. For purposes of this disclosure, PCI loans and net LOCOM have been excluded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
Impaired loans with no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
12,377
|
|
|
$
|
19,620
|
|
|
$
|
|
|
|
$
|
9,224
|
|
|
$
|
|
|
Income CRE
|
|
|
2,468
|
|
|
|
9,389
|
|
|
|
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,845
|
|
|
$
|
29,009
|
|
|
$
|
|
|
|
$
|
11,692
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC (a)
|
|
$
|
11,024
|
|
|
$
|
28,514
|
|
|
$
|
|
|
|
$
|
10,921
|
|
|
$
|
|
|
R/E installment loans (a)
|
|
|
4,582
|
|
|
|
5,829
|
|
|
|
|
|
|
|
4,434
|
|
|
|
|
|
Permanent mortgage (a)
|
|
|
4,041
|
|
|
|
6,460
|
|
|
|
|
|
|
|
4,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,647
|
|
|
$
|
40,803
|
|
|
$
|
|
|
|
$
|
19,791
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
28,781
|
|
|
$
|
32,664
|
|
|
$
|
8,223
|
|
|
$
|
24,921
|
|
|
$
|
87
|
|
TRUPS
|
|
|
3,307
|
|
|
|
3,700
|
|
|
|
925
|
|
|
|
3,323
|
|
|
|
|
|
Income CRE
|
|
|
5,106
|
|
|
|
6,412
|
|
|
|
383
|
|
|
|
5,138
|
|
|
|
20
|
|
Residential CRE
|
|
|
1,376
|
|
|
|
1,844
|
|
|
|
105
|
|
|
|
1,397
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,570
|
|
|
$
|
44,620
|
|
|
$
|
9,636
|
|
|
$
|
34,779
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
$
|
87,726
|
|
|
$
|
90,338
|
|
|
$
|
15,678
|
|
|
$
|
88,580
|
|
|
$
|
487
|
|
R/E installment loans
|
|
|
58,796
|
|
|
|
60,147
|
|
|
|
15,441
|
|
|
|
59,971
|
|
|
|
317
|
|
Permanent mortgage
|
|
|
92,833
|
|
|
|
105,839
|
|
|
|
16,975
|
|
|
|
95,232
|
|
|
|
547
|
|
Credit card & other
|
|
|
345
|
|
|
|
348
|
|
|
|
146
|
|
|
|
360
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
239,700
|
|
|
$
|
256,672
|
|
|
$
|
48,240
|
|
|
$
|
244,143
|
|
|
$
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
$
|
53,415
|
|
|
$
|
73,629
|
|
|
$
|
9,636
|
|
|
$
|
46,471
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
$
|
259,347
|
|
|
$
|
297,475
|
|
|
$
|
48,240
|
|
|
$
|
263,934
|
|
|
$
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
312,762
|
|
|
$
|
371,104
|
|
|
$
|
57,876
|
|
|
$
|
310,405
|
|
|
$
|
1,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.
|
15
Note 4 Loans (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
Impaired loans with no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
13,630
|
|
|
$
|
16,803
|
|
|
$
|
|
|
|
$
|
11,594
|
|
|
$
|
|
|
Income CRE
|
|
|
4,209
|
|
|
|
11,366
|
|
|
|
|
|
|
|
6,369
|
|
|
|
|
|
Residential CRE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,839
|
|
|
$
|
28,169
|
|
|
$
|
|
|
|
$
|
18,537
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC (a)
|
|
$
|
12,600
|
|
|
$
|
31,419
|
|
|
$
|
|
|
|
$
|
12,989
|
|
|
$
|
|
|
R/E installment loans (a)
|
|
|
4,518
|
|
|
|
5,827
|
|
|
|
|
|
|
|
4,669
|
|
|
|
3
|
|
Permanent mortgage (a)
|
|
|
7,205
|
|
|
|
9,336
|
|
|
|
|
|
|
|
7,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,323
|
|
|
$
|
46,582
|
|
|
$
|
|
|
|
$
|
24,889
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
26,252
|
|
|
$
|
30,759
|
|
|
$
|
1,709
|
|
|
$
|
19,772
|
|
|
$
|
253
|
|
TRUPS
|
|
|
13,429
|
|
|
|
13,700
|
|
|
|
4,310
|
|
|
|
13,444
|
|
|
|
|
|
Income CRE
|
|
|
6,695
|
|
|
|
8,180
|
|
|
|
502
|
|
|
|
7,540
|
|
|
|
30
|
|
Residential CRE
|
|
|
1,624
|
|
|
|
1,991
|
|
|
|
109
|
|
|
|
1,497
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
48,000
|
|
|
$
|
54,630
|
|
|
$
|
6,630
|
|
|
$
|
42,253
|
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
$
|
85,102
|
|
|
$
|
87,242
|
|
|
$
|
20,513
|
|
|
$
|
84,636
|
|
|
$
|
448
|
|
R/E installment loans
|
|
|
69,391
|
|
|
|
70,384
|
|
|
|
21,224
|
|
|
|
70,124
|
|
|
|
327
|
|
Permanent mortgage
|
|
|
103,633
|
|
|
|
116,482
|
|
|
|
17,766
|
|
|
|
104,917
|
|
|
|
591
|
|
Credit card & other
|
|
|
484
|
|
|
|
484
|
|
|
|
228
|
|
|
|
508
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
258,610
|
|
|
$
|
274,592
|
|
|
$
|
59,731
|
|
|
$
|
260,185
|
|
|
$
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
$
|
65,839
|
|
|
$
|
82,799
|
|
|
$
|
6,630
|
|
|
$
|
60,790
|
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
$
|
282,933
|
|
|
$
|
321,174
|
|
|
$
|
59,731
|
|
|
$
|
285,074
|
|
|
$
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
348,772
|
|
|
$
|
403,973
|
|
|
$
|
66,361
|
|
|
$
|
345,864
|
|
|
$
|
1,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.
|
Asset Quality Indicators
FHN employs a dual grade
commercial risk grading methodology to assign an estimate for the probability of default (PD) and the loss given default (LGD) for each commercial loan using factors specific to various industry, portfolio, or product
segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 16. Each PD grade corresponds to an estimated one-year default probability percentage; a PD 1 has the lowest expected default probability, and probabilities
increase as grades progress down the scale. PD 1 through PD 12 are pass grades. PD grades 13-16 correspond to the regulatory-defined categories of special mention (13), substandard (14), doubtful (15), and loss (16). Pass loan grades are
required to be reassessed annually or earlier whenever there has been a material change in the financial condition of the borrower or risk characteristics of the relationship. All commercial loans over $1 million and certain commercial loans over
$500,000 that are graded 13 or worse are reassessed on a quarterly basis. LGD grades are assigned based on a scale of 1-12 and represent FHNs expected recovery based on collateral type in the event a loan defaults. See Note 5Allowance
for Loan Losses for further discussion on the credit grading system.
16
Note 4 Loans (Continued)
The following tables provide the balances of commercial loan portfolio classes with associated allowance,
disaggregated by PD grade as of March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
General
C&I
|
|
|
Loans to
Mortgage
Companies
|
|
|
TRUPS (a)
|
|
|
Income
CRE
|
|
|
Residential
CRE
|
|
|
Total
|
|
|
Percentage
of Total
|
|
|
Allowance
for Loan
Losses
|
|
PD Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
595,106
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
580
|
|
|
$
|
|
|
|
$
|
595,686
|
|
|
|
5
|
%
|
|
$
|
127
|
|
2
|
|
|
607,670
|
|
|
|
|
|
|
|
|
|
|
|
10,292
|
|
|
|
117
|
|
|
|
618,079
|
|
|
|
5
|
|
|
|
324
|
|
3
|
|
|
516,275
|
|
|
|
379,810
|
|
|
|
|
|
|
|
166,396
|
|
|
|
|
|
|
|
1,062,481
|
|
|
|
9
|
|
|
|
329
|
|
4
|
|
|
936,719
|
|
|
|
366,958
|
|
|
|
|
|
|
|
180,323
|
|
|
|
8,283
|
|
|
|
1,492,283
|
|
|
|
12
|
|
|
|
987
|
|
5
|
|
|
1,078,567
|
|
|
|
252,228
|
|
|
|
|
|
|
|
241,553
|
|
|
|
3,588
|
|
|
|
1,575,936
|
|
|
|
13
|
|
|
|
6,184
|
|
6
|
|
|
1,195,082
|
|
|
|
350,253
|
|
|
|
|
|
|
|
326,060
|
|
|
|
12,608
|
|
|
|
1,884,003
|
|
|
|
16
|
|
|
|
9,711
|
|
7
|
|
|
1,370,338
|
|
|
|
108,550
|
|
|
|
|
|
|
|
421,650
|
|
|
|
11,942
|
|
|
|
1,912,480
|
|
|
|
15
|
|
|
|
12,953
|
|
8
|
|
|
771,016
|
|
|
|
38,059
|
|
|
|
|
|
|
|
215,048
|
|
|
|
1,902
|
|
|
|
1,026,025
|
|
|
|
8
|
|
|
|
16,815
|
|
9
|
|
|
502,867
|
|
|
|
|
|
|
|
|
|
|
|
64,420
|
|
|
|
1,808
|
|
|
|
569,095
|
|
|
|
5
|
|
|
|
10,571
|
|
10
|
|
|
249,608
|
|
|
|
|
|
|
|
|
|
|
|
67,575
|
|
|
|
16,505
|
|
|
|
333,688
|
|
|
|
3
|
|
|
|
5,286
|
|
11
|
|
|
168,079
|
|
|
|
|
|
|
|
|
|
|
|
18,479
|
|
|
|
2,766
|
|
|
|
189,324
|
|
|
|
2
|
|
|
|
4,895
|
|
12
|
|
|
96,442
|
|
|
|
|
|
|
|
|
|
|
|
20,685
|
|
|
|
3,588
|
|
|
|
120,715
|
|
|
|
1
|
|
|
|
3,588
|
|
13
|
|
|
108,610
|
|
|
|
|
|
|
|
304,527
|
|
|
|
7,756
|
|
|
|
614
|
|
|
|
421,507
|
|
|
|
3
|
|
|
|
4,056
|
|
14,15,16
|
|
|
184,913
|
|
|
|
|
|
|
|
|
|
|
|
21,232
|
|
|
|
907
|
|
|
|
207,052
|
|
|
|
2
|
|
|
|
20,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
|
8,381,292
|
|
|
|
1,495,858
|
|
|
|
304,527
|
|
|
|
1,762,049
|
|
|
|
64,628
|
|
|
|
12,008,354
|
|
|
|
99
|
|
|
|
96,455
|
|
Individually evaluated for impairment
|
|
|
41,158
|
|
|
|
|
|
|
|
3,307
|
|
|
|
7,574
|
|
|
|
1,376
|
|
|
|
53,415
|
|
|
|
1
|
|
|
|
9,636
|
|
Purchased credit-impaired loans
|
|
|
13,041
|
|
|
|
|
|
|
|
|
|
|
|
9,870
|
|
|
|
3,072
|
|
|
|
25,983
|
|
|
|
|
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
$
|
8,435,491
|
|
|
$
|
1,495,858
|
|
|
$
|
307,834
|
|
|
$
|
1,779,493
|
|
|
$
|
69,076
|
|
|
$
|
12,087,752
|
|
|
|
100
|
%
|
|
$
|
106,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
General
C&I
|
|
|
Loans to
Mortgage
Companies
|
|
|
TRUPS (a)
|
|
|
Income CRE
|
|
|
Residential
CRE
|
|
|
Total
|
|
|
Percentage
of Total
|
|
|
Allowance
for Loan
Losses
|
|
PD Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
$
|
446,725
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
605
|
|
|
$
|
59
|
|
|
$
|
447,389
|
|
|
|
4
|
%
|
|
$
|
75
|
|
2
|
|
|
550,069
|
|
|
|
|
|
|
|
|
|
|
|
1,896
|
|
|
|
233
|
|
|
|
552,198
|
|
|
|
5
|
|
|
|
173
|
|
3
|
|
|
528,347
|
|
|
|
276,653
|
|
|
|
|
|
|
|
63,112
|
|
|
|
261
|
|
|
|
868,373
|
|
|
|
8
|
|
|
|
228
|
|
4
|
|
|
663,213
|
|
|
|
235,434
|
|
|
|
|
|
|
|
64,020
|
|
|
|
229
|
|
|
|
962,896
|
|
|
|
9
|
|
|
|
435
|
|
5
|
|
|
1,050,800
|
|
|
|
384,418
|
|
|
|
|
|
|
|
253,658
|
|
|
|
1,840
|
|
|
|
1,690,716
|
|
|
|
15
|
|
|
|
2,743
|
|
6
|
|
|
1,111,069
|
|
|
|
498,752
|
|
|
|
|
|
|
|
213,787
|
|
|
|
5,333
|
|
|
|
1,828,941
|
|
|
|
17
|
|
|
|
5,488
|
|
7
|
|
|
1,278,125
|
|
|
|
192,154
|
|
|
|
|
|
|
|
231,551
|
|
|
|
14,316
|
|
|
|
1,716,146
|
|
|
|
16
|
|
|
|
9,169
|
|
8
|
|
|
735,695
|
|
|
|
27,813
|
|
|
|
|
|
|
|
173,744
|
|
|
|
518
|
|
|
|
937,770
|
|
|
|
9
|
|
|
|
9,786
|
|
9
|
|
|
474,912
|
|
|
|
26,448
|
|
|
|
|
|
|
|
131,893
|
|
|
|
922
|
|
|
|
634,175
|
|
|
|
6
|
|
|
|
8,642
|
|
10
|
|
|
228,176
|
|
|
|
|
|
|
|
|
|
|
|
26,641
|
|
|
|
165
|
|
|
|
254,982
|
|
|
|
2
|
|
|
|
4,811
|
|
11
|
|
|
209,639
|
|
|
|
|
|
|
|
|
|
|
|
27,255
|
|
|
|
946
|
|
|
|
237,840
|
|
|
|
2
|
|
|
|
5,783
|
|
12
|
|
|
93,055
|
|
|
|
|
|
|
|
|
|
|
|
29,205
|
|
|
|
493
|
|
|
|
122,753
|
|
|
|
1
|
|
|
|
4,103
|
|
13
|
|
|
114,775
|
|
|
|
|
|
|
|
325,382
|
|
|
|
4,530
|
|
|
|
1,076
|
|
|
|
445,763
|
|
|
|
4
|
|
|
|
4,989
|
|
14,15,16
|
|
|
129,146
|
|
|
|
|
|
|
|
|
|
|
|
31,015
|
|
|
|
3,641
|
|
|
|
163,802
|
|
|
|
1
|
|
|
|
19,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
|
7,613,746
|
|
|
|
1,641,672
|
|
|
|
325,382
|
|
|
|
1,252,912
|
|
|
|
30,032
|
|
|
|
10,863,744
|
|
|
|
99
|
|
|
|
76,082
|
|
Individually evaluated for impairment
|
|
|
39,882
|
|
|
|
|
|
|
|
12,815
|
|
|
|
10,904
|
|
|
|
1,624
|
|
|
|
65,225
|
|
|
|
1
|
|
|
|
6,630
|
|
Purchased credit-impaired loans
|
|
|
4,858
|
|
|
|
|
|
|
|
|
|
|
|
23,696
|
|
|
|
1,729
|
|
|
|
30,283
|
|
|
|
|
|
|
|
2,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
$
|
7,658,486
|
|
|
$
|
1,641,672
|
|
|
$
|
338,197
|
|
|
$
|
1,287,512
|
|
|
$
|
33,385
|
|
|
$
|
10,959,252
|
|
|
|
100
|
%
|
|
$
|
85,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Balances as of March 31, 2016 and 2015, presented net of $25.5 million and $26.2 million, respectively, in lower of cost or market (LOCOM) valuation allowance. Based on the underlying structure of the
notes, the highest possible internal grade is 13.
|
17
Note 4 Loans (Continued)
The retail portfolio is comprised primarily of smaller-balance loans which are very similar in nature in that
most are standard products and are backed by residential real estate. Because of the similarities of retail loan-types, FHN is able to utilize the Fair Isaac Corporation (FICO) score, among other attributes, to assess the credit quality
of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other retail portfolio.
The following tables reflect period end balances and average FICO scores by origination vintage for the HELOC, real estate installment, and permanent
mortgage classes of loans as of March 31, 2016 and 2015:
HELOC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Period End
|
|
|
Average
Origination
|
|
|
Average
Refreshed
|
|
|
Period End
|
|
|
Average
Origination
|
|
|
Average
Refreshed
|
|
Origination Vintage
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
pre-2003
|
|
$
|
35,875
|
|
|
|
708
|
|
|
|
704
|
|
|
$
|
51,626
|
|
|
|
707
|
|
|
|
700
|
|
2003
|
|
|
67,315
|
|
|
|
718
|
|
|
|
711
|
|
|
|
95,043
|
|
|
|
721
|
|
|
|
707
|
|
2004
|
|
|
184,785
|
|
|
|
721
|
|
|
|
710
|
|
|
|
258,974
|
|
|
|
723
|
|
|
|
707
|
|
2005
|
|
|
276,596
|
|
|
|
728
|
|
|
|
711
|
|
|
|
421,315
|
|
|
|
731
|
|
|
|
720
|
|
2006
|
|
|
246,861
|
|
|
|
737
|
|
|
|
725
|
|
|
|
321,702
|
|
|
|
739
|
|
|
|
726
|
|
2007
|
|
|
286,148
|
|
|
|
744
|
|
|
|
730
|
|
|
|
342,531
|
|
|
|
744
|
|
|
|
728
|
|
2008
|
|
|
164,166
|
|
|
|
753
|
|
|
|
748
|
|
|
|
188,111
|
|
|
|
753
|
|
|
|
748
|
|
2009
|
|
|
80,993
|
|
|
|
751
|
|
|
|
745
|
|
|
|
97,279
|
|
|
|
751
|
|
|
|
742
|
|
2010
|
|
|
76,987
|
|
|
|
753
|
|
|
|
746
|
|
|
|
92,777
|
|
|
|
753
|
|
|
|
749
|
|
2011
|
|
|
74,531
|
|
|
|
759
|
|
|
|
750
|
|
|
|
92,484
|
|
|
|
758
|
|
|
|
753
|
|
2012
|
|
|
91,976
|
|
|
|
759
|
|
|
|
758
|
|
|
|
112,955
|
|
|
|
760
|
|
|
|
758
|
|
2013
|
|
|
117,405
|
|
|
|
756
|
|
|
|
756
|
|
|
|
142,772
|
|
|
|
757
|
|
|
|
756
|
|
2014
|
|
|
107,725
|
|
|
|
761
|
|
|
|
763
|
|
|
|
121,991
|
|
|
|
762
|
|
|
|
763
|
|
2015
|
|
|
151,444
|
|
|
|
761
|
|
|
|
760
|
|
|
|
25,250
|
|
|
|
759
|
|
|
|
756
|
|
2016
|
|
|
26,273
|
|
|
|
764
|
|
|
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,989,080
|
|
|
|
743
|
|
|
|
734
|
|
|
$
|
2,364,810
|
|
|
|
742
|
|
|
|
732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R/E Installment Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
(Dollars in thousands)
|
|
Period End
|
|
|
Origination
|
|
|
Refreshed
|
|
|
Period End
|
|
|
Origination
|
|
|
Refreshed
|
|
Origination Vintage
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
pre-2003
|
|
$
|
6,145
|
|
|
|
673
|
|
|
|
690
|
|
|
$
|
11,786
|
|
|
|
679
|
|
|
|
687
|
|
2003
|
|
|
27,457
|
|
|
|
709
|
|
|
|
720
|
|
|
|
44,729
|
|
|
|
713
|
|
|
|
721
|
|
2004
|
|
|
27,004
|
|
|
|
697
|
|
|
|
694
|
|
|
|
37,944
|
|
|
|
699
|
|
|
|
695
|
|
2005
|
|
|
84,140
|
|
|
|
714
|
|
|
|
709
|
|
|
|
115,702
|
|
|
|
715
|
|
|
|
710
|
|
2006
|
|
|
93,146
|
|
|
|
711
|
|
|
|
704
|
|
|
|
126,225
|
|
|
|
712
|
|
|
|
702
|
|
2007
|
|
|
143,754
|
|
|
|
722
|
|
|
|
709
|
|
|
|
187,510
|
|
|
|
722
|
|
|
|
707
|
|
2008
|
|
|
48,829
|
|
|
|
718
|
|
|
|
719
|
|
|
|
60,538
|
|
|
|
718
|
|
|
|
712
|
|
2009
|
|
|
20,564
|
|
|
|
733
|
|
|
|
732
|
|
|
|
26,812
|
|
|
|
737
|
|
|
|
727
|
|
2010
|
|
|
72,595
|
|
|
|
750
|
|
|
|
755
|
|
|
|
95,017
|
|
|
|
747
|
|
|
|
756
|
|
2011
|
|
|
216,423
|
|
|
|
761
|
|
|
|
758
|
|
|
|
267,079
|
|
|
|
760
|
|
|
|
759
|
|
2012
|
|
|
491,925
|
|
|
|
764
|
|
|
|
765
|
|
|
|
586,729
|
|
|
|
764
|
|
|
|
765
|
|
2013
|
|
|
402,530
|
|
|
|
755
|
|
|
|
759
|
|
|
|
460,196
|
|
|
|
756
|
|
|
|
758
|
|
2014
|
|
|
403,306
|
|
|
|
756
|
|
|
|
760
|
|
|
|
450,765
|
|
|
|
756
|
|
|
|
754
|
|
2015
|
|
|
557,931
|
|
|
|
758
|
|
|
|
757
|
|
|
|
86,975
|
|
|
|
757
|
|
|
|
758
|
|
2016
|
|
|
105,401
|
|
|
|
763
|
|
|
|
762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,701,150
|
|
|
|
751
|
|
|
|
751
|
|
|
$
|
2,558,007
|
|
|
|
749
|
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Note 4 Loans (Continued)
Permanent Mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
(Dollars in thousands)
|
|
Period End
|
|
|
Origination
|
|
|
Refreshed
|
|
|
Period End
|
|
|
Origination
|
|
|
Refreshed
|
|
Origination Vintage
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
|
Balance
|
|
|
FICO
|
|
|
FICO
|
|
pre-2004
|
|
$
|
105,876
|
|
|
|
721
|
|
|
|
719
|
|
|
$
|
136,848
|
|
|
|
723
|
|
|
|
718
|
|
2004
|
|
|
12,211
|
|
|
|
709
|
|
|
|
701
|
|
|
|
16,484
|
|
|
|
712
|
|
|
|
715
|
|
2005
|
|
|
27,317
|
|
|
|
738
|
|
|
|
732
|
|
|
|
32,563
|
|
|
|
736
|
|
|
|
732
|
|
2006
|
|
|
47,704
|
|
|
|
732
|
|
|
|
734
|
|
|
|
59,636
|
|
|
|
732
|
|
|
|
726
|
|
2007
|
|
|
157,235
|
|
|
|
733
|
|
|
|
713
|
|
|
|
183,359
|
|
|
|
733
|
|
|
|
719
|
|
2008
|
|
|
74,962
|
|
|
|
741
|
|
|
|
717
|
|
|
|
82,818
|
|
|
|
741
|
|
|
|
712
|
|
2016
|
|
|
17,486
|
|
|
|
721
|
|
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
442,791
|
|
|
|
730
|
|
|
|
718
|
|
|
$
|
511,708
|
|
|
|
730
|
|
|
|
717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual and Past Due Loans
The following table reflects accruing and non-accruing loans by class on March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing
|
|
|
Non-Accruing
|
|
|
|
|
|
|
|
|
|
30-89
|
|
|
90+
|
|
|
|
|
|
|
|
|
30-89
|
|
|
90+
|
|
|
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Total
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Total
Accruing
|
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Non-
Accruing
|
|
|
Total
Loans
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
8,356,560
|
|
|
$
|
30,463
|
|
|
$
|
314
|
|
|
$
|
8,387,337
|
|
|
$
|
16,702
|
|
|
$
|
557
|
|
|
$
|
17,854
|
|
|
$
|
35,113
|
|
|
$
|
8,422,450
|
|
Loans to mortgage companies
|
|
|
1,489,354
|
|
|
|
6,411
|
|
|
|
|
|
|
|
1,495,765
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
93
|
|
|
|
1,495,858
|
|
TRUPS (a)
|
|
|
304,527
|
|
|
|
|
|
|
|
|
|
|
|
304,527
|
|
|
|
|
|
|
|
|
|
|
|
3,307
|
|
|
|
3,307
|
|
|
|
307,834
|
|
Purchased credit-impaired loans
|
|
|
12,784
|
|
|
|
|
|
|
|
257
|
|
|
|
13,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
10,163,225
|
|
|
|
36,874
|
|
|
|
571
|
|
|
|
10,200,670
|
|
|
|
16,702
|
|
|
|
557
|
|
|
|
21,254
|
|
|
|
38,513
|
|
|
|
10,239,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income CRE
|
|
|
1,759,601
|
|
|
|
1,188
|
|
|
|
105
|
|
|
|
1,760,894
|
|
|
|
3,047
|
|
|
|
64
|
|
|
|
5,618
|
|
|
|
8,729
|
|
|
|
1,769,623
|
|
Residential CRE
|
|
|
65,261
|
|
|
|
|
|
|
|
|
|
|
|
65,261
|
|
|
|
|
|
|
|
|
|
|
|
743
|
|
|
|
743
|
|
|
|
66,004
|
|
Purchased credit-impaired loans
|
|
|
10,828
|
|
|
|
1,673
|
|
|
|
441
|
|
|
|
12,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
1,835,690
|
|
|
|
2,861
|
|
|
|
546
|
|
|
|
1,839,097
|
|
|
|
3,047
|
|
|
|
64
|
|
|
|
6,361
|
|
|
|
9,472
|
|
|
|
1,848,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
1,882,664
|
|
|
|
18,447
|
|
|
|
8,170
|
|
|
|
1,909,281
|
|
|
|
63,021
|
|
|
|
5,542
|
|
|
|
11,236
|
|
|
|
79,799
|
|
|
|
1,989,080
|
|
R/E installment loans
|
|
|
2,651,317
|
|
|
|
9,103
|
|
|
|
2,298
|
|
|
|
2,662,718
|
|
|
|
26,223
|
|
|
|
2,856
|
|
|
|
5,136
|
|
|
|
34,215
|
|
|
|
2,696,933
|
|
Purchased credit-impaired loans
|
|
|
3,984
|
|
|
|
233
|
|
|
|
|
|
|
|
4,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
4,537,965
|
|
|
|
27,783
|
|
|
|
10,468
|
|
|
|
4,576,216
|
|
|
|
89,244
|
|
|
|
8,398
|
|
|
|
16,372
|
|
|
|
114,014
|
|
|
|
4,690,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
401,496
|
|
|
|
5,117
|
|
|
|
5,938
|
|
|
|
412,551
|
|
|
|
12,039
|
|
|
|
4,192
|
|
|
|
14,009
|
|
|
|
30,240
|
|
|
|
442,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
185,652
|
|
|
|
1,463
|
|
|
|
1,396
|
|
|
|
188,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188,511
|
|
Other
|
|
|
163,156
|
|
|
|
962
|
|
|
|
192
|
|
|
|
164,310
|
|
|
|
613
|
|
|
|
|
|
|
|
733
|
|
|
|
1,346
|
|
|
|
165,656
|
|
Purchased credit-impaired loans
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card & other
|
|
|
348,862
|
|
|
|
2,425
|
|
|
|
1,588
|
|
|
|
352,875
|
|
|
|
613
|
|
|
|
|
|
|
|
733
|
|
|
|
1,346
|
|
|
|
354,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
17,287,238
|
|
|
$
|
75,060
|
|
|
$
|
19,111
|
|
|
$
|
17,381,409
|
|
|
$
|
121,645
|
|
|
$
|
13,211
|
|
|
$
|
58,729
|
|
|
$
|
193,585
|
|
|
$
|
17,574,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Total TRUPS includes LOCOM valuation allowance of $25.5 million.
|
19
Note 4 Loans (Continued)
The following table reflects accruing and non-accruing loans by class on March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing
|
|
|
Non-Accruing
|
|
|
|
|
|
|
|
|
|
30-89
|
|
|
90+
|
|
|
|
|
|
|
|
|
30-89
|
|
|
90+
|
|
|
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Total
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Total
Accruing
|
|
|
Current
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Non-
Accruing
|
|
|
Total
Loans
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
7,627,209
|
|
|
$
|
5,291
|
|
|
$
|
251
|
|
|
$
|
7,632,751
|
|
|
$
|
1,441
|
|
|
$
|
10,445
|
|
|
$
|
8,991
|
|
|
$
|
20,877
|
|
|
$
|
7,653,628
|
|
Loans to mortgage companies
|
|
|
1,640,638
|
|
|
|
915
|
|
|
|
|
|
|
|
1,641,553
|
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
119
|
|
|
|
1,641,672
|
|
TRUPS (a)
|
|
|
325,382
|
|
|
|
|
|
|
|
|
|
|
|
325,382
|
|
|
|
|
|
|
|
|
|
|
|
12,815
|
|
|
|
12,815
|
|
|
|
338,197
|
|
Purchased credit-impaired loans
|
|
|
4,192
|
|
|
|
|
|
|
|
666
|
|
|
|
4,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
9,597,421
|
|
|
|
6,206
|
|
|
|
917
|
|
|
|
9,604,544
|
|
|
|
1,441
|
|
|
|
10,445
|
|
|
|
21,925
|
|
|
|
33,811
|
|
|
|
9,638,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income CRE
|
|
|
1,249,793
|
|
|
|
687
|
|
|
|
|
|
|
|
1,250,480
|
|
|
|
1,454
|
|
|
|
2,817
|
|
|
|
9,065
|
|
|
|
13,336
|
|
|
|
1,263,816
|
|
Residential CRE
|
|
|
31,591
|
|
|
|
65
|
|
|
|
|
|
|
|
31,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,656
|
|
Purchased credit-impaired loans
|
|
|
21,817
|
|
|
|
|
|
|
|
3,608
|
|
|
|
25,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
1,303,201
|
|
|
|
752
|
|
|
|
3,608
|
|
|
|
1,307,561
|
|
|
|
1,454
|
|
|
|
2,817
|
|
|
|
9,065
|
|
|
|
13,336
|
|
|
|
1,320,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
2,250,415
|
|
|
|
20,698
|
|
|
|
10,362
|
|
|
|
2,281,475
|
|
|
|
66,743
|
|
|
|
5,075
|
|
|
|
11,517
|
|
|
|
83,335
|
|
|
|
2,364,810
|
|
R/E installment loans
|
|
|
2,502,363
|
|
|
|
11,975
|
|
|
|
5,204
|
|
|
|
2,519,542
|
|
|
|
27,748
|
|
|
|
2,576
|
|
|
|
5,741
|
|
|
|
36,065
|
|
|
|
2,555,607
|
|
Purchased credit-impaired loans
|
|
|
2,308
|
|
|
|
4
|
|
|
|
88
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
4,755,086
|
|
|
|
32,677
|
|
|
|
15,654
|
|
|
|
4,803,417
|
|
|
|
94,491
|
|
|
|
7,651
|
|
|
|
17,258
|
|
|
|
119,400
|
|
|
|
4,922,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
464,677
|
|
|
|
8,019
|
|
|
|
6,085
|
|
|
|
478,781
|
|
|
|
16,710
|
|
|
|
2,752
|
|
|
|
13,465
|
|
|
|
32,927
|
|
|
|
511,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
177,042
|
|
|
|
1,467
|
|
|
|
1,440
|
|
|
|
179,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179,949
|
|
Other
|
|
|
156,478
|
|
|
|
916
|
|
|
|
239
|
|
|
|
157,633
|
|
|
|
|
|
|
|
|
|
|
|
755
|
|
|
|
755
|
|
|
|
158,388
|
|
Purchased credit-impaired loans
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card & other
|
|
|
333,529
|
|
|
|
2,383
|
|
|
|
1,679
|
|
|
|
337,591
|
|
|
|
|
|
|
|
|
|
|
|
755
|
|
|
|
755
|
|
|
|
338,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
16,453,914
|
|
|
$
|
50,037
|
|
|
$
|
27,943
|
|
|
$
|
16,531,894
|
|
|
$
|
114,096
|
|
|
$
|
23,665
|
|
|
$
|
62,468
|
|
|
$
|
200,229
|
|
|
$
|
16,732,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Total TRUPS includes LOCOM valuation allowance of $26.2 million.
|
Troubled Debt Restructurings
As part of FHNs ongoing risk management practices, FHN attempts to work with borrowers when necessary to extend or modify loan terms to better align with
their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately.
A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that FHN has granted a concession to the
borrower. FHN may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future. Many aspects of a
borrowers financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions could include extension of the maturity date, reductions of the interest rate (which may make the rate lower than
current market for a new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a
concession has been granted, are subjective in nature and managements judgment is required when determining whether a modification is classified as a TDR.
For all classes within the commercial portfolio segment, TDRs are typically modified through forbearance agreements (generally 6 to 12 months). Forbearance
agreements could include reduced interest rates, reduced payments, release of guarantor, or entering into short sale agreements. FHNs proprietary modification programs for consumer loans are generally structured using parameters of U.S.
government-sponsored programs such as Home Affordable Modification Program (HAMP). Within the HELOC and R/E installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in
increments of 25 basis points to a minimum of 1 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt ratio. After 5 years, the interest rate will increase 2 percent per year until the original
interest rate prior to modification is achieved. Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2 percent for up to 5 years) and a possible maturity date extension to
reach an affordable housing debt ratio. After 5 years the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent
mortgages and to 30 years for consumer real estate loans. Within the credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship
20
Note 4 Loans (Continued)
program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout
program, customers are granted a rate reduction to 0 percent and term extensions for up to 5 years to pay off the remaining balance.
Despite the absence
of a loan modification, the discharge of personal liability through bankruptcy proceedings is considered a concession. As a result, FHN classifies all non-reaffirmed residential real estate loans discharged in Chapter 7 bankruptcy as nonaccruing
TDRs.
On March 31, 2016 and 2015, FHN had $289.0 million and $317.8 million portfolio loans classified as TDRs, respectively. For TDRs in the loan
portfolio, FHN had loan loss reserves of $54.6 million and $62.1 million, or 19 percent as of March 31, 2016, and 20 percent as of March 31, 2015. Additionally, $76.4 million and $78.0 million of loans held-for-sale as of March 31,
2016 and 2015, respectively were classified as TDRs.
The following tables reflect portfolio loans that were classified as TDRs during the three months
ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
Pre-Modification
|
|
|
Post-Modification
|
|
|
|
|
|
Pre-Modification
|
|
|
Post-Modification
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
(Dollars in thousands)
|
|
Number
|
|
|
Recorded Investment
|
|
|
Recorded Investment
|
|
|
Number
|
|
|
Recorded Investment
|
|
|
Recorded Investment
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
|
1
|
|
|
$
|
708
|
|
|
$
|
708
|
|
|
|
2
|
|
|
$
|
1,388
|
|
|
$
|
1,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
1
|
|
|
|
708
|
|
|
|
708
|
|
|
|
2
|
|
|
|
1,388
|
|
|
|
1,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
99
|
|
|
|
7,440
|
|
|
|
7,370
|
|
|
|
37
|
|
|
|
3,727
|
|
|
|
3,707
|
|
R/E installment loans
|
|
|
15
|
|
|
|
898
|
|
|
|
895
|
|
|
|
16
|
|
|
|
1,354
|
|
|
|
1,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
114
|
|
|
|
8,338
|
|
|
|
8,265
|
|
|
|
53
|
|
|
|
5,081
|
|
|
|
5,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
321
|
|
|
|
321
|
|
Credit card & other
|
|
|
4
|
|
|
|
19
|
|
|
|
18
|
|
|
|
6
|
|
|
|
28
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
|
119
|
|
|
$
|
9,065
|
|
|
$
|
8,991
|
|
|
|
63
|
|
|
$
|
6,818
|
|
|
$
|
6,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present TDRs which re-defaulted during the three months ended March 31, 2016 and 2015, and as to
which the modification occurred 12 months or less prior to the re-default. For purposes of this disclosure, FHN generally defines payment default as 30 or more days past due.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
(Dollars in thousands)
|
|
Number
|
|
|
Recorded
Investment
|
|
|
Number
|
|
|
Recorded
Investment
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
1
|
|
|
$
|
36
|
|
|
|
1
|
|
|
$
|
30
|
|
R/E installment loans
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
1
|
|
|
|
36
|
|
|
|
2
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
|
1
|
|
|
$
|
36
|
|
|
|
3
|
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Note 5Allowance for Loan Losses
The ALLL includes the following components: reserves for commercial loans evaluated based on pools of credit graded loans and reserves for
pools of smaller-balance homogeneous retail loans, both determined in accordance with ASC 450-20-50. The reserve factors applied to these pools are an estimate of probable incurred losses based on managements evaluation of historical net
losses from loans with similar characteristics and are subject to qualitative adjustments by management to reflect current events, trends, and conditions (including economic considerations and trends). The pace of the economic recovery, performance
of the housing market, unemployment levels, labor participation rate, regulatory guidance, and both positive and negative portfolio segment-specific trends, are examples of additional factors considered by management in determining the ALLL.
Additionally, management considers the inherent uncertainty of quantitative models that are driven by historical loss data. Management evaluates the periods of historical losses that are the basis for the loss rates used in the quantitative models
and selects historical loss periods that are believed to be the most reflective of losses inherent in the loan portfolio as of the balance sheet date. Management also periodically reviews analysis of the loss emergence period which is the amount of
time it takes for a loss to be confirmed (initial charge-off) after a loss event has occurred. FHN performs extensive studies as it relates to the historical loss periods used in the model and the loss emergence period and model assumptions are
adjusted accordingly. The ALLL also includes reserves determined in accordance with ASC 310-10-35 for loans determined by management to be individually impaired and an allowance associated with PCI loans. See Note 1 Summary of Significant
Accounting Policies and Note 5 Allowance for Loan Losses in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2015, for additional information about the policies and methodologies used in the
aforementioned components of the ALLL.
The following table provides a rollforward of the allowance for loan losses by portfolio segment for the three
months ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
C&I
|
|
|
Commercial
Real Estate
|
|
|
Consumer
Real Estate
|
|
|
Permanent
Mortgage
|
|
|
Credit Card
and Other
|
|
|
Total
|
|
Balance as of January 1, 2015
|
|
$
|
67,011
|
|
|
$
|
18,574
|
|
|
$
|
113,011
|
|
|
$
|
19,122
|
|
|
$
|
14,730
|
|
|
$
|
232,448
|
|
Charge-offs
|
|
|
(3,555
|
)
|
|
|
(787
|
)
|
|
|
(8,537
|
)
|
|
|
(1,184
|
)
|
|
|
(3,936
|
)
|
|
|
(17,999
|
)
|
Recoveries
|
|
|
1,953
|
|
|
|
691
|
|
|
|
4,724
|
|
|
|
618
|
|
|
|
893
|
|
|
|
8,879
|
|
Provision/(provision credit) for loan losses
|
|
|
2,243
|
|
|
|
(813
|
)
|
|
|
47
|
|
|
|
1,630
|
|
|
|
1,893
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2015
|
|
|
67,652
|
|
|
|
17,665
|
|
|
|
109,245
|
|
|
|
20,186
|
|
|
|
13,580
|
|
|
|
228,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowanceindividually evaluated for impairment
|
|
|
6,019
|
|
|
|
611
|
|
|
|
41,737
|
|
|
|
17,766
|
|
|
|
228
|
|
|
|
66,361
|
|
Allowancecollectively evaluated for impairment
|
|
|
61,440
|
|
|
|
14,642
|
|
|
|
67,018
|
|
|
|
2,420
|
|
|
|
13,352
|
|
|
|
158,872
|
|
Allowancepurchased credit-impaired loans
|
|
|
193
|
|
|
|
2,412
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
3,095
|
|
Loans, net of unearned as of March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
52,697
|
|
|
|
12,528
|
|
|
|
171,611
|
|
|
|
110,838
|
|
|
|
484
|
|
|
|
348,158
|
|
Collectively evaluated for impairment
|
|
|
9,580,800
|
|
|
|
1,282,944
|
|
|
|
4,748,806
|
|
|
|
400,870
|
|
|
|
337,853
|
|
|
|
16,351,273
|
|
Purchased credit-impaired loans
|
|
|
4,858
|
|
|
|
25,425
|
|
|
|
2,400
|
|
|
|
|
|
|
|
9
|
|
|
|
32,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned
|
|
$
|
9,638,355
|
|
|
$
|
1,320,897
|
|
|
$
|
4,922,817
|
|
|
$
|
511,708
|
|
|
$
|
338,346
|
|
|
$
|
16,732,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
$
|
73,637
|
|
|
$
|
25,159
|
|
|
$
|
80,614
|
|
|
$
|
18,947
|
|
|
$
|
11,885
|
|
|
$
|
210,242
|
|
Charge-offs
|
|
|
(6,525
|
)
|
|
|
(642
|
)
|
|
|
(6,926
|
)
|
|
|
(112
|
)
|
|
|
(3,407
|
)
|
|
|
(17,612
|
)
|
Recoveries
|
|
|
780
|
|
|
|
222
|
|
|
|
5,735
|
|
|
|
779
|
|
|
|
888
|
|
|
|
8,404
|
|
Provision/(provision credit) for loan losses
|
|
|
12,995
|
|
|
|
887
|
|
|
|
(12,102
|
)
|
|
|
(860
|
)
|
|
|
2,080
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016
|
|
|
80,887
|
|
|
|
25,626
|
|
|
|
67,321
|
|
|
|
18,754
|
|
|
|
11,446
|
|
|
|
204,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowanceindividually evaluated for impairment
|
|
|
9,148
|
|
|
|
488
|
|
|
|
31,119
|
|
|
|
16,975
|
|
|
|
146
|
|
|
|
57,876
|
|
Allowancecollectively evaluated for impairment
|
|
|
71,615
|
|
|
|
24,840
|
|
|
|
35,477
|
|
|
|
1,779
|
|
|
|
11,299
|
|
|
|
145,010
|
|
Allowancepurchased credit-impaired loans
|
|
|
124
|
|
|
|
298
|
|
|
|
725
|
|
|
|
|
|
|
|
1
|
|
|
|
1,148
|
|
Loans, net of unearned as of March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
44,465
|
|
|
|
8,950
|
|
|
|
162,128
|
|
|
|
96,874
|
|
|
|
345
|
|
|
|
312,762
|
|
Collectively evaluated for impairment
|
|
|
10,181,677
|
|
|
|
1,826,677
|
|
|
|
4,523,885
|
|
|
|
345,917
|
|
|
|
353,822
|
|
|
|
17,231,978
|
|
Purchased credit-impaired loans
|
|
|
13,041
|
|
|
|
12,942
|
|
|
|
4,217
|
|
|
|
|
|
|
|
54
|
|
|
|
30,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
10,239,183
|
|
|
$
|
1,848,569
|
|
|
$
|
4,690,230
|
|
|
$
|
442,791
|
|
|
$
|
354,221
|
|
|
$
|
17,574,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Note 6 Intangible Assets
The following is a summary of intangible assets, net of accumulated amortization, included in the Consolidated Condensed Statements of
Condition:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Goodwill
|
|
|
Other
Intangible
Assets (a)
|
|
December 31, 2014
|
|
$
|
145,932
|
|
|
$
|
29,518
|
|
Amortization expense
|
|
|
|
|
|
|
(1,298
|
)
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
$
|
145,932
|
|
|
$
|
28,220
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 (b)
|
|
$
|
191,307
|
|
|
$
|
26,215
|
|
Amortization expense
|
|
|
|
|
|
|
(1,300
|
)
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
$
|
191,307
|
|
|
$
|
24,915
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents customer lists, acquired contracts, core deposit intangibles, and covenants not to compete.
|
(b)
|
The increase in goodwill was related to the TAF acquisition in fourth quarter 2015.
|
The gross carrying amount
and accumulated amortization of other intangible assets subject to amortization is $72.3 million and $47.4 million, respectively on March 31, 2016. Estimated aggregate amortization expense is expected to be $3.9 million for the remainder of
2016, $4.9 million, $4.7 million, $4.5 million, $1.7 million, and $1.6 million for the twelve-month periods of 2017, 2018, 2019, 2020, and 2021, respectively.
Gross goodwill, accumulated impairments, and accumulated divestiture related write-offs were determined beginning January 1, 2012, when a change in
accounting requirements resulted in goodwill being assessed for impairment rather than being amortized. Gross goodwill of $200.0 million with accumulated impairments and accumulated divestiture related write-offs of $114.1 million and $85.9 million,
respectively, were previously allocated to the non-strategic segment, resulting in $0 net goodwill allocated to the non-strategic segment as of March 31, 2015 and 2016. The regional bank and fixed income segments do not have any accumulated
impairments or divestiture related write-offs. The following is a summary of goodwill by reportable segment included in the Consolidated Condensed Statements of Condition as of and for the three months ended March 31, 2015 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regional
|
|
|
Fixed
|
|
|
|
|
(Dollars in thousands)
|
|
Banking
|
|
|
Income
|
|
|
Total
|
|
December 31, 2014
|
|
$
|
47,928
|
|
|
$
|
98,004
|
|
|
$
|
145,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
|
|
|
|
|
|
|
|
|
|
Divestitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
$
|
47,928
|
|
|
$
|
98,004
|
|
|
$
|
145,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 (a)
|
|
$
|
93,303
|
|
|
$
|
98,004
|
|
|
$
|
191,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
|
|
|
|
|
|
|
|
|
|
Divestitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
$
|
93,303
|
|
|
$
|
98,004
|
|
|
$
|
191,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The increase in goodwill was related to the TAF acquisition in fourth quarter 2015.
|
23
Note 7 Other Income and Other Expense
Following is detail of All other income and commissions and All other expense as presented in the Consolidated Condensed Statements of
Income:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
All other income and commissions:
|
|
|
|
|
|
|
|
|
ATM interchange fees
|
|
$
|
2,958
|
|
|
$
|
2,761
|
|
Electronic banking fees
|
|
|
1,397
|
|
|
|
1,428
|
|
Mortgage banking
|
|
|
1,273
|
|
|
|
1,584
|
|
Letter of credit fees
|
|
|
1,061
|
|
|
|
1,123
|
|
Deferred compensation (a)
|
|
|
329
|
|
|
|
1,033
|
|
Other
|
|
|
3,071
|
|
|
|
3,125
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,089
|
|
|
$
|
11,054
|
|
|
|
|
|
|
|
|
|
|
All other expense:
|
|
|
|
|
|
|
|
|
Travel and entertainment
|
|
$
|
2,062
|
|
|
$
|
1,614
|
|
Customer relations
|
|
|
1,879
|
|
|
|
1,314
|
|
Employee training and dues
|
|
|
1,390
|
|
|
|
1,132
|
|
Supplies
|
|
|
1,026
|
|
|
|
927
|
|
Miscellaneous loan costs
|
|
|
717
|
|
|
|
361
|
|
Tax credit investments
|
|
|
706
|
|
|
|
395
|
|
Litigation and regulatory matters
|
|
|
(475
|
)
|
|
|
162,500
|
|
Other
|
|
|
11,719
|
|
|
|
8,423
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,024
|
|
|
$
|
176,666
|
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
|
Deferred compensation market value adjustments are mirrored by adjustments to employee compensation, incentives, and benefits expense.
|
24
Note 8 Changes in Accumulated Other Comprehensive Income Balances
The following table provides the changes in accumulated other comprehensive income by component, net of tax, for the three months ended
March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, unless otherwise noted)
|
|
Cash Flow
Hedges
|
|
|
Securities
Available-For-
Sale
|
|
|
Pension and Post
Retirement Plans
|
|
|
Total
|
|
Balance as of January 1, 2016
|
|
$
|
|
|
|
$
|
3,394
|
|
|
$
|
(217,586
|
)
|
|
$
|
(214,192
|
)
|
Other comprehensive income before reclassifications, Net of tax expense of $2.4 million and $25.0
million for unrealized gain/(loss) on cash flow hedges and securities available-for-sale, respectively
|
|
|
3,839
|
|
|
|
40,180
|
|
|
|
|
|
|
|
44,019
|
|
Amounts reclassified from accumulated other comprehensive income, Net of tax benefit of $.2
million and $.6 million for net (gain)/loss on cash flow hedges and securities available-for-sale, respectively, and tax expense of $.7 million for pension and post retirement plans
|
|
|
(374
|
)
|
|
|
(1,020
|
)
|
|
|
1,126
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income, Net of tax expense of $2.2 million, $24.3 million
and $.7 million for cash flow hedges, securities available-for-sale, and pension and post retirement plans, respectively
|
|
|
3,465
|
|
|
|
39,160
|
|
|
|
1,126
|
|
|
|
43,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016
|
|
$
|
3,465
|
|
|
$
|
42,554
|
|
|
$
|
(216,460
|
)
|
|
$
|
(170,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015
|
|
$
|
|
|
|
$
|
18,581
|
|
|
$
|
(206,827
|
)
|
|
$
|
(188,246
|
)
|
Other comprehensive income before reclassifications, Net of tax expense of $11.3 million for
unrealized gain/(loss) on securities available-for-sale
|
|
|
|
|
|
|
18,004
|
|
|
|
|
|
|
|
18,004
|
|
Amounts reclassified from accumulated other comprehensive income, Net of tax expense of $.7
million for pension and post retirement plans
|
|
|
|
|
|
|
|
|
|
|
1,083
|
|
|
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income, Net of tax expense of $11.3 million and $.7 million
for unrealized gain/(loss) on securities available-for-sale and pension and post retirement plans, respectively
|
|
|
|
|
|
|
18,004
|
|
|
|
1,083
|
|
|
|
19,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2015
|
|
$
|
|
|
|
$
|
36,585
|
|
|
$
|
(205,744
|
)
|
|
$
|
(169,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Note 9 Earnings Per Share
The following table provides reconciliations of net income to net income available to common shareholders and the difference between average
basic common shares outstanding and average diluted common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars and shares in thousands, except per share
data)
|
|
2016
|
|
|
2015
|
|
Net income/(loss)
|
|
$
|
52,213
|
|
|
$
|
(72,405
|
)
|
Net income attributable to noncontrolling interest
|
|
|
2,851
|
|
|
|
2,758
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to controlling interest
|
|
|
49,362
|
|
|
|
(75,163
|
)
|
Preferred stock dividends
|
|
|
1,550
|
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) available to common shareholders
|
|
$
|
47,812
|
|
|
$
|
(76,713
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingbasic
|
|
|
234,651
|
|
|
|
232,816
|
|
Effect of dilutive securities (a)
|
|
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingdiluted
|
|
|
236,666
|
|
|
|
232,816
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per share available to common shareholders
|
|
$
|
0.20
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
Diluted income/(loss) per share available to common shareholders
|
|
$
|
0.20
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
(a)
|
For the three months ended March 31, 2015 all potential common shares were antidilutive due to the net loss available to common shareholders.
|
The following table presents outstanding options and other equity awards that were excluded from the calculation of diluted earnings per share because they
were either anti-dilutive (the exercise price was higher than the weighted-average market price for the period) or the performance conditions have not been met:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Shares in thousands)
|
|
2016
|
|
|
2015
|
|
Anti-dilutive stock options
|
|
|
4,119
|
|
|
|
7,853
|
|
Weighted average exercise price of anti-dilutive stock options
|
|
$
|
22.45
|
|
|
$
|
17.17
|
|
Anti-dilutive other equity awards
|
|
|
1,124
|
|
|
|
2,499
|
|
26
Note 10 Contingencies and Other Disclosures
CONTINGENCIES
Contingent Liabilities Overview
Contingent liabilities
arise in the ordinary course of business. Often they are related to lawsuits, arbitration, mediation, and other forms of litigation. Various litigation matters are threatened or pending against FHN and its subsidiaries. Also, FHN at times receives
requests for information, subpoenas, or other inquiries from federal, state, and local regulators, from other government authorities, and from other parties concerning various matters relating to FHNs current or former lines of business.
Certain matters of that sort are pending at this time, and FHN is cooperating in those matters. Pending and threatened litigation matters sometimes are resolved in court or before an arbitrator, and sometimes are settled by the parties. Regardless
of the manner of resolution, frequently the most significant changes in status of a matter occur over a short time period, often following a lengthy period of little substantive activity. In view of the inherent difficulty of predicting the outcome
of these matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, or where claims or other actions may be possible but have not been
brought, FHN cannot reasonably determine what the eventual outcome of the matters will be, what the timing of the ultimate resolution of these matters may be, or what the eventual loss or impact related to each matter may be. FHN establishes loss
contingency liabilities for litigation matters when loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. If loss for a matter is probable and a range of possible loss outcomes is the best estimate
available, accounting guidance requires a liability to be established at the low end of the range.
Based on current knowledge, and after consultation
with counsel, management is of the opinion that loss contingencies related to threatened or pending litigation matters should not have a material adverse effect on the consolidated financial condition of FHN, but may be material to FHNs
operating results for any particular reporting period depending, in part, on the results from that period.
Material Loss Contingency Matters
As used in this Note, material loss contingency matters generally fall into at least one of the following categories: (i) FHN has determined
material loss to be probable and has established a material loss liability in accordance with applicable financial accounting guidance, other than matters reported as having been substantially settled or otherwise substantially resolved;
(ii) FHN has determined material loss to be probable but is not reasonably able to estimate an amount or range of material loss liability; or (iii) FHN has determined that material loss is not probable but is reasonably possible, and that
the amount or range of that reasonably possible material loss is estimable. As defined in applicable accounting guidance, loss is reasonably possible if there is more than a remote chance of a material loss outcome for FHN. Set forth below are
disclosures for certain pending or threatened litigation matters, including all matters mentioned in (i) or (ii) and certain matters mentioned in (iii). In addition, certain other matters are discussed relating to FHNs former
mortgage origination and servicing businesses. In all litigation matters discussed, unless settled or otherwise resolved, FHN believes it has meritorious defenses and intends to pursue those defenses vigorously.
FHN reassesses the liability for litigation matters each quarter as the matters progress. At March 31, 2016, the aggregate amount of liabilities
established for all loss contingency matters was $14.4 million. These liabilities are separate from those discussed under the heading Established Repurchase Liability below.
In each material loss contingency matter, except as otherwise noted, there is more than a remote chance that any of the following outcomes will occur: the
plaintiff will substantially prevail; the defense will substantially prevail; the plaintiff will prevail in part; or the matter will be settled by the parties. At March 31, 2016, FHN estimates that for all material loss contingency matters,
estimable reasonably possible losses in future periods in excess of currently established liabilities could aggregate in a range from zero to approximately $108 million.
As a result of the general uncertainties discussed above and the specific uncertainties discussed for each matter mentioned below, it is possible that the
ultimate future loss experienced by FHN for any particular matter may materially exceed the amount, if any, of currently established liability for that matter. That possibility exists both for matters included in the estimated reasonably possible
loss (RPL) range mentioned above and for matters not included in that range.
Certain Matters Included in RPL Range
Debit Transaction Sequencing Litigation Matter.
FTBNA is a defendant in a putative class action lawsuit concerning overdraft fees charged in connection
with debit card transactions. A key claim is that the method used to order or sequence the transactions posted each day was improper. The case is styled as
Hawkins v. First Tennessee Bank National Association
, before the Circuit Court for
Shelby County, Tennessee, Case No. CT-004085-11. The plaintiff seeks actual damages of at least $5 million, unspecified restitution of fees charged, and unspecified punitive damages, among other things. FHNs estimate of RPL for this matter is
subject to significant uncertainties regarding: whether a class will be certified and, if so, the definition of the class; claims as to which no dollar amount is specified; the potential remedies that might be available or awarded; and the ultimate
outcome of potentially significant motions.
27
Note 10 Contingencies and Other Disclosures (Continued)
RPL-Included FH Proprietary Securitization Matters.
FHN, along with multiple co-defendants, is
defending lawsuits brought by investors which claim that the offering documents under which certificates relating to First Horizon branded securitizations were sold to them were materially deficient. FHN can estimate reasonably possible loss for two
of those matters: (1) Federal Deposit Insurance Corporation (FDIC) as receiver for Colonial Bank, in the U.S. District Court for the Middle District of Alabama (Case No. CV-12-791-WKW-WC); and (2) FDIC as receiver for Colonial
Bank, in the U.S. District Court for the Southern District of New York (Case No. 12 Civ. 6166 (LLS)(MHD)). The plaintiff in those suits claims to have purchased (and later sold) certificates in a number of separate securitizations and demands
damages and prejudgment interest, among several remedies sought. The RPL estimates for these matters are subject to significant uncertainties regarding: the dollar amounts claimed; the potential remedies that might be available or awarded; the
outcome of any settlement discussions; the ultimate outcome of potentially significant motions; the availability of significantly dispositive defenses; and the incomplete status of the discovery process. FDICs claims relate to alleged
purchases totaling $145.7 million. Additional information concerning FHNs former mortgage businesses is provided below in Obligations from Legacy Mortgage Businesses.
Legacy Mortgage Matters Excluded from RPL Range
As
mentioned above, FHN is directly defending two lawsuits which claim that the offering documents under which certificates relating to securitizations were sold were materially deficient. Underwriters are co-defendants and have demanded, under
provisions in the applicable underwriting agreements, that FHN indemnify them for their expenses and any losses they may incur. In addition, FHN has received indemnity demands from underwriters in certain other suits as to which investors claim to
have purchased certificates in FH proprietary securitizations but as to which FHN has not been named a defendant.
For the two pending lawsuits FHN is
able to estimate RPL, as mentioned above. For the indemnity claims FHN is unable to estimate an RPL range due to significant uncertainties regarding: claims as to which the claimant specifies no dollar amount; the potential remedies that might be
available or awarded; the availability of significantly dispositive defenses such as statutes of limitations or repose; the outcome of potentially dispositive early-stage motions such as motions to dismiss; the incomplete status of the discovery
process; the lack of a precise statement of damages; and lack of precedent claims. The alleged purchase prices of the certificates subject to the indemnification requests total $510.1 million.
FHN has additional potential exposures related to its former mortgage businesses. A few of those matters have become litigation which FHN currently estimates
are immaterial, some are non-litigation claims or threats, some are mere requests for information, and in some areas FHN has no indication of any active or threatened dispute. Some of those matters might eventually result in loan repurchases or
make-whole payments and would be included in the repurchase liability discussed below, but none are included in the material loss contingency liability mentioned above. None are included in the RPL range mentioned above. Additional information
concerning such exposures is provided below in Obligations from Legacy Mortgage Businesses.
Material Gain Contingency Matter
In second quarter 2015 FHN reached an agreement with DOJ and HUD to settle potential claims related to FHNs underwriting and origination of loans insured
by FHA. Under that agreement FHN paid $212.5 million. FHN believes that certain insurance policies, having an aggregate policy limit of $75 million, provide coverage for FHNs losses and related costs. The insurers have denied and/or reserved
rights to deny coverage. FHN has brought suit against the insurers to enforce the policies under Tennessee law. In connection with this litigation the previously recognized expenses associated with the settled matter may be recouped in part. Under
applicable financial accounting guidance FHN has determined that although material gain from this litigation is not probable, there is a reasonably possible (more than remote) chance of a material gain outcome for FHN. FHN cannot determine a
probable outcome that may result from this matter because of the uncertainty of the potential outcomes of the legal proceedings and also due to significant uncertainties regarding: legal interpretation of the relevant contracts; potential remedies
that might be available or awarded; the ultimate effect of counterclaims asserted by the defendants; and lack of discovery. Additional information concerning FHNs former mortgage businesses is provided below in Obligations from Legacy
Mortgage Businesses.
Obligations from Legacy Mortgage Businesses
Several matters mentioned above stem from FHNs former mortgage origination and servicing businesses. FHN retains potential for further exposure, in
addition to those matters, from those former businesses. The remainder of this Contingencies section provides context and other information to enhance an understanding of those matters and exposures.
28
Note 10 Contingencies and Other Disclosures (Continued)
Overview
Prior to September 2008 FHN originated loans through its legacy mortgage business, primarily first lien home loans, with the intention of selling them. Sales
typically were effected either as non-recourse whole-loan sales or through non-recourse proprietary securitizations. Conventional conforming single-family residential mortgage loans were sold predominately to two GSEs: Fannie Mae and Freddie Mac.
Also, federally insured or guaranteed whole loans were pooled, and payments to investors were guaranteed through Ginnie Mae. Many mortgage loan originations, especially nonconforming mortgage loans, were sold to investors, or certificate-holders,
predominantly through FH proprietary securitizations but also, to a lesser extent, through other whole loans sold to private non-Agency purchasers. FHN used only one trustee for all of its FH proprietary securitizations. FHN also originated mortgage
loans eligible for FHA insurance or VA guaranty. In addition, FHN originated and sold HELOCs and second lien mortgages through other whole loans sold to private purchasers and, to a lesser extent, through FH proprietary securitizations. Currently,
only one FH securitization of HELOCs remains outstanding.
For non-recourse loan sales, FHN has exposure for repurchase of loans, make-whole damages, or
other related damages, arising from claims that FHN breached its representations and warranties made at closing to the purchasers, including GSEs, other whole loan purchasers, and the trustee of FH proprietary securitizations.
During the time these legacy activities were conducted, FHN frequently sold mortgage loans with servicing retained. As a result, FHN accumulated
substantial amounts of MSR on its balance sheet, as well as contractual servicing obligations and related deposits and receivables. FHN conducted a significant servicing business under its First Horizon Home Loans brand.
MI was required by GSE rules for certain of the loans sold to GSEs and was also provided for certain of the loans that were securitized. MI generally was
provided for first lien loans sold or securitized having an LTV ratio at origination of greater than 80 percent.
In 2007, market conditions deteriorated
to the point where mortgage-backed securitizations no longer could be sold economically; FHNs last securitization occurred that year. FHN continued selling mortgage loans to GSEs until August 31, 2008, when FHN sold its national mortgage
origination and servicing platforms along with a portion of its servicing assets and obligations. FHN contracted to have its remaining servicing obligations sub-serviced. Since the platform sale FHN has sold substantially all remaining servicing
assets and obligations in several transactions, concluding in 2014.
Certain mortgage-related terms used in this Contingencies section are
defined in Mortgage-Related Glossary at the end of this Overview.
Repurchase and Make-Whole Obligations
Starting in 2009, FHN received a high number of claims either to repurchase loans from the purchaser or to pay the purchaser to make them whole for
economic losses incurred. These claims have been driven primarily by loan delinquencies. In repurchase or make-whole claims a loan purchaser typically asserts that specified loans violated representations and warranties FHN made when the loans were
sold. A significant majority of claims received overall have come from GSEs, and the remainder are from purchasers of other whole loan sales. FHN has not received a loan repurchase or make-whole claim from the FH proprietary securitization trustee.
Generally, FHN reviews each claim and MI cancellation notice individually. Those responses include appeal, provide additional information, deny the claim
(rescission), repurchase the loan or remit a make-whole payment, or reflect cancellation of MI.
After several years resolving repurchase and make-whole
claims with each GSE on a loan-by-loan basis, in 2013 and 2014 FHN entered into DRAs with the GSEs, resolving at once a large fraction of pending and potential future claims. Starting in 2014, the overall number of such claims diminished
substantially, primarily as a result of the DRAs. Each DRA resolved obligations associated with loans originated from 2000 to 2008, but certain obligations and loans were excluded. Under each DRA, FHN remains responsible for repurchase obligations
related to certain excluded defects (such as title defects and violations of the GSEs Charter Act) and FHN continues to have loan repurchase or monetary compensation obligations under the DRAs related to private mortgage insurance rescissions,
cancellations, and denials (with certain exceptions). FHN also has exposure related to loans where there has been a prior bulk sale of servicing, as well as certain other whole-loan sales. With respect to loans where there has been a prior bulk sale
of servicing, FHN is not responsible for MI cancellations and denials to the extent attributable to the acts of the current servicer.
While large
portions of repurchase claims from the GSEs were settled with the DRAs, large-scale settlement with non-Agency claimants is not practical. Those claims are resolved case by case or, occasionally, with less-comprehensive settlements. Repurchase
claims that are not resolved by the parties could become litigation.
29
Note 10 Contingencies and Other Disclosures (Continued)
FH Proprietary Securitization Actions
FHN has potential financial exposure from FH proprietary securitizations outside of the repurchase/make-whole process. Several investors in certificates sued
FHN and others starting in 2009, and several underwriters or other counterparties have demanded that FHN indemnify and defend them in securitization lawsuits. The pending suits generally assert that disclosures made to investors in the offering and
sale of certificates were legally deficient.
Servicing Obligations
FHNs national servicing business was sold as part of the platform sale in 2008. A significant amount of MSR was sold at that time, and a significant
amount was retained. The related servicing activities, including foreclosure and loss mitigation practices, not sold in 2008 were outsourced through a three-year subservicing arrangement (the 2008 subservicing agreement) with the
platform buyer (the 2008 subservicer). The 2008 subservicing agreement expired in 2011 when FHN entered into a replacement agreement with a new subservicer (the 2011 subservicer). In fourth quarter 2013, FHN contracted to
sell a substantial majority of its remaining servicing obligations and servicing assets (including advances) to the 2011 subservicer. The servicing was transferred to the buyer in stages, and was substantially completed in first quarter 2014. The
servicing still retained by FHN continues to be subserviced by the 2011 subservicer.
As servicer, FHN had contractual obligations to the owners of the
loans, primarily GSEs and securitization trustees, to handle billing, custodial, and other tasks related to each loan. Each subservicer undertook to perform those obligations on FHNs behalf during the applicable subservicing period, although
FHN legally remained the servicer of record for those loans that were subserviced.
The 2008 subservicer has been subject to a consent decree, and entered
into a settlement agreement, with regulators related to alleged deficiencies in servicing and foreclosure practices. The 2008 subservicer has made demands of FHN, under the 2008 subservicing agreement, to pay certain resulting costs and damages
totaling $43.5 million. FHN disagrees with those demands and has made no payments. This disagreement has the potential to result in litigation and, in any such future litigation, the claim against FHN may be substantial.
A certificate holder has contacted FHN, threatening to make claims based on alleged deficiencies in servicing loans held in certain FH proprietary
securitization trusts. FHN cannot predict how this inquiry will proceed nor whether any claim or suit, if made or brought, will be material to FHN.
Origination Data
From 2005 through 2008, FHN originated
and sold $69.5 billion of mortgage loans to the Agencies. This includes $57.6 billion of loans sold to GSEs and $11.9 billion of loans guaranteed by Ginnie Mae. Although FHN conducted these businesses before 2005, GSE loans originated in 2005
through 2008 account for approximately 90 percent of all repurchase requests/make-whole claims received from the 2008 platform sale through December 31, 2015.
From 2005 through 2007, $26.7 billion of mortgage loans were included in FH proprietary securitizations.
30
Note 10 Contingencies and Other Disclosures (Continued)
Mortgage-Related Glossary
|
|
|
|
|
|
|
|
|
Agencies
|
|
the two GSEs and Ginnie Mae
|
|
|
HELOC
|
|
|
home equity line of credit
|
|
|
|
|
certificates
|
|
securities sold to investors representing interests in mortgage loan securitizations
|
|
|
HUD
|
|
|
Dept. of Housing and Urban Development
|
|
|
|
|
DOJ
|
|
U.S. Department of Justice
|
|
|
LTV
|
|
|
loan-to-value, a ratio of the loan amount divided by the home value
|
|
|
|
|
DRA
|
|
definitive resolution agreement with a GSE
|
|
|
MI
|
|
|
private mortgage insurance, insuring against borrower payment default
|
|
|
|
|
Fannie Mae, Fannie,
FNMA
|
|
Federal National Mortgage Association
|
|
|
MSR
|
|
|
mortgage servicing rights
|
|
|
|
|
FH proprietary
securitization
|
|
securitization of mortgages sponsored by FHN under its First Horizon brand
|
|
|
nonconforming loans
|
|
|
loans that did not conform to Agency program requirements
|
|
|
|
|
FHA
|
|
Federal Housing Administration
|
|
|
other whole loans sold
|
|
|
mortgage loans sold to private, non-Agency purchasers
|
|
|
|
|
FHFA
|
|
Federal Housing Financing Agency, conservator for the GSEs
|
|
|
2008 platform sale, platform
sale, 2008 sale
|
|
|
FHNs sale of its national mortgage origination and servicing platforms in 2008
|
|
|
|
|
Freddie Mac, Freddie, FHLMC
|
|
Federal Home Loan Mortgage Corporation
|
|
|
pipeline
|
|
|
pipeline of mortgage repurchase, make-whole, & certain related claims against FHN
|
|
|
|
|
Ginnie Mae, Ginnie, GNMA
|
|
Government National Mortgage Association
|
|
|
UPB
|
|
|
unpaid principal balance
|
|
|
|
|
GSEs
|
|
Fannie Mae and Freddie Mac
|
|
|
VA
|
|
|
Veterans Administration
|
Repurchase and Foreclosure Liability
The repurchase and foreclosure liability is comprised of reserves to cover estimated loss content in the active pipeline, estimated future inflows, as well as
estimated loss content related to certain known claims not currently included in the active pipeline. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches described above for the respective
periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision.
Based on currently available information and experience to date, FHN has evaluated its loan repurchase, make-whole, and certain related exposures and has
accrued for losses of $115.0 million and $117.1 million as of March 31, 2016 and 2015, respectively, including a smaller amount related to equity-lending junior lien loan sales. Accrued liabilities for FHNs estimate of these obligations
are reflected in Other liabilities on the Consolidated Condensed Statements of Condition. Charges to increase the liability are included within Repurchase and foreclosure provision on the Consolidated Condensed Statements of Income. The estimates
are based upon currently available information and fact patterns that exist as of the balance sheet dates and could be subject to future changes. Changes to any one of these factors could significantly impact the estimate of FHNs liability.
Government-Backed Mortgage Lending Programs
FHNs FHA and VA program lending was substantial prior to the 2008 platform sale, and has continued at a much lower level since then. As lender, FHN made
certain representations and warranties as to the compliance of the loans with program requirements. Over the past several years, most recently in first quarter 2015, FHN occasionally has recognized significant losses associated with settling claims
and potential claims by government agencies, and by private parties asserting claims on behalf of agencies, related to these origination activities. At March 31, 2016, FHN had not accrued a liability for any matter related to these government
lending programs, and no pending or known threatened matter related to these programs represented a material loss contingency described above.
Other
FHN Mortgage Exposures
At March 31, 2016, FHN had not accrued a liability for exposure for repurchase of first-lien loans related to FH
proprietary securitizations arising from claims from the trustee that FHN breached its representations and warranties in FH proprietary securitizations at closing. FHNs trustee is a defendant in a lawsuit in which the plaintiffs have asserted
that the trustee has duties to review loans and otherwise to act against FHN outside of the duties specified in the applicable trust documents; FHN is not a defendant in that suit and is not able to assess what, if any, exposure FHN may have as a
result of it.
31
Note 10 Contingencies and Other Disclosures (Continued)
FHN is defending, directly or as indemnitor, certain pending lawsuits brought by purchasers of certificates
in FH proprietary securitizations or their assignees. FHN believes a new lawsuit based on federal securities claims that offering disclosures were deficient cannot be brought at this time due to the running of applicable limitation periods, but
other investor claims, based on other legal theories, might still be possible. Due to the sales of MSR from 2008 through 2014, FHN has limited visibility into current loan information such as principal payoffs, refinance activity, delinquency
trends, and loan modification activity.
Many non-GSE purchasers of whole loans from FHN included those loans in their own securitizations. Regarding such
other whole loans sold, FHN made representations and warranties concerning the loans and provided indemnity covenants to the purchaser/securitizer. Typically the purchaser/securitizer assigned key contractual rights against FHN to the securitization
trustee. As mentioned above, repurchase and make-whole claims related to specific loans are included in the active pipeline and repurchase reserve. In addition, currently the following categories of actions are pending which involve FHN and other
whole loans sold: (i) FHN has received indemnification requests from purchasers of loans or their assignees in cases where FHN is not a defendant; (ii) FHN has received subpoenas seeking loan reviews in cases where FHN is not a defendant;
(iii) FHN has received repurchase demands from purchasers or their assignees; and (iv) FHN is a defendant in legal actions involving FHN-originated loans. At March 31, 2016, FHN had not accrued a liability for any litigation matter
related to other whole loans sold; however, FHNs repurchase and foreclosure liability considered certain known exposures from other whole loans sold.
Certain government entities have subpoenaed information from FHN and others. These entities include the FDIC (on behalf of certain failed banks) and the FHLBs
of San Francisco, Atlanta, and Seattle, among others. These entities purport to act on behalf of several purchasers of FH proprietary securitizations, and of non-FH securitizations which included other whole loans sold. Collectively, the subpoenas
seek information concerning: a number of FH proprietary securitizations and/or underlying loan originations; and originations of certain other whole loans sold which, in many cases, were included by the purchaser in its own securitizations. Some
subpoenas fail to identify the specific investments made or loans at issue. Moreover, FHN has limited information regarding at least some of the loans under review. Unless and until a review (if related to specific loans) becomes an identifiable
repurchase claim, the associated loans are not considered part of the active pipeline.
OTHER DISCLOSURES
Visa Matters
FHN is a member of the Visa USA network. In
October 2007, the Visa organization of affiliated entities completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc. (Visa). Upon
completion of the reorganization, the members of the Visa USA network remained contingently liable for certain Visa litigation matters (the Covered Litigation). Based on its proportionate membership share of Visa USA, FHN recognized a
contingent liability in fourth quarter 2007 related to this contingent obligation. In March 2008, Visa completed its initial public offering (IPO) and funded an escrow account from its IPO proceeds to be used to make payments related to
the Visa litigation matters. FHN received approximately 2.4 million Class B shares in conjunction with Visas IPO.
Conversion of these shares
into Class A shares of Visa and, with limited exceptions, transfer of these shares is restricted until the final resolution of the covered litigation. In conjunction with the prior sales of Visa Class B shares in December 2010 and September
2011, FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio is adjusted
when Visa deposits funds into the escrow account to cover certain litigation.
In July 2012, Visa and MasterCard announced a joint settlement (the
Settlement) related to the Payment Card Interchange matter, one of the Covered Litigation matters. Based on the amount of the Settlement attributable to Visa and an assessment of FHNs contingent liability accrued for Visa
litigation matters, the Settlement did not have a material impact on FHN. In September 2014, Visa funded $450 million into the escrow account, and as a result FHN made a payment to the derivative counterparty of $2.4 million in October 2014. As of
March 31, 2016, the conversion ratio is 165 percent reflecting the Visa stock split in March 2015, and the contingent liability is $.8 million. Future funding of the escrow would dilute this exchange rate by an amount that is not determinable
at present.
As of March 31, 2016 and 2015, the derivative liabilities were $4.6 million and $5.0 million, respectively.
FHN now holds approximately 1.1 million Visa Class B shares. FHNs Visa shares are not considered to be marketable and therefore are included in the
Consolidated Condensed Statements of Condition at their historical cost of $0. The Settlement has been approved by the court but that approval has been appealed by certain of the plaintiffs. A hearing was conducted in September 2015 but the court
has not issued its decision. Accordingly, the outcome of this matter remains uncertain. Additionally, other Covered Litigation matters
are also pending
judicial resolution, including new matters filed by class members who opted out of the Settlement. So long as any Covered Litigation matter remains pending, FHNs ability to transfer its Visa holdings continues to be restricted.
32
Note 10 Contingencies and Other Disclosures (Continued)
Indemnification Agreements and Guarantees
In the ordinary course of business, FHN enters into indemnification agreements for legal proceedings against its directors and officers and standard
representations and warranties for underwriting agreements, merger and acquisition agreements, loan sales, contractual commitments, and various other business transactions or arrangements. The extent of FHNs obligations under these agreements
depends upon the occurrence of future events; therefore, it is not possible to estimate a maximum potential amount of payouts that could be required with such agreements.
33
Note 11 Pension, Savings, and Other Employee Benefits
Pension plan.
FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or
before September 1, 2007. Pension benefits are based on years of service, average compensation near retirement or other termination, and estimated social security benefits at age 65. Benefits under the plan are frozen so that years
of service and compensation changes after 2012 do not affect the benefit owed. The contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. FHN did not make any contributions to the qualified
pension plan in 2015 or in the first quarter of 2016. Future decisions to contribute to the plan will be based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, and the
actual performance of plan assets. Management is evaluating whether a contribution to the qualified pension plan will be made in 2016.
FHN also maintains
non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the qualified pension plan have been limited by tax rules. These other non-qualified plans are unfunded, and contributions to these plans
cover all benefits paid under the non-qualified plans. Payments made under the non-qualified plans were $4.9 million for 2015. FHN anticipates making benefit payments under the non-qualified plans of $5.2 million in 2016.
Savings plan.
FHN provides all qualifying full-time employees with the opportunity to participate in the FHN tax qualified 401(k) savings plan.
The qualified plan allows employees to defer receipt of earned salary, up to tax law limits, on a tax-advantaged basis. Accounts, which are held in trust, may be invested in a wide range of mutual funds and in FHN common stock. Up to tax law limits,
FHN provides a 100 percent match for the first 6 percent of salary deferred, with company match contributions invested according to a participants current investment elections. Through a non-qualified savings restoration plan, FHN provides a
restorative benefit to certain highly-compensated employees who participate in the savings plan and whose contribution elections are capped by tax limitations.
Other employee benefits.
FHN provides postretirement life insurance benefits to certain employees and also provides postretirement medical
insurance benefits to retirement-eligible employees. The postretirement medical plan is contributory with FHN contributing a fixed amount for certain participants. FHNs postretirement benefits include certain prescription drug benefits.
The components of net periodic benefit cost for the three months ended March 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
28
|
|
|
$
|
37
|
|
Interest cost
|
|
|
7,882
|
|
|
|
9,020
|
|
|
|
317
|
|
|
|
360
|
|
Expected return on plan assets
|
|
|
(9,773
|
)
|
|
|
(9,392
|
)
|
|
|
(229
|
)
|
|
|
(241
|
)
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost/(credit)
|
|
|
49
|
|
|
|
83
|
|
|
|
43
|
|
|
|
(291
|
)
|
Actuarial (gain)/loss
|
|
|
2,068
|
|
|
|
2,396
|
|
|
|
(233
|
)
|
|
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
236
|
|
|
$
|
2,117
|
|
|
$
|
(74
|
)
|
|
$
|
(379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2016, FHN changed its methodology for the calculation of interest cost for its applicable employee benefit plans. Prior to
2016 FHN utilized a weighted average discount rate to determine interest cost, which is the same discount rate used to calculate the projected benefit obligation. Starting in 2016, FHN has adopted a spot rate approach which applies duration-specific
rates from the full yield curve to estimated future benefit payments for the determination of interest cost. This change in accounting estimate is expected to reduce annual interest cost across all plans by $5.8 million in 2016.
34
Note 12 Business Segment Information
FHN has four business segments: regional banking, fixed income, corporate, and non-strategic. The regional banking segment offers financial
products and services, including traditional lending and deposit taking, to retail and commercial customers in Tennessee and other selected markets. Regional banking provides investments, financial planning, trust services and asset management,
credit card, and cash management. Additionally, the regional banking segment includes correspondent banking which provides credit, depository, and other banking related services to other financial institutions nationally. The fixed income segment
consists of fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory, and derivative sales. The corporate segment consists of unallocated corporate expenses, expense on
subordinated debt issuances, bank-owned life insurance, unallocated interest income associated with excess equity, net impact of raising incremental capital, revenue and expense associated with deferred compensation plans, funds management, tax
credit investment activities, gains on the extinguishment of debt, and acquisition-related costs. The non-strategic segment consists of the wind-down national consumer lending activities, legacy mortgage banking elements including servicing fees,
and the associated ancillary revenues and expenses related to these businesses. Non-strategic also includes the wind-down trust preferred loan portfolio and exited businesses.
Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also modify its methodology of allocating expenses and equity among
segments which could change historical segment results. Total revenue, expense, and asset levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on
internally developed assignments and allocations, to an extent they are subjective. Generally, all assignments and allocations have been consistently applied for all periods presented. The following table reflects the amounts of consolidated
revenue, expense, tax, and assets for each segment for the three months ended March 31:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
Consolidated
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
172,074
|
|
|
$
|
156,866
|
|
Provision for loan losses
|
|
|
3,000
|
|
|
|
5,000
|
|
Noninterest income
|
|
|
134,305
|
|
|
|
129,689
|
|
Noninterest expense
|
|
|
226,927
|
|
|
|
376,221
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
76,452
|
|
|
|
(94,666
|
)
|
Provision/(benefit) for income taxes
|
|
|
24,239
|
|
|
|
(22,261
|
)
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
52,213
|
|
|
$
|
(72,405
|
)
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
26,618,694
|
|
|
$
|
25,641,934
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
35
Note 12 Business Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
Regional Banking
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
172,326
|
|
|
$
|
154,412
|
|
Provision/(provision credit) for loan losses
|
|
|
14,767
|
|
|
|
4,915
|
|
Noninterest income
|
|
|
59,275
|
|
|
|
60,180
|
|
Noninterest expense
|
|
|
145,355
|
|
|
|
135,444
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
71,479
|
|
|
|
74,233
|
|
Provision/(benefit) for income taxes
|
|
|
25,429
|
|
|
|
26,504
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
46,050
|
|
|
$
|
47,729
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
15,944,097
|
|
|
$
|
14,225,092
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
2,664
|
|
|
$
|
4,319
|
|
Noninterest income
|
|
|
67,122
|
|
|
|
61,564
|
|
Noninterest expense
|
|
|
58,668
|
|
|
|
54,741
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
11,118
|
|
|
|
11,142
|
|
Provision/(benefit) for income taxes
|
|
|
3,874
|
|
|
|
4,143
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
7,244
|
|
|
$
|
6,999
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
2,270,144
|
|
|
$
|
2,447,259
|
|
Corporate
|
|
|
|
|
|
|
|
|
Net interest income/(expense)
|
|
$
|
(14,374
|
)
|
|
$
|
(16,080
|
)
|
Noninterest income
|
|
|
5,723
|
|
|
|
5,385
|
|
Noninterest expense
|
|
|
13,477
|
|
|
|
14,362
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
(22,128
|
)
|
|
|
(25,057
|
)
|
Provision/(benefit) for income taxes
|
|
|
(11,257
|
)
|
|
|
(11,714
|
)
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
(10,871
|
)
|
|
$
|
(13,343
|
)
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
6,362,533
|
|
|
$
|
6,412,346
|
|
Non-Strategic
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
11,458
|
|
|
$
|
14,215
|
|
Provision/(provision credit) for loan losses
|
|
|
(11,767
|
)
|
|
|
85
|
|
Noninterest income
|
|
|
2,185
|
|
|
|
2,560
|
|
Noninterest expense
|
|
|
9,427
|
|
|
|
171,674
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
15,983
|
|
|
|
(154,984
|
)
|
Provision/(benefit) for income taxes
|
|
|
6,193
|
|
|
|
(41,194
|
)
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
9,790
|
|
|
$
|
(113,790
|
)
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
2,041,920
|
|
|
$
|
2,557,237
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
36
Note 13 Variable Interest Entities
ASC 810 defines a VIE as a legal entity where the equity investors, as a group, lack either (1) sufficient equity at risk for the
entity to finance its activities by itself, (2) the power through voting rights, or similar rights, to direct the activities of an entity that most significantly impact the entitys economic performance, (3) the obligation to absorb
the expected losses of the entity, (4) the right to receive the expected residual returns of the entity, or (5) the entity is structured with non-substantive voting rights. A variable interest is a contractual ownership, or other interest,
that fluctuates with changes in the fair value of the VIEs net assets exclusive of variable interests. Under ASC 810, as amended, a primary beneficiary is required to consolidate a VIE when it has a variable interest in a VIE that provides it
with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact
the VIEs economic performance and the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant.
Consolidated Variable Interest Entities
FHN holds
variable interests in a proprietary HELOC securitization trust it established as a source of liquidity for consumer lending operations. Based on its restrictive nature, the trust is considered a VIE as the holders of equity at risk do not have the
power through voting rights or similar rights to direct the activities that most significantly impact the trusts economic performance. The retention of MSR and a residual interest results in FHN potentially absorbing losses or receiving
benefits that are significant to the trust. FHN is considered the primary beneficiary, as it is assumed to have the power, as Master Servicer, to most significantly impact the activities of the VIE. Consolidation of the trust results in the
recognition of the trust proceeds as restricted borrowings since the cash flows on the securitized loans can only be used to settle the obligations due to the holders of trust securities. The trust has entered a rapid amortization period and FHN is
obligated to provide subordinated funding. During the period, cash payments from borrowers are accumulated to repay outstanding debt securities while FHN continues to make advances to borrowers when they draw on their lines of credit. FHN then
transfers the newly generated receivables into the securitization trust and is reimbursed only after other parties in the securitization have received all of the cash flows to which they are entitled. If loan losses requiring draws on the related
monoline insurers policies (which protect bondholders in the securitization) exceed a certain level, FHN may not receive reimbursement for all of the funds advanced to borrowers, as the senior bondholders and the monoline insurers typically
have priority for repayment. Amounts funded from monoline insurance policies are considered restricted term borrowings in FHNs Consolidated Condensed Statements of Condition. Except for recourse due to breaches of representations and
warranties made by FHN in connection with the sale of the loans to the trust, the creditors of the trust hold no recourse to the assets of FHN.
FHN has
established certain rabbi trusts related to deferred compensation plans offered to its employees. FHN contributes employee cash compensation deferrals to the trusts and directs the underlying investments made by the trusts. The assets of these
trusts are available to FHNs creditors only in the event that FHN becomes insolvent. These trusts are considered VIEs as there is no equity at risk in the trusts since FHN provided the equity interest to its employees in exchange for services
rendered. FHN is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities that most significantly impact the economic performance of the rabbi trusts through its ability to direct the underlying investments
made by the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are significant to the trusts due to its right to receive any asset values in excess of liability payoffs and its obligation to fund any liabilities to
employees that are in excess of a rabbi trusts assets.
37
Note 13 Variable Interest Entities (Continued)
The following table summarizes VIEs consolidated by FHN as of March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
On-Balance Sheet
Consumer Loan
Securitization
|
|
|
Rabbi Trusts Used for
Deferred Compensation
Plans
|
|
|
On-Balance Sheet
Consumer Loan
Securitization
|
|
|
Rabbi Trusts Used for
Deferred Compensation
Plans
|
|
(Dollars in thousands)
|
|
Carrying Value
|
|
|
Carrying Value
|
|
|
Carrying Value
|
|
|
Carrying Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
309
|
|
|
|
N/A
|
|
|
$
|
872
|
|
|
|
N/A
|
|
Loans, net of unearned income
|
|
|
47,833
|
|
|
|
N/A
|
|
|
|
71,565
|
|
|
|
N/A
|
|
Less: Allowance for loan losses
|
|
|
|
|
|
|
N/A
|
|
|
|
341
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net loans
|
|
|
47,833
|
|
|
|
N/A
|
|
|
|
71,224
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
75
|
|
|
$
|
70,314
|
|
|
|
242
|
|
|
$
|
68,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
48,217
|
|
|
$
|
70,314
|
|
|
$
|
72,338
|
|
|
$
|
68,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term borrowings
|
|
$
|
34,914
|
|
|
|
N/A
|
|
|
$
|
60,914
|
|
|
|
N/A
|
|
Other liabilities
|
|
|
4
|
|
|
$
|
52,214
|
|
|
|
4
|
|
|
$
|
52,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
34,918
|
|
|
$
|
52,214
|
|
|
$
|
60,918
|
|
|
$
|
52,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonconsolidated Variable Interest Entities
Low Income Housing Partnerships.
First Tennessee Housing Corporation (FTHC), a wholly-owned subsidiary of FTBNA, makes equity
investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. The purpose of these
investments is to achieve a satisfactory return on capital and to support FHNs community reinvestment initiatives. The activities of the limited partnerships include the identification, development, and operation of multi-family housing that
is leased to qualifying residential tenants generally within FHNs primary geographic region. LIHTC partnerships are considered VIEs as FTHC, the holder of the equity investment at risk, does not have the ability to direct the activities that
most significantly affect the performance of the entity through voting rights or similar rights. FTHC could absorb losses that are significant to the LIHTC partnerships as it has a risk of loss for its capital contributions and funding commitments
to each partnership. The general partners are considered the primary beneficiaries as managerial functions give them the power to direct the activities that most significantly impact the entities economic performance and the managing members
are exposed to all losses beyond FTHCs initial capital contributions and funding commitments.
FHN accounts for all qualifying LIHTC investments
under the proportional amortization method. Under this method an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income
statement as a component of income tax expense/(benefit). LIHTC investments that do not qualify for the proportional amortization method are accounted for using the equity method. Expenses associated with these investments were not significant for
the three months ended March 31, 2016 and 2015. The following table summarizes the impact to the Provision/(benefit) for income taxes on the Consolidated Condensed Statements of Income for the three months ended March 31, 2016 and 2015 for
LIHTC investments accounted for under the proportional amortization method.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended
March 31, 2016
|
|
|
Three Months Ended
March 31, 2015
|
|
Provision/(benefit) for income taxes:
|
|
|
|
|
|
|
|
|
Amortization of qualifying LIHTC investments
|
|
$
|
2,298
|
|
|
$
|
2,180
|
|
Low income housing tax credits
|
|
|
(2,523
|
)
|
|
|
(2,363
|
)
|
Other tax benefits related to qualifying LIHTC investments
|
|
|
(1,110
|
)
|
|
|
(844
|
)
|
38
Note 13 Variable Interest Entities (Continued)
Other Tax Credit Investments.
First Tennessee New Markets Corporation (FTNMC), a
wholly-owned subsidiary of FTBNA, makes equity investments through wholly-owned subsidiaries as a non-managing member in various limited liability companies (LLCs) that sponsor community development projects utilizing the New Market Tax
Credit (NMTC) pursuant to Section 45 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital and to support FHNs community reinvestment initiatives. The activities of the
LLCs include providing investment capital for low-income communities within FHNs primary geographic region. A portion of the funding of FTNMCs investment in a NMTC LLC is obtained via a loan from an unrelated third-party that is
typically a community development enterprise. The NMTC LLCs are considered VIEs as FTNMC, the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the performance of the entity
through voting rights or similar rights. While FTNMC could absorb losses that are significant to the NMTC LLCs as it has a risk of loss for its initial capital contributions, the managing members are considered the primary beneficiaries as
managerial functions give them the power to direct the activities that most significantly impact the NMTC LLCs economic performance and the managing members are exposed to all losses beyond FTNMCs initial capital contributions.
FTHC also makes equity investments as a limited partner or non-managing member in entities that receive Historic Tax Credits pursuant to Section 47 of
the Internal Revenue Code. The purpose of these entities is the rehabilitation of historic buildings with the tax credits provided to incent private investment in the historic cores of cities and towns. These entities are considered VIEs as FTHC,
the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the performance of the entity through voting rights or similar rights. FTHC could absorb losses that are significant to
the entities as it has a risk of loss for its capital contributions and funding commitments to each partnership. The managing members are considered the primary beneficiaries as managerial functions give them the power to direct the activities that
most significantly impact the entities economic performance and the managing members are exposed to all losses beyond FTHCs initial capital contributions and funding commitments.
Small Issuer Trust Preferred Holdings
. FTBNA holds variable interests in trusts which have issued mandatorily redeemable preferred capital
securities (trust preferreds) for smaller banking and insurance enterprises. FTBNA has no voting rights for the trusts activities. The trusts only assets are junior subordinated debentures of the issuing enterprises. The
creditors of the trusts hold no recourse to the assets of FTBNA. These trusts meet the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that
most significantly impact the trusts economic performance. Based on the nature of the trusts activities and the size of FTBNAs holdings, FTBNA could potentially receive benefits or absorb losses that are significant to the trusts
regardless of whether a majority of a trusts securities are held by FTBNA. However, since FTBNA is solely a holder of the trusts securities, it has no rights which would give it the power to direct the activities that most significantly
impact the trusts economic performance and thus it is not considered the primary beneficiary of the trusts. FTBNA has no contractual requirements to provide financial support to the trusts.
On-Balance Sheet Trust Preferred Securitization.
In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which the
underlying trust meets the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entitys economic
performance. FTBNA could potentially receive benefits or absorb losses that are significant to the trust based on the size and priority of the interests it retained in the securities issued by the trust. However, since FTBNA did not retain servicing
or other decision making rights, FTBNA is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the trusts economic performance. Accordingly, FTBNA has accounted for the funds
received through the securitization as a term borrowing in its Consolidated Condensed Statements of Condition. FTBNA has no contractual requirements to provide financial support to the trust.
Proprietary Trust Preferred Issuances.
FHN previously issued junior subordinated debt to First Tennessee Capital II (Capital II).
Capital II was considered a VIE as FHNs capital contributions to this trust were not considered at risk in evaluating whether the holders of the equity investments at risk in the trust had the power through voting rights, or
similar rights, to direct the activities that most significantly impacted the entitys economic performance. FHN was not the trusts primary beneficiary as FHNs capital contributions to the trust were not considered variable
interests as they were not at risk. Consequently, Capital II was not consolidated by FHN. In third quarter 2015 FHN redeemed its junior subordinated debt, and as a result Capital II redeemed its 6.30 percent Capital Securities, Series B,
and the trust was terminated.
Proprietary Residential Mortgage Securitizations.
FHN holds variable interests in proprietary residential
mortgage securitization trusts it established prior to 2008 as a source of liquidity for its mortgage banking operations. Except for recourse due to breaches of representations and warranties made by FHN in connection with the sale of the loans to
the trusts, the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts. Based on their restrictive nature, the trusts are considered VIEs as the
holders of equity at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the trusts economic performance. While FHN is assumed to have the power as servicer to most
significantly impact the activities of such VIEs, in situations where FHN does not have the ability to participate in significant portions of a securitization trusts cash flows FHN is not considered the primary beneficiary of the trust.
Therefore, these trusts are not consolidated by FHN.
39
Note 13 Variable Interest Entities (Continued)
Holdings & Short Positions in Agency Mortgage-Backed Securities.
FHN holds securities
issued by various Agency securitization trusts. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power through voting rights, or similar rights, to direct
the activities that most significantly impact the entities economic performance. FHN could potentially receive benefits or absorb losses that are significant to the trusts based on the nature of the trusts activities and the size of
FHNs holdings. However, FHN is solely a holder of the trusts securities and does not have the power to direct the activities that most significantly impact the trusts economic performance, and is not considered the primary
beneficiary of the trusts. FHN has no contractual requirements to provide financial support to the trusts.
Commercial Loan Troubled Debt
Restructurings.
For certain troubled commercial loans, FTBNA restructures the terms of the borrowers debt in an effort to increase the probability of receipt of amounts contractually due. Following a troubled debt restructuring, the
borrower entity typically meets the definition of a VIE as the initial determination of whether an entity is a VIE must be reconsidered as events have proven that the entitys equity is not sufficient to permit it to finance its activities
without additional subordinated financial support or a restructuring of the terms of its financing. As FTBNA does not have the power to direct the activities that most significantly impact such troubled commercial borrowers operations, it is
not considered the primary beneficiary even in situations where, based on the size of the financing provided, FTBNA is exposed to potentially significant benefits and losses of the borrowing entity. FTBNA has no contractual requirements to provide
financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt that allows for preparation of the underlying collateral for sale.
Sale Leaseback Transaction
. In fourth quarter 2015, FTB entered into an agreement with a single asset leasing entity for the sale and lease back
of an office building. In conjunction with this transaction, FTB loaned funds to a related party of the buyer that were used for the purchase price of the building. FTB also entered into a construction loan agreement with the single asset entity for
renovation of the building. Since this transaction did not qualify as a sale, it is being accounted for using the deposit method which creates a net asset or liability for all cash flows between FTB and the buyer. The buyer-lessor in this
transaction meets the definition of a VIE as it does not have sufficient equity at risk since FTB is providing the funding for the purchase and renovation. A related party of the buyer-lessor has the power to direct the activities that most
significantly impact the operations and could potentially receive benefits or absorb losses that are significant to the transactions, making it the primary beneficiary. Therefore, FTB does not consolidate the leasing entity.
The following table summarizes FHNs nonconsolidated VIEs as of March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Maximum
Loss Exposure
|
|
|
Liability
Recognized
|
|
|
Classification
|
Type
|
|
|
|
|
|
|
|
|
|
|
Low income housing partnerships
|
|
$
|
67,911
|
|
|
$
|
14,676
|
|
|
(a)
|
Other Tax Credit Investments (b) (c)
|
|
|
20,759
|
|
|
|
|
|
|
Other assets
|
Small issuer trust preferred holdings (d)
|
|
|
333,374
|
|
|
|
|
|
|
Loans, net of unearned income
|
On-balance sheet trust preferred securitization
|
|
|
49,778
|
|
|
|
64,395
|
|
|
(e)
|
Proprietary residential mortgage securitizations
|
|
|
21,604
|
|
|
|
|
|
|
(f)
|
Holdings of agency mortgage-backed securities (d)
|
|
|
4,422,747
|
|
|
|
|
|
|
(g)
|
Short positions in agency mortgage-backed securities (h)
|
|
|
N/A
|
|
|
|
17
|
|
|
Trading liabilities
|
Commercial loan troubled debt restructurings (i)
|
|
|
33,325
|
|
|
|
|
|
|
Loans, net of unearned income
|
Sale-Leaseback Transaction
|
|
|
11,827
|
|
|
|
|
|
|
(j)
|
(a)
|
Maximum loss exposure represents $53.2 million of current investments and $14.7 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future
funding events, and are also recognized in Other Liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2016.
|
(b)
|
A liability is not recognized as investments are written down over the life of the related tax credit.
|
(c)
|
Maximum loss exposure represents current investment balance. Of the initial investment, $18.0 million was funded through loans from community development enterprises.
|
(d)
|
Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts securities.
|
(e)
|
Includes $112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by $64.4 million classified as Term borrowings.
|
(f)
|
Includes $.5 million classified as MSR, $3.1 million classified as Trading securities, and $18.0 million of aggregate servicing advances.
|
(g)
|
Includes $.6 billion classified as Trading securities and $3.8 billion classified as Securities available-for-sale.
|
(h)
|
No exposure of loss due to the nature of FHNs involvement.
|
(i)
|
Maximum loss exposure represents $29.7 million of current receivables and $3.6 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
|
(j)
|
Maximum loss exposure represents the current loan balance plus additional funding commitments less amounts received from the buyer-lessor.
|
40
Note 13 Variable Interest Entities (Continued)
The following table summarizes FHNs nonconsolidated VIEs as of March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Maximum
Loss Exposure
|
|
|
Liability
Recognized
|
|
|
Classification
|
Type
|
|
|
|
|
|
|
|
|
|
|
Low income housing partnerships
|
|
$
|
58,971
|
|
|
$
|
3,609
|
|
|
(a)
|
Other Tax Credit Investments (b) (c)
|
|
|
21,360
|
|
|
|
|
|
|
Other assets
|
Small issuer trust preferred holdings (d)
|
|
|
364,352
|
|
|
|
|
|
|
Loans, net of unearned income
|
On-balance sheet trust preferred securitization
|
|
|
50,748
|
|
|
|
63,425
|
|
|
(e)
|
Proprietary trust preferred issuances (f)
|
|
|
N/A
|
|
|
|
206,186
|
|
|
Term borrowings
|
Proprietary and agency residential mortgage securitizations
|
|
|
25,786
|
|
|
|
|
|
|
(g)
|
Holdings of agency mortgage-backed securities (d)
|
|
|
4,338,653
|
|
|
|
|
|
|
(h)
|
Commercial loan troubled debt restructurings (i) (j)
|
|
|
39,015
|
|
|
|
|
|
|
Loans, net of unearned income
|
(a)
|
Maximum loss exposure represents $55.4 million of current investments and $3.6 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future
funding events, and are also recognized in Other Liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2016.
|
(b)
|
A liability is not recognized as investments are written down over the life of the related tax credit.
|
(c)
|
Maximum loss exposure represents current investment balance. Of the initial investment, $18.0 million was funded through loans from community development enterprises.
|
(d)
|
Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts securities.
|
(e)
|
Includes $112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by $63.4 million classified as Term borrowings.
|
(f)
|
No exposure to loss due to the nature of FHNs involvement.
|
(g)
|
Includes $.7 million classified as MSR related to proprietary and agency residential mortgage securitizations and $5.3 million classified as Trading securities related to proprietary and agency residential mortgage
securitizations. Aggregate servicing advances of $19.8 million are classified as Other assets.
|
(h)
|
Includes $859.7 million classified as Trading securities and $3.5 billion classified as Securities available-for-sale.
|
(i)
|
Maximum loss exposure represents $34.8 million of current receivables and $4.2 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
|
(j)
|
A liability is not recognized as the loans are the only variable interests held in the troubled commercial borrowers operations.
|
41
Note 14 Derivatives
In the normal course of business, FHN utilizes various financial instruments (including derivative contracts and credit-related agreements)
through its fixed income and risk management operations, as part of its risk management strategy and as a means to meet customers needs. Derivative instruments are subject to credit and market risks in excess of the amount recorded on the
balance sheet as required by GAAP. The contractual or notional amounts of these financial instruments do not necessarily represent the amount of credit or market risk. However, they can be used to measure the extent of involvement in various types
of financial instruments. Controls and monitoring procedures for these instruments have been established and are routinely reevaluated. The Asset/Liability Committee (ALCO) controls, coordinates, and monitors the usage and effectiveness
of these financial instruments.
Credit risk represents the potential loss that may occur if a party to a transaction fails to perform according to the
terms of the contract. The measure of credit exposure is the replacement cost of contracts with a positive fair value. FHN manages credit risk by entering into financial instrument transactions through national exchanges, primary dealers or approved
counterparties, and by using mutual margining and master netting agreements whenever possible to limit potential exposure. FHN also maintains collateral posting requirements with certain counterparties to limit credit risk. On March 31, 2016
and 2015, respectively, FHN had $81.4 million and $93.4 million of cash receivables and $41.7 million and $56.8 million of cash payables related to collateral posting under master netting arrangements, inclusive of collateral posted related to
contracts with adjustable collateral posting thresholds and over collateralized positions, with derivative counterparties. With exchange-traded contracts, the credit risk is limited to the clearinghouse used. For non-exchange traded instruments,
credit risk may occur when there is a gain in the fair value of the financial instrument and the counterparty fails to perform according to the terms of the contract and/or when the collateral proves to be of insufficient value. See additional
discussion regarding master netting agreements and collateral posting requirements later in this note under the heading Master Netting and Similar Agreements. Market risk represents the potential loss due to the decrease in the value of
a financial instrument caused primarily by changes in interest rates or the prices of debt instruments. FHN manages market risk by establishing and monitoring limits on the types and degree of risk that may be undertaken. FHN continually measures
this risk through the use of models that measure value-at-risk and earnings-at-risk.
Derivative Instruments.
FHN enters into various
derivative contracts both in a dealer capacity to facilitate customer transactions and as a risk management tool. Where contracts have been created for customers, FHN enters into transactions with dealers to offset its risk exposure. Contracts with
dealers that require central clearing are novated to a clearing agent who becomes FHNs counterparty. Derivatives are also used as a risk management tool to hedge FHNs exposure to changes in interest rates or other defined market risks.
Forward contracts are over-the-counter contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a
specified price, with delivery or settlement at a specified date. Futures contracts are exchange-traded contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or
settlement at a specified date. Interest rate option contracts give the purchaser the right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a specified price, during a specified period of time. Caps and
floors are options that are linked to a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve the exchange of interest payments at specified intervals between two parties without the exchange of any
underlying principal. Swaptions are options on interest rate swaps that give the purchaser the right, but not the obligation, to enter into an interest rate swap agreement during a specified period of time.
Trading Activities
FHNs fixed income segment
trades U.S. Treasury, U.S. Agency, mortgage-backed, corporate and municipal fixed income securities, and other securities for distribution to customers. When these securities settle on a delayed basis, they are considered forward contracts. Fixed
income also enters into interest rate contracts, including caps, swaps, and floors, for its customers. In addition, fixed income enters into futures and option contracts to economically hedge interest rate risk associated with a portion of its
securities inventory. These transactions are measured at fair value, with changes in fair value recognized currently in fixed income noninterest income. Related assets and liabilities are recorded on the Consolidated Condensed Statements of
Condition as Derivative assets and Derivative liabilities. The FTN Financial Risk Committee and the Credit Risk Management Committee collaborate to mitigate credit risk related to these transactions. Credit risk is controlled through credit
approvals, risk control limits, and ongoing monitoring procedures. Total trading revenues were $57.6 million and $53.5 million for the three months ended March 31, 2016 and 2015, respectively. Trading revenues are inclusive of both derivative
and non-derivative financial instruments, and are included in fixed income noninterest income.
42
Note 14 Derivatives (Continued)
The following tables summarize FHNs derivatives associated with fixed income trading activities as of
March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts
|
|
$
|
1,822,343
|
|
|
$
|
87,287
|
|
|
$
|
935
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,822,343
|
|
|
|
935
|
|
|
|
87,287
|
|
Option Contracts Purchased
|
|
|
5,000
|
|
|
|
9
|
|
|
|
|
|
Forwards and Futures Purchased
|
|
|
3,673,789
|
|
|
|
12,939
|
|
|
|
423
|
|
Forwards and Futures Sold
|
|
|
3,925,911
|
|
|
|
1,086
|
|
|
|
12,806
|
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts
|
|
$
|
1,675,215
|
|
|
$
|
83,797
|
|
|
$
|
2,241
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,675,215
|
|
|
|
2,241
|
|
|
|
83,797
|
|
Option Contracts Purchased
|
|
|
12,500
|
|
|
|
60
|
|
|
|
|
|
Option Contracts Written
|
|
|
7,500
|
|
|
|
|
|
|
|
12
|
|
Forwards and Futures Purchased
|
|
|
3,181,574
|
|
|
|
5,805
|
|
|
|
538
|
|
Forwards and Futures Sold
|
|
|
3,511,607
|
|
|
|
1,105
|
|
|
|
7,290
|
|
Interest Rate Risk Management
FHNs ALCO focuses on managing market risk by controlling and limiting earnings volatility attributable to changes in interest rates. Interest rate risk
exists to the extent that interest-earning assets and interest-bearing liabilities have different maturity or repricing characteristics. FHN uses derivatives, including swaps, caps, options, and collars, that are designed to moderate the impact on
earnings as interest rates change. Interest paid or received for swaps utilized by FHN to hedge the fair value of long term debt is recognized as an adjustment of the interest expense of the liabilities whose risk is being managed. FHNs
interest rate risk management policy is to use derivatives to hedge interest rate risk or market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain interest rate swaps and caps as a part of a product offering
to commercial customers that includes customer derivatives paired with upstream offsetting market instruments that, when completed, are designed to mitigate interest rate risk. These contracts do not qualify for hedge accounting and are measured at
fair value with gains or losses included in current earnings in Noninterest expense on the Consolidated Condensed Statements of Income.
FHN has
designated a derivative transaction in a hedging strategy to manage interest rate risk on $400.0 million of senior debt issued by FTBNA which matures in December 2019. This qualifies for hedge accounting under ASC 815-20 using the long-haul method.
FHN entered into a pay floating, receive fixed interest rate swap to hedge the interest rate risk of the senior debt. The balance sheet impact of this swap was $10.8 million and $5.5 million in Derivative assets as of March 31, 2016 and 2015,
respectively. There was an insignificant level of ineffectiveness related to this hedge.
FHN has designated a derivative transaction in a hedging
strategy to manage interest rate risk on $500.0 million of senior debt which matures in December 2020. This qualifies for hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating, receive fixed interest rate swap
to hedge the interest rate risk of the senior debt. The balance sheet impact of this swap was $7.0 million in Derivative assets as of March 31, 2016. During first quarter 2016, there was an insignificant level of ineffectiveness related to this
hedge.
FHN has entered into pay floating, receive fixed interest rate swaps to hedge the interest rate risk of certain term borrowings totaling $250.0
million. These swaps have been accounted for as fair value hedges under the shortcut method. The balance sheet amount of these swaps were not material on March 31, 2016, and $12.0 million in Derivative assets on March 31, 2015. These
borrowings matured in April 2016.
Prior to maturity in December 2015, FHN designated a derivative transaction in a hedging strategy to manage interest
rate risk on its $500 million noncallable senior debt. This derivative qualified for hedge accounting under ASC 815-20 using the long-haul method. FHN hedged the interest rate risk on this debt using a pay floating, receive fixed interest rate swap.
The balance sheet amount of this swap was $6.9 million in Derivative assets as of March 31, 2015. There was no ineffectiveness related to this hedge at the time of maturity.
Prior to redemption in third quarter 2015, FHN designated derivative transactions in hedging strategies to manage interest rate risk on subordinated debt
related to its trust preferred securities. These qualified for hedge accounting under ASC 815-20 using the long-haul method. FHN hedged the interest rate risk of the subordinated debt totaling $200 million using a pay floating, receive fixed
interest
43
Note 14 Derivatives (Continued)
rate swap. The balance sheet amount of this swap was $2.7 million in Derivative liabilities as of March 31, 2015. There was no ineffectiveness related to this hedge. In third quarter 2015,
FHN called its junior subordinated debt, which triggered a call of the trust preferred securities, and removed all associated hedges. The redemption resulted in a gain on extinguishment of debt of $5.8 million.
The following tables summarize FHNs derivatives associated with interest rate risk management activities as of and for the three months ended
March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Gains/(Losses)
|
|
Customer Interest Rate Contracts Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments and Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Interest Rate Contracts (a)
|
|
$
|
831,958
|
|
|
$
|
39,049
|
|
|
$
|
232
|
|
|
$
|
12,559
|
|
Offsetting Upstream Interest Rate Contracts (a)
|
|
|
831,958
|
|
|
|
232
|
|
|
|
39,549
|
|
|
|
(12,559
|
)
|
Debt Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps (b)
|
|
$
|
1,150,000
|
|
|
$
|
17,852
|
|
|
$
|
|
|
|
$
|
17,037
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Borrowings (b)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
1,150,000
|
(c)
|
|
$
|
(16,745
|
)
(d)
|
|
|
|
|
March 31,2015
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Gains/(Losses)
|
|
Customer Interest Rate Contracts Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments and Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Interest Rate Contracts (a)
|
|
$
|
682,318
|
|
|
$
|
30,204
|
|
|
$
|
307
|
|
|
$
|
4,243
|
|
Offsetting Upstream Interest Rate Contracts (a)
|
|
|
682,318
|
|
|
|
307
|
|
|
|
30,704
|
|
|
|
(4,243
|
)
|
Debt Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps (b)
|
|
$
|
1,350,000
|
|
|
$
|
24,368
|
|
|
$
|
2,677
|
|
|
$
|
970
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Borrowings (b)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
1,350,000
|
(c)
|
|
$
|
(923
|
)
(d)
|
(a)
|
Gains/losses included in the All other expense section of the Consolidated Condensed Statements of Income.
|
(b)
|
Gains/losses included in the All other income and commissions section of the Consolidated Condensed Statements of Income.
|
(c)
|
Represents par value of term borrowings being hedged.
|
(d)
|
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
|
In first quarter 2016, FHN entered into a pay floating, receive fixed interest rate swap in a hedging strategy to manage its exposure to the variability in
cash flows related to the interest payments for the following five years on $250 million principal of debt instruments, which primarily consist of held-to-maturity trust preferred loans that have variable interest payments based on LIBOR. This
qualifies for hedge accounting as a cash flow hedge under ASC 815-20. Changes in the fair value of this derivative are recorded as a component of accumulated other comprehensive income (AOCI), to the extent that the hedge relationship is
effective. Amounts are reclassified from AOCI to earnings as the hedged cash flows affect earnings. FTB measures ineffectiveness using the Hypothetical Derivative Method. To the extent that any ineffectiveness exists in the hedge relationships, the
amounts are recorded in current period earnings. The following table summarizes FHNs derivative activities associated with cash flow hedges as of and for the three months ended March 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Gains/(Losses)
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
250,000
|
|
|
$
|
5,618
|
|
|
|
N/A
|
|
|
$
|
5,618
|
(a)
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variability in Cash Flows Related to Trust Preferred Loans
|
|
|
N/A
|
|
|
|
250,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
(a)
|
Includes approximately $1 million expected to be reclassified into earnings in the next twelve months.
|
FHN
hedges held-to-maturity trust preferred loans which have an initial fixed rate term before conversion to a floating rate. FHN has entered into pay fixed, receive floating interest rate swaps to hedge the interest rate risk associated with this
initial term. Interest paid or received for these swaps is recognized as an adjustment of the interest income of the assets whose risk is being hedged. Basis
44
Note 14 Derivatives (Continued)
adjustments remaining at the end of the hedge term are being amortized as an adjustment to interest income over the remaining life of the loans. Gains or losses are included in Other income and
commissions on the Consolidated Condensed Statements of Income.
The following tables summarize FHNs derivative activities associated with
held-to-maturity trust preferred loans as of and for the three months ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Gains/(Losses)
|
|
Loan Portfolio Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
6,500
|
|
|
|
N/A
|
|
|
$
|
445
|
|
|
$
|
43
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust Preferred Loans (a)
|
|
|
N/A
|
|
|
$
|
6,500
|
(b)
|
|
|
N/A
|
|
|
$
|
(42
|
)
(c)
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Gains/(Losses)
|
|
Loan Portfolio Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
6,500
|
|
|
|
N/A
|
|
|
$
|
703
|
|
|
$
|
41
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust Preferred Loans (a)
|
|
|
N/A
|
|
|
$
|
6,500
|
(b)
|
|
|
N/A
|
|
|
$
|
(41
|
)
(c)
|
(a)
|
Assets included in the Loans, net of unearned income section of the Consolidated Condensed Statements of Condition.
|
(b)
|
Represents principal balance being hedged.
|
(c)
|
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
|
Other Derivatives
In conjunction with the sales of a
portion of its Visa Class B shares, FHN and the purchaser entered into derivative transactions whereby FHN will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. As of
March 31, 2016 and 2015, the derivative liabilities associated with the sales of Visa Class B shares were $4.6 million and $5.0 million, respectively. See the Visa Matters section of Note 10 Contingencies and Other Disclosures for more
information regarding FHNs Visa shares.
FHN utilizes cross currency swaps and cross currency interest rate swaps to economically hedge its exposure
to foreign currency risk and interest rate risk associated with non-U.S. dollar denominated loans. As of March 31, 2016 and 2015, these loans were valued at $1.9 million and $3.8 million, respectively. The balance sheet amount and the
gains/losses associated with these derivatives were not significant.
Master Netting and Similar Agreements
As previously discussed, FHN uses master netting agreements, mutual margining agreements and collateral posting requirements to minimize credit risk on
derivative contracts. Master netting and similar agreements are used when counterparties have multiple derivatives contracts that allow for a right of setoff, meaning that a counterparty may net offsetting positions and collateral with
the same counterparty under the contract to determine a net receivable or payable. The following discussion provides an overview of these arrangements which may vary due to the derivative type and market in which a derivative transaction is
executed.
Interest rate derivatives are subject to agreements consistent with standard agreement forms of the International Swap and Derivatives
Association (ISDA). Currently, all interest rate derivative contracts are entered into as over-the-counter transactions and collateral posting requirements are based on the net asset or liability position with each respective
counterparty. For contracts that require central clearing, novation to a counterparty with access to a clearinghouse occurs and collateral is posted. Cash collateral received (posted) for interest rate derivatives is recognized as a liability
(asset) on FHNs Consolidated Condensed Statements of Condition.
Interest rate derivatives with customers that are smaller financial institutions
typically require posting of collateral by the counterparty to FHN. This collateral is subject to a threshold with daily adjustments based upon changes in the level or fair value of the derivative position. Positions and related collateral can be
netted in the event of default. Collateral pledged by a counterparty is typically cash or securities. The securities pledged as collateral are not recognized within FHNs Consolidated Condensed Statements of Condition. Interest rate derivatives
associated with lending arrangements share the collateral with the related loan(s). The derivative and loan positions may be netted in the event of default. For disclosure purposes, the entire collateral amount is allocated to the loan.
45
Note 14 Derivatives (Continued)
Interest rate derivatives with larger financial institutions entered into prior to required central clearing
typically contain provisions whereby the collateral posting thresholds under the agreements adjust based on the credit ratings of both counterparties. If the credit rating of FHN and/or FTBNA is lowered, FHN could be required to post additional
collateral with the counterparties. Conversely, if the credit rating of FHN and/or FTBNA is increased, FHN could have collateral released and be required to post less collateral in the future. Also, if a counterpartys credit ratings were to
decrease, FHN and/or FTBNA could require the posting of additional collateral; whereas if a counterpartys credit ratings were to increase, the counterparty could require the release of excess collateral. Collateral for these arrangements is
adjusted daily based on changes in the net fair value position with each counterparty.
The net fair value, determined by individual counterparty, of all
derivative instruments with adjustable collateral posting thresholds was $86.8 million of assets and $74.7 million of liabilities on March 31, 2016, and $107.3 million of assets and $84.5 million of liabilities on March 31, 2015. As of
March 31, 2016 and 2015, FHN had received collateral of $168.9 million and $173.5 million and posted collateral of $72.7 million and $84.7 million, respectively, in the normal course of business related to these agreements.
Certain agreements entered into prior to required central clearing also contain accelerated termination provisions, inclusive of the right of offset, if a
counterpartys credit rating falls below a specified level. If a counterpartys debt rating (including FHNs and FTBNAs) were to fall below these minimums, these provisions would be triggered, and the counterparties could
terminate the agreements and require immediate settlement of all derivative contracts under the agreements. The net fair value, determined by individual counterparty, of all derivative instruments with credit-risk-related contingent accelerated
termination provisions was $86.8 million of assets and $22.6 million of liabilities on March 31, 2016, and $107.3 million of assets and $21.1 million of liabilities on March 31, 2015. As of March 31, 2016 and 2015, FHN had received
collateral of $168.9 million and $173.5 million and posted collateral of $24.5 million and $25.9 million, respectively, in the normal course of business related to these contracts.
FHNs fixed income segment buys and sells various types of securities for its customers. When these securities settle on a delayed basis, they are
considered forward contracts, and are generally not subject to master netting agreements. For futures and options, FHN transacts through a third party, and the transactions are subject to margin and collateral maintenance requirements. In the event
of default, open positions can be offset along with the associated collateral.
For this disclosure, FHN considers the impact of master netting and other
similar agreements which allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net derivative asset or liability position with the related securities and cash collateral. The application of the collateral
cannot reduce the net derivative asset or liability position below zero, and therefore any excess collateral is not reflected in the tables below.
The
following table provides a detail of derivative assets and collateral received as presented on the Consolidated Condensed Statements of Condition as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statement of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
assets
|
|
|
Gross amounts
offset in the
Statement of
Condition
|
|
|
Net amounts of
assets presented
in the Statement
of Condition (a)
|
|
|
Derivative
liabilities
available for
offset
|
|
|
Collateral
Received
|
|
|
Net amount
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 (b)
|
|
$
|
150,973
|
|
|
$
|
|
|
|
$
|
150,973
|
|
|
$
|
(9,998
|
)
|
|
$
|
(125,274
|
)
|
|
$
|
15,701
|
|
2015 (b)
|
|
|
140,917
|
|
|
|
|
|
|
|
140,917
|
|
|
|
(14,053
|
)
|
|
|
(126,820
|
)
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in Derivative assets on the Consolidated Condensed Statements of Condition. As of March 31, 2016 and 2015, $14.0 million and $7.2 million, respectively, of derivative assets (primarily fixed income forward
contracts) have been excluded from these tables because they are generally not subject to master netting or similar agreements.
|
(b)
|
2016 and 2015 are comprised entirely of interest rate derivative contracts.
|
46
Note 14 Derivatives (Continued)
The following table provides a detail of derivative liabilities and collateral pledged as presented on the
Consolidated Condensed Statements of Condition as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statement of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
liabilities
|
|
|
Gross amounts
offset in the
Statement of
Condition
|
|
|
Net amounts of
liabilities presented
in the Statement of
Condition (a)
|
|
|
Derivative
assets available
for offset
|
|
|
Collateral
pledged
|
|
|
Net amount
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 (b)
|
|
$
|
128,448
|
|
|
$
|
|
|
|
$
|
128,448
|
|
|
$
|
(9,998
|
)
|
|
$
|
(63,738
|
)
|
|
$
|
54,712
|
|
2015 (b)
|
|
|
120,429
|
|
|
|
|
|
|
|
120,429
|
|
|
|
(14,053
|
)
|
|
|
(82,440
|
)
|
|
|
23,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in Derivative liabilities on the Consolidated Condensed Statements of Condition. As of March 31, 2016 and 2015, $17.8 million and $12.8 million, respectively, of derivative liabilities (primarily fixed
income forward contracts) have been excluded from these tables because they are generally not subject to master netting or similar agreements.
|
(b)
|
2016 and 2015 are comprised entirely of interest rate derivative contracts.
|
47
Note 15 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing and
Lending Transactions
For repurchase, reverse repurchase and securities borrowing and lending transactions, FHN and each counterparty have the ability to offset
all open positions and related collateral in the event of default. Due to the nature of these transactions, the value of the collateral for each transaction approximates the value of the corresponding receivable or payable. For repurchase agreements
within FHNs fixed income business, transactions are collateralized by securities which are delivered on the settlement date and are maintained throughout the term of the transaction. For FHNs repurchase agreements through banking
activities, securities are typically pledged at the time of the transaction and not released until settlement. For asset positions, the collateral is not included on FHNs Consolidated Condensed Statements of Condition. For liability positions,
securities collateral pledged by FHN is generally represented within FHNs trading or available-for-sale securities portfolios.
For this disclosure,
FHN considers the impact of master netting and other similar agreements that allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net asset or liability position with the related securities collateral. The
application of the collateral cannot reduce the net asset or liability position below zero, and therefore any excess collateral is not reflected in the tables below.
The following table provides a detail of Securities purchased under agreements to resell as presented on the Consolidated Condensed Statements of Condition
and collateral pledged by counterparties as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statement of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
assets
|
|
|
Gross amounts
offset in the
Statement of
Condition
|
|
|
Net amounts of
assets presented
in the Statement
of Condition
|
|
|
Offsetting
securities sold
under agreements
to repurchase
|
|
|
Securities collateral
(not recognized on
FHNs Statement
of Condition)
|
|
|
Net amount
|
|
Securities purchased under agreements to resell:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
767,483
|
|
|
$
|
|
|
|
$
|
767,483
|
|
|
$
|
(37,261
|
)
|
|
$
|
(723,992
|
)
|
|
$
|
6,230
|
|
2015
|
|
|
831,541
|
|
|
|
|
|
|
|
831,541
|
|
|
|
(1,581
|
)
|
|
|
(823,157
|
)
|
|
|
6,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a detail of Securities sold under agreements to repurchase as presented on the Consolidated
Condensed Statements of Condition and collateral pledged by FHN as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statement of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
liabilities
|
|
|
Gross amounts
offset in the
Statement of
Condition
|
|
|
Net amounts of
liabilities presented
in the Statement
of Condition
|
|
|
Offsetting
securities
purchased under
agreements to resell
|
|
|
Securities
Collateral
|
|
|
Net amount
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
425,217
|
|
|
$
|
|
|
|
$
|
425,217
|
|
|
$
|
(37,261
|
)
|
|
$
|
(387,897
|
)
|
|
$
|
59
|
|
2015
|
|
|
309,297
|
|
|
|
|
|
|
|
309,297
|
|
|
|
(1,581
|
)
|
|
|
(307,637
|
)
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to the short duration of Securities sold under agreements to repurchase and the nature of collateral involved, the risks
associated with these transactions are considered minimal. The following table provides a detail, by collateral type, of the remaining contractual maturity of Securities sold under agreements to repurchase as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Overnight and
Continuous
|
|
|
Up to 30 Days
|
|
|
Total
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
54,273
|
|
|
$
|
|
|
|
$
|
54,273
|
|
Government agency issued MBS
|
|
|
366,799
|
|
|
|
|
|
|
|
366,799
|
|
Government agency issued CMO
|
|
|
|
|
|
|
4,145
|
|
|
|
4,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities sold under agreements to repurchase
|
|
$
|
421,072
|
|
|
$
|
4,145
|
|
|
$
|
425,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
Note 16 Fair Value of Assets & Liabilities
FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are
traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each
fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:
|
|
|
Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
|
Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for
which all significant assumptions are observable in the market.
|
|
|
|
Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect managements estimates of assumptions that market
participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.
|
Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.
49
Note 16 Fair Value of Assets & Liabilities (Continued)
Recurring Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Trading securities - fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
63,687
|
|
|
$
|
|
|
|
$
|
63,687
|
|
Government agency issued MBS
|
|
|
|
|
|
|
427,851
|
|
|
|
|
|
|
|
427,851
|
|
Government agency issued CMO
|
|
|
|
|
|
|
169,254
|
|
|
|
|
|
|
|
169,254
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
201,760
|
|
|
|
|
|
|
|
201,760
|
|
States and municipalities
|
|
|
|
|
|
|
49,745
|
|
|
|
|
|
|
|
49,745
|
|
Trading loans
|
|
|
|
|
|
|
21,992
|
|
|
|
|
|
|
|
21,992
|
|
Corporate and other debt
|
|
|
|
|
|
|
284,576
|
|
|
|
5
|
|
|
|
284,581
|
|
Equity, mutual funds, and other
|
|
|
|
|
|
|
4,599
|
|
|
|
|
|
|
|
4,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securities - fixed income
|
|
|
|
|
|
|
1,223,464
|
|
|
|
5
|
|
|
|
1,223,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities - mortgage banking
|
|
|
|
|
|
|
|
|
|
|
3,052
|
|
|
|
3,052
|
|
Loans held-for-sale
|
|
|
|
|
|
|
|
|
|
|
26,287
|
|
|
|
26,287
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Government agency issued MBS
|
|
|
|
|
|
|
1,887,422
|
|
|
|
|
|
|
|
1,887,422
|
|
Government agency issued CMO
|
|
|
|
|
|
|
1,938,221
|
|
|
|
|
|
|
|
1,938,221
|
|
States and municipalities
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
1,500
|
|
Equity, mutual funds, and other
|
|
|
25,309
|
|
|
|
|
|
|
|
|
|
|
|
25,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale
|
|
|
25,309
|
|
|
|
3,825,743
|
|
|
|
1,500
|
|
|
|
3,852,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
1,725
|
|
|
|
1,725
|
|
Deferred compensation assets
|
|
|
29,863
|
|
|
|
|
|
|
|
|
|
|
|
29,863
|
|
Derivatives, forwards and futures
|
|
|
14,025
|
|
|
|
|
|
|
|
|
|
|
|
14,025
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
150,982
|
|
|
|
|
|
|
|
150,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
43,888
|
|
|
|
150,982
|
|
|
|
1,725
|
|
|
|
196,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
69,197
|
|
|
$
|
5,200,189
|
|
|
$
|
32,569
|
|
|
$
|
5,301,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities - fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
512,799
|
|
|
$
|
|
|
|
$
|
512,799
|
|
Government agency issued CMO
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
17
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
5,037
|
|
|
|
|
|
|
|
5,037
|
|
Corporate and other debt
|
|
|
|
|
|
|
220,800
|
|
|
|
|
|
|
|
220,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading liabilities - fixed income
|
|
|
|
|
|
|
738,653
|
|
|
|
|
|
|
|
738,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives, forwards and futures
|
|
|
13,229
|
|
|
|
|
|
|
|
|
|
|
|
13,229
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
128,448
|
|
|
|
|
|
|
|
128,448
|
|
Derivatives, other
|
|
|
|
|
|
|
|
|
|
|
4,620
|
|
|
|
4,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
|
13,229
|
|
|
|
128,448
|
|
|
|
4,620
|
|
|
|
146,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
13,229
|
|
|
$
|
867,101
|
|
|
$
|
4,620
|
|
|
$
|
884,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
Note 16 Fair Value of Assets & Liabilities (Continued)
The following table presents the balance of assets and liabilities measured at fair value on a recurring
basis as of March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Trading securities - fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
108,199
|
|
|
$
|
|
|
|
$
|
108,199
|
|
Government agency issued MBS
|
|
|
|
|
|
|
547,569
|
|
|
|
|
|
|
|
547,569
|
|
Government agency issued CMO
|
|
|
|
|
|
|
312,086
|
|
|
|
|
|
|
|
312,086
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
161,317
|
|
|
|
|
|
|
|
161,317
|
|
States and municipalities
|
|
|
|
|
|
|
57,181
|
|
|
|
|
|
|
|
57,181
|
|
Corporate and other debt
|
|
|
|
|
|
|
339,560
|
|
|
|
5
|
|
|
|
339,565
|
|
Equity, mutual funds, and other
|
|
|
|
|
|
|
1,225
|
|
|
|
|
|
|
|
1,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securities - fixed income
|
|
|
|
|
|
|
1,527,137
|
|
|
|
5
|
|
|
|
1,527,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities - mortgage banking
|
|
|
|
|
|
|
|
|
|
|
5,321
|
|
|
|
5,321
|
|
Loans held-for-sale
|
|
|
|
|
|
|
|
|
|
|
26,700
|
|
|
|
26,700
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Government agency issued MBS
|
|
|
|
|
|
|
762,850
|
|
|
|
|
|
|
|
762,850
|
|
Government agency issued CMO
|
|
|
|
|
|
|
2,716,147
|
|
|
|
|
|
|
|
2,716,147
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
|
|
|
|
1,691
|
|
|
|
1,691
|
|
States and municipalities
|
|
|
|
|
|
|
8,405
|
|
|
|
1,500
|
|
|
|
9,905
|
|
Equity, mutual funds, and other
|
|
|
25,870
|
|
|
|
|
|
|
|
|
|
|
|
25,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale
|
|
|
25,870
|
|
|
|
3,487,502
|
|
|
|
3,191
|
|
|
|
3,516,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
2,342
|
|
|
|
2,342
|
|
Deferred compensation assets
|
|
|
26,440
|
|
|
|
|
|
|
|
|
|
|
|
26,440
|
|
Derivatives, forwards and futures
|
|
|
6,910
|
|
|
|
|
|
|
|
|
|
|
|
6,910
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
140,976
|
|
|
|
|
|
|
|
140,976
|
|
Derivatives, other
|
|
|
|
|
|
|
267
|
|
|
|
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
33,350
|
|
|
|
141,243
|
|
|
|
2,342
|
|
|
|
176,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
59,220
|
|
|
$
|
5,155,882
|
|
|
$
|
37,559
|
|
|
$
|
5,252,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities - fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
514,886
|
|
|
$
|
|
|
|
$
|
514,886
|
|
Government agency issued CMO
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
17,863
|
|
|
|
|
|
|
|
17,863
|
|
States and municipalities
|
|
|
|
|
|
|
1,643
|
|
|
|
|
|
|
|
1,643
|
|
Corporate and other debt
|
|
|
|
|
|
|
276,748
|
|
|
|
|
|
|
|
276,748
|
|
Equity, mutual funds, and other
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading liabilities-fixed income
|
|
|
|
|
|
|
813,141
|
|
|
|
|
|
|
|
813,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives, forwards and futures
|
|
|
7,828
|
|
|
|
|
|
|
|
|
|
|
|
7,828
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
120,440
|
|
|
|
|
|
|
|
120,440
|
|
Derivatives, other
|
|
|
|
|
|
|
|
|
|
|
5,005
|
|
|
|
5,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
|
7,828
|
|
|
|
120,440
|
|
|
|
5,005
|
|
|
|
133,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
7,828
|
|
|
$
|
933,581
|
|
|
$
|
5,005
|
|
|
$
|
946,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
Note 16 Fair Value of Assets & Liabilities (Continued)
Changes in Recurring Level 3 Fair Value Measurements
The changes in Level 3 assets and liabilities measured at fair value for the three months ended March 31, 2016 and 2015, on a recurring basis are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
(Dollars in thousands)
|
|
Trading
securities
|
|
|
Loans held-
for-sale
|
|
|
Securities
available-
for-sale
|
|
|
Mortgage
servicing
rights, net
|
|
|
Net derivative
liabilities
|
|
Balance on January 1, 2016
|
|
$
|
4,377
|
|
|
$
|
27,418
|
|
|
$
|
1,500
|
|
|
$
|
1,841
|
|
|
$
|
(4,810
|
)
|
Total net gains/(losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
147
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
(109
|
)
|
Other comprehensive income /(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(1,467
|
)
|
|
|
(1,365
|
)
|
|
|
|
|
|
|
(116
|
)
|
|
|
299
|
|
Net transfers into/(out of) Level 3
|
|
|
|
|
|
|
(256
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on March 31, 2016
|
|
$
|
3,057
|
|
|
$
|
26,287
|
|
|
$
|
1,500
|
|
|
$
|
1,725
|
|
|
$
|
(4,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains/(losses) included in net income
|
|
$
|
(115
|
)(a)
|
|
$
|
342
|
(a)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(109
|
)(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
(Dollars in thousands)
|
|
Trading
securities
|
|
|
Loans held-
for-sale
|
|
|
Securities
available-
for-sale
|
|
|
Mortgage
servicing
rights, net
|
|
|
Net derivative
liabilities
|
|
Balance on January 1, 2015
|
|
$
|
5,642
|
|
|
$
|
27,910
|
|
|
$
|
3,307
|
|
|
$
|
2,517
|
|
|
$
|
(5,240
|
)
|
Total net gains/(losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
170
|
|
|
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
Other comprehensive income /(loss)
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(486
|
)
|
|
|
(2,490
|
)
|
|
|
(102
|
)
|
|
|
(175
|
)
|
|
|
292
|
|
Net transfers into/(out of) Level 3
|
|
|
|
|
|
|
(716
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on March 31, 2015
|
|
$
|
5,326
|
|
|
$
|
26,700
|
|
|
$
|
3,191
|
|
|
$
|
2,342
|
|
|
$
|
(5,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains/(losses) included in net income
|
|
$
|
171
|
(a)
|
|
$
|
1,142
|
(a)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(57
|
)(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
|
Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.
|
(b)
|
Transfers out of recurring loans held-for-sale level 3 balances reflect movements out of loans held-for-sale and into real estate acquired by foreclosure (level 3 nonrecurring).
|
(c)
|
Included in Other expense.
|
Nonrecurring Fair Value Measurements
From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These
adjustments to fair value usually result from the application of LOCOM accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheet at March 31, 2016 and
2015, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment, the related carrying value, and the fair value adjustments recorded during the respective periods.
52
Note 16 Fair Value of Assets & Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at March 31, 2016
|
|
|
Three Months
Ended
March 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Net
gains/(losses)
|
|
Loans held-for-sale - first mortgages
|
|
$
|
|
|
|
$
|
|
|
|
$
|
726
|
|
|
$
|
726
|
|
|
$
|
5
|
|
Loans, net of unearned income (a)
|
|
|
|
|
|
|
|
|
|
|
33,238
|
|
|
|
33,238
|
|
|
|
(4,672
|
)
|
Real estate acquired by foreclosure (b)
|
|
|
|
|
|
|
|
|
|
|
17,460
|
|
|
|
17,460
|
|
|
|
(536
|
)
|
Other assets (c)
|
|
|
|
|
|
|
|
|
|
|
24,231
|
|
|
|
24,231
|
|
|
|
(706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(5,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at March 31, 2015
|
|
|
Three Months
Ended
March 31, 2015
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Net
gains/(losses)
|
|
Loans held-for-sale - SBAs
|
|
$
|
|
|
|
$
|
3,211
|
|
|
$
|
|
|
|
$
|
3,211
|
|
|
$
|
3
|
|
Loans held-for-sale - first mortgages
|
|
|
|
|
|
|
|
|
|
|
858
|
|
|
|
858
|
|
|
|
38
|
|
Loans, net of unearned income (a)
|
|
|
|
|
|
|
|
|
|
|
40,386
|
|
|
|
40,386
|
|
|
|
(1,362
|
)
|
Real estate acquired by foreclosure (b)
|
|
|
|
|
|
|
|
|
|
|
29,681
|
|
|
|
29,681
|
|
|
|
(376
|
)
|
Other assets (c)
|
|
|
|
|
|
|
|
|
|
|
28,265
|
|
|
|
28,265
|
|
|
|
(395
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
|
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for
loan losses.
|
(b)
|
Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government
insured mortgages.
|
(c)
|
Represents tax credit investments accounted for under the equity method.
|
In first quarter 2016, FHNs
Regional Banking segment recognized $3.7 million of impairments on long-lived assets associated with efforts to more efficiently utilize its bank branch locations. The affected branch locations represented a mixture of owned and leased sites. The
fair values of owned sites were determined using estimated sales prices from appraisals less estimated costs to sell. The fair values of leased sites were determined using a discounted cash flow approach, based on the revised estimated useful lives
of the related assets. Both measurement methodologies are considered Level 3 valuations.
53
Note 16 Fair Value of Assets & Liabilities (Continued)
Level 3 Measurements
The following tables provide information regarding the unobservable inputs utilized in determining the fair value of level 3 recurring and non-recurring
measurements as of March 31, 2016 and 2015:
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
Level 3 Class
|
|
Fair Value at
March 31, 2016
|
|
|
Valuation Techniques
|
|
Unobservable Input
|
|
Values Utilized
|
Trading securities - mortgage
|
|
$
|
3,052
|
|
|
Discounted cash flow
|
|
Prepayment speeds
|
|
24% - 46%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
47% - 82%
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale - residential real estate
|
|
|
27,013
|
|
|
Discounted cash flow
|
|
Prepayment speeds - First
mortgage
|
|
2% - 20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment speeds -
HELOC
|
|
3% - 15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure losses
|
|
45% - 57%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss severity trends -
First mortgage
|
|
10% - 65% of UPB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss severity trends -
HELOC
|
|
35% - 100% of UPB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Draw rate - HELOC
|
|
2% - 12%
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities, other
|
|
|
4,620
|
|
|
Discounted cash flow
|
|
Visa covered litigation
resolution amount
|
|
$4.4 billion - $5.2 billion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of resolution
scenarios
|
|
5% - 30%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time until resolution
|
|
6 -36 months
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income (a)
|
|
|
33,238
|
|
|
Appraisals from
comparable properties
|
|
Marketability adjustments
for specific properties
|
|
0% - 10% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other collateral
valuations
|
|
Borrowing base
certificates adjustment
|
|
20% - 50% of gross
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements/
Auction values
adjustment
|
|
0% - 25% of reported
value
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired by foreclosure (b)
|
|
|
17,460
|
|
|
Appraisals from
comparable properties
|
|
Adjustment for value
changes since appraisal
|
|
0% - 10% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
Other assets (c)
|
|
|
24,231
|
|
|
Discounted cash flow
|
|
Adjustments to current
sales yields for specific
properties
|
|
0% - 15% adjustment
to yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisals from
comparable properties
|
|
Marketability adjustments
for specific properties
|
|
0% - 25% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for
loan losses.
|
(b)
|
Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
|
(c)
|
Represents tax credit investments accounted for under the equity method.
|
54
Note 16 Fair Value of Assets & Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
Level 3 Class
|
|
Fair Value at
March 31, 2015
|
|
|
Valuation Techniques
|
|
Unobservable Input
|
|
Values Utilized
|
Trading securities - mortgage
|
|
$
|
5,321
|
|
|
Discounted cash flow
|
|
Prepayment speeds
|
|
42% - 46%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
6% - 55%
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale - residential real estate
|
|
|
27,558
|
|
|
Discounted cash flow
|
|
Prepayment speeds - First
mortgage
|
|
2% - 22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment speeds -
HELOC
|
|
5% - 15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure Losses
|
|
50% - 60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss severity trends -
First mortgage
|
|
10% - 70% of UPB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss severity trends -
HELOC
|
|
45% - 100% of UPB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Draw Rate - HELOC
|
|
5% - 12%
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities, other
|
|
|
5,005
|
|
|
Discounted cash flow
|
|
Visa covered litigation
resolution amount
|
|
$4.5 billion - $5.6 billion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of resolution
scenarios
|
|
10% - 25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time until resolution
|
|
6 - 48 months
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income (a)
|
|
|
40,386
|
|
|
Appraisals from
comparable properties
|
|
Marketability adjustments
for specific properties
|
|
0% - 10% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other collateral
valuations
|
|
Borrowing base
certificates adjustment
|
|
20% - 50% of gross value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements/
Auction Values
adjustment
|
|
0% - 25% of reported value
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired by foreclosure (b)
|
|
|
29,681
|
|
|
Appraisals from
comparable properties
|
|
Adjustment for value
changes since appraisal
|
|
0% - 10% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
Other assets (c)
|
|
|
28,265
|
|
|
Discounted cash flow
|
|
Adjustments to current
sales yields for specific
properties
|
|
0% - 15% adjustment to yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisals from
comparable properties
|
|
Marketability adjustments
for specific properties
|
|
0% - 25% of appraisal
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for
loan losses.
|
(b)
|
Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
|
(c)
|
Represents tax credit investments accounted for under the equity method.
|
Trading
securities-mortgage.
Prepayment rates and credit spreads (part of the discount rate) are significant unobservable inputs used in the fair value measurement of FHNs mortgage trading securities which include interest-only strips and
principal-only strips. Subordinated bonds were also included in mortgage trading securities prior to their payoff in first quarter 2016. Increases in prepayment rates and credit spreads in isolation would result in significantly lower fair value
measurements for the associated assets. Conversely, decreases in prepayment rates and credit spreads in isolation would result in significantly higher fair value measurements for the associated assets. Generally, when market interest rates decline
and other factors favorable to prepayments occur, there is a corresponding increase in prepayment rates as customers are expected to refinance existing mortgages under more favorable interest rate terms. Generally, changes in discount rates
directionally mirror the changes in market interest rates. FHNs Corporate Accounting Department monitors changes in the fair value of these securities monthly.
Loans held-for-sale.
Foreclosure losses and prepayment rates are significant unobservable inputs used in the fair value measurement of
FHNs residential real estate loans held-for-sale. Loss severity trends are also assessed to evaluate the reasonableness of fair value estimates resulting from discounted cash flows methodologies as well as to estimate fair value for newly
repurchased loans and loans that are near foreclosure. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Draw rates are an additional significant unobservable
input for HELOCs. Increases (decreases) in the draw rate estimates for HELOCs would increase (decrease) their fair value. All observable and unobservable inputs are re-assessed quarterly. Fair value measurements are reviewed at least quarterly by
FHNs Corporate Accounting Department.
Derivative liabilities.
In conjunction with the sales of portions of its Visa Class B shares,
FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. FHN uses a discounted cash flow
methodology in order to estimate the fair value of FHNs
55
Note 16 Fair Value of Assets & Liabilities (Continued)
derivative liabilities associated with its prior sales of Visa Class B shares. The methodology includes estimation of both the resolution amount for Visas Covered Litigation matters as well
as the length of time until the resolution occurs. Significant increases (decreases) in either of these inputs in isolation would result in significantly higher (lower) fair value measurements for the derivative liabilities. Additionally, FHN
performs a probability weighted multiple resolution scenario to calculate the estimated fair value of these derivative liabilities. Assignment of higher (lower) probabilities to the larger potential resolution scenarios would result in an increase
(decrease) in the estimated fair value of the derivative liabilities. Since this estimation process requires application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability weighting
assigned to each scenario, these derivatives have been classified within Level 3 in fair value measurements disclosures. The valuation inputs and process are discussed with senior and executive management when significant events affecting the
estimate of fair value occur. Inputs are compared to information obtained from the public issuances and filings of Visa, Inc. as well as public information released by other participants in the applicable litigation matters.
Loans, net of unearned income and Real estate acquired by foreclosure.
Collateral-dependent loans and Real estate acquired by foreclosure are
primarily valued using appraisals based on sales of comparable properties in the same or similar markets. Multiple appraisal firms are utilized to ensure that estimated values are consistent between firms. This process occurs within FHNs
Credit Risk Management (commercial) and Default Servicing functions (primarily consumer) and the Credit Risk Management Committee reviews valuation methodologies and loss information for reasonableness. Back testing is performed during the year
through comparison to ultimate disposition values and is reviewed quarterly within the Credit Risk Management function. Other collateral (receivables, inventory, equipment, etc.) is valued through borrowing base certificates, financial statements
and/or auction valuations. These valuations are discounted based on the quality of reporting, knowledge of the marketability/collectability of the collateral and historical disposition rates.
Other assets tax credit investments.
The estimated fair value of tax credit investments accounted for under the equity method is
generally determined in relation to the yield (i.e., future tax credits to be received) an acquirer of these investments would expect in relation to the yields experienced on current new issue and/or secondary market transactions. Thus, as tax
credits are recognized, the future yield to a market participant is reduced, resulting in consistent impairment of the individual investments. Individual investments are reviewed for impairment quarterly, which may include the consideration of
additional marketability discounts related to specific investments which typically includes consideration of the underlying propertys appraised value. Unusual valuation adjustments and the associated triggering events are discussed with senior
and executive management when appropriate. A portfolio review is conducted annually, with the assistance of a third party, to assess the reasonableness of current valuations.
Fair Value Option
FHN elected the fair value option on a
prospective basis for almost all types of mortgage loans originated for sale purposes under the Financial Instruments Topic (ASC 825). FHN determined that the election reduced certain timing differences and better matched changes in the
value of such loans with changes in the value of derivatives used as economic hedges for these assets at the time of election.
Repurchased loans are
recognized within loans held-for-sale at fair value at the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value
in periods subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely
recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent values from exceeding the initial fair
value, determined at the time of repurchase, but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting
the requirement to recognize subsequent declines in value.
56
Note 16 Fair Value of Assets & Liabilities (Continued)
The following tables reflect the differences between the fair value carrying amount of residential real
estate loans held-for-sale measured at fair value in accordance with managements election and the aggregate unpaid principal amount FHN is contractually entitled to receive at maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Fair value
carrying
amount
|
|
|
Aggregate
unpaid
principal
|
|
|
Fair value carrying
amount less
aggregate unpaid
principal
|
|
Residential real estate loans held-for-sale reported at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
26,287
|
|
|
$
|
40,197
|
|
|
$
|
(13,910
|
)
|
Nonaccrual loans
|
|
|
7,365
|
|
|
|
14,364
|
|
|
|
(6,999
|
)
|
Loans 90 days or more past due and still accruing
|
|
|
227
|
|
|
|
309
|
|
|
|
(82
|
)
|
|
|
|
|
March 31, 2015
|
|
(Dollars in thousands)
|
|
Fair value
carrying
amount
|
|
|
Aggregate
unpaid
principal
|
|
|
Fair value carrying
amount less
aggregate unpaid
principal
|
|
Residential real estate loans held-for-sale reported at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
26,700
|
|
|
$
|
40,762
|
|
|
$
|
(14,062
|
)
|
Nonaccrual loans
|
|
|
6,780
|
|
|
|
13,023
|
|
|
|
(6,243
|
)
|
Loans 90 days or more past due and still accruing
|
|
|
1,343
|
|
|
|
1,686
|
|
|
|
(343
|
)
|
Assets and liabilities accounted for under the fair value election are initially measured at fair value with subsequent
changes in fair value recognized in earnings. Such changes in the fair value of assets and liabilities for which FHN elected the fair value option are included in current period earnings with classification in the income statement line item
reflected in the following table:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2016
|
|
|
2015
|
|
Changes in fair value included in net income:
|
|
|
|
|
|
|
|
|
Mortgage banking noninterest income
|
|
|
|
|
|
|
|
|
Loans held-for-sale
|
|
$
|
342
|
|
|
$
|
1,142
|
|
For the three months ended March 31, 2016, and 2015, the amounts for residential real estate loans held-for-sale include
gains of $.1 million and $.4 million, respectively, in pretax earnings that are attributable to changes in instrument-specific credit risk. The portion of the fair value adjustments related to credit risk was determined based on estimated default
rates and estimated loss severities. Interest income on residential real estate loans held-for-sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Condensed
Statements of Income as interest on loans held-for-sale.
Determination of Fair Value
In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the Consolidated Condensed Statements of
Condition and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.
Short-term financial
assets.
Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions and the Federal Reserve are carried at historical cost. The carrying amount is a reasonable estimate
of fair value because of the relatively short time between the origination of the instrument and its expected realization.
Trading securities and
trading liabilities.
Trading securities and trading liabilities are recognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities.
Broker-dealer long positions are valued at bid price in the bid-ask spread. Short positions are valued at the ask price. Inventory positions are valued using observable inputs including current market transactions, LIBOR and U.S. treasury curves,
credit spreads, and consensus prepayment speeds. Trading loans are valued using observable inputs including current market transactions, swap rates, mortgage rates, and consensus prepayment speeds.
Trading securities also include retained interests in prior securitizations that qualify as financial assets, which include interest-only strips and
principal-only strips. Subordinated bonds were included in mortgage trading securities prior to payoff in first quarter 2016.
57
Note 16 Fair Value of Assets & Liabilities (Continued)
FHN uses inputs including yield curves, credit spreads, and prepayment speeds to determine the fair value of interest-only and principal-only strips. Subordinated bonds are bonds with junior
priority and are valued using an internal model which includes contractual terms, frequency and severity of loss (credit spreads), prepayment speeds of the underlying collateral, and the yield that a market participant would require.
Securities available-for-sale.
Securities available-for-sale includes the investment portfolio accounted for as available-for-sale under ASC
320-10-25, federal bank stock holdings, and short-term investments in mutual funds. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include
LIBOR and U.S. treasury curves, consensus prepayment estimates, and credit spreads. When available, broker quotes are used to support these valuations. Prior to disposition in fourth quarter 2015, certain government agency debt obligations with
limited trading activity were valued using a discounted cash flow model that incorporated a combination of observable and unobservable inputs. Primary observable inputs included contractual cash flows and the treasury curve. Significant unobservable
inputs included estimated trading spreads and estimated prepayment speeds.
Investments in the stock of the Federal Reserve Bank and Federal Home Loan
Banks are recognized at historical cost in the Consolidated Condensed Statements of Condition which is considered to approximate fair value. Short-term investments in mutual funds are measured at the funds reported closing net asset values.
Investments in equity securities are valued using quoted market prices.
Securities held-to-maturity.
Securities held-to-maturity reflects
debt securities for which management has the positive intent and ability to hold to maturity. To the extent possible, valuations of held-to-maturity securities are performed using observable inputs obtained from market transactions in similar
securities. Typical inputs include LIBOR and U.S. treasury curves and credit spreads. Debt securities with limited trading activity are valued using a discounted cash flow model that incorporates a combination of observable and unobservable inputs.
Primary observable inputs include contractual cash flows, the treasury curve and credit spreads from similar instruments. Significant unobservable inputs include estimated credit spreads for individual issuers and instruments as well as prepayment
speeds, as applicable.
Loans held-for-sale.
Residential real estate loans held-for-sale are valued using current transaction prices and/or
values on similar assets when available. Uncommitted bids may be adjusted based on other available market information. For all other loans FHN determines the fair value of residential real estate loans held-for-sale using a discounted cash flow
model which incorporates both observable and unobservable inputs. Inputs include current mortgage rates for similar products, estimated prepayment rates, foreclosure losses, and various loan performance measures (delinquency, LTV, credit score).
Adjustments for delinquency and other differences in loan characteristics are typically reflected in the models discount rates. Loss severity trends and the value of underlying collateral are also considered in assessing the appropriate fair
value for severely delinquent loans and loans in foreclosure. The valuation of HELOCs also incorporates estimates of loan draw rates as well as estimated cancellation rates for loans expected to become delinquent.
Loans held-for-sale also include loans made by the Small Business Administration (SBA), which are accounted for at LOCOM. The fair value of SBA
loans is determined using an expected cash flow model that utilizes observable inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the treasury curve. The fair value of other non-residential real estate loans
held-for-sale is approximated by their carrying values based on current transaction values.
Loans, net of unearned income.
Loans, net of
unearned income are recognized at the amount of funds advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan losses. The fair value estimates for disclosure purposes differentiate loans based on their
financial characteristics, such as product classification, vintage, loan category, pricing features, and remaining maturity.
The fair value of floating
rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is
considered to approximate book value due to the monthly repricing for commercial and consumer loans, with the exception of floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements in market rates. The fair
value for floating rate 1-4 family mortgage loans is calculated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the floating rate 1-4 family residential mortgage portfolio.
The fair value of fixed rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for
differences in loan characteristics. In situations where market pricing inputs are not available, fair value is estimated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the
current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the
fixed rate mortgage and installment loan portfolios.
58
Note 16 Fair Value of Assets & Liabilities (Continued)
For all loan portfolio classes, adjustments are made to reflect liquidity or illiquidity of the market. Such
adjustments reflect discounts that FHN believes are consistent with what a market participant would consider in determining fair value given current market conditions.
Individually impaired loans are measured using either a discounted cash flow methodology or the estimated fair value of the underlying collateral less costs
to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loans effective interest rate for discounting expected cash flow amounts. Thus, this analysis is
not considered a fair value measurement in accordance with ASC 820. However, the results of this methodology are considered to approximate fair value for the applicable loans. Expected cash flows are derived from internally-developed inputs
primarily reflecting expected default rates on contractual cash flows. For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored
and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Carrying value is considered to
reflect fair value for these loans.
Mortgage servicing rights.
FHN recognizes all classes of MSR at fair value. In third quarter 2013, FHN
agreed to sell substantially all of its remaining legacy mortgage servicing. Since that time FHN has used the price in the definitive agreement, as adjusted for the portion of pricing that was not specific to the MSR, as a third-party pricing source
in the valuation of the MSR.
Derivative assets and liabilities
. The fair value for forwards and futures contracts is based on current
transactions involving identical securities. Futures contracts are exchange-traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used.
Valuations of other derivatives (primarily interest rate related swaps, swaptions, caps, and collars) are based on inputs observed in active markets for
similar instruments. Typical inputs include the LIBOR curve, Overnight Indexed Swap (OIS) curve, option volatility, and option skew. In measuring the fair value of these derivative assets and liabilities, FHN has elected to consider
credit risk based on the net exposure to individual counterparties. Credit risk is mitigated for these instruments through the use of mutual margining and master netting agreements as well as collateral posting requirements. Any remaining credit
risk related to interest rate derivatives is considered in determining fair value through evaluation of additional factors such as customer loan grades and debt ratings. Foreign currency related derivatives also utilize observable exchange rates in
the determination of fair value. The determination of fair value for FHNs derivative liabilities associated with its prior sales of Visa Class B shares are classified within Level 3 in the fair value measurements disclosure as
previously discussed in the unobservable inputs discussion.
Real estate acquired by foreclosure.
Real estate acquired by foreclosure
primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value is
determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal.
Nonearning assets.
For disclosure purposes, nonearning financial assets include cash and due from banks, accrued interest receivable, and fixed
income receivables. Due to the short-term nature of cash and due from banks, accrued interest receivable, and fixed income receivables, the fair value is approximated by the book value.
Other assets.
For disclosure purposes, other assets consist of tax credit investments and deferred compensation assets that are considered
financial assets. Tax credit investments accounted for under the equity method are written down to estimated fair value quarterly based on the estimated value of the associated tax credits which incorporates estimates of required yield for
hypothetical investors. The fair value of all other tax credit investments is estimated using recent transaction information with adjustments for differences in individual investments. Deferred compensation assets are recognized at fair value, which
is based on quoted prices in active markets. Other assets also includes property acquired in connection with foreclosures of loans that have government insurance or guarantees. These receivables are valued at the expected amounts recoverable for the
insurance or guarantees.
Defined maturity deposits.
The fair value of these deposits is estimated by discounting future cash flows to their
present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits include all certificates of deposit and other time
deposits.
Undefined maturity deposits.
In accordance with ASC 825, the fair value of these deposits is approximated by the book value. For
the purpose of this disclosure, undefined maturity deposits include demand deposits, checking interest accounts, savings accounts, and money market accounts.
Short-term financial liabilities.
The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term
borrowings are approximated by the book value. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.
59
Note 16 Fair Value of Assets & Liabilities (Continued)
Term borrowings.
The fair value of term borrowings is based on quoted market prices or dealer
quotes for the identical liability when traded as an asset. When pricing information for the identical liability is not available, relevant prices for similar debt instruments are used with adjustments being made to the prices obtained for
differences in characteristics of the debt instruments. If no relevant pricing information is available, the fair value is approximated by the present value of the contractual cash flows discounted by the investors yield which considers
FHNs and FTBNAs debt ratings.
Other noninterest-bearing liabilities.
For disclosure purposes, other noninterest-bearing
financial liabilities include accrued interest payable and fixed income payables. Due to the short-term nature of these liabilities, the book value is considered to approximate fair value.
Loan commitments.
Fair values of these commitments are based on fees charged to enter into similar agreements taking into account the remaining
terms of the agreements and the counterparties credit standing.
Other commitments.
Fair values of these commitments are based on fees
charged to enter into similar agreements.
The following fair value estimates are determined as of a specific point in time utilizing various assumptions
and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, reduces the comparability of fair value disclosures between financial institutions. Due to market
illiquidity, the fair values for loans, net of unearned income, loans held-for-sale, and term borrowings as of March 31, 2016 and 2015, involve the use of significant internally-developed pricing assumptions for certain components of these line
items. The assumptions and valuations utilized for this disclosure are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. The valuations of legacy assets,
particularly consumer loans within the non-strategic segment and TRUP loans, are influenced by the challenging economic conditions experienced during the past several years, including housing price declines and the effect on estimated collateral
values, elevated unemployment or underemployment and risk perceptions of the financial sector. These considerations affect the estimate of a potential acquirers cost of capital and cash flow volatility assumptions from these assets and the
resulting fair value measurements may depart significantly from our internal estimates of the intrinsic value of these assets.
Assets and liabilities
that are not financial instruments have not been included in the following table such as the value of long-term relationships with deposit and trust customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other
assets and other liabilities. Additionally, these measurements are solely for financial instruments as of the measurement date and do not consider the earnings potential of our various business lines. Accordingly, the total of the fair value amounts
does not represent, and should not be construed to represent, the underlying value of the Company.
The following tables summarize the book value and
estimated fair value of financial instruments recorded in the Consolidated Condensed Statements of Condition as well as unfunded loan commitments and stand by and other commitments as of March 31, 2016 and 2015.
60
Note 16 Fair Value of Assets & Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
Book
|
|
|
Fair Value
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income and allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and industrial
|
|
$
|
10,158,296
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,051,987
|
|
|
$
|
10,051,987
|
|
Commercial real estate
|
|
|
1,822,943
|
|
|
|
|
|
|
|
|
|
|
|
1,797,610
|
|
|
|
1,797,610
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
|
|
4,622,909
|
|
|
|
|
|
|
|
|
|
|
|
4,512,005
|
|
|
|
4,512,005
|
|
Permanent mortgage
|
|
|
424,037
|
|
|
|
|
|
|
|
|
|
|
|
392,985
|
|
|
|
392,985
|
|
Credit card & other
|
|
|
342,775
|
|
|
|
|
|
|
|
|
|
|
|
344,736
|
|
|
|
344,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income and allowance for loan losses
|
|
|
17,370,960
|
|
|
|
|
|
|
|
|
|
|
|
17,099,323
|
|
|
|
17,099,323
|
|
Short-term financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
951,920
|
|
|
|
951,920
|
|
|
|
|
|
|
|
|
|
|
|
951,920
|
|
Federal funds sold
|
|
|
34,061
|
|
|
|
|
|
|
|
34,061
|
|
|
|
|
|
|
|
34,061
|
|
Securities purchased under agreements to resell
|
|
|
767,483
|
|
|
|
|
|
|
|
767,483
|
|
|
|
|
|
|
|
767,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial assets
|
|
|
1,753,464
|
|
|
|
951,920
|
|
|
|
801,544
|
|
|
|
|
|
|
|
1,753,464
|
|
Trading securities (a)
|
|
|
1,226,521
|
|
|
|
|
|
|
|
1,223,464
|
|
|
|
3,057
|
|
|
|
1,226,521
|
|
Loans held-for-sale
|
|
|
116,270
|
|
|
|
|
|
|
|
|
|
|
|
116,270
|
|
|
|
116,270
|
|
Securities available-for-sale (a) (b)
|
|
|
4,014,405
|
|
|
|
25,309
|
|
|
|
3,825,743
|
|
|
|
163,353
|
|
|
|
4,014,405
|
|
Securities held-to-maturity
|
|
|
14,326
|
|
|
|
|
|
|
|
|
|
|
|
15,021
|
|
|
|
15,021
|
|
Derivative assets (a)
|
|
|
165,007
|
|
|
|
14,025
|
|
|
|
150,982
|
|
|
|
|
|
|
|
165,007
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit investments
|
|
|
88,670
|
|
|
|
|
|
|
|
|
|
|
|
81,672
|
|
|
|
81,672
|
|
Deferred compensation assets
|
|
|
29,863
|
|
|
|
29,863
|
|
|
|
|
|
|
|
|
|
|
|
29,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
118,533
|
|
|
|
29,863
|
|
|
|
|
|
|
|
81,672
|
|
|
|
111,535
|
|
Nonearning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & due from banks
|
|
|
280,625
|
|
|
|
280,625
|
|
|
|
|
|
|
|
|
|
|
|
280,625
|
|
Fixed income receivables
|
|
|
114,854
|
|
|
|
|
|
|
|
114,854
|
|
|
|
|
|
|
|
114,854
|
|
Accrued interest receivable
|
|
|
70,849
|
|
|
|
|
|
|
|
70,849
|
|
|
|
|
|
|
|
70,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonearning assets
|
|
|
466,328
|
|
|
|
280,625
|
|
|
|
185,703
|
|
|
|
|
|
|
|
466,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
25,245,814
|
|
|
$
|
1,301,742
|
|
|
$
|
6,187,436
|
|
|
$
|
17,478,696
|
|
|
$
|
24,967,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined maturity
|
|
$
|
1,317,431
|
|
|
$
|
|
|
|
$
|
1,326,095
|
|
|
$
|
|
|
|
$
|
1,326,095
|
|
Undefined maturity
|
|
|
19,010,403
|
|
|
|
|
|
|
|
19,010,403
|
|
|
|
|
|
|
|
19,010,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
20,327,834
|
|
|
|
|
|
|
|
20,336,498
|
|
|
|
|
|
|
|
20,336,498
|
|
Trading liabilities (a)
|
|
|
738,653
|
|
|
|
|
|
|
|
738,653
|
|
|
|
|
|
|
|
738,653
|
|
Short-term financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
588,413
|
|
|
|
|
|
|
|
588,413
|
|
|
|
|
|
|
|
588,413
|
|
Securities sold under agreements to repurchase
|
|
|
425,217
|
|
|
|
|
|
|
|
425,217
|
|
|
|
|
|
|
|
425,217
|
|
Other short-term borrowings
|
|
|
96,723
|
|
|
|
|
|
|
|
96,723
|
|
|
|
|
|
|
|
96,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial liabilities
|
|
|
1,110,353
|
|
|
|
|
|
|
|
1,110,353
|
|
|
|
|
|
|
|
1,110,353
|
|
Term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investment trust-preferred
|
|
|
45,981
|
|
|
|
|
|
|
|
|
|
|
|
49,350
|
|
|
|
49,350
|
|
Term borrowings - new market tax credit investment
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
18,234
|
|
|
|
18,234
|
|
Borrowings secured by residential real estate
|
|
|
34,914
|
|
|
|
|
|
|
|
|
|
|
|
30,131
|
|
|
|
30,131
|
|
Other long term borrowings
|
|
|
1,224,854
|
|
|
|
|
|
|
|
1,199,592
|
|
|
|
|
|
|
|
1,199,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total term borrowings
|
|
|
1,323,749
|
|
|
|
|
|
|
|
1,199,592
|
|
|
|
97,715
|
|
|
|
1,297,307
|
|
Derivative liabilities (a)
|
|
|
146,297
|
|
|
|
13,229
|
|
|
|
128,448
|
|
|
|
4,620
|
|
|
|
146,297
|
|
Other noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income payables
|
|
|
56,399
|
|
|
|
|
|
|
|
56,399
|
|
|
|
|
|
|
|
56,399
|
|
Accrued interest payable
|
|
|
25,077
|
|
|
|
|
|
|
|
25,077
|
|
|
|
|
|
|
|
25,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest-bearing liabilities
|
|
|
81,476
|
|
|
|
|
|
|
|
81,476
|
|
|
|
|
|
|
|
81,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
23,728,362
|
|
|
$
|
13,229
|
|
|
$
|
23,595,020
|
|
|
$
|
102,335
|
|
|
$
|
23,710,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Classes are detailed in the recurring and nonrecurring measurement tables.
|
(b)
|
Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.
|
61
Note 16 Fair Value of Assets & Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
|
|
Book
|
|
|
Fair Value
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income and allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and industrial
|
|
$
|
9,570,703
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,523,767
|
|
|
$
|
9,523,767
|
|
Commercial real estate
|
|
|
1,303,232
|
|
|
|
|
|
|
|
|
|
|
|
1,285,775
|
|
|
|
1,285,775
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
|
|
4,813,572
|
|
|
|
|
|
|
|
|
|
|
|
4,640,351
|
|
|
|
4,640,351
|
|
Permanent mortgage
|
|
|
491,522
|
|
|
|
|
|
|
|
|
|
|
|
458,133
|
|
|
|
458,133
|
|
Credit card & other
|
|
|
324,766
|
|
|
|
|
|
|
|
|
|
|
|
326,506
|
|
|
|
326,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income and allowance for loan losses
|
|
|
16,503,795
|
|
|
|
|
|
|
|
|
|
|
|
16,234,532
|
|
|
|
16,234,532
|
|
Short-term financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
438,633
|
|
|
|
438,633
|
|
|
|
|
|
|
|
|
|
|
|
438,633
|
|
Federal funds sold
|
|
|
43,052
|
|
|
|
|
|
|
|
43,052
|
|
|
|
|
|
|
|
43,052
|
|
Securities purchased under agreements to resell
|
|
|
831,541
|
|
|
|
|
|
|
|
831,541
|
|
|
|
|
|
|
|
831,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial assets
|
|
|
1,313,226
|
|
|
|
438,633
|
|
|
|
874,593
|
|
|
|
|
|
|
|
1,313,226
|
|
Trading securities (a)
|
|
|
1,532,463
|
|
|
|
|
|
|
|
1,527,137
|
|
|
|
5,326
|
|
|
|
1,532,463
|
|
Loans held-for-sale (a)
|
|
|
133,958
|
|
|
|
|
|
|
|
3,211
|
|
|
|
130,747
|
|
|
|
133,958
|
|
Securities available-for-sale (a) (b)
|
|
|
3,672,331
|
|
|
|
25,870
|
|
|
|
3,487,502
|
|
|
|
158,959
|
|
|
|
3,672,331
|
|
Securities held-to-maturity
|
|
|
4,299
|
|
|
|
|
|
|
|
|
|
|
|
5,451
|
|
|
|
5,451
|
|
Derivative assets (a)
|
|
|
148,153
|
|
|
|
6,910
|
|
|
|
141,243
|
|
|
|
|
|
|
|
148,153
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit investments
|
|
|
80,331
|
|
|
|
|
|
|
|
|
|
|
|
62,768
|
|
|
|
62,768
|
|
Deferred compensation assets
|
|
|
26,440
|
|
|
|
26,440
|
|
|
|
|
|
|
|
|
|
|
|
26,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
106,771
|
|
|
|
26,440
|
|
|
|
|
|
|
|
62,768
|
|
|
|
89,208
|
|
Nonearning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & due from banks
|
|
|
282,800
|
|
|
|
282,800
|
|
|
|
|
|
|
|
|
|
|
|
282,800
|
|
Fixed income receivables
|
|
|
190,662
|
|
|
|
|
|
|
|
190,662
|
|
|
|
|
|
|
|
190,662
|
|
Accrued interest receivable
|
|
|
72,716
|
|
|
|
|
|
|
|
72,716
|
|
|
|
|
|
|
|
72,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonearning assets
|
|
|
546,178
|
|
|
|
282,800
|
|
|
|
263,378
|
|
|
|
|
|
|
|
546,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
23,961,174
|
|
|
$
|
780,653
|
|
|
$
|
6,297,064
|
|
|
$
|
16,597,783
|
|
|
$
|
23,675,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined maturity
|
|
$
|
1,210,417
|
|
|
$
|
|
|
|
$
|
1,216,398
|
|
|
$
|
|
|
|
$
|
1,216,398
|
|
Undefined maturity
|
|
|
17,428,137
|
|
|
|
|
|
|
|
17,428,137
|
|
|
|
|
|
|
|
17,428,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
18,638,554
|
|
|
|
|
|
|
|
18,644,535
|
|
|
|
|
|
|
|
18,644,535
|
|
Trading liabilities (a)
|
|
|
813,141
|
|
|
|
|
|
|
|
813,141
|
|
|
|
|
|
|
|
813,141
|
|
Short-term financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
703,352
|
|
|
|
|
|
|
|
703,352
|
|
|
|
|
|
|
|
703,352
|
|
Securities sold under agreements to repurchase
|
|
|
309,297
|
|
|
|
|
|
|
|
309,297
|
|
|
|
|
|
|
|
309,297
|
|
Other short-term borrowings
|
|
|
158,745
|
|
|
|
|
|
|
|
158,745
|
|
|
|
|
|
|
|
158,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial liabilities
|
|
|
1,171,394
|
|
|
|
|
|
|
|
1,171,394
|
|
|
|
|
|
|
|
1,171,394
|
|
Term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investment trust-preferred
|
|
|
45,913
|
|
|
|
|
|
|
|
|
|
|
|
49,350
|
|
|
|
49,350
|
|
Term borrowings - new market tax credit investment
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
18,208
|
|
|
|
18,208
|
|
Borrowings secured by residential real estate
|
|
|
60,914
|
|
|
|
|
|
|
|
|
|
|
|
52,568
|
|
|
|
52,568
|
|
Other long term borrowings
|
|
|
1,445,819
|
|
|
|
|
|
|
|
1,426,924
|
|
|
|
|
|
|
|
1,426,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total term borrowings
|
|
|
1,570,646
|
|
|
|
|
|
|
|
1,426,924
|
|
|
|
120,126
|
|
|
|
1,547,050
|
|
Derivative liabilities (a)
|
|
|
133,273
|
|
|
|
7,828
|
|
|
|
120,440
|
|
|
|
5,005
|
|
|
|
133,273
|
|
Other noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income payables
|
|
|
91,176
|
|
|
|
|
|
|
|
91,176
|
|
|
|
|
|
|
|
91,176
|
|
Accrued interest payable
|
|
|
31,745
|
|
|
|
|
|
|
|
31,745
|
|
|
|
|
|
|
|
31,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest-bearing liabilities
|
|
|
122,921
|
|
|
|
|
|
|
|
122,921
|
|
|
|
|
|
|
|
122,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
22,449,929
|
|
|
$
|
7,828
|
|
|
$
|
22,299,355
|
|
|
$
|
125,131
|
|
|
$
|
22,432,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
|
Classes are detailed in the recurring and nonrecurring measurement tables.
|
(b)
|
Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $66.0 million.
|
62
Note 16 Fair Value of Assets & Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Amount
|
|
|
Fair Value
|
|
(Dollars in thousands)
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Unfunded Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
8,042,286
|
|
|
$
|
7,073,470
|
|
|
$
|
2,279
|
|
|
$
|
2,439
|
|
Standby and other commitments
|
|
|
273,666
|
|
|
|
374,173
|
|
|
|
3,885
|
|
|
|
5,229
|
|
63