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A
STRONG REGIONAL FINANCIAL SERVICES COMPANY
First Horizon is a financial services company with approximately 10,000 employees. We are one of the nation's top 30 bank holding companies in asset size, with $37.0 billion in assets at year-end. We are recognized as one of the nation's best employers by AARP and Working Mother magazines. Our company also was named one of the nation's 100 best corporate citizens by CRO magazine. In
2007 we
refocused our business strategy:
• Concentrated
banking investments in Tennessee
• Leveraged
First Tennessee banking franchise regionally
• Reduced
mortgage exposure and national real estate lending
• Improved
efficiency and productivity
• Continued
diversification of capital markets business, FTN
Financial |
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CEO
MESSAGE:
When
I
reflect on 2007, I think of a year with unusual challenges that tested
our
resolve and changed our organization. Although much was accomplished,
we
know we have a lot of work ahead, and we will continue to make decisions
that will reward shareholders over the long term.
The
source of
much of our adversity was a strategy that emphasized national real
estate
lending. During a period of increasingly unfavorable credit conditions
and
deteriorating housing values nationally, our mortgage business incurred
operating losses and our national construction lending portfolios'
credit
quality deteriorated.
These
conditions led us to adjust our strategy to create a more appropriately
sized mortgage company and to refocus on our strengths in
retail/commercial banking. The result is to shift capital away from
and
reduce our exposure to the more volatile, lower-return national mortgage
business. During 2007 and continuing into 2008, we significantly
downsized
our mortgage |
sales
force,
sold $7.3 billion of our mortgage servicing portfolio, curtailed
national
construction lending, and ceased national home builder and commercial
real
estate lending to focus our lending in Tennessee and the Southeast.
As
asset quality in our national portfolios deteriorated, we also increased
our reserves for loan losses, and, as of last month, we divested
the
majority of our First Horizon Banks.
We
are a statewide market leader,
with
leading market share in four
of
Tennessee's five major markets.
Another
significant action we took was to lower our dividend from $0.45
per share to
$0.20 per share. This was a difficult decision, but we did not
make it
lightly; it should have a positive effect on capital ratios as
we face
serious ongoing challenges in the banking
environment. |
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Amidst
these tough challenges, our fundamentals are strong. We experienced
continued growth of our traditional Tennessee banking franchise,
and we see even more opportunities ahead for market share growth.
We are a statewide market leader, with leading market share in
four of Tennessee's five major markets. We can improve our position
even more by building new financial centers with a particular
emphasis on Middle Tennessee, the one region in which we don't
have a leading market share, growing deposits and wealth management
services and adding top talent to further improve our performance.
And
our banking business is more than Tennessee. First Tennessee
has had customers throughout
CUSTOMER
MARKET SHARE
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the
Southeast for decades, and we've added regional commercial lending
offices in nearby states in recent years.
By
focusing on our fundamental
strengths,
we are positioning the
company
for better long-term returns
on
capital and shareholder value.
We
also are focused on our capital markets group, which rebounded
nicely late in the year after experiencing the adverse impacts
of credit market disruptions in third quarter. We expect this
historically successful fixed income sales business to continue
to benefit in response to the Fed's recent rate reductions and
other market factors. We also continue to diversify into sales
of other products, including structured finance, investment banking,
equity research, loan sales and portfolio advisory services. |
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We
also saw,
and will continue to see, additional opportunities to be more efficient
and productive. In 2007 we put in place important efficiency initiatives
and have now achieved our $175 million annual cost-reduction target.
We
will
continue to focus on realizing additional efficiency improvements
in
2008.
Since
2006
we've reduced our number of employees by more than 20 percent. It
was not
easy, but the strength of our culture is showing even in the tough
times.
Our workforce is committed to making the changes that are appropriate
in
this environment. We
have
outstanding people, and they are empowered to build better relationships
with our customers. |
The
future of
the economy remains unclear, but our mission is not. By focusing
on our
fundamental strengths, we are positioning the company for better
long-term
returns on capital and shareholder value.
Sincerely,
 Gerald
L.
Baker
President
and
Chief Executive Officer
March
1,
2008 |
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FINANCIAL INFORMATION AND DISCUSSION
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Results of Operations and Financial Condition |
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Report of Management on Internal Control over Financial Reporting |
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121 |
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Consolidated Average Balance Sheets and Related Yields and Rates |
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124 |
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125 |
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FIRST HORIZON NATIONAL CORPORATION
SELECTED FINANCIAL AND OPERATING DATA
(Dollars in millions except per share data)
2007
2006
2005
2004
2003
2002 (Loss)/income from continuing operations
$
(174.9
)
$
250.8
$
410.7
$
430.1
$
445.2
$
355.3 Income from discontinued operations, net of tax
4.8
210.8
17.1
15.6
7.4
6.6 (Loss)/income before cumulative effect of changes in accounting principle
(170.1
)
461.6
427.8
445.7
452.6
361.9 Cumulative effect of changes in accounting principle, net of tax
-
1.3
(3.1
)
-
-
- Net (loss)/income
(170.1
)
462.9
424.7
445.7
452.6
361.9 Common Stock Data (Loss)/earnings per common share from continuing operations
$
(1.39
)
$
2.02
$
3.27
$
3.45
$
3.51
$
2.80 (Loss)/earnings per common share before cumulative effect of changes in accounting principle
(1.35
)
3.71
3.41
3.57
3.57
2.86 (Loss)/earnings per common share
(1.35
)
3.72
3.38
3.57
3.57
2.86 Diluted (loss)/earnings per common share from continuing operations
(1.39
)
1.96
3.17
3.35
3.40
2.73 Diluted (loss)/earnings per common share before cumulative effect of changes in accounting principle
(1.35
)
3.61
3.31
3.47
3.46
2.78 Diluted (loss)/earnings per common share
(1.35
)
3.62
3.28
3.47
3.46
2.78 Cash dividends declared per common share
1.80
1.80
1.74
1.63
1.30
1.05 Year-end book value per common share
16.83
19.61
18.46
16.66
15.26
13.56 Closing price of common stock per share: High
45.13
42.76
44.55
48.01
47.98
40.45 Low
18.00
37.20
35.13
41.59
36.14
30.05 Year-end
18.15
41.78
38.44
43.11
44.10
35.94 Dividends per common share/year-end closing price
9.9
%
4.3
%
4.5
%
3.8
%
2.9
%
2.9
% Dividends per common share/diluted earnings per common share
NM
49.7
53.0
47.0
37.6
37.8 Price/earnings ratio
NM
11.5
x
11.7
x
12.4
x
12.7
x
12.9
x Market capitalization
$
2,303.8
$
5,246.4
$
4,888.7
$
5,368.0
$
5,552.0
$
4,553.9 Average shares (thousands)
125,843
124,453
125,475
124,730
126,765
126,714 Average diluted shares (thousands)
125,843
127,917
129,364
128,436
130,876
130,221 Period-end shares outstanding (thousands)
126,366
124,866
126,222
123,532
124,834
125,600 Volume of shares traded (thousands)
463,266
176,158
162,220
173,177
176,528
139,946 Selected Average Balances Total assets
$
38,175.4
$
38,764.6
$
36,560.4
$
27,305.8
$
25,133.6
$
20,704.0 Total assets – divestiture
123.1
-
-
-
-
- Total loans*
22,106.7
21,504.2
18,334.7
15,440.5
12,679.8
10,645.6 Total loans held for sale – divestiture
117.8
-
-
-
-
- Investment securities
3,380.2
3,481.5
2,906.2
2,471.1
2,563.5
2,480.3 Earning assets
33,405.4
34,042.3
31,976.2
23,740.3
21,347.5
17,411.3 Deposits
20,313.8
22,751.7
23,015.8
17,635.5
16,111.6
13,674.8 Total deposits – divestiture
95.3
-
-
-
-
- Long-term debt
6,567.7
5,062.4
2,560.1
2,248.0
1,342.9
685.5 Shareholders’ equity
2,423.5
2,423.0
2,177.0
1,937.7
1,829.4
1,592.5 Selected Period-End Balances Total assets
$
37,015.5
$
37,918.3
$
36,579.1
$
29,771.7
$
24,506.7
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