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 2017 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, 2016.
Summary of Accounting
Changes.
Effective January 1, 2017, FHN adopted the provisions of Accounting Standards Update (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 are 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 are no longer included within estimated proceeds when performing the treasury stock method for calculation of diluted earnings per share.
Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirement to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash
flows shifted to an operating activity from the prior classification as a financing activity.
ASU 2016-09 also provides an accounting policy election to
recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than the previous 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 previous guidance, withholding of equity awards in excess of the minimum statutory requirement resulted
in liability classification for the entire award. The related cash remittance by the employer for employee taxes is treated as a financing activity in the statement of cash flows. Transition to the new guidance was accomplished through a combination
of retrospective (cash flows), cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (tax windfalls and shortfalls). FHN estimates, based on currently enacted tax rates, that adoption of ASU 2016-09 in 2017 will result
in an incremental effect on tax provision ranging from $3.0 million of tax benefit to $1.0 million of additional tax provision. The actual effects of adoption in 2017 will primarily depend upon the share price of the FHNs common stock, which
affects the vesting of certain performance awards, probability of exercise of certain stock options and the magnitude of windfalls for all awards upon either vesting or exercise. The effects on earnings per share calculations and election to account
for forfeitures as incurred have not been significant.
Effective January 1, 2017, FHN early adopted the provisions of ASU 2016-16,
Intra-Entity Transfers of Assets Other Than Inventory which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Therefore, ASU 2016-16 reverses the
previous requirement to delay recognition of the tax consequences of these transactions until the associated assets are sold to an outside party. Adoption of ASU 2016-16 did not have a significant effect on FHN.
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
assets. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the 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. ASU
2016-12, Narrow-Scope Improvements and Practical Expedients, was issued in May 2016 to provide additional guidance for the implementation and application of ASU 2014-09. Technical Corrections and Improvements ASU 2016-20 was
issued in December 2016 and provides further guidance on certain issues. These ASUs are effective in annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is
permitted for annual
7
Note 1 Financial Information (Continued)
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 will not early adopt these ASUs and is evaluating their effects
on its revenue recognition practices. Currently, FHN anticipates that it will elect to adopt the provisions of the revenue recognition standards through a cumulative effect to retained earnings with comparability disclosures provided throughout
2018.
In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of
Nonfinancial Assets which clarifies the meaning and application of the term in substance nonfinancial asset in transactions involving both financial and nonfinancial assets. If substantially all of the fair value of the assets that are
promised to the counterparty in a contract are concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of revenue recognition guidance for nonfinancial
assets. ASU 2017-05 also clarifies that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it with the amount of
revenue recognized based on the allocation guidance provided in ASU 2014-09. ASU 2017-05 also requires an entity to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it 1) does
not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Topic 810 and 2) transfers control of the asset in accordance with the provisions of ASU 2014-09. Once an entity transfers
control of a distinct nonfinancial asset or distinct in substance nonfinancial asset, it is required to measure any noncontrolling interest it receives (or retains) at fair value. ASU 2017-05 has the same effective date and transition provisions as
ASU 2014-09 and the two standards must be adopted simultaneously although the transition methods may be different. FHN is evaluating the effects of ASU 2017-05 on its revenue recognition practices. Currently, FHN anticipates that it will elect to
adopt the provisions of ASU 2017-05 through a cumulative effect to retained earnings with comparability disclosures provided throughout 2018.
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, those that result in consolidation of the investee, and those held by entities subject to specialized industry accounting which already apply fair value through earnings) are required
to be measured at fair value with changes in fair value recognized in net income. This excludes FRB and FHLB stock holdings which are specifically exempted from the provisions of ASU 2016-01. 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. FHN has not elected fair value accounting for any existing
financial liabilities. 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. Transition will be through a cumulative effect adjustment to retained earnings for equity investments with readily
determinable fair values. Equity investments without readily determinable fair values, for which the accounting election is made, will have any initial fair value marks recorded through earnings prospectively after adoption.
Upon adoption, FHN will reclassify all equity investments out of available-for-sale securities, leaving only debt securities within this classification. FHN
has evaluated the nature of its current equity investments and determined that substantially all qualify for the election available to assets without readily determinable fair values, including its holdings of Visa Class B shares. Accordingly, FHN
intends to apply this election and any fair value marks for these investments will be recognized through earnings on a prospective basis subsequent to adoption. FHN continues to evaluate the appropriate characteristics of similar
instruments as well as related valuation inputs and methodologies for its equity investments without readily determinable fair values. The requirements of ASU 2016-01 related to assessment of deferred tax assets and disclosure of the fair value of
financial instruments will not have a significant effect on FHN because its current accounting and disclosure practices conform to the requirements of ASU 2016-01. FHN also continues to evaluate the impact of ASU 2016-01 on other aspects of 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
8
Note 1 Financial Information (Continued)
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.
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. FHN is evaluating the impact of ASU 2016-04 on its current accounting and disclosure practices.
In June 2016, the FASB
issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which revises the measurement and recognition of credit losses for assets measured at amortized cost (e.g., held-to-maturity (HTM) loans and debt
securities) and available-for-sale (AFS) debt securities. Under ASU 2016-13, for assets measured at amortized cost, the current expected credit loss (CECL) is measured as the difference between amortized cost and the net
amount expected to be collected. This represents a departure from existing GAAP as the incurred loss methodology for recognizing credit losses delays recognition until it is probable a loss has been incurred. The measurement of current
expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Additionally, current
disclosures of credit quality indicators in relation to the amortized cost of financing receivables will be further disaggregated by year of origination. ASU 2016-13 leaves the methodology for measuring credit losses on AFS debt securities largely
unchanged, with the maximum credit loss representing the difference between amortized cost and fair value. However, such credit losses will be recognized through an allowance for credit losses, which permits recovery of previously recognized credit
losses if circumstances change.
ASU 2016-13 also revises the recognition of credit losses for purchased financial assets with a more-than insignificant
amount of credit deterioration since origination (PCD assets). For PCD assets, the initial allowance for credit losses is added to the purchase price. Only subsequent changes in the allowance for credit losses are recorded as a credit
loss expense for PCD assets. Interest income for PCD assets will be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirers assessment of credit losses at
acquisition. Currently, credit losses for purchased credit-impaired assets are included in the initial basis of the assets with subsequent declines in credit resulting in expense while subsequent improvements in credit are reflected as an increase
in the future yield from the assets.
The provisions of ASU 2016-13 will be generally adopted through a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in the year of adoption. Prospective implementation is required for debt securities for which an other-than-temporary-impairment (OTTI) had been previously recognized. Amounts previously
recognized in accumulated other comprehensive income (AOCI) as of the date of adoption that relate to improvements in cash flows expected to be collected will continue to be accreted into income over the remaining life of the asset.
Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption will be recorded in earnings when received. A prospective transition approach will be used for existing PCD assets where, upon adoption,
the amortized cost basis will be adjusted to reflect the addition of the allowance for credit losses. Thus, an entity will not be required to reassess its purchased financial assets that exist as of the date of adoption to determine whether they
would have met at acquisition the new criteria of more-than-insignificant credit deterioration since origination. An entity will accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income at the
effective interest rate at the adoption date.
ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods
within those fiscal years. Early adoption is permitted in fiscal years beginning after December 15, 2018. FHN is still evaluating the impact of ASU 2016-13 on its current accounting and disclosure practices.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies multiple cash flow
presentation issues including providing guidance as to classification on the cash flow statement for certain cash receipts and cash payments where diversity in practice exists. ASU 2016-15 is effective for fiscal years beginning after
December 15,
9
Note 1 Financial Information (Continued)
2017, including interim periods within those fiscal years. The provisions of ASU 2016-15 will be applied retroactively and will result in proceeds from bank-owned life insurance
(BOLI) being classified as an investing activity rather than their prior classification as an operating activity.
In March 2017, the FASB
issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which requires the disaggregation of the service cost component from the other components of net benefit cost for
pension and postretirement plans. Service cost must be included in the same income statement line item as other compensation-related expenses. All other components of net benefit cost are required to be presented in the income statement separately
from the service cost component, with disclosure of the line items where these amounts are recorded. The presentation requirements of ASU 2017-07 must be applied retrospectively and adoption is required for annual periods beginning after
December 15, 2017, including interim periods within those annual periods. FHNs disclosures for pension and postretirement costs provide details of the service cost and all other components for expenses recognized for its applicable
benefit plans. These amounts are currently included in Employee compensation, incentives, and benefits expense in the Consolidated Condensed Statements of Income. Upon adoption of ASU 2017-07 FHN will reclassify the expense components other than
service cost into All other expense and revise its disclosures accordingly. The amounts to be reclassified are presented in Note 11Pension, Savings, and Other Employee Benefits in this Quarterly Report on Form 10-Q for the quarter ended
March 31, 2017 and in Note 18Pension, Savings, and Other Employee Benefits in Exhibit 13 to FHNs Annual Report on Form 10-K for the year ended December 31, 2016.
In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities which shortens the amortization period for
securities that have explicit, noncontingent call features that are callable at fixed prices and on preset dates. In contrast to the current requirement for premium amortization to extend to the contractual maturity date, ASU 2017-08 requires the
premium to be amortized to the earliest call date. ASU 2017-08 does not change the amortization of discounts, which will continue to be amortized to maturity. The new guidance does not apply to debt securities where the prepayment date is not preset
or the price is not known in advance, which includes debt securities that qualify for amortization based on estimated prepayment rates. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018 with early adoption permitted. Transition is accomplished through a cumulative-effect adjustment directly to retained earnings as of the beginning of the year of adoption. Based upon the current composition of its debt
securities portfolios, FHN does not anticipate a significant effect upon adoption.
10
Note 2 Acquisitions and Divestitures
On May 4, 2017, FHN and Capital Bank Financial Corp. (Capital Bank) announced that they had entered into an agreement and plan of merger. Under the
agreement FHN will acquire Capital Bank, which is headquartered in Charlotte, North Carolina, and reported approximately $10 billion of assets at March 31, 2017. At the time of announcement Capital Bank operated 193 branches in North and South
Carolina, Tennessee, Florida and Virginia. Collectively, Capital Bank shareholders will receive approximately $411 million in cash plus FHN common shares which are expected to represent approximately 29 percent of FHNs outstanding common
shares immediately after consummation of the merger. The total transaction value, measured at the time of announcement, was approximately $2.2 billion. The agreement calls for two members of Capital Banks board of directors to join FHNs
board after closing. The transaction is expected to close in fourth quarter 2017, subject to regulatory approvals, approval by shareholders of FHN and of Capital Bank, and other customary conditions.
On April 3, 2017, FTN Financial acquired substantially all of the assets and assumed substantially all of the liabilities of Coastal Securities, Inc.
(Coastal), a national leader in the trading, securitization, and analysis of Small Business Administration (SBA) loans, for approximately $130 million in cash. Coastal, which was based in Houston, TX, also traded United
States Department of Agriculture (USDA) loans and fixed income products and provided municipal underwriting and advisory services to its clients. Coastals government-guaranteed loan products, combined with FTN Financials
existing SBA trading activities, have established an additional major product sector for FTN Financial.
On September 16, 2016, FTBNA acquired $537.4
million in unpaid principal balance (UPB) of restaurant franchise loans from GE Capitals Southeast and Southwest regional portfolios. Subsequent to the acquisition the acquired loans were combined with existing FTBNA relationships
to establish a franchise finance specialty banking business.
In addition to the transactions 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.
11
Note 3 Investment Securities
The following tables summarize FHNs investment securities on March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(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 mortgage-backed securities (MBS)
|
|
|
2,171,843
|
|
|
|
13,675
|
|
|
|
(25,596
|
)
|
|
|
2,159,922
|
|
Government agency issued collateralized mortgage obligations (CMO)
|
|
|
1,610,857
|
|
|
|
4,980
|
|
|
|
(23,526
|
)
|
|
|
1,592,311
|
|
Equity and other (a)
|
|
|
186,948
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
186,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale (b)
|
|
$
|
3,969,748
|
|
|
$
|
18,655
|
|
|
$
|
(49,125
|
)
|
|
$
|
3,939,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
4,354
|
|
|
$
|
386
|
|
|
$
|
|
|
|
$
|
4,740
|
|
Corporate bonds
|
|
|
10,000
|
|
|
|
63
|
|
|
|
|
|
|
|
10,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held-to-maturity
|
|
$
|
14,354
|
|
|
$
|
449
|
|
|
$
|
|
|
|
$
|
14,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million. The remainder is money market, mutual funds, and cost method investments.
|
(b)
|
Includes $3.5 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(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
|
|
|
2,217,593
|
|
|
|
14,960
|
|
|
|
(23,866
|
)
|
|
|
2,208,687
|
|
Government agency issued CMO
|
|
|
1,566,986
|
|
|
|
4,909
|
|
|
|
(23,937
|
)
|
|
|
1,547,958
|
|
Equity and other (a)
|
|
|
186,756
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
186,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale (b)
|
|
$
|
3,971,435
|
|
|
$
|
19,869
|
|
|
$
|
(47,805
|
)
|
|
$
|
3,943,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
4,347
|
|
|
$
|
393
|
|
|
$
|
|
|
|
$
|
4,740
|
|
Corporate bonds
|
|
|
10,000
|
|
|
|
33
|
|
|
|
|
|
|
|
10,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held-to-maturity
|
|
$
|
14,347
|
|
|
$
|
426
|
|
|
$
|
|
|
|
$
|
14,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million. The remainder is money market, mutual funds, and cost method investments.
|
(b)
|
Includes $3.3 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, 2017 are
provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
Available-for-Sale
|
|
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
Within 1 year
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100
|
|
|
$
|
100
|
|
After 1 year; within 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years; within 10 years
|
|
|
10,000
|
|
|
|
10,063
|
|
|
|
|
|
|
|
|
|
After 10 years
|
|
|
4,354
|
|
|
|
4,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
14,354
|
|
|
|
14,803
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agency issued MBS and CMO (a)
|
|
|
|
|
|
|
|
|
|
|
3,782,700
|
|
|
|
3,752,233
|
|
Equity and other
|
|
|
|
|
|
|
|
|
|
|
186,948
|
|
|
|
186,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,354
|
|
|
$
|
14,803
|
|
|
$
|
3,969,748
|
|
|
$
|
3,939,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
12
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)
|
|
2017
|
|
|
2016
|
|
Gross gains on sales of securities
|
|
$
|
44
|
|
|
$
|
3,837
|
|
Gross (losses) on sales of securities
|
|
|
|
|
|
|
(2,263
|
)
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) on sales of securities (a)
|
|
$
|
44
|
|
|
$
|
1,574
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Cash proceeds for the three months ended March 31, 2017 were not material. Cash proceeds for the three months ended March 31, 2016 were $1.0 million. 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, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Government agency issued CMO
|
|
$
|
1,068,010
|
|
|
$
|
(18,525
|
)
|
|
$
|
111,813
|
|
|
$
|
(5,001
|
)
|
|
$
|
1,179,823
|
|
|
$
|
(23,526
|
)
|
Government agency issued MBS
|
|
|
1,846,348
|
|
|
|
(25,596
|
)
|
|
|
|
|
|
|
|
|
|
|
1,846,348
|
|
|
|
(25,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
2,914,358
|
|
|
|
(44,121
|
)
|
|
|
111,813
|
|
|
|
(5,001
|
)
|
|
|
3,026,171
|
|
|
|
(49,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
2,914,364
|
|
|
$
|
(44,124
|
)
|
|
$
|
111,813
|
|
|
$
|
(5,001
|
)
|
|
$
|
3,026,177
|
|
|
$
|
(49,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollars in thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Government agency issued CMO
|
|
$
|
1,059,471
|
|
|
$
|
(19,052
|
)
|
|
$
|
116,527
|
|
|
$
|
(4,885
|
)
|
|
$
|
1,175,998
|
|
|
$
|
(23,937
|
)
|
Government agency issued MBS
|
|
|
1,912,126
|
|
|
|
(23,866
|
)
|
|
|
|
|
|
|
|
|
|
|
1,912,126
|
|
|
|
(23,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
2,971,597
|
|
|
|
(42,918
|
)
|
|
|
116,527
|
|
|
|
(4,885
|
)
|
|
|
3,088,124
|
|
|
|
(47,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
7
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
2,971,604
|
|
|
$
|
(42,920
|
)
|
|
$
|
116,527
|
|
|
$
|
(4,885
|
)
|
|
$
|
3,088,131
|
|
|
$
|
(47,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHN has reviewed investment securities that were in unrealized loss positions in accordance with its accounting policy for
OTTI and does not consider them other-than-temporarily impaired. For debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. The decline in
value is primarily attributable to changes in interest rates and not credit losses. For equity securities, FHN has both the ability and intent to hold these securities for the time necessary to recover the amortized cost.
13
Note 4 Loans
The following table provides the balance of loans by portfolio segment as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial, financial, and industrial
|
|
$
|
11,703,996
|
|
|
$
|
12,148,087
|
|
Commercial real estate
|
|
|
2,173,311
|
|
|
|
2,135,523
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Consumer real estate (a)
|
|
|
4,456,811
|
|
|
|
4,523,752
|
|
Permanent mortgage
|
|
|
409,235
|
|
|
|
423,125
|
|
Credit card & other
|
|
|
346,721
|
|
|
|
359,033
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
$
|
19,090,074
|
|
|
$
|
19,589,520
|
|
Allowance for loan losses
|
|
|
201,968
|
|
|
|
202,068
|
|
|
|
|
|
|
|
|
|
|
Total net loans
|
|
$
|
18,888,106
|
|
|
$
|
19,387,452
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Balances as of March 31, 2017 and December 31, 2016, include $32.5 million and $35.9 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. Consumer loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio.
Consumer classes include home equity lines of credit (HELOCs), real estate (R/E) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and
other.
Concentrations
FHN has a concentration of
residential real estate loans (25 percent of total loans), the majority of which is in the consumer real estate segment (23 percent of total loans). Loans to finance and insurance companies total $2.6 billion (22 percent of the C&I portfolio, or
13 percent of the total loans). FHN had loans to mortgage companies totaling $1.5 billion (13 percent of the C&I segment, or 8 percent of total loans) as of March 31, 2017. As a result, 35 percent of the C&I segment is sensitive to
impacts on the financial services industry.
Purchased Credit-Impaired Loans
The following table presents a rollforward of the accretable yield for the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Balance, beginning of period
|
|
$
|
6,871
|
|
|
$
|
8,542
|
|
Accretion
|
|
|
(851
|
)
|
|
|
(1,151
|
)
|
Adjustment for payoffs
|
|
|
(273
|
)
|
|
|
(1,777
|
)
|
Adjustment for charge-offs
|
|
|
|
|
|
|
(663
|
)
|
Adjustment for pool excess recovery (a)
|
|
|
(222
|
)
|
|
|
|
|
Increase/(decrease) in accretable yield (b)
|
|
|
(295
|
)
|
|
|
4,007
|
|
Other
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
5,198
|
|
|
$
|
8,958
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents the removal of accretable difference for the remaining loans in a pool which is now in a recovery state.
|
(b)
|
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.
|
14
Note 4 Loans (Continued)
At March 31, 2017, the ALLL related to PCI loans was $.6 million compared to $.7 million at
December 31, 2016. The loan loss provision amounts related to PCI loans recognized during the three months ended March 31, 2017, and 2016, respectively, were not significant.
The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of March 31, 2017 and December 31,
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Carrying value
|
|
|
Unpaid balance
|
|
|
Carrying value
|
|
|
Unpaid balance
|
|
Commercial, financial and industrial
|
|
$
|
38,088
|
|
|
$
|
39,257
|
|
|
$
|
40,368
|
|
|
$
|
41,608
|
|
Commercial real estate
|
|
|
4,096
|
|
|
|
5,466
|
|
|
|
4,763
|
|
|
|
6,514
|
|
Consumer real estate
|
|
|
1,072
|
|
|
|
1,442
|
|
|
|
1,172
|
|
|
|
1,677
|
|
Credit card and other
|
|
|
53
|
|
|
|
64
|
|
|
|
52
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
43,309
|
|
|
$
|
46,229
|
|
|
$
|
46,355
|
|
|
$
|
49,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
The
following tables provide information at March 31, 2017 and December 31, 2016, by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment
in a loan, before valuation allowance but which does reflect any direct write-down of the investment. For purposes of this disclosure, PCI loans and the TRUPs valuation allowance have been excluded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
|
|
March 31, 2017
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
(Dollars in thousands)
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
Impaired loans with no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
10,395
|
|
|
$
|
16,612
|
|
|
$
|
|
|
|
$
|
10,407
|
|
|
$
|
|
|
|
$
|
9,224
|
|
|
$
|
|
|
Income CRE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,395
|
|
|
$
|
16,612
|
|
|
$
|
|
|
|
$
|
10,407
|
|
|
$
|
|
|
|
$
|
11,692
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC (a)
|
|
$
|
10,724
|
|
|
$
|
22,020
|
|
|
$
|
|
|
|
$
|
11,054
|
|
|
$
|
|
|
|
$
|
10,921
|
|
|
$
|
|
|
R/E installment loans (a)
|
|
|
3,916
|
|
|
|
4,987
|
|
|
|
|
|
|
|
3,937
|
|
|
|
|
|
|
|
4,434
|
|
|
|
|
|
Permanent mortgage (a)
|
|
|
5,803
|
|
|
|
8,607
|
|
|
|
|
|
|
|
5,557
|
|
|
|
|
|
|
|
4,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,443
|
|
|
$
|
35,614
|
|
|
$
|
|
|
|
$
|
20,548
|
|
|
$
|
|
|
|
$
|
19,791
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
31,392
|
|
|
$
|
31,532
|
|
|
$
|
2,850
|
|
|
$
|
32,863
|
|
|
$
|
215
|
|
|
$
|
24,921
|
|
|
$
|
87
|
|
TRUPS
|
|
|
3,183
|
|
|
|
3,700
|
|
|
|
925
|
|
|
|
3,196
|
|
|
|
|
|
|
|
3,323
|
|
|
|
|
|
Income CRE
|
|
|
1,803
|
|
|
|
2,181
|
|
|
|
61
|
|
|
|
1,817
|
|
|
|
14
|
|
|
|
5,138
|
|
|
|
20
|
|
Residential CRE
|
|
|
1,293
|
|
|
|
1,761
|
|
|
|
131
|
|
|
|
1,293
|
|
|
|
5
|
|
|
|
1,397
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,671
|
|
|
$
|
39,174
|
|
|
$
|
3,967
|
|
|
$
|
39,169
|
|
|
$
|
234
|
|
|
$
|
34,779
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
$
|
81,438
|
|
|
$
|
83,888
|
|
|
$
|
16,641
|
|
|
$
|
83,075
|
|
|
$
|
564
|
|
|
$
|
88,580
|
|
|
$
|
487
|
|
R/E installment loans
|
|
|
50,394
|
|
|
|
51,317
|
|
|
|
12,060
|
|
|
|
51,902
|
|
|
|
318
|
|
|
|
59,971
|
|
|
|
317
|
|
Permanent mortgage
|
|
|
82,940
|
|
|
|
94,755
|
|
|
|
11,532
|
|
|
|
85,778
|
|
|
|
615
|
|
|
|
95,232
|
|
|
|
547
|
|
Credit card & other
|
|
|
269
|
|
|
|
269
|
|
|
|
122
|
|
|
|
288
|
|
|
|
2
|
|
|
|
360
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
215,041
|
|
|
$
|
230,229
|
|
|
$
|
40,355
|
|
|
$
|
221,043
|
|
|
$
|
1,499
|
|
|
$
|
244,143
|
|
|
$
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
$
|
48,066
|
|
|
$
|
55,786
|
|
|
$
|
3,967
|
|
|
$
|
49,576
|
|
|
$
|
234
|
|
|
$
|
46,471
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
$
|
235,484
|
|
|
$
|
265,843
|
|
|
$
|
40,355
|
|
|
$
|
241,591
|
|
|
$
|
1,499
|
|
|
$
|
263,934
|
|
|
$
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
283,550
|
|
|
$
|
321,629
|
|
|
$
|
44,322
|
|
|
$
|
291,167
|
|
|
$
|
1,733
|
|
|
$
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
(Dollars in thousands)
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
Impaired loans with no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
10,419
|
|
|
$
|
16,636
|
|
|
$
|
|
|
|
$
|
12,009
|
|
|
$
|
|
|
Income CRE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,419
|
|
|
$
|
16,636
|
|
|
$
|
|
|
|
$
|
13,552
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC (a)
|
|
$
|
11,383
|
|
|
$
|
21,662
|
|
|
$
|
|
|
|
$
|
11,168
|
|
|
$
|
|
|
R/E installment loans (a)
|
|
|
3,957
|
|
|
|
4,992
|
|
|
|
|
|
|
|
4,255
|
|
|
|
|
|
Permanent mortgage (a)
|
|
|
5,311
|
|
|
|
7,899
|
|
|
|
|
|
|
|
4,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,651
|
|
|
$
|
34,553
|
|
|
$
|
|
|
|
$
|
19,841
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
34,334
|
|
|
$
|
34,470
|
|
|
$
|
3,294
|
|
|
$
|
30,836
|
|
|
$
|
902
|
|
TRUPS
|
|
|
3,209
|
|
|
|
3,700
|
|
|
|
925
|
|
|
|
3,274
|
|
|
|
|
|
Income CRE
|
|
|
1,831
|
|
|
|
2,209
|
|
|
|
62
|
|
|
|
3,757
|
|
|
|
70
|
|
Residential CRE
|
|
|
1,293
|
|
|
|
1,761
|
|
|
|
132
|
|
|
|
1,360
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,667
|
|
|
$
|
42,140
|
|
|
$
|
4,413
|
|
|
$
|
39,227
|
|
|
$
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
$
|
84,711
|
|
|
$
|
87,126
|
|
|
$
|
15,927
|
|
|
$
|
87,659
|
|
|
$
|
2,092
|
|
R/E installment loans
|
|
|
53,409
|
|
|
|
54,559
|
|
|
|
12,875
|
|
|
|
57,906
|
|
|
|
1,370
|
|
Permanent mortgage
|
|
|
88,615
|
|
|
|
100,983
|
|
|
|
12,470
|
|
|
|
91,838
|
|
|
|
2,310
|
|
Credit card & other
|
|
|
306
|
|
|
|
306
|
|
|
|
133
|
|
|
|
345
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
227,041
|
|
|
$
|
242,974
|
|
|
$
|
41,405
|
|
|
$
|
237,748
|
|
|
$
|
5,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
$
|
51,086
|
|
|
$
|
58,776
|
|
|
$
|
4,413
|
|
|
$
|
52,779
|
|
|
$
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
$
|
247,692
|
|
|
$
|
277,527
|
|
|
$
|
41,405
|
|
|
$
|
257,589
|
|
|
$
|
5,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
298,778
|
|
|
$
|
336,303
|
|
|
$
|
45,818
|
|
|
$
|
310,368
|
|
|
$
|
6,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. This credit grading system is intended to identify and measure the credit quality of the loan portfolio by analyzing the migration of loans between grading
categories. It is also integral to the estimation methodology utilized in determining the allowance for loan losses since an allowance is established for pools of commercial loans based on the credit grade assigned. 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. Loan grading discipline is regularly reviewed
internally by Credit Assurance Services to determine if the process continues to result in accurate loan grading across the portfolio. FHN may utilize availability of guarantors/sponsors to support lending decisions during the credit underwriting
process and when determining the assignment of internal loan grades. 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 5 Allowance 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, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(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
|
|
$
|
478,025
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
610
|
|
|
$
|
|
|
|
$
|
478,635
|
|
|
|
3
|
%
|
|
$
|
78
|
|
2
|
|
|
891,450
|
|
|
|
|
|
|
|
|
|
|
|
11,293
|
|
|
|
81
|
|
|
|
902,824
|
|
|
|
7
|
|
|
|
442
|
|
3
|
|
|
403,403
|
|
|
|
398,860
|
|
|
|
|
|
|
|
160,115
|
|
|
|
|
|
|
|
962,378
|
|
|
|
7
|
|
|
|
239
|
|
4
|
|
|
998,015
|
|
|
|
227,257
|
|
|
|
|
|
|
|
242,069
|
|
|
|
221
|
|
|
|
1,467,562
|
|
|
|
11
|
|
|
|
879
|
|
5
|
|
|
1,269,384
|
|
|
|
139,434
|
|
|
|
|
|
|
|
426,147
|
|
|
|
333
|
|
|
|
1,835,298
|
|
|
|
13
|
|
|
|
7,260
|
|
6
|
|
|
1,535,573
|
|
|
|
521,253
|
|
|
|
|
|
|
|
368,073
|
|
|
|
8,072
|
|
|
|
2,432,971
|
|
|
|
17
|
|
|
|
10,600
|
|
7
|
|
|
1,479,242
|
|
|
|
169,444
|
|
|
|
|
|
|
|
396,654
|
|
|
|
2,161
|
|
|
|
2,047,501
|
|
|
|
15
|
|
|
|
12,767
|
|
8
|
|
|
1,042,772
|
|
|
|
49,588
|
|
|
|
|
|
|
|
352,370
|
|
|
|
4,383
|
|
|
|
1,449,113
|
|
|
|
10
|
|
|
|
24,532
|
|
9
|
|
|
641,463
|
|
|
|
4,643
|
|
|
|
|
|
|
|
82,734
|
|
|
|
3,357
|
|
|
|
732,197
|
|
|
|
5
|
|
|
|
14,396
|
|
10
|
|
|
344,633
|
|
|
|
4,499
|
|
|
|
|
|
|
|
35,489
|
|
|
|
9,695
|
|
|
|
394,316
|
|
|
|
3
|
|
|
|
8,510
|
|
11
|
|
|
228,258
|
|
|
|
|
|
|
|
|
|
|
|
17,501
|
|
|
|
5,454
|
|
|
|
251,213
|
|
|
|
2
|
|
|
|
6,289
|
|
12
|
|
|
162,238
|
|
|
|
13,956
|
|
|
|
|
|
|
|
15,831
|
|
|
|
2,965
|
|
|
|
194,990
|
|
|
|
1
|
|
|
|
6,862
|
|
13
|
|
|
115,844
|
|
|
|
|
|
|
|
304,236
|
|
|
|
4,755
|
|
|
|
128
|
|
|
|
424,963
|
|
|
|
3
|
|
|
|
3,757
|
|
14,15,16
|
|
|
197,230
|
|
|
|
48
|
|
|
|
|
|
|
|
14,395
|
|
|
|
1,183
|
|
|
|
212,856
|
|
|
|
2
|
|
|
|
23,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
|
9,787,530
|
|
|
|
1,528,982
|
|
|
|
304,236
|
|
|
|
2,128,036
|
|
|
|
38,033
|
|
|
|
13,786,817
|
|
|
|
99
|
|
|
|
119,788
|
|
Individually evaluated for impairment
|
|
|
41,787
|
|
|
|
|
|
|
|
3,183
|
|
|
|
1,803
|
|
|
|
1,293
|
|
|
|
48,066
|
|
|
|
1
|
|
|
|
3,967
|
|
Purchased credit-impaired loans
|
|
|
38,278
|
|
|
|
|
|
|
|
|
|
|
|
4,052
|
|
|
|
94
|
|
|
|
42,424
|
|
|
|
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
$
|
9,867,595
|
|
|
$
|
1,528,982
|
|
|
$
|
307,419
|
|
|
$
|
2,133,891
|
|
|
$
|
39,420
|
|
|
$
|
13,877,307
|
|
|
|
100
|
%
|
|
$
|
123,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 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
|
|
$
|
465,179
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,078
|
|
|
$
|
|
|
|
$
|
466,257
|
|
|
|
3
|
%
|
|
$
|
77
|
|
2
|
|
|
791,183
|
|
|
|
|
|
|
|
|
|
|
|
11,742
|
|
|
|
87
|
|
|
|
803,012
|
|
|
|
6
|
|
|
|
403
|
|
3
|
|
|
491,386
|
|
|
|
462,486
|
|
|
|
|
|
|
|
153,670
|
|
|
|
|
|
|
|
1,107,542
|
|
|
|
8
|
|
|
|
304
|
|
4
|
|
|
978,282
|
|
|
|
332,107
|
|
|
|
|
|
|
|
222,422
|
|
|
|
|
|
|
|
1,532,811
|
|
|
|
11
|
|
|
|
953
|
|
5
|
|
|
1,232,401
|
|
|
|
275,209
|
|
|
|
|
|
|
|
365,653
|
|
|
|
702
|
|
|
|
1,873,965
|
|
|
|
13
|
|
|
|
6,670
|
|
6
|
|
|
1,540,519
|
|
|
|
614,109
|
|
|
|
|
|
|
|
338,344
|
|
|
|
9,338
|
|
|
|
2,502,310
|
|
|
|
17
|
|
|
|
10,403
|
|
7
|
|
|
1,556,117
|
|
|
|
317,283
|
|
|
|
|
|
|
|
352,390
|
|
|
|
2,579
|
|
|
|
2,228,369
|
|
|
|
16
|
|
|
|
14,010
|
|
8
|
|
|
963,359
|
|
|
|
30,974
|
|
|
|
|
|
|
|
425,503
|
|
|
|
2,950
|
|
|
|
1,422,786
|
|
|
|
10
|
|
|
|
25,986
|
|
9
|
|
|
611,774
|
|
|
|
4,299
|
|
|
|
|
|
|
|
105,277
|
|
|
|
4,417
|
|
|
|
725,767
|
|
|
|
5
|
|
|
|
13,857
|
|
10
|
|
|
355,359
|
|
|
|
8,663
|
|
|
|
|
|
|
|
50,484
|
|
|
|
9,110
|
|
|
|
423,616
|
|
|
|
3
|
|
|
|
8,400
|
|
11
|
|
|
238,230
|
|
|
|
|
|
|
|
|
|
|
|
20,600
|
|
|
|
6,541
|
|
|
|
265,371
|
|
|
|
2
|
|
|
|
6,556
|
|
12
|
|
|
170,531
|
|
|
|
|
|
|
|
|
|
|
|
15,395
|
|
|
|
4,168
|
|
|
|
190,094
|
|
|
|
1
|
|
|
|
6,377
|
|
13
|
|
|
121,276
|
|
|
|
|
|
|
|
304,236
|
|
|
|
6,748
|
|
|
|
311
|
|
|
|
432,571
|
|
|
|
3
|
|
|
|
4,225
|
|
14,15,16
|
|
|
194,572
|
|
|
|
59
|
|
|
|
|
|
|
|
16,313
|
|
|
|
1,659
|
|
|
|
212,603
|
|
|
|
1
|
|
|
|
20,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
|
9,710,168
|
|
|
|
2,045,189
|
|
|
|
304,236
|
|
|
|
2,085,619
|
|
|
|
41,862
|
|
|
|
14,187,074
|
|
|
|
99
|
|
|
|
118,518
|
|
Individually evaluated for impairment
|
|
|
44,753
|
|
|
|
|
|
|
|
3,209
|
|
|
|
1,831
|
|
|
|
1,293
|
|
|
|
51,086
|
|
|
|
1
|
|
|
|
4,413
|
|
Purchased credit-impaired loans
|
|
|
40,532
|
|
|
|
|
|
|
|
|
|
|
|
4,583
|
|
|
|
335
|
|
|
|
45,450
|
|
|
|
|
|
|
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
$
|
9,795,453
|
|
|
$
|
2,045,189
|
|
|
$
|
307,445
|
|
|
$
|
2,092,033
|
|
|
$
|
43,490
|
|
|
$
|
14,283,610
|
|
|
|
100
|
%
|
|
$
|
123,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Balances as of March 31, 2017 and December 31, 2016, presented net of a $25.5 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade is 13.
|
17
Note 4 Loans (Continued)
The consumer 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 consumer 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 consumer
portfolio.
The following table reflects the percentage of balances outstanding by average, refreshed FICO scores for the HELOC, real estate installment,
and permanent mortgage classes of loans as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
HELOC
|
|
|
R/E Installment
Loans
|
|
|
Permanent
Mortgage
|
|
|
HELOC
|
|
|
R/E Installment
Loans
|
|
|
Permanent
Mortgage
|
|
FICO score 740 or greater
|
|
|
57.6
|
%
|
|
|
70.1
|
%
|
|
|
45.5
|
%
|
|
|
56.9
|
%
|
|
|
70.3
|
%
|
|
|
45.0
|
%
|
FICO score 720-739
|
|
|
8.8
|
|
|
|
8.0
|
|
|
|
8.7
|
|
|
|
8.8
|
|
|
|
8.3
|
|
|
|
9.5
|
|
FICO score 700-719
|
|
|
8.2
|
|
|
|
7.2
|
|
|
|
9.5
|
|
|
|
8.6
|
|
|
|
6.8
|
|
|
|
9.2
|
|
FICO score 660-699
|
|
|
12.6
|
|
|
|
9.0
|
|
|
|
16.8
|
|
|
|
13.2
|
|
|
|
8.4
|
|
|
|
17.1
|
|
FICO score 620-659
|
|
|
5.7
|
|
|
|
3.0
|
|
|
|
8.9
|
|
|
|
5.6
|
|
|
|
3.5
|
|
|
|
9.1
|
|
FICO score less than 620 (a)
|
|
|
7.1
|
|
|
|
2.7
|
|
|
|
10.6
|
|
|
|
6.9
|
|
|
|
2.7
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
(a)
|
For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loans have seasoned.
|
Nonaccrual and Past Due Loans
The following table
reflects accruing and non-accruing loans by class on March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing
|
|
|
Non-Accruing
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
|
30-89
Days
Past Due
|
|
|
90+
Days
Past Due
|
|
|
Total
Accruing
|
|
|
Current
|
|
|
30-89
Days
Past Due
|
|
|
90+
Days
Past Due
|
|
|
Total
Non-
Accruing
|
|
|
Total
Loans
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
9,781,688
|
|
|
$
|
20,073
|
|
|
$
|
101
|
|
|
$
|
9,801,862
|
|
|
$
|
14,511
|
|
|
$
|
113
|
|
|
$
|
12,831
|
|
|
$
|
27,455
|
|
|
$
|
9,829,317
|
|
Loans to mortgage companies
|
|
|
1,528,934
|
|
|
|
|
|
|
|
|
|
|
|
1,528,934
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
48
|
|
|
|
1,528,982
|
|
TRUPS (a)
|
|
|
304,236
|
|
|
|
|
|
|
|
|
|
|
|
304,236
|
|
|
|
|
|
|
|
|
|
|
|
3,183
|
|
|
|
3,183
|
|
|
|
307,419
|
|
Purchased credit-impaired loans
|
|
|
38,045
|
|
|
|
8
|
|
|
|
225
|
|
|
|
38,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
11,652,903
|
|
|
|
20,081
|
|
|
|
326
|
|
|
|
11,673,310
|
|
|
|
14,511
|
|
|
|
113
|
|
|
|
16,062
|
|
|
|
30,686
|
|
|
|
11,703,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income CRE
|
|
|
2,128,111
|
|
|
|
128
|
|
|
|
|
|
|
|
2,128,239
|
|
|
|
100
|
|
|
|
|
|
|
|
1,500
|
|
|
|
1,600
|
|
|
|
2,129,839
|
|
Residential CRE
|
|
|
38,531
|
|
|
|
|
|
|
|
|
|
|
|
38,531
|
|
|
|
|
|
|
|
|
|
|
|
795
|
|
|
|
795
|
|
|
|
39,326
|
|
Purchased credit-impaired loans
|
|
|
3,605
|
|
|
|
541
|
|
|
|
|
|
|
|
4,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
2,170,247
|
|
|
|
669
|
|
|
|
|
|
|
|
2,170,916
|
|
|
|
100
|
|
|
|
|
|
|
|
2,295
|
|
|
|
2,395
|
|
|
|
2,173,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
1,521,042
|
|
|
|
16,612
|
|
|
|
10,247
|
|
|
|
1,547,901
|
|
|
|
46,661
|
|
|
|
4,187
|
|
|
|
8,345
|
|
|
|
59,193
|
|
|
|
1,607,094
|
|
R/E installment loans
|
|
|
2,814,663
|
|
|
|
7,056
|
|
|
|
4,427
|
|
|
|
2,826,146
|
|
|
|
17,477
|
|
|
|
1,993
|
|
|
|
2,679
|
|
|
|
22,149
|
|
|
|
2,848,295
|
|
Purchased credit-impaired loans
|
|
|
1,328
|
|
|
|
|
|
|
|
94
|
|
|
|
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
4,337,033
|
|
|
|
23,668
|
|
|
|
14,768
|
|
|
|
4,375,469
|
|
|
|
64,138
|
|
|
|
6,180
|
|
|
|
11,024
|
|
|
|
81,342
|
|
|
|
4,456,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
369,882
|
|
|
|
4,802
|
|
|
|
5,718
|
|
|
|
380,402
|
|
|
|
14,166
|
|
|
|
1,006
|
|
|
|
13,661
|
|
|
|
28,833
|
|
|
|
409,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
182,129
|
|
|
|
1,393
|
|
|
|
1,449
|
|
|
|
184,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184,971
|
|
Other
|
|
|
160,929
|
|
|
|
482
|
|
|
|
150
|
|
|
|
161,561
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
136
|
|
|
|
161,697
|
|
Purchased credit-impaired loans
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card & other
|
|
|
343,111
|
|
|
|
1,875
|
|
|
|
1,599
|
|
|
|
346,585
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
136
|
|
|
|
346,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
18,873,176
|
|
|
$
|
51,095
|
|
|
$
|
22,411
|
|
|
$
|
18,946,682
|
|
|
$
|
92,915
|
|
|
$
|
7,299
|
|
|
$
|
43,178
|
|
|
$
|
143,392
|
|
|
$
|
19,090,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
TRUPS is presented net of the valuation allowance of $25.5 million.
|
18
Note 4 Loans (Continued)
The following table reflects accruing and non-accruing loans by class on December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing
|
|
|
Non-Accruing
|
|
|
|
|
(Dollars in thousands)
|
|
Current
|
|
|
30-89
Days
Past Due
|
|
|
90+
Days
Past Due
|
|
|
Total
Accruing
|
|
|
Current
|
|
|
30-89
Days
Past Due
|
|
|
90+
Days
Past Due
|
|
|
Total
Non-
Accruing
|
|
|
Total
Loans
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
$
|
9,720,231
|
|
|
$
|
5,199
|
|
|
$
|
23
|
|
|
$
|
9,725,453
|
|
|
$
|
16,106
|
|
|
$
|
374
|
|
|
$
|
12,988
|
|
|
$
|
29,468
|
|
|
$
|
9,754,921
|
|
Loans to mortgage companies
|
|
|
2,041,408
|
|
|
|
3,722
|
|
|
|
|
|
|
|
2,045,130
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
59
|
|
|
|
2,045,189
|
|
TRUPS (a)
|
|
|
304,236
|
|
|
|
|
|
|
|
|
|
|
|
304,236
|
|
|
|
|
|
|
|
|
|
|
|
3,209
|
|
|
|
3,209
|
|
|
|
307,445
|
|
Purchased credit-impaired loans
|
|
|
40,113
|
|
|
|
185
|
|
|
|
234
|
|
|
|
40,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
12,105,988
|
|
|
|
9,106
|
|
|
|
257
|
|
|
|
12,115,351
|
|
|
|
16,106
|
|
|
|
374
|
|
|
|
16,256
|
|
|
|
32,736
|
|
|
|
12,148,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income CRE
|
|
|
2,085,455
|
|
|
|
14
|
|
|
|
|
|
|
|
2,085,469
|
|
|
|
232
|
|
|
|
460
|
|
|
|
1,289
|
|
|
|
1,981
|
|
|
|
2,087,450
|
|
Residential CRE
|
|
|
42,182
|
|
|
|
178
|
|
|
|
|
|
|
|
42,360
|
|
|
|
|
|
|
|
|
|
|
|
795
|
|
|
|
795
|
|
|
|
43,155
|
|
Purchased credit-impaired loans
|
|
|
4,809
|
|
|
|
109
|
|
|
|
|
|
|
|
4,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
2,132,446
|
|
|
|
301
|
|
|
|
|
|
|
|
2,132,747
|
|
|
|
232
|
|
|
|
460
|
|
|
|
2,084
|
|
|
|
2,776
|
|
|
|
2,135,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
1,602,640
|
|
|
|
17,997
|
|
|
|
10,859
|
|
|
|
1,631,496
|
|
|
|
46,964
|
|
|
|
4,201
|
|
|
|
8,922
|
|
|
|
60,087
|
|
|
|
1,691,583
|
|
R/E installment loans
|
|
|
2,794,866
|
|
|
|
7,844
|
|
|
|
5,158
|
|
|
|
2,807,868
|
|
|
|
17,989
|
|
|
|
2,383
|
|
|
|
2,353
|
|
|
|
22,725
|
|
|
|
2,830,593
|
|
Purchased credit-impaired loans
|
|
|
1,319
|
|
|
|
164
|
|
|
|
93
|
|
|
|
1,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
4,398,825
|
|
|
|
26,005
|
|
|
|
16,110
|
|
|
|
4,440,940
|
|
|
|
64,953
|
|
|
|
6,584
|
|
|
|
11,275
|
|
|
|
82,812
|
|
|
|
4,523,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
385,972
|
|
|
|
4,544
|
|
|
|
5,428
|
|
|
|
395,944
|
|
|
|
11,867
|
|
|
|
2,194
|
|
|
|
13,120
|
|
|
|
27,181
|
|
|
|
423,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
188,573
|
|
|
|
1,622
|
|
|
|
1,456
|
|
|
|
191,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191,651
|
|
Other
|
|
|
166,062
|
|
|
|
992
|
|
|
|
134
|
|
|
|
167,188
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
142
|
|
|
|
167,330
|
|
Purchased credit-impaired loans
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit card & other
|
|
|
354,687
|
|
|
|
2,614
|
|
|
|
1,590
|
|
|
|
358,891
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
142
|
|
|
|
359,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
19,377,918
|
|
|
$
|
42,570
|
|
|
$
|
23,385
|
|
|
$
|
19,443,873
|
|
|
$
|
93,158
|
|
|
$
|
9,612
|
|
|
$
|
42,877
|
|
|
$
|
145,647
|
|
|
$
|
19,589,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
TRUPS is presented net of the valuation allowance of $25.5 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 the former 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-to-income ratio. After 5 years, the interest rate generally returns to the original interest
rate prior to modification; for certain modifications, the modified interest rate increases 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-to-income 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
19
Note 4 Loans (Continued)
credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship 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, 2017 and December 31, 2016, FHN had $270.0 million and $285.2 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $43.4 million, or 16 percent as of
March 31, 2017, and $44.9 million, or 16 percent as of December 31, 2016. Additionally, $67.2 million and $69.3 million of loans held-for-sale as of March 31, 2017 and December 31, 2016, respectively, were classified as TDRs.
The following tables reflect portfolio loans that were classified as TDRs during the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Number
|
|
|
Pre-Modification
Outstanding
Recorded Investment
|
|
|
Post-Modification
Outstanding
Recorded Investment
|
|
|
Number
|
|
|
Pre-Modification
Outstanding
Recorded Investment
|
|
|
Post-Modification
Outstanding
Recorded Investment
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
|
1
|
|
|
$
|
27
|
|
|
$
|
37
|
|
|
|
1
|
|
|
$
|
708
|
|
|
$
|
708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
1
|
|
|
|
27
|
|
|
|
37
|
|
|
|
1
|
|
|
|
708
|
|
|
|
708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
35
|
|
|
|
2,589
|
|
|
|
2,473
|
|
|
|
99
|
|
|
|
7,440
|
|
|
|
7,370
|
|
R/E installment loans
|
|
|
14
|
|
|
|
957
|
|
|
|
902
|
|
|
|
15
|
|
|
|
898
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
49
|
|
|
|
3,546
|
|
|
|
3,375
|
|
|
|
114
|
|
|
|
8,338
|
|
|
|
8,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent mortgage
|
|
|
5
|
|
|
|
1,310
|
|
|
|
1,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other
|
|
|
6
|
|
|
|
21
|
|
|
|
20
|
|
|
|
4
|
|
|
|
19
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
|
61
|
|
|
$
|
4,904
|
|
|
$
|
4,735
|
|
|
|
119
|
|
|
$
|
9,065
|
|
|
$
|
8,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present TDRs which re-defaulted during the three months ended March 31, 2017 and 2016, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Number
|
|
|
Recorded
Investment
|
|
|
Number
|
|
|
Recorded
Investment
|
|
Commercial (C&I):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General C&I
|
|
|
1
|
|
|
$
|
5,779
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial (C&I)
|
|
|
1
|
|
|
|
5,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOC
|
|
|
4
|
|
|
|
685
|
|
|
|
1
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate
|
|
|
4
|
|
|
|
685
|
|
|
|
1
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card & other
|
|
|
2
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
|
7
|
|
|
$
|
6,471
|
|
|
|
1
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Note 5 Allowance 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 consumer 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 current economic conditions and trends, 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 FHNs Form 10-K for the year ended December 31, 2016, 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, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
C&I
|
|
|
Commercial
Real Estate
|
|
|
Consumer
Real Estate
|
|
|
Permanent
Mortgage
|
|
|
Credit Card
and Other
|
|
|
Total
|
|
Balance as of January 1, 2017
|
|
$
|
89,398
|
|
|
$
|
33,852
|
|
|
$
|
50,357
|
|
|
$
|
16,289
|
|
|
$
|
12,172
|
|
|
$
|
202,068
|
|
Charge-offs
|
|
|
(600
|
)
|
|
|
|
|
|
|
(3,849
|
)
|
|
|
(483
|
)
|
|
|
(3,481
|
)
|
|
|
(8,413
|
)
|
Recoveries
|
|
|
1,676
|
|
|
|
221
|
|
|
|
5,676
|
|
|
|
903
|
|
|
|
837
|
|
|
|
9,313
|
|
Provision/(provision credit) for loan losses
|
|
|
2,633
|
|
|
|
(3,185
|
)
|
|
|
(2,504
|
)
|
|
|
(816
|
)
|
|
|
2,872
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
93,107
|
|
|
|
30,888
|
|
|
|
49,680
|
|
|
|
15,893
|
|
|
|
12,400
|
|
|
|
201,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance - individually evaluated for impairment
|
|
|
3,775
|
|
|
|
192
|
|
|
|
28,701
|
|
|
|
11,532
|
|
|
|
122
|
|
|
|
44,322
|
|
Allowance - collectively evaluated for impairment
|
|
|
89,142
|
|
|
|
30,646
|
|
|
|
20,629
|
|
|
|
4,361
|
|
|
|
12,278
|
|
|
|
157,056
|
|
Allowance - purchased credit-impaired loans
|
|
|
190
|
|
|
|
50
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
590
|
|
Loans, net of unearned as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
44,970
|
|
|
|
3,096
|
|
|
|
146,472
|
|
|
|
88,743
|
|
|
|
269
|
|
|
|
283,550
|
|
Collectively evaluated for impairment
|
|
|
11,620,748
|
|
|
|
2,166,069
|
|
|
|
4,308,917
|
|
|
|
320,492
|
|
|
|
346,399
|
|
|
|
18,762,625
|
|
Purchased credit-impaired loans
|
|
|
38,278
|
|
|
|
4,146
|
|
|
|
1,422
|
|
|
|
|
|
|
|
53
|
|
|
|
43,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income
|
|
$
|
11,703,996
|
|
|
$
|
2,173,311
|
|
|
$
|
4,456,811
|
|
|
$
|
409,235
|
|
|
$
|
346,721
|
|
|
$
|
19,090,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance - individually evaluated for impairment
|
|
|
9,148
|
|
|
|
488
|
|
|
|
31,119
|
|
|
|
16,975
|
|
|
|
146
|
|
|
|
57,876
|
|
Allowance - collectively evaluated for impairment
|
|
|
71,615
|
|
|
|
24,840
|
|
|
|
35,477
|
|
|
|
1,779
|
|
|
|
11,299
|
|
|
|
145,010
|
|
Allowance - purchased 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Note 6 Intangible Assets
The following is a summary of other intangible assets included in the Consolidated Condensed Statements of Condition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Value
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Value
|
|
Core deposit intangibles
|
|
$
|
16,850
|
|
|
$
|
(5,199
|
)
|
|
$
|
11,651
|
|
|
$
|
16,850
|
|
|
$
|
(4,721
|
)
|
|
$
|
12,129
|
|
Customer lists
|
|
|
54,865
|
|
|
|
(47,053
|
)
|
|
|
7,812
|
|
|
|
54,865
|
|
|
|
(46,302
|
)
|
|
|
8,563
|
|
Other (a)
|
|
|
322
|
|
|
|
|
|
|
|
322
|
|
|
|
555
|
|
|
|
(230
|
)
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
72,037
|
|
|
$
|
(52,252
|
)
|
|
$
|
19,785
|
|
|
$
|
72,270
|
|
|
$
|
(51,253
|
)
|
|
$
|
21,017
|
|
(a)
|
Balance at March 31, 2017 relates to state banking licenses and are not subject to amortization.
|
Amortization expense was $1.2 million and $1.3 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017 the
estimated aggregated amortization expense is expected to be:
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
Year
|
|
Amortization
|
|
Remainder of 2017
|
|
$
|
3,683
|
|
2018
|
|
|
4,679
|
|
2019
|
|
|
4,453
|
|
2020
|
|
|
1,659
|
|
2021
|
|
|
1,574
|
|
2022
|
|
|
1,450
|
|
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, 2017 and December 31, 2016. The
regional banking 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
March 31, 2017 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Regional
Banking
|
|
|
Fixed
Income
|
|
|
Total
|
|
December 31, 2015
|
|
$
|
93,303
|
|
|
$
|
98,004
|
|
|
$
|
191,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
$
|
93,303
|
|
|
$
|
98,004
|
|
|
$
|
191,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
$
|
93,367
|
|
|
$
|
98,004
|
|
|
$
|
191,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
$
|
93,367
|
|
|
$
|
98,004
|
|
|
$
|
191,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
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)
|
|
2017
|
|
|
2016
|
|
All other income and commissions:
|
|
|
|
|
|
|
|
|
Other service charges
|
|
$
|
2,984
|
|
|
$
|
2,713
|
|
ATM interchange fees
|
|
|
2,778
|
|
|
|
2,958
|
|
Deferred compensation
|
|
|
1,827
|
|
|
|
329
|
|
Electronic banking fees
|
|
|
1,323
|
|
|
|
1,397
|
|
Mortgage banking
|
|
|
1,261
|
|
|
|
1,273
|
|
Letter of credit fees
|
|
|
1,036
|
|
|
|
1,061
|
|
Insurance commissions
|
|
|
883
|
|
|
|
487
|
|
Other
|
|
|
2,299
|
|
|
|
3,071
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,391
|
|
|
$
|
13,289
|
|
|
|
|
|
|
|
|
|
|
All other expense:
|
|
|
|
|
|
|
|
|
Other insurance and taxes
|
|
$
|
2,390
|
|
|
$
|
3,313
|
|
Travel and entertainment
|
|
|
2,348
|
|
|
|
2,062
|
|
Employee training and dues
|
|
|
1,543
|
|
|
|
1,390
|
|
Customer relations
|
|
|
1,336
|
|
|
|
1,879
|
|
Tax credit investments
|
|
|
942
|
|
|
|
706
|
|
Supplies
|
|
|
863
|
|
|
|
1,026
|
|
Miscellaneous loan costs
|
|
|
622
|
|
|
|
717
|
|
Foreclosed real estate
|
|
|
204
|
|
|
|
(258
|
)
|
Litigation and regulatory matters
|
|
|
(292
|
)
|
|
|
(475
|
)
|
Other
|
|
|
8,831
|
|
|
|
11,719
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,787
|
|
|
$
|
22,079
|
|
|
|
|
|
|
|
|
|
|
23
Note 8 Components of Other Comprehensive Income/(loss)
The following table provides the changes in accumulated other comprehensive income/(loss) by component, net of tax, for the three months ended March 31,
2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Securities AFS
|
|
|
Cash Flow
Hedges
|
|
|
Pension and
Post-retirement
Plans
|
|
|
Total
|
|
Balance as of January 1, 2017
|
|
$
|
(17,232
|
)
|
|
$
|
(1,265
|
)
|
|
$
|
(229,157
|
)
|
|
$
|
(247,654
|
)
|
Net unrealized gains/(losses)
|
|
|
(1,536
|
)
|
|
|
(1,062
|
)
|
|
|
|
|
|
|
(2,598
|
)
|
Amounts reclassified from AOCI
|
|
|
(27
|
)
|
|
|
(852
|
)
|
|
|
1,173
|
|
|
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss)
|
|
|
(1,563
|
)
|
|
|
(1,914
|
)
|
|
|
1,173
|
|
|
|
(2,304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
$
|
(18,795
|
)
|
|
$
|
(3,179
|
)
|
|
$
|
(227,984
|
)
|
|
$
|
(249,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
$
|
3,394
|
|
|
$
|
|
|
|
$
|
(217,586
|
)
|
|
$
|
(214,192
|
)
|
Net unrealized gains/(losses)
|
|
|
40,180
|
|
|
|
3,839
|
|
|
|
|
|
|
|
44,019
|
|
Amounts reclassified from AOCI
|
|
|
(1,020
|
)
|
|
|
(374
|
)
|
|
|
1,126
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss)
|
|
|
39,160
|
|
|
|
3,465
|
|
|
|
1,126
|
|
|
|
43,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016
|
|
$
|
42,554
|
|
|
$
|
3,465
|
|
|
$
|
(216,460
|
)
|
|
$
|
(170,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications from AOCI, and related tax effects, were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended
March 31
|
|
|
|
Details about AOCI
|
|
2017
|
|
|
2016
|
|
|
Affected line item in the statement where net
income is presented
|
Securities AFS:
|
|
|
|
|
|
|
|
|
|
|
Realized (gains)/losses on securities AFS
|
|
$
|
(44
|
)
|
|
$
|
(1,654
|
)
|
|
Debt securities gains/(losses), net
|
Tax expense/(benefit)
|
|
|
17
|
|
|
|
634
|
|
|
Provision/(benefit) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Realized (gains)/losses on cash flow hedges
|
|
|
(1,380
|
)
|
|
|
(606
|
)
|
|
Interest and fees on loans
|
Tax expense/(benefit)
|
|
|
528
|
|
|
|
232
|
|
|
Provision/(benefit) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(852
|
)
|
|
|
(374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Postretirement Plans:
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost and net actuarial gain/(loss)
|
|
|
1,900
|
|
|
|
1,826
|
|
|
Employee compensation, incentives, and benefits
|
Tax expense/(benefit)
|
|
|
(727
|
)
|
|
|
(700
|
)
|
|
Provision/(benefit) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,173
|
|
|
|
1,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassification from AOCI
|
|
$
|
294
|
|
|
$
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
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)
|
|
2017
|
|
|
2016
|
|
Net income/(loss)
|
|
$
|
58,388
|
|
|
$
|
52,213
|
|
Net income attributable to noncontrolling interest
|
|
|
2,820
|
|
|
|
2,851
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to controlling interest
|
|
|
55,568
|
|
|
|
49,362
|
|
Preferred stock dividends
|
|
|
1,550
|
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) available to common shareholders
|
|
$
|
54,018
|
|
|
$
|
47,812
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingbasic
|
|
|
233,076
|
|
|
|
234,651
|
|
Effect of dilutive securities
|
|
|
3,779
|
|
|
|
2,015
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingdiluted
|
|
|
236,855
|
|
|
|
236,666
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per share available to common shareholders
|
|
$
|
0.23
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
Diluted income/(loss) per share available to common shareholders
|
|
$
|
0.23
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
2017
|
|
|
2016
|
|
Stock options excluded from the calculation of diluted EPS
|
|
|
2,453
|
|
|
|
4,119
|
|
Weighted average exercise price of stock options excluded from the calculation of diluted
EPS
|
|
$
|
26.08
|
|
|
$
|
22.45
|
|
Other equity awards excluded from the calculation of diluted EPS
|
|
|
99
|
|
|
|
1,124
|
|
25
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 a loss contingency liability for a litigation matter 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
Summary
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 certain 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, or groups of 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, 2017, the aggregate amount of liabilities
established for all such loss contingency matters was $1.6 million. These liabilities are separate from those discussed under the heading Repurchase and Foreclosure 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, 2017, 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 $52 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.
Material 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. One of those matters is viewed as material currently: Federal Deposit Insurance Corporation (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 that suit claims to have purchased
26
Note 10 Contingencies and Other Disclosures (Continued)
(and later sold) certificates totaling $83.4 million, relating to a number of separate securitizations. Plaintiff demands damages and prejudgment interest, among several remedies sought. The
current RPL estimate for this matter is 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 availability of
significantly dispositive defenses; and the incomplete status of the discovery process. Additional information concerning FHNs former mortgage businesses is provided below in Obligations from Legacy Mortgage Businesses.
Underwriters are co-defendants in the FDIC-New York matter 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 most pending 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 pending indemnification claims, excluding the FDIC-New York matter, total $409.9 million.
FHN is defending a suit filed in January 2017 by the
successor to a purchaser of other whole loans sold, ResCap Liquidating Trust, which is pending in the U.S District Court for the District of Minnesota (Case No. 17-CV-194). Plaintiff claims that FHN breached representations and warranties made
in the loan sales, which occurred over many years, and that FHN is obligated to indemnify plaintiff for certain losses. The suit seeks make-whole and other damages, indemnification, a declaratory judgment, and other remedies. FHN is unable to
estimate an RPL range for this matter due to significant uncertainties regarding, among other things: lack of information about the claims made; the prospects for potentially dispositive early-stage motions; the prospects for significantly
dispositive defenses; the scope of potential remedies that might be available or awarded; lack of discovery; lack of a precise statement of damages; and lack of precedent claims.
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 subpoenas or other 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 could be included in the repurchase liability discussed below, and some might eventually result in damages or other litigation-oriented liability, but none are included in the material loss contingency
liabilities mentioned above or 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 incomplete
discovery. Additional information concerning FHNs former mortgage businesses is provided below in Obligations from Legacy Mortgage Businesses.
Obligations from Legacy Mortgage Businesses
Loss
contingencies mentioned above under Material Matters stem from FHNs former mortgage origination and servicing businesses. FHN retains potential for further exposure, in addition to the matters mentioned, from those former
businesses. The following discussion provides context and other information to enhance an understanding of those matters and exposures.
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
27
Note 10 Contingencies and Other Disclosures (Continued)
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 consolidated 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.
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. FHNs 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 potential 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, comprehensive settlement of repurchase, make-whole, and indemnity claims with non-Agency claimants is not practical. Such claims that are not resolved by the parties can, and
sometimes have, become litigation.
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.
28
Note 10 Contingencies and Other Disclosures (Continued)
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.
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, claiming that it has been damaged from alleged deficiencies in servicing loans held in certain FH proprietary
securitization trusts. The holder has sued the FH securitization trustee on related grounds, but has not yet sued FHN. FHN cannot predict how this matter will proceed nor can FHN predict whether this matter ultimately 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 a substantial majority of all repurchase requests/make-whole claims received since the 2008 platform sale.
From 2005 through
2007, $26.7 billion of mortgage loans were included in FH proprietary securitizations. The last FH securitization occurred in 2007.
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
|
|
|
|
|
Freddie Mac, Freddie, FHLMC
|
|
Federal Home Loan Mortgage Corporation
|
|
2008 platform sale, platform sale, 2008 sale
|
|
FHNs sale of its national mortgage origination and servicing platforms in 2008
|
|
|
|
|
Ginnie Mae, Ginnie,
GNMA
|
|
Government National Mortgage Association
|
|
pipeline or active pipeline
|
|
pipeline of mortgage repurchase, make-whole, & certain related claims against FHN
|
|
|
|
|
GSEs
|
|
Fannie Mae and Freddie Mac
|
|
VA
|
|
Veterans Administration
|
29
Note 10 Contingencies and Other Disclosures (Continued)
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 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 $65.5 million and $66.0 million as of March 31, 2017 and December 31, 2016, 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/expense reversals to increase/decrease the liability are included within Repurchase and foreclosure provision/(provision credit) 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.
Other FHN Mortgage Exposures
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, 2017, 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.
At
March 31, 2017, 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 lawsuits 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 and is not able to assess what, if any, exposure FHN may have as a result of them.
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 sales of MSR starting in 2008, 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, make-whole, indemnity, and other monetary 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 other whole loans sold, including one of the material matters mentioned above. At March 31, 2017, 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.
30
Note 10 Contingencies and Other Disclosures (Continued)
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 is prohibited 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. As of March 31, 2017 and December 31, 2016, the derivative liabilities were $6.0 million and $6.2 million, respectively.
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. The Settlement was vacated
upon appeal in June 2016. 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 is restricted, with limited exceptions.
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. As of
March 31, 2017, the conversion ratio is 165 percent reflecting a Visa stock split in March 2015, and the contingent liability is $.8 million. Future funding of the escrow would dilute this conversion ratio by an amount that is not determinable
at present. Based on the closing price on March 31, 2017, assuming conversion into Class A shares at the current conversion ratio, FHNs Visa holdings would have a value of approximately $163 million. Recognition of this value is
dependent upon the final resolution of the remainder of Visas Covered Litigation matters without further reduction of the conversion ratio.
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.
31
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. Minimum contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. Decisions to contribute to the plan are based upon
pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. FHN contributed $165 million to the
qualified pension plan in third quarter 2016. The contribution had no effect on FHNs 2016 Consolidated Statements of Income. FHN did not make any contributions to the qualified pension plan in the first quarter of 2017. Management does not
currently anticipate that FHN will make a contribution to the qualified pension plan for the remainder of 2017.
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 $5.1 million for 2016. FHN anticipates making benefit payments under the non-qualified plans of $5.0 million in 2017.
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 matching 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)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
9
|
|
|
$
|
10
|
|
|
$
|
27
|
|
|
$
|
28
|
|
Interest cost
|
|
|
7,379
|
|
|
|
7,882
|
|
|
|
326
|
|
|
|
317
|
|
Expected return on plan assets
|
|
|
(8,891
|
)
|
|
|
(9,773
|
)
|
|
|
(237
|
)
|
|
|
(229
|
)
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost/(credit)
|
|
|
13
|
|
|
|
49
|
|
|
|
24
|
|
|
|
43
|
|
Actuarial (gain)/loss
|
|
|
2,380
|
|
|
|
2,068
|
|
|
|
(142
|
)
|
|
|
(233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost/(credit)
|
|
$
|
890
|
|
|
$
|
236
|
|
|
$
|
(2
|
)
|
|
$
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
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 consumer and commercial customers in Tennessee and other selected markets. Regional banking also 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 securities sales, trading, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory services, 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, derivative valuation adjustments related to prior sales of Visa Class B shares, 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. Business segment revenue, expense, asset, and equity 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 average assets for each segment for the three months ended March 31:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Consolidated
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
189,708
|
|
|
$
|
172,074
|
|
Provision/(provision credit) for loan losses
|
|
|
(1,000
|
)
|
|
|
3,000
|
|
Noninterest income
|
|
|
116,939
|
|
|
|
134,305
|
|
Noninterest expense
|
|
|
222,205
|
|
|
|
226,927
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
85,442
|
|
|
|
76,452
|
|
Provision/(benefit) for income taxes
|
|
|
27,054
|
|
|
|
24,239
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
58,388
|
|
|
$
|
52,213
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
28,806,106
|
|
|
$
|
26,618,694
|
|
|
|
|
|
|
|
|
|
|
33
Note 12 Business Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Regional Banking
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
193,389
|
|
|
$
|
172,312
|
|
Provision/(provision credit) for loan losses
|
|
|
3,098
|
|
|
|
14,767
|
|
Noninterest income
|
|
|
58,976
|
|
|
|
59,276
|
|
Noninterest expense
|
|
|
148,065
|
|
|
|
145,399
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
101,202
|
|
|
|
71,422
|
|
Provision/(benefit) for income taxes
|
|
|
36,623
|
|
|
|
25,407
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
64,579
|
|
|
$
|
46,015
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
17,955,319
|
|
|
$
|
15,945,192
|
|
|
|
|
|
|
|
|
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
1,151
|
|
|
$
|
2,667
|
|
Noninterest income
|
|
|
50,822
|
|
|
|
67,122
|
|
Noninterest expense
|
|
|
48,685
|
|
|
|
58,623
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
3,288
|
|
|
|
11,166
|
|
Provision/(benefit) for income taxes
|
|
|
1,024
|
|
|
|
3,892
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
2,264
|
|
|
$
|
7,274
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
1,875,708
|
|
|
$
|
2,269,678
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Net interest income/(expense)
|
|
$
|
(14,100
|
)
|
|
$
|
(14,363
|
)
|
Noninterest income
|
|
|
5,476
|
|
|
|
5,723
|
|
Noninterest expense
|
|
|
16,880
|
|
|
|
13,461
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
(25,504
|
)
|
|
|
(22,101
|
)
|
Provision/(benefit) for income taxes
|
|
|
(13,093
|
)
|
|
|
(11,246
|
)
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
(12,411
|
)
|
|
$
|
(10,855
|
)
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
7,359,015
|
|
|
$
|
6,362,224
|
|
|
|
|
|
|
|
|
|
|
Non-Strategic
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
9,268
|
|
|
$
|
11,458
|
|
Provision/(provision credit) for loan losses
|
|
|
(4,098
|
)
|
|
|
(11,767
|
)
|
Noninterest income
|
|
|
1,665
|
|
|
|
2,184
|
|
Noninterest expense
|
|
|
8,575
|
|
|
|
9,444
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
|
6,456
|
|
|
|
15,965
|
|
Provision/(benefit) for income taxes
|
|
|
2,500
|
|
|
|
6,186
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
3,956
|
|
|
$
|
9,779
|
|
|
|
|
|
|
|
|
|
|
Average assets
|
|
$
|
1,616,064
|
|
|
$
|
2,041,600
|
|
|
|
|
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
34
Note 13 Variable Interest Entities
ASC 810 defines a VIE as a legal entity where (a) the equity investors, as a group, lack sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support, (b) the equity investors, as a group, lack either, (1) the power through voting rights, or similar rights, to direct the activities of an entity that most significantly impact
the entitys economic performance, (2) the obligation to absorb the expected losses of the entity, or (3) the right to receive the expected residual returns of the entity, or (c) 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. Through first quarter 2016 the trust experienced a rapid
amortization period and FHN was obligated to provide subordinated funding. During the period, cash payments from borrowers were accumulated to repay outstanding debt securities while FHN continued to make advances to borrowers when they drew on
their lines of credit. FHN then transferred the newly generated receivables into the securitization trust. FHN is reimbursed for these advances 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.
35
Note 13 Variable Interest Entities (Continued)
The following table summarizes VIEs consolidated by FHN as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
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
|
|
$
|
|
|
|
|
N/A
|
|
|
$
|
|
|
|
|
N/A
|
|
Loans, net of unearned income
|
|
|
32,486
|
|
|
|
N/A
|
|
|
|
35,873
|
|
|
|
N/A
|
|
Less: Allowance for loan losses
|
|
|
244
|
|
|
|
N/A
|
|
|
|
587
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net loans
|
|
|
32,242
|
|
|
|
N/A
|
|
|
|
35,286
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
150
|
|
|
$
|
76,149
|
|
|
|
283
|
|
|
$
|
74,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
32,392
|
|
|
$
|
76,149
|
|
|
$
|
35,569
|
|
|
$
|
74,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term borrowings
|
|
$
|
19,819
|
|
|
|
N/A
|
|
|
$
|
23,126
|
|
|
|
N/A
|
|
Other liabilities
|
|
|
3
|
|
|
$
|
57,559
|
|
|
|
3
|
|
|
$
|
54,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
19,822
|
|
|
$
|
57,559
|
|
|
$
|
23,129
|
|
|
$
|
54,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 units
that are 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 17, 2017 and 2016. 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,
2017, and 2016 for LIHTC investments accounted for under the proportional amortization method.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three Months Ended
March 31, 2017
|
|
|
Three Months Ended
March 31, 2016
|
|
Provision/(benefit) for income taxes:
|
|
|
|
|
|
|
|
|
Amortization of qualifying LIHTC investments
|
|
$
|
2,278
|
|
|
$
|
2,298
|
|
Low income housing tax credits
|
|
|
(2,400
|
)
|
|
|
(2,523
|
)
|
Other tax benefits related to qualifying LIHTC investments
|
|
|
(919
|
)
|
|
|
(1,110
|
)
|
36
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 Residential Mortgage Securitizations.
FHN holds variable interests (primarily principal-only strips) in proprietary residential
mortgage securitization trusts it established prior to 2008 as a source of liquidity for its mortgage banking operations. Prior to fourth quarter 2016 these interests included MSR and interest-only strips. 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 it held MSR, FHN was assumed to have the power as servicer to most significantly impact the activities of such VIEs. However, in situations where FHN did not have the ability to participate in significant portions of a
securitization trusts cash flows, FHN was not considered the primary beneficiary of the trust. Therefore, these trusts were not consolidated by FHN.
37
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
. FTB has entered into an agreement with a single asset leasing entity for the sale and leaseback 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.
38
Note 13 Variable Interest Entities (Continued)
The following table summarizes FHNs nonconsolidated VIEs as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Maximum
Loss Exposure
|
|
|
Liability
Recognized
|
|
|
Classification
|
|
Type
|
|
|
|
|
|
|
|
|
|
|
|
|
Low income housing partnerships
|
|
$
|
71,114
|
|
|
$
|
14,749
|
|
|
|
(a)
|
|
Other tax credit investments (b) (c)
|
|
|
21,210
|
|
|
|
|
|
|
|
Other assets
|
|
Small issuer trust preferred holdings (d)
|
|
|
332,959
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
On-balance sheet trust preferred securitization
|
|
|
49,361
|
|
|
|
64,812
|
|
|
|
(e)
|
|
Proprietary residential mortgage securitizations
|
|
|
2,330
|
|
|
|
|
|
|
|
Trading securities
|
|
Holdings of agency mortgage-backed securities (d)
|
|
|
4,289,239
|
|
|
|
|
|
|
|
(f)
|
|
Commercial loan troubled debt restructurings (g)
|
|
|
35,295
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
Sale-leaseback transaction
|
|
|
14,827
|
|
|
|
|
|
|
|
(h)
|
|
(a)
|
Maximum loss exposure represents $56.4 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 2017.
|
(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 $64.8 million classified as Term borrowings.
|
(f)
|
Includes $.5 billion classified as Trading securities and $3.8 billion classified as Securities available-for-sale.
|
(g)
|
Maximum loss exposure represents $34.5 million of current receivables and $.8 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
|
(h)
|
Maximum loss exposure represents the current loan balance plus additional funding commitments less amounts received from the buyer-lessor.
|
The following table summarizes FHNs nonconsolidated VIEs as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Maximum
Loss Exposure
|
|
|
Liability
Recognized
|
|
|
Classification
|
Type
|
|
|
|
|
|
|
|
|
|
|
Low income housing partnerships
|
|
$
|
73,582
|
|
|
$
|
17,398
|
|
|
(a)
|
Other tax credit investments (b) (c)
|
|
|
21,898
|
|
|
|
|
|
|
Other assets
|
Small issuer trust preferred holdings (d)
|
|
|
332,985
|
|
|
|
|
|
|
Loans, net of unearned income
|
On-balance sheet trust preferred securitization
|
|
|
49,361
|
|
|
|
64,812
|
|
|
(e)
|
Proprietary residential mortgage securitizations
|
|
|
2,568
|
|
|
|
|
|
|
Trading securities
|
Holdings of agency mortgage-backed securities (d)
|
|
|
4,163,313
|
|
|
|
|
|
|
(f)
|
Commercial loan troubled debt restructurings (g)
|
|
|
42,696
|
|
|
|
|
|
|
Loans, net of unearned income
|
Sale-leaseback transaction
|
|
|
11,827
|
|
|
|
|
|
|
(h)
|
(a)
|
Maximum loss exposure represents $56.2 million of current investments and $17.4 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 2017.
|
(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 $64.8 million classified as Term borrowings.
|
(f)
|
Includes $.4 billion classified as Trading securities and $3.8 billion classified as Securities available-for-sale.
|
(g)
|
Maximum loss exposure represents $37.5 million of current receivables and $5.2 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
|
(h)
|
Maximum loss exposure represents the current loan balance plus additional funding commitments less amounts received from the buyer-lessor.
|
39
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. Commencing in first
quarter 2017, a central clearinghouse revised the treatment of daily margin posted or received from collateral to legal settlements of the related derivative contracts. This change resulted in a reduction in derivative assets and liabilities and
corresponding reductions in collateral posted and received as these amounts are now presented net by contract in the Consolidated Condensed Statements of Condition. This change has no effect on hedge accounting or gains/losses for the applicable
derivative contracts. On March 31, 2017 and December 31, 2016, respectively, FHN had $41.9 million and $47.8 million of cash receivables and $29.4 million and $32.8 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 upstream 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 $42.7 million and $57.6 million for the three months ended March 31, 2017 and 2016, respectively. Trading revenues are inclusive of both derivative
and non-derivative financial instruments, and are included in fixed income noninterest income.
40
Note 14 Derivatives (Continued)
The following tables summarize FHNs derivatives associated with fixed income trading activities as of
March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts
|
|
$
|
1,743,855
|
|
|
$
|
34,060
|
|
|
$
|
15,510
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,743,855
|
|
|
|
15,258
|
|
|
|
31,677
|
|
Option Contracts Purchased
|
|
|
60,000
|
|
|
|
86
|
|
|
|
|
|
Forwards and Futures Purchased
|
|
|
3,804,024
|
|
|
|
11,817
|
|
|
|
5,230
|
|
Forwards and Futures Sold
|
|
|
3,817,997
|
|
|
|
5,410
|
|
|
|
13,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts
|
|
$
|
1,697,992
|
|
|
$
|
39,495
|
|
|
$
|
14,996
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,697,992
|
|
|
|
14,996
|
|
|
|
39,495
|
|
Option Contracts Purchased
|
|
|
17,500
|
|
|
|
63
|
|
|
|
|
|
Option Contracts Written
|
|
|
5,000
|
|
|
|
|
|
|
|
8
|
|
Forwards and Futures Purchased
|
|
|
2,916,750
|
|
|
|
6,257
|
|
|
|
26,659
|
|
Forwards and Futures Sold
|
|
|
3,085,396
|
|
|
|
27,330
|
|
|
|
6,615
|
|
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, primarily swaps, 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 $.3 million and $1.6 million in Derivative assets as of March 31, 2017 and December 31, 2016,
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 $.5 million in Derivative assets as of March 31, 2017 and $7.3 million in Derivative liabilities as of December 31, 2016. There was an
insignificant level of ineffectiveness related to this hedge.
41
Note 14 Derivatives (Continued)
The following tables summarize FHNs derivatives associated with interest rate risk management
activities as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments and Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Interest Rate Contracts
|
|
$
|
1,450,711
|
|
|
$
|
15,401
|
|
|
$
|
15,388
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,450,711
|
|
|
|
14,053
|
|
|
|
14,277
|
|
Debt Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
900,000
|
|
|
$
|
749
|
|
|
|
N/A
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Borrowings
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
900,000
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Customer Interest Rate Contracts Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments and Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Interest Rate Contracts
|
|
$
|
1,357,920
|
|
|
$
|
17,566
|
|
|
$
|
14,277
|
|
Offsetting Upstream Interest Rate Contracts
|
|
|
1,357,920
|
|
|
|
14,277
|
|
|
|
18,066
|
|
Debt Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
900,000
|
|
|
$
|
1,628
|
|
|
$
|
7,276
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Borrowings
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
900,000
|
(a)
|
(a)
|
Represents par value of term borrowings being hedged.
|
The following table summarizes gains/(losses) on
FHNs derivatives associated with interest rate risk management activities for the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Gains/(Losses)
|
|
|
Gains/(Losses)
|
|
Customer Interest Rate Contracts Hedging
|
|
|
|
|
|
Hedging Instruments and Hedged Items:
|
|
|
|
|
|
|
|
|
Customer Interest Rate Contracts (a)
|
|
$
|
(3,276
|
)
|
|
$
|
12,559
|
|
Offsetting Upstream Interest Rate Contracts (a)
|
|
|
3,276
|
|
|
|
(12,559
|
)
|
Debt Hedging
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
Interest Rate Swaps (a)
|
|
$
|
(2,800
|
)
|
|
$
|
17,037
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
Term Borrowings (a) (b)
|
|
|
2,733
|
|
|
|
(16,745
|
)
|
(a)
|
Gains/losses included in the All other expense section of the Consolidated Condensed Statements of Income.
|
(b)
|
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 3-month LIBOR. In
first quarter 2017, FHN initiated cash flow hedges of $650 million notional amount that have durations between three and seven years. The debt instruments primarily consist of held-to-maturity commercial loans that have variable interest payments
based on 1-month LIBOR. These qualify for hedge accounting as cash flow hedges under ASC 815-20. Changes in the fair value of these derivatives are recorded as a component of AOCI, to the extent that the hedging relationships are effective. Amounts
are reclassified from AOCI to earnings as the hedged cash flows affect earnings. FTB measures the ineffectiveness using the Hypothetical Derivative Method. AOCI is adjusted to an amount that reflects the lesser of either the cumulative change in
fair value of the swaps or the cumulative change in the fair value of the hypothetical derivative instruments. To the extent that any ineffectiveness exists in the hedge relationships, the amounts are recorded in current period earnings. Interest
paid or received for these swaps is recognized as an adjustment to interest income of the assets whose cash flows are being hedged.
42
Note 14 Derivatives (Continued)
The following tables summarize FHNs derivative activities associated with cash flow hedges as of
March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
900,000
|
|
|
$
|
1,286
|
|
|
|
N/A
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Variability in Cash Flows Related to Debt Instruments (Primarily Loans)
|
|
|
N/A
|
|
|
$
|
900,000
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
250,000
|
|
|
|
N/A
|
|
|
$
|
2,045
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Variability in Cash Flows Related to Debt Instruments (Primarily Loans)
|
|
|
N/A
|
|
|
$
|
250,000
|
|
|
|
N/A
|
|
The following table summarizes gains/(losses) on FHNs derivatives associated with cash flow hedges for the three months
ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Gains/(Losses)
|
|
|
Gains/(Losses)
|
|
Cash Flow Hedges
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
Interest Rate Swaps (a) (b)
|
|
$
|
(3,101
|
)
|
|
$
|
5,618
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
Variability in Cash Flows Related to Debt Instruments (Primarily Loans)
|
|
|
N/A
|
|
|
|
N/A
|
|
(a)
|
Amount represents the pre-tax gains/(losses) included within AOCI.
|
(b)
|
Includes approximately $1.5 million of losses 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
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. These hedges expire in third quarter 2017.
43
Note 14 Derivatives (Continued)
The following tables summarize FHNs derivative activities associated with held-to-maturity trust
preferred loans as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Loan Portfolio Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
6,500
|
|
|
|
N/A
|
|
|
$
|
134
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust Preferred Loans (a)
|
|
|
N/A
|
|
|
$
|
6,500
|
(b)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Notional
|
|
|
Assets
|
|
|
Liabilities
|
|
Loan Portfolio Hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
6,500
|
|
|
|
N/A
|
|
|
$
|
208
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust Preferred Loans (a)
|
|
|
N/A
|
|
|
$
|
6,500
|
(b)
|
|
|
N/A
|
|
(a)
|
Assets included in the Loans, net of unearned income section of the Consolidated Condensed Statements of Condition.
|
(b)
|
Represents principal balance being hedged.
|
The following table summarizes gains/(losses) on FHNs
derivatives associated with held-to-maturity trust preferred loans for the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Gains/(Losses)
|
|
|
Gains/(Losses)
|
|
Loan Portfolio Hedging
|
|
|
|
|
|
Hedging Instruments:
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
74
|
|
|
$
|
43
|
|
Hedged Items:
|
|
|
|
|
|
|
|
|
Trust Preferred Loans (a)
|
|
$
|
(74
|
)
|
|
$
|
(42
|
)
|
(a)
|
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, 2017 and December 31, 2016, the derivative liabilities associated with the sales of Visa Class B shares were $6.0 million and $6.2 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, 2017 and December 31, 2016, 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 margin is posted. Cash margin received (posted) that is considered settlements for the derivative contracts is included
in the respective derivative asset (liability) value. Cash margin that is considered collateral received (posted) for interest rate derivatives is recognized as a liability (asset) on FHNs Consolidated Condensed Statements of Condition.
44
Note 14 Derivatives (Continued)
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.
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 $31.3 million of assets and $44.1 million of liabilities on March 31, 2017, and $35.9 million of assets and $49.0 million of liabilities on December 31, 2016. As of March 31, 2017 and
December 31, 2016, FHN had received collateral of $121.2 million and $137.6 million and posted collateral of $33.0 million and $39.3 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 $30.7 million of assets and $19.2 million of liabilities on March 31, 2017, and $35.9 million of assets and $19.6 million of liabilities on December 31, 2016. As of March 31, 2017 and December 31, 2016,
FHN had received collateral of $120.6 million and $137.5 million and posted collateral of $10.0 million and $12.9 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 following tables.
The following table provides details of derivative assets and collateral received as presented on the Consolidated Condensed Statements of Condition as of
March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statements of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
assets
|
|
|
Gross amounts
offset in the
Statements of
Condition
|
|
|
Net amounts of
assets presented
in the Statements
of Condition (a)
|
|
|
Derivative
liabilities
available for
offset
|
|
|
Collateral
Received
|
|
|
Net amount
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017 (b)
|
|
$
|
80,807
|
|
|
$
|
|
|
|
$
|
80,807
|
|
|
$
|
(18,674
|
)
|
|
$
|
(46,189
|
)
|
|
$
|
15,944
|
|
December 31, 2016 (b)
|
|
|
87,962
|
|
|
|
|
|
|
|
87,962
|
|
|
|
(25,953
|
)
|
|
|
(52,888
|
)
|
|
|
9,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in Derivative assets on the Consolidated Condensed Statements of Condition. As of March 31, 2017 and December 31, 2016, $17.3 million and $33.7 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)
|
Amounts are comprised entirely of interest rate derivative contracts.
|
45
Note 14 Derivatives (Continued)
The following table provides details of derivative liabilities and collateral pledged as presented on the
Consolidated Condensed Statements of Condition as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statements of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
liabilities
|
|
|
Gross amounts
offset in the
Statements of
Condition
|
|
|
Net amounts of
liabilities presented
in the Statements
of Condition (a)
|
|
|
Derivative
assets available
for offset
|
|
|
Collateral
pledged
|
|
|
Net amount
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017 (b)
|
|
$
|
76,986
|
|
|
$
|
|
|
|
$
|
76,986
|
|
|
$
|
(18,674
|
)
|
|
$
|
(55,378
|
)
|
|
$
|
2,934
|
|
December 31, 2016 (b)
|
|
|
96,363
|
|
|
|
|
|
|
|
96,363
|
|
|
|
(25,953
|
)
|
|
|
(60,746
|
)
|
|
|
9,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in Derivative liabilities on the Consolidated Condensed Statements of Condition. As of March 31, 2017 and December 31, 2016, $24.4 million and $39.5 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)
|
Amounts are comprised entirely of interest rate derivative contracts.
|
46
Note 15 Master Netting and Similar AgreementsRepurchase, Reverse
Repurchase, and Securities Borrowing Transactions
For repurchase, reverse repurchase and securities borrowing 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 through FHNs fixed income business (Securities purchased under agreements to resell and Securities sold under agreements to repurchase), 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 sold under agreements to repurchase), securities are typically pledged at settlement and not
released until maturity. 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 details 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, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statements of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
assets
|
|
|
Gross amounts
offset in the
Statements of
Condition
|
|
|
Net amounts of
assets presented
in the Statements
of Condition
|
|
|
Offsetting
securities sold
under agreements
to repurchase
|
|
|
Securities collateral
(not recognized on
FHNs Statements
of Condition)
|
|
|
Net amount
|
|
Securities purchased under agreements to resell:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
$
|
835,222
|
|
|
$
|
|
|
|
$
|
835,222
|
|
|
$
|
(150
|
)
|
|
$
|
(828,596
|
)
|
|
$
|
6,476
|
|
December 31, 2016
|
|
|
613,682
|
|
|
|
|
|
|
|
613,682
|
|
|
|
(1,628
|
)
|
|
|
(603,813
|
)
|
|
|
8,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides details 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, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the
Statements of Condition
|
|
|
|
|
(Dollars in thousands)
|
|
Gross amounts
of recognized
liabilities
|
|
|
Gross amounts
offset in the
Statements of
Condition
|
|
|
Net amounts of
liabilities presented
in the Statements
of Condition
|
|
|
Offsetting
securities
purchased under
agreements to resell
|
|
|
Securities
Collateral
|
|
|
Net amount
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
$
|
406,354
|
|
|
$
|
|
|
|
$
|
406,354
|
|
|
$
|
(150
|
)
|
|
$
|
(406,185
|
)
|
|
$
|
19
|
|
December 31, 2016
|
|
|
453,053
|
|
|
|
|
|
|
|
453,053
|
|
|
|
(1,628
|
)
|
|
|
(451,414
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Note 15 Master Netting and Similar AgreementsRepurchase, Reverse Repurchase, and Securities
Borrowing Transactions (Continued)
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 tables provide details, by collateral type, of the remaining contractual maturity of Securities sold under agreements to repurchase as of March 31,
2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Overnight and
Continuous
|
|
|
Up to 30 Days
|
|
|
Total
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
19,344
|
|
|
$
|
|
|
|
$
|
19,344
|
|
Government agency issued MBS
|
|
|
345,156
|
|
|
|
|
|
|
|
345,156
|
|
Government agency issued CMO
|
|
|
29,383
|
|
|
|
12,471
|
|
|
|
41,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities sold under agreements to repurchase
|
|
$
|
393,883
|
|
|
$
|
12,471
|
|
|
$
|
406,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Overnight and
Continuous
|
|
|
Up to 30 Days
|
|
|
Total
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
14,864
|
|
|
$
|
|
|
|
$
|
14,864
|
|
Government agency issued MBS
|
|
|
421,771
|
|
|
|
|
|
|
|
421,771
|
|
Government agency issued CMO
|
|
|
|
|
|
|
16,418
|
|
|
|
16,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities sold under agreements to repurchase
|
|
$
|
436,635
|
|
|
$
|
16,418
|
|
|
$
|
453,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 1Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
|
Level 2Valuation 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 3Valuation 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, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Trading securitiesfixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
107,264
|
|
|
$
|
|
|
|
$
|
107,264
|
|
Government agency issued MBS
|
|
|
|
|
|
|
323,058
|
|
|
|
|
|
|
|
323,058
|
|
Government agency issued CMO
|
|
|
|
|
|
|
213,949
|
|
|
|
|
|
|
|
213,949
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
88,613
|
|
|
|
|
|
|
|
88,613
|
|
States and municipalities
|
|
|
|
|
|
|
83,872
|
|
|
|
|
|
|
|
83,872
|
|
Corporate and other debt
|
|
|
|
|
|
|
346,743
|
|
|
|
5
|
|
|
|
346,748
|
|
Equity, mutual funds, and other
|
|
|
|
|
|
|
1,476
|
|
|
|
|
|
|
|
1,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securitiesfixed income
|
|
|
|
|
|
|
1,164,975
|
|
|
|
5
|
|
|
|
1,164,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securitiesmortgage banking
|
|
|
|
|
|
|
|
|
|
|
2,330
|
|
|
|
2,330
|
|
Loans held-for-sale
|
|
|
|
|
|
|
1,224
|
|
|
|
21,221
|
|
|
|
22,445
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Government agency issued MBS
|
|
|
|
|
|
|
2,159,922
|
|
|
|
|
|
|
|
2,159,922
|
|
Government agency issued CMO
|
|
|
|
|
|
|
1,592,311
|
|
|
|
|
|
|
|
1,592,311
|
|
Equity, mutual funds, and other
|
|
|
25,221
|
|
|
|
|
|
|
|
|
|
|
|
25,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale
|
|
|
25,221
|
|
|
|
3,752,333
|
|
|
|
|
|
|
|
3,777,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation assets
|
|
|
34,109
|
|
|
|
|
|
|
|
|
|
|
|
34,109
|
|
Derivatives, forwards and futures
|
|
|
17,227
|
|
|
|
|
|
|
|
|
|
|
|
17,227
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
80,893
|
|
|
|
|
|
|
|
80,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
51,336
|
|
|
|
80,893
|
|
|
|
|
|
|
|
132,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
76,557
|
|
|
$
|
4,999,425
|
|
|
$
|
23,556
|
|
|
$
|
5,099,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilitiesfixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
657,059
|
|
|
$
|
|
|
|
$
|
657,059
|
|
States and municipalities
|
|
|
|
|
|
|
11,048
|
|
|
|
|
|
|
|
11,048
|
|
Corporate and other debt
|
|
|
|
|
|
|
180,083
|
|
|
|
|
|
|
|
180,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading liabilitiesfixed income
|
|
|
|
|
|
|
848,190
|
|
|
|
|
|
|
|
848,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives, forwards and futures
|
|
|
18,365
|
|
|
|
|
|
|
|
|
|
|
|
18,365
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
76,986
|
|
|
|
|
|
|
|
76,986
|
|
Derivatives, other
|
|
|
|
|
|
|
46
|
|
|
|
5,950
|
|
|
|
5,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
|
18,365
|
|
|
|
77,032
|
|
|
|
5,950
|
|
|
|
101,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
18,365
|
|
|
$
|
925,222
|
|
|
$
|
5,950
|
|
|
$
|
949,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Trading securitiesfixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
146,988
|
|
|
$
|
|
|
|
$
|
146,988
|
|
Government agency issued MBS
|
|
|
|
|
|
|
256,611
|
|
|
|
|
|
|
|
256,611
|
|
Government agency issued CMO
|
|
|
|
|
|
|
150,058
|
|
|
|
|
|
|
|
150,058
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
52,314
|
|
|
|
|
|
|
|
52,314
|
|
States and municipalities
|
|
|
|
|
|
|
60,351
|
|
|
|
|
|
|
|
60,351
|
|
Corporate and other debt
|
|
|
|
|
|
|
227,934
|
|
|
|
5
|
|
|
|
227,939
|
|
Equity, mutual funds, and other
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securitiesfixed income
|
|
|
|
|
|
|
894,498
|
|
|
|
5
|
|
|
|
894,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securitiesmortgage banking
|
|
|
|
|
|
|
|
|
|
|
2,568
|
|
|
|
2,568
|
|
Loans held-for-sale
|
|
|
|
|
|
|
2,345
|
|
|
|
21,924
|
|
|
|
24,269
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Government agency issued MBS
|
|
|
|
|
|
|
2,208,687
|
|
|
|
|
|
|
|
2,208,687
|
|
Government agency issued CMO
|
|
|
|
|
|
|
1,547,958
|
|
|
|
|
|
|
|
1,547,958
|
|
Equity, mutual funds, and other
|
|
|
25,249
|
|
|
|
|
|
|
|
|
|
|
|
25,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available-for-sale
|
|
|
25,249
|
|
|
|
3,756,745
|
|
|
|
|
|
|
|
3,781,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
985
|
|
|
|
985
|
|
Deferred compensation assets
|
|
|
32,840
|
|
|
|
|
|
|
|
|
|
|
|
32,840
|
|
Derivatives, forwards and futures
|
|
|
33,587
|
|
|
|
|
|
|
|
|
|
|
|
33,587
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
88,025
|
|
|
|
|
|
|
|
88,025
|
|
Derivatives, other
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
66,427
|
|
|
|
88,067
|
|
|
|
985
|
|
|
|
155,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
91,676
|
|
|
$
|
4,741,655
|
|
|
$
|
25,482
|
|
|
$
|
4,858,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilitiesfixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries
|
|
$
|
|
|
|
$
|
381,229
|
|
|
$
|
|
|
|
$
|
381,229
|
|
Other U.S. government agencies
|
|
|
|
|
|
|
844
|
|
|
|
|
|
|
|
844
|
|
Corporate and other debt
|
|
|
|
|
|
|
179,775
|
|
|
|
|
|
|
|
179,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading liabilitiesfixed income
|
|
|
|
|
|
|
561,848
|
|
|
|
|
|
|
|
561,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives, forwards and futures
|
|
|
33,274
|
|
|
|
|
|
|
|
|
|
|
|
33,274
|
|
Derivatives, interest rate contracts
|
|
|
|
|
|
|
96,371
|
|
|
|
|
|
|
|
96,371
|
|
Derivatives, other
|
|
|
|
|
|
|
7
|
|
|
|
6,245
|
|
|
|
6,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
|
33,274
|
|
|
|
96,378
|
|
|
|
6,245
|
|
|
|
135,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
33,274
|
|
|
$
|
658,226
|
|
|
$
|
6,245
|
|
|
$
|
697,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017 and 2016, on a recurring basis are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
(Dollars in thousands)
|
|
Trading
securities
|
|
|
Loans held-
for-sale
|
|
|
Net derivative
liabilities
|
|
Balance on January 1, 2017
|
|
$
|
2,573
|
|
|
$
|
21,924
|
|
|
$
|
(6,245
|
)
|
Total net gains/(losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
17
|
|
|
|
922
|
|
|
|
(1
|
)
|
Purchases
|
|
|
|
|
|
|
32
|
|
|
|
|
|
Settlements
|
|
|
(255
|
)
|
|
|
(1,574
|
)
|
|
|
296
|
|
Net transfers into/(out of) Level 3
|
|
|
|
|
|
|
(83
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on March 31, 2017
|
|
$
|
2,335
|
|
|
$
|
21,221
|
|
|
$
|
(5,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains/(losses) included in net income
|
|
$
|
(27
|
)(a)
|
|
$
|
922
|
(a)
|
|
$
|
(1
|
)(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Purchases
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.
|
(b)
|
Transfers out of loans held-for-sale level 3 measured on a recurring basis generally reflect movements into real estate acquired by foreclosure (level 3 nonrecurring).
|
(c)
|
Included in Other expense.
|
52
Note 16 Fair Value of Assets & Liabilities (Continued)
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 lower of cost or market (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, 2017, and December 31, 2016, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at March 31, 2017
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Loans held-for-saleSBAs
|
|
$
|
|
|
|
$
|
3,476
|
|
|
$
|
|
|
|
$
|
3,476
|
|
Loans held-for-salefirst mortgages
|
|
|
|
|
|
|
|
|
|
|
606
|
|
|
|
606
|
|
Loans, net of unearned income (a)
|
|
|
|
|
|
|
|
|
|
|
30,838
|
|
|
|
30,838
|
|
Real estate acquired by foreclosure (b)
|
|
|
|
|
|
|
|
|
|
|
10,259
|
|
|
|
10,259
|
|
Other assets (c)
|
|
|
|
|
|
|
|
|
|
|
28,667
|
|
|
|
28,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at December 31, 2016
|
|
(Dollars in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Loans held-for-saleSBAs
|
|
$
|
|
|
|
$
|
4,286
|
|
|
$
|
|
|
|
$
|
4,286
|
|
Loans held-for-salefirst mortgages
|
|
|
|
|
|
|
|
|
|
|
638
|
|
|
|
638
|
|
Loans, net of unearned income (a)
|
|
|
|
|
|
|
|
|
|
|
31,070
|
|
|
|
31,070
|
|
Real estate acquired by foreclosure (b)
|
|
|
|
|
|
|
|
|
|
|
11,235
|
|
|
|
11,235
|
|
Other assets (c)
|
|
|
|
|
|
|
|
|
|
|
29,609
|
|
|
|
29,609
|
|
(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.
|
(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.
|
For assets measured on a
nonrecurring basis which were still held on the consolidated balance sheet at period end, the following table provides information about the fair value adjustments recorded during the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses)
|
|
|
|
Three months ended March 31,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Loans held-for-saleSBAs
|
|
$
|
(33
|
)
|
|
$
|
|
|
Loans held-for-salefirst mortgages
|
|
|
3
|
|
|
|
5
|
|
Loans, net of unearned income (a)
|
|
|
484
|
|
|
|
(4,672
|
)
|
Real estate acquired by foreclosure (b)
|
|
|
(445
|
)
|
|
|
(536
|
)
|
Other assets (c)
|
|
|
(942
|
)
|
|
|
(706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(933
|
)
|
|
$
|
(5,909
|
)
|
|
|
|
|
|
|
|
|
|
(a)
|
Write-downs on these loans are recognized as part of provision for loan losses.
|
(b)
|
Represents 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, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
Level 3 Class
|
|
Fair Value at
March 31, 2017
|
|
|
Valuation Techniques
|
|
Unobservable Input
|
|
Values Utilized
|
Loans held-for-sale - residential real estate
|
|
|
21,827
|
|
|
Discounted cash flow
|
|
Prepayment speeds - First mortgage
|
|
2% - 12%
|
|
|
|
|
|
|
|
|
Prepayment speeds - HELOC
|
|
3% - 15%
|
|
|
|
|
|
|
|
|
Foreclosure losses
|
|
50% - 70%
|
|
|
|
|
|
|
|
|
Loss severity trends - First mortgage
|
|
5% - 50% of UPB
|
|
|
|
|
|
|
|
|
Loss severity trends - HELOC
|
|
15% - 100% of UPB
|
Derivative liabilities, other
|
|
|
5,950
|
|
|
Discounted cash flow
|
|
Visa covered litigation resolution amount
|
|
$4.4 billion - $5.2 billion
|
|
|
|
|
|
|
|
|
Probability of resolution scenarios
|
|
10% - 30%
|
|
|
|
|
|
|
|
|
Time until resolution
|
|
21 - 51 months
|
Loans, net of unearned
income (a)
|
|
|
30,838
|
|
|
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)
|
|
|
10,259
|
|
|
Appraisals from comparable properties
|
|
Adjustment for value changes since appraisal
|
|
0% - 10% of appraisal
|
Other assets (c)
|
|
|
28,667
|
|
|
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
December 31,
2016
|
|
|
Valuation Techniques
|
|
Unobservable Input
|
|
Values Utilized
|
Loans held-for-sale - residential real estate
|
|
|
22,562
|
|
|
Discounted cash flow
|
|
Prepayment speeds - First mortgage
|
|
2% - 13%
|
|
|
|
|
|
|
|
|
Prepayment speeds - HELOC
|
|
3% - 15%
|
|
|
|
|
|
|
|
|
Foreclosure Losses
|
|
50% - 70%
|
|
|
|
|
|
|
|
|
Loss severity trends - First mortgage
|
|
5% - 50% of UPB
|
|
|
|
|
|
|
|
|
Loss severity trends - HELOC
|
|
15% - 100% of UPB
|
Derivative liabilities, other
|
|
|
6,245
|
|
|
Discounted cash flow
|
|
Visa covered litigation resolution amount
|
|
$4.4 billion - $5.2 billion
|
|
|
|
|
|
|
|
|
Probability of resolution scenarios
|
|
10% - 30%
|
|
|
|
|
|
|
|
|
Time until resolution
|
|
24 - 54 months
|
Loans, net of unearned income (a)
|
|
|
31,070
|
|
|
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)
|
|
|
11,235
|
|
|
Appraisals from comparable properties
|
|
Adjustment for value changes since appraisal
|
|
0% - 10% of appraisal
|
Other assets (c)
|
|
|
29,609
|
|
|
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.
|
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. 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 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. FHN uses a discounted cash flow methodology in order to estimate the fair value of
FHNs 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.
55
Note 16 Fair Value of Assets & Liabilities (Continued)
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). The Credit Risk Management Committee reviews dispositions and additions of foreclosed assets annually. Back
testing is performed during the year through comparison to ultimate disposition values. 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 has 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 reduces certain timing differences and better matches changes in
the value of such loans with changes in the value of derivatives and forward delivery commitments 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.
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, 2017
|
|
(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
|
|
$
|
22,444
|
|
|
$
|
32,427
|
|
|
$
|
(9,983
|
)
|
Nonaccrual loans
|
|
|
6,689
|
|
|
|
12,305
|
|
|
|
(5,616
|
)
|
Loans 90 days or more past due and still accruing
|
|
|
120
|
|
|
|
158
|
|
|
|
(38
|
)
|
|
|
|
|
December 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
|
|
$
|
24,269
|
|
|
$
|
35,262
|
|
|
$
|
(10,993
|
)
|
Nonaccrual loans
|
|
|
6,775
|
|
|
|
12,910
|
|
|
|
(6,135
|
)
|
Loans 90 days or more past due and still accruing
|
|
|
211
|
|
|
|
331
|
|
|
|
(120
|
)
|
56
Note 16 Fair Value of Assets & Liabilities (Continued)
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)
|
|
2017
|
|
|
2016
|
|
Changes in fair value included in net income:
|
|
|
|
|
|
|
|
|
Mortgage banking noninterest income
|
|
|
|
|
|
|
|
|
Loans held-for-sale
|
|
$
|
922
|
|
|
$
|
342
|
|
For the three months ended March 31, 2017, and 2016, the amounts for residential real estate loans held-for-sale include
gains of $.2 million and $.1 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 primarily principal-only strips.
FHN uses inputs including yield curves, credit spreads, and prepayment speeds to determine the fair value of principal-only strips.
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.
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 when available. Cost method investments are valued at historical cost less any recorded impairment due to the illiquid nature of these investments.
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.
57
Note 16 Fair Value of Assets & Liabilities (Continued)
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, including committed bids for specific loans or loan portfolios. 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 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.
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.
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) 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. For derivative contracts with daily cash margin requirements that
are considered settlements, the daily margin amount is netted within derivative assets or liabilities. 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
58
Note 16 Fair Value of Assets & Liabilities (Continued)
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.
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 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.
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, 2017 and December 31, 2016, 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 changes in economic conditions since origination 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 FHNs 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 FHN.
59
Note 16 Fair Value of Assets & Liabilities (Continued)
The following table summarizes the book value and estimated fair value of financial instruments recorded in
the Consolidated Condensed Statements of Condition as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
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
|
|
$
|
11,610,889
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11,520,970
|
|
|
$
|
11,520,970
|
|
Commercial real estate
|
|
|
2,142,423
|
|
|
|
|
|
|
|
|
|
|
|
2,112,591
|
|
|
|
2,112,591
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
|
|
4,407,131
|
|
|
|
|
|
|
|
|
|
|
|
4,325,035
|
|
|
|
4,325,035
|
|
Permanent mortgage
|
|
|
393,342
|
|
|
|
|
|
|
|
|
|
|
|
393,859
|
|
|
|
393,859
|
|
Credit card & other
|
|
|
334,321
|
|
|
|
|
|
|
|
|
|
|
|
334,868
|
|
|
|
334,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income and allowance for loan losses
|
|
|
18,888,106
|
|
|
|
|
|
|
|
|
|
|
|
18,687,323
|
|
|
|
18,687,323
|
|
Short-term financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
2,106,597
|
|
|
|
2,106,597
|
|
|
|
|
|
|
|
|
|
|
|
2,106,597
|
|
Federal funds sold
|
|
|
31,495
|
|
|
|
|
|
|
|
31,495
|
|
|
|
|
|
|
|
31,495
|
|
Securities purchased under agreements to resell
|
|
|
835,222
|
|
|
|
|
|
|
|
835,222
|
|
|
|
|
|
|
|
835,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial assets
|
|
|
2,973,314
|
|
|
|
2,106,597
|
|
|
|
866,717
|
|
|
|
|
|
|
|
2,973,314
|
|
Trading securities (a)
|
|
|
1,167,310
|
|
|
|
|
|
|
|
1,164,975
|
|
|
|
2,335
|
|
|
|
1,167,310
|
|
Loans held-for-sale
|
|
|
105,456
|
|
|
|
|
|
|
|
4,700
|
|
|
|
100,756
|
|
|
|
105,456
|
|
Securities available-for-sale (a) (b)
|
|
|
3,939,278
|
|
|
|
25,221
|
|
|
|
3,752,333
|
|
|
|
161,724
|
|
|
|
3,939,278
|
|
Securities held-to-maturity
|
|
|
14,354
|
|
|
|
|
|
|
|
|
|
|
|
14,803
|
|
|
|
14,803
|
|
Derivative assets (a)
|
|
|
98,120
|
|
|
|
17,227
|
|
|
|
80,893
|
|
|
|
|
|
|
|
98,120
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit investments
|
|
|
96,824
|
|
|
|
|
|
|
|
|
|
|
|
94,884
|
|
|
|
94,884
|
|
Deferred compensation assets
|
|
|
34,109
|
|
|
|
34,109
|
|
|
|
|
|
|
|
|
|
|
|
34,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
130,933
|
|
|
|
34,109
|
|
|
|
|
|
|
|
94,884
|
|
|
|
128,993
|
|
Nonearning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & due from banks
|
|
|
369,290
|
|
|
|
369,290
|
|
|
|
|
|
|
|
|
|
|
|
369,290
|
|
Fixed income receivables
|
|
|
168,315
|
|
|
|
|
|
|
|
168,315
|
|
|
|
|
|
|
|
168,315
|
|
Accrued interest receivable
|
|
|
61,832
|
|
|
|
|
|
|
|
61,832
|
|
|
|
|
|
|
|
61,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonearning assets
|
|
|
599,437
|
|
|
|
369,290
|
|
|
|
230,147
|
|
|
|
|
|
|
|
599,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
27,916,308
|
|
|
$
|
2,552,444
|
|
|
$
|
6,099,765
|
|
|
$
|
19,061,825
|
|
|
$
|
27,714,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined maturity
|
|
$
|
1,385,818
|
|
|
$
|
|
|
|
$
|
1,391,170
|
|
|
$
|
|
|
|
$
|
1,391,170
|
|
Undefined maturity
|
|
|
22,094,023
|
|
|
|
|
|
|
|
22,094,023
|
|
|
|
|
|
|
|
22,094,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
23,479,841
|
|
|
|
|
|
|
|
23,485,193
|
|
|
|
|
|
|
|
23,485,193
|
|
Trading liabilities (a)
|
|
|
848,190
|
|
|
|
|
|
|
|
848,190
|
|
|
|
|
|
|
|
848,190
|
|
Short-term financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
504,805
|
|
|
|
|
|
|
|
504,805
|
|
|
|
|
|
|
|
504,805
|
|
Securities sold under agreements to repurchase
|
|
|
406,354
|
|
|
|
|
|
|
|
406,354
|
|
|
|
|
|
|
|
406,354
|
|
Other short-term borrowings
|
|
|
79,454
|
|
|
|
|
|
|
|
79,454
|
|
|
|
|
|
|
|
79,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial liabilities
|
|
|
990,613
|
|
|
|
|
|
|
|
990,613
|
|
|
|
|
|
|
|
990,613
|
|
Term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investment trust-preferred
|
|
|
46,049
|
|
|
|
|
|
|
|
|
|
|
|
49,350
|
|
|
|
49,350
|
|
Term borrowingsnew market tax credit investment
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
17,934
|
|
|
|
17,934
|
|
Borrowings secured by residential real estate
|
|
|
19,819
|
|
|
|
|
|
|
|
|
|
|
|
18,828
|
|
|
|
18,828
|
|
Other long term borrowings
|
|
|
951,168
|
|
|
|
|
|
|
|
967,792
|
|
|
|
|
|
|
|
967,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total term borrowings
|
|
|
1,035,036
|
|
|
|
|
|
|
|
967,792
|
|
|
|
86,112
|
|
|
|
1,053,904
|
|
Derivative liabilities (a)
|
|
|
101,347
|
|
|
|
18,365
|
|
|
|
77,032
|
|
|
|
5,950
|
|
|
|
101,347
|
|
Other noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income payables
|
|
|
21,116
|
|
|
|
|
|
|
|
21,116
|
|
|
|
|
|
|
|
21,116
|
|
Accrued interest payable
|
|
|
17,696
|
|
|
|
|
|
|
|
17,696
|
|
|
|
|
|
|
|
17,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest-bearing liabilities
|
|
|
38,812
|
|
|
|
|
|
|
|
38,812
|
|
|
|
|
|
|
|
38,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
26,493,839
|
|
|
$
|
18,365
|
|
|
$
|
26,407,632
|
|
|
$
|
92,062
|
|
|
$
|
26,518,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
60
Note 16 Fair Value of Assets & Liabilities (Continued)
The following table summarizes the book value and estimated fair value of financial instruments recorded in
the Consolidated Statements of Condition as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 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
|
|
$
|
12,058,689
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11,918,374
|
|
|
$
|
11,918,374
|
|
Commercial real estate
|
|
|
2,101,671
|
|
|
|
|
|
|
|
|
|
|
|
2,078,306
|
|
|
|
2,078,306
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
|
|
4,473,395
|
|
|
|
|
|
|
|
|
|
|
|
4,385,669
|
|
|
|
4,385,669
|
|
Permanent mortgage
|
|
|
406,836
|
|
|
|
|
|
|
|
|
|
|
|
404,930
|
|
|
|
404,930
|
|
Credit card & other
|
|
|
346,861
|
|
|
|
|
|
|
|
|
|
|
|
347,577
|
|
|
|
347,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income and allowance for loan losses
|
|
|
19,387,452
|
|
|
|
|
|
|
|
|
|
|
|
19,134,856
|
|
|
|
19,134,856
|
|
Short-term financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing cash
|
|
|
1,060,034
|
|
|
|
1,060,034
|
|
|
|
|
|
|
|
|
|
|
|
1,060,034
|
|
Federal funds sold
|
|
|
50,838
|
|
|
|
|
|
|
|
50,838
|
|
|
|
|
|
|
|
50,838
|
|
Securities purchased under agreements to resell
|
|
|
613,682
|
|
|
|
|
|
|
|
613,682
|
|
|
|
|
|
|
|
613,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial assets
|
|
|
1,724,554
|
|
|
|
1,060,034
|
|
|
|
664,520
|
|
|
|
|
|
|
|
1,724,554
|
|
Trading securities (a)
|
|
|
897,071
|
|
|
|
|
|
|
|
894,498
|
|
|
|
2,573
|
|
|
|
897,071
|
|
Loans held-for-sale
|
|
|
111,248
|
|
|
|
|
|
|
|
6,631
|
|
|
|
104,617
|
|
|
|
111,248
|
|
Securities available-for-sale (a) (b)
|
|
|
3,943,499
|
|
|
|
25,249
|
|
|
|
3,756,745
|
|
|
|
161,505
|
|
|
|
3,943,499
|
|
Securities held-to-maturity
|
|
|
14,347
|
|
|
|
|
|
|
|
|
|
|
|
14,773
|
|
|
|
14,773
|
|
Derivative assets (a)
|
|
|
121,654
|
|
|
|
33,587
|
|
|
|
88,067
|
|
|
|
|
|
|
|
121,654
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit investments
|
|
|
100,105
|
|
|
|
|
|
|
|
|
|
|
|
98,400
|
|
|
|
98,400
|
|
Deferred compensation assets
|
|
|
32,840
|
|
|
|
32,840
|
|
|
|
|
|
|
|
|
|
|
|
32,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
132,945
|
|
|
|
32,840
|
|
|
|
|
|
|
|
98,400
|
|
|
|
131,240
|
|
Nonearning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & due from banks
|
|
|
373,274
|
|
|
|
373,274
|
|
|
|
|
|
|
|
|
|
|
|
373,274
|
|
Fixed income receivables
|
|
|
57,411
|
|
|
|
|
|
|
|
57,411
|
|
|
|
|
|
|
|
57,411
|
|
Accrued interest receivable
|
|
|
62,887
|
|
|
|
|
|
|
|
62,887
|
|
|
|
|
|
|
|
62,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonearning assets
|
|
|
493,572
|
|
|
|
373,274
|
|
|
|
120,298
|
|
|
|
|
|
|
|
493,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
26,826,342
|
|
|
$
|
1,524,984
|
|
|
$
|
5,530,759
|
|
|
$
|
19,516,724
|
|
|
$
|
26,572,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined maturity
|
|
$
|
1,355,133
|
|
|
$
|
|
|
|
$
|
1,361,104
|
|
|
$
|
|
|
|
$
|
1,361,104
|
|
Undefined maturity
|
|
|
21,317,230
|
|
|
|
|
|
|
|
21,317,230
|
|
|
|
|
|
|
|
21,317,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
22,672,363
|
|
|
|
|
|
|
|
22,678,334
|
|
|
|
|
|
|
|
22,678,334
|
|
Trading liabilities (a)
|
|
|
561,848
|
|
|
|
|
|
|
|
561,848
|
|
|
|
|
|
|
|
561,848
|
|
Short-term financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
414,207
|
|
|
|
|
|
|
|
414,207
|
|
|
|
|
|
|
|
414,207
|
|
Securities sold under agreements to repurchase
|
|
|
453,053
|
|
|
|
|
|
|
|
453,053
|
|
|
|
|
|
|
|
453,053
|
|
Other short-term borrowings
|
|
|
83,177
|
|
|
|
|
|
|
|
83,177
|
|
|
|
|
|
|
|
83,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term financial liabilities
|
|
|
950,437
|
|
|
|
|
|
|
|
950,437
|
|
|
|
|
|
|
|
950,437
|
|
Term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investment trust-preferred
|
|
|
46,032
|
|
|
|
|
|
|
|
|
|
|
|
49,350
|
|
|
|
49,350
|
|
Term borrowingsnew market tax credit investment
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
17,918
|
|
|
|
17,918
|
|
Borrowings secured by residential real estate
|
|
|
23,126
|
|
|
|
|
|
|
|
|
|
|
|
21,969
|
|
|
|
21,969
|
|
Other long term borrowings
|
|
|
953,498
|
|
|
|
|
|
|
|
965,066
|
|
|
|
|
|
|
|
965,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total term borrowings
|
|
|
1,040,656
|
|
|
|
|
|
|
|
965,066
|
|
|
|
89,237
|
|
|
|
1,054,303
|
|
Derivative liabilities (a)
|
|
|
135,897
|
|
|
|
33,274
|
|
|
|
96,378
|
|
|
|
6,245
|
|
|
|
135,897
|
|
Other noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income payables
|
|
|
21,002
|
|
|
|
|
|
|
|
21,002
|
|
|
|
|
|
|
|
21,002
|
|
Accrued interest payable
|
|
|
10,336
|
|
|
|
|
|
|
|
10,336
|
|
|
|
|
|
|
|
10,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest-bearing liabilities
|
|
|
31,338
|
|
|
|
|
|
|
|
31,338
|
|
|
|
|
|
|
|
31,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
25,392,539
|
|
|
$
|
33,274
|
|
|
$
|
25,283,401
|
|
|
$
|
95,482
|
|
|
$
|
25,412,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $68.6 million.
|
61
Note 16 Fair Value of Assets & Liabilities (Continued)
The following table presents the contractual amount and fair value of unfunded loan commitments and standby
and other commitments as of March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Amount
|
|
|
Fair Value
|
|
(Dollars in thousands)
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Unfunded Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
9,430,508
|
|
|
$
|
8,744,649
|
|
|
$
|
2,612
|
|
|
$
|
2,924
|
|
Standby and other commitments
|
|
|
273,029
|
|
|
|
277,549
|
|
|
|
4,230
|
|
|
|
4,037
|
|
62