8-K/A
FIRST HORIZON CORP (FHN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
June 29, 2020
Date of Report (date of earliest event reported)
First Horizon National Corporation
(Exact name of registrant as specified in its charter)
| TN | 001-15185 | 62-0803242 | |
|---|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | |
| 165 Madison Avenue | Memphis, | Tennessee | 38103 |
| (Address of Principal Executive Offices) | (Zip Code) |
(901) 523-4444
Registrant's telephone number, including area code
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Exchange on which Registered |
|---|---|---|
| $0.625 Par Value Common Capital Stock | FHN | New York Stock Exchange LLC |
| Depositary Shares, each representing a 1/4,000th interest in | FHN PR A | New York Stock Exchange LLC |
| a share of Non-Cumulative Perpetual Preferred Stock, Series A | ||
| Depositary Shares, each representing a 1/400th interest in | FHN PR B | New York Stock Exchange LLC |
| a share of Non-Cumulative Perpetual Preferred Stock, Series B | ||
| Depositary Shares, each representing a 1/400th interest in | FHN PR C | New York Stock Exchange LLC |
| a share of Non-Cumulative Perpetual Preferred Stock, Series C | ||
| Depositary Shares, each representing a 1/400th interest in | FHN PR D | New York Stock Exchange LLC |
| a share of Non-Cumulative Perpetual Preferred Stock, Series D | ||
| Depositary Shares, each representing a 1/4,000th interest in | FHN PR E | New York Stock Exchange LLC |
| a share of Non-Cumulative Perpetual Preferred Stock, Series E |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Explanatory Note
On July 1, 2020, First Horizon National Corporation (“First Horizon”) completed its previously announced merger of equals (the “Merger”) with IBERIABANK Corporation (“IBKC”), as previously disclosed in Current Report on Form 8-K dated June 29, 2020. This Amendment on Form 8-K/A is being filed by First Horizon to amend item 9.01 of the Original 8-K solely to present certain financial information in connection with the Mergers.
ITEM 9.01. Financial Statements and Exhibits.
a) Financial Statements of Business Acquired
The financial statements of IBKC required by this Item 9.01(a) are filed as Exhibits 99.1- 99.2 to this Form 8-K/A and incorporated herein by reference.
(b) Pro-Forma Financial Information
The pro forma financial information required by this Item 9.01(b) are filed as Exhibit 99.3 to this Form 8-K/A and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| First Horizon National Corporation | |||
|---|---|---|---|
| Date: | September 15, 2020 | By: | /s/ William C. Losch III |
| William C. Losch III | |||
| Senior Executive Vice President and Chief Financial Officer |
Exhibit
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of First Horizon National Corporation on:
| • | Form S-3 (No. 333-229338) |
|---|---|
| • | Forms S-8 (No. 033-64471, 033-63809, 033-57241, 333-16225, 333-16227, 333-70075, 333-91137, 333-92147, 333-92145, 333-56052, 333-73440, 333-73442, 333-106015, 333-108738, 333-108750, 333-109862, 333-212850, 333-110845, 333-123372, 333-123404, 333-124297, 333-124299, 333-133635, 333-147409, 333-156614, 333-166818, 333-181162, 333-211120, 333-219052, 333-238038, 333-235757 and 333-239877) |
| --- | --- |
of our report dated March 2, 2020, with respect to the consolidated balance sheets of IBERIABANK Corporation and subsidiaries as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three-years in the period ended December 31, 2019, incorporated by reference in this Current Report on Form 8-K dated September 15, 2020, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
New Orleans, LA
September 15, 2020
Exhibit
EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following financial statements show unaudited pro forma condensed combined consolidated financial information about the financial condition and results of operations, including per share data, after giving effect to the merger between First Horizon National Corporation (“First Horizon”) and IBERIABANK Corporation (“IBKC”) as well as the purchase of certain branches of Truist Bank by First Horizon Bank (the “Truist Purchase”) and other pro forma adjustments. The transactions were accounted for under the acquisition method of accounting with the assets and liabilities of IBKC and the purchased branches of Truist Bank generally recorded by First Horizon at their respective fair values as of the date the transactions were completed. The unaudited pro forma condensed balance sheet gives effect to the transactions as if the transactions had occurred on June 30, 2020. The unaudited pro forma condensed combined income statements for the six months ended June 30, 2020, and the year ended December 31, 2019, give effect to the transactions as if the transactions had become effective at January 1, 2019. The unaudited selected pro forma combined financial information has been derived from and should be read in conjunction with First Horizon’s Quarterly Report on Form 10-Q for the period ended June 30, 2020, and Annual Report on Form 10-K for the year ended December 31, 2019, and IBKC’s Quarterly Report on Form 10-Q for the period ended March 31, 2020, and Annual Report on Form 10-K for the year ended December 31, 2019.
The IBKC merger was announced on November 4, 2019, and was completed on July 1, 2020. In the merger each outstanding share of IBKC common stock was canceled and converted into the right to receive 4.584 shares of First Horizon common stock. Accordingly, First Horizon issued an aggregate of 243,015,231 of its shares of common stock as merger consideration.
The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of each period presented, nor the impact of possible business model changes. The unaudited pro forma condensed combined financial information also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors.
| FIRST HORIZON NATIONAL CORPORATION | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF CONDITION | ||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||
| (Dollars and shares in thousands, except per share data)(Unaudited) | First Horizon<br><br>(As reported) | Truist Purchase | Truist Purchase Pro Forma Adjustments | Ref | Pro Forma including Truist Purchase | IBKC <br>(As reported)<br><br>(a) | IBKC Pro Forma Adjustments | Ref | Pro Forma First Horizon including Truist Purchase and IBKC | |||||||||
| Assets: | ||||||||||||||||||
| Cash and due from banks | $ | 604,280 | $ | 2,201,685 | $ | (521,433 | ) | A | $ | 2,284,532 | $ | 357,727 | $ | (112,396 | ) | J | $ | 2,529,863 |
| Federal funds sold and securities purchases under agreement to resell | 415,267 | — | — | 415,267 | — | — | 415,267 | |||||||||||
| Total cash and cash equivalents | 1,019,547 | 2,201,685 | (521,433 | ) | 2,699,799 | 357,727 | (112,396 | ) | 2,945,130 | |||||||||
| Interest-bearing deposits with banks | 3,135,844 | — | — | 3,135,844 | 2,009,518 | — | 5,145,362 | |||||||||||
| Trading securities | 1,116,450 | — | — | 1,116,450 | — | — | 1,116,450 | |||||||||||
| Loans held-for-sale | 745,655 | — | — | 745,655 | 307,800 | — | 1,053,455 | |||||||||||
| Investment securities | 5,486,156 | — | — | 5,486,156 | 3,531,492 | 14,872 | K | 9,032,520 | ||||||||||
| Loans and leases, net of unearned income | 32,708,937 | 423,665 | (268 | ) | B | 33,132,334 | 26,078,311 | (126,659 | ) | B | 59,083,986 | |||||||
| Less: Allowance for loan and lease losses | 537,881 | — | 2,355 | C | 540,236 | 397,612 | (122,633 | ) | C | 815,215 | ||||||||
| Total net loans and leases | 32,171,056 | 423,665 | (2,623 | ) | 32,592,098 | 25,680,699 | (4,026 | ) | 58,268,771 | |||||||||
| Goodwill | 1,432,787 | — | 77,644 | D | 1,510,431 | 1,235,533 | (1,235,533 | ) | L | 1,510,431 | ||||||||
| Other intangible assets | 119,608 | — | 7,000 | E | 126,608 | 53,632 | 180,131 | M | 360,371 | |||||||||
| Premises and equipment | 448,028 | 9,899 | 1,066 | F | 458,993 | 295,814 | 14,668 | F | 769,475 | |||||||||
| Real estate acquired by foreclosure | 15,134 | — | — | 15,134 | 13,803 | (5,210 | ) | N | 23,727 | |||||||||
| Other assets | 2,954,394 | 1,459 | 26,241 | G | 2,982,094 | 1,108,445 | 53,644 | O | 4,144,183 | |||||||||
| Total assets | $ | 48,644,659 | $ | 2,636,708 | $ | (412,105 | ) | $ | 50,869,262 | $ | 34,594,463 | $ | (1,093,850 | ) | $ | 84,369,875 | ||
| Liabilities and shareholders' equity: | ||||||||||||||||||
| Deposits | $ | 37,759,351 | $ | 2,191,136 | $ | 3,734 | H | $ | 39,954,221 | $ | 28,317,499 | $ | 22,201 | H | $ | 68,293,921 | ||
| Trading liabilities | 232,742 | — | — | 232,742 | — | — | 232,742 | |||||||||||
| Short-term borrowings | 2,391,697 | — | — | 2,391,697 | 207,171 | — | 2,598,868 | |||||||||||
| Term borrowings | 2,032,476 | — | — | 2,032,476 | 1,167,892 | 31,414 | P | 3,231,782 | ||||||||||
| Other liabilities | 1,020,008 | 2,322 | 27,411 | I | 1,049,741 | 590,953 | 207,675 | Q | 1,848,369 | |||||||||
| Total liabilities | 43,436,274 | 2,193,458 | 31,145 | 45,660,877 | 30,283,515 | 261,290 | 76,205,682 | |||||||||||
| Shareholders' equity |
2
| Preferred stock | 240,289 | — | — | 240,289 | 228,485 | 2,156 | R | 470,930 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common stock | 195,224 | — | — | 195,224 | 52,886 | 98,999 | S | 347,109 | |||||||||||
| Capital surplus | 2,940,610 | — | — | 2,940,610 | 2,698,087 | (583,323 | ) | T | 5,055,374 | ||||||||||
| Retained earnings | 1,671,629 | — | — | 1,671,629 | 1,224,193 | (765,675 | ) | U | 2,130,147 | ||||||||||
| Accumulated other comprehensive loss, net | (134,798 | ) | — | — | (134,798 | ) | 107,297 | (107,297 | ) | V | (134,798 | ) | |||||||
| Shareholders' equity | 4,912,954 | — | — | 4,912,954 | 4,310,948 | (1,355,140 | ) | 7,868,762 | |||||||||||
| Noncontrolling interest | 295,431 | — | — | 295,431 | — | — | 295,431 | ||||||||||||
| Total shareholders' equity | 5,208,385 | — | — | 5,208,385 | 4,310,948 | (1,355,140 | ) | 8,164,193 | |||||||||||
| Total liabilities and shareholders' equity | $ | 48,644,659 | $ | 2,193,458 | $ | 31,145 | $ | 50,869,262 | $ | 34,594,463 | $ | (1,093,850 | ) | $ | 84,369,875 | ||||
| Common shares outstanding | 312,359 | N/A | N/A | 312,359 | 52,886 | 190,129 | W | 555,374 | |||||||||||
| Book value per common share | $ | 14.96 | $ | 14.96 | $ | 77.19 | $ | 13.32 | |||||||||||
| (a) | IBKC "as reported" information for periods ended June 30, 2020 or as of June 30, 2020 is presented as it would have been reported if IBKC had filed a quarterly report on Form 10-Q for the quarter ended June 30, 2020, or is summarized or condensed from what would have been reported, except that certain amounts have been reclassified to conform to First Horizon’s presentation. | ||||||||||||||||||
| --- | --- |
3
| FIRST HORIZON NATIONAL CORPORATION | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||
| Six months ended June 30, 2020 | ||||||||||||||||||||
| (Dollars in thousands except per share data)/(Unaudited) | First Horizon (As reported) | Truist Purchase | Truist Purchase Pro Forma Adjustments | Ref | Pro Forma including Truist Purchase | IBKC<br><br>(As reported)<br><br>(a) | IBKC Pro Forma Adjustments | Ref | Pro Forma First Horizon including Truist Purchase and IBKC | |||||||||||
| Interest income: | ||||||||||||||||||||
| Interest and fees on loans and leases | $ | 632,512 | $ | 10,522 | $ | 36 | X | $ | 643,070 | $ | 523,196 | $ | 9,813 | CC | $ | 1,176,079 | ||||
| Interest on investment securities | 52,996 | — | — | 52,996 | 47,299 | 14,979 | DD | 115,274 | ||||||||||||
| Interest and fees on loans held-for-sale | 13,495 | — | — | 13,495 | 3,899 | — | 17,394 | |||||||||||||
| Interest on trading securities | 21,840 | — | — | 21,840 | — | — | 21,840 | |||||||||||||
| Interest on other earning assets | 4,149 | — | — | 4,149 | 3,634 | — | 7,783 | |||||||||||||
| Total interest income | 724,992 | 10,522 | 36 | 735,550 | 578,028 | 24,792 | 1,338,370 | |||||||||||||
| Interest expense: | ||||||||||||||||||||
| Interest on deposits | 79,234 | 4,726 | (175 | ) | Y | 83,785 | 103,623 | (1,547 | ) | EE | 185,861 | |||||||||
| Interest on trading liabilities | 4,266 | — | — | 4,266 | — | — | 4,266 | |||||||||||||
| Interest on short-term borrowings | 11,319 | — | — | 11,319 | 652 | — | 11,971 | |||||||||||||
| Interest on term borrowings | 22,027 | — | — | 22,027 | 16,333 | (681 | ) | FF | 37,679 | |||||||||||
| Total interest expense | 116,846 | 4,726 | (175 | ) | 121,397 | 120,608 | (2,228 | ) | 239,777 | |||||||||||
| Net interest income | 608,146 | 5,796 | 211 | 614,153 | 457,420 | 27,020 | 1,098,593 | |||||||||||||
| Provision for credit losses (b) | 275,388 | — | — | 275,388 | 203,146 | — | 478,534 | |||||||||||||
| Net interest income after provision for credit losses | 332,758 | 5,796 | 211 | 338,765 | 254,274 | 27,020 | 620,059 | |||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Fixed income | 208,056 | — | — | 208,056 | — | — | 208,056 | |||||||||||||
| Deposit transactions and cash management | 61,077 | 7,942 | — | 69,019 | 27,208 | — | 96,227 | |||||||||||||
| Mortgage banking and title income | 6,569 | — | — | 6,569 | 64,954 | — | 71,523 | |||||||||||||
| Brokerage, management fees and commissions | 29,205 | — | — | 29,205 | 4,714 | — | 33,919 | |||||||||||||
| Trust services and investment management | 14,928 | — | — | 14,928 | 8,681 | — | 23,609 | |||||||||||||
| Securities gains (losses), net | (1,468 | ) | — | — | (1,468 | ) | 5,561 | — | 4,093 | |||||||||||
| All other income and commissions | 62,658 | — | — | 62,658 | 40,808 | — | 103,466 | |||||||||||||
| Total noninterest income | 381,025 | 7,942 | — | 388,967 | 151,926 | — | 540,893 | |||||||||||||
| Adjusted gross income after provision for credit losses | 713,783 | 13,738 | 211 | 727,732 | 406,200 | 27,020 | 1,160,952 |
4
| Noninterest expense: | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Personnel expense | 383,729 | 5,359 | (120 | ) | Z | 388,968 | 210,660 | (9,137 | ) | Z | 590,491 | |||||||
| Net occupancy expense | 41,008 | 2,441 | (46 | ) | Z | 43,403 | 28,544 | (533 | ) | Z,GG | 71,414 | |||||||
| Computer software | 32,549 | — | — | 32,549 | 17,260 | — | 49,809 | |||||||||||
| Legal and professional fees | 21,627 | — | (845 | ) | Z | 20,782 | 18,089 | (12,863 | ) | Z | 26,008 | |||||||
| Operations services | 23,346 | — | (96 | ) | Z | 23,250 | 4,418 | (32 | ) | Z | 27,636 | |||||||
| Equipment expense | 16,936 | 686 | (105 | ) | Z | 17,517 | 11,886 | (2,792 | ) | HH | 26,611 | |||||||
| Amortization of intangible assets | 10,592 | — | 473 | AA | 11,065 | 7,933 | 7,415 | II | 26,413 | |||||||||
| All other expense | 93,312 | 137 | (5,709 | ) | Z | 87,740 | 73,097 | (2,139 | ) | Z | 158,698 | |||||||
| Total noninterest expense | 623,099 | 8,623 | (6,448 | ) | 625,274 | 371,887 | (20,081 | ) | 977,080 | |||||||||
| Income before income taxes | 90,684 | 5,115 | 6,659 | 102,458 | 34,313 | 47,101 | 183,872 | |||||||||||
| Provision/(benefit) for income taxes | 17,547 | — | 2,870 | BB | 20,417 | 8,244 | 11,480 | JJ | 40,141 | |||||||||
| Net income/(loss) | 73,137 | 5,115 | 3,789 | 82,041 | 26,069 | 35,621 | 143,731 | |||||||||||
| Net income attributable to noncontrolling interest | 5,703 | — | — | 5,703 | — | — | 5,703 | |||||||||||
| Net income attributable to controlling interest | 67,434 | 5,115 | 3,789 | 76,338 | 26,069 | 35,621 | 138,028 | |||||||||||
| Preferred stock dividends | 3,100 | — | — | 3,100 | 7,597 | — | 10,697 | |||||||||||
| Net income/(loss) available to common shareholders | 64,334 | 5,115 | 3,789 | 73,238 | 18,472 | 35,621 | 127,331 | |||||||||||
| Less: Earnings allocated to unvested restricted stock | — | — | — | — | 211 | (211 | ) | KK | — | |||||||||
| Earnings allocated to common shareholders | $ | 64,334 | $ | 5,115 | $ | 3,789 | $ | 73,238 | $ | 18,261 | $ | 35,832 | $ | 127,331 | ||||
| Earnings per common share | $ | 0.21 | N/A | N/A | $ | 0.23 | $ | — | $ | 0.15 | $ | 0.23 | ||||||
| Diluted earnings per common share | $ | 0.21 | N/A | N/A | $ | 0.23 | $ | — | $ | 0.15 | $ | 0.23 | ||||||
| Weighted average common shares | 311,843 | — | — | 311,843 | — | 238,413 | LL | 550,256 | ||||||||||
| Diluted average common shares | 312,792 | — | — | 312,792 | — | 238,924 | LL | 551,716 |
(a) IBKC "as reported" information for periods ended June 30, 2020 or as of June 30, 2020 is presented as it would have been reported if IBKC had filed a quarterly report on Form 10-Q for the quarter ended June 30, 2020, or is summarized or condensed from what would have been reported, except that certain amounts have been reclassified to conform to First Horizon’s presentation.
(b) Beginning in Third Quarter 2020, First Horizon began recording credit expense on unfunded commitments as a component of provision for credit losses. This presentation follows that format with $11.2 million reclassified from other expense.
5
| FIRST HORIZON NATIONAL CORPORATION | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||
| Year Ended December 31, 2019 | ||||||||||||||||||||
| (Dollars in thousands except per share data)/(Unaudited) | First Horizon (As reported) | Truist Purchase | Truist Purchase Pro Forma Adjustments | Ref | Pro Forma including Truist Purchase | IBKC<br><br>(As reported)<br><br>(a) | IBKC Pro Forma Adjustments | Ref | Pro Forma First Horizon including Truist Purchase and IBKC | |||||||||||
| Interest income: | ||||||||||||||||||||
| Interest and fees on loans and leases | $ | 1,394,442 | $ | 21,044 | $ | 89 | X | $ | 1,415,575 | $ | 1,160,919 | $ | 29,425 | CC | $ | 2,605,919 | ||||
| Interest on investment securities | 121,083 | — | — | 121,083 | 125,786 | 25,432 | DD | 272,301 | ||||||||||||
| Interest and fees on loans held-for-sale | 31,127 | — | — | 31,127 | 6,710 | — | 37,837 | |||||||||||||
| Interest on trading securities | 46,576 | — | — | 46,576 | — | — | 46,576 | |||||||||||||
| Interest on other earning assets | 31,112 | — | — | 31,112 | 11,611 | — | 42,723 | |||||||||||||
| Total interest income | 1,624,340 | 21,044 | 89 | 1,645,473 | 1,305,026 | 54,857 | 3,005,356 | |||||||||||||
| Interest expense: | ||||||||||||||||||||
| Interest on deposits | 307,216 | 9,453 | (3,559 | ) | Y | 313,110 | 267,227 | (20,506 | ) | EE | 559,831 | |||||||||
| Interest on trading liabilities | 12,502 | — | — | 12,502 | — | — | 12,502 | |||||||||||||
| Interest on short-term borrowings | 41,172 | — | — | 41,172 | 15,739 | — | 56,911 | |||||||||||||
| Interest on term borrowings | 53,263 | — | — | 53,263 | 37,396 | (1,216 | ) | FF | 89,443 | |||||||||||
| Total interest expense | 414,153 | 9,453 | (3,559 | ) | 420,047 | 320,362 | (21,722 | ) | 718,687 | |||||||||||
| Net interest income | 1,210,187 | 11,591 | 3,648 | 1,225,426 | 984,664 | 76,579 | 2,286,669 | |||||||||||||
| Provision for credit losses (b) | 45,483 | — | — | 45,483 | 41,657 | — | 87,140 | |||||||||||||
| Net interest income after provision for credit losses | 1,164,704 | 11,591 | 3,648 | 1,179,943 | 943,007 | 76,579 | 2,199,529 | |||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Fixed income | 278,789 | — | — | 278,789 | — | — | 278,789 | |||||||||||||
| Deposit transactions and cash management | 131,663 | 15,884 | — | 147,547 | 63,707 | — | 211,254 | |||||||||||||
| Mortgage banking and title income | 10,055 | — | — | 10,055 | 63,030 | — | 73,085 | |||||||||||||
| Brokerage, management fees and commissions | 55,467 | — | — | 55,467 | 8,280 | — | 63,747 | |||||||||||||
| Trust services and investment management | 29,511 | — | — | 29,511 | 17,058 | — | 46,569 | |||||||||||||
| Securities gains (losses), net | 174 | — | — | 174 | (971 | ) | — | (797 | ) | |||||||||||
| All other income and commissions | 148,421 | — | — | 148,421 | 88,238 | — | 236,659 | |||||||||||||
| Total noninterest income | 654,080 | 15,884 | — | 669,964 | 239,342 | — | 909,306 | |||||||||||||
| Adjusted gross income after provision for credit losses | 1,818,784 | 27,475 | 3,648 | 1,849,907 | 1,182,349 | 76,579 | 3,108,835 | |||||||||||||
| Noninterest expense: |
6
| Personnel expense | 695,351 | 10,717 | — | 706,068 | 411,869 | (5,327 | ) | Z | 1,112,610 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net occupancy expense | 80,271 | 4,881 | — | 85,152 | 57,020 | 396 | Z,GG | 142,568 | ||||||||||
| Computer software | 60,721 | — | — | 60,721 | 31,195 | — | 91,916 | |||||||||||
| Legal and professional fees | 72,098 | — | (124 | ) | Z | 71,974 | 30,148 | (17,018 | ) | Z | 85,104 | |||||||
| Operations services | 46,006 | — | — | 46,006 | 6,913 | — | 52,919 | |||||||||||
| Equipment expense | 33,998 | 1,372 | — | 35,370 | 21,850 | (5,584 | ) | HH | 51,636 | |||||||||
| Amortization of intangible assets | 24,834 | — | 1,015 | AA | 25,849 | 18,464 | 14,503 | II | 58,816 | |||||||||
| All other expense | 219,841 | 273 | (318 | ) | Z | 219,796 | 105,297 | (346 | ) | Z | 324,747 | |||||||
| Total noninterest expense | 1,233,120 | 17,243 | 573 | 1,250,936 | 682,756 | (13,376 | ) | 1,920,316 | ||||||||||
| Income before income taxes | 585,664 | 10,232 | 3,075 | 598,971 | 499,593 | 89,955 | 1,188,519 | |||||||||||
| Provision/(benefit) for income taxes | 133,291 | — | 3,243 | BB | 136,534 | 115,438 | 21,925 | JJ | 273,897 | |||||||||
| Net income/(loss) | 452,373 | 10,232 | (168 | ) | 462,437 | 384,155 | 68,030 | 914,622 | ||||||||||
| Net income attributable to noncontrolling interest | 11,465 | — | — | 11,465 | — | — | 11,465 | |||||||||||
| Net income attributable to controlling interest | 440,908 | 10,232 | (168 | ) | 450,972 | 384,155 | 68,030 | 903,157 | ||||||||||
| Preferred stock dividends | 6,200 | — | — | 6,200 | 12,602 | — | 18,802 | |||||||||||
| Net income/(loss) available to common shareholders | 434,708 | 10,232 | (168 | ) | 444,772 | 371,553 | 68,030 | 884,355 | ||||||||||
| Less: Earnings allocated to unvested restricted stock | — | — | — | — | 3,559 | (3,559 | ) | KK | — | |||||||||
| Earnings allocated to common shareholders | $ | 434,708 | $ | 10,232 | $ | (168 | ) | $ | 444,772 | $ | 367,994 | $ | 71,589 | $ | 884,355 | |||
| Earnings per common share | $ | 1.39 | N/A | N/A | $ | 1.42 | $ | 6.97 | $ | 0.38 | $ | 1.59 | ||||||
| Diluted earnings per common share | $ | 1.38 | N/A | N/A | $ | 1.41 | $ | 6.92 | $ | 0.38 | $ | 1.58 | ||||||
| Weighted average common shares | 313,637 | — | — | 313,637 | 52,826 | 189,330 | LL | 555,793 | ||||||||||
| Diluted average common shares | 315,657 | — | — | 315,657 | 53,153 | 189,412 | LL | 558,222 |
(a) Certain amounts have been reclassified to conform to First Horizon’s presentation.
(b) Beginning in Third Quarter 2020, First Horizon began recording credit expense on unfunded commitments as a component of provision for credit losses. This presentation follows that format with $11.2 million reclassified from other expense.
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Note 1 - Basis of Presentation
The unaudited pro forma combined consolidated financial information and explanatory notes have been prepared to illustrate the effects of the merger involving First Horizon and IBKC and the Truist Purchase under the acquisition method of accounting with First Horizon treated as the acquirer. The unaudited pro forma combined consolidated financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined entities. Under the acquisition method of accounting, the assets and liabilities from the merger and Truist Purchase as of their respective effective dates will generally be recorded by First Horizon at their respective fair values with the excess/shortfall of purchase price over/under the acquired net assets allocated to goodwill/recorded as a purchase accounting gain.
The merger, which closed on July 1, 2020, provided for IBKC common shareholders to receive 4.584 shares of First Horizon common stock for each share of IBKC common stock they held immediately prior to the merger closing. Based on the closing trading price of First Horizon common stock on the NYSE on July 1, 2020, the value of the merger consideration per share of IBKC common stock was $43.09. The aggregate amount of consideration, inclusive of consideration for common and preferred stock, equity awards, and cash in lieu of fractional shares was $2,501,555.
The Truist Purchase, which closed on July 17, 2020, resulted in the acquisition of branch loans and related fixed assets and the assumption of branch deposits of Truist Bank by First Horizon for approximately $521 million in cash.
The accounting policies of both First Horizon and IBKC are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.
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Note 2 - Preliminary Purchase Price Allocation for the Truist Purchase
The pro forma adjustments for the Truist Purchase include the estimated acquisition accounting entries to record the purchase of branch loans and related fixed assets and the assumption of branch deposits, as well as conformity adjustments to align with First Horizon’s presentation. The excess of the purchase price over the fair value of net assets acquired, net of deferred taxes, is allocated to goodwill. Estimated fair value adjustments included in the pro forma combined consolidated financial statements are based upon available information and certain assumptions considered reasonable, and may be subject to change as additional information becomes available.
Provisional other intangible assets of $7.0 million are included in the Truist Purchase pro forma adjustments separate from goodwill and are amortized using the sum-of-the-years-digits method or an accelerated methodology that mirrors the discounted cash flows used in the determination of fair value. Provisional goodwill totaling $77.6 million is included in the Truist Purchase pro forma adjustments and is not subject to amortization.
The following schedule details significant assets purchased and liabilities assumed from the Truist Purchase estimated as of June 30, 2020:
| (Dollars in thousands) | |||
|---|---|---|---|
| Purchase Price | |||
| Cash consideration | $ | 521,433 | |
| Truist Purchase Net Assets at Fair Value | |||
| Assets acquired: | |||
| Cash and due from banks | $ | 2,201,685 | |
| Loans and leases, net of unearned income | 423,397 | ||
| Allowance for loan and lease losses | (2,355 | ) | |
| Other intangible assets | 7,000 | ||
| Premises and equipment | 10,965 | ||
| Other assets | 27,700 | ||
| Total assets acquired | $ | 2,668,392 | |
| Liabilities assumed: | |||
| Deposits | 2,194,870 | ||
| Other liabilities | 29,733 | ||
| Total liabilities assumed | $ | 2,224,603 | |
| Net assets acquired | $ | 443,789 | |
| Preliminary pro forma goodwill | $ | 77,644 |
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Note 3 - Preliminary Purchase Price Allocation for IBKC
The pro forma adjustments for IBKC include the estimated acquisition accounting entries to record the merger. The shortfall of the purchase price under the acquisition accounting value of net assets acquired, net of deferred taxes, is recorded as a purchase accounting gain. Estimated fair value adjustments included in the pro forma combined consolidated financial statements are based upon available information and certain assumptions considered reasonable, and may be subject to change as additional information becomes available.
Provisional Core deposits and other intangible assets of $233.8 million resulting from the merger have been recorded separately from goodwill and have been amortized over an estimated ten year average life using the sum-of-the-years-digits method or an accelerated methodology that mirrors the timing of related expected cash flows used in the determination of fair value. Based on the closing trading price of First Horizon common stock on the NYSE on July 1, 2020, the preliminary purchase price allocation resulted in a purchase accounting gain of $542.3 million.
The preliminary purchase price allocation as of June 30, 2020 is as follows:
| (Dollars in thousands, except per share data) | |||||
|---|---|---|---|---|---|
| Pro Forma Purchase Price | |||||
| Share Consideration: | |||||
| First Horizon common stock issued | 238,577 | ||||
| First Horizon share price (as of July 1, 2020) | $ | 9.40 | |||
| Preliminary consideration for outstanding common stock | 2,242,611 | ||||
| Consideration for equity awards | 28,291 | ||||
| Consideration for preferred stock | 230,641 | ||||
| Cash in lieu of fractional shares | 12 | ||||
| Total estimated consideration to be paid | $ | 2,501,555 | |||
| IBKC Net Assets at Fair Value | |||||
| Assets acquired: | |||||
| Cash and cash equivalents | $ | 357,715 | |||
| Interest-bearing deposits with banks | 2,009,518 | ||||
| Loans held-for-sale | 307,800 | ||||
| Investment securities | 3,546,364 | ||||
| Loans and leases, net of unearned income | 25,951,652 | ||||
| Allowance for loan and lease losses | (274,979 | ) | |||
| Other intangible assets | 233,763 | ||||
| Premises and equipment | 310,482 | ||||
| Real estate acquired by foreclosure | 8,593 | ||||
| Other assets | 1,137,795 | ||||
| Total assets acquired | $ | 33,588,703 | |||
| Liabilities assumed: | |||||
| Deposits | $ | 28,339,700 | |||
| Short-term borrowings | 207,171 | ||||
| Term borrowings | 1,199,306 | ||||
| Other liabilities | 798,629 | ||||
| Total liabilities assumed | $ | 30,544,806 | |||
| Net assets acquired | $ | 3,043,897 | |||
| Preliminary purchase accounting gain | $ | (542,342 | ) |
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Note 4 - Pro Forma Adjustments
The following pro forma adjustments have been reflected in the unaudited pro forma combined consolidated financial information. All taxable adjustments were calculated using a 24.63 percent tax rate to arrive at deferred tax asset or liability adjustments. All adjustments are based on current assumptions and valuations, which are subject to change.
| A. | Adjustments to cash and due from banks to reflect cash of $521.4 million used to purchase branch loans and related fixed assets and assume branch deposits acquired from Truist Bank. |
|---|---|
| B. | Adjustments to Loans and Leases, net of unearned income to reflect estimated fair value adjustments, which include credit deterioration, current interest rates and liquidity, to acquired loans and leases. The adjustment to loans and leases related to the IBKC merger reflects a $548.9 million gross mark for loans and leases less $147.2 million of existing IBKC discount on loans and leases and a net reclassification of $275.0 million to the allowance for loan and lease losses related to purchased credit deteriorated (“PCD”) loans. The adjustment to loans and leases acquired from Truist Bank reflects a $2.6 million gross mark for loans and leases less a net reclassification of $2.4 million to the allowance for loan and lease losses related to PCD loans. |
| --- | --- |
| C. | Adjustment to Allowance for loan and lease losses to reflect current expected credit losses for acquired loans and leases. The Adjustment to the allowance for loan and lease losses related to the IBKC merger includes the removal of IBKC’s prior allowance of $397.6 million and a net reclassification of $275.0 million related to PCD loans. The adjustment to the allowance for loan and lease losses related to the loans acquired from Truist Bank reflects a net reclassification of $2.4 million related to PCD loans. |
| --- | --- |
| D. | Adjustments to record goodwill associated with the purchase of branch loans and related fixed assets and the assumption of branch deposits from Truist Bank. |
| --- | --- |
| E. | Adjustments to Other intangible assets to record estimated other intangible assets associated with the purchase of branch loans and related fixed assets and the assumption of branch deposits from Truist Bank. |
| --- | --- |
| F. | Adjustments to Premises and equipment to reflect estimated fair value. |
| --- | --- |
| G. | Adjustments to Other assets to record Right-of-Use ("ROU") assets associated with leases acquired from Truist Bank. |
| --- | --- |
| H. | Adjustments to Deposits to record estimated fair value of acquired interest-bearing deposits. |
| --- | --- |
| I. | Adjustments to Other liabilities to record a lease liability associated with leases acquired from Truist Bank. |
| --- | --- |
| J. | Adjustments to cash and due from banks to reflect $112.4 million of contractually obligated merger costs to be paid by First Horizon as a result of the merger including personnel-related expenses and fees for investment banker, legal, and accounting services directly attributable and incremental to the transaction. |
| --- | --- |
| K. | Adjustments to investment securities to reflect estimated fair value of acquired securities. |
| --- | --- |
| L. | Adjustments to Goodwill to eliminate $1.2 billion of IBKC's goodwill at the closing date. |
| --- | --- |
| M. | Adjustments to Other intangible assets to eliminate $53.6 million of IBKC's other intangible assets and to record estimated other intangible assets associated with the merger of $233.8 million including $206.7 million related to estimated core deposit intangible assets. |
| --- | --- |
| N. | Adjustments to Real estate acquired by foreclosure to record estimated fair value of acquired foreclosed assets. |
| --- | --- |
| O. | Adjustments to increase other assets by $29.3 million as a result of purchase accounting adjustments largely associated with fair value adjustments to ROU assets and the recognition of a net deferred tax asset for the effects of the acquisition accounting adjustments, and to record a $24.3 million tax receivable associated with contractually obligated merger costs. |
| --- | --- |
| P. | Adjustments to Term borrowings to reflect estimated fair value adjustments of $31.4 million. |
| --- | --- |
| Q. | Adjustments to increase other liabilities by $88.0 million as a result of purchase accounting adjustments largely associated with fair value adjustments to lease liabilities associated with leases acquired from IBKC and acquired contingencies, and to record a $119.7 million liability associated with contractually obligated merger costs paid by IBKC at closing. |
| --- | --- |
| R. | Adjustments to eliminate IBKC preferred stock of $228.5 million par value and record the issuance of rollover First Horizon preferred stock to IBKC shareholders of $230.6 million. |
| --- | --- |
| S. | Adjustments to eliminate IBKC common stock of $52.9 million par value and record the issuance of First Horizon common stock to IBKC shareholders of $151.9 million par value. |
| --- | --- |
| T. | Adjustments to Capital surplus to eliminate IBKC capital surplus of $2.7 billion and record the issuance of First Horizon common stock in excess of par value to IBKC shareholders of $2.1 billion. Additionally, includes decreases in capital surplus of $4.3 million related to transaction costs directly associated with the share issuance. |
| --- | --- |
| U. | Adjustment to Retained earnings to eliminate IBKC Retained earnings of $1.2 billion and to recognize the impact on equity of approximately $83.8 million (after-tax) of contractually obligated merger costs to be paid by First Horizon, as well as $542.3 million representing the preliminary purchase accounting gain calculated as if the net |
| --- | --- |
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assets were acquired on June 30, 2020. This purchase accounting gain is not reflected in the unaudited pro forma combined statement of income because it is a nonrecurring item that is directly related to the transaction.
| V. | Adjustments to eliminate remaining IBKC equity balances of $107.3 million. |
|---|---|
| W. | Adjustments to shares of First Horizon's common stock outstanding to eliminate shares of IBKC common stock outstanding of 52,885,523 and record shares of First Horizon common stock of 243,015,231, calculated using the exchange ratio of 4.584 per share. |
| --- | --- |
| X. | Increase in Interest and fees on loans of $36 thousand for the six months ended June 30, 2020 and $89 thousand for the year ended December 31, 2019 to record estimated amortization of premiums and accretion of discounts on acquired branch loans from Truist Bank. |
| --- | --- |
| Y. | Net decrease in Interest on deposits of $.2 million for the six months ended June 30, 2020 and $3.6 million for the year ended December 31, 2019 to record amortization of premiums and accretion of discounts on acquired deposits of Truist Bank. |
| --- | --- |
| Z. | Adjustments to remove transaction costs incurred by First Horizon related to the Truist Purchase and to remove transaction costs incurred by First Horizon and IBKC related to the IBKC merger. |
| --- | --- |
| AA. | Increase in Amortization expense of $.5 million for the six months ended June 30, 2020 and $1.0 million for the year ended December 31, 2019 to record estimated amortization expense of acquired other intangible assets. See Note 2 for additional information regarding First Horizon's amortization of acquired other intangible assets related to the Truist Purchase. |
| --- | --- |
BB. Net increase in Provision for income taxes of $2.9 million for the six months ended June 30, 2020 and $3.2 million for the year ended December 31, 2019 to conform tax provision to the estimated effective rate for the combined entity and to record the income tax effect of pro forma adjustments at the incremental tax rate of 24.63 percent.
CC. Net increase in Interest and fees on loans of $9.8 million for the six months ended June 30, 2020 and $29.4 million for the year ended December 31, 2019 to eliminate IBKC's amortization of premiums and accretion of discounts on previously acquired loans and to record estimated amortization of premiums and accretion of discounts on acquired loans of IBKC.
DD. Net increase in Interest on investment securities of $15.0 million for the six months ended June 30, 2020 and $25.4 million for the year ended December 31, 2019 to remove amortization of premium from IBKC's investment securities and to record estimated amortization of discount on acquired securities.
EE. Net decrease in Interest on deposits of $1.5 million for the six months ended June 30, 2020 and $20.5 million for the year ended December 31, 2019 to eliminate IBKC's amortization of premiums and accretion of discounts on previously acquired deposits and record estimated amortization of premiums and accretion of discounts on acquired deposits of IBKC.
| FF. | Net increase in Interest on long-term debt of $.7 million for the six months ended June 30, 2020 and $1.2 million for the year ended December 31, 2019 to eliminate IBKC's amortization of premiums and accretion of discounts on previously acquired trust preferred debt and record estimated amortization of premiums and accretion of discounts on acquired long-term debt and trust preferred debt of IBKC. |
|---|---|
| GG. | Net increase in occupancy expense of $.2 million for the six months ended June 30, 2020 and $.4 million for the year ended December 31, 2019 to eliminate IBKC’s accretion of discounts on previously acquired lease intangibles and record estimated amortization on acquired lease intangibles of IBKC. |
| --- | --- |
| HH. | Net decrease in equipment expense of $2.8 million for the six months ended June 30, 2020 and $5.6 million for the year ended December 31, 2019 to record depreciation expense related to estimated fair value marks and alignment of useful lives for IBKC’s tangible assets. |
| --- | --- |
| II. | Net increase in Amortization expense of $7.4 million for the six months ended June 30, 2020 and $14.5 million for the year ended December 31, 2019 to eliminate IBKC’s amortization expense on other intangible assets and record estimated amortization expense of acquired other intangible assets. See Note 3 for additional information regarding First Horizon’s amortization of acquired other intangible assets related to the IBKC acquisition. |
| --- | --- |
| JJ. | Increase in Provision for income taxes of $11.5 million for the six months ended June 30, 2020 and $21.9 million for the year ended December 31, 2019 to record the income tax effect of pro forma adjustments at the incremental tax rate of 24.63 percent. |
| --- | --- |
| KK. | Adjustment to remove income previously allocated to participating securities under the two class method. |
| --- | --- |
| LL. | Adjustments to weighted-average shares of First Horizon common stock outstanding to eliminate IBKC weighted average shares of IBKC common stock outstanding and record shares of First Horizon common stock outstanding, calculated using the exchange ratio of 4.584. |
| --- | --- |
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Note 5 - Estimated Cost Savings and Merger Integration Costs
First Horizon expects to realize approximately $170 million, or approximately 25 percent of IBKC’s annualized noninterest expense over the last twelve months, in annual pre-tax cost savings following the merger. The estimated cost savings is expected to be 75 percent realized in the run-rate by the end of fiscal year 2021 and fully realized during fiscal year 2022 and is excluded from this pro forma analysis.
Anticipated merger and integration-related costs are not included in the pro forma combined statements of income since they will be recorded in the combined results of income as they are incurred prior to, or after completion of, the merger and are not indicative of what the historical results of the condensed combined company would have been had the companies been actually combined during the periods presented. Anticipated merger and integration-related pre-tax costs are estimated to be $440 million.
Anticipated provision expense for Non-PCD loans for both the IBKC merger and the Truist purchase are not included in the pro forma statements of income. In accordance with generally accepted accounting principles these amounts are reflected in current period earnings. FHN anticipates recognizing approximately $160 million of provision expense in third quarter 2020 for Non-PCD loans related to the IBKC merger and Truist purchase.
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