UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-15185

First Horizon National Corporation

(Exact name of registrant as specified in its charter)



TN		62-0803242
(State or other jurisdiction incorporation of organization)		(IRS Employer Identification No.)

165 MADISON AVENUE MEMPHIS, TENNESSEE		38103
(Address of principal executive office)		(Zip Code)

(Registrant’s telephone number, including area code) (901) 523-4444

~~______________________________________~~

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

~~______________________________________~~

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒		Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐		Emerging Growth Company	☐
~~Smaller reporting company ☐~~		~~Emerging Growth Company ☐~~		~~(Do not check if a smaller reporting company)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:



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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding on ~~September 30, 2018~~March 31, 2019
Common Stock, $.625 par value		~~323,942,816~~315,361,125

Table of Contents

FIRST HORIZON NATIONAL CORPORATION

INDEX

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements



The Consolidated Condensed Statements of Condition (unaudited)	2

The Consolidated Condensed Statements of Income (unaudited)	3

The Consolidated Condensed Statements of Comprehensive Income (unaudited)	4

The Consolidated Condensed Statements of Equity (unaudited)	5

The Consolidated Condensed Statements of Cash Flows (unaudited)	6

The Notes to the Consolidated Condensed Financial Statements (unaudited)	8
Note 1 Financial Information	8
Note 2 Acquisitions and Divestitures	1513
Note 3 Investment Securities	1814
Note 4 Loans	2117
Note 5 Allowance for Loan Losses	3227
Note 6 Intangible Assets	3429
Note 7 Leases	30
Note 8 Other Income and Other Expense	33
Note 9 Components of Other Comprehensive Income/(loss)	34
Note 10 Earnings Per Share	35
Note ~~8 Components of~~11 Contingencies and Other ~~Comprehensive Income/(loss)~~Disclosures	36
Note ~~9 Earnings Per Share~~	38
~~Note 10 Contingencies~~12 Pension, Savings, and Other ~~Disclosures~~Employee Benefits	39
Note ~~11 Pension, Savings, and Other Employee Benefits~~	45
~~Note 12~~13 Business Segment Information	4740
Note 1314 Variable Interest Entities	51
~~Note 14 Derivatives~~	5643
Note 15 Derivatives	48
Note 16 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions	6355
Note 1617 Fair Value of Assets & Liabilities	6557
Note 18 Restructuring, Repositioning, and Efficiency	72

This financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial condition and results of operations for the interim periods presented.

CONSOLIDATED CONDENSED STATEMENTS OF CONDITION


	First Horizon National Corporation						First Horizon National Corporation
	(Unaudited)			December 31			(Unaudited)			December 31
	September 30						March 31
(Dollars in thousands, except per share amounts)	2018			2017			2019			2018
Assets:
Cash and due from banks	$	642,051		$	639,073		$	570,589		$	781,291
Federal funds sold	113,722			87,364			167,602			237,591
Securities purchased under agreements to resell (Note 15)	687,437			725,609
Securities purchased under agreements to resell (Note 16)							474,679			386,443
Total cash and cash equivalents	1,443,210			1,452,046			1,212,870			1,405,325
Interest-bearing cash	531,681			1,185,600			1,013,254			1,277,611
Trading securities	1,930,991			1,416,345			1,681,727			1,448,168
Loans held-for-sale (a)	725,651			699,377			594,662			679,149
Securities available-for-sale (Note 3)	4,608,383			5,170,255			4,616,322			4,626,470
Securities held-to-maturity (Note 3)	10,000			10,000			10,000			10,000
Loans, net of unearned income (Note 4) (b)	27,350,214			27,658,929			27,990,048			27,535,532
Less: Allowance for loan losses (Note 5)	185,959			189,555			184,911			180,424
Total net loans	27,164,255			27,469,374			27,805,137			27,355,108
Goodwill (Note 6)	1,409,822			1,386,853			1,432,787			1,432,787
Other intangible assets, net (Note 6)	161,495			184,389			148,818			155,034
Fixed income receivables	177,802			68,693			46,782			38,861
Premises and equipment, net (September 30, 2018 and December 31, 2017 include $30.1 million and $53.2 million, respectively, classified as held-for-sale)	506,453			532,251
Premises and equipment, net (March 31, 2019 and December 31, 2018 include $16.0 million and $19.6 million, respectively, classified as held-for-sale)							484,494			494,041
Other real estate owned (“OREO”) (c)	28,628			43,382			23,396			25,290
Derivative assets (Note 14)	54,476			81,634
Derivative assets (Note 15)							118,128			81,475
Other assets	1,883,077			1,723,189			1,910,626			1,802,939
Total assets	$	40,635,924		$	41,423,388		$	41,099,003		$	40,832,258
Liabilities and equity:
Deposits:
Savings (December 31, 2017 includes $22.6 million classified as held-for-sale)	$	11,157,023		$	10,872,665
Time deposits, net (December 31, 2017 includes $8.0 million classified as held-for-sale)	4,056,184			3,322,921
Savings							$	11,651,750		$	12,064,072
Time deposits, net							4,454,622			4,105,777
Other interest-bearing deposits	7,768,997			8,401,773			8,393,468			8,371,826
Interest-bearing	22,982,204			22,597,359			24,499,840			24,541,675
Noninterest-bearing (December 31, 2017 includes $4.8 million classified as held-for-sale)	8,025,881			8,023,003
Noninterest-bearing							7,963,048			8,141,317
Total deposits	31,008,085			30,620,362			32,462,888			32,682,992
Federal funds purchased	437,474			399,820			339,360			256,567
Securities sold under agreements to repurchase (Note 15)	678,510			656,602
Securities sold under agreements to repurchase (Note 16)							745,788			762,592
Trading liabilities	739,694			638,515			429,669			335,380
Other short-term borrowings	1,069,912			2,626,213			140,832			114,764
Term borrowings	1,200,134			1,218,097			1,177,926			1,170,963
Fixed income payables	36,939			48,996			100,290			9,572
Derivative liabilities (Note 14)	170,324			85,061
Derivative liabilities (Note 15)							107,123			133,713
Other liabilities	552,921			549,234			748,606			580,335
Total liabilities	35,893,993			36,842,900			36,252,482			36,046,878
Equity:
First Horizon National Corporation Shareholders’ Equity:
Preferred stock - Series A, non-cumulative perpetual, no par value, liquidation preference of $100,000 per share - (shares authorized - 1,000; shares issued - 1,000 on September 30, 2018 and December 31, 2017)	95,624			95,624
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 323,942,816 on September 30, 2018 and 326,736,214 on December 31, 2017)	202,464			204,211
Preferred stock - Series A, non-cumulative perpetual, no par value, liquidation preference of $100,000 per share - (shares authorized - 1,000; shares issued - 1,000 on March 31, 2019 and December 31, 2018)							95,624			95,624
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 315,361,125 on March 31, 2019 and 318,573,400 on December 31, 2018)							197,101			199,108
Capital surplus	3,101,102			3,147,613			2,983,948			3,029,425
Undivided profits	1,484,959			1,160,434			1,595,568			1,542,408
Accumulated other comprehensive loss, net (Note 8)	(437,649		)	(322,825		)
Accumulated other comprehensive loss, net (Note 9)							(321,151		)	(376,616		)
Total First Horizon National Corporation Shareholders’ Equity	4,446,500			4,285,057			4,551,090			4,489,949
Noncontrolling interest	295,431			295,431			295,431			295,431
Total equity	4,741,931			4,580,488			4,846,521			4,785,380
Total liabilities and equity	$	40,635,924		$	41,423,388		$	41,099,003		$	40,832,258

See accompanying notes to consolidated condensed financial statements.


(a)	~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 include ~~$9.2~~$8.0 million and ~~$11.7~~$8.4 million, respectively, of held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure.


(b)	~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 include ~~$20.8~~$24.1 million and ~~$22.7~~$28.6 million, respectively, of held-to-maturity consumer mortgage loans secured by residential real estate in process of foreclosure.


(c)	~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 include ~~$11.0~~$10.1 million and ~~$12.2~~$9.7 million, respectively, of foreclosed residential real estate.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME


	First Horizon National Corporation												First Horizon National Corporation
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars and shares in thousands except per share data, unless otherwise noted) (Unaudited)	2018			2017			2018			2017			2019			2018
Interest income:
Interest and fees on loans	$	331,000		$	205,220		$	954,467		$	578,264		$	331,938		$	299,493
Interest on investment securities available-for-sale	32,391			25,575			97,872			76,867			31,843			32,847
Interest on investment securities held-to-maturity	131			131			394			460			131			131
Interest on loans held-for-sale	9,977			6,123			33,349			10,916			9,877			12,144
Interest on trading securities	14,130			8,262			43,280			24,033			13,548			14,408
Interest on other earning assets	6,040			2,834			15,473			11,757			13,278			4,332
Total interest income	393,669			248,145			1,144,835			702,297			400,615			363,355
Interest expense:
Interest on deposits:
Savings	30,022			10,920			70,522			31,324			39,914			14,900
Time deposits	14,667			2,591			35,428			8,342			20,254			9,525
Other interest-bearing deposits	14,401			6,759			36,922			15,976			22,042			10,608
Interest on trading liabilities	5,125			3,298			15,039			11,282			2,816			5,124
Interest on short-term borrowings	9,762			4,998			29,914			9,293			6,744			10,042
Interest on term borrowings	13,992			9,762			39,205			25,854			14,337			11,983
Total interest expense	87,969			38,328			227,030			102,071			106,107			62,182
Net interest income	305,700			209,817			917,805			600,226			294,508			301,173
Provision/(provision credit) for loan losses	2,000			—			1,000			(3,000		)	9,000			(1,000		)
Net interest income after provision/(provision credit) for loan losses	303,700			209,817			916,805			603,226			285,508			302,173
Noninterest income:
Fixed income	44,813			55,758			128,016			161,546			53,749			45,506
Deposit transactions and cash management	35,792			28,011			107,859			80,434			31,621			35,984
Brokerage, management fees and commissions	14,200			11,937			41,423			35,872			12,633			13,483
Trust services and investment management	7,438			6,953			22,847			21,304			7,026			7,277
Bankcard income	6,878			6,170			19,958			17,230			6,015			6,445
Bank-owned life insurance ("BOLI")	4,337			3,539			14,103			11,137			4,402			3,993
Debt securities gains/(losses), net (Note 3 and Note 8)	—			1			52			450
Debt securities gains/(losses), net (Note 3 and Note 9)													—			52
Equity securities gains/(losses), net (Note 3)	212,859			5			212,924			5			31			34
All other income and commissions (Note 7)	22,655			43			65,332			29,051
All other income and commissions (Note 8)													25,568			23,243
Total noninterest income	348,972			112,417			612,514			357,029			141,045			136,017
Adjusted gross income after provision/(provision credit) for loan losses	652,672			322,234			1,529,319			960,255			426,553			438,190
Noninterest expense:
Employee compensation, incentives, and benefits	164,839			137,383			501,983			410,153			177,925			171,254
Occupancy	20,002			13,619			62,956			38,759			20,693			20,451
Computer software	15,693			11,993			45,948			35,077			15,139			15,132
Operational services	13,121			10,805			43,335			33,204
Professional fees													12,299			12,272
Operations services													11,488			15,561
Equipment rentals, depreciation, and maintenance	9,423			6,626			30,149			20,013			8,829			10,018
Professional fees	9,270			6,566			36,957			20,971
Advertising and public relations	8,365			5,205			17,034			13,901			7,242			3,599
FDIC premium expense	7,850			6,062			26,442			17,728
Communications and courier	7,014			4,328			22,776			12,245			6,453			8,232
Amortization of intangible assets	6,460			1,964			19,394			5,160			6,216			6,474
FDIC premium expense													4,273			8,614
Contract employment and outsourcing	4,314			2,762			14,274			8,975			3,371			4,053
Legal fees	2,541			2,052			7,670			10,831			2,831			2,345
Repurchase and foreclosure provision/(provision credit)	(562		)	(609		)	(886		)	(22,580		)	(455		)	(72		)
All other expense (Note 7)	25,701			28,113			112,032			72,554
All other expense (Note 8)													19,786			35,332
Total noninterest expense	294,031			236,869			940,064			676,991			296,090			313,265
Income/(loss) before income taxes	358,641			85,365			589,255			283,264			130,463			124,925
Provision/(benefit) for income taxes	83,925			13,596			133,553			57,903			27,058			29,931
Net income/(loss)	$	274,716		$	71,769		$	455,702		$	225,361		$	103,405		$	94,994
Net income attributable to noncontrolling interest	2,883			2,883			8,555			8,555			2,820			2,820
Net income/(loss) attributable to controlling interest	$	271,833		$	68,886		$	447,147		$	216,806		$	100,585		$	92,174
Preferred stock dividends	1,550			1,550			4,650			4,650			1,550			1,550
Net income/(loss) available to common shareholders	$	270,283		$	67,336		$	442,497		$	212,156		$	99,035		$	90,624
Basic earnings/(loss) per share (Note 9)	$	0.83		$	0.29		$	1.36		$	0.91
Diluted earnings/(loss) per share (Note 9)	$	0.83		$	0.28		$	1.35		$	0.90
Weighted average common shares (Note 9)	324,406			233,749			325,341			233,438
Diluted average common shares (Note 9)	327,252			236,340			328,645			236,372
Basic earnings/(loss) per share (Note 10)													$	0.31		$	0.28
Diluted earnings/(loss) per share (Note 10)													$	0.31		$	0.27
Weighted average common shares (Note 10)													317,435			326,489
Diluted average common shares (Note 10)													319,581			330,344
Cash dividends declared per common share	$	0.12		$	0.09		$	0.36		$	0.27		$	0.14		$	0.12

Certain previously reported amounts have been ~~revised~~reclassified to reflect the retroactive effect of the adoption of ASU 2017-07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” See Note 1 - Financial Information for additional information.agree with current presentation.

See accompanying notes to consolidated condensed financial statements.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME


	First Horizon National Corporation												First Horizon National Corporation
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands) (Unaudited)	2018			2017			2018			2017			2019		2018
Net income/(loss)	$	274,716		$	71,769		$	455,702		$	225,361		$	103,405	$	94,994
Other comprehensive income/(loss), net of tax:
Net unrealized gains/(losses) on securities available-for-sale	(25,924		)	3,917			(106,561		)	11,292			48,615		(59,543		)
Net unrealized gains/(losses) on cash flow hedges	(1,746		)	(734		)	(13,533		)	(493		)	5,387		(8,793		)
Net unrealized gains/(losses) on pension and other postretirement plans	2,135			1,895			5,481			4,471			1,463		1,287
Other comprehensive income/(loss)	(25,535		)	5,078			(114,613		)	15,270			55,465		(67,049		)
Comprehensive income	249,181			76,847			341,089			240,631			158,870		27,945
Comprehensive income attributable to noncontrolling interest	2,883			2,883			8,555			8,555			2,820		2,820
Comprehensive income attributable to controlling interest	$	246,298		$	73,964		$	332,534		$	232,076		$	156,050	$	25,125
Income tax expense/(benefit) of items included in Other comprehensive income:
Net unrealized gains/(losses) on securities available-for-sale	$	(8,510	)	$	2,430		$	(34,981	)	$	7,002		$	15,958	$	(19,543	)
Net unrealized gains/(losses) on cash flow hedges	(573		)	(455		)	(4,443		)	(306		)	1,768		(2,887		)
Net unrealized gains/(losses) on pension and other postretirement plans	701			1,175			1,799			2,772			480		422

See accompanying notes to consolidated condensed financial statements.

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY


	First Horizon National Corporation
	2018									2017
(Dollars in thousands except per share data) (Unaudited)	Controlling Interest			Noncontrolling Interest			Total			Controlling Interest			Noncontrolling Interest			Total
Balance, January 1	$	4,285,057		$	295,431		$	4,580,488		$	2,409,653		$	295,431		$	2,705,084
Adjustment to reflect adoption of ASU 2017-12	67			—			67			—			—			—
Three months ended March 31, 2019																			Three months ended March 31, 2019
(Dollars and shares in thousands, except per share data) (unaudited)																				Common Shares		Total			Preferred Stock		Common Stock			Capital Surplus			Undivided Profits			Accumulated Other Comprehensive Income/(Loss) (a)			Noncontrolling Interest
Balance, December 31, 2018																				318,573		4,785,380			95,624		199,108			3,029,425			1,542,408			(376,616		)	295,431
Adjustment to reflect adoption of ASU 2016-02																				—		(1,011		)	—		—			—			(1,011		)	—			—
Beginning balance, as adjusted	$	4,285,124		$	295,431		$	4,580,555		$	2,409,653		$	295,431		$	2,705,084			318,573		4,784,369			95,624		199,108			3,029,425			1,541,397			(376,616		)	295,431
Net income/(loss)	447,147			8,555			455,702			216,806			8,555			225,361				—		103,405			—		—			—			100,585			—			2,820
Other comprehensive income/(loss) (a)	(114,613		)	—			(114,613		)	15,270			—			15,270
Other comprehensive income/(loss)																				—		55,465			—		—			—			—			55,465			—
Comprehensive income/(loss)	332,534			8,555			341,089			232,076			8,555			240,631				—		158,870			—		—			—			100,585			55,465			2,820
Cash dividends declared:
Preferred stock ($4,650 per share for the nine months ended September 30, 2018 and 2017)	(4,650		)	—			(4,650		)	(4,650		)	—			(4,650		)
Common stock ($.36 and $.27 per share for the nine months ended September 30, 2018 and 2017, respectively)	(118,250		)	—			(118,250		)	(63,777		)	—			(63,777		)
Preferred stock ($1,550 per share)																				—		(1,550		)	—		—			—			(1,550		)	—			—
Common stock ($.14 per share)																				—		(44,864		)	—		—			—			(44,864		)	—			—
Common stock repurchased (b)	(23,997		)	—			(23,997		)	(5,285		)	—			(5,285		)		(3,594	)	(53,436		)	—		(2,246		)	(51,190		)	—			—			—
Common stock issued for:
Stock options and restricted stock - equity awards	4,442			—			4,442			5,132			—			5,132				382		520			—		239			281			—			—			—
Acquisition equity adjustment (c)	(46,035		)	—			(46,035		)	—			—			—
Stock-based compensation expense	17,465			—			17,465			14,971			—			14,971				—		5,432			—		—			5,432			—			—			—
Dividends declared - noncontrolling interest of subsidiary preferred stock	—			(8,555		)	(8,555		)	—			(8,555		)	(8,555		)		—		(2,820		)	—		—			—			—			—			(2,820		)
Other	(133		)	—			(133		)	—			—			—
Balance, September 30	$	4,446,500		$	295,431		$	4,741,931		$	2,588,120		$	295,431		$	2,883,551
Balance, March 31, 2019																				315,361		$	4,846,521		$	95,624	$	197,101		$	2,983,948		$	1,595,568		$	(321,151	)	$	295,431

See accompanying notes to consolidated condensed financial statements.


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


(b)	~~2018 includes $19.0~~ Includes $51.5 million repurchased under share repurchase programs.



Three months ended March 31, 2018
(Dollars and shares in thousands, except per share data) (unaudited)	Common Shares		Total			Preferred Stock		Common Stock			Capital Surplus			Undivided Profits			Accumulated Other Comprehensive Income/(Loss) (a)			Noncontrolling Interest
Balance, December 31, 2017	326,736		4,580,488			95,624		204,211			3,147,613			1,102,888			(265,279		)	295,431
Adjustment to reflect adoption of ASU 2018-02	—		—			—		—			—			57,546			(57,546		)	—
Balance, December 31, 2017, as adjusted	326,736		4,580,488			95,624		204,211			3,147,613			1,160,434			(322,825		)	295,431
Adjustment to reflect adoption of ASU 2016-01 and 2017-12	—		67			—		—			—			278			(211		)	—
Beginning balance, as adjusted	326,736		4,580,555			95,624		204,211			3,147,613			1,160,712			(323,036		)	295,431
Net income/(loss)	—		94,994			—		—			—			92,174			—			2,820
Other comprehensive income/(loss)	—		(67,049		)	—		—			—			—			(67,049		)	—
Comprehensive income/(loss)	—		27,945			—		—			—			92,174			(67,049		)	2,820
Cash dividends declared:
Preferred stock ($1,550 per share)	—		(1,550		)	—		—			—			(1,550		)	—			—
Common stock ($.12 per share)	—		(39,681		)	—		—			—			(39,681		)	—			—
Common stock repurchased	(110	)	(2,185		)	—		(70		)	(2,115		)	—			—			—
Common stock issued for:
Stock options and restricted stock - equity awards	569		4,376			—		356			4,020			—			—			—
Acquisition equity adjustment	(1	)	(18		)	—		(1		)	(17		)	—			—			—
Stock-based compensation expense	—		5,906			—		—			5,906			—			—			—
Dividends declared - noncontrolling interest of subsidiary preferred stock	—		(2,820		)	—		—			—			—			—			(2,820		)
Balance, March 31, 2018	327,194		$	4,572,528		$	95,624	$	204,496		$	3,155,407		$	1,211,655		$	(390,085	)	$	295,431

See accompanying notes to consolidated condensed financial statements.


~~(c)~~(a)	~~See Note 2- Acquisitions~~Due to the nature of the preferred stock issued by FHN and ~~Divestitures for additional information.~~its subsidiaries, all components of Other comprehensive income/(loss) have been attributed solely to FHN as the controlling interest holder.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


	First Horizon National Corporation						First Horizon National Corporation
	Nine months ended September 30						Three months ended March 31
(Dollars in thousands) (Unaudited)	2018			2017			2019			2018
Operating Activities
Net income/(loss)	$	455,702		$	225,361		$	103,405		$	94,994
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:
Provision/(provision credit) for loan losses	1,000			(3,000		)	9,000			(1,000		)
Provision/(benefit) for deferred income taxes	106,314			(547		)	7,238			20,309
Depreciation and amortization of premises and equipment	35,700			25,052			11,400			11,978
Amortization of intangible assets	19,394			5,160			6,217			6,474
Net other amortization and accretion	(9,991		)	22,921			1,257			(1,613		)
Net (increase)/decrease in derivatives	86,135			(14,670		)	(51,821		)	(14,549		)
Fair value adjustment on interest-only strips	(840		)	(107		)	1,258			(1,592		)
Repurchase and foreclosure provision/(provision credit)	—			(20,000		)
(Gains)/losses and write-downs on OREO, net	814			44			(290		)	216
Litigation and regulatory matters	(1,447		)	7,409			—			671
Stock-based compensation expense	17,465			14,971			5,432			5,906
Gain on sale of held-to-maturity loans	3,777			—
Equity securities (gains)/losses, net	(212,924		)	(5		)	(31		)	(34		)
Debt securities (gains)/losses, net	(52		)	(450		)	—			(52		)
(Gain)/loss on extinguishment of debt	1			14,329
Net (gains)/losses on sale/disposal of fixed assets	(2,469		)	(13		)	(42		)	(3,202		)
(Gain)/loss on BOLI	(2,785		)	(3,500		)	(1,032		)	—
Loans held-for-sale:
Purchases and originations	(1,729,549		)	(1,252,300		)	(513,788		)	(574,735		)
Gross proceeds from settlements and sales (a)	751,589			1,252,477
Gross proceeds from settlements and sales							135,855			152,209
(Gain)/loss due to fair value adjustments and other	13,755			2,485			19,291			3,651
Net (increase)/decrease in:
Trading securities	392,411			(433,897		)	192,101			(9,843		)
Fixed income receivables	(109,109		)	(11,339		)	(7,921		)	(25,343		)
Interest receivable	(14,052		)	(7,171		)	(5,970		)	(2,990		)
Other assets	(6,699		)	(51,575		)	56,984			44,468
Net increase/(decrease) in:
Trading liabilities	101,179			17,180			94,289			188,847
Fixed income payables	(12,057		)	(73,187		)	90,718			(42,829		)
Interest payable	16,610			8,869			16,570			10,030
Other liabilities	(30,717		)	(35,770		)	(47,631		)	(66,349		)
Total adjustments	(586,547		)	(536,634		)	19,084			(299,372		)
Net cash provided/(used) by operating activities	(130,845		)	(311,273		)	122,489			(204,378		)
Investing Activities
Available-for-sale securities:
Sales	15,137			3,360			13,012			13,104
Maturities	510,232			420,136			157,502			152,800
Purchases	(362,215		)	(426,129		)	(83,512		)	(159,951		)
Held-to-maturity securities:
Prepayments and maturities	—			4,740
Premises and equipment:
Sales	22,794			2,577			4,080			2,619
Purchases	(32,928		)	(30,395		)	(6,995		)	(18,020		)
Proceeds from the sale of Visa Class B shares	240,206			—
Proceeds from sales of OREO	25,328			9,235			3,791			10,527
Proceeds from sales of loans classified as held-to-maturity	50,498			—
Proceeds from BOLI	11,559			5,850			3,208			494
Net (increase)/decrease in:
Loans	283,922			(586,426		)	(448,321		)	418,174
Interests retained from securitizations classified as trading securities	731			648			148			241
Interest-bearing cash	653,919			459,840			264,357			876,249
Cash paid related to divestitures	(27,599		)	—			—			(27,599		)
Cash (paid)/received for acquisition, net (b)	(46,017		)	(123,971		)
Cash paid/(received) for acquisitions, net							—			(18		)
Net cash provided/(used) by investing activities	1,345,567			(260,535		)	(92,730		)	1,268,620
Financing Activities
Common stock:
Stock options exercised							520			4,327
Cash dividends paid							(38,759		)	(21,353		)
Repurchase of shares (a)							(53,436		)	(2,184		)
Cash dividends paid - preferred stock - noncontrolling interest							(2,883		)	(2,883		)
Cash dividends paid - Series A preferred stock							(1,550		)	(1,550		)

Common stock:
Stock options exercised 4,443
5,173
Cash dividends paid (99,753 ) (58,850 )
Repurchase of shares (c) (23,997 ) (5,285 )
Cash dividends paid - preferred stock - noncontrolling interest (8,555 ) (8,523 )
Cash dividends paid - Series A preferred stock (4,650 ) (4,650 )
Term borrowings:
Issuance —
121,184
Payments/maturities (17,565 ) (145,285 )
Increases in restricted and secured term borrowings 5,646
29,231
Net increase/(decrease) in:
Deposits 417,612
(572,621 )
Short-term borrowings (1,496,739 ) 1,261,395
Net cash provided/(used) by financing activities (1,223,558 ) 621,769
Net increase/(decrease) in cash and cash equivalents (8,836 ) 49,961
Cash and cash equivalents at beginning of period 1,452,046
1,037,794
Cash and cash equivalents at end of period $ 1,443,210
$ 1,087,755
Supplemental Disclosures
Total interest paid $ 208,160
$ 92,405
Total taxes paid 12,779
38,151
Total taxes refunded 1,576
8,201
Transfer from loans to OREO 11,388
5,564
Transfer from loans HFS to trading securities 907,788
829,668



Term borrowings:
Payments/maturities	(1,179		)	(2,625		)
Increases in restricted and secured term borrowings	3,120			159
Net increase/(decrease) in:
Deposits	(220,104		)	228,478
Short-term borrowings	92,057			(1,285,626		)
Net cash provided/(used) by financing activities	(222,214		)	(1,083,257		)
Net increase/(decrease) in cash and cash equivalents	(192,455		)	(19,015		)
Cash and cash equivalents at beginning of period	1,405,325			1,452,046
Cash and cash equivalents at end of period	$	1,212,870		$	1,433,031
Supplemental Disclosures
Total interest paid	$	88,774		$	51,418
Total taxes paid	1,008			4,066
Total taxes refunded	27,522			90
Transfer from loans to OREO	1,607			3,076
Transfer from loans HFS to trading securities	425,808			333,483

Certain previously reported amounts have been reclassified to agree with current presentation.

See accompanying notes to consolidated condensed financial statements.

(a) ~~2018~~2019 includes ~~$107.4 million related to the sale of approximately $120 million UPB of subprime auto loans. See Note 2- Acquisitions and Divestitures for additional information.~~

~~(b) See Note 2- Acquisitions and Divestitures for additional information.~~

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 ~~2018~~2019 period are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

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

~~Following is~~See Note 1– Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2018, for a discussion of FHN's key ~~revenues within the scope of Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers", and all related amendments, except as noted.~~

~~Fixed Income.~~ Fixed income includes fixed income securities sales, trading, and strategies, loan sales and derivative sales which are not within the scope of revenue from contracts with customers. Fixed income also includes investment banking fees earned for services related to underwriting debt securities and performing portfolio advisory services. FHN's performance obligation for underwriting services is satisfied on the trade date while advisory services is satisfied over time.

~~Deposit Transactions and Cash Management.~~ Deposit transactions and cash management activities include fees for services related to consumer and commercial deposit products (such as service charges on checking accounts), cash management products and services such as electronic transaction processing (Automated Clearing House and Electronic Data Interchange), account reconciliation services, cash vault services, lockbox processing, and information reporting to large corporate clients. FHN's obligation for transaction-based services is satisfied at the time of the transaction when the service is delivered while FHN's obligation for service based fees is satisfied over the course of each month.

~~Brokerage, Management Fees and Commissions.~~ Brokerage, management fees and commissions include fees for portfolio management, trade commissions, and annuity and mutual fund sales. Asset-based management fees are charged based on the market value of the client’s assets. The services associated with these revenues, which include investment advice and active management of client assets are generally performed and recognized over a month or quarter. Transactional revenues are based on the size and number of transactions executed at the client’s direction and are generally recognized on the trade date.

~~Trust Services and Investment Management.~~ Trust services and investment management fees include investment management, personal trust, employee benefits, and custodial trust services. Obligations for trust services are generally satisfied over time but may be satisfied at points in time for certain activities that are transactional in nature.

~~Bankcard Income.~~ Bankcard income includes credit interchange and network revenues and various card-related fees. Interchange income is recognized concurrently with the delivery of services on a daily basis. Card-related fees such as late fees, currency conversion, and cash advance fees are loan-related and excluded from the scope of ASU 2014-09.revenues.

Contract Balances. As of ~~September 30, 2018,~~March 31, 2019, accounts receivable related to products and services on non-interest income were ~~$9.0~~$7.9 million. For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, FHN had no material impairment losses on non-interest accounts receivable and there were no material contract assets, contract liabilities or deferred contract costs recorded on the Consolidated Condensed ~~Statement~~Statements of Condition as of ~~September 30, 2018.~~March 31, 2019.

Transaction Price Allocated to Remaining Performance Obligations. For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, revenue recognized from performance obligations related to prior periods was not material.

~~Note 1 – Financial Information (Continued)~~

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

Refer to Note ~~12 -~~13– Business Segment Information for a reconciliation of disaggregated revenue by major product line and reportable segment.

~~Debt Investment Securities.~~ Leases.~~Available-for-sale ("AFS") and held-to-maturity (“HTM”) securities~~ At inception, all arrangements are ~~reviewed quarterly~~evaluated to determine if they contain a lease, which is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment for ~~possible other-than-temporary impairment (“OTTI”). The review includes an analysis of the facts and circumstances of each individual investment such as the degree of loss, the length~~a period of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and FHN’s intent and ability to hold the security. Debt securities that may be sold prior to maturity are classified as AFS and are carried at fair value. The unrealized gains and losses on debt securities AFS, including securities for which no credit impairment exists, are excluded from earnings and are reported, net of tax, as a component of other comprehensive income within shareholders’ equity and the Statements of Comprehensive Income. Debt securities which management has the intent and ability to hold to maturity are reported at amortized cost. Interest-only strips that are classified as securities AFS are valued at elected fair value. See Note 16 - Fair Value of Assets and Liabilities for additional information.

Realized gains and losses for investment securities are determined by the specific identification method and reported in noninterest income. Declines in value judged to be other-than-temporary based on FHN’s analysis of the facts and circumstances related to an individual investment, including securities that FHN has the intent to sell, are also determined by the specific identification method. For HTM debt securities, OTTI recognized is typically credit-related and is reported in noninterest income. For impaired AFS debt securities that FHN does not intend to sell and will not be required to sell prior to recovery but for which credit losses exist, the OTTI recognized is separated between the total impairment related to credit losses which is reported in noninterest income, and the impairment related to all other factors which is excluded from earnings and reported, net of tax, as a component of other comprehensive income within shareholders’ equity and the Statements of Comprehensive Income.

~~Equity Investment Securities.~~ ~~Equity securities were classified as AFS through December 31, 2017. Subsequently, all equity securities are classified in Other assets.~~

National banks chartered by the federal government are, by law, members of the Federal Reserve System. Each member bank is required to own stock in its regional Federal Reserve Bank ("FRB"). Given this requirement, FRB stock may not be sold, traded, or pledged as collateral for loans. Membership in the Federal Home Loan Bank (“FHLB”) network requires ownership of capital stock. Member banks are entitled to borrow funds from the FHLB and are required to pledge mortgage loans as collateral. Investments in the FHLB are non-transferable and, generally, membership is maintained primarily to provide a source of liquidity as needed. FRB and FHLB stock are recorded at cost and are subject to impairment reviews.

Other equity investments primarily consist of mutual funds which are marked to fair value through earnings. Smaller balances of equity investments without a readily determinable fair value are recorded at cost minus impairment with adjustments through earnings for observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

~~Summary of Accounting Changes.~~

Effective January 1, 2018, FHN adopted the provisions of ASU 2014-09, “Revenue from Contracts with Customers,” and all related amendments to all contracts using a modified retrospective transaction method. 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~~consideration. Control is ~~accomplished through~~deemed to exist when a ~~five-step recognition framework involving 1)~~lessor has granted and a lessee has received both the ~~identification of contracts with customers, 2) identification of performance obligations, 3) determination of the transaction price, 4) allocation of the transaction price~~right 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

~~Note 1 – Financial Information (Continued)~~

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. FHN elected to adopt the provisions of the revenue recognition standards through the cumulative effect alternative and determined that there were no significant effects on the timing of recognition, which resulted in no cumulative effect adjustment being required. Beginning in first quarter 2018, in situations where FHN's broker-dealer operations serve as the lead underwriter, the associated revenues and expenses are presented gross. The effect on 2018 revenues and expenses is not expected to be significant.

Effective January 1, 2018, FHN adopted the provisions of ASU 2017-05, “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” through the cumulative effect approach. ASU 2017-05 clarifies the meaning and application of the term "in substance nonfinancial asset" in transactions involving both financial and nonfinancial assets. Ifobtain substantially all of the ~~fair~~economic benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use.

Lessee. As a lessee, FHN recognizes lease (right-of-use) assets and lease liabilities for all leasing arrangements with lease terms that are greater than one year. The lease asset and lease liability are recognized at the present value of estimated future lease payments, including estimated renewal periods, with the discount rate reflecting a fully-collateralized rate matching the estimated lease term. Renewal options are included in the estimated lease term if they are considered reasonably certain of exercise. Periods covered by termination options are included in the lease term if it is reasonably certain they will not be exercised. Additionally, prepaid or accrued lease payments, lease incentives and initial direct costs related to lease arrangements are recognized within the right-of-use asset. Each lease is classified as a financing or operating lease which depends on the relationship of the lessee’s rights to the economic value of the ~~assets~~leased asset. For finance leases, interest on the lease liability is recognized separately from amortization of the right-of-use asset in earnings, resulting in higher expense in the earlier portion of the lease term. For operating leases, a single lease cost is calculated so that ~~are promised to~~ the ~~counterparty in~~cost of the lease is allocated over the lease term on a ~~contract are concentrated in nonfinancial assets, then~~generally straight-line basis. Substantially all of ~~the financial assets promised to the counterparty~~FHN’s lessee arrangements are ~~in substance nonfinancial assets within the scope~~classified as operating leases. For leases with a term of ~~revenue recognition guidance for nonfinancial assets. ASU 2017-05 also clarifies that an entity should identify each distinct nonfinancial asset~~12 months 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)less, FHN does not ~~have (or ceases~~ to ~~have) a controlling financial interest in the legal entity that holds the asset in accordance with Topic 810~~recognize lease assets 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~~lease liabilities and expense is required to measure any noncontrolling interest it receives (or retains) at fair value. FHN determined that there were no significant effects on the timing of revenue recognition, which resulted in no cumulative effect adjustment being required.

Effective January 1, 2018, FHN adopted the provisions of 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 valuegenerally 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 instraight-line basis over the determination of fair value. Transition is 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.lease term.

Upon adoption, FHN reclassified $265.9 million of equity investments out of AFS securities to Other assets, leaving only debt securities within the AFS classification. FHN evaluated the nature of its current equity investments (excluding FRB and FHLB stock holdings which are specifically exempted from the provisions of ASU 2016-01) and determined that substantially all qualified for the election available to assets without readily determinable fair values. Accordingly, FHN has applied this election and any future fair value marks for these investments will be recognized through earnings on a prospective basis subsequent to adoption. The requirements of ASU 2016-01 related to assessment of deferred tax assets and disclosure of the fair value of financial instruments did not have a significant effect on FHN because its current accounting and disclosure practices conform to the requirements of ASU 2016-01.

Effective January 1, 2018, FHN adopted the provisions of 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. The adoption of ASU 2016-04 did not have a significant effect on FHN’s current accounting and disclosure practices.

Note 1 – Financial Information (Continued)

~~Effective January 1, 2018, FHN adopted~~Lease assumptions and classification are reassessed upon the ~~provisions~~occurrence of ~~ASU 2016-15, “Classification~~events that result in changes to the estimated lease term or consideration. Modifications to lease contracts are evaluated to determine 1) if a right to use an additional asset has been obtained, 2) if only the lease term and/or consideration have been revised or 3) if a full or partial termination has occurred. If an additional right-of use-asset has been obtained, the modification is treated as a separate contract and its classification is evaluated as a new lease arrangement. If only the lease term or consideration are changed, the lease liability is revalued with an offset to the lease asset and the lease classification is re-assessed. If a modification results in a full or partial termination of ~~Certain Cash Receipts~~the lease, the lease liability is revalued through earnings along with a proportionate reduction in the value of the related lease asset and ~~Cash Payments,” which clarifies multiple~~subsequent expense recognition is similar to a new lease arrangement.

Lease assets are evaluated for impairment when triggering events occur, such as a change in management intent regarding the continued occupation of the leased space. If a lease asset is impaired, it is written down to the present value of estimated future cash ~~flow presentation issues including providing guidance as~~flows and the prospective expense recognition for that lease follows the accelerated expense recognition methodology applicable to classification on the cash flow statement for certain cash receipts and cash payments where diversity in practice exists. The adoption of ASU 2016-15 was applied retroactively resulting in proceeds from bank-owned life insurance (“BOLI”) beingfinance leases, even if it remains classified as an ~~investing activity rather than their prior classification as an~~ operating ~~activity. All~~lease.

Sublease arrangements are accounted for consistent with the lessor accounting described below. Sublease arrangements are evaluated to determine if changes to estimates for the primary lease are warranted or if the sublease terms reflect impairment of ~~these amounts~~the related lease asset.

Lease assets are ~~included~~recognized in Other assets and lease liabilities are recognized in Other liabilities in the Consolidated Condensed ~~Statement~~Statements of Condition. ~~The amounts reclassified are presented in the table below.~~

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017 Fiscal Years Ended December 31
(Dollars in thousands) 2017 2016 2015

Proceeds from BOLI $ 160
$ 5,850
$ 11,440
$ 2,740
$ 2,425

~~Effective January 1, 2018,~~Since substantially all of its leasing arrangements relate to real estate, FHN ~~retroactively adopted the provisions of ASU 2017-07, “Improving the Presentation of Net~~

~~Periodic Pension Cost~~records lease expense, 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 sameany related sublease 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. FHN’s disclosures for pension and postretirement costs provide details of the service cost and all other components for expenses recognized for its applicable benefit plans. All of these amounts were previously included in Employee compensation, incentives, and benefitswithin Occupancy expense in the Consolidated Condensed Statements of Income. ~~Upon adoption of ASU 2017-07~~

Lessor. As a lessor, FHN ~~reclassified~~also evaluates its lease arrangements to determine whether a finance lease or an operating lease exists and utilizes the ~~expense components other than service cost into All other expense and revised its disclosures accordingly. The amounts reclassified are presented~~rate implicit in the ~~table below.~~

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017 Fiscal Years Ended December 31
(Dollars in thousands)
2017 2016 2015

Net periodic benefit cost reclassified $ 415
$ 1,665
$ 1,946
$ (843 ) $ (1,168 )

~~Effective January 1, 2018, FHN early adopted~~lease arrangement as the ~~provisions~~discount rate to calculate the present value of ~~ASU 2017-08, “Premium Amortization on Purchased Callable Debt Securities,”~~future cash flows. Depending upon the terms of the individual agreements, finance leases represent either sales-type or direct financing leases, both of which ~~shortens~~require de-recognition of 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 either 1) debt securities where the prepayment date is not preset or the price is not known in advance or 2) debt securities that qualify for amortization based on estimated prepayment rates. The adoption of ASU 2017-08 did not have an effect on FHN's current investments.

Effective January 1, 2018, FHN early adopted the provisions of ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” which revises the financial reporting for hedging relationships through changes to both the designation and measurement requirements for qualifying hedge relationships and the presentation of hedge results. ASU 2017-12 expands permissible risk component hedging strategies, including the designationasset being leased with offsetting recognition of a ~~contractually specified interest rate (e.g., a bank’s prime rate) in hedges~~lease receivable that is evaluated for impairment similar to loans. Currently, all of ~~cash flows from variable rate financial instruments. Additionally, ASU 2017-12 makes significant revisions to fair value hedging activities, including the ability to measure the fair value changes~~FHN’s lessor arrangements are considered operating leases.

Lease income for a hedged item solely for changes in the benchmark interest rate, permitting partial-term hedges, limiting consideration of prepayment risk for hedged debt instruments solely to the effects of changes in the benchmark interest rate and allowing for certain hedging strategies to be applied to closed portfolios of prepayable debt instruments. ASU 2017-12 also provides elections for the exclusion of certain portions of a hedging instrument’s change in fair value from the assessment of hedge effectiveness. If elected, the fair value changes of these excluded components may beoperating leases is recognized ~~immediately or recorded into other comprehensive income with recycling into earnings using a rational and systematic methodology~~ over the life of the ~~hedging instrument.~~lease, generally on a straight line basis. Lease incentives and initial direct costs are capitalized and amortized over the estimated life of the lease. Lease income is not significant for any reporting periods and is classified as a reduction of Occupancy expense in the Consolidated Condensed Statements of Income.

~~Under ASU 2017-12 some~~Summary of the documentation requirements for hedge accounting relationships are relaxed, but the highly effective threshold has been retained. Hedge designation documentation and a prospective qualitative assessment are still required at hedge inception, but the initial quantitative analysis may be delayed until the end of the quarter the hedge is commenced. If certain criteria are met, an election can be made to perform future effectiveness assessments using a purely qualitative methodology. ASU 2017-12 also revises the income statement presentation requirements for hedging activities. For

~~Note 1 – Financial Information (Continued)~~

fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of effectiveness is recorded to the same income statement line item used to present the earnings effect of the hedged item. For cash flow hedges, the entire fair value change of the hedging instrument that is included in the assessment of hedge effectiveness is initially recorded in other comprehensive income and later recycled into earnings as the hedged transaction(s) affect net income with the income statement effects recorded in the same financial statement line item used to present the earnings effect of the hedged item.

ASU 2017-12 also makes revisions to the current disclosure requirements for hedging activities to reflect the presentation of hedging results consistent with the changes to income statement classification and to improve the disclosure of the hedging results on the balance sheet.

FHN early adopted the provisions of ASU 2017-12 in the first quarter of 2018. Prospectively, FHN is recording components of hedging results for its fair value and cash flow hedges previously recognized in other expense within either interest income or interest expense. Additionally, FHN made cumulative effect adjustments to the hedged items, accumulated other comprehensive income and retained earnings as of the beginning of 2018. The magnitude of the cumulative effect adjustments and prospective effects were insignificant for FHN’s hedge relationships.

Accounting ~~Changes Issued but Not Currently Effective~~

Changes. In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires a lessee to recognize in its statement of condition a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 leaves lessor accounting largely unchanged from prior standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. All other leases must be classified as financing or operating leases which depends on the relationship of the lessee’s rights to the economic value of the leased asset. For finance leases, interest on the lease liability is recognized separately from amortization of the right-of-use asset in earnings, resulting in higher expense in the earlier portion of the lease term. For operating leases, a single lease cost is calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

In July 2018, the FASB issued ASU 2018-11, “Leases - Targeted Improvements,” which provides an election for a cumulative effect adjustment to retained earnings upon initial adoption of ASU 2016-02. Alternatively, under the initial guidance of ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. Both adoption alternatives include a number of optional practical expedients that entities may elect to apply, which would result in continuing to account for leases that commence before the effective date in accordance with previous requirements (unless the lease is modified) except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous requirements. ASU 2016-02 also requires expanded qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from lease arrangements. ASU 2016-02 and ASU 2018-11 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~FHN continues to evaluate the impact of ASU 2016-02 on its current accounting and disclosure practices.~~ Upon adoption, FHN ~~intends to utilize~~utilized the cumulative effect transition alternative provided by ASU 2018-11. FHN ~~also intends to utilize~~utilized the lease classification practical expedients and the short-term lease exemption upon adoption. FHN currently estimates that adoption of ASU 2016-02 will result in recognition of lease assets of approximately $185 million and lease liabilities of approximately $195 million along with smaller impacts to other balance sheet classifications as well as an after-tax increase in retained earnings of approximately $3 million, primarily reflecting the recognition of deferred gains associated with prior sale-leaseback transactions. Since FHN will electalso has elected to determine the discount rate on leases as of the effective date and ~~will also elect~~elected to use hindsight in determining ~~remaining~~ lease terms as well as impairments of lease assets resulting from lease abandonments upon ~~adoption, this amount may change based on revisions to~~adoption. The table below summarizes the ~~inputs used~~impact of adopting ASU 2016-02 as of January 1, 2019, for line items in ~~calculating this estimated adoption effect.~~the Consolidated Condensed Statements of Condition. Lease assets of approximately $185 million are included in Other Assets. Lease liabilities of

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

Note 1 – Financial Information (Continued)

~~forecasts that affect the collectability of the reported amount. Additionally, current disclosures of credit quality indicators~~approximately $204 million are included 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~~Other Liabilities. The after-tax decrease in Undivided Profits reflects the recognition of credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”). For PCD assets, the initial allowance for credit losses is added to the purchase price. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for PCD assets. Interest income for PCD assets will be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. Currently, credit losses for purchased credit-impaired assets are included in the initial basis of the assets with subsequent declines in credit resulting in expense while subsequent improvements in credit are reflected as an increase in the future yield from the assets.

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 continues to evaluate the impact of ASU 2016-13. FHN has met with industry experts, initiated training for key employeesdeferred gains associated with ~~the new standard, and defined an initial approach that it is currently testing. FHN has begun developing the formal models and processes that will be required to implement the new standard.~~

~~In August 2018, the FASB issued ASU 2018-13,~~ “Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,” which makes multiple revisions to current disclosures requirements for fair value measurements. ASU 2018-13 removes the disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of recognition for transfers between fair value levels and the discussion of valuation processes for Level 3 measurements. Additional disclosure is required for unrealized gains and losses recognized with accumulated other comprehensive income and the weighted average and range of unobservable inputs used in Level 3 measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted at an individual level for each removed or modified disclosure while adoption of other changes may be delayed until their effective date. FHN is assessing the effects of ASU 2018-13 on its current fair value disclosures.

~~In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which makes multiple~~prior sale-leaseback transactions, revisions to the ~~disclosure requirements for defined benefit pension~~estimated useful lives of leasehold improvements and ~~postretirement plans. ASU 2018-14 removes the disclosure requirements for 1) the amounts in accumulated other comprehensive income expected~~adjustments of lease expense to be recognized as components of net periodic benefit cost over the next fiscal year, 2) the amount and timing of plan assets expected to be returned to the employer, and 3) the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. ASU 2018-14 adds disclosures for 1) the weighted-average interest crediting rates for plans with promised interest crediting rates, 2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period, 3) the projected benefit obligation ("PBO") and fair value of plan assets for plans with PBOs in excess of plan assets and 4) the accumulated benefit obligation ("ABO") and fair value of plan assets for plans with ABOs in excess of plan assets. ASU 2018-14 is effective for fiscal years ending after December 15, 2020 with fullreflect revised lease duration estimates.

~~Note 1 – Financial Information (Continued)~~

~~retrospective presentation required. Early adoption is permitted. FHN is assessing the effects of ASU 2018-14 on its current benefit plan disclosures.~~




(Dollars in thousands)	January 1, 2019

Loans, net of unearned income	$	3,450
Premises and equipment, net	2,718
Other assets	183,884
Other liabilities	(191,010		)
Undivided profits	1,011

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

Accounting Changes Issued but Not Currently Effective

In April 2019, the FASB issued ASU ~~2018-15~~2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which makes several revisions and clarifications to the accounting for these items. The revisions related to ASU 2016-03 (Topic 326) are discussed below. ASU 2019-04 clarifies several aspects of fair hedge accounting, including the application to partial term fair value hedges. ASU 2019-04 provides an election regarding the timing for amortization of basis adjustments to hedged items in fair value hedges, indicating that amortization may, but is not required to, commence prior to the end of the hedge relationship. ASU 2019-04 also provides additional guidance related to the application of the hypothetical derivative method and first-payments-received method in cash flow hedges. Further, ASU 2019-04 indicates that remeasurement of an equity security without a readily determinable fair value when an orderly transaction is identified for an identical or similar investment of the same issuer represents a non-recurring fair value measurement and the related disclosure requirements apply to the remeasurement event. The hedging updates are effective at the beginning of the first annual reporting period after issuance with early adoption permitted. The financial instruments measurement and disclosure changes are effective for fiscal years and interim periods beginning after December 15, 2019 with early adoption permitted. FHN will early adopt these portions of ASU 2019-04 in second quarter 2019 and the effects will not be significant based on ~~it current~~its existing accounting practices.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” which revises the measurement and recognition of credit losses for assets measured at amortized cost (e.g., held-to-maturity (“HTM”) loans and debt securities) and available-for-sale (“AFS”) debt securities. Under ASU 2016-13, for assets measured at amortized cost, the current expected credit loss (“CECL”) is measured as the difference between amortized cost and the net amount expected to be collected. This represents a departure from existing GAAP as the “incurred loss” methodology for recognizing credit losses delays recognition until it is probable a loss has been incurred. Under CECL the full amount of expected credit losses will be recognized at the time of loan origination. The measurement of current expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Additionally, current disclosures of credit quality indicators in relation to the amortized

Note 1 – Financial Information (Continued)

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

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

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

ASU 2019-04 provides an election to either not measure or measure separately an allowance for credit losses for accrued interest receivable (“AIR"). Entities electing to not measure an allowance for AIR must write off uncollectible interest in a timely manner. Additionally, an election is provided for the write off of uncollectible interest to be recorded either as a reversal of interest income or a charge against the allowance for credit losses or a combination of both. Disclosures are required depending upon which elections are made.

ASU 2019-04 also clarifies that when loans and securities are transferred between balance sheet categories (e.g., loans from held-for-investment to held-for-sale or securities from held-to-maturity to available-for-sale) the associated allowance for credit losses should be reversed to income and prospective accounting follows the requirements for the new classification. Further, ASU 2019-04 clarifies that recoveries should be incorporated within the estimation of the allowance for credit losses. Expected recoveries should not exceed the aggregate amount of prior write offs and expected future write offs. Additionally, for collateral dependent financial assets, the allowance for credit losses that is added to the amortized cost basis should not exceed amounts previously written off.

ASU 2019-04 also makes several changes when a discounted cash flow approach is used to measure expected credit losses. ASU 2019-04 removes ASU 2016-03’s prohibition of using projections of future interest rate environments when using a discounted cash flow method to measure expected credit losses on variable-rate financial instruments. If an entity uses projections or expectations of future interest rate environments in estimating expected cash flows, the same assumptions should be used in determining the effective interest rate used to discount those expected cash flows. The effective interest rate should also be adjusted to consider the effects of expected prepayments on the timing of expected future cash flows. ASU 2019-04 provides an election to adjust the effective interest rate used in discounting expected cash flows to isolate credit risk in

Note 1 – Financial Information (Continued)

measuring the allowance for credit losses. Further, the discount rate should not be adjusted for subsequent changes in expected prepayments if a financial asset is restructured in a troubled debt restructuring.

Related to collateral-dependent financial assets, ASU 2019-04 requires inclusion of estimated costs to sell in the measurement of expected credit losses in situations where the entity intends to sell rather than operate the collateral. Additionally, the estimated costs to sell should be undiscounted when the entity intends to sell rather than operate the collateral.

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

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

Note 2 – Acquisitions and Divestitures

On November 30, 2017, FHN completed its acquisition of Capital Bank Financial Corporation ("CBF") and its subsidiaries, including Capital Bank Corporation for an aggregate of 92,042,232 shares of FHN common stock and $423.6 million in cash in a transaction valued at $2.2 billion. In second quarter 2018, FHN canceled 2,373,220 common shares which had been issued but set aside for certain shareholders of CBF who have commenced a dissenters' appraisal process resulting in a reduction in equity consideration and an increase in cash consideration of $46.0 million. The final appraisal or ~~settlement~~resolution amount, as applicable, may differ from current estimates. CBF operated 178 branches in North and South Carolina, Tennessee, Florida and Virginia at the time of closing. In relation to the acquisition, FHN acquired approximately $9.9 billion in assets, including approximately $7.3 billion in loans and $1.2 billion in AFS securities, and assumed approximately $8.1 billion of CBF deposits.

The following schedule details acquired assets and liabilities and consideration paid, as well as adjustments to record the assets and liabilities at their estimated fair values as of November 30, 2017. ~~These fair value measurements are based on third party and internal valuations.~~

Capital Bank Financial Corporation
As Purchase Accounting/Fair
Acquired Value Adjustments (unaudited) As recorded
(Dollars in thousands) (unaudited) 2017 2018 (a) by FHN
Assets:
Cash and cash equivalents $ 205,999
$ —
$ —
$ 205,999
Trading securities 4,758
(4,758 ) (b) —
—
Loans held-for-sale —
134,003
(9,085 ) 124,918
Securities available-for-sale 1,017,867
175,526
—
1,193,393
Securities held-to-maturity 177,549
(177,549 ) —
—
Loans 7,596,049
(320,372 ) 867
7,276,544
Allowance for loan losses (45,711 ) 45,711
—
—
CBF Goodwill 231,292
(231,292 ) —
—
Other intangible assets 24,498
119,302
(2,593 ) 141,207
Premises and equipment 196,298
37,054
(2,351 ) 231,001
OREO 43,077
(9,149 ) (315 ) 33,613
Other assets 617,232
41,320
(c) (7,248 ) (c) 651,304
Total assets acquired $ 10,068,908
$ (190,204 ) $ (20,725 ) $ 9,857,979

Liabilities:
Deposits $ 8,141,593
$ (849 ) $ (642 ) $ 8,140,102
Securities sold under agreements to repurchase 26,664
—
—
26,664
Other short-term borrowings 390,391
—
—
390,391
Term borrowings 119,486
67,683
—
187,169
Other liabilities 59,995
4,291
2,908
67,194
Total liabilities assumed 8,738,129
71,125
2,266
8,811,520
Net assets acquired $ 1,330,779
$ (261,329 ) $ (22,991 ) 1,046,459
Consideration paid:
Equity (1,746,724 )
Cash (469,609 )
Total consideration paid (2,216,333 )
Goodwill $ 1,169,874


~~(a)~~	~~Amounts reflect adjustments made to provisional fair value estimates during the measurement period ending November 30, 2018. These adjustments were~~ FHN recorded ~~in FHN's Consolidated Condensed Statement of Condition as of September 30, 2018 with a corresponding adjustment to goodwill.~~


~~(b)~~	~~Amount represents a conformity adjustment to align with FHN presentation.~~


~~(c)~~	~~Amount primarily relates to a net deferred tax asset recorded for the effects of the purchase accounting adjustments.~~

~~Note 2 – Acquisitions and Divestitures (Continued)~~

Due to the timing of merger completion in relation to the previous year end, the fact that back office functions (including loan and deposit processing) have only recently been integrated, the evaluation of post-merger activity, and the extended information gathering and management review processes required to properly record acquired assets and liabilities, FHN considers its valuations of CBF's loans, loans held-for-sale, premises and equipment, other assets, tax receivables and payables, lease intangibles, other liabilities and acquired contingencies to be provisional as management continues to identify and assess information regarding the nature of these assets and liabilities and reviews the associated valuation assumptions and methodologies. Accordingly, the amounts recorded for current and deferred tax assets and liabilities are also considered provisional as FHN continues to evaluate the nature and extent of temporary (timing) and permanent differences between the book and tax bases of the acquired assets and liabilities assumed. Additionally, the accounting policies of both FHN and CBF are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.

~~In relation to the acquisition, FHN has recorded preliminary~~ goodwill of approximately $1.2 billion, representing the excess of acquisition consideration over the estimated fair value of net assets acquired.

~~All expenses related to the merger and integration with CBF are recorded in FHN's Corporate segment. Integration activities were substantially completed in second quarter 2018.~~

~~Total CBF merger and integration expense recognized for the three and nine months ended September 30, 2018 and 2017 are presented in the table below:~~

Three Months Ended September 30 Nine Months Ended September 30
(Dollars in thousands) 2018 2017 2018 2017
Professional fees (a) $ 4,594
$ 3,492
$ 19,215
$ 8,004
Employee compensation, incentives and benefits (b) 1,965
232
8,459
232
Contract employment and outsourcing (c) 599
351
3,702
351
Occupancy (d) 100
15
2,321
15
Miscellaneous expense (e) 1,384
130
6,522
234
All other expense (f) 1,548
2,771
41,833
2,786
Total $ 10,190
$ 6,991
$ 82,052
$ 11,622

~~(a) Primarily comprised of fees for legal, accounting, investment bankers, and merger consultants.~~

~~(b) Primarily comprised of fees for severance and retention.~~

~~(c) Primarily relates to fees for temporary assistance for merger and integration activities.~~

~~(d) Primarily relates to fees associated with lease exit accruals.~~

~~(e) Consists of fees for Operations services, communications and courier, equipment rentals, depreciation, and maintenance,~~

~~supplies, travel and entertainment, computer software, and advertising and public relations.~~

~~(f) Primarily relates to contract termination charges, costs of shareholder matters and asset impairments related~~

~~to the integration, as well as other miscellaneous expenses.~~

On March 23, 2018, FHN divested two branches, including approximately $30 million of deposits and $2 million of ~~loans, to Apex Bank, a Tennessee banking corporation.~~loans. The branches, both in Greeneville, Tennessee, were divested in connection with First Horizon's agreement with the U.S. Department of Justice and commitments to the Board of Governors of the Federal Reserve System, which were entered into in connection with a customary review of FHN's merger with CBF.

In second quarter 2018, FHN sold approximately $120 million UPB of its subprime auto loans. These loans, originally acquired as part of the CBF acquisition, did not fit within FHN's risk profile. Based on the sales price, a measurement period adjustment to the acquisition-date fair value of the subprime auto loans was recorded in second quarter 2018.

~~On April 3, 2017, FTN Financial~~ A measurement period adjustment was made in fourth quarter 2018 for other consumer loans 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 $131 million in~~ ~~cash. Coastal, which was~~from CBF 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. Coastal’s government-guaranteed loan products, combined with FTN Financial’s existing SBA trading activities, have established an additional major product sector for FTN Financial. In relation to the acquisition, FTN

~~Note 2 – Acquisitions and Divestitures (Continued)~~

Financial acquired approximately $418 million in assets, inclusive of approximately $236 million of HFS loans and $139 million of trading securities, and assumed approximately $202 million of securities sold under agreements to repurchase and $96 million of fixed income payables. In relation to the acquisition, FHN has recorded $45.0 million in goodwill representing the excess of acquisition consideration over the estimated fair value of net assets acquired.on pricing information received from potential buyers.

See Note 2- Acquisitions and Divestitures in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, ~~2017,~~2018, for additional information about the CBF acquisition and ~~Coastal~~other acquisitions.

Expenses related to FHN's merger and integration activities are recorded in FHN's Corporate segment.

Total merger and integration expense recognized for the three months ended March 31, 2019 and 2018 are presented in the table below:



	Three Months Ended March 31
(Dollars in thousands)	2019		2018
Professional fees (a)	$	1,867	$	5,633
Employee compensation, incentives and benefits (b)	1,517		5,237
Contract employment and outsourcing (c)	—		1,399
Miscellaneous expense (d)	1,187		2,064
All other expense (e)	1,089		17,041
Total	$	5,660	$	31,374

(a) Primarily comprised of fees for legal, accounting, and merger consultants.

(b) Primarily comprised of fees for severance and retention.

(d) Consists of fees for communications and courier, operations services, equipment rentals, depreciation, and maintenance,

supplies, travel and entertainment, computer software, advertising and public relations, and occupancy.

(e) Primarily relates to contract termination charges, lease buyouts, costs of shareholder matters and asset impairments related to the integration, as well as other miscellaneous expenses.

In addition to the transactions mentioned above, FHN acquires or divests assets from time to time in transactions that are considered business combinations or divestitures but are not material to FHN individually or in the aggregate. In April 2019, FHN sold Superior Financial Services, Inc., a subsidiary acquired as part of the CBF acquisition. The sale will result in the removal of approximately $25 million UPB of subprime consumer loans from Loans held-for-sale on FHN's Consolidated Condensed Statements of Condition.

Note 3 – Investment Securities

The following tables summarize FHN’s investment securities on ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018									March 31, 2019
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	(2	)	$	98	$	100	$	—	$	(1	)	$	99
Government agency issued mortgage-backed securities (“MBS”)	2,504,101		2,987		(92,211		)	2,414,877		2,398,177		8,992		(21,360		)	2,385,809
Government agency issued collateralized mortgage obligations (“CMO”)	2,077,326		216		(86,358		)	1,991,184		1,958,529		2,020		(28,765		)	1,931,784
Other U.S. government agencies	114,053		—		(965		)	113,088		189,067		1,761		—			190,828
Corporates and other debt	55,495		270		(691		)	55,074		55,266		302		(384		)	55,184
States and municipalities	24,151		—		(450		)	23,701		38,028		1,395		—			39,423
	$	4,775,226	$	3,473	$	(180,677	)	4,598,022		$	4,639,167	$	14,470	$	(50,510	)	4,603,127
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (a)								10,361									13,195
Total securities available-for-sale (b)								$	4,608,383								$	4,616,322
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	—	$	(244	)	$	9,756	$	10,000	$	—	$	(111	)	$	9,889
Total securities held-to-maturity	$	10,000	$	—	$	(244	)	$	9,756	$	10,000	$	—	$	(111	)	$	9,889


(a)	SBA-interest only strips are recorded at elected fair value. See Note 1617 - Fair Value ~~of Assets and Liabilities~~ for additional information.


(b)	Includes ~~$3.6~~$3.9 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


	December 31, 2017									December 31, 2018
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	(1	)	$	99	$	100	$	—	$	(2	)	$	98
Government agency issued MBS	2,580,442		10,538		(13,604		)	2,577,376		2,473,687		4,819		(58,400		)	2,420,106
Government agency issued CMO	2,302,439		1,691		(34,272		)	2,269,858		2,006,488		888		(48,681		)	1,958,695
Other U.S. government agencies										149,050		809		(73		)	$	149,786
Corporates and other debt	55,799		23		(40		)	55,782		55,383		388		(461		)	55,310
Equity and other (a)	265,863		7		—			265,870
State and municipalities										32,473		314		(214		)	32,573
	$	5,204,643	$	12,259	$	(47,917	)	5,168,985		$	4,717,181	$	7,218	$	(107,831	)	4,616,568
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (b)								1,270
Total securities available-for-sale (c)								$	5,170,255
AFS securities recorded at fair value through earnings:
SBA-interest only strips (a)																	9,902
Total securities available-for-sale (b)																	$	4,626,470
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	—	$	(99	)	$	9,901	$	10,000	$	—	$	(157	)	$	9,843
Total securities held-to-maturity	$	10,000	$	—	$	(99	)	$	9,901	$	10,000	$	—	$	(157	)	$	9,843


(a)	Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $134.6 million. The remainder is money market, mutual funds, and cost method investments. Equity investments were reclassified to Other assets upon adoption of ASU 2016-01 on January 1, 2018.


~~(b)~~	SBA-interest only strips are recorded at elected fair value. See Note 1617 - Fair Value of Assets and Liabilities for additional information.

~~Note 3 – Investment Securities (Continued)~~


~~(c)~~(b)	Includes ~~$4.0~~$3.8 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.

Note 3 – Investment Securities (Continued)

The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturity debt securities portfolios on ~~September 30, 2018~~March 31, 2019 are provided below:


	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	15,188	$	15,025	$	—	$	—	$	15,060	$	14,998
After 1 year; within 5 years	—		—		154,460		153,261		—		—		229,373		231,160
After 5 years; within 10 years	10,000		9,756		—		3,741		10,000		9,889		755		3,825
After 10 years	—		—		24,151		30,295		—		—		37,273		48,746
Subtotal	10,000		9,756		193,799		202,322		10,000		9,889		282,461		298,729
Government agency issued MBS and CMO (a)	—		—		4,581,427		4,406,061		—		—		4,356,706		4,317,593
Total	$	10,000	$	9,756	$	4,775,226	$	4,608,383	$	10,000	$	9,889	$	4,639,167	$	4,616,322


(a)	Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The table below provides information on gross gains and gross losses from debt investment securities for the three ~~and nine~~ months ended ~~September 30, 2018. Equity securities are included for periods prior to~~March 31, 2019 and 2018.


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended March 31
(Dollars in thousands)	2018		2017		2018		2017		2019		2018
Gross gains on sales of securities	$	—	$	6	$	52	$	455	$	—	$	52
Gross (losses) on sales of securities	—		—		—		��		—		—
Net gain/(loss) on sales of securities (a) (b)	$	—	$	6	$	52	$	455
Net gain/(loss) on sales of securities (a)									$	—	$	52


(a)	Cash proceeds ~~from the sale of available-for-sale securities~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 ~~and 2017~~ were not material.


~~(b)~~	~~Nine months ended September 30, 2017 includes a $.4 million gain associated with the call of a $4.4 million held-to-maturity municipal bond.~~

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	As of September 30, 2018															As of March 31, 2019
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. treasuries	$	—	$	—		$	98	$	(2	)	$	98	$	(2	)	$	—	$	—		$	99	$	(1	)	$	99	$	(1	)
Government agency issued MBS	1,500,317		(52,607		)	732,470		(39,604		)	2,232,787		(92,211		)	1,542		(13		)	1,948,718		(21,347		)	1,950,260		(21,360		)
Government agency issued CMO	1,000,444		(28,664		)	963,763		(57,694		)	1,964,207		(86,358		)	863		—			1,699,529		(28,765		)	1,700,392		(28,765		)
Other U.S. government agencies	113,088		(965		)	—		—			113,088		(965		)
Corporates and other debt	40,024		(691		)	—		—			40,024		(691		)	—		—			40,065		(384		)	40,065		(384		)
States and municipalities	23,701		(450		)	—		—			23,701		(450		)
Total temporarily impaired securities	$	2,677,574	$	(83,377	)	$	1,696,331	$	(97,300	)	$	4,373,905	$	(180,677	)	$	2,405	$	(13	)	$	3,688,411	$	(50,497	)	$	3,690,816	$	(50,510	)

Note 3 – Investment Securities (Continued)


	As of December 31, 2017															As of December 31, 2018
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. treasuries	$	99	$	(1	)	$	—	$	—		$	99	$	(1	)	$	—	$	—		$	98	$	(2	)	$	98	$	(2	)
Government agency issued MBS	1,455,476		(4,738		)	331,900		(8,866		)	1,787,376		(13,604		)	597,008		(12,335		)	1,537,106		(46,065		)	2,134,114		(58,400		)
Government agency issued CMO	1,043,987		(7,464		)	832,173		(26,808		)	1,876,160		(34,272		)	290,863		(2,860		)	1,560,420		(45,821		)	1,851,283		(48,681		)
Other U.S. government agencies																29,776		(73		)	—		—			$	29,776	$	(73	)
Corporates and other debt	15,294		(40		)	—		—			15,294		(40		)	25,114		(344		)	15,008		(117		)	40,122		(461		)
States and municipalities																17,292		(214		)	—		—			17,292		(214		)
Total temporarily impaired securities	$	2,514,856	$	(12,243	)	$	1,164,073	$	(35,674	)	$	3,678,929	$	(47,917	)	$	960,053	$	(15,826	)	$	3,112,632	$	(92,005	)	$	4,072,685	$	(107,831	)

FHN has reviewed debt investment securities that were in unrealized loss positions in accordance with its accounting policy for OTTI and does not consider them other-than-temporarily impaired. For debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. The decline in value is primarily attributable to changes in interest rates and not credit losses.

The carrying amount of equity investments without a readily determinable fair value was ~~$21.6~~$22.2 million and ~~$16.3~~$21.3 million at ~~September 30, 2018~~March 31, 2019 and ~~January 1,~~December 31, 2018, respectively. The year-to-date 2019 and 2018 gross amounts of upward and downward valuation adjustments were not significant.

Unrealized gains of ~~$1.0~~$3.4 million and ~~$2.1~~$.3 million were recognized in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, respectively, for equity investments with readily determinable fair values.

In third quarter 2018 FHN sold its remaining holdings of Visa Class B Shares resulting in a pre-tax gain of $212.9 million recognized within the Corporate segment. See the Visa Matters section of Note 10 - Contingencies and Other Disclosures and Other Derivatives section of Note 14 - Derivatives for more information regarding FHN’s Visa shares.

Note 4 – Loans

The following table provides the balance of loans, net of unearned income, by portfolio segment as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30		December 31		March 31		December 31
(Dollars in thousands)	2018		2017		2019		2018
Commercial:
Commercial, financial, and industrial	$	16,044,145	$	16,057,273	$	17,176,112	$	16,514,328
Commercial real estate	4,237,036		4,214,695		3,946,943		4,030,870
Consumer:
Consumer real estate (a)	6,191,183		6,367,755		6,151,503		6,249,516
Permanent mortgage	347,054		399,307		209,260		222,448
Credit card & other	530,796		619,899		506,230		518,370
Loans, net of unearned income	$	27,350,214	$	27,658,929	$	27,990,048	$	27,535,532
Allowance for loan losses	185,959		189,555		184,911		180,424
Total net loans	$	27,164,255	$	27,469,374	$	27,805,137	$	27,355,108


(a)	Balances as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, include ~~$17.1~~$15.0 million and ~~$24.2~~$16.2 million of restricted real estate loans, respectively. See Note ~~13—~~14—Variable Interest Entities for additional information.

COMPONENTS OF THE LOAN PORTFOLIO

The loan portfolio is disaggregated into segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally determined based on the initial measurement attribute (i.e., amortized cost or purchased credit-impaired), risk characteristics of the loan, and FHN’s method for monitoring and assessing credit risk. Commercial loan portfolio segments include commercial, financial and industrial (“C&I”) and commercial real ~~estate.~~estate ("CRE"). Commercial classes within C&I include general C&I, loans to mortgage companies, the trust preferred loans (“~~TRUPs”~~TRUPS”) (i.e. long-term unsecured loans to bank and insurance-related businesses) portfolio and purchased credit-impaired (“PCI”) loans. Loans to mortgage companies include commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Commercial classes within CRE include income CRE, residential CRE and PCI loans. Consumer loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio. Consumer classes include home equity lines of credit (“HELOCs”), real estate (“R/E”) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other.

Concentrations

FHN has a concentration of residential real estate loans ~~(24~~(23 percent of total loans), the majority of which is in the consumer real estate segment ~~(23~~(22 percent of total loans). Loans to finance and insurance companies total ~~$2.7~~$2.6 billion ~~(17~~(15 percent of the C&I portfolio, or 109 percent of the total loans). FHN had loans to mortgage companies totaling ~~$2.1~~$2.3 billion (13 percent of the C&I segment, or 8 percent of total loans) as of ~~September 30, 2018.~~March 31, 2019. As a result, 3028 percent of the C&I segment is sensitive to impacts on the financial services industry.

Note 4 – Loans (Continued)

Purchased Credit-Impaired Loans

The following table presents a rollforward of the accretable yield for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
Balance, beginning of period	$	14,474		$	4,045		$	15,623		$	6,871		$	13,375		$	15,623
Accretion	(2,183		)	(642		)	(6,927		)	(2,412		)	(1,673		)	(2,137		)
Adjustment for payoffs	(840		)	(198		)	(2,559		)	(1,232		)	(462		)	(612		)
Adjustment for charge-offs	(122		)	—			(1,046		)	—			(176		)	(551		)
Adjustment for pool excess recovery (a)	(123		)	—			(123		)	(222		)
Increase/(decrease) in accretable yield (b)	4,062			(2		)	10,721			112
Disposals	—			—			(240		)	—
Increase/(decrease) in accretable yield (a)													2,718			3,178
Other	—			—			(181		)	86			—			(178		)
Balance, end of period	$	15,268		$	3,203		$	15,268		$	3,203		$	13,782		$	15,323


(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 and amounts of the cash flows.

At ~~September 30, 2018,~~March 31, 2019, the ALLL related to PCI loans was $3.4 million compared to ~~$3.2~~$4.0 million at December 31, ~~2017.~~2018. A loan loss provision ~~expense~~credit related to PCI loans of ~~$.9~~$.4 million was recognized during the three months ended ~~September 30, 2018, as~~March 31, 2019, compared to a loan loss provision expense of ~~$2.6~~$.8 million ~~recognized~~ during the three months ended September 30, 2017. A loan loss provision expense related to PCI loans of $3.5 million was recognized during the nine months ended September 30, 2018, as compared to a loan loss provision expense of $2.4 million recognized during the nine months ended September 30, 2017.March 31, 2018.

The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
(Dollars in thousands)	Carrying value		Unpaid balance		Carrying value		Unpaid balance		Carrying value		Unpaid balance		Carrying value		Unpaid balance
Commercial, financial and industrial	$	47,841	$	53,265	$	96,598	$	109,280	$	34,619	$	38,575	$	38,873	$	44,259
Commercial real estate	23,174		26,970		36,107		41,488		8,402		9,301		15,197		17,232
Consumer real estate	33,203		37,900		38,176		42,568		28,723		32,464		30,723		34,820
Credit card and other	2,229		2,545		5,500		6,351		1,127		1,377		1,627		1,879
Total	$	106,447	$	120,680	$	176,381	$	199,687	$	72,871	$	81,717	$	86,420	$	98,190

Note 4 – Loans (Continued)

Impaired Loans

The following tables provide information at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment in a loan, excluding any valuation allowance but including any direct write-down of the investment. For purposes of this disclosure, PCI loans and the ~~TRUPs~~TRUPS valuation allowance have been excluded.


	September 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans with no related allowance recorded:
Commercial:
General C&I	$	21,555	$	21,910	$	—	$	8,183	$	17,372	$	—	$	68,629	$	71,101	$	—	$	42,902	$	45,387	$	—
Income CRE	1,611		1,611		—		—		—		—		1,522		1,522		—		1,589		1,589		—
Residential CRE	495		963		—		—		—		—
Total	$	23,661	$	24,484	$	—	$	8,183	$	17,372	$	—	$	70,151	$	72,623	$	—	$	44,491	$	46,976	$	—
Consumer:
HELOC (a)	$	7,874	$	15,869	$	—	$	9,258	$	19,193	$	—	$	6,548	$	13,869	$	—	$	8,645	$	16,648	$	—
R/E installment loans (a)	5,891		6,518		—		4,093		4,663		—		5,910		6,693		—		4,314		4,796		—
Permanent mortgage (a)	3,703		6,043		—		5,132		7,688		—		3,449		5,851		—		3,601		6,003		—
Total	$	17,468	$	28,430	$	—	$	18,483	$	31,544	$	—	$	15,907	$	26,413	$	—	$	16,560	$	27,447	$	—
Impaired loans with related allowance recorded:
Commercial:
General C&I	$	29,058	$	29,058	$	5,103	$	31,774	$	38,256	$	5,119	$	11,786	$	11,786	$	2,512	$	2,802	$	2,802	$	149
TRUPs	2,936		3,700		925		3,067		3,700		925
TRUPS													2,838		3,700		925		2,888		3,700		925
Income CRE	397		397		—		1,612		1,612		49		357		357		—		377		377		—
Residential CRE	—		—		—		795		1,263		83
Total	$	32,391	$	33,155	$	6,028	$	37,248	$	44,831	$	6,176	$	14,981	$	15,843	$	3,437	$	6,067	$	6,879	$	1,074
Consumer:
HELOC	$	67,086	$	70,168	$	11,136	$	72,469	$	75,207	$	14,382	$	63,546	$	66,801	$	8,378	$	66,482	$	69,610	$	11,241
R/E installment loans	38,878		39,581		6,940		43,075		43,827		8,793		43,949		44,898		6,464		38,993		39,851		6,743
Permanent mortgage	71,130		81,971		9,996		79,662		90,934		12,105		65,930		76,289		9,081		67,245		78,010		9,419
Credit card & other	552		552		293		593		593		311		684		684		446		695		695		337
Total	$	177,646	$	192,272	$	28,365	$	195,799	$	210,561	$	35,591	$	174,109	$	188,672	$	24,369	$	173,415	$	188,166	$	27,740
Total commercial	$	56,052	$	57,639	$	6,028	$	45,431	$	62,203	$	6,176	$	85,132	$	88,466	$	3,437	$	50,558	$	53,855	$	1,074
Total consumer	$	195,114	$	220,702	$	28,365	$	214,282	$	242,105	$	35,591	$	190,016	$	215,085	$	24,369	$	189,975	$	215,613	$	27,740
Total impaired loans	$	251,166	$	278,341	$	34,393	$	259,713	$	304,308	$	41,767	$	275,148	$	303,551	$	27,806	$	240,533	$	269,468	$	28,814


(a)	All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.

Note 4 – Loans (Continued)


	Three Months Ended September 30								Nine months ended September 30								Three Months Ended March 31
	2018				2017				2018				2017				2019				2018
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded:
Commercial:
General C&I	$	23,740	$	203	$	5,771	$	—	$	21,506	$	561	$	8,706	$	—	$	55,765	$	180	$	15,954	$	175
Income CRE	1,680		12		—		—		1,379		37		—		—		1,556		13		791		12
Residential CRE	500		—		—		—		416		—		—		—		—		—		248		—
Total	$	25,920	$	215	$	5,771	$	—	$	23,301	$	598	$	8,706	$	—	$	57,321	$	193	$	16,993	$	187
Consumer:
HELOC (a)	$	8,343	$	—	$	10,225	$	—	$	8,878	$	—	$	10,536	$	—	$	7,597	$	—	$	9,257	$	—
R/E installment loans (a)	4,631		—		4,182		—		4,032		—		4,014		—		5,112		—		3,914		—
Permanent mortgage (a)	3,949		—		5,693		—		4,638		—		5,701		—		3,525		—		5,217		—
Total	$	16,923	$	—	$	20,100	$	—	$	17,548	$	—	$	20,251	$	—	$	16,234	$	—	$	18,388	$	—
Impaired loans with related allowance recorded:
Commercial:
General C&I	$	16,375	$	—	$	26,144	$	193	$	16,038	$	—	$	29,136	$	597	$	7,294	$	—	$	22,891	$	—
TRUPs	2,960		—		3,117		—		3,004		—		3,157		—
TRUPS																	2,863		—		3,047		—
Income CRE	199		5		1,628		11		335		5		1,737		39		367		4		806		—
Residential CRE	—		—		1,044		—		133		—		1,210		10		—		—		398		—
Total	$	19,534	$	5	$	31,933	$	204	$	19,510	$	5	$	35,240	$	646	$	10,524	$	4	$	27,142	$	—
Consumer:
HELOC	$	68,913	$	556	$	74,894	$	554	$	70,452	$	1,711	$	78,859	$	1,695	$	65,013	$	522	$	71,654	$	577
R/E installment loans	39,147		246		47,628		315		40,512		764		49,634		950		41,471		270		42,110		267
Permanent mortgage	71,898		585		79,305		616		74,617		1,737		82,186		1,805		66,588		552		77,725		578
Credit card & other	578		3		452		3		626		9		351		8		690		5		648		3
Total	$	180,536	$	1,390	$	202,279	$	1,488	$	186,207	$	4,221	$	211,030	$	4,458	$	173,762	$	1,349	$	192,137	$	1,425
Total commercial	$	45,454	$	220	$	37,704	$	204	$	42,811	$	603	$	43,946	$	646	$	67,845	$	197	$	44,135	$	187
Total consumer	$	197,459	$	1,390	$	222,379	$	1,488	$	203,755	$	4,221	$	231,281	$	4,458	$	189,996	$	1,349	$	210,525	$	1,425
Total impaired loans	$	242,913	$	1,610	$	260,083	$	1,692	$	246,566	$	4,824	$	275,227	$	5,104	$	257,841	$	1,546	$	254,660	$	1,612


(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 FHN’s 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.

Note 4 – Loans (Continued)

The following tables provide the balances of commercial loan portfolio classes with associated allowance, disaggregated by PD grade as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018																March 31, 2019
(Dollars in thousands)	General C&I		Loans to Mortgage Companies		TRUPs (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses		General C&I		Loans to Mortgage Companies		TRUPS (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses
PD Grade:
1	$	600,373	$	—	$	—	$	418	$	—	$	600,791	3	%	$	64	$	635,273	$	—	$	—	$	11,997	$	—	$	647,270	3	%	$	100
2	840,685		—		—		2,815		37		843,537		4		261		849,658		—		—		2,144		26		851,828		4		267
3	730,939		639,378		—		218,170		82		1,588,569		8		242		720,323		689,936		3,314		291,517		179		1,705,269		8		338
4	909,454		456,311		—		543,486		121		1,909,372		9		594		1,201,020		478,359		32,498		513,082		112		2,225,071		11		806
5	1,879,972		257,625		36,620		689,740		8,334		2,872,291		14		8,677		1,904,650		347,923		96,052		855,280		20,311		3,224,216		15		10,033
6	1,578,359		450,207		90,297		604,757		36,743		2,760,363		14		8,269		1,992,100		400,889		33,815		636,472		44,286		3,107,562		15		9,700
7	2,390,220		98,832		52,927		505,988		16,990		3,064,957		15		15,154		2,794,923		94,626		11,446		544,211		30,322		3,475,528		17		18,677
8	1,202,328		84,915		4,068		235,595		15,487		1,542,393		7		20,265		1,344,591		172,050		—		280,323		24,944		1,821,908		9		20,047
9	1,974,390		105,098		45,117		978,148		75,336		3,178,089		15		20,617		1,460,633		104,832		45,117		377,027		17,672		2,005,281		9		16,042
10	459,567		—		18,536		45,560		4,266		527,929		3		9,156		492,043		12,579		18,536		73,040		3,924		600,122		3		8,739
11	283,724		—		—		52,546		396		336,666		2		8,033		395,393		—		—		63,318		2,112		460,823		2		10,353
12	275,015		—		—		100,868		5,759		381,642		2		6,636		289,203		146		—		48,454		5,586		343,389		2		6,172
13	288,183		—		5,786		58,840		73		352,882		2		10,711		223,362		—		5,786		51,615		238		281,001		1		9,652
14,15,16	181,927		—		—		9,986		796		192,709		1		17,596		204,958		—		—		37,703		832		243,493		1		21,591
Collectively evaluated for impairment	13,595,136		2,092,366		253,351		4,046,917		164,420		20,152,190		99		126,275		14,508,130		2,301,340		246,564		3,786,183		150,544		20,992,761		100		132,517
Individually evaluated for impairment	50,613		—		2,936		2,008		495		56,052		—		6,028		80,415		—		2,838		1,879		—		85,132		—		3,437
Purchased credit-impaired loans	49,743		—		—		19,573		3,623		72,939		1		1,926		36,825		—		—		6,043		2,294		45,162		—		2,141
Total commercial loans	$	13,695,492	$	2,092,366	$	256,287	$	4,068,498	$	168,538	$	20,281,181	100	%	$	134,229	$	14,625,370	$	2,301,340	$	249,402	$	3,794,105	$	152,838	$	21,123,055	100	%	$	138,095

~~(a)~~

Balances presented net of a $20.5 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade was “13” prior to second quarter 2018. In second quarter 2018, this portfolio was re-graded to align with the scorecard grading methodologies which resulted in upgrades to a majority of this portfolio. In 3Q18, FHN sold $55.5 million of TRUPs loans with a $5.0 million valuation allowance. Upon sale, a gain of $3.8 million was recognized in the Non-Strategic segment within Fixed Income in the Consolidated Condensed Statement of Income.

Note 4 – Loans (Continued)


	December 31, 2017																December 31, 2018
(Dollars in thousands)	General C&I		Loans to Mortgage Companies		TRUPs (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses		General C&I		Loans to Mortgage Companies		TRUPS (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses
PD Grade:
1	$	536,244	$	—	$	—	$	2,500	$	—	$	538,744	3	%	$	70	$	610,177	$	—	$	—	$	12,586	$	—	$	622,763	3	%	$	100
2	877,635		—		—		1,798		69		879,502		4		339		835,776		—		—		1,688		29		837,493		4		274
3	582,224		652,982		—		210,073		40		1,445,319		7		272		782,362		716,971		—		289,594		147		1,789,074		9		315
4	959,581		629,432		—		309,699		—		1,898,712		9		854		1,223,092		394,862		43,220		563,243		—		2,224,417		11		686
5	1,461,632		328,477		—		415,764		2,474		2,208,347		11		7,355		1,920,034		277,814		77,751		798,509		14,150		3,088,258		15		8,919
6	1,668,247		335,169		—		456,706		3,179		2,463,301		12		10,495		1,722,136		365,341		45,609		657,628		33,759		2,824,473		14		8,141
7	2,257,400		47,720		—		554,590		9,720		2,869,430		14		13,490		2,690,784		96,603		11,446		538,909		26,135		3,363,877		16		16,906
8	1,092,994		35,266		—		241,938		6,454		1,376,652		7		21,831		1,337,113		53,224		—		265,901		20,320		1,676,558		8		18,545
9	2,633,854		70,915		—		1,630,176		61,475		4,396,420		22		9,804		1,472,852		96,292		45,117		455,184		29,849		2,099,294		10		15,454
10	373,537		—		—		43,297		4,590		421,424		2		8,808		490,795		13,260		18,536		60,803		3,911		587,305		3		8,675
11	226,382		—		—		31,785		2,936		261,103		1		6,784		311,967		—		—		66,986		788		379,741		2		7,973
12	409,838		—		—		156,717		6,811		573,366		3		5,882		244,867		9,379		—		82,574		5,717		342,537		2		6,972
13	202,613		—		303,848		15,707		268		522,436		3		7,265		285,987		—		5,786		55,408		251		347,432		2		10,094
14,15,16	228,852		—		—		6,587		823		236,262		1		24,400		224,853		—		—		28,835		837		254,525		1		23,307
Collectively evaluated for impairment	13,511,033		2,099,961		303,848		4,077,337		98,839		20,091,018		99		117,649		14,152,795		2,023,746		247,465		3,877,848		135,893		20,437,747		100		126,361
Individually evaluated for impairment	39,957		—		3,067		1,612		795		45,431		—		6,176		45,704		—		2,888		1,966		—		50,558		—		1,074
Purchased credit-impaired loans	99,407		—		—		31,615		4,497		135,519		1		2,813		41,730		—		—		12,730		2,433		56,893		—		2,823
Total commercial loans	$	13,650,397	$	2,099,961	$	306,915	$	4,110,564	$	104,131	$	20,271,968	100	%	$	126,638	$	14,240,229	$	2,023,746	$	250,353	$	3,892,544	$	138,326	$	20,545,198	100	%	$	130,258

(a)

Balances as of March 31, 2019 and December 31, 2018, presented net of a ~~$25.5~~$20.2 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade was “13” prior to second quarter 2018. In second quarter 2018, this portfolio was re-graded to align with the scorecard grading methodologies which resulted in upgrades to a majority of this portfolio.

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
	HELOC		R/E Installment Loans		Permanent Mortgage		HELOC		R/E Installment Loans		Permanent Mortgage		HELOC		R/E Installment Loans		Permanent Mortgage		HELOC		R/E Installment Loans		Permanent Mortgage
FICO score 740 or greater	60.8	%	71.1	%	51.2	%	60.0	%	73.1	%	46.4	%	61.0	%	72.2	%	52.0	%	61.4	%	71.3	%	51.8	%
FICO score 720-739	8.5		9.0		8.5		8.7		8.0		12.8		8.8		8.3		8.3		8.5		8.8		7.6
FICO score 700-719	8.1		6.6		9.0		8.3		6.4		9.2		7.8		6.9		9.9		7.6		7.0		10.6
FICO score 660-699	10.9		8.0		15.9		11.1		7.2		14.8		10.9		7.2		14.8		10.9		7.6		14.7
FICO score 620-659	5.2		2.8		6.5		4.9		2.8		7.3		5.0		2.7		7.0		5.1		2.8		6.5
FICO score less than 620 (a)	6.5		2.5		8.9		7.0		2.5		9.5		6.5		2.7		8.0		6.5		2.5		8.8
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	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.

Note 4 – Loans (Continued)

Nonaccrual and Past Due Loans

The following table reflects accruing and non-accruing loans by class on ~~September 30, 2018:~~March 31, 2019:


	Accruing								Non-Accruing										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		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	$	13,597,235	$	9,202	$	124	$	13,606,561	$	25,713	$	1,284	$	12,191	$	39,188	$	13,645,749	$	14,508,455	$	7,741	$	191	$	14,516,387	$	61,711	$	147	$	10,300	$	72,158	$	14,588,545
Loans to mortgage companies	2,092,366		—		—		2,092,366		—		—		—		—		2,092,366		2,301,340		—		—		2,301,340		—		—		—		—		2,301,340
TRUPs (a)	253,351		—		—		253,351		—		—		2,936		2,936		256,287
TRUPS (a)																			246,564		—		—		246,564		—		—		2,838		2,838		249,402
Purchased credit-impaired loans	35,784		384		13,575		49,743		—		—		—		—		49,743		33,056		2,210		1,559		36,825		—		—		—		—		36,825
Total commercial (C&I)	15,978,736		9,586		13,699		16,002,021		25,713		1,284		15,127		42,124		16,044,145		17,089,415		9,951		1,750		17,101,116		61,711		147		13,138		74,996		17,176,112
Commercial real estate:
Income CRE	4,041,797		6,652		—		4,048,449		35		37		404		476		4,048,925		3,785,127		292		—		3,785,419		—		45		2,598		2,643		3,788,062
Residential CRE	164,338		47		—		164,385		35		—		495		530		164,915		150,300		238		—		150,538		—		6		—		6		150,544
Purchased credit-impaired loans	21,373		1,718		105		23,196		—		—		—		—		23,196		7,448		818		71		8,337		—		—		—		—		8,337
Total commercial real estate	4,227,508		8,417		105		4,236,030		70		37		899		1,006		4,237,036		3,942,875		1,348		71		3,944,294		—		51		2,598		2,649		3,946,943
Consumer real estate:
HELOC	1,495,298		14,582		8,531		1,518,411		48,400		4,038		7,611		60,049		1,578,460		1,380,487		9,735		7,321		1,397,543		48,772		4,223		8,370		61,365		1,458,908
R/E installment loans	4,541,642		8,589		8,008		4,558,239		15,219		2,239		2,692		20,150		4,578,389		4,623,499		10,037		7,982		4,641,518		15,151		2,685		3,395		21,231		4,662,749
Purchased credit-impaired loans	28,475		2,183		3,676		34,334		—		—		—		—		34,334		24,480		1,628		3,738		29,846		—		—		—		—		29,846
Total consumer real estate	6,065,415		25,354		20,215		6,110,984		63,619		6,277		10,303		80,199		6,191,183		6,028,466		21,400		19,041		6,068,907		63,923		6,908		11,765		82,596		6,151,503
Permanent mortgage	315,746		4,051		4,935		324,732		12,217		749		9,356		22,322		347,054		184,237		1,494		2,579		188,310		11,874		95		8,981		20,950		209,260
Credit card & other:
Credit card	193,681		1,292		1,078		196,051		—		—		—		—		196,051		193,754		992		969		195,715		—		—		—		—		195,715
Other	326,672		4,078		718		331,468		93		78		535		706		332,174		305,267		3,067		473		308,807		155		67		211		433		309,240
Purchased credit-impaired loans	1,007		835		729		2,571		—		—		—		—		2,571		717		325		233		1,275		—		—		—		—		1,275
Total credit card & other	521,360		6,205		2,525		530,090		93		78		535		706		530,796		499,738		4,384		1,675		505,797		155		67		211		433		506,230
Total loans, net of unearned income	$	27,108,765	$	53,613	$	41,479	$	27,203,857	$	101,712	$	8,425	$	36,220	$	146,357	$	27,350,214	$	27,744,731	$	38,577	$	25,116	$	27,808,424	$	137,663	$	7,268	$	36,693	$	181,624	$	27,990,048

(a) ~~TRUPs~~TRUPS is presented net of the valuation allowance of ~~$20.5~~$20.2 million.

Note 4 – Loans (Continued)

The following table reflects accruing and non-accruing loans by class on December 31, ~~2017:~~2018:


	Accruing								Non-Accruing										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		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	$	13,514,752	$	8,057	$	95	$	13,522,904	$	1,761	$	7,019	$	19,306	$	28,086	$	13,550,990	$	14,153,275	$	8,234	$	102	$	14,161,611	$	26,325	$	5,537	$	5,026	$	36,888	$	14,198,499
Loans to mortgage companies	2,099,961		—		—		2,099,961		—		—		—		—		2,099,961		2,023,746		—		—		2,023,746		—		—		—		—		2,023,746
TRUPs (a)	303,848		—		—		303,848		—		—		3,067		3,067		306,915
TRUPS (a)																			247,465		—		—		247,465		—		—		2,888		2,888		250,353
Purchased credit-impaired loans	77,843		2,207		19,357		99,407		—		—		—		—		99,407		39,433		624		1,673		41,730		—		—		—		—		41,730
Total commercial (C&I)	15,996,404		10,264		19,452		16,026,120		1,761		7,019		22,373		31,153		16,057,273		16,463,919		8,858		1,775		16,474,552		26,325		5,537		7,914		39,776		16,514,328
Commercial real estate:
Income CRE	4,077,106		1,240		—		4,078,346		56		—		546		602		4,078,948		3,876,229		626		—		3,876,855		30		—		2,929		2,959		3,879,814
Residential CRE	98,844		—		—		98,844		—		—		791		791		99,635		135,861		—		—		135,861		32		—		—		32		135,893
Purchased credit-impaired loans	31,173		2,686		2,253		36,112		—		—		—		—		36,112		13,308		103		1,752		15,163		—		—		—		—		15,163
Total commercial real estate	4,207,123		3,926		2,253		4,213,302		56		—		1,337		1,393		4,214,695		4,025,398		729		1,752		4,027,879		62		—		2,929		2,991		4,030,870
Consumer real estate:
HELOC	1,743,776		17,744		9,702		1,771,222		40,508		3,626		8,354		52,488		1,823,710		1,443,651		11,653		10,129		1,465,433		49,009		3,314		8,781		61,104		1,526,537
R/E installment loans	4,475,669		7,274		3,573		4,486,516		14,439		1,957		2,603		18,999		4,505,515		4,652,658		10,470		6,497		4,669,625		15,146		1,924		4,474		21,544		4,691,169
Purchased credit-impaired loans	35,356		2,016		1,158		38,530		—		—		—		—		38,530		24,096		2,094		5,620		31,810		—		—		—		—		31,810
Total consumer real estate	6,254,801		27,034		14,433		6,296,268		54,947		5,583		10,957		71,487		6,367,755		6,120,405		24,217		22,246		6,166,868		64,155		5,238		13,255		82,648		6,249,516
Permanent mortgage	365,527		3,930		3,460		372,917		13,245		1,052		12,093		26,390		399,307		193,591		2,585		4,562		200,738		11,227		996		9,487		21,710		222,448
Credit card & other:
Credit card	193,940		1,371		1,053		196,364		—		—		—		—		196,364		188,009		2,133		1,203		191,345		—		—		—		—		191,345
Other	415,070		2,666		103		417,839		31		—		165		196		418,035		320,551		3,570		526		324,647		110		60		454		624		325,271
Purchased credit-impaired loans	2,993		1,693		814		5,500		—		—		—		—		5,500		746		611		397		1,754		—		—		—		—		1,754
Total credit card & other	612,003		5,730		1,970		619,703		31		—		165		196		619,899		509,306		6,314		2,126		517,746		110		60		454		624		518,370
Total loans, net of unearned income	$	27,435,858	$	50,884	$	41,568	$	27,528,310	$	70,040	$	13,654	$	46,925	$	130,619	$	27,658,929	$	27,312,619	$	42,703	$	32,461	$	27,387,783	$	101,879	$	11,831	$	34,039	$	147,749	$	27,535,532

Certain previously reported amounts have been reclassified to agree with current presentation.

(a) ~~TRUPs~~TRUPS is presented net of the valuation allowance of ~~$25.5~~$20.2 million.

Note 4 – Loans (Continued)

Troubled Debt Restructurings

As part of FHN’s 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 borrower’s 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 management’s 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. FHN’s 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 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, FHN had ~~$236.5~~$241.6 million and ~~$234.4~~$228.2 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of ~~$28.4~~$24.4 million, or 10 percent as of March 31, 2019, and $27.7 million, or 12 percent as of ~~September 30, 2018, and $37.3 million, or 16 percent as of~~ December 31, ~~2017.~~2018. Additionally, ~~$57.9~~$55.4 million and ~~$63.2~~$57.8 million of loans held-for-sale as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, were classified as TDRs.

Note 4 – Loans (Continued)

The following tables reflect portfolio loans that were classified as TDRs during the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
(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
$ 25,591
$ 25,439
9
$ 27,639
$ 27,190
     Total commercial (C&I) 1
25,591
25,439
9
27,639
27,190
Commercial real estate:
Income CRE 1
442
442
4
643
637
Total commercial real estate 1
442
442
4
643
637
Consumer real estate:
HELOC 15
1,057
1,041
79
7,641
7,580
R/E installment loans 62
4,561
4,356
77
5,944
5,738
     Total consumer real estate 77
5,618
5,397
156
13,585
13,318
Permanent mortgage —
—
—
5
709
713
Credit card & other 12
65
59
80
370
350
Total troubled debt restructurings 91
$ 31,716
$ 31,337
254
$ 42,946
$ 42,208

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
(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 —
$ —
$ —
2
$ 842
$ 836
     Total commercial (C&I) —
—
—
2
842
836
Consumer real estate:
HELOC 45
4,451
4,396
107
9,333
9,139
R/E installment loans 15
1,630
1,622
43
3,386
3,306
     Total consumer real estate 60
6,081
6,018
150
12,719
12,445
Permanent mortgage 2
34
32
11
2,043
2,028
Credit card & other 37
261
251
66
426
411
Total troubled debt restructurings 99
$ 6,376
$ 6,301
229
$ 16,030
$ 15,720

~~Note 4 – Loans (Continued)~~



	March 31, 2019					March 31, 2018
(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	2	$	13,895	$	13,820	5	$	1,504	$	1,214
Total commercial (C&I)	2	13,895		13,820		5	1,504		1,214
Consumer real estate:
HELOC	19	2,104		2,084		30	2,760		2,733
R/E installment loans	44	5,977		5,934		5	611		612
Total consumer real estate	63	8,081		8,018		35	3,371		3,345
Permanent mortgage	3	1,448		1,479		1	275		273
Credit card & other	15	74		71		41	210		197
Total troubled debt restructurings	83	$	23,498	$	23,388	82	$	5,360	$	5,029

The following tables present TDRs which re-defaulted during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ 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.


	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018			March 31, 2019			March 31, 2018
(Dollars in thousands)	Number	Recorded Investment		Number	Recorded Investment		Number	Recorded Investment		Number	Recorded Investment
Commercial (C&I):
General C&I	1	$	321	2	$	579
Total commercial (C&I)	1	321		2	579
Consumer real estate:
HELOC	1	40		5	204
R/E installment loans	—	—		1	25
Total consumer real estate	1	40		6	229
Permanent mortgage	3	294		5	699
Credit card & other	13	56		39	212
Total troubled debt restructurings	18	$	711	52	$	1,719



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
(Dollars in thousands)	Number	Recorded Investment		Number	Recorded Investment
Commercial (C&I):
General C&I	1	$	1,763	4	$	9,770
Total commercial (C&I)	1	1,763		4	9,770
Commercial Real Estate
Income CRE	1	88		1	88
Total Commercial real estate	1	88		1	88
Consumer real estate:
HELOC	—	—		4	685		1	33		2	69
Total consumer real estate	—	—		4	685		1	33		2	69
Permanent mortgage	1	89		2	627		—	—		1	112
Credit card & other	2	12		5	30		8	18		14	81
Total troubled debt restructurings	5	$	1,952	16	$	11,200	9	$	51	17	$	262

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 management’s 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 FHN’s Form 10-K for the year ended December 31, ~~2017,~~2018, for additional information about the policies and methodologies used in the aforementioned components of the ALLL.

Note 5 – Allowance for Loan Losses (Continued)

The following table provides a rollforward of the allowance for loan losses by portfolio segment for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total			C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
Balance as of July 1, 2018	$	96,834		$	33,832		$	31,769		$	14,078		$	8,949		$	185,462
Balance as of January 1, 2019																			$	98,947		$	31,311		$	26,439		$	11,000		$	12,727		$	180,424
Charge-offs	(1,391		)	(9		)	(2,801		)	(15		)	(5,266		)	(9,482		)	(3,101		)	(434		)	(2,800		)	(4		)	(4,188		)	(10,527		)
Recoveries	1,052			267			5,302			554			804			7,979			829			57			3,453			588			1,087			6,014
Provision/(provision credit) for loan losses	3,819			(175		)	(7,733		)	(1,137		)	7,226			2,000			7,038			3,448			(3,019		)	(1,503		)	3,036			9,000
Balance as of September 30, 2018	100,314			33,915			26,537			13,480			11,713			185,959
Balance as of March 31, 2019																			103,713			34,382			24,073			10,081			12,662			184,911
Allowance - individually evaluated for impairment																			3,437			—			14,842			9,081			446			27,806
Allowance - collectively evaluated for impairment																			98,135			34,382			8,108			1,000			12,067			153,692
Allowance - purchased credit-impaired loans																			2,141			—			1,123			—			149			3,413
Loans, net of unearned as of March 31, 2019:
Individually evaluated for impairment																			83,253			1,879			119,953			69,379			684			275,148
Collectively evaluated for impairment																			17,056,034			3,936,727			6,001,704			139,881			504,271			27,638,617
Purchased credit-impaired loans																			36,825			8,337			29,846			—			1,275			76,283
Total loans, net of unearned income																			$	17,176,112		$	3,946,943		$	6,151,503		$	209,260		$	506,230		$	27,990,048
Balance as of January 1, 2018	$	98,211		$	28,427		$	37,371		$	15,565		$	9,981		$	189,555		$	98,211		$	28,427		$	39,823		$	13,113		$	9,981		$	189,555
Charge-offs	(6,753		)	(281		)	(6,193		)	(475		)	(14,271		)	(27,973		)	(2,075		)	(44		)	(1,911		)	(160		)	(4,293		)	(8,483		)
Recoveries	3,607			348			15,129			1,250			3,043			23,377			1,519			6			4,383			65			1,149			7,122
Provision/(provision credit) for loan losses	5,249			5,421			(19,770		)	(2,860		)	12,960			1,000			2,583			668			(7,094		)	(34		)	2,877			(1,000		)
Balance as of September 30, 2018	100,314			33,915			26,537			13,480			11,713			185,959
Balance as of March 31, 2018																			100,238			29,057			35,201			12,984			9,714			187,194
Allowance - individually evaluated for impairment	6,028			—			18,076			9,996			293			34,393			4,555			—			23,049			11,311			359			39,274
Allowance - collectively evaluated for impairment	92,382			33,893			7,331			3,484			11,078			148,168			93,603			28,869			11,877			1,673			9,343			145,365
Allowance - purchased credit-impaired loans	1,904			22			1,130			—			342			3,398			2,080			188			275			—			12			2,555
Loans, net of unearned as of September 30, 2018:
Loans, net of unearned as of March 31, 2018:
Individually evaluated for impairment	53,549			2,503			119,729			74,833			552			251,166			40,758			2,077			124,975			81,090			702			249,602
Collectively evaluated for impairment	15,940,853			4,211,337			6,037,120			272,221			527,673			26,989,204			15,705,895			4,201,220			6,194,449			189,631			556,189			26,847,384
Purchased credit-impaired loans	49,743			23,196			34,334			—			2,571			109,844			81,655			31,138			36,095			—			3,919			152,807
Total loans, net of unearned income	$	16,044,145		$	4,237,036		$	6,191,183		$	347,054		$	530,796		$	27,350,214		$	15,828,308		$	4,234,435		$	6,355,519		$	270,721		$	560,810		$	27,249,793
Balance as of July 1, 2017	$	92,379		$	30,470		$	46,069		$	16,398		$	11,941		$	197,257
Charge-offs	(3,723		)	—			(3,601		)	(173		)	(3,173		)	(10,670		)
Recoveries	601			278			6,188			542			671			8,280
Provision/(provision credit) for loan losses	8,948			(1,065		)	(7,717		)	(1,048		)	882			—
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Balance as of January 1, 2017	$	89,398		$	33,852		$	50,357		$	16,289		$	12,172		$	202,068
Charge-offs	(6,188		)	(20		)	(11,401		)	(1,499		)	(9,805		)	(28,913		)
Recoveries	2,877			639			17,007			1,933			2,256			24,712
Provision/(provision credit) for loan losses	12,118			(4,788		)	(15,024		)	(1,004		)	5,698			(3,000		)
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Allowance - individually evaluated for impairment	6,895			126			23,936			12,601			246			43,804
Allowance - collectively evaluated for impairment	88,529			29,557			16,649			3,118			10,075			147,928
Allowance - purchased credit-impaired loans	2,781			—			354			—			—			3,135
Loans, net of unearned as of September 30, 2017:
Individually evaluated for impairment	32,028			2,320			135,858			84,081			544			254,831
Collectively evaluated for impairment	12,739,091			2,244,895			4,232,564			319,001			349,889			19,885,440
Purchased credit-impaired loans	20,725			3,800			1,295			—			—			25,820
Total loans, net of unearned income	$	12,791,844		$	2,251,015		$	4,369,717		$	403,082		$	350,433		$	20,166,091

Certain previously reported amounts have been reclassified to agree with current presentation.

Note 6 – Intangible Assets

The following is a summary of other intangible assets included in the Consolidated Condensed Statements of Condition:


	September 30, 2018							December 31, 2017							March 31, 2019							December 31, 2018
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Core deposit intangibles ~~(a)~~	$	157,150	$	(23,148	)	$	134,002	$	160,650	$	(8,176	)	$	152,474	$	157,150	$	(32,955	)	$	124,195	$	157,150	$	(28,150	)	$	129,000
Customer relationships	77,865		(54,404		)	23,461		77,865		(50,777		)	27,088		77,865		(56,744		)	21,121		77,865		(55,597		)	22,268
Other ~~(b)~~(a)	5,622		(1,590		)	4,032		5,622		(795		)	4,827		5,622		(2,120		)	3,502		5,622		(1,856		)	3,766
Total	$	240,637	$	(79,142	)	$	161,495	$	244,137	$	(59,748	)	$	184,389	$	240,637	$	(91,819	)	$	148,818	$	240,637	$	(85,603	)	$	155,034


(a)	2018 decrease in gross carrying amounts associated with the sale of two CBF branches and purchase accounting measurement period adjustments related to the CBF acquisition. See Note 2 - Acquisitions and Divestitures for additional information.


~~(b)~~	Balance primarily includes noncompete covenants, as well as $.3 million related to state banking licenses not subject to amortization.

Amortization expense was ~~$6.5~~$6.2 million and ~~$2.0~~$6.5 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively and $19.4 million and $5.2 million for nine months ended September 30, 2018 and 2017,~~ respectively. As of ~~September 30, 2018~~March 31, 2019 the estimated aggregated amortization expense is expected to be:


(Dollars in thousands)
Year	Amortization		Amortization
Remainder of 2018	$	6,471
2019	24,834
Remainder of 2019			$	18,625
2020	21,159		21,159
2021	19,547		19,547
2022	17,412		17,412
2023	16,117		16,117
2024			14,679

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.


(Dollars in thousands)	Regional Banking		Fixed Income		Total		Regional Banking		Fixed Income		Total
December 31, 2016	$	93,367	$	98,004	$	191,371
Additions (a)	—		44,964		44,964
September 30, 2017	$	93,367	$	142,968	$	236,335

December 31, 2017	$	1,243,885	$	142,968	$	1,386,853	$	1,243,885	$	142,968	$	1,386,853
Additions (a)	22,969		—		22,969		11,648		—		11,648
September 30, 2018	$	1,266,854	$	142,968	$	1,409,822
March 31, 2018							$	1,255,533	$	142,968	$	1,398,501

December 31, 2018							$	1,289,819	$	142,968	$	1,432,787
Additions							—		—		—
March 31, 2019							$	1,289,819	$	142,968	$	1,432,787

(a) ~~2017 increase associated with the Coastal acquisition, 2018 increase associated with measurement period adjustments for the CBF acquisition.~~ See Note 2 - Acquisitions and Divestitures for ~~additional information.~~further details regarding goodwill related to acquisitions.

Note 7 – Leases

FHN has operating, financing, and short-term leases for branch locations, corporate offices and certain equipment. Substantially all of these leases are classified as operating leases.

The following table provides a detail of the classification of FHN's right-of-use ("ROU") assets and lease liabilities included in the Consolidated Condensed Statement of Conditions.



(Dollars in thousands)		March 31, 2019
Lease Right-of-Use Assets:	Classification
Operating lease right-of use assets	Other assets	$	179,028
Finance lease right-of use assets	Other assets	682
Total Lease Right-of Use Assets		$	179,710

Lease Liabilities:
Operating lease liabilities	Other liabilities	$	198,091
Finance lease liabilities	Other liabilities	1,344
Total Lease Liabilities		$	199,435

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The following table details the weighted average remaining lease term and discount rate for FHN's operating and finance leases as of March 31, 2019.



Weighted Average Remaining Lease Terms
Operating leases	12.38 years
Finance leases	7.17 years
Weighted Average Discount Rate
Operating leases	3.48	%
Finance leases	9.96	%

Note 7 – Leases (Continued)

The following table provides a detail of the components of lease expense and other lease information for the three months ended March 31, 2019:



(Dollars in thousands)	Three Months Ended March 31, 2019
Lease cost
Operating lease cost	$	6,183
Finance lease cost:
Amortization of right-of-use assets	24
Interest on lease liabilities	33
Short-term lease cost	45
Sublease income	(95		)
Total lease cost	$	6,190

Other information
(Gain)/loss on right-of-use asset impairment-Operating leases	$	817

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	5,302
Operating cash flows from finance leases	33
Financing cash flows from finance leases	31

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	2,442
Finance leases	—

The following table provides a detail of the maturities of FHN's operating and finance lease liabilities as of March 31, 2019:



(Dollars in thousands)	March 31, 2019
Remainder of 2019	$	18,489
2020	23,911
2021	21,630
2022	20,535
2023	19,627
2024 and after	143,048
Total future minimum lease payments	247,240
Less lease liability interest	(47,805		)
Present value of net future minimum lease payments	$	199,435

FHN had aggregate undiscounted contractual obligations totaling $22.1 million for lease arrangements that have not commenced. Payments under these arrangements are expected to occur from 2019 through 2032.

Note 7 – Leases (Continued)

Minimum future lease payments for noncancelable operating leases, primarily on premises, on December 31, 2018 are shown below.



(Dollars in thousands)	December 31, 2018
2019	$	27,524
2020	24,722
2021	20,954
2022	16,518
2023	13,174
2024 and after	42,370
Total minimum lease payments	$	145,262

Note 78 – 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 September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
All other income and commissions:
Deferred compensation (a)													$	5,474		$	451
Other service charges	$	3,758		$	2,954		$	11,609		$	9,047		3,869			4,123
ATM and interchange fees	3,263			3,137			9,943			8,998			3,241			3,267
Dividend income (a)	2,757			—			8,130			—
Dividend income													2,313			2,249
Mortgage banking	2,533			1,354			7,510			3,883			1,886			2,546
Deferred compensation	1,458			1,128			2,900			4,446
Letter of credit fees													1,368			1,249
Electronic banking fees	1,309			1,282			3,741			3,911			1,271			1,204
Letter of credit fees	1,307			1,211			3,851			3,369
Insurance commissions	396			567			1,629			2,042			624			757
Gain/(loss) on extinguishment of debt ~~(b)~~	(1		)	(14,329		)	(1		)	(14,329		)	(1		)	—
Other	5,875			2,739			16,020			7,684			5,523			7,397
Total	$	22,655		$	43		$	65,332		$	29,051		$	25,568		$	23,243
All other expense:
Travel and entertainment	$	3,988		$	2,798		$	12,102		$	8,308		$	2,712		$	2,983
Other insurance and taxes	2,761			2,396			8,178			7,229			2,694			2,665
Supplies													1,804			1,836
Customer relations													1,599			1,063
Employee training and dues	1,682			1,198			5,310			4,194			1,457			1,779
Supplies	1,635			928			5,458			2,884
Miscellaneous loan costs													1,027			1,142
Tax credit investments													675			1,137
Non-service components of net periodic pension and post-retirement cost	1,585			454			3,619			1,782			432			504
Tax credit investments	1,370			762			3,586			2,646
Customer relations	1,328			1,361			3,749			4,240
Litigation and regulatory matters													13			2,134
OREO	1,256			303			2,174			953			(366		)	108
Miscellaneous loan costs	543			757			2,720			2,078
Litigation and regulatory matters	(1,541		)	8,162			609			8,403
Other ~~(c)~~	11,094			8,994			64,527			29,837			7,739			19,981
Total	$	25,701		$	28,113		$	112,032		$	72,554		$	19,786		$	35,332

agree with current presentation.

(a)

~~Effective January 1, 2018, FHN adopted ASU 2016-01, “Recognition~~Amounts are driven by market conditions and ~~Measurement of Financial Assets and Financial Liabilities” and began recording dividend income from FRB and FHLB holdings~~are mirrored by changes in ~~Other income. Prior to first quarter 2018 these amounts were~~deferred compensation expense which is included in ~~Interest income on the Consolidated Condensed Statements of Income.~~employee compensation expense.


~~(b)~~	~~Loss on extinguishment of debt for three and nine months ended September 30, 2017 relates to the repurchase of equity securities previously included in a financing transaction.~~


~~(c)~~	Expense increase for the nine months ended September 30, 2018 largely attributable to an increase in acquisition- and integration-related expense primarily associated with the CBF acquisition. See Note 2 - Acquisitions and Divestitures for additional information.

Note 89 – 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 ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


(Dollars in thousands)	Securities AFS			Cash Flow Hedges			Pension and Post-retirement Plans			Total			Securities AFS			Cash Flow Hedges			Pension and Post-retirement Plans			Total
Balance as of July 1, 2018	$	(107,476	)	$	(19,757	)	$	(284,881	)	$	(412,114	)
Balance as of January 1, 2019													$	(75,736	)	$	(12,112	)	$	(288,768	)	$	(376,616	)
Net unrealized gains/(losses)	(25,924		)	(2,517		)	—			(28,441		)	48,615			3,936			—			52,551
Amounts reclassified from AOCI	—			771			2,135			2,906			—			1,451			1,463			2,914
Other comprehensive income/(loss)	(25,924		)	(1,746		)	2,135			(25,535		)	48,615			5,387			1,463			55,465
Balance as of September 30, 2018	$	(133,400	)	$	(21,503	)	$	(282,746	)	$	(437,649	)
Balance as of March 31, 2019													$	(27,121	)	$	(6,725	)	$	(287,305	)	$	(321,151	)

Balance as of January 1, 2018	$	(26,834	)	$	(7,764	)	$	(288,227	)	$	(322,825	)	$	(26,834	)	$	(7,764	)	$	(288,227	)	$	(322,825	)
Adjustment to reflect adoption of ASU 2016-01 and ASU 2017-12	(5		)	(206		)	—			(211		)	(5		)	(206		)	—			(211		)
Beginning balance, as adjusted	$	(26,839	)	$	(7,970	)	$	(288,227	)	$	(323,036	)	$	(26,839	)	$	(7,970	)	$	(288,227	)	$	(323,036	)
Net unrealized gains/(losses)	(106,522		)	(14,612		)	—			(121,134		)	(59,504		)	(8,638		)	—			(68,142		)
Amounts reclassified from AOCI	(39		)	1,079			5,481			6,521			(39		)	(155		)	1,287			1,093
Other comprehensive income/(loss)	(106,561		)	(13,533		)	5,481			(114,613		)	(59,543		)	(8,793		)	1,287			(67,049		)
Balance as of September 30, 2018	$	(133,400	)	$	(21,503	)	$	(282,746	)	$	(437,649	)
Balance as of March 31, 2018													$	(86,382	)	$	(16,763	)	$	(286,940	)	$	(390,085	)

Reclassifications from AOCI, and related tax effects, were as follows:

(Dollars in thousands) Securities AFS
Cash Flow
Hedges

Pension and
Post-retirement
Plans
Total
Balance as of July 1, 2017 $ (9,857 ) $ (1,024 ) $ (226,581 ) $ (237,462 )
Net unrealized gains/(losses) 3,918
(91 ) 490
4,317
Amounts reclassified from AOCI (1 ) (643 ) 1,405
761
Other comprehensive income/(loss) 3,917
(734 ) 1,895
5,078
Balance as of September 30, 2017 $ (5,940 ) $ (1,758 ) $ (224,686 ) $ (232,384 )

Balance as of January 1, 2017 $ (17,232 ) $ (1,265 ) $ (229,157 ) $ (247,654 )
Net unrealized gains/(losses) 11,570
1,906
490
13,966
Amounts reclassified from AOCI (278 ) (2,399 ) 3,981
1,304
Other comprehensive income/(loss) 11,292
(493 ) 4,471
15,270
Balance as of September 30, 2017 $ (5,940 ) $ (1,758 ) $ (224,686 ) $ (232,384 )



(Dollars in thousands)	Three Months Ended March 31
Details about AOCI	2019			2018			Affected line item in the statement where net income is presented
Securities AFS:
Realized (gains)/losses on securities AFS	$	—		$	(52	)	Debt securities gains/(losses), net
Tax expense/(benefit)	—			13			Provision/(benefit) for income taxes
	—			(39		)
Cash flow hedges:
Realized (gains)/losses on cash flow hedges	1,927			(206		)	Interest and fees on loans
Tax expense/(benefit)	(476		)	51			Provision/(benefit) for income taxes
	1,451			(155		)
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial gain/(loss)	1,943			1,709			All other expense
Tax expense/(benefit)	(480		)	(422		)	Provision/(benefit) for income taxes
	1,463			1,287
Total reclassification from AOCI	$	2,914		$	1,093

~~Note 8 – Components of Other Comprehensive Income/(loss) (Continued)~~

~~Reclassifications from AOCI, and related tax effects, were as follows:~~

(Dollars in thousands) Three Months Ended
September 30 Nine Months Ended September 30
Details about AOCI 2018 2017 2018 2017 Affected line item in the statement where net income is presented
Securities AFS:
Realized (gains)/losses on securities AFS $ —
$ (1 ) $ (52 ) $ (450 ) Debt securities gains/(losses), net
Tax expense/(benefit) —
—
13
172
Provision/(benefit) for income taxes
—
(1 ) (39 ) (278 )
Cash flow hedges:
Realized (gains)/losses on cash flow hedges 1,024
(1,041 ) 1,433
(3,886 ) Interest and fees on loans
Tax expense/(benefit) (253 ) 398
(354 ) 1,487
Provision/(benefit) for income taxes
771
(643 ) 1,079
(2,399 )
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial gain/(loss) 2,836
2,277
7,280
6,450
All other expense
Tax expense/(benefit) (701 ) (872 ) (1,799 ) (2,469 ) Provision/(benefit) for income taxes
2,135
1,405
5,481
3,981

Total reclassification from AOCI $ 2,906
$ 761
$ 6,521
$ 1,304

Note 910 – 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 September 30				Nine Months Ended September 30				Three Months Ended March 31
(Dollars and shares in thousands, except per share data)	2018		2017		2018		2017		2019		2018
Net income/(loss)	$	274,716	$	71,769	$	455,702	$	225,361	$	103,405	$	94,994
Net income attributable to noncontrolling interest	2,883		2,883		8,555		8,555		2,820		2,820
Net income/(loss) attributable to controlling interest	271,833		68,886		447,147		216,806		100,585		92,174
Preferred stock dividends	1,550		1,550		4,650		4,650		1,550		1,550
Net income/(loss) available to common shareholders	$	270,283	$	67,336	$	442,497	$	212,156	$	99,035	$	90,624

Weighted average common shares outstanding—basic	324,406		233,749		325,341		233,438		317,435		326,489
Effect of dilutive securities	2,846		2,591		3,304		2,934		2,146		3,855
Weighted average common shares outstanding—diluted	327,252		236,340		328,645		236,372		319,581		330,344

Net income/(loss) per share available to common shareholders	$	0.83	$	0.29	$	1.36	$	0.91	$	0.31	$	0.28
Diluted income/(loss) per share available to common shareholders	$	0.83	$	0.28	$	1.35	$	0.90	$	0.31	$	0.27

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 September 30				Nine Months Ended September 30				Three Months Ended March 31
(Shares in thousands)	2018		2017		2018		2017		2019		2018
Stock options excluded from the calculation of diluted EPS	2,251		2,595		2,316		2,490		2,613		2,410
Weighted average exercise price of stock options excluded from the calculation of diluted EPS	$	23.67	$	25.00	$	24.43	$	25.70	$	21.77	$	24.83
Other equity awards excluded from the calculation of diluted EPS	1,605		1,002		538		325		1,922		307

Note 1011 – 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 FHN’s current or former businesses. Certain matters of that sort are pending at this time, and FHN is cooperating in those matters. Pending and threatened litigation matters sometimes are settled by the parties, and sometimes pending matters are resolved in court or before an arbitrator. 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 FHN’s 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, except for matters that are reported as having been substantially settled or otherwise substantially resolved, FHN's “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; (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 FHN’s 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 ~~September 30, 2018,~~March 31, 2019, the aggregate amount of liabilities established for all such loss contingency matters was ~~$32.8~~$32.9 million. These liabilities are separate from those discussed under the heading ~~“Repurchase~~“Loan 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 ~~September 30, 2018,~~March 31, 2019, 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 $20 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.

Table of Headers

Note 1011 – Contingencies and Other Disclosures (Continued)

Material Matters

FHN is defending a suit claiming material deficiencies in the offering documents under which certificates relating to First Horizon branded proprietary securitizations were ~~sold:~~sold under FHN's former (pre-2009) mortgage business: 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 (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 liability and RPL estimates for this matter are subject to significant uncertainties regarding: the dollar amounts claimed; the potential remedies that might be available or awarded; the outcome of settlement discussions; the availability of significantly dispositive defenses; and the incomplete status of the discovery process.

Underwriters are co-defendants in the FDIC- Colonial Bank 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, Other Former Mortgage Business Exposures

FHN has received indemnity ~~demands~~claims from underwriters ~~in certain other suits~~and others related to lawsuits as to which investors ~~claim~~or others claimed to have purchased certificates in FHFHN proprietary securitizations but as to which FHN ~~has~~was not ~~been~~ named a defendant.

For most pending indemnity claims involving FH proprietary securitizations, 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; inability to identify specific loans and/or breaches that are the source of the claim; lack of specific grounds to trigger FHN's indemnity obligation; and lack of precedent claims. The alleged purchase prices of the certificates subject to pending indemnification claims, excluding the FDIC-Colonial Bank matter mentioned above, total $231.2 million.

FHN has received a notice of indemnification claims from Nationstar Mortgage LLC, currently doing business as “Mr. Cooper.” Nationstar was the purchaser of FHN’s mortgage servicing obligations and assets in 2013 and 2014 and, starting in 2011, FHN’s subservicer. The notice asserts several categories of indemnity obligations by FHN to Nationstar in connection with mortgage loans under the subservicing arrangement and under the purchase transaction. This matter currently is not in litigation, but litigation in the future is possible. FHN is unable to estimate an RPL range for this matter due to significant uncertainties regarding: the exact nature of each of Nationstar’s claims and its position in respect of each; the number of, and the facts underlying, the claimed instances of indemnifiable events; the applicability of FHN’s contractual indemnity covenants to those facts and events; and, in those cases where the facts and events might support an indemnity claim, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.

FHN is contending with indemnification claims related to ~~other~~"other whole loans ~~sold.~~sold," which were mortgage loans originated by FHN before 2009 and sold outside of an FHN securitization. These claims generally assert that FHN-originated loans contributed to claimant’s losses in connection with settlements that claimant paid to various third parties in connection with mortgage loans securitized by claimant. The claims generally do not include specific deficiencies for specific loans sold by FHN. Instead, the claims generally assert that FHN is liable for a share of the claimant's loss estimated by assessing the totality of the other whole loans sold by FHN to claimant in relation to the totality of the larger number of loans securitized by claimant. FHN is unable to estimate an RPL range for these matters due to significant uncertainties regarding: the number of, and the facts underlying, the loan originations which claimants assert are indemnifiable; the applicability of FHN’s contractual indemnity covenants to those facts and originations; and, in those cases where an indemnity claim may be supported, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.

FHN also has indemnification claims related to servicing obligations. The most significant is from Nationstar Mortgage LLC, currently doing business as “Mr. Cooper.” Nationstar was the purchaser of FHN’s mortgage servicing obligations and assets in 2013 and 2014 and, starting in 2011, was FHN’s subservicer. Nationstar asserts several categories of indemnity obligations in connection with mortgage loans under the subservicing arrangement and under the purchase transaction. This matter currently is not in litigation, but litigation in the future is possible. FHN is unable to estimate an RPL range for this matter due to significant uncertainties regarding: the exact nature of each of Nationstar’s claims and its position in respect of each; the number of, and the facts underlying, the claimed instances of indemnifiable events; the applicability of FHN’s contractual indemnity covenants to those facts and events; and, in those cases where the facts and events might support an indemnity claim, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.

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 settlements, and ~~could be included in the repurchase liability discussed below, and~~ some might eventually result in ~~litigation-oriented liability,~~adverse litigation outcomes, 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.”~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

~~Obligations from Legacy Mortgage Businesses~~

Loss contingencies mentioned above under “Material Matters” stem from FHN’s 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 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: to indemnify underwriters of FH securitizations who are defending claims that they assert are based, at least in part, on FHN's breach of its representations and warranties made at closing to underwriters, the purchasers and the trustee of FH proprietary securitizations; and to indemnify purchasers of other whole loans sold, or their assignees, asserting that FHN breached representations and warranties made in connection with the sales of those loans.

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; FHN’s 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 loans sold. 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. FHN’s 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 a substantial majority 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

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

responsible for repurchase obligations related to certain excluded defects (such as title defects and violations of the GSE’s 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~~

~~Servicing Obligations~~

FHN’s 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 FHN’s 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.

~~Origination Data~~

From 2005 through 2008, FHN originated and sold $69.5 billion of mortgage loans connected with 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.~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

~~Mortgage-Related Glossary~~




~~Agencies~~	~~the two GSEs and Ginnie Mae~~	~~HELOC~~	~~home equity line of credit~~
~~certificates~~	~~securities sold to investors representing interests in mortgage loan securitizations~~	~~HUD~~	~~Dept. of Housing and Urban Development~~

~~DOJ~~	~~U.S. Department of Justice~~	~~LTV~~	~~loan-to-value, a ratio of the loan amount divided by the home value~~

~~DRA~~	~~definitive resolution agreement with a GSE~~	MI	~~private mortgage insurance, insuring against borrower payment default~~

~~Fannie Mae, Fannie,~~ ~~FNMA~~	~~Federal National Mortgage Association~~	~~MSR~~	~~mortgage servicing rights~~

~~FH proprietary~~ ~~securitization~~	~~securitization of mortgages sponsored by FHN under its First Horizon brand~~	~~nonconforming loans~~	~~loans that did not conform to Agency program requirements~~

~~FHA~~	~~Federal Housing Administration~~	~~other whole loans sold~~	~~mortgage loans sold to private, non-Agency purchasers~~

~~Freddie Mac, Freddie, FHLMC~~	~~Federal Home~~ Loan ~~Mortgage Corporation~~	~~2008 platform sale, platform sale~~	~~FHN’s 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~~

Repurchase and Foreclosure Liability

The repurchase and foreclosure liability is comprised of ~~reserves~~accruals to cover estimated loss content in the active pipeline (consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, ~~as well as~~and estimated loss content related to certain known claims not currently included in the active pipeline. FHN

Table of Headers

Note 11 – Contingencies and Other Disclosures (Continued)

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, foreclosure, and certain related exposures and has accrued for losses of ~~$32.5~~$31.9 million and ~~$34.2~~$32.3 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, including a smaller amount related to equity-lending junior lien loan sales. A $12.6 million settlement payment was made in second quarter 2019 that will reduce the accrual. Accrued liabilities for FHN’s 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 each balance sheet date and could be subject to future changes. Changes to any one of these factors could significantly impact the estimate of FHN’s liability.

~~Other FHN Mortgage Exposures~~

At September 30, 2018, 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, and no such claims had been made. FHN’s 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.

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

FHN is defending, directly or as indemnitor, certain pending lawsuits brought by purchasers of certificates in FH proprietary securitizations or their assignees. FHN believes a new lawsuit based on federal securities claims that offering disclosures were deficient cannot be brought at this time due to the running of applicable limitation periods, but other investor claims, based on other legal theories, might still be possible. Due to sales of MSR from 2008 to 2014, FHN has limited visibility into current loan information such as principal payoffs, refinance activity, delinquency trends, and loan modification activity.

Many non-GSE purchasers of whole loans from FHN included those loans in their own securitizations. Regarding such other whole loans sold, FHN made representations and warranties concerning the loans and provided indemnity covenants to the purchaser/securitizer. Typically, the purchaser/securitizer assigned key contractual rights against FHN to the securitization trustee. As mentioned above, repurchase, 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; and (iii) FHN has received repurchase, indemnity, and other demands from purchasers or their assignees. At September 30, 2018, FHN’s repurchase and foreclosure liability considered certain known exposures from other whole loans sold.

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 Visa’s IPO.

FHN executed sales of its Visa Class B shares in December 2010, September 2011 and September 2018, resulting in the complete disposition of its holdings of these shares and relief from the contingent liability. In each sale 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. See Note 14 - Derivatives for further discussion of these transactions.

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 FHN’s 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 by such agreements.

Note 1112 – 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. ~~In second quarter 2018,~~ FHN made an insignificant contribution to the qualified pension ~~plan.~~plan in 2018. Management does not currently anticipate that FHN will make a contribution to the qualified pension plan ~~for the remainde~~r ~~of 2018.~~in 2019.

FHN assumed two additional qualified plans in conjunction with the CBF acquisition. Both legacy CBF plans are frozen. ~~FHN contributed $5.1 million to these plans in December 2017.~~ As of December 31, ~~2017,~~2018, the aggregate benefit obligation for the plans was ~~$18.7~~$17.1 million and aggregate plan assets were ~~$18.6~~$16.5 million. Benefit payments, expense and actuarial gains/losses related to these plans were insignificant for ~~2018~~first quarter 2019 and ~~2017.~~2018. Additional funding amounts to these plans are dependent upon the potential settlement of the plans. Due to the insignificant financial statement impact, these two plans are not included in the disclosures that follow.

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 ~~$5.4~~$5.8 million for ~~2017.~~2018. FHN anticipates making benefit payments under the non-qualified plans of ~~$5.7~~$5.2 million in ~~2018.~~2019.

Savings plan. FHN provides all qualifying full-time employees with the opportunity to participate in FHN's 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 participant’s current investment ~~elections.~~election. 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. FHN’s postretirement benefits include certain prescription drug benefits.

Service cost is included in Employee compensation, incentives, and benefits in the Consolidated Condensed Statements of Income. All other components of net periodic benefit cost are included in All other expense.

The components of net periodic benefit cost for the three months ended ~~September 30~~March 31 are as follows:


	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
(Dollars in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Components of net periodic benefit cost
Service cost	$	11		$	9		$	33		$	26		$	8		$	10		$	24		$	33
Interest cost	6,935			7,276			328			328			7,575			6,986			351			327
Expected return on plan assets	(8,222		)	(9,230		)	(268		)	(236		)	(9,173		)	(8,225		)	(269		)	(269		)
Amortization of unrecognized:
Prior service cost/(credit)	—			13			—			23
Actuarial (gain)/loss	3,164			2,380			(108		)	(140		)	2,435			2,956			(117		)	(91		)
Net periodic benefit cost/(credit)	$	1,888		$	448		$	(15	)	$	1		$	845		$	1,727		$	(11	)	$	—

~~Note 11 – Pension, Savings, and Other Employee Benefits (Continued)~~

~~The components of net periodic benefit cost for the nine months ended September 30 are as follows:~~

Pension Benefits Other Benefits
(Dollars in thousands) 2018 2017 2018 2017
Components of net periodic benefit cost
Service cost $ 31
$ 28
$ 100
$ 80
Interest cost 20,908
22,035
982
979
Expected return on plan assets (24,673 ) (27,011 ) (806 ) (710 )
Amortization of unrecognized:
Prior service cost/(credit) —
39
—
71
Actuarial (gain)/loss 9,076
7,140
(290 ) (425 )
Net periodic benefit cost/(credit) $ 5,342
$ 2,231
$ (14 ) $ (5 )

Note 1213 – 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, North Carolina, South Carolina, Florida and other selected markets. Regional banking also provides investments, wealth management, financial planning, trust services and asset management, mortgage banking, 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, underwriting, 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, gain/(loss) on extinguishment of debt, acquisition-and integration-related costs and ~~acquisition-~~various charges related to restructuring, repositioning, and ~~integration-related costs.~~efficiency efforts. The non-strategic segment consists of run-off consumer lending activities, legacy (pre-2009) mortgage banking elements, 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 ~~and nine~~ months ended ~~September 30:~~March 31:


	Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended March 31
(Dollars in thousands)	2018		2017		2018		2017			2019		2018
Consolidated
Net interest income	$	305,700	$	209,817	$	917,805	$	600,226		$	294,508	$	301,173
Provision/(provision credit) for loan losses	2,000		—		1,000		(3,000		)	9,000		(1,000		)
Noninterest income ~~(a)~~	348,972		112,417		612,514		357,029			141,045		136,017
Noninterest expense	294,031		236,869		940,064		676,991			296,090		313,265
Income/(loss) before income taxes	358,641		85,365		589,255		283,264			130,463		124,925
Provision/(benefit) for income taxes ~~(b)~~	83,925		13,596		133,553		57,903			27,058		29,931
Net income/(loss)	$	274,716	$	71,769	$	455,702	$	225,361		$	103,405	$	94,994
Average assets	$	40,077,033	$	28,874,827	$	40,199,487	$	28,852,679		$	40,883,192	$	40,350,724

Note 1213 – Business Segment Information (Continued)



	Three Months Ended March 31
(Dollars in thousands)	2019			2018
Regional Banking
Net interest income	$	287,157		$	293,194
Provision/(provision credit) for loan losses	13,958			4,458
Noninterest income	72,117			79,963
Noninterest expense	199,959			201,749
Income/(loss) before income taxes	145,357			166,950
Provision/(benefit) for income taxes	33,693			39,340
Net income/(loss)	$	111,664		$	127,610
Average assets	$	28,889,492		$	28,171,416
Fixed Income
Net interest income	$	7,322		$	8,475
Noninterest income	53,807			45,605
Noninterest expense	51,227			49,931
Income/(loss) before income taxes	9,902			4,149
Provision/(benefit) for income taxes	2,283			896
Net income/(loss)	$	7,619		$	3,253
Average assets	$	2,849,939		$	3,479,425
Corporate
Net interest income/(expense)	$	(7,853	)	$	(16,184	)
Noninterest income	13,352			9,316
Noninterest expense	40,351			53,329
Income/(loss) before income taxes	(34,852		)	(60,197		)
Provision/(benefit) for income taxes	(11,403		)	(13,771		)
Net income/(loss)	$	(23,449	)	$	(46,426	)
Average assets	$	8,050,162		$	7,115,661
Non-Strategic
Net interest income	$	7,882		$	15,688
Provision/(provision credit) for loan losses	(4,958		)	(5,458		)
Noninterest income	1,769			1,133
Noninterest expense	4,553			8,256
Income/(loss) before income taxes	10,056			14,023
Provision/(benefit) for income taxes	2,485			3,466
Net income/(loss)	$	7,571		$	10,557
Average assets	$	1,093,599		$	1,584,222

Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars in thousands) 2018 2017 2018 2017
Regional Banking
Net interest income $ 302,448
$ 209,100
$ 902,546
$ 604,075
Provision/(provision credit) for loan losses 8,045
8,552
17,428
11,910
Noninterest income 79,857
64,370
240,093
188,089
Noninterest expense 207,591
150,445
619,283
451,135
Income/(loss) before income taxes 166,669
114,473
505,928
329,119
Provision/(benefit) for income taxes 39,101
41,191
118,929
118,771
Net income/(loss) $ 127,568
$ 73,282
$ 386,999
$ 210,348
Average assets $ 28,659,158
$ 19,158,852
$ 28,450,747
$ 18,519,999
Fixed Income
Net interest income $ 9,048
$ 5,985
$ 26,686
$ 12,126
Noninterest income 41,123
55,803
125,091
161,833
Noninterest expense 47,306
53,136
145,635
155,865
Income/(loss) before income taxes 2,865
8,652
6,142
18,094
Provision/(benefit) for income taxes 532
2,970
988
5,929
Net income/(loss) $ 2,333
$ 5,682
$ 5,154
$ 12,165
Average assets $ 3,247,016
$ 2,586,773
$ 3,326,118
$ 2,388,740
Corporate
Net interest income/(expense) $ (15,415 ) $ (13,769 ) $ (48,651 ) $ (42,408 )
Noninterest income (a) 222,619
(9,476 ) 240,665
2,219
Noninterest expense 33,323
23,926
152,797
65,365
Income/(loss) before income taxes 173,881
(47,171 ) 39,217
(105,554 )
Provision/(benefit) for income taxes (b) 40,529
(34,167 ) 4,253
(82,758 )
Net income/(loss) $ 133,352
$ (13,004 ) $ 34,964
$ (22,796 )
Average assets $ 6,904,585
$ 5,697,894
$ 6,990,484
$ 6,421,643
Non-Strategic
Net interest income $ 9,619
$ 8,501
$ 37,224
$ 26,433
Provision/(provision credit) for loan losses (6,045 ) (8,552 ) (16,428 ) (14,910 )
Noninterest income (c) 5,373
1,720
6,665
4,888
Noninterest expense 5,811
9,362
22,349
4,626
Income/(loss) before income taxes 15,226
9,411
37,968
41,605
Provision/(benefit) for income taxes 3,763
3,602
9,383
15,961
Net income/(loss) $ 11,463
$ 5,809
$ 28,585
$ 25,644
Average assets $ 1,266,274
$ 1,431,308
$ 1,432,138
$ 1,522,297

Certain previously reported amounts have been reclassified to agree with current presentation.


~~(a)~~	Three and nine months ended September 30, 2018 includes a $212.9 million pre-tax gain from the sale of Visa Class B Shares. Three and nine months ended September 30, 2017 includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.

~~(b)~~

Provision/(benefit) for income taxes for consolidated results and the Corporate segment for the three and nine months ended September 30, 2017 was affected by a decline in the effective tax rate in 2017 primarily related to the reversal of the valuation allowance for the deferred tax asset related to its 2012 federal capital loss carry forward based on capital gain transactions initiated in second quarter 2017. See Note 15 - Income Taxes in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2016 for additional information related to FHN’s valuation allowance related to its capital loss carryforward.


~~(c)~~	~~Three and nine months ended September 30, 2018 includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPs loans.~~

Note 1213 – Business Segment Information (Continued)

The following ~~table reflects~~tables reflect a disaggregation of FHN’s noninterest income by major product line and reportable segment for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended September 30, 2018												Three months ended March 31, 2019
(Dollars in thousands)	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated		Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income (a)	$	103	$	40,937	$	(5	)	$	3,778		$	44,813	$	17	$	53,732	$	—		$	—		$	53,749
Deposit transactions and cash management	34,008		3		1,725			56			35,792		30,005		3		1,563			50			31,621
Brokerage, management fees and commissions	14,200		—		—			—			14,200		12,629		—		—			4			12,633
Trust services and investment management	7,453		—		(15		)	—			7,438		7,056		—		(30		)	—			7,026
Bankcard income	6,999		—		57			(178		)	6,878		6,102		—		62			(149		)	6,015
Bank-owned life insurance (b)	—		—		4,337			—			4,337
BOLI (b)													—		—		4,402			—			4,402
Debt securities gains/(losses), net (b)	—		—		—			—			—		—		—		—			—			—
Equity securities gains/(losses), net (b) (d)	—		—		212,859			—			212,859
Equity securities gains/(losses), net (b)													—		—		31			—			31
All other income and commissions (c)	17,094		183		3,661			1,717			22,655		16,308		72		7,324			1,864			25,568
Total noninterest income	$	79,857	$	41,123	$	222,619		$	5,373		$	348,972	$	72,117	$	53,807	$	13,352		$	1,769		$	141,045

	Three Months Ended September 30, 2017
	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income	$	135	$	55,623	$	—		$	—		$	55,758
Deposit transactions and cash management	26,620		—		1,339			52			28,011
Brokerage, management fees and commissions	11,937		—		—			—			11,937
Trust services and investment management	6,968		—		(15		)	—			6,953
Bankcard income	6,057		—		56			57			6,170
Bank-owned life insurance	—		—		3,539			—			3,539
Debt securities gains/(losses), net	—		—		1			—			1
Equity securities gains/(losses), net	—		—		5			—			5
All other income and commissions (e)	12,653		180		(14,401		)	1,611			43
Total noninterest income	$	64,370	$	55,803	$	(9,476	)	$	1,720		$	112,417


(a)	Includes ~~$8.4~~$7.3 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers." ~~Non-Strategic includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPs loans~~


(b)	Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.


(c)	Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.



	Three months ended March 31, 2018
(Dollars in thousands)	Regional Banking		Fixed Income		Corporate			Non- Strategic		Consolidated
Noninterest income:
Fixed income (a)	$	81	$	45,425	$	—		$	—	$	45,506
Deposit transactions and cash management	34,722		3		1,209			50		35,984
Brokerage, management fees and commissions	13,483		—		—			—		13,483
Trust services and investment management	7,292		—		(15		)	—		7,277
Bankcard income	6,279		—		56			110		6,445
BOLI (b)	—		—		3,993			—		3,993
Debt securities gains/(losses), net (b)	—		—		52			—		52
Equity securities gains/(losses), net (b)	—		—		34			—		34
All other income and commissions (c) (d)	18,106		177		3,987			973		23,243
Total noninterest income	$	79,963	$	45,605	$	9,316		$	1,133	$	136,017

Certain previously reported amounts have been reclassified to agree with current presentation.


(a)	Includes $8.2 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers."


(b)	Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.


(c)	Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.


(d)	~~In third quarter 2018, FHN sold its remaining holdings of Visa Class B shares resulting in a pre-tax gain of $212.9 million.~~


~~(e)~~	Corporate includes a ~~$14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.~~

~~Note 12 – Business Segment Information (Continued)~~

Nine Months Ended September 30, 2018
(Dollars in thousands) Regional Banking Fixed Income Corporate Non-Strategic Consolidated
Noninterest income:
Fixed income (a) $ 314
$ 123,929
$ (5 ) $ 3,778
$ 128,016
Deposit transactions and cash management 103,275
9
4,416
159
107,859
Brokerage, management fees and commissions 41,423
—
—
—
41,423
Trust services and investment management 22,891
—
(44 ) —
22,847
Bankcard income 19,921
—
168
(131 ) 19,958
Bank-owned life insurance (b) —
—
14,103
—
14,103
Debt securities gains/(losses), net (b) —
—
52
—
52
Equity securities gains/(losses), net (b) (d) —
—
212,924
—
212,924
All other income and commissions (c) (e) 52,269
1,153
9,051
2,859
65,332
Total noninterest income $ 240,093
$ 125,091
$ 240,665
$ 6,665
$ 612,514

Nine Months Ended September 30, 2017
Regional Banking Fixed Income Corporate Non-Strategic Consolidated
Noninterest income:
Fixed income $ 348
$ 161,198
$ —
$ —
$ 161,546
Deposit transactions and cash management 76,288
—
4,004
142
80,434
Brokerage, management fees and commissions 35,872
—
—
—
35,872
Trust services and investment management 21,360
—
(56 ) —
21,304
Bankcard income 16,894
—
169
167
17,230
Bank-owned life insurance —
—
11,137
—
11,137
Debt securities gains/(losses), net 386
—
64
—
450
Equity securities gains/(losses), net —
—
5
—
5
All other income and commissions (f) 36,941
635
(13,104 ) 4,579
29,051
Total noninterest income $ 188,089
$ 161,833
$ 2,219
$ 4,888
$ 357,029


~~(a)~~	Includes $24.0 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers." Non-Strategic includes a $3.8$3.3 million gain ~~from~~on the ~~reversal~~sale of a ~~previous valuation adjustment due to sales of TRUPs loans excluded from the scope of ASC 606.~~building.


~~(b)~~	~~Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.~~


~~(c)~~	~~Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.~~


~~(d)~~	~~In third quarter 2018, FHN sold its remaining holdings of Visa Class B shares resulting in a pre-tax gain of $212.9 million.~~


~~(e)~~	~~Corporate includes $4.1 million of gains on the sales of buildings.~~


~~(f)~~	~~Corporate includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.~~

Note 1314 – 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 entity’s 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 VIE’s 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 VIE’s 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 trust’s economic performance. The retention of mortgage service rights ("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 FHN’s 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 FHN’s 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 trust’s assets.

Note 1314 – Variable Interest Entities (Continued)

The following table summarizes VIEs consolidated by FHN as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	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		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
(Dollars in thousands)									Carrying Value		Carrying Value		Carrying Value		Carrying Value
Assets:
Cash and due from banks	$	—	N/A		$	—	N/A		$	—	N/A		$	—	N/A
Loans, net of unearned income	17,106		N/A		24,175		N/A		14,990		N/A		16,213		N/A
Less: Allowance for loan losses	—		N/A		—		N/A		—		N/A		—		N/A
Total net loans	17,106		N/A		24,175		N/A		14,990		N/A		16,213		N/A
Other assets	35		$	84,170	47		$	80,479	34		$	83,941	35		$	78,446
Total assets	$	17,141	$	84,170	$	24,222	$	80,479	$	15,024	$	83,941	$	16,248	$	78,446
Liabilities:
Term borrowings	$	4,071	N/A		$	11,226	N/A		$	1,802	N/A		$	2,981	N/A
Other liabilities	—		$	63,017	2		$	61,733	—		$	64,069	—		$	56,700
Total liabilities	$	4,071	$	63,017	$	11,228	$	61,733	$	1,802	$	64,069	$	2,981	$	56,700

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 FHN’s 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 FHN’s 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 FTHC’s 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 ~~$1.2~~$.5 million and ~~$.3~~$1.0 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017. Expenses associated with these investments were $3.1 million and $1.4 million for nine months ended September 30, 2018~~ ~~and 2017.The~~respectively. The following table summarizes the impact to the Provision/(benefit) for income taxes on the Consolidated Condensed Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019, and 2018 ~~and 2017~~ for LIHTC investments accounted for under the proportional amortization method.


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017
(Dollars in thousands)													2019			2018
Provision/(benefit) for income taxes:
Amortization of qualifying LIHTC investments	$	1,547		$	3,774		$	6,094		$	8,414		$	3,998		$	2,356
Low income housing tax credits	(2,584		)	(3,103		)	(7,681		)	(8,101		)	(3,629		)	(2,537		)
Other tax benefits related to qualifying LIHTC investments	(1,412		)	(2,478		)	(2,996		)	(4,307		)	(1,610		)	(690		)

Note 1314 – 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 FHN’s community reinvestment initiatives. The activities of the LLCs include providing investment capital for low-income communities within FHN’s primary geographic region. A portion of the funding of FTNMC’s 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 FTNMC’s initial capital contributions. A NMTC relationship was resolved in fourth quarter 2018 resulting in a $15.3 million decline in the investment balance and the related debt.

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 FTHC’s 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 FTBNA’s holdings, FTBNA could potentially receive benefits or absorb losses that are significant to the trusts regardless of whether a majority of a trust’s 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 entity’s 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 trust’s 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. 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. However, FHN did not have the ability to participate in significant portions of a securitization trust’s cash flows and FHN was not considered the primary beneficiary of the trust. Therefore, these trusts were not consolidated by FHN.

Note 14 – Variable Interest Entities (Continued)

Holdings 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

~~Note 13 – Variable Interest Entities (Continued)~~

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 FHN’s 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 borrower’s 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 entity’s 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 prior to 2019, it ~~is being~~was accounted for using the deposit method which ~~creates~~created a net asset or liability for all cash flows between FTB and the buyer. Upon adoption of ASU 2016-02 the transaction qualified as a seller-financed sale-leaseback. 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.

Proprietary Trust Preferred Issuances. In conjunction with the acquisition of CBF, FHN acquired junior subordinated debt totaling $212.4 million underlying multiple issuances of trust preferred debt by institutions previously acquired by CBF. All of these trusts are considered VIEs because the ownership interests from the capital contributions to these trusts are not considered “at risk” in evaluating whether the holders of the equity investments at risk in the trusts have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities’ economic performance. Thus, FHN cannot be the trusts’ primary beneficiary because its ownership interests in the trusts are not considered variable interests as they are not considered “at risk”. Consequently, none of the trusts are consolidated by FHN. ~~In third quarter 2018,~~ FHN retired ~~$10.3~~$45.4 million of this debt and the related trust preferred ~~debt. FHN has retired or given notice of its election to retire an additional $35.1 million of this debt~~securities in third and fourth quarter 2018.

Note 1314 – Variable Interest Entities (Continued)

The following table summarizes FHN’s nonconsolidated VIEs as of ~~September 30, 2018:~~March 31, 2019:


(Dollars in thousands)	Maximum Loss Exposure		Liability Recognized		Classification	Maximum Loss Exposure		Liability Recognized		Classification
Type
Low income housing partnerships	$	118,355	$	52,148	(a)	$	152,048	$	79,691	(a)
Other tax credit investments (b) (c)	17,878		—		Other assets	8,961		—		Other assets
Small issuer trust preferred holdings (d)	276,825		—		Loans, net of unearned income	269,635		—		Loans, net of unearned income
On-balance sheet trust preferred securitization	48,306		65,868		(e)	37,121		77,053		(e)
Proprietary residential mortgage securitizations	1,592		—		Trading securities	1,397		—		Trading securities
Holdings of agency mortgage-backed securities (d)	5,209,810		—		(f)	4,905,088		—		(f)
Commercial loan troubled debt restructurings (g)	41,926		—		Loans, net of unearned income	51,893		—		Loans, net of unearned income
Sale-leaseback transaction	16,327		—		(h)	19,777		—		(h)
Proprietary trust preferred issuances (i)	—		202,068		Term borrowings	—		167,014		Term borrowings


(a)	Maximum loss exposure represents ~~$66.2~~$72.4 million of current investments and ~~$52.1~~$79.7 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 2021.


(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, $2.7 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 $77.1 million classified as Term borrowings.


(f)	Includes $.6 billion classified as Trading securities and $4.3 billion classified as Securities available-for-sale.


(g)	Maximum loss exposure represents $51.6 million of current receivables and $.3 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.


(i)	No exposure to loss due to nature of FHN's involvement.

The following table summarizes FHN’s nonconsolidated VIEs as of December 31, 2018:



(Dollars in thousands)	Maximum Loss Exposure		Liability Recognized		Classification
Type
Low income housing partnerships	$	156,056	$	80,427	(a)
Other tax credit investments (b) (c)	3,619		—		Other assets
Small issuer trust preferred holdings (d)	270,585		—		Loans, net of unearned income
On-balance sheet trust preferred securitization	37,532		76,642		(e)
Proprietary residential mortgage securitizations	1,524		—		Trading securities
Holdings of agency mortgage-backed securities (d)	4,842,630		—		(f)
Commercial loan troubled debt restructurings (g)	40,590		—		Loans, net of unearned income
Sale-leaseback transaction	16,327		—		(h)
Proprietary trust preferred issuances (i)	—		167,014		Term borrowings


(a)	Maximum loss exposure represents $75.6 million of current investments and $80.4 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 2020.


(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~~$2.7 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 ~~$65.9~~$76.6 million classified as Term borrowings.


(f)	Includes ~~$.8~~$.5 billion classified as Trading securities and $4.4 billion classified as Securities available-for-sale.


(g)	Maximum loss exposure represents ~~$41.4~~$38.2 million of current receivables and ~~$.6 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.~~


~~(i)~~	~~No exposure to loss due to nature of FHN's involvement.~~

~~The following table summarizes FHN’s nonconsolidated VIEs as of December 31, 2017:~~

(Dollars in thousands)
Maximum
Loss Exposure

Liability
Recognized
Classification
Type

Low income housing partnerships $ 94,798
$ 33,348
(a)
Other tax credit investments (b) (c) 20,394
—
Other assets
Small issuer trust preferred holdings (d) 332,455
—
Loans, net of unearned income
On-balance sheet trust preferred securitization 48,817
65,357
(e)
Proprietary residential mortgage securitizations 2,151
—
Trading securities
Holdings of agency mortgage-backed securities (d) 5,349,287
—
(f)
Commercial loan troubled debt restructurings (g) 19,411
—
Loans, net of unearned income
Sale-leaseback transaction 14,827
—
(h)
Proprietary trust preferred issuances (i) —
212,378
Term borrowings


~~(a)~~	Maximum loss exposure represents $61.5 million of current investments and $33.3 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 2020.


~~(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 $65.4 million classified as Term borrowings.~~


~~(f)~~	~~Includes $.5 billion classified as Trading securities and $4.8 billion classified as Securities available-for-sale.~~


~~(g)~~	~~Maximum loss exposure represents $19.1 million of current receivables and $.3~~$2.3 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.


(i)	No exposure to loss due to nature of FHN's involvement.

Note 1415 – 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. ~~Both~~In 2017 and 2018, the central clearinghouses ~~used by FHN consider~~revised the treatment of daily ~~variation~~ margin posted or received asfrom collateral to legal settlements of the related derivative ~~contracts. This results~~contracts which resulted in a reduction in derivative assets and liabilities and corresponding reductions in collateral posted and received as these amounts ~~being~~are now presented net by contract in the Consolidated Condensed Statements of Condition. ~~This has~~These changes had no effect on hedge accounting or gains/losses for the applicable derivative contracts. On ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, FHN had ~~$81.7~~$79.6 million and ~~$60.3~~$76.0 million of cash receivables and ~~$50.3~~$33.2 million and ~~$49.7~~$34.0 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 FHN’s counterparty. Derivatives are also used as a risk management tool to hedge FHN’s 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

FHN’s fixed income segment trades U.S. Treasury, U.S. Agency, government-guaranteed loan, 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

Note 15 – Derivatives (Continued)

through credit approvals, risk control limits, and ongoing monitoring procedures. Total trading revenues were ~~$34.3~~$44.5 million and

~~Note 14 – Derivatives (Continued)~~

~~$45.0~~ $38.0 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, and $102.3 million and $133.3 million for the nine months ended September 30, 2018 and 2017,~~ respectively. Trading revenues are inclusive of both derivative and non-derivative financial instruments, and are included in ~~fixed~~Fixed income noninterest ~~income.~~income on the Consolidated Condensed Statements of Income.

The following tables summarize FHN’s derivatives associated with fixed income trading activities as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018						March 31, 2019
(Dollars in thousands)	Notional		Assets		Liabilities		Notional		Assets		Liabilities
Customer interest rate contracts	$	2,200,080	$	7,861	$	55,392	$	2,279,361	$	30,632	$	14,245
Offsetting upstream interest rate contracts	2,200,080		7,904		8,244		2,279,361		5,056		4,834
Option contracts purchased	30,000		32		—		72,500		103		—
Forwards and futures purchased	5,425,631		4,915		14,002		7,983,000		31,733		4,404
Forwards and futures sold	5,701,595		15,098		4,768		8,373,739		5,243		32,284


	December 31, 2017						December 31, 2018
(Dollars in thousands)	Notional		Assets		Liabilities		Notional		Assets		Liabilities
Customer interest rate contracts	$	2,026,753	$	22,097	$	18,323	$	2,271,448	$	18,744	$	27,768
Offsetting upstream interest rate contracts	2,026,753		17,931		20,720		2,271,448		4,014		9,041
Option contracts purchased	20,000		15		—		20,000		25		—
Forwards and futures purchased	6,257,140		4,354		5,526		4,684,177		28,304		181
Forwards and futures sold	6,292,012		5,806		4,010		4,967,454		522		30,055

Interest Rate Risk Management

FHN’s 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. FHN’s 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 not significant as of September 30, 2018 and was $.1 million in Derivative assets as of December 31, 2017.~~

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 not significant as of September 30, 2018 and was $.2 million in Derivative assets as of December 31, 2017.~~

Note 1415 – Derivatives (Continued)

The following tables summarize FHN’s derivatives associated with interest rate risk management activities as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018							March 31, 2019
(Dollars in thousands)	Notional		Assets		Liabilities			Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts	$	1,871,936	$	3,792	$	50,992		$	2,122,743	$	37,754	$	14,260
Offsetting upstream interest rate contracts	1,871,936		14,182		2,608			2,122,743		7,232		6,731
Debt Hedging
Hedging Instruments:
Interest rate swaps	$	900,000	$	189	N/A			$	900,000	N/A		$	448
Hedged Items:
Term borrowings:
Par	N/A		N/A		$	900,000		N/A		N/A		$	900,000
Cumulative fair value hedging adjustments	N/A		N/A		(21,782		)	N/A		N/A		(10,828		)
Unamortized premium/(discount) and issuance costs	N/A		N/A		(2,699		)	N/A		N/A		(1,891		)
Total carrying value	N/A		N/A		875,519			N/A		N/A		$	887,281


	December 31, 2017							December 31, 2018
(Dollars in thousands)	Notional		Assets		Liabilities			Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts	$	1,608,912	$	11,644	$	19,780		$	2,029,162	$	20,262	$	25,880
Offsetting upstream interest rate contracts	1,608,912		18,473		11,019			2,029,162		8,154		9,153
Debt Hedging
Hedging Instruments:
Interest rate swaps	$	900,000	$	371	N/A			$	900,000	$	127	$	6
Hedged Items:
Term borrowings:
Par	N/A		N/A		$	900,000		N/A		N/A		$	900,000
Cumulative fair value hedging adjustments	N/A		N/A		(13,472		)	N/A		N/A		(15,094		)
Unamortized premium/(discount) and issuance costs	N/A		N/A		(3,910		)	N/A		N/A		(2,295		)
Total carrying value	N/A		N/A		$	882,618		N/A		N/A		$	882,611

Note 1415 – Derivatives (Continued)

The following table summarizes gains/(losses) on FHN’s derivatives associated with interest rate risk management activities for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
		2018			2017			2018			2017				2019			2018
(Dollars in thousands)		Gains/(Losses)			Gains/(Losses)			Gains/(Losses)			Gains/(Losses)				Gains/(Losses)			Gains/(Losses)
Customer Interest Rate Contracts Hedging	Customer Interest Rate Contracts Hedging													Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts (a)		$	(10,620	)	$	(180	)	$	(39,803	)	$	643			$	29,112		$	(24,724	)
Offsetting upstream interest rate contracts (a)		10,620			180			39,803			(643		)		(29,112		)	24,724
Debt Hedging
Hedging Instruments:
Interest rate swaps (b)		$	(246	)	$	(966	)	$	(8,386	)	$	(1,958	)		$	4,279		$	(6,595	)
Hedged Items:
Term borrowings (b) (c)		240			941			8,310			1,870
Term borrowings (a) (c)															(4,266		)	6,550


(a)	Gains/losses included in All other expense within the Consolidated Condensed Statements of Income.


(b)	Gains/losses included in the Interest ~~expense for 2018 and All other expense for 2017 within the Consolidated Condensed Statements of Income.~~expense.


(c)	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 had initial 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. ~~Subsequent to 2017, all~~All changes in the fair value of these derivatives are recorded as a component of AOCI. Amounts are reclassified from AOCI to earnings as the hedged cash flows affect earnings. Prior to 2018, FTB measured ineffectiveness using the Hypothetical Derivative Method and AOCI was adjusted to an amount that reflected 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 existed in the hedge relationships, the amounts were 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.

The following tables summarize FHN’s derivative activities associated with cash flow hedges as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

September 30, 2018

March 31, 2019

(Dollars in thousands)

Notional

Assets

Liabilities

Notional

Assets

Liabilities

Cash Flow Hedges

Hedging Instruments:

Interest rate swaps

900,000

373

N/A

900,000

N/A

891

Hedged Items:

Variability in cash flows related to debt instruments (primarily loans)

N/A

900,000

N/A

900,000

N/A



	December 31, 2018
(Dollars in thousands)	Notional		Assets		Liabilities
Cash Flow Hedges
Hedging Instruments:
Interest rate swaps	$	900,000	$	888	$	5
Hedged Items:
Variability in cash flows related to debt instruments (primarily loans)	N/A		$	900,000	N/A

Note 1415 – Derivatives (Continued)

December 31, 2017
(Dollars in thousands) Notional Assets Liabilities
Cash Flow Hedges
Hedging Instruments:

Interest rate swaps $ 900,000
$ 942
N/A
Hedged Items:
Variability in cash flows related to debt instruments (primarily loans) N/A
$ 900,000
N/A

The following table summarizes gains/(losses) on FHN’s derivatives associated with cash flow hedges for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
	2018			2017			2018			2017				2019		2018
(Dollars in thousands)	Gains/(Losses)			Gains/(Losses)			Gains/(Losses)			Gains/(Losses)				Gains/(Losses)		Gains/(Losses)
Cash Flow Hedges													Cash Flow Hedges
Hedging Instruments:
Interest rate swaps (a)	$	(2,257	)	$	(1,190	)	$	(17,788	)	$	(800	)		$	7,218	$	(11,618	)
Gain/(loss) recognized in Other comprehensive income/(loss)	(2,517		)	(91		)	(14,612		)	1,906				3,936		(8,844		)
Gain/(loss) reclassified from AOCI into Interest income	771			(643		)	1,079			(2,399		)		1,451		(155		)


(a)	Approximately ~~$10.6~~$5.0 million of pre-tax losses are expected to be reclassified into earnings in the next twelve months.

Other Derivatives

In conjunction with the sales of a portion of its Visa Class B shares in 2010 and 2011, 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 is also required to make periodic financing payments to the purchasers until all of Visa's covered litigation matters are resolved. In third quarter 2018, FHN sold the remainder of its Visa Class B shares, entering into a similar derivative arrangement with the counterparty. All of these derivatives extend until the end of Visa’s Covered Litigation matters. In September 2018, Visa reached a preliminary settlement for one class of plaintiffs in its Payment Card Interchange ~~matter.~~matter which has received court approval. This settlement ~~is subject to court approval and~~ contains opt out provisions for individual plaintiffs as well as a termination option if opt outs exceed a specified threshold. Settlement has not been reached with the second class of plaintiffs in this matter and other covered litigation matters are also pending judicial resolution. Accordingly, the value and timing for completion of Visa’s Covered Litigation matters are uncertain.

The derivative transaction executed in third quarter 2018 includes a contingent accelerated termination clause based on the credit ratings of FHN and FTBNA. FHN has not received or paid collateral related to this contract. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the derivative liabilities associated with the sales of Visa Class B shares were ~~$34.2~~$29.0 million and ~~$5.6~~$31.5 million, respectively. $28.1 million of the value at September 30, 2018 relates to the transaction executed in third quarter 2018. See the Visa Matters section of Note 10 - Contingencies and Other Disclosures for more information regarding FHN’s Visa shares. See Note 1617 - Fair Value of Assets & Liabilities for discussion of the valuation inputs and processes for these Visa-related derivatives.

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, these loans were valued at ~~$10.6~~$15.2 million and ~~$1.5~~$11.0 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

~~Note 14 – Derivatives (Continued)~~

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 FHN’s Consolidated Condensed Statements of Condition.

Note 15 – 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 FHN’s 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 counterparty’s credit ratings were to decrease, FHN and/or FTBNA could require the posting of additional collateral; whereas if a counterparty’s 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 ~~$22.0~~$27.2 million of assets and ~~$57.7~~$16.4 million of liabilities on ~~September 30, 2018,~~March 31, 2019, and ~~$23.3~~$20.7 million of assets and ~~$34.5~~$37.8 million of liabilities on December 31, ~~2017.~~2018. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, FHN had received collateral of ~~$92.3~~$86.3 million and ~~$119.3~~$86.6 million and posted collateral of ~~$20.4~~$18.6 million and ~~$18.9~~$16.2 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 counterparty’s credit rating falls below a specified level. If a counterparty’s debt rating (including FHN’s and FTBNA’s) 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 ~~$18.1~~$27.2 million of assets and ~~$54.5~~$10.9 million of liabilities on ~~September 30, 2018,~~March 31, 2019, and ~~$22.8~~$19.0 million of assets and ~~$19.4~~$33.2 million of liabilities on December 31, ~~2017.~~2018. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, FHN had received collateral of ~~$88.2~~$86.3 million and ~~$118.6~~$84.5 million and posted collateral of ~~$20.9~~$13.5 million and ~~$6.7~~$15.2 million, respectively, in the normal course of business related to these contracts.

FHN’s 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.

Note 1415 – Derivatives (Continued)

The following table provides details of derivative assets and collateral received as presented on the Consolidated Condensed Statements of Condition as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


							Gross amounts not offset in the Statements of Condition														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		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:
September 30, 2018 (b)	$	34,414	$	—	$	34,414	$	(8,590	)	$	(25,156	)	$	668
December 31, 2017 (b)	71,458		—		71,458		(17,278		)	(51,271		)	2,909
March 31, 2019 (b)															$	81,003	$	—	$	81,003	$	(12,081	)	$	(68,887	)	$	35
December 31, 2018 (b)															52,562		—		52,562		(12,745		)	(39,637		)	180

(a)

Included in Derivative assets on the Consolidated Condensed Statements of Condition. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, $20.1~~2018, $37.1 million and ~~$10.2~~$28.9 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.

The following table provides details of derivative liabilities and collateral pledged as presented on the Consolidated Condensed Statements of Condition as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


							Gross amounts not offset in the Statements of Condition														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		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:
September 30, 2018 (b)	$	117,241	$	—	$	117,241	$	(8,590	)	$	(65,354	)	$	43,297
December 31, 2017 (b)	69,842		—		69,842		(17,278		)	(51,801		)	763
March 31, 2019 (b)															$	41,409	$	—	$	41,409	$	(12,081	)	$	(28,679	)	$	649
December 31, 2018 (b)															71,853		—		71,853		(12,745		)	(54,773		)	4,335

(a)

Included in Derivative liabilities on the Consolidated Condensed Statements of Condition. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, $53.1~~2018, $65.7 million and ~~$15.2~~$61.9 million, respectively, of derivative liabilities (primarily Visa-related derivatives and 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.

Note 1516 – Master Netting and Similar Agreements—Repurchase, 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 FHN’s fixed income business (Securities purchased under agreements to resell and Securities sold under agreements to repurchase), transactions are collateralized by securities and/or government guaranteed loans which are delivered on the settlement date and are maintained throughout the term of the transaction. For FHN’s 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 FHN’s Consolidated Condensed Statements of Condition. For liability positions, securities collateral pledged by FHN is generally represented within FHN’s 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


							Gross amounts not offset in the Statements of Condition														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 FHN’s Statements of Condition)			Net amount		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 FHN’s Statements of Condition)			Net amount
Securities purchased under agreements to resell:
September 30, 2018	$	687,437	$	—	$	687,437	$	(1,017	)	$	(681,110	)	$	5,310
December 31, 2017	725,609		—		725,609		(259		)	(720,036		)	5,314
March 31, 2019															$	474,679	$	—	$	474,679	$	(1,276	)	$	(469,450	)	$	3,953
December 31, 2018															386,443		—		386,443		(261		)	(382,756		)	3,426

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


							Gross amounts not offset in the Statements of Condition														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/ government guaranteed loans collateral			Net amount		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/ government guaranteed loans collateral			Net amount
Securities sold under agreements to repurchase:
September 30, 2018	$	678,510	$	—	$	678,510	$	(1,017	)	$	(677,125	)	$	368
December 31, 2017	656,602		—		656,602		(259		)	(656,216		)	127
March 31, 2019															$	745,788	$	—	$	745,788	$	(1,276	)	$	(744,427	)	$	85
December 31, 2018															762,592		—		762,592		(261		)	(762,322		)	9

Note 1516 – Master Netting and Similar Agreements—Repurchase, 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018						March 31, 2019
(Dollars in thousands)	Overnight and Continuous		Up to 30 Days		Total		Overnight and Continuous		Up to 30 Days		Total
Securities sold under agreements to repurchase:
U.S. treasuries	$	17,555	$	—	$	17,555	$	24,108	$	—	$	24,108
Government agency issued MBS	314,231		5,529		319,760		366,837		9,140		375,977
Government agency issued CMO	49,553		2,413		51,966		36,137		—		36,137
Government guaranteed loans (SBA and USDA)	289,229		—		289,229		309,566		—		309,566
Total Securities sold under agreements to repurchase	$	670,568	$	7,942	$	678,510	$	736,648	$	9,140	$	745,788

	December 31, 2017						December 31, 2018
(Dollars in thousands)	Overnight and Continuous		Up to 30 Days		Total		Overnight and Continuous		Up to 30 Days		Total
Securities sold under agreements to repurchase:
U.S. treasuries	$	13,830	$	—	$	13,830	$	16,321	$	—	$	16,321
Government agency issued MBS	424,821		5,365		430,186		414,488		5,220		419,708
Government agency issued CMO	54,037		3,666		57,703		36,688		—		36,688
Government guaranteed loans (SBA and USDA)	154,883		—		154,883		289,875		—		289,875
Total Securities sold under agreements to repurchase	$	647,571	$	9,031	$	656,602	$	757,372	$	5,220	$	762,592

Note 1617 – Fair Value of Assets & Liabilities

FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:

Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2—Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3—Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s 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.~~

Note 1617 – 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 ~~September 30, 2018:~~March 31, 2019:


	September 30, 2018								March 31, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	121,490	$	—	$	121,490	$	—	$	232,019	$	—	$	232,019
Government agency issued MBS	—		235,403		—		235,403		—		292,020		—		292,020
Government agency issued CMO	—		568,344		—		568,344		—		295,476		—		295,476
Other U.S. government agencies	—		43,642		—		43,642		—		78,958		—		78,958
States and municipalities	—		54,669		—		54,669		—		81,513		—		81,513
Corporates and other debt	—		866,128		—		866,128
Corporate and other debt									—		696,680		—		696,680
Equity, mutual funds, and other	—		39,723		—		39,723		—		3,664		—		3,664
Total trading securities—fixed income	—		1,929,399		—		1,929,399		—		1,680,330		—		$	1,680,330
Trading securities—mortgage banking	—		—		1,592		1,592		—		—		1,397		1,397
Loans held-for-sale (elected fair value)	—		182		16,236		16,418		—		—		15,751		15,751
Securities available-for-sale:
U.S. treasuries	—		98		—		98		—		99		—		99
Government agency issued MBS	—		2,414,877		—		2,414,877		—		2,385,809		—		2,385,809
Government agency issued CMO	—		1,991,184		—		1,991,184		—		1,931,784		—		1,931,784
Other U.S. government agencies	—		113,088		—		113,088		—		190,828		—		190,828
States and municipalities	—		23,701		—		23,701		—		39,423		—		39,423
Corporates and other debt	—		55,074		—		55,074
Interest-only strips (elected fair value)	—		—		10,361		10,361
Corporate and other debt									—		55,184		—		55,184
Interest-Only Strip (elected fair value)									—		—		13,195		13,195
Total securities available-for-sale	—		4,598,022		10,361		4,608,383		—		4,603,127		13,195		4,616,322
Other assets:
Deferred compensation mutual funds	40,912		—		—		40,912		41,097		—		—		41,097
Equity, mutual funds, and other	22,141		—		—		22,141		22,326		—		—		22,326
Derivatives, forwards and futures	20,013		—		—		20,013		36,976		—		—		36,976
Derivatives, interest rate contracts	—		34,333		—		34,333		—		80,777		—		80,777
Derivatives, other	—		130		—		130		—		375		—		375
Total other assets	83,066		34,463		—		117,529		100,399		81,152		—		181,551
Total assets	$	83,066	$	6,562,066	$	28,189	$	6,673,321	$	100,399	$	6,364,609	$	30,343	$	6,495,351
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	574,897	$	—	$	574,897	$	—	$	284,394	$	—	$	284,394
States and municipalities	—		110		—		110
Corporates and other debt	—		164,687		—		164,687
Other U.S.government agencies									—		16,817		—		16,817
Corporate and other debt									—		128,458		—		128,458
Total trading liabilities—fixed income	—		739,694		—		739,694		—		429,669		—		429,669
Other liabilities:
Derivatives, forwards and futures	18,770		—		—		18,770		36,688		—		—		36,688
Derivatives, interest rate contracts	—		117,236		—		117,236		—		41,409		—		41,409
Derivatives, other	—		106		34,212		34,318		—		56		28,970		29,026
Total other liabilities	18,770		117,342		34,212		170,324		36,688		41,465		28,970		107,123
Total liabilities	$	18,770	$	857,036	$	34,212	$	910,018	$	36,688	$	471,134	$	28,970	$	536,792

Note 1617 – 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, ~~2017:~~2018:


	December 31, 2017										December 31, 2018
(Dollars in thousands)	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	128,995		$	—	$	128,995		$	—	$	169,799		$	—	$	169,799
Government agency issued MBS	—		227,038			—		227,038			—		133,373			—		133,373
Government agency issued CMO	—		275,014			—		275,014			—		330,456			—		330,456
Other U.S. government agencies	—		54,699			—		54,699			—		76,733			—		76,733
States and municipalities	—		34,573			—		34,573			—		54,234			—		54,234
Corporates and other debt	—		693,877			—		693,877
Corporate and other debt											—		682,068			—		682,068
Equity, mutual funds, and other	—		(2		)	—		(2		)	—		(19		)	—		(19		)
Total trading securities—fixed income	—		1,414,194			—		1,414,194			—		1,446,644			—		1,446,644
Trading securities—mortgage banking	—		—			2,151		2,151			—		—			1,524		1,524
Loans held-for-sale	—		1,955			18,926		20,881
Loans held-for-sale (elected fair value)											—		—			16,273		16,273
Securities available-for-sale:
U.S. treasuries	—		99			—		99			—		98			—		98
Government agency issued MBS	—		2,577,376			—		2,577,376			—		2,420,106			—		2,420,106
Government agency issued CMO	—		2,269,858			—		2,269,858			—		1,958,695			—		1,958,695
Corporates and other debt	—		55,782			—		55,782
Interest-only strips	—		—			1,270		1,270
Equity, mutual funds, and other	27,017		—			—		27,017
Other U.S. government agencies											—		149,786			—		149,786
States and municipalities											—		32,573			—		32,573
Corporate and other debt											—		55,310			—		55,310
Interest-Only Strip (elected fair value)											—		—			9,902		9,902
Total securities available-for-sale	27,017		4,903,115			1,270		4,931,402			—		4,616,568			9,902		4,626,470
Other assets:
Deferred compensation assets	39,822		—			—		39,822
Deferred compensation mutual funds											37,771		—			—		37,771
Equity, mutual funds, and other											22,248		—			—		22,248
Derivatives, forwards and futures	10,161		—			—		10,161			28,826		—			—		28,826
Derivatives, interest rate contracts	—		71,473			—		71,473			—		52,214			—		52,214
Derivatives, other											—		435			—		435
Total other assets	49,983		71,473			—		121,456			88,845		52,649			—		141,494
Total assets	$	77,000	$	6,390,737		$	22,347	$	6,490,084		$	88,845	$	6,115,861		$	27,699	$	6,232,405
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	506,679		$	—	$	506,679		$	—	$	207,739		$	—	$	207,739
Corporates and other debt	—		131,836			—		131,836
Other U.S.government agencies											—		98			—		98
Corporate and other debt											—		127,543			—		127,543
Total trading liabilities—fixed income	—		638,515			—		638,515			—		335,380			—		335,380
Other liabilities:
Derivatives, forwards and futures	9,535		—			—		9,535			30,236		—			—		30,236
Derivatives, interest rate contracts	—		69,842			—		69,842			—		71,853			—		71,853
Derivatives, other	—		39			5,645		5,684			—		84			31,540		31,624
Total other liabilities	9,535		69,881			5,645		85,061			30,236		71,937			31,540		133,713
Total liabilities	$	9,535	$	708,396		$	5,645	$	723,576		$	30,236	$	407,317		$	31,540	$	469,093

Note 1617 – 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 ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ on a recurring basis are summarized as follows:


	Three Months Ended September 30, 2018																Three Months Ended March 31, 2019
(Dollars in thousands)	Trading securities				Interest- only strips- AFS				Loans held- for-sale				Net derivative liabilities				Trading securities				Interest- only strips- AFS				Loans held- for-sale				Net derivative liabilities
Balance on July 1, 2018	$	1,724			$	5,787			$	16,718			$	(9,425	)
Balance on January 1, 2019																	$	1,524			$	9,902			$	16,273			$	(31,540	)
Total net gains/(losses) included in:
Net income	33				(456		)		277				(529		)		21				(1,258		)		495				135
Purchases	—				—				—				(28,100		)	(e)	—				86				—				—
Sales	—				(2,034		)		—				—				—				(13,012		)		—				—
Settlements	(165		)		—				(759		)		3,842				(148		)		—				(1,017		)		2,435
Net transfers into/(out of) Level 3	—				7,064			(b)	—			(d)	—				—				17,477			(b)	—				—
Balance on September 30, 2018	$	1,592			$	10,361			$	16,236			$	(34,212	)
Balance on March 31, 2019																	$	1,397			$	13,195			$	15,751			$	(28,970	)
Net unrealized gains/(losses) included in net income	$	(3	)	(a)	$	(215	)	(c)	$	277		(a)	$	(530	)	(f)	$	(30	)	(a)	$	(894	)	(c)	$	495		(a)	$	135		(d)


	Three Months Ended September 30, 2017																Three Months Ended March 31, 2018
(Dollars in thousands)	Trading securities				Interest-only strips-AFS				Loans held-for-sale				Net derivative liabilities				Trading securities				Interest-only-strips-AFS				Loans held-for-sale				Net derivative liabilities
Balance on July 1, 2017	$	2,464			$	1,163			$	20,587			$	(5,700	)
January 1, 2018																	$	2,151			$	1,270			$	18,926			$	(5,645	)
Total net gains/(losses) included in:
Net income	92				(160		)		390				(129		)		16				1,592				169				(296		)
Purchases	—				—				43				—				—				—				28				—
Sales																	—				(9,193		)		—				—
Settlements	(251		)		—				(939		)		299				(241		)		—				(789		)		296
Net transfers into/(out of) Level 3	—				2,120			(b)	—			(d)	—				—				9,064			(b)	—				—
Balance on September 30, 2017	$	2,305			$	3,123			$	20,081			$	(5,530	)
Balance on March 31, 2018																	$	1,926			$	2,733			$	18,334			$	(5,645	)
Net unrealized gains/(losses) included in net income	$	62		(a)	$	(72	)	(c)	$	390		(a)	$	(129	)	(f)	$	(25	)	(a)	$	19		(c)	$	169		(a)	$	(296	)	(d)


(a)	Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.


(b)	Transfers into interest-only strips - AFS ~~level~~Level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).


(c)	Primarily included in fixed income on the Consolidated Condensed Statements of Income.


(d)	~~Transfers out of loans held-for-sale level 3 measured on a recurring basis generally reflect movements into OREO (level 3 nonrecurring).~~


~~(e)~~	~~Increase related to newly executed Visa-related derivatives, see Note 14- Derivatives for additional discussion.~~


~~(f)~~	Included in Other expense.

~~Note 16 – Fair Value of Assets & Liabilities (Continued)~~

~~Changes in Recurring Level 3 Fair Value Measurements~~

~~The changes in~~There were no net unrealized gains/(losses) for Level 3 assets and liabilities ~~measured at fair value for the nine months ended September 30, 2018~~included in other comprehensive income as of March 31, 2019 and ~~2017, on a recurring basis are summarized as follows:~~

Nine Months Ended September 30, 2018
(Dollars in thousands)
Trading
securities
Interest- only strips- AFS
Loans held-
for-sale

Net derivative
liabilities

Balance on January 1, 2018 $ 2,151
$ 1,270
$ 18,926
$ (5,645 )
Total net gains/(losses) included in:
Net income 173
840
986
(4,904 )
Purchases —
—
62
(28,100 ) (e)
Sales —
(11,227 ) —
—

Settlements (732 ) —
(3,382 ) 4,437

Net transfers into/(out of) Level 3 —
19,478
(b) (356 ) (d) —

Balance on September 30, 2018 $ 1,592
$ 10,361
$ 16,236
$ (34,212 )
Net unrealized gains/(losses) included in net income $ 59
(a) $ (279 ) (c) $ 986
(a) $ (4,904 ) (f)

Nine Months Ended September 30, 2017
(Dollars in thousands) Trading
securities Interest-only-strips- AFS 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 380
107
1,722
(179 )
Purchases —
1,413
118
—

Sales —
(3,291 ) —
—

Settlements (648 ) —
(3,340 ) 894

Net transfers into/(out of) Level 3 —
4,894
(b) (343 ) (d) —

Balance on September 30, 2017 $ 2,305
$ 3,123
$ 20,081
$ (5,530 )
Net unrealized gains/(losses) included in net income $ 264
(a) $ (122 ) (c) $ 1,722
(a) $ (179 ) (f)


~~(a)~~	~~Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.~~


~~(b)~~	~~Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).~~


~~(c)~~	~~Primarily included in fixed income on the Consolidated Condensed Statements of Income.~~


~~(d)~~	~~Transfers out of loans held-for-sale level 3 measured on a recurring basis generally reflect movements into OREO (level 3 nonrecurring).~~


~~(e)~~	~~Increase related to newly executed Visa-related derivatives, see Note 14- Derivatives for additional discussion.~~


~~(f)~~	~~Included in Other expense.~~

2018.

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~~Consolidated Condensed Statements of Condition at ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017,~~2018, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value.

Note 1617 – Fair Value of Assets & Liabilities (Continued)


	Carrying value at September 30, 2018								Carrying value at March 31, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans held-for-sale—other consumer									$	—	$	18,137	$	—	$	18,137
Loans held-for-sale—SBAs and USDA	$	—	$	618,142	$	1,018	$	619,160	—		494,445		1,006		495,451
Loans held-for-sale—first mortgages	—		—		542		542		—		—		519		519
Loans, net of unearned income (a)	—		—		26,995		26,995		—		—		59,657		59,657
OREO (b)	—		—		25,726		25,726		—		—		20,676		20,676
Other assets (c)	—		—		23,329		23,329		—		—		13,962		13,962


	Carrying value at December 31, 2017								Carrying value at December 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans held-for-sale—other consumer									$	—	$	18,712	$	—	$	18,712
Loans held-for-sale—SBAs and USDA	$	—	$	465,504	$	1,473	$	466,977	—		577,280		1,011		578,291
Loans held-for-sale—first mortgages	—		—		618		618		—		—		541		541
Loans, net of unearned income (a)	—		—		26,666		26,666		—		—		48,259		48,259
OREO (b)	—		—		39,566		39,566		—		—		22,387		22,387
Other assets (c)	—		—		26,521		26,521		—		—		8,845		8,845


(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 OREO. Balance excludes OREO 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~~Consolidated Condensed Statements of Condition at period end, the following table provides information about the fair value adjustments recorded during the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Net gains/(losses) Three Months Ended September 30						Net gains/(losses) Nine months ended September 30						Net gains/(losses) Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
Loans held-for-sale—other consumer													$	(200	)	$	—
Loans held-for-sale—SBAs and USDA	$	(1,213	)	$	(86	)	$	(2,464	)	$	(1,259	)	(683		)	(206		)
Loans held-for-sale—first mortgages	3			6			7			22			15			5
Loans, net of unearned income (a)	363			(2,388		)	1,020			(1,456		)	200			502
OREO (b)	(776		)	(41		)	(2,198		)	(662		)	35			(1,160		)
Other assets (c)	(1,370		)	(762		)	(3,586		)	(2,646		)	(675		)	(1,137		)
	$	(2,993	)	$	(3,271	)	$	(7,221	)	$	(6,001	)	$	(1,308	)	$	(1,996	)


(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 OREO. Balance excludes OREO related to government insured mortgages.


(c)	Represents tax credit investments accounted for under the equity method.

In first quarter of 2019, FHN recognized $.8 million of impairments for lease assets and $.5 million of impairments for long-lived tangible assets related to restructuring, repositioning, and efficiency efforts within the Corporate segment. In fourth, third, and second quarters of 2018, FHN recognized $1.9 million, $.7 million, and $1.3 million, respectively, of impairments of long-lived assets in its ~~corporate~~Corporate segment primarily related to optimization efforts for its facilities. In fourth and third quarter ~~2017, FHN recognized $3.0~~2018 $.5 million and $.8 million of impairments on long-lived assets in its Corporate and Regional Banking segments, respectively, associated with efforts to utilize its branch locations more efficiently, including integration with branches acquired from CBF. $1.0 million, respectively, of ~~the fourth quarter~~impairment charges previously recognized in 2017 ~~impairments~~ in the ~~corporate~~Corporate segment were reversed ~~in third quarter 2018~~ based on the disposition price for the applicable location. 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 sales contract or 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.

In third quarter 2017, FHN’s Corporate segment recognized $2.0 million of impairments on long-lived technology assets associated with the transition to expanded processing capacity that will be required upon completion of the merger with CBF.

Note 1617 – Fair Value of Assets & Liabilities (Continued)

The fair values of the assets impaired were determined using a discounted cash flow approach which reflected short estimated remaining lives and considered estimated salvage values. The measurement methodologies are considered Level 3 valuations.

Level 3 Measurements

The following tables provide information regarding the unobservable inputs utilized in determining the fair value of ~~level~~Level 3 recurring and non-recurring measurements as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

(Dollars in thousands)

Values Utilized

Level 3 Class

Fair Value at
September 30, 2018

Valuation Techniques

Unobservable Input

Values Utilized

Fair Value at
March 31, 2019

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

Available-for-sale- securities SBA-interest only strips

10,361

Discounted cash flow

Constant prepayment rate

11%

13,195

Discounted cash flow

Constant prepayment rate

12%

Bond equivalent yield

13%- 18%

Bond equivalent yield

15%- 16%

15%

Loans held-for-sale - residential real estate

16,778

Discounted cash flow

Prepayment speeds - First mortgage

2% - 11%

16,270

Discounted cash flow

Prepayment speeds - First mortgage

2% - 10%

Prepayment speeds - HELOC

5% - 12%

Prepayment speeds - HELOC

5% - 12%

7.5%

Foreclosure losses

50% - 70%

Foreclosure losses

50% - 66%

64%

Loss severity trends - First mortgage

2% - 25% of UPB

Loss severity trends - First mortgage

3% - 25% of UPB

17%

Loss severity trends - HELOC

50% - 100% of UPB

Loss severity trends - HELOC

50% - 100% of UPB

50%

Loans held-for-sale- unguaranteed interest in SBA loans

1,018

Discounted cash flow

Constant prepayment rate

8% - 12%

1,006

Discounted cash flow

Constant prepayment rate

8% - 12%

10%

Bond equivalent yield

Derivative liabilities, other

34,212

Discounted cash flow

Visa covered litigation resolution amount

$5.2 billion - $5.8 billion

28,970

Discounted cash flow

Visa covered litigation resolution amount

$5.0 billion - $5.8 billion

$5.6 billion

Probability of resolution scenarios

20% - 30%

Probability of resolution scenarios

15% - 25%

22%

Time until resolution

24- 48 months

Time until resolution

18 - 48 months

33 months

Loans, net of unearned

income (a)

26,995

Appraisals from comparable properties

Marketability adjustments for specific properties

0% - 10% of appraisal

59,657

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

Other collateral valuations

Borrowing base certificates adjustment

20% - 50% of gross value

Financial Statements/Auction values adjustment

0% - 25% of reported value

Financial Statements/Auction values adjustment

0% - 25% of reported value

OREO (b)

25,726

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

20,676

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

Other assets (c)

23,329

Discounted cash flow

Adjustments to current sales yields for specific properties

0% - 15% adjustment to yield

13,962

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

Appraisals from comparable properties

Marketability adjustments for specific properties

0% - 25% of appraisal

NM - Not meaningful.


(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 OREO. Balance excludes OREO related to government insured mortgages.


(c)	Represents tax credit investments accounted for under the equity method.


(d)	Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.

Note 1617 – Fair Value of Assets & Liabilities (Continued)

(Dollars in thousands)

Values Utilized

Level 3 Class

Fair Value at
December 31, 2017

Valuation Techniques

Unobservable Input

Values Utilized

Fair Value at
December 31, 2018

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

Available-for-sale- securities SBA-interest only strips

1,270

Discounted cash flow

Constant prepayment rate

10% - 11%

9,902

Discounted cash flow

Constant prepayment rate

11% - 12%

11%

Bond equivalent yield

17%

Bond equivalent yield

14% - 15%

14%

Loans held-for-sale - residential real estate

19,544

Discounted cash flow

Prepayment speeds - First mortgage

2% - 12%

16,815

Discounted cash flow

Prepayment speeds - First mortgage

2% - 10%

Prepayment speeds - HELOC

5% - 12%

Prepayment speeds - HELOC

5% - 12%

7.5%

Foreclosure losses

50% - 70%

Foreclosure losses

50% - 66%

63%

Loss severity trends - First mortgage

5% - 30% of UPB

Loss severity trends - First mortgage

2% - 25% of UPB

17%

Loss severity trends - HELOC

15% - 100% of UPB

Loss severity trends - HELOC

50% - 100% of UPB

50%

Loans held-for-sale- unguaranteed interest in SBA loans

1,473

Discounted cash flow

Constant prepayment rate

8% - 12%

1,011

Discounted cash flow

Constant prepayment rate

8% - 12%

10%

Bond equivalent yield

9% - 10%

Bond equivalent yield

Derivative liabilities, other

5,645

Discounted cash flow

Visa covered litigation resolution amount

$4.4 billion - $5.2 billion

31,540

Discounted cash flow

Visa covered litigation resolution amount

$5.0 billion - $5.8 billion

$5.6 billion

Probability of resolution scenarios

10% - 30%

Probability of resolution scenarios

10% - 25%

23%

Time until resolution

18 - 48 months

Time until resolution

18 - 48 months

36 months

Loans, net of unearned

income (a)

26,666

Appraisals from comparable properties

Marketability adjustments for specific properties

0% - 10% of appraisal

48,259

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

Other collateral valuations

Borrowing base certificates adjustment

20% - 50% of gross value

Financial Statements/Auction values adjustment

0% - 25% of reported value

Financial Statements/Auction values adjustment

0% - 25% of reported value

OREO (b)

39,566

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

22,387

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

Other assets (c)

26,521

Discounted cash flow

Adjustments to current sales yields for specific properties

0% - 15% adjustment to yield

8,845

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

Appraisals from comparable properties

Marketability adjustments for specific properties

0% - 25% of appraisal

NM - Not meaningful.


(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 OREO. Balance excludes OREO related to government insured mortgages.


(c)	Represents tax credit investments accounted for under the equity method.


(d)	Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.

Note 17 – Fair Value of Assets & Liabilities (Continued)

Securities AFS. Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of SBA interest only strips. Management additionally considers whether the loans underlying related SBA-interest only strips are delinquent, in default or prepaying, and adjusts the fair value down 20 - 100% depending on the length of time in default.

Loans held-for-sale. Foreclosure losses and prepayment rates are significant unobservable inputs used in the fair value measurement of FHN’s 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 FHN’s Corporate Accounting Department.~~

~~Note 16 – Fair Value of Assets & Liabilities (Continued)~~

Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of unguaranteed interests in SBA loans. Unguaranteed interest in SBA loans held-for-sale are carried at less than the outstanding balance due to credit risk estimates. Credit risk adjustments may be reduced if prepayment is likely or as consistent payment history is realized. Management also considers other factors such as delinquency or default and adjusts the fair value accordingly.

Derivative liabilities. In conjunction with the sales of portions of its Visa Class B shares, FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. FHN uses a discounted cash flow methodology in order to estimate the fair value of FHN’s derivative liabilities associated with its prior sales of Visa Class B shares. The methodology includes estimation of both the resolution amount for Visa’s 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 institutions that have similar derivatives.

Loans, net of unearned income and Other Real Estate Owned. Collateral-dependent loans and OREO 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 FHN’s Credit Risk Management (commercial) and Default Servicing functions (primarily consumer). The Credit Risk Management Committee reviews dispositions and additions of OREO 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 property’s 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”) except for mortgage origination operations which utilize the platform acquired from CBF. 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

Note 17 – Fair Value of Assets & Liabilities (Continued)

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.

~~Note 16 – Fair Value of Assets & Liabilities (Continued)~~

The following tables reflect the differences between the fair value carrying amount of residential real estate loans held-for-sale measured at fair value in accordance with management’s election and the aggregate unpaid principal amount FHN is contractually entitled to receive at maturity.


	September 30, 2018							March 31, 2019
(Dollars in thousands)	Fair value carrying amount		Aggregate unpaid principal		Fair value carrying amount less aggregate unpaid principal			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	$	16,418	$	23,897	$	(7,479	)	$	15,751	$	22,568	$	(6,817	)
Nonaccrual loans	4,483		8,360		(3,877		)	4,382		7,761		(3,379		)
Loans 90 days or more past due and still accruing	—		—		—			—		—		—
	December 31, 2017							December 31, 2018
(Dollars in thousands)	Fair value carrying amount		Aggregate unpaid principal		Fair value carrying amount less aggregate unpaid principal			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	$	20,881	$	29,755	$	(8,874	)	$	16,273	$	23,567	$	(7,294	)
Nonaccrual loans	5,783		10,881		(5,098		)	4,536		8,128		(3,592		)
Loans 90 days or more past due and still accruing	—		—		—			171		281		(110		)

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 September 30				Nine months ended September 30				Three Months Ended March 31
(Dollars in thousands)	2018		2017		2018		2017		2019		2018
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held-for-sale	$	277	$	390	$	986	$	1,722	$	495	$	169

For the three months ended ~~September 30,~~March 31, 2019, and 2018, ~~residential real estate loans held-for-sale included an insignificant amount of gains in pretax earnings that are attributable to change in instruments-specific credit risk. For~~ the ~~three months ended September 30, 2017, the amount~~amounts for residential real estate loans held-for-sale included gains of ~~$.1~~$.3 million in pretax earnings that are attributable to changes in instruments-specific credit risk. For the nine months ended September 30, 2018, and 2017, the amounts for the real estate loans held-for-sale included gains of $.3 million and $.5 million, respectively, in pretax earnings that are attributable to changes in instruments-specificinstrument-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.

FHN has elected to account for retained interest-only strips from guaranteed SBA loans recorded in available-for-sale securities at fair value through earnings. Since these securities are subject to the risk that prepayments may result in FHN not recovering all or a portion of its recorded investment, the fair value election results in a more timely recognition of the effects of estimated prepayments through earnings rather than being recognized through other comprehensive income with periodic review for other-than-temporary impairment. Gains or losses are recognized through fixed income revenues and are presented in the recurring measurements table.

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

Note 1617 – Fair Value of Assets & Liabilities (Continued)

Consolidated Condensed Statements of Condition and for estimating the fair value of financial instruments for which fair value is ~~disclosed.~~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 mortgage 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. 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.

Interest only strips are valued at elected fair value based on an income approach using an internal valuation model. The internal valuation model includes assumptions regarding projections of future cash flows, prepayment rates, default rates and interest only strip terms. These securities bear the risk of loan prepayment or default that may result in the Company not recovering all or a portion of its recorded investment. When appropriate, valuations are adjusted for various factors including default or prepayment status of the underlying SBA loans. Because of the inherent uncertainty of valuation, those estimated values may be higher or lower than the values that would have been used had a ready market for the securities existed, and may change in the near term.

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 model’s 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.

Non-mortgage consumer loans held-for-sale are valued using committed bids for specific loans or loan portfolios or current market pricing for similar assets with adjustments for differences in credit standing (delinquency, historical default rates for similar loans), yield, collateral values and prepayment rates. If pricing for similar assets is not available, a discounted cash flow methodology is utilized, which incorporates all of these factors into an estimate of investor required yield for the discount rate.

The Company utilizes quoted market prices of similar instruments or broker and dealer quotations to value the SBA and USDA guaranteed loans. The Company values SBA-unguaranteed interests in loans held-for-sale based on individual loan characteristics, such as industry type and pay history which generally follows an income approach. Furthermore, these valuations are adjusted for changes in prepayment estimates and are reduced due to restrictions on trading. The fair value of other non-residential real estate loans held-for-sale is approximated by their carrying values based on current transaction values.

Collateral-Dependent loans. 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.

Note 1617 – Fair Value of Assets & Liabilities (Continued)

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 ratings. Foreign currency related derivatives also utilize observable exchange rates in the determination of fair value. The determination of fair value for FHN’s 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.

OREO. OREO 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, for periods prior to 2018, 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, FRB and FHLB Stock, deferred compensation mutual funds and equity investments (including other mutual funds) with readily determinable fair values. 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 mutual funds are recognized at fair value, which is based on quoted prices in active markets.

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. 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.

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.~~ For periods prior to 2018, 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.

~~Other noninterest-bearing liabilities.~~ For disclosure purposes, for periods prior to 2018, 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.

~~Note 16 – Fair Value of Assets & Liabilities (Continued)~~

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, 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 ~~TRUPs~~TRUPS 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 acquirer’s cost of capital and cash flow volatility assumptions from these assets and the resulting fair value measurements may depart significantly from FHN’s internal estimates of the intrinsic value of these assets.

Note 17 – Fair Value of Assets & Liabilities (Continued)

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.

Note 1617 – 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 ~~September 30,~~March 31, 2019:



	March 31, 2019
	Book Value		Fair Value
(Dollars in thousands)	Book Value		Level 1		Level 2		Level 3		Total
Assets:
Loans, net of unearned income and allowance for loan losses
Commercial:
Commercial, financial and industrial	$	17,072,399	$	—	$	—	$	17,166,407	$	17,166,407
Commercial real estate	3,912,561		—		—		3,916,819		3,916,819
Consumer:
Consumer real estate	6,127,430		—		—		6,112,800		6,112,800
Permanent mortgage	199,179		—		—		210,387		210,387
Credit card & other	493,568		—		—		495,130		495,130
Total loans, net of unearned income and allowance for loan losses	27,805,137		—		—		27,901,543		27,901,543
Short-term financial assets:
Interest-bearing cash	1,013,254		1,013,254		—		—		1,013,254
Federal funds sold	167,602		—		167,602		—		167,602
Securities purchased under agreements to resell	474,679		—		474,679		—		474,679
Total short-term financial assets	1,655,535		1,013,254		642,281		—		1,655,535
Trading securities (a)	1,681,727		—		1,680,330		1,397		1,681,727
Loans held-for-sale
Mortgage loans (elected fair value) (a)	15,751		—		—		15,751		15,751
USDA & SBA loans- LOCOM	495,451		—		499,307		1,015		500,322
Other consumer loans- LOCOM	24,238		—		6,101		18,137		24,238
Mortgage loans- LOCOM	59,222		—		—		59,222		59,222
Total loans held-for-sale	594,662		—		505,408		94,125		599,533
Securities available-for-sale (a)	4,616,322		—		4,603,127		13,195		4,616,322
Securities held-to-maturity	10,000		—		—		9,889		9,889
Derivative assets (a)	118,128		36,976		81,152		—		118,128
Other assets:
Tax credit investments	164,509		—		—		161,355		161,355
Deferred compensation mutual funds	41,097		41,097		—		—		41,097
Equity, mutual funds, and other (b)	216,684		22,326		—		194,358		216,684
Total other assets	422,290		63,423		—		355,713		419,136
Total assets	$	36,903,801	$	1,113,653	$	7,512,298	$	28,375,862	$	37,001,813
Liabilities:
Defined maturity deposits	$	4,454,622	$	—	$	4,454,687	$	—	$	4,454,687
Trading liabilities (a)	429,669		—		429,669		—		429,669
Short-term financial liabilities:
Federal funds purchased	339,360		—		339,360		—		339,360
Securities sold under agreements to repurchase	745,788		—		745,788		—		745,788
Other short-term borrowings	140,832		—		140,832		—		140,832
Total short-term financial liabilities	1,225,980		—		1,225,980		—		1,225,980
Term borrowings:
Real estate investment trust-preferred	46,185		—		—		47,000		47,000
Term borrowings—new market tax credit investment	2,699		—		—		2,678		2,678
Secured borrowings	21,119		—		—		21,119		21,119
Junior subordinated debentures	143,589		—		—		138,947		138,947
Other long term borrowings	964,334		—		967,047		—		967,047
Total term borrowings	1,177,926		—		967,047		209,744		1,176,791
Derivative liabilities (a)	107,123		36,688		41,465		28,970		107,123
Total liabilities	$	7,395,320	$	36,688	$	7,118,848	$	238,714	$	7,394,250


(a)	Classes are detailed in the recurring and nonrecurring measurement tables.


(b)	Level 1 primarily consists of mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of $63.7 million and FRB stock of $130.7 million.

Note 17 – 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, 2018:

September 30, 2018

Book
Value
Fair Value
(Dollars in thousands)
Level 1 Level 2 Level 3 Total
Assets:
Loans, net of unearned income and allowance for loan losses
Commercial:
Commercial, financial and industrial $ 15,943,831
$ —
$ —
$ 15,941,049
$ 15,941,049
Commercial real estate 4,203,121
—
—
4,198,110
4,198,110
Consumer:
Consumer real estate 6,164,646
—
—
6,114,607
6,114,607
Permanent mortgage 333,574
—
—
338,736
338,736
Credit card & other 519,083
—
—
520,074
520,074
Total loans, net of unearned income and allowance for loan losses 27,164,255
—
—
27,112,576
27,112,576
Short-term financial assets:
Interest-bearing cash 531,681
531,681
—
—
531,681
Federal funds sold 113,722
—
113,722
—
113,722
Securities purchased under agreements to resell 687,437
—
687,437
—
687,437
Total short-term financial assets 1,332,840
531,681
801,159
—
1,332,840
Trading securities (a) 1,930,991
—
1,929,399
1,592
1,930,991
Loans held-for-sale
Mortgage loans (elected fair value) (a) 16,418
—
182
16,236
16,418
USDA & SBA loans- LOCOM 619,160
—
623,863
1,023
624,886
Other consumer loans- LOCOM 28,843
—
6,704
22,139
28,843
Mortgage loans- LOCOM 61,230
—
—
61,230
61,230
Total loans held-for-sale 725,651
—
630,749
100,628
731,377
Securities available-for-sale (a) 4,608,383
—
4,598,022
10,361
4,608,383
Securities held-to-maturity 10,000
—
—
9,756
9,756
Derivative assets (a) 54,476
20,013
34,463
—
54,476
Other assets:
Tax credit investments 139,983
—
—
136,984
136,984
Deferred compensation mutual funds 40,912
40,912
—
—
40,912
Equity, mutual funds, and other (b) 240,667
22,141
—
218,526
240,667
Total other assets 421,562
63,053
—
355,510
418,563
Total assets $ 36,248,158
$ 614,747
$ 7,993,792
$ 27,590,423
$ 36,198,962
Liabilities:
Defined maturity deposits $ 4,056,184
$ —
$ 4,024,544
$ —
$ 4,024,544
Trading liabilities (a) 739,694
—
739,694
—
739,694
Short-term financial liabilities:
Federal funds purchased 437,474
—
437,474
—
437,474
Securities sold under agreements to repurchase 678,510
—
678,510
—
678,510
Other short-term borrowings 1,069,912
—
1,069,912
—
1,069,912
Total short-term financial liabilities 2,185,896
—
2,185,896
—
2,185,896
Term borrowings:
Real estate investment trust-preferred 46,151
—
—
47,470
47,470
Term borrowings—new market tax credit investment 18,000
—
—
17,915
17,915
Secured borrowings 16,621
—
—
16,499
16,499
Junior subordinated debentures 177,974
—
—
177,974
177,974
Other long term borrowings 941,388
—
957,647
—
957,647
Total term borrowings 1,200,134
—
957,647
259,858
1,217,505
Derivative liabilities (a) 170,324
18,770
117,342
34,212
170,324
Total liabilities $ 8,352,232
$ 18,770
$ 8,025,123
$ 294,070
$ 8,337,963



	December 31, 2018
	Book Value		Fair Value
(Dollars in thousands)	Book Value		Level 1		Level 2		Level 3		Total
Assets:
Loans, net of unearned income and allowance for loan losses
Commercial:
Commercial, financial and industrial	$	16,415,381	$	—	$	—	$	16,438,272	$	16,438,272
Commercial real estate	3,999,559		—		—		3,997,736		3,997,736
Consumer:
Consumer real estate	6,223,077		—		—		6,194,066		6,194,066
Permanent mortgage	211,448		—		—		227,254		227,254
Credit card & other	505,643		—		—		507,001		507,001
Total loans, net of unearned income and allowance for loan losses	27,355,108		—		—		27,364,329		27,364,329
Short-term financial assets:
Interest-bearing cash	1,277,611		1,277,611		—		—		1,277,611
Federal funds sold	237,591		—		237,591		—		237,591
Securities purchased under agreements to resell	386,443		—		386,443		—		386,443
Total short-term financial assets	1,901,645		1,277,611		624,034		—		1,901,645
Trading securities (a)	1,448,168		—		1,446,644		1,524		1,448,168
Loans held-for-sale
Mortgage loans (elected fair value) (a)	16,273		—		—		16,273		16,273
USDA & SBA loans- LOCOM	578,291		—		582,476		1,015		583,491
Other consumer loans- LOCOM	25,134		—		6,422		18,712		25,134
Mortgage loans- LOCOM	59,451		—		—		59,451		59,451
Total loans held-for-sale	679,149		—		588,898		95,451		684,349
Securities available-for-sale (a)	4,626,470		—		4,616,568		9,902		4,626,470
Securities held-to-maturity	10,000		—		—		9,843		9,843
Derivative assets (a)	81,475		28,826		52,649		—		81,475
Other assets:
Tax credit investments	163,300		—		—		159,452		159,452
Deferred compensation assets	37,771		37,771		—		—		37,771
Equity, mutual funds, and other (b)	240,780		22,248		—		218,532		240,780
Total other assets	441,851		60,019		—		377,984		438,003
Total assets	$	36,543,866	$	1,366,456	$	7,328,793	$	27,859,033	$	36,554,282
Liabilities:
Deposits:
Defined maturity	$	4,105,777	$	—	$	4,082,822	$	—	$	4,082,822
Trading liabilities (a)	335,380		—		335,380		—		335,380
Short-term financial liabilities:
Federal funds purchased	256,567		—		256,567		—		256,567
Securities sold under agreements to repurchase	762,592		—		762,592		—		762,592
Other short-term borrowings	114,764		—		114,764		—		114,764
Total short-term financial liabilities	1,133,923		—		1,133,923		—		1,133,923
Term borrowings:
Real estate investment trust-preferred	46,168		—		—		47,000		47,000
Term borrowings—new market tax credit investment	2,699		—		—		2,664		2,664
Secured Borrowings	19,588		—		—		19,588		19,588
Junior subordinated debentures	143,255		—		—		134,266		134,266
Other long term borrowings	959,253		—		960,483		—		960,483
Total term borrowings	1,170,963		—		960,483		203,518		1,164,001
Derivative liabilities (a)	133,713		30,236		71,937		31,540		133,713
Total liabilities	$	6,879,756	$	30,236	$	6,584,545	$	235,058	$	6,849,839


(a)	Classes are detailed in the recurring and nonrecurring measurement tables.


(b)	Level 1 primarily consists of mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $130.7 million.

~~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, 2017:~~

December 31, 2017

Book
Value
Fair Value
(Dollars in thousands) Level 1 Level 2 Level 3 Total
Assets:
Loans, net of unearned income and allowance for loan losses
Commercial:
Commercial, financial and industrial $ 15,959,062
$ —
$ —
$ 15,990,991
$ 15,990,991
Commercial real estate 4,186,268
—
—
4,215,367
4,215,367
Consumer:
Consumer real estate 6,330,384
—
—
6,320,308
6,320,308
Permanent mortgage 383,742
—
—
388,396
388,396
Credit card & other 609,918
—
—
607,955
607,955
Total loans, net of unearned income and allowance for loan losses 27,469,374
—
—
27,523,017
27,523,017
Short-term financial assets:
Interest-bearing cash 1,185,600
1,185,600
—
—
1,185,600
Federal funds sold 87,364
—
87,364
—
87,364
Securities purchased under agreements to resell 725,609
—
725,609
—
725,609
Total short-term financial assets 1,998,573
1,185,600
812,973
—
1,998,573
Trading securities (a) 1,416,345
—
1,414,194
2,151
1,416,345
Loans held-for-sale
Mortgage loans 88,173
—
6,902
81,271
88,173
USDA & SBA loans 466,977
—
467,227
1,510
468,737
Other consumer loans 144,227
—
9,965
134,262
144,227
Securities available-for-sale (a) (b) 5,170,255
27,017
4,903,115
240,123
5,170,255
Securities held-to-maturity 10,000
—
—
9,901
9,901
Derivative assets (a) 81,634
10,161
71,473
—
81,634
Other assets:
Tax credit investments 119,317
—
—
112,292
112,292
Deferred compensation assets 39,822
39,822
—
—
39,822
Total other assets 159,139
39,822
—
112,292
152,114
Nonearning assets:
Cash & due from banks 639,073
639,073
—
—
639,073
Fixed income receivables 68,693
—
68,693
—
68,693
Accrued interest receivable 97,239
—
97,239
—
97,239
Total nonearning assets 805,005
639,073
165,932
—
805,005
Total assets $ 37,809,702
$ 1,901,673
$ 7,851,781
$ 28,104,527
$ 37,857,981
Liabilities:
Deposits:
Defined maturity $ 3,322,921
$ —
$ 3,293,650
$ —
$ 3,293,650
Undefined maturity 27,297,441
—
27,297,431
—
27,297,431
Total deposits 30,620,362
—
30,591,081
—
30,591,081
Trading liabilities (a) 638,515
—
638,515
—
638,515
Short-term financial liabilities:
Federal funds purchased 399,820
—
399,820
—
399,820
Securities sold under agreements to repurchase 656,602
—
656,602
—
656,602
Other short-term borrowings 2,626,213
—
2,626,213
—
2,626,213
Total short-term financial liabilities 3,682,635
—
3,682,635
—
3,682,635
Term borrowings:
Real estate investment trust-preferred 46,100
—
—
48,880
48,880
Term borrowings—new market tax credit investment 18,000
—
—
17,930
17,930
Secured borrowings 18,642
—
—
18,305
18,305
Junior subordinated debentures 187,281
—
—
187,281
187,281
Other long term borrowings 948,074
—
966,292
—
966,292
Total term borrowings 1,218,097
—
966,292
272,396
1,238,688
Derivative liabilities (a) 85,061
9,535
69,881
5,645
85,061
Other noninterest-bearing liabilities:
Fixed income payables 48,996
—
48,996
—
48,996
Accrued interest payable 16,270
—
16,270
—
16,270
Total other noninterest-bearing liabilities 65,266
—
65,266
—
65,266
Total liabilities $ 36,309,936
$ 9,535
$ 36,013,670
$ 278,041
$ 36,301,246


~~(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 $134.6 million.~~

Note 1617 – 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	Contractual Amount				Fair Value				Contractual Amount				Fair Value
(Dollars in thousands)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Unfunded Commitments:
Loan commitments	$	10,829,303	$	10,678,485	$	2,871	$	2,617	$	11,000,220	$	10,884,975	$	2,735	$	2,551
Standby and other commitments	450,745		420,728		4,981		5,274		404,249		446,958		5,052		5,043

Note 18 – Restructuring, Repositioning, and Efficiency

In first quarter 2019, FHN initiated a company-wide review of business practices with the goal of optimizing its expense base to improve profitability and create capacity to reinvest savings into technology and revenue production activities. Restructuring, repositioning, and efficiency charges related to these corporate-driven actions were $12.2 million in first quarter 2019 and are included in the corporate segment. Significant expenses recognized in the quarter resulted from the following actions:

Severance and other employee costs of $6.5 million primarily related to efficiency initiatives within corporate and bank services functions which are classified as Employee compensation, incentives and benefits within noninterest expense.

Expense of $4.3 million largely related to the identification of efficiency opportunities within the organization which is reflected in Professional fees.

Settlement of the obligations arising from current initiatives will be funded from operating cash flows.

Total expense recognized for the three months ended March 31, 2019 is presented in the table below:



Dollars in thousands	Total Expense
Employee compensation, incentives and benefits	$	6,505
Professional fees	4,295
Occupancy	817
Other (a)	535
Total restructuring and repositioning charges	$	12,152


(a)	Primarily relates to costs associated with asset impairments.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

FIRST HORIZON NATIONAL CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

GENERAL INFORMATION

First Horizon National Corporation (“FHN”) began as a community bank chartered in ~~1864~~1864. FHN's sole class of common stock, $.625 par value, is listed and ~~as of September 30, 2018, was one of~~trades on the ~~30 largest publicly traded banking organizations in~~New York Stock Exchange, Inc. under the ~~United States in terms of asset size.~~symbol FHN.

FHN is the parent company of First Tennessee Bank National Association ("FTBNA"). FTBNA's principal divisions and subsidiaries operate under the brands of First Tennessee Bank, Capital Bank, FTB Advisors, and FTN Financial. FHN offers regional banking, wealth management and capital market services through the First Horizon family of companies. First Tennessee Bank, Capital Bank, and FTB Advisors provide consumer and commercial banking and wealth management services. FTN Financial ("FTNF"), which operates partly through a division of FTBNA and partly through subsidiaries, is an industry leader in fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad. FTBNA has approximately 300 banking offices in eight southeastern U.S. states, and FTNF has 2829 offices in 18 states across the U.S.

FHN is composed of the following operating segments:

Regional banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial customers in Tennessee, North Carolina, South Carolina, Florida and other selected markets. Regional banking also provides investments, wealth management, financial planning, trust services and asset management, mortgage banking, 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.

Fixed income segment consists of fixed income securities sales, trading, underwriting, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory services, and derivative sales.

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~~gain/(loss) on extinguishment of debt, acquisition- and integration-related ~~costs.~~costs and various charges related to restructuring, repositioning, and efficiency efforts.

Non-strategic segment consists of run-off consumer lending activities, legacy (pre-2009) mortgage banking elements, 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.

On November 30, 2017, FHN completed its merger with Capital Bank Financial Corporation ("CBF") for an aggregate of 92,042,232 shares of FHN common stock and $423.6 million in cash in a transaction valued at $2.2 billion. I~~n second quarter 2018, FHN canceled 2,373,220 FHN common shares which had been issued but set aside for certain CBF shareholders who have commenced a dissenter appraisal process.~~ ~~That process is discussed more fully in this MD&A at "Capital--Cancellation of Dissenters' Shares."~~

In second quarter 2018, FHN sold approximately $120 million UPB of its subprime auto loans. These loans, originally acquired as part of the CBF acquisition, did not fit within FHN's risk profile.

~~On October 2, 2017, FTBNA~~In April 2019, FHN sold Superior Financial Services, Inc., a subsidiary acquired the operations and certain assets of Professional Mortgage Company, Inc. ("PMC"). PMC was a provider of institutional debt capital and commercial mortgage loan servicing. Eleven professionals joined FTBNA's commercial real estate ("CRE") team as ~~a result~~part of the ~~transaction, expanding the capabilities of its CRE platform.~~

~~On April 3, 2017, FTNF acquired substantially all of the assets and assumed substantially all of the liabilities of Coastal Securities, Inc. (“Coastal”), a national leader~~CBF acquisition. The sale will result in the ~~trading, securitization, and analysis~~removal of ~~Small Business Administration (“SBA”)~~approximately $25 million UPB of subprime consumer loans ~~for approximately $131 million in cash. Coastal, which was based in Houston, TX, also traded United States Department~~from Loans held-for-sale on FHN's Consolidated Condensed Statements of ~~Agriculture (“USDA”) loans and fixed income products and provided municipal underwriting and advisory~~

~~services to its clients. Coastal’s government-guaranteed loan products were combined with FTNF's existing SBA trading activities to establish an additional major product sector for FTNF.~~Condition.

In relation to all acquisitions, FHN's operating results include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Refer to Note 2 – Acquisitions and Divestitures in this report and in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 for additional information.

For the purpose of this management’s discussion and analysis (“MD&A”), earning assets have been expressed as averages, unless otherwise noted, and loans have been disclosed net of unearned income. The following financial discussion should beread with the accompanying unaudited Consolidated Condensed Financial Statements and Notes in this report. Additional

information including the ~~2017~~2018 financial statements, notes, and MD&A is provided in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

ADOPTION OF ACCOUNTING UPDATES

Effective January 1, ~~2018,~~2019, FHN ~~retroactively~~ adopted the provisions of ASU ~~2017-07, "Improving the Presentation of Net Periodic Pension Cost~~2016-02 "Leases" and ~~Net Periodic Postretirement Benefit Cost,"~~related ASUs on a prospective basis which resulted in the ~~reclassification~~recognition of ~~$.4 million and $1.7~~approximately $185 million of ~~non-service components~~lease assets and approximately $204 million of net periodic pension and post-retirement costs from Employee compensation, incentives, and benefits to Other expense for the three and nine months ended September 30, 2017. All prior periods and associated narrative have been revised to reflect this change. lease liabilities. See Note 1– Financial Information for additional information.

Non-GAAP Measures

Certain measures are included in the narrative and tables in this MD&A that are “non-GAAP”, meaning (under U.S. financial reporting rules) they are not presented in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the capital position or financial results of FHN. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by banking regulators in reviewing capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory standards. Regulatory measures used in this MD&A include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets (“RWA”), which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.

The non-GAAP measure presented in this filing is return on average tangible common equity (“ROTCE”). Refer to table 24 for a reconciliation of the non-GAAP to GAAP measure and presentation of the most comparable GAAP item.

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements with respect to FHN’s beliefs, plans, goals, expectations, and estimates. Forward-looking statements are ~~statements that are~~ not a representation of historical information but instead pertain to future operations, strategies, financial results, or other developments. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends identify forward-looking statements.

Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies, many of which are beyond FHN’s control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change. Examples of uncertainties and contingencies include, among other important factors: global, general and local economic and business conditions, including economic recession or depression; the stability or volatility of values and activity in the residential housing and commercial real estate markets; potential requirements for FHN to repurchase, or compensate for losses from, previously sold or securitized mortgages or securities based on such mortgages; potential claims alleging mortgage

servicing failures, individually, on a class basis, or as master servicer of securitized loans; potential claims relating to participation in government programs, especially lending or other financial services programs; expectations of and actual timing and amount of interest rate movements, including the slope and shape of the yield curve, which can have a significant impact on a financial services institution; market and monetary fluctuations, including fluctuations in mortgage markets; inflation or deflation; customer, investor, competitor, regulatory, and legislative responses to any or all of these conditions; the financial condition of borrowers and other counterparties; competition within and outside the financial services industry; geopolitical developments including possible terrorist activity; natural disasters; effectiveness and cost-efficiency of FHN’s hedging practices; technological changes; fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN or its customers, business counterparties or competitors; demand for FHN’s product offerings; new products and services in the industries in which FHN operates; the increasing use of new technologies to interact with customers and others; and critical accounting estimates. Other factors are those inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other

real estate prices, fluctuation of collateral values, and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission (“SEC”), the Financial Accounting Standards Board (“FASB”), the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Federal Reserve” or “Fed”), the Federal Deposit Insurance Corporation (“FDIC”), the Financial Industry Regulatory Authority (“FINRA”), the U.S. Department of the Treasury (“U.S. Treasury”), the Municipal Securities Rulemaking Board (“MSRB”), the Consumer Financial Protection Bureau (“CFPB”), the Financial Stability Oversight Council (“Council”), the Public Company Accounting Oversight Board (“PCAOB”), and other regulators and agencies; pending, threatened, or possible future regulatory, administrative, and judicial outcomes, actions, and proceedings; current or future Executive orders; changes in laws and regulations applicable to FHN; and FHN’s success in executing its business plans and strategies and managing the risks involved in the foregoing, could cause actual results to differ, perhaps materially, from those contemplated by the forward-looking statements.

FHN assumes no obligation to update or revise any forward-looking statements that are made in this Quarterly Report of which this MD&A is a part or otherwise from time to time. Actual results could differ and expectations could change, possibly materially, because of one or more factors, including those presented in this Forward-Looking Statements section, in other sections of this MD&A, in other parts of and exhibits to this Quarterly Report on Form 10-Q for the period ended ~~September 30, 2018,~~March 31, 2019, and in documents incorporated into this Quarterly Report.

FINANCIAL SUMMARY

In ~~third~~first quarter ~~2018,~~2019, FHN reported net income available to common shareholders of ~~$270.3~~ $99.0 million, or ~~$.83~~$.31 per diluted share, compared to net income available to common of ~~$67.3~~$90.6 million, or ~~$.28~~$.27 per diluted share in ~~third~~first quarter ~~2017. For~~2018. Results improved in first quarter 2019 relative to the ~~nine months ended September 30, 2018, FHN reported net~~prior year driven by a decrease in noninterest expense and higher fee income, available to common shareholders of $442.5 million, or $1.35 per diluted share, compared to net income available to common of $212.2 million, or $.90 per diluted share, for the nine months ended September 30, 2017. The increase in net income available to common shareholders for the quarter and year-to-date periods was primarily due tosomewhat offset by an increase in loan loss provision expense and lower net interest income ("NII").

Total revenue ~~which more than offset~~was $435.6 million in first quarter 2019 compared to $437.2 million in first quarter 2018. NII decreased to $294.5 million in first quarter 2019 from $301.2 million in first quarter 2018. The decline in NII was primarily attributable to lower loan accretion and higher expenses. Operating results for the three and nine months ended September 30, 2018 include activity associated with the CBF acquisition which closed late in fourth quarter 2017 and significantly impacted FHN's operating results anddeposits rates, somewhat mitigated by balance sheet ~~trends for both the three and nine month periods ended September 30, 2018.~~

Total revenue increased $332.4 million and $573.1 million, respectively, for the three and nine months ended September 30, 2018 to $654.7 million and $1.5 billion. In third quarter 2018, FHN sold its remaining holdings of Visa Class B shares resulting in a $212.9 million pre-tax gain. Additionally, an increase in NII favorably impacted the quarter and year-to-date periods of 2018.

NII increased 46 percent and 53 percent from $209.8 million and $600.2 million for the three and nine months ended September 30, 2017 to $305.7 million and $917.8 million for the three and nine months ended September 30, 2018. This increase was largely driven by loans and deposits added through the CBF acquisition, as well as the positive impact of higher short-term interest rates on loans.growth. Noninterest income increased ~~$236.6~~4 percent, or $5.0 million ~~and $255.5 million for the three and nine months ended September 30, 2018 primarily~~in first quarter 2019 due in large part to ~~the sale of FHN's remaining holdings of Visa Class B shares previously mentioned. To a lesser extent,~~ an increase in ~~fees from~~fixed income sales revenue and higher deferred compensation income as a result of equity market valuations. Fee income was negatively impacted by lower deposit transactions and cash management ~~activities and higher fee~~ income ~~related to brokerage, management fees, and commissions also contributed~~in first quarter 2019 relative to the increase in noninterest for the three and nine months ended September 30, 2018. The adoption of ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" on January 1, 2018 also favorably impacted noninterest income in both periods of 2018, as dividend income previously recognized within net interest income is now recognized as noninterest income. Additionally, in third quarter 2017, noninterest income was negatively impacted by a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction, which also contributed to the year-over-year increase in noninterest income for

~~both the quarter and year-to-date periods of 2018. These increases were somewhat offset by lower fixed income revenue in 2018 relative to 2017.~~

prior year.

Noninterest expense ~~increased 24~~decreased 5 percent ~~and 39 percent, respectively,~~ to ~~$294.0~~$296.1 million ~~and $940.1~~in first quarter 2019 from $313.3 million ~~for the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017.~~in first quarter 2018. Expenses ~~increased for both periods of 2018~~decreased in first quarter 2019 largely driven by ~~higher~~lower acquisition- and ~~integration-related~~integration- related expenses ~~primarily associated with~~relative to the ~~CBF acquisition, higher personnel-related expenses, and~~prior year. Additionally, a strategic focus on expense optimization contributed to broad-based cost savings across multiple expense categories. These decreases were partially offset by increases in ~~several~~severance and other employee costs and professional fees related to restructuring, repositioning, and efficiency initiatives, and higher advertising expense ~~categories due~~recognized in first quarter 2019 relative to ~~the inclusion of Capital Bank in the~~first quarter and year-to-date periods of 2018. Additionally, for the year-to-date period of 2017, expenses were favorably impacted by a $22.6 million pre-tax reversal of mortgage repurchase and foreclosure provision primarily as a result of the settlement of certain repurchase claims, which also contributed to the year-over-year increase in expenses for the nine months ended September 30, 2018.

~~On a consolidated basis,~~Asset quality trends were stable in first quarter 2019 reflecting continued strong underwriting standards, strong economic conditions, and credit ~~quality remained strong in 2018, with net charge-offs remaining at historical lows and the allowance~~risk management. Allowance for loan losses ~~decreasing relative to the comparative periods~~increased $4.5 million primarily driven by organic loan growth, partially offset by continued run-off of ~~the prior year. The provision~~non-strategic loan balances. Net charge-offs as a percentage of loans was .07 percent for ~~loan losses was $2.0 million in third~~first quarter ~~2018~~2019 and ~~$0 in 2017. For the nine months ended September 30, 2018, the provision for loan losses was $1.0 million~~30+ delinquencies declined 15 percent compared to ~~a $3.0 million provision credit for the nine months ended September 30, 2017.~~year-end.

Return on average common equity (“~~ROE”~~ROCE”) and ROTCE were ~~25.41~~9.09 percent and ~~40.51~~14.17 percent, respectively, in ~~third~~first quarter ~~2018~~2019 compared to ~~10.79~~8.79 percent and ~~12.17~~14.06 percent, respectively, in ~~third~~first quarter 2017. For the nine months ended September 30, 2018, ROE and ROTCE were 14.13 percent and 22.60 percent, respectively, compared to 11.83 percent and 13.25 percent, respectively, for the nine months ended September 30, 2017. The increase in these performance measures relative to the prior year was primarily driven by higher revenue which positively impacted net income available to common for the three and nine months ended September 30, 2018. Return on average assets (“ROA”) ~~also increased~~improved to 1.03 percent in ~~2018 relative to the prior year and was 2.72~~first quarter 2019 from .95 percent ~~and 1.52 percent for the three and nine months ended September 30, 2018 compared to .99 percent and 1.04 percent for the three and nine months ended September 30, 2017.~~in first quarter 2018. Common ~~equity tier~~Equity Tier 1, Tier 1, Total ~~capital,~~Capital, and Leverage ratios were ~~9.84~~9.62 percent, ~~10.86~~10.65 percent, ~~12.02~~11.78 percent, and ~~9.21~~9.02 percent, respectively, in first quarter 2019 compared to 8.98 percent, 9.98 percent, 11.25 percent and 8.50 percent, respectively, in ~~third~~first quarter ~~2018 compared to 10.04 percent, 11.20 percent, 12.18 percent and 9.60 percent, respectively, in third quarter 2017.~~2018. Average assets increased ~~39 percent for both three and nine months ended September 30, 2018~~ to ~~$40.1~~$40.9 billion ~~and $40.2~~in first quarter 2019 from $40.4 billion ~~from $28.9 billion for the three and nine months ended September 30, 2017 primarily due to the CBF acquisition.~~in first quarter 2018. Average loans and average deposits also increased 381 percent and 408 percent, respectively, to $27.3 billion and ~~$30.8~~$32.5 billion in ~~third~~first quarter ~~2018~~2019 from ~~third~~first quarter ~~2017. For the nine months ended September 30, 2018 average loans~~2018. Period-end and average ~~deposits increased 41 percent and 36 percent, respectively, to $27.2 billion and $30.6 billion. Average shareholder's~~Shareholders’ equity increased to $4.8 billion in first quarter 2019 from $4.6 billion for both the three and nine months ended September 30, 2018 from $2.9 billion and $2.8 billion for the three and nine months ended September 30, 2017. Period-end shareholders’ equity increased to $4.7 billion on September 30, 2018 from $2.9 billion on September 30, 2017 primarily due to the CBF acquisition.in first quarter 2018.

BUSINESS LINE REVIEW

Regional Banking

Pre-tax income within the regional banking segment ~~increased 46 percent, or $52.2 million to $166.7~~was $145.4 million in ~~third~~first quarter ~~2018~~2019, down from ~~$114.5~~$167.0 million in ~~third~~first quarter 2017. For the nine months ended September 30, 2018, the regional banking pre-tax income increased 54 percent, or $176.8 million to $505.9 million from $329.1 million for the nine months ended September 30, 2017.2018. The ~~increase~~decrease in pre-tax income ~~for both the quarter and year-to-date periods~~ was primarily driven by a decrease in revenues and an increase in ~~revenue somewhat offset by higher expenses.~~loan loss provision expense.

Total revenue ~~increased $108.8 million, or 40~~decreased 4 percent to ~~$382.3~~$359.3 million in ~~third~~first quarter 2019 from $373.2 million in first quarter 2018, ~~from $273.5 million in third quarter 2017, largely~~ driven by ~~a $93.3 million increase~~decreases in noninterest income and NII. The ~~increase~~decline in NII was ~~largely due~~primarily attributable to ~~loans~~lower loan accretion and higher deposits ~~added through the CBF acquisition and the favorable impact of higher short-term interest~~ rates, ~~on loans. Noninterest income also increased for the three months ended September 30, 2018 relative to the prior year, favorably impacting third quarter 2018 operating results.~~somewhat mitigated by balance sheet growth. The ~~increase~~decrease in noninterest income was largely driven by ~~an $7.4~~a $4.7 million ~~increase~~decrease in deposit transactions and cash management fee income ~~primarily the result of higher~~driven by excess fees received from Capital Bank debit card transactions in first quarter 2018, as well as lower NSF fee income ~~associated with the inclusion of Capital Bank in third quarter 2018. A $2.3 million increase in fees from brokerage,~~and cash management fees ~~and commissions and a $1.5 million increase in fees from mortgage banking activities also contributed to the increase in noninterest income in third quarter 2018 relative to the prior year. The increase in fees from brokerage, management fees, and commissions was~~ driven by ~~the continued growth of FHN's advisory business and favorable market conditions, coupled with an increase~~changes in ~~the sales of structured products.~~consumer behavior. ~~To a lesser extent, bankcard income and other service charges also increased in third quarter 2018 due in large part to the inclusion of Capital Bank activity.~~

Provision expense was ~~$8.0~~$14.0 million and $4.5 million in ~~third~~first quarter 2019 and 2018, ~~compared to $8.6 million in third quarter 2017. Both periods reflect continued strong performance in both the~~respectively, primarily driven by commercial and consumer portfolios. The current quarter provision expense was driven primarily by higher reserves associated with individually impaired loans within the C&I portfolio; the increase in reserves was partially offset by the effect of continued lower loss rates and lower net charge-offs.loan growth.

Noninterest expense was ~~$207.6~~$200.0 million in ~~third~~first quarter ~~2018, up 38 percent~~2019, down from ~~$150.4~~$201.7 million in ~~third~~first quarter ~~2017.~~2018. The ~~increase~~decrease in expense was primarily driven by ~~the inclusion of Capital Bank in third quarter 2018, which led to higher personnel-related expenses, and increases in occupancy~~broad-based cost savings across multiple expense amortization expense, and operation services. Communication expenses, equipment rentals, depreciation and maintenance expense, computer software, and FDIC premium expense increased in third quarter 2018 relative to the prior year alsocategories driven by ~~the inclusion of Capital Bank.~~ ~~A $3.4 million increase~~strategic focus on expense optimization in ~~advertising expense also contributed to the increase in noninterest expense in third~~first quarter 2018 largely driven by the inclusion of Capital Bank, as well as promotional branding campaigns. These increases were somewhat offset by a $6.4 million net decline in loss accruals for legal matters compared to third quarter 2017.

~~Total revenue increased 44 percent to $1.1 billion for the~~ ~~nine months ended September 30, 2018, from $792.2~~ million for the nine months ended September 30, 2017, largely driven by a $298.5 million increase in NII. The increase in NII was largely due to loans and deposits added through the CBF acquisition. To a lesser extent, the favorable impact of higher interest rates on loans, cash basis interest income, higher average balances of loans to mortgage companies and organic loan growth within the commercial loan portfolio also favorably impacted NII in the nine months ended September 30, 2018 relative to the prior year. For the nine months September 30, 2018 and 2017, noninterest income was $240.1 million and $188.1 million, respectively. The increase in noninterest income was largely driven by a $27.0 million increase in deposit transactions and cash management fee income, primarily the result of higher fee income associated with the inclusion of Capital Bank. A $5.6 million increase in fees from brokerage, management fees, and commissions and a $3.9 million increase in fees from mortgage banking activities also contributed to the increase in noninterest income for the nine months ended September 30, 2018 relative to the prior year. Additionally, to a lesser extent, bankcard income and other service charges also increased in 2018 due in large part to the inclusion of Capital Bank activity.

Provision expense was $17.4 million for the nine months ended September 30, 2018, compared to $11.9 million for the nine months ended September 30, 2017. The same factors impacting the quarterly loan loss provisioning levels also drove the provision for the year-to-date period.

~~Noninterest expense~~ ~~was $619.3 million for the nine months ended September 30, 2018, up 37 percent from $451.1 million for the same period of 201~~7. The increase in expense was primarily driven by the inclusion of Capital Bank for the nine months ended September 30, 2018, which led to higher expenses in the same categories noted above. Additionally, strategic hires in expansion markets and specialty areas, higher incentive expense associated with loan and deposit growth, and an increase in minimum wage also contributed to an increase in personnel expense for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were somewhat offset by a $3.4 million net decline in loss accruals related to legal matters in 2018 relative to the prior year.2019.

Fixed Income

~~The fixed~~Pre-tax income ~~segment had pre-tax income of $2.9 million~~ in ~~third quarter 2018 compared to pre-tax income of $8.7 million in third quarter 2017. For the nine months ended September 30, 2018, the pre-tax income within~~ the fixed income segment more than doubled to $9.9 million in first quarter 2019 from $4.1 million in first quarter 2018. The increase in pre-tax income in first quarter 2019 was $6.1 million compared to $18.1 million for the nine months ended September 30, 2017. The decline in results for the three and nine months ended September 30, 2018 relative to the same periods of 2017 was the result of lowerdriven by higher noninterest income, somewhat offset by ~~a decline in expenses~~lower NII and an increase in ~~NII.~~expenses.

~~NII~~Noninterest income increased ~~from $6.0~~18 percent, or $8.2 million to $53.8 million in ~~third~~first quarter ~~2017 to $9.0~~2019 from $45.6 million in ~~third~~first quarter 2018. ~~The increase in NII in third quarter 2018 was primarily due to an increase in trading securities and loans held-for-sale largely associated with government-guaranteed loan products.~~ Fixed income product revenue ~~decreased 24~~increased 17 percent to ~~$34.3~~$44.5 million in ~~third~~first quarter ~~2018~~2019 from ~~$45.0~~$38.0 million in ~~third~~first quarter ~~2017,~~2018, as average daily revenue (“ADR”) ~~declined~~increased to ~~$544~~$729 thousand in ~~third~~first quarter ~~2018~~2019 from ~~$715~~$624 thousand in ~~third~~first quarter ~~2017. This decline reflects lower activity due to challenging market conditions (expected~~2018. Federal Reserve interest rate ~~increases, a flattening yield curve,~~commentary and ~~low levels of market volatility).~~the revised outlook for rates to be flat/down favorably impacted fixed income product revenue in first quarter 2019, with all trading desks showing growth. Other product revenue ~~was $6.9~~increased to $9.3 million in ~~third~~first quarter ~~2018, down~~2019, from ~~$10.8~~$7.6 million in the prior year, ~~primarily~~ driven by ~~lower~~higher fees from loan sales. NII was $7.3 million in first quarter 2019, down from $8.5 million in first quarter 2018. The decline in NII was due to lower spreads on inventory positions somewhat offset by higher inventory balances compared to prior year.

Noninterest expense ~~decreased 11~~increased 3 percent, or ~~$5.8~~$1.3 million, to ~~$47.3~~$51.2 million in ~~third~~first quarter ~~2018~~2019, primarily ~~driven by lower~~due to higher variable compensation associated with the ~~decrease~~increase in fixed income product revenue ~~in third quarter 2018.~~

~~For the nine months ended September 30, 2018, NII increased $14.6 million to $26.7 million from $12.1 million for the nine months ended September 30, 2017.~~ ~~The increase in NII for the nine months ended September 30, 2018 was driven~~partially offset by ~~the same~~

~~factors that impacted the quarterly increase in NII.~~ Fixed income product revenue was $102.3 million for the nine months ended September 30, 2018, down from $133.3 million in the prior year, reflecting lower activity due to challenging market conditions (expected interest rate increases, a flattening yield curve, and low levels of market volatility). ~~Other product revenue was $22.8 million and $28.5 million for the nine months ended September 30, 2018 and 2017, respectively, primarily driven by lower fees from loan sales.~~ Noninterest expense decreased 7 percent, or $10.2 million, to $145.6 million for the nine months ended September 30, 2018 from $155.9 million for the nine months ended September 30, 2017. The decrease was primarily due to lower variable compensation associated with th~~e decrease in fixed income product revenue during the nine months ended September 30, 2018 and a decrease in legal fees relative to the prior year.~~efficiency initiatives.

Corporate

The ~~corporate segment had pre-tax income of $173.9 million in third quarter 2018 compared to a~~ pre-tax loss ~~of $47.2 million in third quarter 2017. For the nine months ended September 30, 2018,~~for the corporate segment ~~had pre-tax income of $39.2~~was $34.9 million in first quarter 2019 compared to ~~a pre-tax loss of $105.6~~$60.2 million ~~for the nine months ended September 20, 2017.~~ ~~In third~~in first quarter ~~2018, FHN sold its remaining holdings of Visa Class B shares resulting in a $212.9 million pre-tax gain.~~2018.

Net interest ~~expense~~expense was ~~$15.4~~$7.9 million and ~~$13.8~~$16.2 million in ~~third~~first quarter 2019 and 2018, ~~and 2017,~~ respectively. Net interest expense was favorably impacted by reduction of market-indexed deposits in first quarter 2019 due to strong deposit growth in Regional Banking. Noninterest income (including securities gain/losses) increased to ~~$222.6~~$13.4 million in ~~third~~first quarter ~~2018~~2019, from ~~negative $9.5~~$9.3 million in ~~third~~first quarter ~~2017. The increase in noninterest income in third quarter~~ 2018, was primarily driven by the gain on sale of Visa Class B shares previously mentioned. To a much lesser extent, the increase in noninterest income was also due in part to the adoption of ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" on January 1, 2018, which resulted in dividend income from FRB and FHLB holdings being recognized in other income rather than Interest income where it was recognized prior to adoption. In third quarter 2017, FHN recognized a $14.3 million loss from the repurchase of equity securities previously included in a financing transactions, which negatively impacted noninterest income in 2017.

~~Noninterest expense increased to $33.3 million in third quarter 2018 from $23.9 million in third quarter 2017. The increase in expense for third quarter 2018 was~~ primarily driven by higher personnel expense largely due to inclusion of Capital Bank and a $3.0 million increase in acquisition- and integration-related expenses primarily associated with the CBF acquisition compared to third quarter 2017.

~~Net interest expense was $48.7 million and $42.4 million, respectively for the nine months ended September 30, 2018 and 2017. Noninterest~~deferred compensation income ~~(including securities gain/lo~~sses) increased to $240.7 million for the nine months ended September 30, 2018 from $2.2 million for the nine months ended September 30, 2017. The increase in noninterest income for the year-to-date period was driven by ~~the same factors impacting the quarterly increase~~equity market valuations in ~~noninterest income. Additionally, $4.1~~first quarter 2019.

Noninterest expense decreased 24 percent or $13.0 million ~~of gains on the sales of buildings recognized in 2018 and a net increase of $3.0~~from $53.3 million in ~~BOLI policy benefits received also contributed~~first quarter 2018 to ~~the increase~~$40.4 million in ~~noninterest income during the nine months ended September 30, 2018.~~

~~Noninterest expense increased to $152.8 million for the nine months ended September 30, 2018 from $65.4 million for the nine months ended September 30, 2017.~~first quarter 2019. The ~~increase~~decrease in expense for ~~the year-to-date period~~first quarter 2019 was primarily driven by a ~~$70.9~~$25.7 million ~~increase of acquisition-~~decrease in acquisition and integration-related ~~expenses primarily~~costs relative to the prior year, partially offset by $12.2 million of restructuring costs associated with ~~the CBF acquisition. Additionally, an increase in personnel expense, a $4.8 million increase in valuation adjustments associated with derivatives related to prior sales of Visa Class B shares~~efficiency initiatives recognized in 2018 and an increase in professional fees also contributed to the increase in noninterest expense. The increase in personnel expenses was due in large part to a 16 percent increase in headcount due to the inclusion of Capital Bank. These expense increases were somewhat offset by a $3.2 million charitable contribution made to the First Tennessee Foundation in 2017; a similar contribution was not made in 2018.first quarter 2019.

~~Non-Strategi~~cNon-Strategic

The non-strategic segment had pre-tax income of ~~$15.2~~$10.1 million in ~~third~~first quarter 2019 compared to $14.0 million in first quarter 2018. The decrease in results for first quarter 2019 was driven by a decline in NII relative to first quarter 2018 ~~compared to $9.4 million~~somewhat offset by a decrease in ~~third quarter 2017. For the nine months ended September 30, 2018 the non-strategic segment had pre-tax income of $38.0 million compared to $41.6 million for the nine months ended September 30, 2017.~~expenses.

Total revenue was ~~$15.0~~$9.7 million in ~~third~~first quarter 2019 down from $16.8 million in first quarter 2018. NII decreased to $7.9 million in first quarter 2019 from $15.7 million in first quarter 2018, ~~up from $10.2~~primarily due to continued run-off of the loan portfolios. Noninterest income was $1.8 million and $1.1 million in ~~third~~first quarter ~~2017. NII increased 13 percent to $9.6 million in third quarter~~2019 and 2018, ~~largely driven by higher rates on loans held-for-sale added through the CBF acquisition. Noninterest income increased to $5.4 million in third quarter 2018 from $1.7~~ ~~million in third 2017, largely driven by a $3.8 million gain on the sales of TRUPs loans.~~respectively.

The provision for loan losses within the ~~non-strategic~~non-strategic segment was a provision credit of ~~$6.0~~$5.0 million in ~~third~~first quarter ~~2018~~2019 compared to a provision credit of ~~$8.6~~$5.5 million in the prior year. Overall, the non-strategic segment continued to reflect stable performance combined with lower loan balances as reserves declined by ~~$10.3~~$3.9 million from December 31, ~~2017,~~2018, to ~~$25.1~~$20.4 million as of ~~September 30, 2018.~~March 31, 2019. Losses remain ~~historically~~ low as the non-strategic segment had net recoveries of ~~$2.2~~$1.0 million in ~~third~~first quarter ~~2018~~2019 compared to net recoveries of ~~$3.3~~$1.3 million a year ago.

Noninterest expense ~~was $5.8~~decreased 45 percent to $4.6 million in ~~third~~first quarter ~~2018 compared to $9.4~~2019 from $8.3 million in ~~third~~first quarter ~~2017.~~2018. The ~~decline~~decrease in expense ~~in third quarter 2018 relative to the prior year~~ was primarily driven by lower ~~loss accruals related to~~ legal ~~matters.~~

~~For the nine months ended September 30, 2018, total revenue was $43.9 million, up from $31.3 million for the nine months~~ ended September 30, 2017. NII increased 41 percent to $37.2 million during 2018, primarily driven by the interest income associated with the acquired CBF indirect auto loan portfolio, a large portion of which was subsequently sold in second quarter 2018. Noninterest income increased to $6.7 million in 2018 from $4.9 million in 2017, primarily driven by the gain on the reversal of a previous valuation adjustment on TRUPs loans sales previously mentioned.

The provision for loan losses within the non-strategic segment was a provision credit of $16.4 million for the nine months ended September 30, 2018 compared to a provision credit of $14.9 million in the prior year. The same factors impacting the quarterly change in loan loss provisioning levels also drove the change for the year-to-date period.

For the nine months ended September 30, 2018, noninterest expense was $22.3 million compared to a $4.6 million for the nine months ended September 30, 2017. The increase in expense for the year-to-date period was largely the result of a $21.7 million pre-tax reversal of mortgage repurchasefees and foreclosure provision recognized in second quarter 2017 primarily as a result of the settlement of certain repurchase claims, which favorably impacted expenses for year-to-date period of 2017. This increase was somewhat offset by a decrease in loss accruals related to legal matters ~~in 2018 relative~~compared to ~~the prior year.~~first quarter 2018.

INCOME STATEMENT REVIEW

Total consolidated revenue ~~increased to $654.7~~was $435.6 million in ~~third~~first quarter ~~2018~~2019, down from ~~$322.2~~$437.2 million in ~~third~~first quarter ~~2017~~2018 driven by a ~~$212.9 million pre-tax gain on the sale on Visa Class B shares and~~decrease in NII, somewhat offset by an increase in ~~NII.~~noninterest income. Total expenses ~~increased 24~~decreased 5 percent to ~~$294.0~~$296.1 million in ~~third~~first quarter ~~2018~~2019 from ~~$236.9~~$313.3 million in ~~third~~first quarter ~~2017.~~

Total consolidated revenue for the nine months ended September 30, 2018 was $1.5 billion, a 60 percent increase from $957.3 million for the nine months ended September 30, 2017. The increase in revenue for 2018 was attributable to an increase in NII as well as higher noninterest income primarily due to the gain on the sale of Visa Class B shares previously mentioned. Total expenses were $940.1 million for the nine months ended September 30, 2018 compared to $677.0 million for the nine months ended September 30, 2017.2018.

NET INTEREST INCOME

Net interest income ~~increased 46 percent, or $95.9 million, to $305.7~~was $294.5 million in ~~third~~first quarter ~~2018~~2019, down from ~~$209.8~~$301.2 million in ~~third~~first quarter ~~2017.~~ 2018. The ~~increase~~decline in NII ~~in third quarter 2018~~ was ~~largely due~~primarily attributable to ~~loans added through the CBF acquisition, including CBF~~lower loan ~~accretion. Additionally, favorable funding due to increased deposits from the CBF acquisition, the favorable impact of higher interest rates on loans,~~accretion and higher average balances of trading securities positively impacted NII in third quarter 2018. To a lesser extent, organic loan growth within the regional banking commercial and consumer loan portfolios, an increase in cash basis interest income and higher average balances of loans to mortgage companies also improved NII in third quarter 2018 relative to third quarter 2017. For the nine months ended September 30, 2018, NII increased 53 percent, or $317.6 million, to $917.8 million from $600.2 for the nine months ended September 30, 2017. The same factors that contributed to the third quarter 2018 increase in NII also drove the increase in NII for the year-to-date period of 2018 relative to the prior year.deposits rates, somewhat mitigated by balance sheet growth. Average earning assets ~~were $35.6~~increased to $36.3 billion ~~for the three and nine months ended September 30, 2018 compared to $26.6~~in first quarter 2019 from $35.7 billion ~~for the three and nine months ended September 30, 2017.~~in first quarter 2018. The increase in average earning assets ~~in both periods relative to 2017~~ was primarily ~~due~~driven by an increase in interest bearing cash and loan growth, somewhat offset by decreases in securities purchased under agreement to ~~the CBF acquisition, as well as organic growth within the Regional Banking segment.~~resell ("asset repos"), fixed income inventory, and available-for-sale ("AFS") securities.

For purposes of computing yields and the net interest margin, FHN adjusts net interest income to reflect tax-exempt income on an equivalent pre-tax basis which provides comparability of net interest income arising from both taxable and tax-exempt sources. The consolidated net interest margin ~~improved to 3.44~~was 3.31 percent in ~~third~~first quarter ~~2018~~2019 down 12 basis points from ~~3.19~~3.43 percent in ~~third~~first quarter ~~2017.~~2018. The net interest spread was ~~3.12~~2.92 percent in ~~third~~first quarter ~~2018, up 16~~2019, down 29 basis points from ~~2.96~~3.21 percent in ~~third~~first quarter ~~2017.~~2018. The ~~improvement~~decrease in NIM in ~~third~~first quarter ~~2018~~2019 was primarily athe result of ~~loans and deposits added through~~ the ~~CBF acquisition (including accretion) and the favorable~~negative impact of higher market interest rates on ~~loans. For~~deposits and an increase in average excess cash held at the ~~nine months ended September 30, 2018, the net interest margin~~Fed. Additionally, lower loan accretion negatively impacted NIM in first quarter 2019, but was ~~3.47 percent, up 41 basis points from 3.06 percent for the nine months ended September 30, 2017.~~somewhat mitigated by loan and deposit growth.

The increase in NIM for the nine months ended September 30, 2018 was also favorably impacted by higher short-term interest rates on loans, CBF loan accretion, and loans and deposits added through the CBF acquisition, but was also favorably impacted by lower balances of interest bearing cash. The following table provides detail regarding FHN's net interest margin for the three and nine months ended September 30, 2018.

Table 1—Net Interest Margin

Three Months Ended
September 30 Nine months ended
September 30
2018 2017 2018 2017
Assets:
Earning assets:
Loans, net of unearned income:
Commercial loans 4.95 % 4.13 % 4.79 % 4.01 %
Consumer loans 4.51
4.23
4.50
4.19
Total loans, net of unearned income 4.84
4.16
4.71
4.06
Loans held-for-sale 5.49
4.53
6.11
4.47
Investment securities:
U.S. government agencies 2.71
2.54
2.69
2.57
States and municipalities 3.60
—
3.52
9.43
Corporates and other debt 4.36
5.25
4.43
5.25
Other (a) 31.97
3.67
30.66
3.32
Total investment securities 2.78
2.60
2.75
2.61
Trading securities 3.81
3.06
3.67
3.00
Other earning assets:
Federal funds sold 2.50
1.75
2.35
1.58
Securities purchased under agreements to resell 1.82
0.88
1.51
0.64
Interest bearing cash 1.84
1.24
1.67
0.92
Total other earning assets 1.85
1.03
1.59
0.82
Interest income / total earning assets 4.43 % 3.76 % 4.32 % 3.57 %
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings 1.07 % 0.50 % 0.85 % 0.46 %
Other interest-bearing deposits 0.74
0.46
0.63
0.37
Time deposits 1.51
0.85
1.33
0.84
Total interest-bearing deposits 1.03
0.51
0.85
0.46
Federal funds purchased 2.05
1.24
1.79
0.98
Securities sold under agreements to repurchase 1.53
1.06
1.25
0.70
Fixed income trading liabilities 2.90
2.19
2.75
2.26
Other short-term borrowings 2.13
1.22
1.78
1.24
Term borrowings 4.53
3.51
4.27
3.24
Interest expense / total interest-bearing liabilities 1.31
0.80
1.12
0.71
Net interest spread 3.12 % 2.96 % 3.20 % 2.86 %
Effect of interest-free sources used to fund earning assets 0.32
0.23
0.27
0.20
Net interest margin (b)
3.44 % 3.19 % 3.47 % 3.06 %

~~Certain previously reported amounts have reclassified to agree with current presentation.~~



	Three Months Ended March 31
	2019		2018
Assets:
Earning assets:
Loans, net of unearned income:
Commercial loans	5.08	%	4.53	%
Consumer loans	4.59		4.48
Total loans, net of unearned income	4.96		4.51
Loans held-for-sale	5.89		6.68
Investment securities:
U.S. government agencies	2.68		2.66
States and municipalities	4.33		3.37
Corporates and other debt	3.76		4.54
Other	34.56		27.65
Total investment securities	2.79		2.71
Trading securities	3.80		3.40
Other earning assets:
Federal funds sold	2.63		2.11
Securities purchased under agreements to resell	2.21		1.15
Interest-bearing cash	2.41		1.42
Total other earning assets	2.38		1.26
Interest income / total earning assets	4.49	%	4.13	%
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings	1.36	%	0.55	%
Other interest-bearing deposits	1.05		0.53
Time deposits	1.91		1.16
Total interest-bearing deposits	1.35		0.64
Federal funds purchased	2.50		1.52
Securities sold under agreements to repurchase	2.06		1.02
Fixed income trading liabilities	3.04		2.53
Other short-term borrowings	3.40		1.53
Term borrowings	4.89		3.93
Interest expense / total interest-bearing liabilities	1.57		0.92
Net interest spread	2.92	%	3.21	%
Effect of interest-free sources used to fund earning assets	0.39		0.22
Net interest margin (a)	3.31	%	3.43	%

(a) 2018 increase driven by the adoption of ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" which resulted in the reclassification of interest and dividend income on equity securities to noninterest income on a prospective basis. The remaining balance is primarily comprised of higher-yielding SBA IO strips.

~~(b)~~ Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21 percent ~~and 35 percent in 2018 and 2017, respectively,~~ and, where applicable, state income taxes.

FHN’s net interest margin is primarily impacted by its balance sheet mix including the levels of fixed and floating rate loans, rate sensitive and non-rate sensitive liabilities, cash levels, trading inventory levels as well as loan fees and cash basis income. ~~FHN’s balance sheet is positioned to benefit primarily from a rise in short-term interest rates.~~ For 2019, NIM will also depend on changes to the ~~extent of~~yield curve, changes to the Fed ~~interest~~Funds rate, ~~increases,~~ loan accretion levels, and the competitive pricing environment for core deposits.

PROVISION FOR LOAN LOSSES

The provision for loan losses is the charge ~~to or credit~~ to earnings that management determines to be necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of probable incurred losses in the loan portfolio. ~~The~~Provision expense was $9.0 million in first quarter 2019 compared to a provision ~~for loan losses was $2.0 million and~~credit of $1.0 million ~~for the three and nine months ended September 30, 2018 compared to $0 and a $3.0 million credit to the provision for loan losses, respectively, for the three and nine months ended September 30, 2017.~~in first quarter 2018. For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31 2019, FHN’s asset quality metrics remained strong. ~~Annualized~~In first quarter 2019, net charge-offs as a percentage of loans was ~~.02 percent for the three and nine months ended September 30, 2018.~~.07 percent. The ALLL ~~decreased $3.6~~increased $4.5 million from year-end ~~2017~~2018 to ~~$186.0~~$184.9 million as of ~~September 30, 2018.~~March 31, 2019, primarily driven by loan growth. For additional information about the provision for loan losses refer to the Regional Banking and Non-Strategic sections of the Business Line Review section in this MD&A. For additional information about general asset quality trends refer to the Asset Quality section in this MD&A.

NONINTEREST INCOME

Noninterest income (including securities gains/(losses)) was ~~$349.0~~$141.0 million in ~~third~~first quarter ~~2018~~2019 and represented 5332 percent of total revenue compared to ~~$112.4~~$136.0 million in ~~third~~first quarter ~~2017 and 35 percent of total revenue. For the nine months ended September 30,~~ 2018 and ~~2017 noninterest income was $612.5 million and $357.0 million, respectively, representing 40 percent and 37 percent of total revenue.~~31 percent. The increase in noninterest income ~~for the~~in first quarter ~~and year-to-date periods~~2019 was primarily driven by ~~a $212.9 million pre-tax securities gain associated with the sale of Visa Class B shares. In third quarter 2017, noninterest~~higher fixed income ~~was negatively impacted by the recognition of a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction, which also contributed to the year-over-year~~revenue and an increase in ~~noninterest~~deferred compensation income, in 2018. To a lesser extent, increases in fee income due to the inclusion of Capital Bank also contributed to the increase in noninterest income for both the three and nine months ended September 30, 2018, but were partiallysomewhat offset by lower ~~fixed income~~deposit transactions and cash management revenue relative to ~~the three and nine months ended September 30, 2017.~~first quarter 2018.

Fixed Income Noninterest Income

Fixed income noninterest income was ~~$44.8~~$53.7 million ~~and $128.0~~in first quarter 2019, up 18 percent from $45.5 million ~~for the three and nine months ended September 30, 2018, down 20 percent and 21 percent, respectively, from $55.8 million~~ ~~and $161.5 million for the three and nine months ended September 30, 2017.~~in first quarter 2018. The ~~decline~~increase in ~~both periods reflects lower activity due to challenging market conditions (expected~~first quarter 2019 was favorably impacted by Federal Reserve interest rate ~~increases, a flattening yield curve,~~commentary and ~~low levels of market volatility).~~the revised outlook for rates to be flat/down in 2019, which resulted in growth across all trading desks. Revenue from other products ~~was $10.5~~increased 24 percent to $9.3 million ~~and $10.8~~in first quarter 2019 from $7.5 million ~~for the three months ended September 30,~~in first quarter 2018, ~~and 2017 and was $25.8 million and $28.2 million for the nine months ended September 30, 2018 and 2017, respectively. Both periods reflect a decline in fee income~~primarily driven by higher fees from ~~lower~~ loan ~~sales, but were favorably impacted by a $3.8 million gain on the sales of TRUPs loans recognized within the Non-Strategic segment in third quarter 2018. The~~sales. The following table summarizes FHN’s fixed income noninterest income for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Table 2—Fixed Income Noninterest Income


	Three Months Ended September 30				Percent Change			Nine months ended September 30					Percent Change			Three Months Ended March 31					Percent Change
(Dollars in thousands)	2018		2017				2018			2017			Percent Change		2019			2018			Percent Change
Noninterest income:					Percent Change
Fixed income	$	34,268	$	45,020	(24	)%		$	102,255		$	133,302	(23	)%		$	44,472		$	38,047	17	%
Other product revenue	10,545		10,738		(2	)%		25,761			28,244		(9	)%		9,277			7,459		24	%
Total fixed income noninterest income	$	44,813	$	55,758	(20	)%		$	128,016		$	161,546	(21	)%		$	53,749		$	45,506	18	%

Deposit Transactions and Cash Management

Fees from deposit transactions and cash management activities ~~increased to $35.8~~was $31.6 million in ~~third~~first quarter 2019, down 12 percent from $36.0 million in first quarter 2018. The decrease in first quarter 2019 is largely due to excess fees received from Capital Bank debit card transactions in first quarter 2018, ~~from $28.0 million in third quarter 2017 largely driven by higher~~as well as lower NSF fee income ~~associated with the inclusion of Capital Bank. For the nine months ended September 30, 2018 and 2017 fees from deposit transactions~~ and cash management activities were $107.9 million and $80.4 million, respectively. The year-to-date increase was also largely associated with the inclusion of Capital Bank. Fees from deposit transactions and cash management activities were negatively impacted in first quarter 2017 due tofees driven by changes in consumer behavior and a modification of billing practices, which further contributed to the year-over-year increase in fees from deposit transactions and cash management activities for the nine months ended September 30, 2018.behavior.

Brokerage, Management Fees and Commissions

Noninterest income from brokerage, management fees and commissions ~~increased 19 percent to $14.2~~was $12.6 million in ~~third~~first quarter ~~2018 from $11.9~~2019 compared to $13.5 million in ~~third~~first quarter 2017. For the nine months ended September 30, 2018 noninterest income from brokerage, management fees and commissions increased 15 percent to $41.4 million from $35.9 million for the nine months ended September 30, 2017.2018. The ~~increase~~decline in ~~both periods~~first quarter 2019 was due to a reduction in ~~large part~~transaction activity due to ~~the continued growth of FHN's advisory business and~~more favorable market conditions ~~coupled with an increase~~ in first quarter 2018. Additionally, the ~~sales of structured products.~~

~~Bank-owned Life Insurance~~

~~Bank-owned life insurance ("BOLI") increased to $4.3 million and $14.1 million for the three and nine months ended September 30,~~fourth quarter 2018 ~~from $3.5 million and $11.1 million for the three and nine months ended September 30, 2017. The increase~~decline in ~~both periods was driven by higher BOLI policy gains recognized~~equity markets negatively impacted fee based income in ~~2018~~first quarter 2019 relative to ~~2017.~~

~~Bankcard Income~~

~~Bankcard income was $6.9 million and $20.0 million for~~ the three and nine months ended September 30, 2018 compared to $6.2 million and $17.2 million for the three and nine months ended September 30, 2017. The increase in bankcard income was primarily the result of an increase in interchange income driven by higher volume and favorable rate changes in 2018 compared to 2017.

~~Securities Gains/(Losses)~~

Net securities gains were $212.9 million and $213.0 million for the three and nine months ended September 30, 2018 and primarily related to FHN's sale of its remaining holdings of Visa Class B shares. Net securities gains for the three months ended September 30, 2017 were not material. Net securities gains for the nine months ended September 30, 2017 were $.5 million and were primarily the result of the call of a $4.4 million held-to-maturity municipal bond within the regional banking segment in second quarter 2017.prior year.

Other Noninterest Income

Other income includes revenues ~~from other service charges, ATM and interchange fees, dividend income (subsequent to 2017), mortgage banking (primarily within the non-strategic and regional banking segments), revenue~~ related to deferred compensation plans (which are mirrored by changes in noninterest expense), ~~electronic~~other service charges, ATM and interchange fees, dividend income, mortgage banking ~~fees,~~(primarily within the non-strategic and regional banking segments), letter of credit fees, electronic banking fees, insurance commissions, ~~loss on extinguishment of debt~~ and various other fees.

Revenue from all other income and commissions increased to $22.7 million in third quarter 2018 from $43 thousand in third quarter 2017. Effective January 1, 2018, FHN adopted ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" and began recording dividend income from FRB and FHLB holdings in other income which contributed to the increase in other noninterest income in third quarter 2018 relative to the prior year, as previously these amounts were included in Interest income. Additionally, increases in mortgage banking income and other service charges related to the inclusion of Capital Bank also contributed to the increase in all other income and commissions in third quarter 2018 compared with the prior year. To a lesser extent, $1.6 million in collections from CBF loans that were fully charged off prior to acquisition increased other noninterest income for third quarter 2018. In third quarter 2017, all other income and commissions was negatively impacted by a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction.

Revenue from all other income and commissions increased to ~~$65.3~~$25.6 million fo~~r the nine months ended September 30, 2018~~in first quarter 2019 from ~~$29.1~~$23.2 million ~~for the nine months ended September 30, 2017.~~in first quarter 2018. The increase in all other income and commissions ~~for the nine months ended September 30, 2018~~in first quarter 2019 was largely due to ~~$8.1~~a $5.0 million increase in ~~dividend income from FRB and FHLB holdings,~~

$4.3 million in collections from CBF loans that were fully charged off prior to acquisition and $4.1 million of gains on the sales of buildings recognized in 2018. Additionally, mortgage banking income and other service charges increased primarily related to the inclusion of Capital Bank. For the nine months ended September 30, 2018 deferred compensation income ~~decreased~~ ~~$1.5 million to $2.9 million,~~ ~~offsetting a portion of the overall increase~~driven by equity market valuations in ~~revenue from all other income and commissions.~~first quarter 2019. Deferred compensation income fluctuates with changes in the market value of the underlying ~~investments.~~ ~~For 2017,~~investments and is mirrored by changes in deferred compensation expense which is included in personnel expense. In first quarter 2018, all other income and commissions was ~~negatively~~positively impacted by a $3.3 million gain on the ~~$14.3 million loss on extinguishment~~sale of ~~debt previously mentioned.~~a building. The following t~~following table~~able provides detail regarding FHN’s other ~~income for the three and nine months ended September 30, 2018 and 2017.~~income.

Table 3—Other Income


	Three Months Ended September 30						Percent Change			Nine Months Ended September 30							Percent Change			Three Months Ended March 31						Percent Change
(Dollars in thousands)	2018			2017					2018				2017				Percent Change		2019				2018			Percent Change
Other income:							Percent Change
Deferred compensation (a)																				$	5,474			$	451	NM
Other service charges	$	3,758		$	2,954		27	%		$	11,609			$	9,047		28	%		3,869				4,123		(6	)%
ATM and interchange fees	3,263			3,137			4	%		9,943				8,998			11	%		3,241				3,267		(1	)%
Dividend income (a)	2,757			—			NM			8,130				—			NM
Dividend income																				2,313				2,249		3	%
Mortgage banking	2,533			1,354			87	%		7,510				3,883			93	%		1,886				2,546		(26	)%
Deferred compensation	1,458			1,128			29	%		2,900				4,446			(35	)%
Letter of credit fees																				1,368				1,249		10	%
Electronic banking fees	1,309			1,282			2	%		3,741				3,911			(4	)%		1,271				1,204		6	%
Letter of credit fees	1,307			1,211			8	%		3,851				3,369			14	%
Insurance commissions	396			567			(30	)%		1,629				2,042			(20	)%		624				757		(18	)%
Gain/(loss) on extinguishment of debt ~~(b)~~	(1		)	(14,329		)	NM			(1		)		(14,329		)	NM			(1		)		—		NM
Other	5,875			2,739			NM			16,020				7,684			NM			5,523				7,397		(25	)%
Total	$	22,655		$	43		NM			$	65,332			$	29,051		NM			$	25,568			$	23,243	10	%

NM – Not meaningful


~~(a)~~	Effective January 1, 2018, FHN adopted ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” and began recording dividend income from FRB and FHLB holdings in Other income. Prior to first quarter 2018 these amounts were included in Interest income on the Consolidated Condensed Statements of Income.


~~(b)~~	~~Loss on extinguishment of debt for three and nine months ended September 30, 2017 relates to the repurchase of equity securities previously included in a financing transaction.~~

(a) Amounts driven by market conditions and are mirrored by changes in deferred compensation expense which is included in employee compensation expense.

NONINTEREST EXPENSE

Total noninterest expense ~~increased~~decreased to ~~$294.0~~$296.1 million in ~~third~~first quarter ~~2018~~2019 from ~~$236.9~~$313.3 million in ~~third~~first quarter ~~2017.~~2018. The ~~increase~~decrease in noninterest expense in ~~third~~first quarter ~~2018~~2019 was largely driven by ~~higher acquisition- and~~lower acquisition-and integration-related expenses ~~primarily associated with the CBF acquisition, higher personnel-related expenses,~~compared to prior year. Additionally, a company wide focus on efficiency initiatives and ~~increases in several other~~ expense categories due to the inclusion of Capital Bank, somewhat offset by a decrease in loss accruals related to legal matters. For the nine months ended September 30, 2018, total noninterest expense increased 39 percent to $940.1 million, largely driven by the same factors thatsavings also contributed to the ~~quarterly expense increase. For the nine months ended September 30, 2018, lower legal fees relative to the nine months ended September 30, 2017 favorably impacted~~decrease in noninterest expense in ~~2018, offsetting a portion of the net increase in expenses.~~first quarter 2019.

Employee Compensation, Incentives, and Benefits

Employee compensation, incentives, and benefits (personnel expense), the largest component of noninterest expense, increased 204 percent in ~~third~~first quarter ~~2018~~2019 to ~~$164.8~~$177.9 million from ~~$137.4~~$171.3 million in ~~third quarter 2017.~~first quarter 2018. The increase in personnel expense in first quarter 2019 was primarily the ~~result~~result of ~~a 31 percent~~ severance-related costs associated with restructuring, repositioning, and efficiency initiatives recognized in first quarter 2019 and an increase in ~~headcount in connection with the CBF acquisition.~~deferred compensation expense driven by equity market valuations. Additionally, an increase in ~~minimum wage and a $1.7 million increase of personnel expense related to acquisition- and integration-related expenses during third quarter 2018~~variable compensation associated with higher fixed income sales revenue also contributed to the increase in ~~personnel~~first quarter 2019. These expense increases were somewhat offset by a $3.7 million decrease in acquisition- and integration-related expenses as compared to first quarter 2018 and a reduction in headcount relative to ~~third~~the prior year.

Operations Services

Operations services expense decreased $4.1 million to $11.5 million in first quarter ~~2017. A decline~~2019 from $15.6 million in first quarter 2018 primarily driven by the reduction of third-party vendors following completion of integration of the CBF merger.

~~variable compensation associated with lower fixed income sales revenue relative to third~~Professional Fees

Professional fees were $12.3 million in first quarter ~~2017, favorably impacted personnel expense~~2019 and 2018. Professional fees in ~~third~~first quarter ~~2018, offsetting a portion of the expense increase.~~

~~For the nine months ended September~~ ~~30, 2018, personnel expense increased 22 percent, or $91.8~~2019 included $4.3 million ~~to $502.0 million. The increase~~ in personnel expense for the year-to-date period was also due primarily to an increase in headcount in connection with the CBF acquisition. Additionally, an increase in minimum wage in 2018 as well as strategic hires in expansion markets and specialty areas and higher incentive expense associated with loan and deposit growth within the regional banking segment also contributed to the increase in personnel expense relative to the prior year. For year-to-date period of 2018, a $9.3 million increase in personnel expense primarily related to acquisition- and integration-related expensesrestructuring costs associated with the ~~CBF acquisition also increased personnel expense for~~identification of efficiency opportunities within the ~~nine months ended September 30, 2018. A decline~~organization. Professional fees in ~~variable compensation associated with lower fixed income sales revenue relative to the prior year offset a portion of the expense increase for the year-to-date period.~~

~~Occupancy~~

~~Occupancy expense increased to $20.0 million in third~~first quarter 2018 from $13.6 million in third quarter 2017. For the nine months ended September 30, 2018, occupancy expense increased to $63.0 million from $38.8 million. The increase in occupancy was primarily driven by higher rental expense due to the inclusion of Capital Bank and Coastal expenses, as well as an increase in depreciation expense due to the completion of space-consolidating renovations made to FHN's headquarters and other locations completed during 2017. In addition, in 2018 FHN recognized $2.4included $5.6 million of acquisition- and integration-related ~~expenses primarily associated with the CBF acquisition.~~

~~Computer Softwa~~re

Computer software expense was $15.7 million in third quarter 2018, up 31 percent from $12.0 million in third quarter 2017. For the nine months ended September 30, 2018, computer software expense was $45.9 million, up from $35.1 million for the same period in 2017. ~~The increase in computer software expense in both periods was driven by the inclusion of Capital Bank, as well as FHN's focus on technology-related projects.~~ ~~To a lesser extent acquisition- and integration-related expenses primarily associated with the CBF acquisition also contributed to the increase in computer software expense for year-to-date 2018.~~

~~Operations Services~~

~~Operations services expense increased~~ ~~$2.3 million and $10.1 million, respectively to $13.1 million and $43.3 million for the three and nine months ended September 30, 2018 from $10.8 million and $33.2 million for the same periods of 2017.~~ The increase in operations services expense was primarily related to an increase in third party fees associated with the inclusion of Capital Bank expenses, as well as higher acquisition- and integration-related expenses primarily related to the CBF acquisition.

~~Equipment Rentals, Depreciation, and Maintenance~~

Equipment rentals, depreciation, and maintenance expense increased 42 percent, or $2.8 million, to $9.4 million in third quarter 2018 from $6.6 million in third quarter 2017. For the nine months ended September 30, 2018, equipment rentals, depreciation and maintenance expense increased $10.1 million to $30.1 million. The increase in equ~~ipment rentals, depreciation, and maintenance expense in both periods was due in large part to the inclusion of Capital Bank in 2018.~~ ~~For the year-to-end period, the increase was also driven by higher acquisition- and integration-related expenses primarily related to the CBF acquisition.~~

~~Professional Fees~~

~~Professional fees were~~ ~~$9.3 million and $37.0 million for~~ ~~the three and nine months ended September 30, 2018 compared to $6.6 million and $21.0 million for the three and nine months ended September 3~~0, 2017. The increase in professional fees was primarily driven by strategic investments to analyze growth potential and product mix for new markets, as well as higher acquisition- and integration-related expenses primarily associated with the CBF acquisition compared to 2017.expense.

Advertising and Public Relations

Expenses associated with advertising and public relations ~~were $8.4~~increased to $7.2 million ~~and $17.0~~in first quarter 2019 from $3.6 million ~~for the three and nine months ended September 30, 2018 compared to $5.2 million and $13.9 million for the three and nine months ended September 30, 2017.~~in first quarter 2018. In ~~2018,~~first quarter 2019, FHN recognized higher advertising expense due in large part to promotional branding campaigns and targeted marketing in new ~~markets which contributed to an increase in both the quarter and year-to-date periods.~~

markets.

FDIC Premium Expense

FDIC premium expense ~~was $7.9~~decreased 50 percent from $8.6 million ~~and $26.4~~in first quarter 2018 to $4.3 million ~~for the three and nine months ended September 30, 2018, compared to $6.1 million and $17.7 million for the three and nine months ended September 30, 2017.~~ ~~The increase~~ in ~~FDIC premium expense for the three and nine months ended September 30, 2018 relative to 2017 was~~first quarter 2019, primarily due ~~in large part~~ to the ~~CBF acquisition, as well as organic growth. For the nine months ended September 30, 2018, the increase was also impacted by the Coastal acquisition.~~

~~Communications and Courier~~

Expenses associated with communications and courier were $7.0 million and $22.8 million for the three and nine months ended September 30, 2018 up from $4.3 million and $12.2 million for the three and nine months ended September 30, 2017. The increase in communication and courier expense was primarily driven by the inclusion of Capital Bank for the quarter and year-to-date periods of 2018. Expenses related to acquisition- and integration- related projects primarily associated with the CBF acquisition also contributed to the increase in expenses for the year-to-date period.

~~Amortization of Intangible Assets~~

~~Amortization expense was $6.5 million and $19.4 million for the three and nine months ended September 30, 2018, a $4.5 million and $14.2 million increase, respectively, from $2.0 million and $5.2 million for the three and nine months ended September 30, 2017.~~ ~~The increase was due to amortization expense as a result~~end of the ~~CBF and Coastal acquisitions.~~

~~Contract employment and outsourcing~~

~~Expenses associated~~FDIC assessment surcharge starting with ~~contract employment and outsourcing increased to~~ ~~$4.3 million and $14.3 million for the three and nine months ended September 30, 2018~~ ~~from $2.8 million and $9.0 million for the three and nine months ended September 30, 2017, due in large part to acquisition- and integration- related projects primarily associated with the CBF acquisition.~~

~~Legal Fees~~

Legal fees were $2.5 million and $7.7 million for the three and nine months ended September 30, 2018 compared to $2.1 million and $10.8 million for the three and nine months ended September 30, 2017. Legal fees fluctuate primarily based on the status, timing, type, and composition of cases or other projects.

~~Repurchase and Foreclosure Provision/(Provision Credit)~~

For the three and nine months ended September 30, 2018, the mortgage repurchase and foreclosure provision was not material. For the nine months ended September 30, 2017, FHN recognized a $22.6 million pre-tax reversal of mortgage repurchase and foreclosure provision primarily as a result of the settlement of certain repurchase claims, which favorably impacted the 2017 year-to-date period.fourth quarter 2018.

Other Noninterest Expense

Other expense includes travel and entertainment expenses, other insurance and tax expense, supplies, customer relations expenses, costs associated with employee training and dues, ~~supplies,~~miscellaneous loan costs, tax credit investments expense, expenses associated with the non-service components of net periodic pension and post-retirement cost, ~~tax credit investments expenses, customer relations expenses, expenses associated with OREO, miscellaneous loan costs,~~ losses from litigation and regulatory matters, expenses associated with OREO, and various other expenses.

AllAll other expenses decreased 44 percent to ~~$25.7~~$19.8 million in ~~third~~first quarter ~~2018~~2019 from ~~$28.1~~$35.3 million in ~~third~~first quarter ~~2017.~~2018. The decrease was primarily due to ~~a $9.7~~$15.7 million decrease in loss accruals related to legal matters from $8.2 million in third quarter 2017 to a net expense reversal of $1.5 million in third quarter 2018. The decline in third quarter 2018 was somewhat offset by increased activity due to CBF, an increase in the reserve for unfunded commitments, an increase in pension expense, and higher expenses associated with foreclosed properties.

~~For the nine months ended September 30, 2018, all other expenses increased to~~ ~~$112.0 million from $72.6 million for the nine~~ ~~months ended September 30, 2017. The increase was primarily due to a $39.9 million increase of~~ acquisition- and integration-related ~~costs primarily associated with the CBF acquisition, including contract termination charges, costs of shareholder matters and asset impairments related~~expenses compared to ~~the integration, as well as other miscellaneous expenses.~~first quarter 2018. Additionally, a $4.8 million increase in Visa derivative valuation adjustments recognized for the nine months ended September 30, 2018, higher expenses associated with travel and entertainment, supplies, and employee training and dues largely due to the inclusion of Capital Bank, higher

~~pension~~broad-based cost savings driven by strategic-focus on expense ~~and an increase in the reserve for unfunded commitments for the nine months ended September 30, 2018~~optimization also contributed to the ~~increase~~decrease in other noninterest ~~income relative to the prior year. These~~ expense ~~increases were somewhat offset by a $7.8 million net decrease~~ in ~~loss accruals related to legal matters and a $3.2 million charitable contribution made to the First Tennessee Foundation in 2017; a similar contribution was not made in 2018.~~first quarter 2019. The following table provides detail regarding FHN’s other ~~expense for the three and nine months ended September 30, 2018 and 2017.~~expense.

Table 4—Other Expense


	Three Months Ended September 30					Percent Change			Nine Months Ended September 30					Percent Change			Three Months Ended March 31						Percent Change
(Dollars in thousands)	2018			2017				2018			2017			Percent Change		2019				2018			Percent Change
Other expense:						Percent Change
Travel and entertainment	$	3,988		$	2,798	43	%		$	12,102		$	8,308	46	%		$	2,712			$	2,983	(9	)%
Other insurance and taxes	2,761			2,396		15	%		8,178			7,229		13	%		2,694				2,665		1	%
Supplies																	1,804				1,836		(2	)%
Customer relations																	1,599				1,063		50	%
Employee training and dues	1,682			1,198		40	%		5,310			4,194		27	%		1,457				1,779		(18	)%
Supplies	1,635			928		76	%		5,458			2,884		89	%
Miscellaneous loan costs																	1,027				1,142		(10	)%
Tax credit investments																	675				1,137		(41	)%
Non-service components of net periodic pension and post-retirement cost	1,585			454		NM			3,619			1,782		NM			432				504		(14	)%
Tax credit investments	1,370			762		80	%		3,586			2,646		36	%
Customer relations	1,328			1,361		(2	)%		3,749			4,240		(12	)%
Litigation and regulatory matters																	13				2,134		(99	)%
OREO	1,256			303		NM			2,174			953		NM			(366		)		108		NM
Miscellaneous loan costs	543			757		(28	)%		2,720			2,078		31	%
Litigation and regulatory matters	(1,541		)	8,162		NM			609			8,403		(93	)%
Other ~~(a)~~	11,094			8,994		23	%		64,527			29,837		NM			7,739				19,981		(61	)%
Total	$	25,701		$	28,113	(9	)%		$	112,032		$	72,554	54	%		$	19,786			$	35,332	(44	)%

NM – Not ~~meaningful.~~meaningful

Certain previously reported amounts have been revised to reflect the retroactive effect of the adoption of ASU 2017-07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” See Note 1 - Financial Information for additional information.


~~(a)~~	Expense increase for the nine months ended September 30, 2018 largely attributable to an increase in acquisition- and integration-related expense primarily associated with the CBF acquisition. See Note 2 - Acquisitions and Divestitures for additional information.

INCOME TAXES

~~FHN~~

FHN recorded an income tax provision of ~~$83.9~~$27.1 million in ~~third~~first quarter ~~2018,~~2019, compared to ~~$13.6~~$29.9 million in ~~third~~first quarter ~~2017. For the nine months ended September 30, 2018 and 2017, FHN recorded an income tax provision of $133.6 million and $57.9 million, respectively.~~2018. The effective tax ~~rates~~rate for the three ~~and nine~~ months ended ~~September 30, 2018 were~~March 31, 2019 was approximately 2321 percent compared to ~~16 percent and 20~~24 percent for the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2018.

The ~~Company's~~Company’s effective tax rate is favorably affected by recurring items such as bank-owned life insurance, tax-exempt income, and credits and other tax benefits from affordable housing investments. The effective rate is unfavorably affected by the non-deductibility of ~~portions~~a portion of ~~FHN's~~the Company's FDIC premium and executive compensation expense. ~~FHN’s~~The company’s effective tax rate also may be affected by items that may occur in any given period but are not consistent from period to period, such as changes in the deferred tax asset valuation allowance and changes in unrecognized tax benefits. For the three months ended September 30, 2018, FHN recognized $.6 million of net unfavorable discrete items. For the nine months ended September 30, 2018, FHN recognized $3.1 million of net favorable discrete items primarily related to CBF purchase accounting adjustments.

FHN's effective tax rate in 2017 was based on the 35% federal tax rate which was lowered to 21% in 2018. It was favorably impacted by the reversal of the valuation allowance for the deferred tax asset related to its 2012 federal capital loss carryforward based on capital gain transactions initiated in second quarter 2017; this lowered the effective rate to 16 percent and 20 percent for the three and nine months ended September 30, 2017. For the three months ended September 30, 2017, FHN also recognized $1.9 million of net favorable discrete items primarily related to the 2016 tax return filings.

A deferred tax asset (“DTA”) or deferred tax liability (“DTL”) is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax consequence is calculated by applying enacted statutory tax rates, applicable to future years, to these temporary differences. As of ~~September 30, 2018,~~March 31, 2019, FHN’s gross DTA (net of a valuation allowance) and gross DTL were ~~$269.4~~$272.4 million and ~~$119.5~~$169.6 million, respectively, resulting in a net DTA of ~~$149.8~~$102.8 million at ~~September 30, 2018,~~March 31, 2019, compared with a net DTA of ~~$190.7~~$127.9 million at September 30, 2017. There have been various changes to FHN's DTA since the third quarter of 2017. Major changes include an increase in the DTA as a result of the acquisition of CBF and decreases in the DTA as a result of the decrease in the federal tax rate and the utilization due to projected taxable income inDecember 31, 2018.

As of ~~September 30, 2018,~~March 31, 2019, FHN had deferred tax asset balances related to federal and state income tax carryforwards of ~~$57.3~~$43.8 million and ~~$12.4~~$5.2 million, respectively, which will expire at various dates.

FHN’s gross DTA after valuation allowance was ~~$269.4~~$272.4 million and ~~$282.3~~$254.6 million as of ~~September 30,~~March 31, 2019 and December 31, 2018, ~~and 2017,~~ respectively. Other than a small valuation allowance against state NOLs, FHN believes that it will be able to realize the value of its DTA and that no valuation allowance is needed. FHN monitors its DTA and the need for a valuation allowance on a quarterly basis.

RESTRUCTURING, REPOSITIONING, AND EFFICIENCY INITIATIVES

In first quarter 2019, FHN initiated a company-wide review of business practices with the goal of optimizing its expense base to improve profitability and create capacity to reinvest savings into technology and revenue production activities. The net charge from restructuring, repositioning, and efficiency initiatives was $12.2 million in first quarter 2019, primarily associated with severance and other employee costs and professional fees. Due to the broad nature of the actions being taken, many components of expense are expected to benefit from the current efficiency initiatives. See Note 18 – Restructuring, Repositioning, and Efficiency for additional information.

STATEMENT OF CONDITION REVIEW

Total period-end assets were ~~$40.6~~$41.1 billion on ~~September 30, 2018, a 2 percent decrease~~March 31, 2019, up from ~~$41.4~~$40.8 billion on December 31, ~~2017.~~2018. Effective January 1, 2019, FHN adopted ASU 2016-02, "Leases" and all related ASUs and began recording right-of-use ("ROU") lease assets and lease liabilities in Other assets and Other liabilities which contributed to the increase in period-end and average total assets and liabilities in first quarter 2019 relative to prior year. Average assets increased 211 percent from ~~$33.1~~$40.3 billion in fourth quarter ~~2017~~2018 to ~~$40.1~~$40.9 billion in ~~third~~first quarter 2018. The increase in average assets was primarily driven by the timing of the CBF acquisition on November 30, 2017; third quarter 2018 includes the average impact of three months of balances compared with one month in fourth quarter 2017. The increase was2019, largely due to increases in interest bearing cash levels, ROU lease assets, and net increases in loan portfolios from December 31, 2018, somewhat offset by decreases in fixed income trading inventory and securities purchased under agreements to resell. On a period-end basis, the increase was due to a net increase in the loan portfolios, increases in ~~goodwill and other intangible~~ROU lease assets and a larger investment securities portfolio. Additionally, loans held-for-sale and premises and equipment also contributed to the increase in average assets from December 31, 2017. The decrease in period-end assets was due in large part to decreases in interest bearing cash levels, as well as net decreases in the available-for-sale ("AFS") securities and loan portfolios, but wasfixed income trading inventory, somewhat offset by ~~an increase~~decreases in ~~Fixed income trading inventory.~~interest-bearing cash and cash.

Total period-end liabilities were ~~$35.9~~$36.3 billion on ~~September 30, 2018,~~March 31, 2019, a 31 percent ~~decrease~~increase from ~~$36.8~~$36.0 billion on December 31, ~~2017.~~2018. Average liabilities increased to ~~$35.5~~$36.1 billion in ~~third~~first quarter ~~2018,~~2019, from ~~$29.6~~$35.6 billion in fourth quarter ~~2017.~~2018, primarily due to increases in deposits and lease liabilities. These increases were partially offset by a decrease in trading liabilities and other short-term funds. The net increase in ~~average~~period-end liabilities relative to fourth quarter ~~2017 was also the result of the timing of the CBF acquisition in late fourth quarter 2017 and~~2018 was primarily ~~attributable to acquired deposits. The decrease in period-end liabilities was largely~~ due to ~~a decrease~~increases in ~~short-term borrowings,~~lease liabilities, trading liabilities, federal funds purchased and fixed income payables, somewhat offset by ~~increases~~decreases in ~~deposits and trading liabilities.~~deposits.

EARNING ASSETS

Earning assets consist of loans, investment securities, other earning assets such as trading securities, interest-bearing cash, and loans HFS. Average earning assets increased 181 percent and 342 percent to ~~$35.6~~$36.3 billion in ~~third~~first quarter ~~2018~~2019 from ~~$30.0~~$35.8 billion and ~~$26.6~~$35.7 billion in fourth quarter ~~2017~~2018 and ~~third~~first quarter ~~2017,~~2018, respectively. A more detailed discussion of the major line items follows.

Loans

Period-end loans ~~were $27.4~~increased 2 percent to $28.0 billion as of ~~September 30,~~March 31, 2019 from $27.5 billion on December 31, 2018 ~~compared with $27.7~~and increased 3 percent from $27.2 billion as of ~~December~~March 31, ~~2017 and $20.2 billion as of September 30, 2017.~~2018. Average loans for ~~third~~first quarter ~~2018~~2019 increased to $27.3 billion from ~~$22.5~~$27.2 billion in fourth quarter ~~2017~~2018 and ~~$19.8~~$27.1 billion in ~~third~~first quarter ~~2017.~~2018. The increase in period-end and average loan balances ~~from third quarter 2017~~compared to both prior periods was primarily ~~the result of $7.3 billion in loans from the CBF acquisition and organic~~due to net loan growth within ~~FHN's regional banking segment,~~the Regional Bank, somewhat offset by run-off within the non-strategic portfolios. The increase in average loans from fourth quarter 2017 was primarily due to the timing of the CBF acquisition, as third quarter 2018 includes the average impact of three months of balances compared with one month in fourth quarter 2017. The decrease in period-end loans from December 31, 2017 was driven by low spread run-off within the Regional Banking portfolios, coupled with sales and run-off within the Non-strategic portfolios, somewhat mitigated by net loan growth within several of the Regional Banking loan portfolios. The following table provides detail regarding FHN's average loans.

Table 5—Average Loans


	Quarter Ended September 30, 2018				Quarter Ended December 31, 2017						Quarter Ended March 31, 2019				Quarter Ended December 31, 2018
(Dollars in thousands)	Amount		Percent of total		Amount		Percent of total		Growth Rate		Amount		Percent of total		Amount		Percent of total		Growth Rate
Commercial:
Commercial, financial, and industrial	$	16,038,920	59	%	$	13,756,024	61	%	17	%	$	16,428,088	60	%	$	15,952,608	59	%	3	%
Commercial real estate	4,226,580		15		2,892,949		13		46		3,959,592		14		4,170,186		15		(5	)
Total commercial	20,265,500		74		16,648,973		74		22		20,387,680		74		20,122,794		74		1
Consumer:
Consumer real estate (a)	6,199,910		23		5,029,588		22		23		6,194,147		23		6,274,799		23		(1	)
Permanent mortgage	348,922		1		400,991		2		(13	)	216,037		1		228,184		1		(5	)
Credit card and other	532,890		2		439,057		2		21
Credit card, OTC and other											515,436		2		528,866		2		(3	)
Total consumer	7,081,722		26		5,869,636		26		21		6,925,620		26		7,031,849		26		(2	)
Total loans, net of unearned income	$	27,347,222	100	%	$	22,518,609	100	%	21	%	$	27,313,300	100	%	$	27,154,643	100	%	1	%

(a) Balance as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, includes ~~$17.8~~$15.5 million and ~~$25.1~~$16.7 million of restricted and secured real estate loans, respectively.

C&I loans are the largest component of the loan portfolio comprising 60 percent of total loans in first quarter 2019 and 59 percent in fourth quarter 2018. C&I loans increased 3 percent, or $.5 billion, from fourth quarter 2018 due to net loan growth within several of the regional bank’s portfolios including commercial, healthcare, and loans to mortgage companies. Commercial real estate loans experienced a net decrease of 5 percent to $4.0 billion in first quarter 2019 as loan runoff outpaced loan growth.

Average consumer loans declined 2 percent, or $.1 billion, from fourth quarter 2018 to $6.9 billion in first quarter 2019, driven by the continued wind-down of portfolios within the non-strategic segment.

Investment Securities

FHN’s investment portfolio consists principally of debt securities including government agency issued mortgage-backed securities (“MBS”) and government agency issued collateralized mortgage obligations (“CMO”), substantially all of which are classified as ~~available-for-sale.~~available-for-sale (“AFS”). FHN utilizes the securities portfolio as a source of income, liquidity and collateral for repurchase agreements, for public funds, and as a tool for managing risk of interest rate movements. ~~Investment~~Period-end and average investment securities were $4.6 billion on~~September 30, 2018 compared to $5.2 billion on~~ March 31, 2019 and December 31, ~~2017. The decrease~~2018 and in ~~period-end investment securities was due in part to the adoption of ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities," o~~n January 1, 2018, which resulted in the reclassification of equity securities from Investment securities to Other assets and an increase in unrealized losses as a result of higher rates. FHN moderated its reinvestment strategy which also contributed to the decrease in the investment securities balance on September 30, ~~2018. Investment securities averaged $4.7 billion and $4.3 billion in third~~first quarter ~~2018~~2019 and fourth quarter ~~2017, respectively,~~ 2018, representing 13 ~~percent and 14~~ percent of average earning assets in third quarter 2018 and fourth quarter 2017, respectively. The increase in average assets in third quarter 2018 compared to fourth quarter 2017 was primarily due to the timing of the CBF acquisition, as third quarter 2018 includes the average impact of three months of CBF balances compared to one month in fourth quarter 2017, somewhat offset by the factors listed above that contributed to the decline in period-end balances.both periods. FHN manages the size and mix of the investment portfolio to assist in asset liability management, provide liquidity, and optimize risk adjusted returns.

Loans Held-for-Sale

Loans HFS consists of small business, other consumer loans, the mortgage warehouse, USDA, student, and home equity loans. On ~~September 30, 2018~~March 31, 2019 loans HFS were ~~$725.7~~$594.7 million compared to ~~$699.4~~$679.1 million on ~~December~~December 31, ~~2017.~~2018. The average balance of loans HFS ~~increased~~decreased to ~~$727.5~~$670.4 million in ~~third~~first quarter ~~2018~~2019 from ~~$504.6~~$714.4 million in fourth quarter ~~2017.~~2018. The ~~increase~~decrease in period-end ~~balances is primarily attributable to an increase in small business loans. The increase in~~and average loans HFS was primarily ~~due to an increase~~driven by a decrease in small business loans, ~~somewhat~~partially offset by ~~a decrease in other consumer loans primarily attributable to the second quarter 2018 sale of approximately $120 million UPB of subprime auto loans acquired from the CBF acquisition.~~an increase in USDA loans.

Other Earning Assets

Other earning assets include trading securities, securities purchased under agreements to resell ("asset repos"), federal funds sold (“FFS”), and interest-bearing deposits with the Fed and other financial institutions. Other earning assets averaged ~~$2.8~~$3.7 billion in ~~third~~first quarter ~~2018,~~2019, up from ~~$2.7~~$3.4 billion in fourth quarter ~~2017.~~2018. The increase in other earning assets was primarily driven by ~~an increase~~increases in ~~fixed income trading securities,~~interest bearing cash, somewhat offset by ~~a decrease in securities purchased under agreements to resell ("~~lower levels of fixed income inventory and asset ~~repos")~~repos relative to fourth quarter ~~2017.~~2018. Fixed income's trading inventory fluctuates daily based on customer demand. Asset repos are used in fixed income trading activity and generally fluctuate with the level of fixed income trading liabilities (short-positions) as securities collateral from asset repo transactions are used to fulfill trades. Ot~~her~~Other earning assets were $3.3 billion on ~~September 30, 2018, down from $3.4 billion on~~March 31, 2019 and December 31, ~~2017. The decrease in other earning assets on a period-end basis was driven by~~2018, as lower levels of interest bearing cash ~~somewhat~~were offset by an increase in fixed income trading ~~securities.~~

securities and asset repos.

Non-earning assets

Period-end non-earning assets ~~increased to $4.7~~were $4.6 billion on ~~September 30, 2018 from $4.5 billion on~~March 31, 2019 and December 31, ~~2017. The~~2018, as an increase ~~in non-earning~~due to the recognition of ROU assets ~~was primarily due to~~associated with the adoption of ASU ~~2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities,~~2016-02, "Leases," ~~which resulted~~was partially offset by a decrease in the reclassification of equity securities from investment securities to other assets. Additionally, an increase in fixed income receivables also contributed to the increase in non-earning assets as of September 30, 2018.cash.

Deposits

Average deposits were ~~$30.8~~$32.5 billion during ~~third~~first quarter ~~2018,~~2019, up 242 percent and 408 percent, respectively from ~~$24.9~~$31.8 billion in fourth quarter ~~2017~~2018 and ~~$22.1~~$30.2 billion in ~~third~~first quarter ~~2017.~~2018. The increase in average deposits from fourth quarter 2018 and first quarter 2018 was driven by increases in commercial and consumer interest deposits primarily as a result of FHN's strategic focus on growing these types of deposits. On an average basis, market-indexed deposits increased relative to first quarter 2018, largely driven by loan demand throughout the year, but decreased relative to fourth quarter 2018 as FHN was able to utilize the influx of commercial and consumer interest deposits (as a more efficient use of funding) to meet loan demands. The decrease in non-interest bearing deposits from fourth quarter 2018 was due ~~primarily~~ to ~~the addition~~seasonal outflows of ~~$8.1 billion~~commercial deposits which more than offset seasonal inflows of ~~deposits associated with the CBF acquisition.~~

FHN's composition of deposits shifted slightly from third and fourth quarter 2017, resulting in an increase in interest-bearing deposits in third quarter 2018 relative to the prior year. Market-indexed deposits as a percentage of total deposits decreased from 16 percent in third quarter 2017 and fourth quarter 2017, respectively, to 15 percent in third quarter 2018, while commercial interest increased as a percentage of totalconsumer deposits.

Period-end deposits were ~~$31.0~~$32.5 billion on ~~September 30, 2018, up~~March 31, 2019, down 1 percent from ~~$30.6~~$32.7 billion on December 31, ~~2017,~~2018, and up 405 percent from ~~$22.1~~$30.8 billion on ~~September 30, 2017. The increase~~March 31, 2018. On a period-end basis, deposits increased from March 31, 2018 driven by increases in ~~period-end~~commercial and consumer interest deposits, from September 30, 2017 was also primarily due to deposits acquired in the CBF acquisition. The increase in period-end deposits from December 31, 2017 was largely the result of an increase in time deposits and savings, somewhat offset by a decline in ~~other interest~~market-indexed deposits and non-interest bearing deposits. The decrease in deposits from December 31, 2018 was primarily due to a decrease in market-indexed deposits and non-interest bearing deposits which more than offset the influx of commercial and consumer interest deposits. The following table summarizes FHN's average deposits for ~~the quarters ended September 30, 2018~~quarters-ended March 31, 2019 and December 31, ~~2017.~~

2018.

Table 6—Average Deposits


	Quarter Ended September 30, 2018				Quarter Ended December 31, 2017						Quarter Ended March 31, 2019				Quarter Ended December 31, 2018
(Dollars in thousands)	Amount		Percent of total		Amount		Percent of total		Growth Rate		Amount		Percent of total		Amount		Percent of total		Growth Rate
Interest-bearing deposits:
Consumer interest	$	12,663,181	41	%	$	10,279,937	41	%	23	%	$	13,390,692	41	%	$	12,965,734	41	%	3	%
Commercial interest	5,580,371		18		3,684,643		15		51		6,577,476		20		5,900,136		19		11
Market-indexed (a)	4,486,335		15		3,958,224		16		13		4,734,295		15		4,947,192		16		(4	)
Total interest-bearing deposits	22,729,887		74		17,922,804		72		27		24,702,463		76		23,813,062		75		4
Noninterest-bearing deposits	8,117,349		26		6,972,912		28		16		7,795,015		24		8,034,692		25		(3	)
Total deposits	$	30,847,236	100	%	$	24,895,716	100	%	24	%	$	32,497,478	100	%	$	31,847,754	100	%	2	%

(a) Market-indexed deposits are tied to ~~indices~~an index not administered by FHN and are comprised of insured network deposits, correspondent banking deposits, and trust/sweep deposits.

Short-Term Borrowings

Short-term borrowings (federal funds purchased (“FFP”), securities sold under agreements to repurchase, trading liabilities, and other short-term borrowings) averaged ~~$2.7~~$1.5 billion in ~~third~~first quarter ~~2018,~~2019, down 915 percent from ~~$3.0~~$1.8 billion in fourth quarter ~~2017. The~~2018. As noted in the table below, the decrease in short-term borrowings between ~~third~~first quarter ~~2018~~2019 and fourth quarter ~~2017~~2018 was primarily due to decreases in trading liabilities and other short-term borrowings. To a lesser extent a decrease in ~~other short-term borrowings, partially offset by an increase in~~ securities

sold under agreements to ~~repurchase.~~repurchase also contributed to the decline but was somewhat offset by increases in FFP. Average trading liabilities fluctuates based on expectations of customer demand. Other short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. ~~Average securities~~ ~~sold under agreements to repurchase increased in third quarter 2018, as an additional source of wholesale funding for FHN's balance sheet activities.~~ Period-end short-term borrowings ~~decreased~~increased to ~~$2.9~~$1.7 billion on ~~September 30, 2018~~March 31, 2019 from ~~$4.3~~$1.5 billion on December 31, ~~2017.~~2018. The ~~decrease~~increase in short-term borrowings on a period-end basis was primarily driven by ~~a decrease~~increases in ~~other short-term borrowings (primarily FHLB advances), somewhat offset by higher levels of~~ trading ~~inventory. The following table provides detail regarding FHN's average short-term borrowings for the quarters ended September 30, 2018~~liabilities and ~~December 31, 2017.~~FFP.

Table 7—Average Short-Term Borrowings


	Quarter Ended September 30, 2018				Quarter Ended December 31, 2017						Quarter Ended March 31, 2019				Quarter Ended December 31, 2018
(Dollars in thousands)	Amount		Percent of total		Amount		Percent of total		Growth Rate		Amount		Percent of total		Amount		Percent of total		Growth Rate
Short-term borrowings:
Federal funds purchased	$	454,670	17	%	$	425,900	14	%	7	%	$	370,868	25	%	$	334,036	18	%	11	%
Securities sold under agreements to repurchase	720,716		26		595,275		20		21		688,765		44		710,898		39		(3	)
Trading liabilities	702,026		26		741,063		25		(5	)	375,169		24		543,696		30		(31	)
Other short-term borrowings	861,865		31		1,246,087		41		(31	)	114,474		7		244,413		13		(53	)
Total short-term borrowings	$	2,739,277	100	%	$	3,008,325	100	%	(9	)%	$	1,549,276	100	%	$	1,833,043	100	%	(15	)%

Term Borrowings

Term borrowings include senior and subordinated borrowings with original maturities greater than one year. ~~Term~~Average and period-end term borrowings were $1.2 billion on ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Average term borrowings increased to $1.2 billion in third quarter 2018 from $1.1 billion in fourth quarter 2017 primarily driven by a full quarter of average impact of the addition of $212.4 million junior subordinated debentures underlying trust preferred debt acquired in association with the CBF acquisition. In fourth quarter 2017, this balance was only included for one month due to the timing of the CBF acquisition. In third quarter 2018, FHN retired $10.3 million of this junior subordinated debt and the related trust preferred debt. FHN has retired or given notice of its election to retire an additional $35.1 million of this debt in fourth quarter 2018.

Other Liabilities

Period-end other liabilities were ~~$.8~~$1.0 billion on ~~September 30, 2018 compared to~~March 31, 2019, up from $.7 billion on December 31, ~~2017.~~2018, primarily due to the recognition of lease liabilities associated with the adoption of ASU 2016-02, "Leases" and an increase in fixed income payables.

CAPITAL

Management’s objectives are to provide capital sufficient to cover the ~~risks~~risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards, and to assure ready access to the capital markets. Period-end equity ~~was~~increased $.1 billion to $4.8 billion on March 31, 2019 from December 31, 2018. Average equity increased to $4.8 billion in first quarter 2019 from $4.7 billion ~~on September 30, 2018 compared~~in fourth quarter 2018. The increase in period-end and average equity was primarily due to ~~$4.6 billion on December 31, 2017 as~~ net income recognized ~~in the nine months ended September 30,~~since fourth quarter 2018, ~~was~~somewhat offset by common and preferred dividends paid, share repurchases (mentioned below), as well as a decrease in accumulated other comprehensive income ("AOCI")~~, and the cancellation of 2,373,220 common shares in connection with CBF dissenting shareholders (mentioned below)~~. The decrease in AOCI was largely driven by an increase in unrealized losses on AFS debt securities as a result of higher rates. Average equity increased to $4.6 billion in third quarter 2018 from $3.5 billion in fourth quarter 2017, due in large part to the average impact of $1.8 billion of equity issued in connection with the CBF acquisition on November 30, 2017. Average equity was negatively impacted by a decline in AOCI and the cancellation of the dissenters' shares. The decline in AOCI was largely the result of ~~an increase~~a decrease in unrealized losses ~~recognized on~~associated with AFS debt ~~securities and an increase in net actuarial losses for pension and post retirement plans.~~securities.

The following tables provide a reconciliation of Shareholders’ equity from the Consolidated Condensed Statements of Condition to Common Equity Tier 1, Tier 1 and Total Regulatory Capital as well as certain selected capital ratios:

Table 8—Regulatory Capital and Ratios

(Dollars in thousands)
September 30, 2018 December 31, 2017
Shareholders’ equity $ 4,446,500
$ 4,285,057
FHN non-cumulative perpetual preferred (95,624 ) (95,624 )
Common equity $ 4,350,876
$ 4,189,433
Regulatory adjustments:
Disallowed goodwill and other intangibles (1,513,204 ) (1,480,725 )
Net unrealized (gains)/losses on securities available-for-sale 133,400
26,834
Net unrealized (gains)/losses on pension and other postretirement plans 282,746
288,227
Net unrealized (gains)/losses on cash flow hedges 21,503
7,764
Disallowed deferred tax assets (22,256 ) (69,065 )
Other deductions from common equity tier 1 (240 ) (313 )
Common equity tier 1 $ 3,252,825
$ 2,962,155
FHN non-cumulative perpetual preferred 95,624
95,624
Qualifying noncontrolling interest—FTBNA preferred stock 241,116
257,080
Other deductions from tier 1 —
(33,381 )
Tier 1 capital $ 3,589,565
$ 3,281,478
Tier 2 capital (a) 383,576
422,276
Total regulatory capital $ 3,973,141
$ 3,703,754
Risk-Weighted Assets
First Horizon National Corporation $ 33,041,617
$ 33,373,877
First Tennessee Bank National Association 32,502,442
32,786,547
Average Assets for Leverage
First Horizon National Corporation 38,962,431
31,824,751
First Tennessee Bank National Association 38,106,208
31,016,187



(Dollars in thousands)	March 31, 2019			December 31, 2018
Shareholders’ equity	$	4,551,090		$	4,489,949
FHN non-cumulative perpetual preferred	(95,624		)	(95,624		)
Common equity	$	4,455,466		$	4,394,325
Regulatory adjustments:
Disallowed goodwill and other intangibles	(1,523,565		)	(1,529,532		)
Net unrealized (gains)/losses on securities available-for-sale	27,121			75,736
Net unrealized (gains)/losses on pension and other postretirement plans	287,305			288,768
Net unrealized (gains)/losses on cash flow hedges	6,725			12,112
Disallowed deferred tax assets	(13,749		)	(17,637		)
Other deductions from common equity tier 1	(54		)	(70		)
Common equity tier 1	$	3,239,249		$	3,223,702
FHN non-cumulative perpetual preferred	95,624			95,624
Qualifying noncontrolling interest—FTBNA preferred stock	248,704			246,047
Tier 1 capital	$	3,583,577		$	3,565,373
Tier 2 capital	380,324			374,744
Total regulatory capital	$	3,963,901		$	3,940,117
Risk-Weighted Assets
First Horizon National Corporation	$	33,656,950		$	33,002,595
First Tennessee Bank National Association	33,168,717			32,592,577
Average Assets for Leverage
First Horizon National Corporation	39,717,387			39,221,755
First Tennessee Bank National Association	38,923,818			38,381,985


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount
Common Equity Tier 1
First Horizon National Corporation	9.84	%	$	3,252,825	8.88	%	$	2,962,155	9.62	%	$	3,239,249	9.77	%	$	3,223,702
First Tennessee Bank National Association	10.10		3,282,347		9.28		3,041,420		9.68		3,209,689		9.81		3,197,725
Tier 1
First Horizon National Corporation	10.86		3,589,565		9.83		3,281,478		10.65		3,583,577		10.80		3,565,373
First Tennessee Bank National Association	11.01		3,577,163		10.12		3,317,684		10.57		3,504,505		10.72		3,492,541
Total
First Horizon National Corporation	12.02		3,973,141		11.10		3,703,754		11.78		3,963,901		11.94		3,940,117
First Tennessee Bank National Association	11.63		3,779,301		10.74		3,520,670		11.17		3,706,028		11.32		3,689,180
Tier 1 Leverage
First Horizon National Corporation	9.21		3,589,565		10.31		3,281,478		9.02		3,583,577		9.09		3,565,373
First Tennessee Bank National Association	9.39		3,577,163		10.70		3,317,684		9.00		3,504,505		9.10		3,492,541


~~(a)~~	Third quarter 2018 reflects a reduction of $39.0 million in Tier 2 qualifying trust preferred securities which were retired in third and fourth quarters 2018 or will be retired during fourth quarter 2018 and for which notice of the retirement was given by September 30, 2018.

Banking regulators define minimum capital ratios for bank holding companies and their bank subsidiaries. Based on the capital rules and definitions prescribed by the banking regulators, should any depository institution’s capital ratios decline below predetermined levels, it would become subject to a series of increasingly restrictive regulatory actions. The system categorizes a depository institution’s capital position into one of five categories ranging from well-capitalized to critically under-capitalized. For an institution the size of FHN to qualify as well-capitalized, Common Equity Tier 1, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least 6.5 percent, 8 percent, 10 percent, and 5 percent, respectively. Furthermore, beginning January 1, 2019, a capital conservation buffer of 50 basis points above these levels must be maintained on the Common Equity Tier 1, Tier 1 Capital and Total Capital ratios to avoid restrictions on dividends, share repurchases and discretionary bonuses. As of ~~September 30, 2018, each of~~March 31, 2019, both FHN and FTBNA had sufficient capital to qualify as a well-capitalized ~~institution.~~institutions and to meet the capital conservation buffer requirement. For both FHN and FTBNA, the risk-based regulatory capital ratios ~~increased~~decreased in ~~third~~first quarter ~~2018~~2019 relative to fourth quarter ~~2017~~2018 primarily due to the impact of net income ~~including the gain from the sale of FHN's remaining holdings of Visa Class B shares,~~ less

dividends ~~declared during the nine months ended September 30, 2018. The increase in the ratios for FHN was partially offset by CBF dissenters' share cancellations~~ and share repurchases during the ~~nine months ended September 30, 2018. The~~quarter as well as increased risk-weighted assets primarily from loan growth. Also, the Tier 1 leverage ratio declined for both FHNC and FTBNA as average assets for leverage in the ~~third~~first quarter ~~2018 reflect the full impact of the CBF acquisition compared~~2019 increased relative to ~~only one month in~~ fourth quarter ~~2017.~~2018. During ~~the remainder of 2018 and into~~ 2019, capital ratios are expected to remain above well capitalized ~~standards.~~standards plus the required capital conservation buffer.

Common Stock Purchase Programs

Pursuant to board authority, FHN may repurchase shares of its common stock from time to time and will evaluate the level of capital and take action designed to generate or use capital, as appropriate, for the interests of the shareholders, subject to legal and regulatory restrictions. Two common stock purchase programs currently authorized are discussed below. FHN’s board has not authorized a preferred stock purchase program.

Table 9a—Issuer Purchases of Common Stock - General Authority

On January 23, 2018, FHN announced a $250 million share purchase authority with an expiration date of January 31, 2020. ~~The program replaces~~On January 29, 2019, FHN announced a $250 million increase in that authority along with an ~~older program that was terminated at~~extension of the ~~same time with $189.7 million of remaining authority unused which was scheduled~~expiration date to ~~expire on~~ January 31, ~~2018.~~2021. Purchases may be made in the open market or through privately negotiated transactions and are subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions. As of ~~September 30, 2018, $19.0~~March 31, 2019, $151.0 million in purchases had been made under this authority at an average price per share of ~~$17.84, or $17.82~~$15.25, $15.23 excluding commissions.

(Dollar values and volume in thousands, except per share data) Total number
of shares
purchased Average price
paid per share (a) Total number of
shares purchased
as part of publicly
announced programs Maximum approximate dollar value that may yet be purchased under the programs
2018
July 1 to July 31 298
$ 17.46
298
$ 244,796
August 1 to August 31 288
$ 18.11
288
$ 239,572
September 1 to September 30 478
$ 17.91
478
$ 231,020
Total 1,064
$ 17.84
1,064



(Dollar values and volume in thousands, except per share data)	Total number of shares purchased	Average price paid per share (a)		Total number of shares purchased as part of publicly announced programs	Maximum approximate dollar value that may yet be purchased under the programs
2019
January 1 to January 31	404	$	14.67	404	$	394,634
February 1 to February 28	1,159	$	15.21	1,159	$	377,009
March 1 to March 31	1,907	$	14.66	1,907	$	349,048
Total	3,470	$	14.85	3,470

(a) Represents total costs including commissions paid.

Table 9b—Issuer Purchase of Common Stock - Compensation Authority

A consolidated compensation plan share purchase program was announced on August 6, 2004. This program consolidated into a single share purchase program all of the previously authorized compensation plan share programs as well as the renewal of the authorization to purchase shares for use in connection with two compensation plans for which the share purchase authority had expired. The total amount authorized under this consolidated compensation plan share purchase program, inclusive of a program amendment on April 24, 2006, is 29.6 million shares calculated before adjusting for stock dividends distributed through January 1, 2011. The authorization has been reduced for that portion which relates to compensation plans for which no options remain outstanding. The shares may be purchased over the option exercise period of the various compensation plans on or before December 31, 2023. Purchases may be made in the open market or through privately negotiated transactions and are subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions. ~~On September 30, 2018,~~As of March 31, 2019, the maximum number of shares that may be purchased under the program was ~~25.2~~25.0 million shares. Management currently does not anticipate purchasing a material number of shares under this authority during ~~2018.~~2019.

(Volume in thousands, except per share data)
Total number
of shares
purchased

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced programs

Maximum number
of shares that may
yet be purchased
under the programs
2018
July 1 to July 31 2
$ 17.77
2
25,193
August 1 to August 31 10
$ 18.41
10
25,182
September 1 to September 30 —
N/A
—
25,182
Total 12
$ 18.31
12



(Volume in thousands, except per share data)	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced programs	Maximum number of shares that may yet be purchased under the programs
2019
January 1 to January 31	12	$	14.71	12	25,151
February 1 to February 28	3	$	15.06	3	25,148
March 1 to March 31	109	$	15.55	109	25,039
Total	124	$	15.46	124

~~Cancellation of Dissenters' Shares~~

On November 30, 2017, FHN completed its merger with CBF, which was a Delaware corporation. Under Delaware corporate law, each CBF shareholder had the right to dissent from the terms of the merger and obtain a judicial appraisal of the pre-merger value of his, her, or its CBF shares. If the dissent and appraisal process is followed to its conclusion, FHN is required by law to pay each dissenter the appraised value, entirely in cash. In 2017 certain CBF shareholders commenced the dissent and appraisal process. When the merger closed in 2017, FHN issued a total of 2,373,220 FHN common shares for those CBF shareholders in accordance with the terms of the merger agreement, but FHN set them aside for later delivery or cancellation. In April, 2018, the process reached a point where FHN canceled those set-aside shares. Cancellation resulted in a reduction in the equity consideration recorded by FHN and an increase in cash consideration of $46.0 million. The final appraisal or settlement amounts, as applicable, may differ from current estimates.ASSET QUALITY

~~ASSET QUALITY~~

Loan Portfolio Composition

FHN groups its loans into portfolio segments based on internal classifications reflecting the manner in which the ALLL is established and how credit risk is measured, monitored, and reported. From time to time, and if conditions are such that certain subsegments are uniquely affected by economic or market conditions or are experiencing greater deterioration than other components of the loan portfolio, management may determine the ALLL at a more granular level. Commercial loans are composed of commercial, financial, and industrial (“C&I”) and commercial real estate (“CRE”). Consumer loans are composed of consumer real estate; permanent mortgage; and credit card and other. FHN has a concentration of residential real estate loans ~~(24~~(23 percent of total loans), the majority of which is in the consumer real estate portfolio ~~(23~~(22 percent of total loans). Industry concentrations are discussed under the heading C&I below.

Consolidated key asset quality metrics for each of these portfolios can be found in Table 17 – Asset Quality by Portfolio. Credit underwriting guidelines are outlined in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, in the Loan Portfolio Composition discussion in the Asset Quality Section beginning on page 2728 and continuing to page ~~46.~~47. FHN’s credit underwriting guidelines and loan product offerings as of ~~September 30, 2018,~~March 31, 2019, are generally consistent with those reported and disclosed in the Company’s Form 10-K for the year ended December 31, ~~2017.~~2018.

COMMERCIAL LOAN PORTFOLIOS

C&I

The C&I portfolio was ~~$16.0~~$17.2 billion on ~~September 30, 2018,~~March 31, 2019, and is comprised of loans used for general business purposes. Typical products include working capital lines of credit, term loan financing of owner-occupied real estate and fixed assets, and trade credit enhancement through letters of credit. The largest geographical concentrations of balances as of ~~September 30, 2018,~~March 31, 2019, are in Tennessee ~~(36~~(34 percent), North Carolina (11 percent), Texas (7 percent), Florida (6 percent), ~~Texas~~California (6 percent), ~~California (5~~Georgia (4 percent), and ~~Georgia~~South Carolina (4 percent), with no other state representing more than 3 percent of the portfolio.

The following table provides the composition of the C&I portfolio by industry as of ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017.~~2018. For purposes of this disclosure, industries are determined based on the North American Industry Classification System (“NAICS”) industry codes used by Federal statistical agencies in classifying business establishments for the collection, analysis, and publication of statistical data related to the U.S. business economy.

Table 10—C&I Loan Portfolio by Industry


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
Industry:
Finance & insurance	$	2,668,466	17	%	$	2,859,769	18	%	$	2,632,236	15	%	$	2,766,041	17	%
Loans to mortgage companies	2,092,366		13		2,099,961		13		2,301,340		13		2,023,746		12
Real estate rental & leasing (a)	1,372,597		9		1,408,299		9		1,595,875		9		1,548,903		9
Manufacturing									1,365,809		8		1,245,230		8
Health care & social assistance	1,250,442		8		1,201,285		7		1,355,806		8		1,309,983		8
Manufacturing	1,202,305		7		1,184,861		7
Accommodation & food service	1,157,339		7		1,145,944		7		1,203,112		7		1,171,333		7
Wholesale trade	1,151,063		7		1,060,642		7		1,171,982		7		1,166,590		7
Retail trade	797,980		5		831,790		5		811,591		5		765,254		5
Public administration	739,926		5		705,704		4		785,933		5		778,497		5
Other (education, arts, entertainment, etc) (b)	3,611,661		22		3,559,018		23		3,952,428		23		3,738,751		22
Total C&I loan portfolio	$	16,044,145	100	%	$	16,057,273	100	%	$	17,176,112	100	%	$	16,514,328	100	%


(a)	Leasing, rental of real estate, equipment, and goods.


(b)	Industries in this category each comprise less than 5 percent for ~~2018.~~2019.

Industry Concentrations

Loan concentrations are considered to exist for a financial institution when there are loans to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. 3028 percent of FHN’s C&I portfolio (Finance and insurance plus Loans to mortgage companies) could be affected by items that uniquely impact the financial services industry. Except “Finance and Insurance” and “Loans to Mortgage Companies”, as discussed below, on ~~September 30, 2018,~~March 31, 2019, FHN did not have any other concentrations of C&I loans in any single industry of 10 percent or more of total loans.

Finance and Insurance

The finance and insurance component ~~represen~~represent~~ts 17~~s 15 percent of the C&I portfolio and includes ~~TRUPs~~TRUPS (i.e., long-term unsecured loans to bank and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of ~~September 30, 2018,~~March 31, 2019, asset-based lending to consumer finance companies represents approximately ~~$1.2~~$1.1 billion of the finance and insurance component.

~~TRUPs~~TRUPS lending was originally extended as a form of “bridge” financing to participants in the pooled trust preferred securitization program offered primarily to smaller banking (generally less than $15 billion in total assets) and insurance institutions through FHN’s fixed income business. Origination of ~~TRUPs~~TRUPS lending ceased in early 2008. Individual ~~TRUPs~~TRUPS are re-graded at least quarterly as part of FHN’s commercial loan review process. During second quarter 2018, FHN revised the grading approach associated with the TRUPs portfolio to align with its scorecard grading methodologies which resulted in upgrades to a majority of this portfolio. The terms of these loans generally include a scheduled 30 year balloon payoff and include an option to defer interest for up to 20 consecutive quarters. As of ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017,~~2018, one TRUP relationship was on interest deferral.

~~During third quarter 2018, FHN sold three TRUP relationships with an~~As of March 31, 2019, the unpaid principal balance ~~("UPB"~~(“UPB”) of $55.5 million and valuation allowance of $5.0 million. Upon sale, FHN recognized a $3.8 million gain which is presented in the Non-Strategic segment within Fixed Income in the Consolidated Condensed Statement of Income. As of September 30, 2018, the UPB of trust preferred loans totaled ~~$276.8~~$269.6 million ($~~193.0~~188.9 million of bank ~~TRUPs~~TRUPS and ~~$83.8~~$80.8 million of insurance ~~TRUPs)~~TRUPS) with the UPB of other bank-related loans totaling ~~$236.2~~$243.3 million. Inclusive of a valuation allowance on ~~TRUPs~~TRUPS of ~~$20.5~~$20.2 million, total reserves (ALLL plus the valuation allowance) for ~~TRUPs~~TRUPS and other bank-related loans were ~~$21.5~~$21.3 million or 4 percent of outstanding UPB.

Loans to Mortgage Companies

The balance of loans to mortgage companies was 13 ~~perce~~percntent of the C&I portfolio as of ~~September 30, 2018~~March 31, 2019, ~~and~~12 percent as of December 31, ~~2017, respectively,~~2018 and 11 percent as of March 31, 2018, and includes balances related to both home purchase and refinance ~~activity. In third quarter 2018, 77 percent of the loans funded were home purchases and 23 percent were refinance transactions.~~activity. This portfolio c~~lass,~~class, which generally fluctuates with mortgage rates and seasonal factors, includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Generally, lending to mortgage lenders increases when there is a decline in mortgage rates and decreases when rates rise. In first quarter 2019, 70 percent of the loans funded were home purchases and 30 percent were refinance transactions.

C&I Asset Quality Trends

Overall, the C&I portfolio trends remain ~~strong~~stable in ~~2018,~~ 2019, continuing in line with recent historical performance. The C&I ALLL increased ~~$2.1~~$4.8 million from December 31, ~~2017,~~2018, to ~~$100.3~~$103.7 million as of ~~September 30, 2018.~~March 31, 2019, primarily due to loan growth. The allowance as a percentage of period-end loans ~~increased to .63~~remained the same at .60 percent as of ~~September 30, 2018, from .61 percent as of December~~March 31, ~~2017.~~2019, compared to year-end 2018. Nonperforming C&I loans increased ~~$11.0~~$35.2 million from December 31, ~~2017,~~2018, to ~~$42.1~~$75.0 million on ~~September 30, 2018, primarily driven by one credit which was partially offset by payments, returns to accrual status, or other resolutions.~~March 31, 2019. The nonperforming loan (“NPL”) ratio increased 720 basis points from December 31, ~~2017,~~2018, to ~~.26~~.44 percent of C&I loans as of ~~September 30, 2018.~~March 31, 2019. The increase in NPLs was primarily driven by three credits. The 30+ delinquency ratio ~~decreased 4~~increased one basis ~~points~~point to ~~.15~~.07 percent as of ~~September 30, 2018. Third~~ March 31, 2019. First quarter ~~2018~~2019 experienced net charge-offs of ~~$.3~~$2.3 million compared to ~~$3.1~~$8.1 million and $.6 million of net charge-offs in ~~third~~fourth quarter ~~2017.~~2018 and first quarter 2018, respectively. The following table shows C&I asset quality trends by segment.

Table 11—C&I Asset Quality Trends by Segment


	2018									2019
	Three months ended									Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated			Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of July 1	$	95,526		$	1,308		$	96,834
Allowance for loan losses as of January 1										$	97,617		$	1,330		$	98,947
Charge-offs	(1,391		)	—			(1,391		)	(3,101		)	—			(3,101		)
Recoveries	1,044			8			1,052			801			28			829
Provision/(provision credit) for loan losses	3,829			(10		)	3,819			7,076			(38		)	7,038
Allowance for loan losses as of September 30	$	99,008		$	1,306		$	100,314
Allowance for loan losses as of March 31										$	102,393		$	1,320		$	103,713
Net charge-offs % (qtr. annualized)	0.01		%	NM			0.01		%	0.06		%	NM			0.06		%
Allowance / net charge-offs	71.90		x	NM			74.66		x	10.98		x	NM			11.26		x

	As of September 30									As of March 31
Period-end loans	$	15,675,188		$	368,957		$	16,044,145		$	16,814,044		$	362,068		$	17,176,112
Nonperforming loans	39,188			2,936			42,124			72,158			2,838			74,996
Troubled debt restructurings	39,346			—			39,346			48,725			—			48,725
30+ Delinq. % (a)	0.15		%	—		%	0.15		%	0.06		%	0.46		%	0.07		%
NPL %(b)	0.25			0.80			0.26			0.43			0.78			0.44
Allowance / loans %	0.63			0.35			0.63			0.61			0.36			0.60

	2017									2018
	Three months ended									Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated			Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of July 1	$	90,958		$	1,421		$	92,379
Allowance for loan losses as of January 1										$	96,850		$	1,361		$	98,211
Charge-offs	(3,723		)	—			(3,723		)	(2,075		)	—			(2,075		)
Recoveries	586			15			601			1,515			4			1,519
Provision/(provision credit) for loan losses	9,039			(91		)	8,948			2,692			(109		)	2,583
Allowance for loan losses as of September 30	$	96,860		$	1,345		$	98,205
Allowance for loan losses as of March 31										$	98,982		$	1,256		$	100,238
Net charge-offs % (qtr. annualized)	0.10		%	NM			0.10		%	0.02		%	NM			0.01		%
Allowance / net charge-offs	7.83		x	NM			7.97		x	43.61		x	NM			44.48		x

	As of December 31									As of December 31
Period-end loans	$	15,639,060		$	418,213		$	16,057,273		$	16,151,298		$	363,030		$	16,514,328
Nonperforming loans	28,086			3,067			31,153			36,888			2,888			39,776
Troubled debt restructurings	17,670			—			17,670			36,739			—			36,739
30+ Delinq. % (a)	0.20		%	—		%	0.19		%	0.06		%	0.47		%	0.06		%
NPL %	0.18			0.73			0.19			0.23			0.80			0.24
Allowance / loans %	0.62			0.33			0.61			0.60			0.37			0.60

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.


(b)	1Q19 increase in NPLs as a percentages of total loans was primarily driven by three credits.

Commercial Real Estate

The CRE portfolio was ~~$4.2~~$3.9 billion on ~~September 30, 2018.~~March 31, 2019. The CRE portfolio includes both financings for commercial construction and nonconstruction loans. The largest geographical concentrations of ~~bala~~balances as~~nces as~~ of ~~September 30, 2018,~~March 31, 2019, are in North Carolina ~~(32~~(31 percent), Tennessee ~~(18~~(19 percent), Florida ~~(15~~(13 percent), South Carolina (8 percent), Texas (6(7 percent), Georgia (6(7 percent), and Ohio (4 percent), with no other state representing more than 3 percent of the portfolio. This portfolio is segregated between the income-producing CRE class which contains loans, draws on lines and letters of credit to commercial real estate developers for the construction and mini-permanent financing of income-producing real estate, and the residential CRE class. Subcategories of income CRE consist of multi-family ~~(27~~(25 percent), retail (20 percent), office ~~(18~~(19 percent), industrial ~~(12~~(15 percent), hospitality ~~(11~~(12 percent), land/land development (2 percent), and other ~~(10~~(7 percent).

The residential CRE class includes loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town homes, and on a limited basis, for ~~developing~~developing residential subdivisions. ~~Subsequent~~After the fulfillment of existing commitments, which will result in a moderate increase to loan balances, the ~~Capital Bank merger completed in 2017, active~~ residential CRE ~~lending is now primarily focused~~class will be in ~~certain FHN core markets. Nearly all new originations are to “strategic” clients. FHN considers~~ a ~~“strategic” residential CRE borrower as a homebuilder who demonstrates~~wind-down state with the ability to withstand cyclical downturns, maintains active development and investment activities providing for regular financing opportunities, and is fundamentally sound as evidenced by a prudent loan structure, appropriate covenants and recourse, and capable and willing sponsorsexpectation of full runoff in ~~markets with positive homebuilding and economic dynamics.~~the foreseeable future.

CRE Asset Quality Trends

The CRE portfolio had continued ~~stable~~strong performance as of ~~September 30,~~March 31, 2019, with nonperforming loans down $0.3 million from December 31, 2018, and a $1.0 million decrease in delinquencies since December 31, 2018. The allowance increased ~~$5.5 million from December 31, 2017,~~ to ~~$33.9~~$34.4 million as of ~~September 30, 2018.~~ ~~The increase in allowance was~~March 31, 2019, from $31.3 million as of December 31, 2018, driven by organic loan growth. Allowance as a percentage of loans increased 139 basis points from December 31, ~~2017,~~2018, to ~~.80~~.87 percent as of~~September 30, 2018.~~ March 31, 2019. Nonperforming loans as a percentage of total CRE loans ~~decreased to .02~~remained the same at .07 percent as of ~~September 30, 2018, from .03 percent at December~~March 31, ~~2017.~~2019 compared to year-end 2018. Accruing delinquencies as a percentage of period-end loans ~~increased~~decreased to ~~.20~~.04 percent as of ~~September 30, 2018~~March 31, 2019, from ~~.15~~.06 percent as of ~~year-end 2017.~~December 31, 2018. Net ~~recoveries~~charge-offs were ~~$.3 million~~$377 thousand in ~~third~~first quarter ~~2018 and third~~2019 compared to $38 thousand in first quarter ~~2017.~~2018. The following table shows commercial real estate asset quality trends by segment.

Table 12—Commercial Real Estate Asset Quality Trends by Segment



	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	31,311		$	—		$	31,311
Charge-offs	(434		)	—			(434		)
Recoveries	57			—			57
Provision/(provision credit) for loan losses	3,448			—			3,448
Allowance for loan losses as of March 31	$	34,382		$	—		$	34,382
Net charge-offs % (qtr. annualized)	0.04		%	NM			0.04		%
Allowance / net charge-offs	22.50		x	NM			22.50		x

	As of March 31
Period-end loans	$	3,946,943		$	—		$	3,946,943
Nonperforming loans	2,649			—			2,649
Troubled debt restructurings	2,878			—			2,878
30+ Delinq. % (a)	0.04		%	—		%	0.04		%
NPL %	0.07			—			0.07
Allowance / loans %	0.87			—			0.87

	2018
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	28,427		$	—		$	28,427
Charge-offs	(44		)	—			(44		)
Recoveries	6			—			6
Provision/(provision credit) for loan losses	668			—			668
Allowance for loan losses as of March 31	$	29,057		$	—		$	29,057
Net charge-offs % (qtr. annualized)	—			—			—
Allowance / net charge-offs	NM			NM			NM

	As of December 31
Period-end loans	$	4,030,870		$	—		$	4,030,870
Nonperforming loans	2,991			—			2,991
Troubled debt restructurings	1,505			—			1,505
30+ Delinq. % (a)	0.06		%	NM			0.06		%
NPL %	0.07			NM			0.07
Allowance / loans %	0.78			NM			0.78

2018
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 33,832
$ —
$ 33,832

Charge-offs (9 ) —
(9 )
Recoveries 252
15
267

Provision/(provision credit) for loan losses (160 ) (15 ) (175 )
Allowance for loan losses as of September 30 $ 33,915
$ —
$ 33,915

Net charge-offs % (qtr. annualized)              NM              NM              NM
Allowance / net charge-offs              NM              NM              NM

As of September 30
Period-end loans $ 4,237,036
$ —
$ 4,237,036

Nonperforming loans 1,006
—
1,006

Troubled debt restructurings 2,020
—
2,020

30+ Delinq. % (a) 0.20 % — % 0.20 %
NPL % 0.02
—
0.02

Allowance / loans % 0.80
—
0.80

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 30,470
$ —
$ 30,470

Charge-offs —
—
—

Recoveries 267
11
278

Provision/(provision credit) for loan losses (1,054 ) (11 ) (1,065 )
Allowance for loan losses as of September 30 $ 29,683
$ —
$ 29,683

Net charge-offs % (qtr. annualized)              NM              NM              NM
Allowance / net charge-offs              NM              NM              NM

As of December 31
Period-end loans $ 4,214,695
$ —
$ 4,214,695

Nonperforming loans 1,393
—
1,393

Troubled debt restructurings 2,407
—
2,407

30+ Delinq. % (a) 0.15 % — % 0.15 %
NPL % 0.03
—
0.03

Allowance / loans % 0.67
—
0.67

Certain previously reported amounts have been reclassified to agree with current presentation.

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

CONSUMER LOAN PORTFOLIOS

Consumer Real Estate

The consumer real estate portfolio was $6.2 billion on ~~September 30, 2018,~~March 31, 2019, and is primarily composed of home equity lines and installment loans including ~~restrict~~edrestricted balances (loans consolidated under ASC 810). The largest geographical concentrations of balances as of ~~September 30, 2018,~~March 31, 2019, are inin Tennessee ~~(53~~(54 percent), North Carolina (15 percent), ~~and~~ Florida (13 percent), and California (3 percent), with no other state ~~representing~~representing more than 3 percent of the ~~portfolio.~~portfolio. As of ~~September 30, 2018,~~March 31, 2019, approximately 7981 percent of the consumer real estate portfolio was in a first lien position. At origination, weighted average FICO score of this portfolio was 753 ~~for September 30, 2018 and December 31, 2017,~~ and refreshed FICO scores averaged ~~751 for September 30, 2018,~~752 on both March 31, 2019 and ~~758 for~~ December 31, ~~2017.~~2018. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

Home equity lines of credit (“HELOCs”) comprise ~~$1.6~~$1.5 billion of the consumer real estate portfolio as of ~~September 30, 2018.~~March 31, 2019. FHN’s HELOCs typically have a 5 or 10 year draw period followed by a 10 or 20 year repayment period, respectively. During the draw period, a borrower is able to draw on the line and is only required to make interest payments. The line is automatically frozen if a borrower becomes 45 days or more past due on payments. Once the draw period has concluded, the line is closed and the borrower is required to make both principal and interest payments monthly until the loan matures. The principal payment generally is fully amortizing, but payment amounts will adjust when variable rates reset to reflect changes in the prime rate.

As of ~~September 30, 2018, approximat~~March 31, 2019, approximately~~ely 71 pe~~ 73 ~~rcent~~percent of FHN's HELOCs are in the draw period compared to approximately 72 percent as of December 31, ~~2017.~~2018. Based on when draw periods are scheduled to end per the line agreement, it is expected that ~~$408.5~~$370.1 million, or 3635 percent of HELOCs currently in the draw period, will enter the repayment period during the next 60 months. Delinquencies and charge-off rates for HELOCs that have entered the repayment period are initially higher than HELOCs still in the draw period because of the increased minimum payment requirement; however, after some seasoning, performance of these loans usually begins to stabilize. The home equity lines of the consumer real estate portfolio are being monitored closely for those nearing the end of the draw period and borrowers are initially being contacted at least 24 months before the repayment period begins to remind the customer of the terms of their agreement and to inform them of options. The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period.

Table 13—HELOC Draw To Repayment Schedule


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
(Dollars in thousands)	Repayment Amount		Percent		Repayment Amount		Percent		Repayment Amount		Percent		Repayment Amount		Percent
Months remaining in draw period:
0-12	$	75,974	7	%	$	138,333	10	%	$	60,903	6	%	$	67,523	6	%
13-24	72,307		6		88,188		7		68,187		6		69,154		6
25-36	78,762		7		99,109		8		78,369		7		75,074		7
37-48	87,942		8		96,997		7		81,850		8		86,308		8
49-60	93,497		8		105,753		8		80,814		8		90,018		8
>60	714,919		64		792,723		60		695,061		65		715,390		65
Total	$	1,123,401	100	%	$	1,321,103	100	%	$	1,065,184	100	%	$	1,103,467	100	%

Consumer Real Estate Asset Quality Trends

~~The overall~~Overall, performance of the consumer real estate portfolio remained strong in ~~third~~first quarter 2018 despite deterioration of some metrics compared to year-end. Specifically, the regional bank’s NPLs as a percentage of loans increased 23 basis points to .62 percent and the 30+ delinquencies increased 16 basis points as of September 30, 2018. The balance of nonperforming loans increased $8.7 million to $80.2 million on September 30, 2018, primarily driven by the alignment of CBF's and FTB's policies related to second liens behind delinquent or modified first liens.2019. The non-strategic segment is a run-off portfolio and while the absolute dollars of delinquencies and nonaccruals as well as the 30+ accruing delinquencies ratio improved ~~or remained flat compared to~~from year-end, nonperforming loans ratios ~~deteriorated~~deteriorated. That trend of increasing deterioration of ratios in the non-strategic segment is likely to continue and may become more skewed as the portfolio shrinks and some of the stronger borrowers payoff or refinance elsewhere. NPLs as a percentage of loans increased 2 basis points from year-end to 1.34 percent as of March 31, 2019. The ALLL decreased ~~$10.8~~$2.4 million from December 31, ~~2017,~~2018, to ~~$26.5~~$24.1 million as of ~~September 30, 2018,~~March 31, 2019, with the majority of the decline attributable to the non-strategic segment. The allowance as a percentage of loans declined 163 basis points to ~~.43~~.39 percent as of ~~September 30, 2018,~~March 31, 2019, compared to year-end. The balance of nonperforming loans decreased to $82.6 million on March 31, 2019. Loans delinquent 30 or more days and still accruing ~~increased~~declined from ~~$41.5~~$46.5 million as of December 31, ~~2017,~~2018, to ~~$45.6~~$40.4 million as of ~~September 30, 2018.~~March 31, 2019. The portfolio realized net recoveries of ~~$2.5~~$.7 million in ~~third~~first quarter ~~2018~~2019 compared to net recoveries of ~~$2.6~~$1.4 million in ~~third~~fourth quarter ~~2017.~~2018 and net recoveries of $2.5 million in first quarter 2018. The following table shows consumer real estate asset quality trends by segment.

Table 14—Consumer Real Estate Asset Quality Trends by Segment



	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	14,479		$	11,960		$	26,439
Charge-offs	(1,641		)	(1,159		)	(2,800		)
Recoveries	1,036			2,417			3,453
Provision/(provision credit) for loan losses	1,255			(4,274		)	(3,019		)
Allowance for loan losses as of March 31	$	15,129		$	8,944		$	24,073
Net charge-offs % (qtr. annualized)	0.04		%	NM			NM
Allowance / net charge-offs	6.17		x	NM			NM

	As of March 31
Period-end loans	$	5,780,080		$	371,423		$	6,151,503
Nonperforming loans	40,826			41,770			82,596
Troubled debt restructurings	52,323			67,630			119,953
30+ Delinq. % (a)	0.52		%	2.77		%	0.66		%
NPL %	0.71			11.25			1.34
Allowance / loans %	0.26			2.41			0.39

	2018
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	18,859		$	20,964		$	39,823
Charge-offs	(470		)	(1,441		)	(1,911		)
Recoveries	862			3,521			4,383
Provision/(provision credit) for loan losses	(1,154		)	(5,940		)	(7,094		)
Allowance for loan losses as of March 31	$	18,097		$	17,104		$	35,201
Net charge-offs % (qtr. annualized)	NM			NM			NM
Allowance / net charge-offs	NM			NM			NM

	As of December 31
Period-end loans	$	5,844,778		$	404,738		$	6,249,516
Nonperforming loans	39,080			43,568			82,648
Troubled debt restructurings	47,480			70,954			118,434
30+ Delinq. % (a)	0.58		%	3.07		%	0.74		%
NPL %	0.67			10.76			1.32
Allowance / loans %	0.25			2.95			0.42

2018
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 15,748
$ 16,021
$ 31,769

Charge-offs (1,405 ) (1,396 ) (2,801 )
Recoveries 1,014
4,288
5,302

Provision/(provision credit) for loan losses (1,249 ) (6,484 ) (7,733 )
Allowance for loan losses as of September 30 $ 14,108
$ 12,429
$ 26,537

Net charge-offs % (qtr. annualized) 0.03 %              NM              NM
Allowance / net charge-offs 9.09 x              NM              NM

As of September 30
Period-end loans $ 5,748,961
$ 442,222
$ 6,191,183

Nonperforming loans 35,593
44,606
80,199

Troubled debt restructurings 46,288
73,441
119,729

30+ Delinq. % (a) 0.56 % 3.06 % 0.74 %
NPL % 0.62
10.09
1.30

Allowance / loans % 0.25
2.81
0.43

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 17,881
$ 28,188
$ 46,069

Charge-offs (1,492 ) (2,109 ) (3,601 )
Recoveries 1,105
5,083
6,188

Provision/(provision credit) for loan losses (562 ) (7,155 ) (7,717 )
Allowance for loan losses as of September 30 $ 16,932
$ 24,007
$ 40,939

Net charge-offs % (qtr. annualized) 0.04 %              NM              NM
Allowance / net charge-offs 11.04 x              NM              NM

As of December 31
Period-end loans $ 5,774,466
$ 593,289
$ 6,367,755

Nonperforming loans 22,678
48,809
71,487

Troubled debt restructurings 44,375
84,520
128,895

30+ Delinq. % (a) 0.40 % 3.06 % 0.65 %
NPL % 0.39
8.23
1.12

Allowance / loans % 0.28
3.53
0.59

Certain previously reported amounts have been reclassified to agree with current presentation.

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

Permanent Mortgage

The permanent mortgage portfolio was ~~$.3~~$.2 billion on ~~September 30, 2018.~~March 31, 2019. This portfolio is primarily composed of jumbo mortgages and one-time-close (“OTC”) completed construction loans in the non-strategic segment that were originated through legacy businesses. ~~The regional banking segment primarily includes recently acquired mortgage loans associated with FHN’s CRA initiatives.~~ The corporate segment includes loans that were previously included in off-balance sheet proprietary securitization trusts. These loans were brought back into the loan portfolios at fair value through the execution of cleanup calls due to the relatively small balances left in the securitization and should continue to run-off. ~~Appr~~Approximately ~~18 percent~~27 percent of loan balances as of ~~September 30, 2018,~~March 31, 2019, are in California, but the remainder of the portfolio is somewhat geographically diverse. Non-strategic and corporate segment run-off contributed to a majority of the ~~$52.3~~$13.2 million net decrease in permanent mortgage period-end balances from December 31, ~~2017,~~2018, to ~~September 30, 2018.~~March 31, 2019.

~~Permanent Mortgage Asset Quality Trends~~

The permanent mortgage portfolios within the non-strategic and corporate segments are run-off portfolios. As a result, asset quality metrics ~~may become~~are becoming skewed as the portfolio shrinks and some of the stronger borrowers payoff or refinance elsewhere. The ALLL decreased ~~$2.1 million~~ to ~~$13.5~~$10.1 million as of ~~September 30, 2018,~~March 31, 2019, from $11.0 million as of December 31, ~~2017.~~2018. TDR reserves (which are estimates of losses for the expected life of the loan) comprise 7490 percent of the ALLL for the permanent mortgage portfolio as of ~~September 30, 2018.~~March 31, 2019. Consolidated accruing delinquencies ~~increased $1.6~~decreased $3.1 million from year-end to ~~$9.0~~$4.1 million as of ~~September 30, 2018.~~March 31, 2019. Nonperforming loans decreased ~~$4.1~~$.8 million from December 31, ~~2017,~~2018, to ~~$22.3~~$21.0 million as of ~~September 30, 2018.~~March 31, 2019. The portfolio experienced net recoveries of ~~$.5~~$.6 million in ~~third~~first quarter ~~2018~~2019, compared to net ~~recoveries~~charge offs of ~~$.4~~$.1 million in ~~third~~first quarter ~~2017.~~2018. The following table shows permanent mortgage asset quality trends by segment.

Table 15—Permanent Mortgage Asset Quality Trends by Segment

2018
Three months ended
(Dollars in thousands) Regional Bank Corporate (a) Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 2,478
         N/A $ 11,600
$ 14,078
Charge-offs —
         N/A (15 ) (15 )
Recoveries —
         N/A 554
554
Provision/(provision credit) for loan losses (12 )          N/A (1,125 ) (1,137 )
Allowance for loan losses as of September 30 $ 2,466
         N/A $ 11,014
$ 13,480
Net charge-offs % (qtr. annualized) — %          N/A          NM          NM
Allowance / net charge-offs          NM          N/A          NM          NM

As of September 30
Period-end loans $ 113,935
$ 41,942
$ 191,177
$ 347,054
Nonperforming loans 336
1,727
20,259
22,322
Troubled debt restructurings 1,065
2,802
70,966
74,833
30+ Delinq. % (b) 0.79 % 4.21 % 3.31 % 2.59 %
NPL % 0.29
4.12
10.60
6.43
Allowance / loans % 2.16
         N/A 5.76
3.88

2017
Three months ended
(Dollars in thousands) Regional Bank Corporate (a) Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 1,981
         N/A $ 14,417
$ 16,398
Charge-offs —
         N/A (173 ) (173 )
Recoveries —
         N/A 542
542
Provision/(provision credit) for loan losses 287
         N/A (1,335 ) (1,048 )
Allowance for loan losses as of September 30 $ 2,268
         N/A $ 13,451
$ 15,719
Net charge-offs % (qtr. annualized) — %          N/A          NM          NM
Allowance / net charge-offs          NM          N/A          NM          NM

As of December 31
Period-end loans $ 116,914
$ 53,556
$ 228,837
$ 399,307
Nonperforming loans 427
2,157
23,806
26,390
Troubled debt restructurings 941
3,637
80,216
84,794
30+ Delinq. % (b) 0.35 % 3.98 % 2.12 % 1.85 %
NPL % 0.37
4.03
10.40
6.61
Allowance / loans % 2.17
         N/A 5.70
3.90



	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Corporate (a)			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	76		N/A			$	10,924		$	11,000
Charge-offs	—			N/A			(4		)	(4		)
Recoveries	—			N/A			588			588
Provision/(provision credit) for loan losses	(2		)	N/A			(1,501		)	(1,503		)
Allowance for loan losses as of March 31	$	74		N/A			$	10,007		$	10,081
Net charge-offs % (qtr. annualized)	—		%	N/A			NM			NM
Allowance / net charge-offs	NM			N/A			NM			NM

	As of March 31
Period-end loans	$	3,910		$	37,521		$	167,829		$	209,260
Nonperforming loans	309			1,687			18,954			20,950
Troubled debt restructurings	802			2,531			66,046			69,379
30+ Delinq. % (b)	11.83		%	4.54		%	1.14		%	1.95		%
NPL %	7.92			4.49			11.29			10.01
Allowance / loans %	1.90			N/A			5.96			4.82

	2018
	Three months ended
(Dollars in thousands)	Regional Bank			Corporate (a)			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	80		N/A			$	13,033		$	13,113
Charge-offs	—			N/A			(160		)	(160		)
Recoveries	—			N/A			65			65
Provision/(provision credit) for loan losses	15			N/A			(49		)	(34		)
Allowance for loan losses as of March 31	$	95		N/A			$	12,889		$	12,984
Net charge-offs % (qtr. annualized)	—		%	N/A			0.17%			0.14%
Allowance / net charge-offs	NM			N/A			33.55x			33.8x

	As of December 31
Period-end loans	$	3,988		$	39,221		$	179,239		$	222,448
Nonperforming loans	346			1,707			19,657			21,710
Troubled debt restructurings	933			2,557			67,356			70,846
30+ Delinq. % (b)	7.32		%	4.37		%	2.87		%	3.21		%
NPL %	8.69			4.35			10.97			9.76
Allowance / loans %	1.90			N/A			6.10			4.95

Certain previously reported amounts have been reclassified to agree with current presentation.

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	An allowance has not been established for these loans as the valuation adjustment taken upon exercise of clean-up calls included expected losses.


(b)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

Credit Card and Other

The credit card and other portfolio, which is primarily within the regional banking segment, was $.5 billion as of ~~September 30, 2018,~~March 31, 2019, and primarily includes credit card receivables, ~~automobile loans, and~~ other consumer-related ~~credits. The~~credits, and automobile loans, presented in the non-strategic segment, are a run-off portfolio of indirect auto loans acquired through the CBF acquisition. As a result, asset quality metrics within this portfolio may become skewed as the auto loan portfolio continues to shrink.loans. The allowance ~~increased $1.7 million from December 31, 2017, to $11.7~~was $12.7 million as of ~~September 30, 2018.~~December 31, 2018 and March 31, 2019. Loans 30 days or more delinquent and accruing ~~increased $1.0 million~~as a percentage of loans decreased 43 basis points from December 31, ~~2017,~~2018, to ~~$8.7 million~~1.20 percent as of ~~September 30, 2018.~~March 31, 2019. In ~~third~~both first quarter 2019 and first quarter 2018, FHN recognized ~~$4.5~~$3.1 million of net charge-offs in the credit card and other ~~portfolio, compared to $2.5 million in third quarter 2017. The following table shows credit card and other asset quality trends by segment.~~portfolio.

Table 16—Credit Card and Other Asset Quality Trends by Segment~~(a)~~



	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	12,595		$	132		$	12,727
Charge-offs	(3,002		)	(1,186		)	(4,188		)
Recoveries	745			342			1,087
Provision/(provision credit) for loan losses	2,179			857			3,036
Allowance for loan losses as of March 31	$	12,517		$	145		$	12,662
Net charge-offs % (qtr. annualized)	2.10		%	4.35		%	2.44		%
Allowance / net charge-offs	1.37		x	0.04		x	1.01		x

	As of March 31
Period-end loans	$	435,375		$	70,855		$	506,230
Nonperforming loans	35			398			433
Troubled debt restructurings	652			32			684
30+ Delinq. % (a)	0.64		%	4.61		%	1.20		%
NPL %	0.01			0.56			0.09
Allowance / loans %	2.87			0.20			2.50

	2018
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	9,894		$	87		$	9,981
Charge-offs	(3,343		)	(950		)	(4,293		)
Recoveries	853			296			1,149
Provision/(provision credit) for loan losses	2,237			640			2,877
Allowance for loan losses as of March 31	$	9,641		$	73		$	9,714
Net charge-offs % (qtr. annualized)	2.35		%	1.61		%	2.15		%
Allowance / net charge-offs	0.95		x	0.03		x	0.76		x

	As of December 31
Period-end loans	$	432,531		$	85,839		$	518,370
Nonperforming loans	34			590			624
Troubled debt restructurings	658			37			695
30+ Delinq. % (a)	0.89		%	5.35		%	1.63		%
NPL %	0.01			0.69			0.12
Allowance / loans %	2.91			0.15			2.46

2018
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 8,888
$ 61
$ 8,949

Charge-offs (3,852 ) (1,414 ) (5,266 )
Recoveries 654
150
804

Provision/(provision credit) for loan losses 5,637
1,589
7,226

Allowance for loan losses as of September 30 $ 11,327
$ 386
$ 11,713

Net charge-offs % (qtr. annualized) 3.01 % 4.47 % 3.32 %
Allowance / net charge-offs 0.89 x 0.08 x 0.66 x

As of September 30
Period-end loans $ 427,714
$ 103,082
$ 530,796

Nonperforming loans 22
684
706

Troubled debt restructurings 534
18
552

30+ Delinq. % (b) 0.72 % 5.47 % 1.64 %
NPL % 0.01
0.66
0.13

Allowance / loans % 2.65
0.37
2.21

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 11,917
$ 24
$ 11,941

Charge-offs (3,100 ) (73 ) (3,173 )
Recoveries 617
54
671

Provision/(provision credit) for loan losses 842
40
882

Allowance for loan losses as of September 30 $ 10,276
$ 45
$ 10,321

Net charge-offs % (qtr. annualized) 2.83 % 1.14 % 2.80 %
Allowance / net charge-offs 1.04 x 0.60 x 1.04 x

As of December 31
Period-end loans $ 439,745
$ 180,154
$ 619,899

Nonperforming loans 75
121
196

Troubled debt restructurings 564
29
593

30+ Delinq. % (b) 0.76 % 2.41 % 1.24 %
NPL % 0.02
0.07
0.03

Allowance / loans % 2.25
0.05
1.61

Certain amounts previously reported ~~amounts~~ have been reclassified to agree with current presentation.

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	~~In 3Q18, the acquired CBF indirect auto portfolio was retrospectively reclassed through 4Q17 from the Regional Banking segment to the Non-Strategic segment.~~


~~(b)~~	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

The following table provides additional asset quality data by loan portfolio:

Table 17—Asset Quality by Portfolio



	March 31			December 31
	2019			2018
Key Portfolio Details
C&I
Period-end loans ($ millions)	$	17,176		$	16,515
30+ Delinq. % (a)	0.07		%	0.06		%
NPL % (b)	0.44			0.24
Charge-offs % (qtr. annualized)	0.06			0.20
Allowance / loans %	0.60		%	0.60		%
Allowance / net charge-offs	11.26		x	3.06		x
Commercial Real Estate
Period-end loans ($ millions)	$	3,947		$	4,031
30+ Delinq. % (a)	0.04		%	0.06		%
NPL %	0.07			0.07
Charge-offs % (qtr. annualized)	0.04			0.05
Allowance / loans %	0.87		%	0.78		%
Allowance / net charge-offs	22.50		x	15.45		x
Consumer Real Estate
Period-end loans ($ millions)	$	6,152		$	6,250
30+ Delinq. % (a)	0.66		%	0.74		%
NPL %	1.34			1.32
Charge-offs % (qtr. annualized)	NM			NM
Allowance / loans %	0.39		%	0.42		%
Allowance / net charge-offs	NM			NM
Permanent Mortgage
Period-end loans ($ millions)	$	209		$	222
30+ Delinq. % (a)	1.95		%	3.21		%
NPL %	10.01			9.76
Charge-offs % (qtr. annualized)	NM			NM
Allowance / loans %	4.82		%	4.95		%
Allowance / net charge-offs	NM			NM
Credit Card and Other
Period-end loans ($ millions)	$	506		$	518
30+ Delinq. % (a)	1.20		%	1.63		%
NPL %	0.09			0.12
Charge-offs % (qtr. annualized)	2.44			3.32
Allowance / loans %	2.50		%	2.46		%
Allowance / net charge-offs	1.01		x	0.73		x

September 30 December 31
2018 2017
Key Portfolio Details
C&I
Period-end loans ($ millions) $ 16,044
$ 16,057

30+ Delinq. % (a) 0.15 % 0.19 %
NPL % 0.26
0.19

Charge-offs % (qtr. annualized) 0.01
0.28

Allowance / loans % 0.63 % 0.61 %
Allowance / net charge-offs 74.66 x 2.52 x
Commercial Real Estate
Period-end loans ($ millions) $ 4,237
$ 4,215

30+ Delinq. % (a) 0.20 % 0.15 %
NPL % 0.02
0.03

Charge-offs % (qtr. annualized)            NM            NM
Allowance / loans % 0.80 % 0.67 %
Allowance / net charge-offs            NM            NM
Consumer Real Estate
Period-end loans ($ millions) $ 6,191
$ 6,368

30+ Delinq. % (a) 0.74 % 0.65 %
NPL % 1.30
1.12

Charge-offs % (qtr. annualized)            NM              NM
Allowance / loans % 0.43 % 0.59 %
Allowance / net charge-offs            NM
             NM

Permanent Mortgage
Period-end loans ($ millions) $ 347
$ 399

30+ Delinq. % (a) 2.59 % 1.85 %
NPL % 6.43
6.61

Charge-offs % (qtr. annualized)            NM 0.10

Allowance / loans % 3.88 % 3.90 %
Allowance / net charge-offs            NM 37.67 x
Credit Card and Other
Period-end loans ($ millions) $ 531
$ 620

30+ Delinq. % (a) 1.64 % 1.24 %
NPL % 0.13
0.03

Charge-offs % (qtr. annualized) 3.32
2.30

Allowance / loans % 2.21 % 1.61 %
Allowance / net charge-offs 0.66 x 0.99 x

NM – Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.


(b)	1Q19 increase in NPLs as a percentage of total loans was primarily driven by three credits.

Allowance for Loan Losses

Management’s policy is to maintain the ALLL at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. The total allowance for loan losses ~~decreased~~increased to ~~$186.0~~$184.9 million on ~~September 30, 2018,~~March 31, 2019, from ~~$189.6~~$180.4 million on December 31, ~~2017.~~2018. The ALLL as of ~~September 30, 2018,~~March 31, 2019, reflects strong asset quality, ~~with the consumer real estate portfolio continuing to stabilize, historically low levels of~~declining net charge-offs from year end, increasing Regional Banking loan balances, and declining ~~non-strategic~~Non-Strategic balances. The ratio of allowance for loan losses to total loans, net of unearned income, ~~decreased 1 basis points to .68~~remained at .66 percent on ~~September 30, 2018,~~March 31, 2019, compared to December 31, ~~2017.~~2018.

The provision for loan losses is the charge to or release of earnings necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of probable incurred losses in the loan portfolio. ~~There~~Provision expense was $9.0 million in first quarter 2019 compared to a provision ~~expense~~credit of ~~$2.0~~$1.0 million ~~recorded~~ in ~~third~~first quarter ~~2018 compared to no recorded provision expense in third quarter 2017.~~2018.

FHN expects asset quality trends to remain relatively stable for the near term if the economy ~~continues to grow at the current pace.~~remains stable. The C&I portfolio is expected to continue to show stable trends but short-term variability (both positive and negative) is possible primarily due to the size of the credits within this portfolio. The CRE portfolio metrics should be relatively consistent as FHN expects stable property values over the near term; however, oversupply of any CRE product type, changes in the lending environment, or economic uncertainty could result in decreased property values (which could happen abruptly). The remaining non-strategic consumer real estate and permanent mortgage portfolios should continue to steadily wind down. Asset quality metrics within non-strategic ~~may become~~are becoming skewed as the portfolio continues to shrink. Continued stabilization in performance of the consumer real estate portfolio assumes an ongoing economic recovery as consumer delinquency and loss rates are correlated with life events that affect borrowers' finances, unemployment trends, and strength of the housing market.

Consolidated Net Charge-offs

~~Overall, net charge-offs continue to be at historical lows. Third~~First quarter ~~2018~~2019 experienced net charge-offs of ~~$1.5~~$4.5 million compared to ~~$2.4~~$1.4 million of net charge-offs in ~~third~~first quarter ~~2017.~~2018.

The commercial portfolio experienced ~~$.1~~$2.6 million of net charge-offs in ~~third~~first quarter ~~2018~~2019 compared to ~~$2.8~~$.6 million ofin net charge-offs in ~~third~~first quarter ~~2017.~~2018. In addition, the consumer real estate portfolio experienced net recoveries of ~~$2.5~~$.7 million in ~~third~~first quarter ~~2018~~2019 compared to ~~$2.6~~$2.5 million of net recoveries during ~~third~~first quarter ~~2017.~~2018. Permanent mortgage and credit card and other experienced net charge-offs of ~~$3.9~~$2.5 million in ~~third~~first quarter ~~2018~~2019 compared to ~~$2.1~~$3.2 million a year ago.

Nonperforming Assets

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on a case-by-case basis if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans in which FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy, and second liens, regardless of delinquency status, behind first liens that are 90 or more days past due, are bankruptcies, or are TDRs. These, along with OREO, excluding OREO from government insured mortgages, represent nonperforming assets (“NPAs”).

Total nonperforming assets (including NPLs HFS) increased to ~~$177.8~~$207.5 million on ~~September 30, 2018,~~March 31, 2019, from ~~$177.2~~$175.5 million on December 31, ~~2017.~~2018. The nonperforming assets ratio (nonperforming assets excluding NPLs HFS to total period-end loans plus OREO and other assets) increased to ~~.63~~.72 percent as of ~~September 30, 2018,~~March 31, 2019, compared to ~~.61~~.62 percent as of December 31, ~~2017.~~2018. Portfolio nonperforming loans increased ~~$15.7~~$33.9 million from December 31, ~~2017,~~2018, to ~~$146.4~~$181.6 million on ~~September 30, 2018.~~March 31, 2019. The increase in nonperforming loans was primarily driven by three credits within the C&I ~~and consumer real estate portfolios.~~portfolio.

The ratio of the ALLL to NPLs in the loan portfolio was ~~1.27~~1.02 times as of ~~September 30, 2018,~~March 31, 2019, compared to ~~1.45~~1.22 times as of December 31, ~~2017.~~2018. Certain nonperforming loans in both the commercial and consumer portfolios are deemed collateral-dependent and are charged down to an estimate of collateral value less costs to sell. Because loss content has been recognized through a partial charge-off, typically reserves are not recorded.

Table 18 provides an activity rollforward of OREO balances for ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. The balance of OREO, exclusive of inventory from government insured mortgages, ~~increased~~decreased to ~~$25.7~~$20.7 million as of ~~September 30, 2018,~~March 31, 2019, from ~~$7.9~~$32.4 million as of ~~September 30, 2017,~~March 31, 2018, driven by the ~~acquisition~~sale of ~~CBF. In addition, FHN has executed sales of existing~~ OREO, ~~and continued efforts to avoid foreclosures by restructuring loans and working with borrowers.~~primarily those acquired from CBF. Moreover, property values have stabilized which also affects the balance of OREO.

Table 18—Rollforward of OREO


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
Beginning balance	$	26,457		$	7,038		$	39,566		$	11,235		$	22,387		$	39,566
Valuation adjustments	(776		)	(41		)	(2,198		)	(662		)	35			(1,160		)
New foreclosed property	7,378			2,434			11,430			5,280			1,607			3,076
Disposals	(7,333		)	(1,554		)	(23,072		)	(7,976		)
Ending balance, September 30 (a)	$	25,726		$	7,877		$	25,726		$	7,877
Disposal													(3,353		)	(9,107		)
Ending balance, March 31 (a)													$	20,676		$	32,375


(a)	Excludes OREO and receivables related to government insured mortgages of ~~$3.5~~$3.4 million and ~~$6.5~~$4.5 million as of ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

The following table provides consolidated asset quality information for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ and as of ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017:~~2018:

Table 19—Asset Quality Information


	Three Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2019			2018
Allowance for loan losses:
Beginning balance on July 1	$	185,462		$	197,257
Beginning balance on January 1							$	180,424		$	189,555
Provision/(provision credit) for loan losses	2,000			—			9,000			(1,000		)
Charge-offs	(9,482		)	(10,670		)	(10,527		)	(8,483		)
Recoveries	7,979			8,280			6,014			7,122
Ending balance on September 30	$	185,959		$	194,867
Ending balance on March 31							$	184,911		$	187,194
Reserve for remaining unfunded commitments	7,581			4,372			8,014			4,613
Total allowance for loan losses and reserve for unfunded commitments	$	193,540		$	199,239		$	192,925		$	191,807
Key ratios
Allowance / net charge-offs (a)	31.20		x	20.55		x	10.10		x	33.90		x
Net charge-offs % (b)	0.02		%	0.05		%	0.07		%	0.02		%

	As of September 30			As of December 31			As of March 31			As of December 31
Nonperforming Assets by Segment ~~(c)~~	2018			2017			2019			2018
Regional Banking:
Nonperforming loans (d)	$	76,145		$	52,659
Nonperforming loans (c)							$	115,977		$	79,339
OREO ~~(e)~~(d)	20,571			34,679			16,698			18,535
Total Regional Banking	96,716			87,338			132,675			97,874
Non-Strategic:
Nonperforming loans (d)	68,485			75,803
Nonperforming loans (c)							63,960			66,703
Nonperforming loans held-for-sale net of fair value adjustment ~~(d)~~(c)	5,675			6,971			5,219			5,328
OREO ~~(e)~~(d)	5,155			4,887			3,978			3,852
Total Non-Strategic	79,315			87,661			73,157			75,883
Corporate:
Nonperforming loans ~~(d)~~(c)	1,727			2,157			1,687			1,707
Total Corporate	1,727			2,157			1,687			1,707
Total nonperforming assets (d) (e)	$	177,758		$	177,156
Total nonperforming assets (c) (d)							$	207,519		$	175,464

~~Certain previously reported amounts have been reclassified to agree with current presentation.~~NM - Not meaningful.


(a)	Ratio is total allowance divided by annualized net charge-offs.


(b)	Ratio is annualized net charge-offs divided by quarterly average loans, net of unearned income.


(c)	~~In 3Q18, the acquired CBF indirect auto portfolio was retrospectively reclassed through 4Q17 from the Regional Banking segment to the Non-Strategic segment.~~


~~(d)~~	Excludes loans that are 90 or more days past due and still accruing interest.


~~(e)~~(d)	Excludes OREO from government-insured mortgages.

~~Table 19—Asset Quality Information (continued)~~



	As of March 31			As of December 31
	2019			2018
Loans and commitments:
Total period-end loans, net of unearned income	$	27,990,048		$	27,535,532
Potential problem assets (a)	270,358			316,952
Loans 30 to 89 days past due	38,577			42,703
Loans 90 days past due (b) (c)	25,116			32,461
Loans held-for-sale 30 to 89 days past due (c)	4,750			5,790
Loans held-for-sale 30 to 89 days past due—guaranteed portion (c) (d)	4,492			4,848
Loans held-for-sale 90 days past due (c)	5,779			7,368
Loans held-for-sale 90 days past due—guaranteed portion (c) (d)	5,725			7,237
Remaining unfunded commitments	$	11,000,219		$	10,884,975
Key ratios
Allowance / loans %	0.66		%	0.66		%
Allowance / NPL	1.02		x	1.22		x
NPA % (e)	0.72		%	0.62		%
NPL %	0.65		%	0.54		%

As of September 30 As of December 31
2018 2017
Loans and commitments:
Total period-end loans, net of unearned income $ 27,350,214
$ 27,658,929

Potential problem assets (a) 266,412
327,214

Loans 30 to 89 days past due 53,613
50,884

Loans 90 days past due (b) (c) 41,479
41,568

Loans held-for-sale 30 to 89 days past due 5,061
13,419

Loans held-for-sale 30 to 89 days past due—guaranteed portion (d) 4,495
5,975

Loans held-for-sale 90 days past due (c) 7,875
10,885

Loans held-for-sale 90 days past due—guaranteed portion (c) (d) 7,772
9,451

Remaining unfunded commitments $ 10,829,303
$ 10,678,485

Key ratios
Allowance / loans % 0.68 % 0.69 %
Allowance / NPL 1.27 x 1.45 x
NPA % (e) 0.63 % 0.61 %
NPL % 0.54 % 0.47 %


(a)	Includes past due loans.


(b)	Excludes loans classified as held-for-sale.


(c)	Amounts are not included in nonperforming/nonaccrual loans.


(d)	Guaranteed loans include FHA, VA, SBA, USDA, and GNMA loans repurchased through the GNMA buyout program.


(e)	Ratio is non-performing assets related to the loan portfolio to total loans plus OREO and other assets.

Past Due Loans and Potential Problem Assets

Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. Loans in the portfolio that are 90 days or more past due and still accruing were ~~$41.5~~$25.1 million on ~~September 30, 2018,~~March 31, 2019, compared to ~~$41.6~~$32.5 million on December 31, ~~2017.~~2018. Loans 30 to 89 days past due ~~increased~~decreased to ~~$53.6~~$38.6 million on ~~September 30, 2018,~~March 31, 2019, from ~~$50.9~~$42.7 million on December 31, ~~2017.~~2018. The ~~increase in past due loans~~decrease was primarily driven by the ~~consumer portfolios.~~home equity portfolio.

Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms and includes loans past due 90 days or more and still accruing. This definition is believed to be substantially consistent with the standards established by the OCC for loans classified as substandard. Potential problem assets in the loan po ~~portfolio~~rtfolio were ~~$266.4~~$270.4 million on ~~September 30, 2018, $327.2~~March 31, 2019, $317.0 million on December 31, ~~2017,~~2018, and ~~$280.4~~$342.4 million on ~~September 30, 2017.~~March 31, 2018. The linked-quarter and year-over-year decrease in potential problem assets was due to a couple of credits moving to nonaccrual combined with a net decrease in classified commercial ~~loans primarily driven by payoffs and upgrades.~~loans. The current expectation of losses from potential problem assets has been included in management’s analysis for assessing the adequacy of the allowance for loan losses.

Troubled Debt Restructuring and Loan Modifications

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when appropriate 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. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, FHN identifies and reports that loan as a Troubled Debt Restructuring (“TDR”). See Note 4 – Loans for further discussion regarding TDRs and loan modifications.

On ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, FHN had ~~$236.5~~$241.6 million and ~~$234.4~~$228.2 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of ~~$28.4~~$24.4 million and ~~$37.3~~$27.7 million, or 1210 percent and 1612 percent of TDR balances, as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Additionally, FHN

had ~~$57.9~~$55.4 million and ~~$63.2~~$57.8 million of HFS loans classified as TDRs as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Total held-to-maturity TDRs increased by $13.4 million with the majority of the increase attributable to commercial loans.

The following table provides a summary of TDRs for the periods ended ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Table 20—Troubled Debt Restructurings


(Dollars in thousands)	As of September 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
Held-to-maturity:
Permanent mortgage:
Current	$	57,493	$	63,891	$	54,736	$	54,114
Delinquent	2,693		4,463		665		2,367
Non-accrual (a)	14,647		16,440		13,978		14,365
Total permanent mortgage	74,833		84,794		69,379		70,846
Consumer real estate:
Current	70,565		84,697		68,767		68,960
Delinquent	2,163		1,975		2,916		2,311
Non-accrual (b)	47,001		42,223		48,270		47,163
Total consumer real estate	119,729		128,895		119,953		118,434
Credit card and other:
Current	542		544		657		665
Delinquent	10		49		27		30
Non-accrual	—		—		—		—
Total credit card and other	552		593		684		695
Commercial loans:
Current	14,209		15,311		12,939		13,246
Delinquent	322		—		—		831
Non-accrual	26,835		4,766		38,664		24,167
Total commercial loans	41,366		20,077		51,603		38,244
Total held-to-maturity	$	236,480	$	234,359	$	241,619	$	228,219
Held-for-sale:
Current	$	44,412	$	43,455	$	42,993	$	42,574
Delinquent	10,051		13,269		7,495		10,041
Non-accrual	3,470		6,515		4,923		5,209
Total held-for-sale	57,933		63,239		55,411		57,824
Total troubled debt restructurings	$	294,413	$	297,598	$	297,030	$	286,043


(a)	Balances as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, include ~~$3.7~~$3.4 million and ~~$5.1~~$3.6 million, respectively, of discharged bankruptcies.


(b)	Balances as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, include ~~$13.8~~$12.5 million and ~~$13.4~~$13.0 million, respectively, of discharged bankruptcies.

RISK MANAGEMENT

There have been no significant changes to FHN’s risk management practices as described under “Risk Management” beginning on page 5248 of Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

MARKET RISK MANAGEMENT

There have been no significant changes to FHN’s market risk management practices as described under “Market Risk Management” beginning onon page 5349 of Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Value-at-Risk (“VaR”) and Stress Testing

VaR is a statistical risk measure used to estimate the potential loss in value from adverse market movements over an assumed fixed holding period within a stated confidence level. FHN employs a model to compute daily VaR measures for its trading securities inventory. FHN computes VaR using historical simulation with a 1-year lookback period at a 99 percent confidence level and 1-day and 10-day time horizons. Additionally, FHN computes a Stressed VaR (“SVaR”) measure. The SVaR computation uses the same model but with model inputs reflecting historical data from a continuous 12-month period that reflects a period of significant financial stress appropriate for our trading securities portfolio.

A summary of FHN’s VaR and SVaR measures for 1-day and 10-day time horizons is as follows:

Table 21—VaR and SVaR Measures


	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018						As of September 30, 2018		Three Months Ended March 31, 2019						As of March 31, 2019
(Dollars in thousands)	Mean		High		Low		Mean		High		Low				Mean		High		Low
1-day
VaR	$	1,705	$	2,660	$	1,355	$	1,733	$	2,660	$	1,148	$	1,688	$	1,433	$	1,907	$	1,018	$	1,307
SVaR	8,686		10,450		7,779		9,336		11,918		6,576		8,537		8,243		9,629		6,242		8,144
10-day
VaR	3,289		4,129		2,697		3,685		4,589		2,601		3,480		3,390		4,280		2,592		3,046
SVaR	22,773		27,665		19,153		25,863		32,343		19,153		22,478		21,757		28,086		16,032		21,812

	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017						As of September 30, 2017		Three Months Ended March 31, 2018						As of March 31, 2018
(Dollars in thousands)	Mean		High		Low		Mean		High		Low				Mean		High		Low
1-day
VaR	$	1,620	$	3,310	$	521	$	1,450	$	3,310	$	521	$	3,174	$	1,747	$	2,294	$	1,148	$	2,036
SVaR	4,575		7,781		2,150		4,023		7,781		1,775		6,805		9,764		11,918		6,576		10,006
10-day
VaR	4,112		8,039		870		3,538		8,039		870		6,302		3,947		4,589		2,601		3,844
SVaR	15,021		22,511		7,833		13,390		24,550		4,916		18,602		27,469		32,304		20,382		29,485

							Year Ended December 31, 2017						As of December 31, 2017		Year Ended December 31, 2018						As of December 31, 2018
(Dollars in thousands)							Mean		High		Low				Mean		High		Low
1-day
VaR							$	1,529	$	3,310	$	521	$	1,287	$	1,728	$	2,660	$	1,148	$	1,878
SVaR							4,704		8,301		1,775		6,230		9,191		11,918		6,576		8,881
10-day
VaR							3,560		8,039		870		3,059		3,735		5,124		2,601		3,258
SVaR							15,511		28,232		4,916		19,813		24,762		32,343		16,257		21,621

FHN’s overall VaR measure includes both interest rate risk and credit spread risk. Separate measures of these component risks are as follows:

Table 22—Schedule of Risks Included in VaR


	As of September 30, 2018				As of September 30, 2017				As of December 31, 2017				As of March 31, 2019				As of March 31, 2018				As of December 31, 2018
(Dollars in thousands)	1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day
Interest rate risk	$	878	$	2,192	$	2,055	$	8,334	$	930	$	2,084	$	560	$	1,412	$	1,573	$	2,230	$	618	$	1,514
Credit spread risk	322		589		370		701		305		471		398		726		897		1,638		394		596

The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static. Because FHN’s Fixed Income division procures fixed income securities for purposes of distribution to customers, its trading securities inventory turns over regularly. Additionally, Fixed Income traders actively manage the trading securities inventory continuously throughout each trading day. Accordingly, FHN’s trading securities inventory is highly dynamic, rather than static. As a result, it would be rare for Fixed Income to incur a negative revenue day in its fixed income activities of the level indicated by its VaR measurements.

In addition to being used in FHN’s daily market risk management process, the VaR and SVaR measures are also used by FHN in computing its regulatory market risk capital requirements in accordance with the Market Risk Capital rules. For additional information regarding FHN's capital adequacy refer to the "Capital" section of this MD&A.

FHN also performs stress tests on its trading securities portfolio to calculate the potential loss under various assumed market scenarios. Key assumed stresses used in those tests are:

Down 25 bps - assumes an instantaneous downward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Up 25 bps - assumes an instantaneous upward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Curve flattening - assumes an instantaneous flattening of the interest rate yield curve through an increase in short-term rates and a decrease in long-term rates. The 2-year point on the Treasury yield curve is assumed to increase 15 basis points and the 10-year point on the Treasury yield curve is assumed to decrease 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Curve steepening - assumes an instantaneous steepening of the interest rate yield curve through a decrease in short-term rates and an increase in long-term rates. The 2-year point on the Treasury yield curve is assumed to decrease 15 basis points and the 10-year point on the Treasury yield curve is assumed to increase 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Credit spread widening - assumes an instantaneous increase in credit spreads (the difference between yields on Treasury securities and non-Treasury securities) of 25 basis points.

Model Validation

Trading risk management personnel within Fixed Income have primary responsibility for model risk management with respect to the model used by FHN to compute its VaR measures and perform stress testing on the trading inventory. Among other procedures, these personnel monitor model results and perform periodic backtesting as part of an ongoing process of validating the accuracy of the model. These model risk management activities are subject to annual review by FHN’s Model Validation Group, an independent assurance group charged with oversight responsibility for FHN’s model risk management.

INTEREST RATE RISK MANAGEMENT

Except as disclosed below, there have been no significant changes to FHN's interest rate risk management practices as described under "Interest Rate Risk Management" beginning onon page ~~55 of~~51 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Net Interest Income Simulation Analysis

The information provided in this section, including the discussion regarding the outcomes of simulation analysis and rate shock analysis, is forward-looking. Actual results, if the assumed scenarios were to occur, could differ because of interest rate movements, the ability of management to execute its business plans, and other factors, including those presented in the Forward-Looking Statements section of this MD&A.

Management uses a simulation model to measure interest rate risk and to formulate strategies to improve balance sheet positioning, earnings, or both, within FHN’s interest rate risk, liquidity, and capital guidelines. Interest rate exposure is measured by forecasting 12 months of NII under various interest rate scenarios and comparing the percentage change in NII for each scenario to a base case scenario where interest rates remain unchanged. Assumptions are made regarding future balance sheet composition, interest rate movements, and loan and deposit pricing. In addition, assumptions are made about the

magnitude of asset prepayments and earlier than anticipated deposit withdrawals. The results of these scenarios help FHN develop strategies for managing exposure to interest rate risk. While management believes the assumptions used and scenarios selected in its simulations are reasonable, simulation modeling provides only an estimate, not a precise calculation, of exposure to any given change in interest rates.

Based on a static balance sheet as of ~~September 30, 2018, net interest income exposure~~March 31, 2019, NII exposures over the next 12 months assuming a rate ~~shock~~shocks of plus 25 basis points, 50 basis points, 100 basis points, and 200 basis points isare estimated to have a favorable ~~variance~~variances of ~~.92~~.8 percent, ~~1.78~~1.5 percent, ~~3.33~~3.2 percent, and ~~6.51~~5.2 percent, respectively ofcompared to base ~~net interest income.~~NII. A steepening yield curve scenario where long-term rates increase by 50 basis points and short-term rates are static, results in a favorable NII variance ~~in net interest income~~ of ~~.57 percent of base net interest income.~~1.2 percent. A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in an unfavorable NII variance ~~in net interest income~~ of ~~.83 percent of base net interest income. A rate shock~~.6 percent. Rate shocks of minus 25 basis points and ~~minus~~ 50 basis points ~~results~~result in an unfavorable ~~variance in net interest income~~NII variances of ~~.61~~1.0 percent and ~~1.80 percent, respectively, of base net interest income.~~2.7 percent. These hypothetical scenarios are used to create a risk measurement framework, and do not necessarily represent management’s current view of future interest rates or market developments.

~~The recent~~During the past few years, the movement of short-term interest rates higher after a prolonged period of very low interest rates has had aan overall positive effect on FHN's ~~net interest income~~NII and net interest margin. Given recent strength in the economy, the upward trend in interest rates, and market expectations for higher rates in the future, FHN has employed a moderately asset sensitive position. While it is expected that rates will continue to move higher, the upward movement of rates during the past year has created the possibility that rates could decline in the future. FHN continues to monitor economic conditions and remains prepared to take any actions to mitigate exposure to falling interest rates should that occur. In addition, it is possible that interest rates continue to rise and thatNIM. More recently however, competitive pressures ~~might cause FHN's~~have caused FHN’s deposit costs to rise faster than the long-term “through the cycle” assumptions made in its simulation model. Of the many assumptions made in its simulation model, deposit pricing and deposit mix are two that can have a meaningful impact on measured results. For example, in the analysis presented above, interest bearing deposit rates are assumed to increase by 52 basis points in the +100 basis point scenario. If interest bearing deposit costs were to increase 5 percent more than currently assumed in ~~FHN's simulation analysis.~~the +100 basis point scenario, the 3.2 percent favorable variance in NII disclosed above for that scenario would decline to a 2.6 percent favorable variance. Similarly, in each interest rate scenario, management makes assumptions about the balance sheet’s deposit mix. In the +100 basis point scenario it is assumed that an additional $750 million moves from non-interest bearing accounts to market rate accounts as compared to the migration assumed in the base case scenario. If that amount were to ~~occur, management believes FHN's asset sensitivity could moderate further.~~increase to $1 billion, the 3.2 percent favorable variance in NII disclosed above for that scenario would decline to 2.4 percent.

CAPITAL RISK MANAGEMENT AND ADEQUACY

There have been no significant changes to FHN's capital management practices as described under "Capital Risk Management and Adequacy" on ~~page 56~~page 52 of ~~Exhibit~~Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

OPERATIONAL RISK MANAGEMENT

There have been no significant changes to FHN's operational risk management practices as described under "Operational Risk Management" beginning on ~~page 57~~page 52 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

COMPLIANCE RISK MANAGEMENT

There have been no significant changes to FHN's compliance risk management practices as described under "Compliance Risk Management" on page 5753 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

CREDIT RISK MANAGEMENT

There have been no significant changes to FHN's credit risk management practices as described under "Credit Risk Management" beginning on page 5753 of ~~Exhibit~~Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

LIQUIDITY RISK MANAGEMENT

ALCO also focuses on liquidity management: the funding of assets with liabilities of appropriate duration, while mitigating the risk of unexpected cash needs. ALCO and the Board of Directors have adopted a Liquidity Policy. The objective of the Liquidity Policy is to ensure that FHN meets its cash and collateral obligations promptly, in a cost-effective manner and with the highest degree of reliability. The maintenance of adequate levels of asset and liability liquidity should provide FHN with the ability to meet both expected and unexpected cash and collateral needs. Key liquidity ratios, asset liquidity levels and the amount available from funding sources are reported to ALCO on a regular basis. FHN’s Liquidity Policy establishes liquidity limits that are deemed appropriate for FHN’s risk profile.

In accordance with the Liquidity Policy, ALCO manages FHN’s exposure to liquidity risk through a dynamic, real time forecasting methodology. Base liquidity forecasts are reviewed by ALCO and are updated as financial conditions dictate. In addition to the baseline liquidity reports, robust stress testing of assumptions and funds availability are periodically reviewed.

FHN maintains a contingency funding plan that may be executed, should unexpected difficulties arise in accessing funding that affects FHN, the industry as a whole, or both. Subject to market conditions and compliance with applicable regulatory requirements from time to time, funds are available from a number of sources including the available-for-sale securities

portfolio, dealer and commercial customer repurchase agreements, access to the overnight and term Federal Funds markets, incremental borrowing ~~capacity~~capacity at the ~~FHLB~~FHLB ($~~2.2 billion~~5.5 billion was available at ~~September 30, 2018)~~March 31, 2019), brokered deposits, loan sales, syndications, and access to the Federal Reserve Banks.

Core deposits are a significant source of funding and have historically been a stable source of liquidity for banks. Generally, core deposits represent funding from a financial institution's customer base which provide inexpensive, predictable pricing. The Federal Deposit Insurance Corporation insures these deposits to the extent authorized by law. Generally, these limits are $250 thousand per account owner for interest bearing and non-interest bearing accounts. The ratio of total loans, excluding loans HFS and restricted real estate loans, to core ~~deposits~~deposits was ~~100~~92 percent on ~~September 30, 2018~~March 31, 2019 compared to ~~101~~100 percent on December 31, ~~2017.~~2018.

FHN also may use unsecured short-term borrowings as a source of liquidity. ~~Currently, the largest concentration~~One source of unsecured borrowings is federal funds purchased from correspondent bank customers. These funds are considered to be substantially more stable than funds purchased in the national broker markets for federal funds due to the long, historical, and reciprocal nature of banking services provided by FHN to these correspondent banks. The remainder of FHN’s wholesale short-term borrowings is securities sold under agreements to repurchase transactions accounted for as secured borrowings with Regional Banking’s business customers or Fixed Income’s broker dealer counterparties.

Both FHN and FTBNA may access the debt markets in order to provide funding through the issuance of senior or subordinated unsecured debt subject to market conditions and compliance with applicable regulatory requirements. In 2014, FTBNA issued $400 million of fixed rate senior notes due in December 2019. In October 2015, FHN issued $500 million of fixed rate senior notes due in December 2020.

Both FHN and FTBNA have the ability to generate liquidity by issuing preferred equity, and (for FHN) by issuing common equity, subject to market conditions and compliance with applicable regulatory requirements. In January 2013, FHN issued $100 million of Non-Cumulative Perpetual Preferred Stock, Series A. As of ~~September 30, 2018,~~March 31, 2019, FTBNA and subsidiaries had outstanding preferred shares of $295.4 million, which are reflected as noncontrolling interest on the Consolidated Condensed Statements of Condition.

Parent company liquidity is primarily provided by cash flows stemming from dividends and interest payments collected from subsidiaries. These sources of cash represent the primary sources of funds to pay cash dividends to shareholders and principal and interest to debt holders of FHN. The amount paid to the parent company through FTBNA common dividends is managed as part of ~~FHN's~~FHN’s overall cash management process, subject to applicable regulatory restrictions. Certain regulatory restrictions exist regarding the ability of FTBNA to transfer funds to FHN in the form of cash, common dividends, loans, or advances. At any given time, the pertinent portions of those regulatory restrictions allow FTBNA to declare preferred or common dividends without prior regulatory approval in an aggregate amount equal to FTBNA’s retained net income for the two most recent completed years plus the current year to date. For any period, FTBNA’s ‘retained net income’ generally is equal to FTBNA’s regulatory net income reduced by the preferred and common dividends declared by FTBNA. Excess dividends in either of the two most recent ~~completed~~completed years may be offset with available retained net income in the two years immediately preceding it. Applying the dividend restrictions imposed under applicable federal rules as outlined above, the ~~Bank's~~Bank’s total amount available for dividends was ~~$293.0~~$161.8 million as of ~~October~~April 1, ~~2018.~~2019. Consequently, on that date the ~~bank~~Bank could pay common dividends up to that amount to its sole common stockholder, FHN, or to its preferred shareholders without prior regulatory approval. FTBNA declared and paid common dividends to ~~FHN in fourth quarter 2018~~the parent company in the amount of ~~$185 million.~~$110.0 million in each quarter to date of 2019 and $420.0 million in 2018. FTBNA declared and paid preferred dividends in first quarter 2019 and each quarter of 2018. Additionally, FTBNA declared preferred dividends in ~~fourth~~second quarter ~~2018,~~2019, payable in ~~January~~July 2019. In second and third quarter 2018 FTBNA declared and paid common dividends to FHN in the amount of $90 million and $145 million, respectively. FTBNA applied for and received approval from the OCC to declare and pay common dividends to FHN in 2017 in the amount of $250 million. FTBNA also declared and paid preferred dividends in each quarter to date of 2018 and each quarter of 2017, with OCC approval as necessary.

Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board. These factors include FHN’s current and prospective capital, liquidity, and other needs, applicable regulatory restrictions, and also availability of funds to FHN through a dividend from FTBNA. Beginning January 1, 2019, the ability to pay dividends for both FHN and FTBNA is restricted if capital ratios fall below regulatory minimums for Common Equity Tier 1, Tier 1, Total Capital ratios plus a 2.5 percent capital conservation buffer or 50 basis points above the capital ratios required to be considered well-capitalized. Additionally, the Federal Reserve and the OCC generally require insured banks and bank holding companies to pay cash dividends only out of current operating earnings. Consequently, the decision of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results. FHN paid a cash dividend of ~~$.12~~$.14 per common share on ~~October 2, 2018,~~April 1, 2019, and in ~~October 2018~~April 2019 the Board approved a ~~$.12~~$.14 per common share cash dividend payable on ~~January 2,~~July 1, 2019, to shareholders of record on ~~December~~June 14, ~~2018.~~2019. FHN paid a cash dividend of $1,550.00 per preferred share on ~~October~~April 10, ~~2018,~~2019, and in ~~October 2018~~

April 2019 the Board approved a $1,550.00 per preferred share cash dividend payable on ~~January~~July 10, 2019, to shareholders of record on ~~December 26, 2018.~~June 25, 2019.

CASH FLOWS

The Consolidated Condensed Statements of Cash Flows provide information on cash flows from operating, investing, and financing activities for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. The level of cash and cash equivalents decreased ~~$8.8~~ $192.5 million during ~~2018~~first quarter 2019 compared to ~~an increase~~a decrease of ~~$50.0~~$19.0 million in ~~2017.~~first quarter 2018. In 2019, cash used by financing and investing activities was more than cash provided by operating activities. In 2018, cash used by financing and operating activities was more than cash provided by investing activities. ~~In 2017, cash provided by financing activities more than offset cash used by operating and investing activities.~~

Net cash used in financing activities was ~~$1.2~~$222.2 million in first quarter 2019, largely driven by a decrease in deposits, share repurchases and cash dividends paid during first quarter 2019, somewhat offset by an increase in other short-term borrowings, primarily FFP. Net cash used by investing activities was $92.7 million in first quarter 2019, largely driven by increases in loan balances somewhat offset by a decrease in interest-bearing cash and a net decrease in AFS debt securities, as maturities and sales outpaced purchases. Net cash provided by operating activities was $122.5 million in first quarter 2019 primarily due to net cash inflows of $369.2 million related to fixed income trading activities and favorably driven cash-related net income items, somewhat offset by outflows of $358.6 million related to loans held-for-sale.

Net cash used in financing activities was $1.1 billion in first quarter 2018, largely driven by a decrease in short-term borrowings, ~~and to a lesser extent cash dividends paid,~~ somewhat offset by an increase in deposits. The decrease in short-term borrowings was primarily the result of a decline in FHLB borrowings, which fluctuate largely based on loan demand, deposit levels and balance sheet funding strategies. Net cash used by operating activities was ~~$130.8~~$204.4 million in first quarter 2018 ~~largely driven by~~primarily due to net cash outflows of ~~$964.2~~$418.9 million related to ~~a net~~an increase in loans ~~HFS, as purchases of government guaranteed loans outpaced sales, including the sale of approximately $120 million UPB of subprime auto loans. These cash outflows were~~held-for-sale, somewhat offset by ~~a net decrease in~~inflows of $110.8 million related to fixed income trading activities ~~of $372.4 million~~ and favorably driven cash-related net income items. Net cash provided by investing activities was $1.3 billion in first quarter 2018, largely driven by deceases in interest-bearing cash and loan balances. The decrease in loan balances was due in large part to a decrease in interest-bearing cash. Net decreases in the loan and AFS securities portfolios also favorably impacted investing cash flows in 2018. Additionally, proceeds from the sales of FHN's remaining Visa Class B shares, TRUPs loans and OREO during 2018 also favorably impacted cash flows during the nine months ended September 30, 2018. Cash paid associated with the cancellation of common shares in connection with CBF dissenting shareholders and cash paid related to the divestiture of two branches negatively impacted investing cash flows during the nine months ended September 30, 2018.

~~Net cash provided by financing activities was $621.8 million in 2017, largely driven by an increase in short-term borrowings (primarily FHLB borrowings) used to fund loan growth, somewhat offset by a~~seasonal decline in ~~market-indexed deposits. Net cash used by investing activities was $260.5 million in 2017, as loan growth and cash paid~~loans to acquire Coastal, was partially offset by a $459.8 million decrease in interest bearing cash. Net cash used by operating activities was $311.3 million in 2017. Operating cash decreased in 2017 primarily due to net cash outflows of $501.2 million related to fixed income trading activities and cash outflows of $90.8 million related to operating assets and liabilities, but were somewhat offset by favorably driven cash-related net income items.mortgage companies.

REPURCHASE OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS, AND OTHER CONTRACTUAL OBLIGATIONS

Obligations from Legacy Mortgage Businesses

~~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 government-sponsored entities, or "GSEs": Fannie Mae and Freddie Mac. Also, federally insured or guaranteed whole loans were pooled, and payments to investors were guaranteed through Ginnie Mae. Many mortgage loan originations, especially nonconforming mortgage loans, were sold to investors, or certificate-holders, predominantly through FH proprietary securitizations but also, to a lesser extent, through other whole loans sold to private non-Agency purchasers. FHN used only one trustee for all of its FH proprietary securitizations. In addition to FH proprietary securitization and other whole loan sales activities, FHN also originated and sometimes sold or securitized second-lien, line of credit, and government-insured mortgage loans.

For non-recourse loan sales, FHN has exposure: to indemnify underwriters of FH securitizations who are defending claims that they assert are based, at least in part, on FHN's breach of its representations and warranties made at closing to underwriters, the purchasers, and the trustee of FH proprietary securitizations; and to indemnify purchasers of other whole loans sold, or their assignees, asserting that FHN breached representations and warranties made in connection with the sales of those loans.

Repurchase and Make-Whole Obligations

As mentioned in Note 10 - Contingencies and Other Disclosures - starting in 2009 FHN received a high number of claims (primarily from GSEs, but to a lesser extent from purchasers of other whole loans sold) either to repurchase loans from the

~~purchaser or to pay the purchaser to “make them whole” for economic losses incurred. FHN has not received a loan repurchase or make-whole claim from the FH proprietary securitization trustee.~~

Generally, FHN reviews each claim and private mortgage insurance ("MI") cancellation notice individually. FHN’s responses include appeal, provide additional information, deny the claim (rescission), repurchase the loan or remit a make-whole payment, or reflect cancellation of MI.

To date, FHN has resolved a substantial number of GSE claims through definitive resolution agreements ("DRAs") with the GSEs, while the remainder have been resolved on a loan-by-loan basis. Under each DRA, FHN remains responsible for repurchase obligations related to certain excluded defects (such as title defects and violations of the GSE’s 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.

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~~offering and sale of certificates were legally deficient. A number of those matters have settled or otherwise been resolved. ~~On September 30, 2018, the remaining UPB of loans held in FH proprietary securitizations was $2.5 billion, comprised of $1.8 billion of Alt-A loans and $.7 billion of Jumbo loans.~~ See Note ~~10 –~~11 - Contingencies and Other Disclosures for a discussion of certain actions pending in relation to FH proprietary securitizations.

Servicing Obligations

~~As mentioned in Note 10 - Contingencies and Other Disclosures - FHN’s~~FHN's national servicing business was sold as part of the platform sale in 2008. A significant amount of mortgage servicing rights ("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 two separate~~including a subservicing ~~arrangements to the "2008 subservicer” and the~~arrangement initiated in 2011 (the "2011 subservicer"). In fourth quarter 2013 and first quarter 2014, FHN sold and transferred a substantial majority of its remaining servicing obligations and servicing assets (including advances) to the 2011 subservicer. The servicing still retained by FHN is not significant and 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 ~~FHN’s~~FHN's 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.

As mentioned in Note ~~10—~~11 - Contingencies and Other ~~Disclosures—~~Disclosures - FHN has received a notice of indemnification claims from its 2011 subservicer, Nationstar Mortgage LLC, currently doing business as ~~“Mr.~~"Mr. Cooper.”" The notice asserts several categories of indemnity obligations by FHN to Nationstar in connection with mortgage loans under the subservicing arrangement and under the purchase transaction. This matter currently is not in formal litigation, but litigation in the future is possible.

~~Active Pipeline~~

FHN accumulates the amount of repurchase requests, make-whole claims, and certain other related claims into the “active pipeline.” The active pipeline includes the amount of claims for loan repurchase, make-whole payments, loans as to which MI has been canceled, and information requests from purchasers of loans originated and sold through FHN’s legacy mortgage banking business. Additionally, FHN is responsible for covering losses for purchasers to the extent there is a shortfall in MI insurance coverage (MI curtailment). MI curtailment requests are the largest portion of the active pipeline and are intended only to cover the shortfall in MI insurance proceeds; as a result, FHN's currently accrued loss from MI curtailments as a percentage of UPB is significantly lower than that of a repurchase or make-whole claim. On September 30, 2018, the active pipeline was $10.0 million, compared to $44.1 million on December 31, 2017.

At September 30, 2018, the active pipeline contained no loan repurchase or make-whole requests from the FH proprietary securitization trustee related to first lien mortgage loans based on claims related to breaches of representations and warranties related to origination.

Repurchase Accrual Methodology

Over the past several years FHN’s approach for determining the adequacy of the repurchase and foreclosure reserve has evolved, sometimes substantially, based on changes in information available. Repurchase/make-whole rates vary based on purchaser, vintage, and claim type. For those loans repurchased or covered by a make-whole payment, cumulative average loss severities range between 50 and 60 percent of the UPB.

Repurchase Accrual Approach

Repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the DRAs are significant components of FHN’s remaining repurchase liability as of September 30, 2018. Other components of that liability primarily relate to other whole loans sold, MI rescissions, and loans included in bulk servicing sales effected prior to the DRAs.

In determining the loss content of GSE loans subject to repurchase requests excluded from the DRAs (primarily loans included in bulk sales), FHN applies a vintage level estimate of loss to all loans sold to the GSEs that were not included in the settlements and which have not had a prior repurchase resolution. First, pre-payment, default, and claim rate estimates are applied by vintage to estimate the aggregate claims expected but not yet resolved. Historical loss factors for each sale vintage and repurchase rates are then applied to estimate total loss content. Loss content related to other whole loan sales is estimated by applying the historical average repurchase and loss severity rates to the current UPB in the active pipeline to calculate estimated losses attributable to the current pipeline. FHN then uses an internal model to calculate loss content by applying historical average repurchase and loss severity rates to historical average inflows. For purposes of estimating loss content, FHN also considers MI cancellations. When assessing loss content related to loans where MI has been canceled, FHN applies historical loss factors (including repurchase rates and loss severity ratios) to the total unresolved MI cancellations in the active pipeline, as well as applying these factors to historical average inflows to estimate loss content. Additionally, FHN identifies estimated losses related to MI curtailment requests. Management also evaluates the nature of claims from purchasers and/or servicers of loans sold to determine if qualitative adjustments are appropriate.

Repurchase and Foreclosure Liability

The repurchase and foreclosure liability is comprised of ~~reserves~~accruals to cover estimated loss content in the active pipeline ~~as well as~~(consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, and estimated loss content related to certain known claims not currently included in the active pipeline. The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the DRAs, as well as other whole loans sold, MI rescissions, and loans included in bulk servicing sales effected prior to the DRAs. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches ~~described above~~ for the respective periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision.

The following table provides a rollforward of the legacy mortgage repurchase liability for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

Table 23—Reserves for Repurchase and Foreclosure Losses


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
Legacy Mortgage
Beginning balance	$	32,223		$	34,599		$	33,556		$	65,309		$	31,623		$	33,556
Provision/(provision credit) for repurchase and foreclosure losses	(562		)	(609		)	(886		)	(22,580		)	(455		)	(72		)
Net realized losses	174			(124		)	(835		)	(8,863		)	8			6
Balance on September 30	$	31,835		$	33,866		$	31,835		$	33,866
Balance on March 31													$	31,176		$	33,490

~~Other FHN Mortgage Exposures~~

At September 30, 2018, 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. FHN’s 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 the sales of MSR from 2008 through 2014, FHN has limited visibility into current loan information such as principal payoffs, refinance activity, delinquency trends, and loan modification activity.

~~Many non-GSE purchasers of whole loans from FHN included those loans in their own securitizations. Regarding such other whole loans sold,~~In April, FHN made ~~representations and warranties concerning~~a $12.6 million indemnification settlement payment that will reduce 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; and (iii) FHN has received repurchase, indemnity, and other demands from purchasers or their assignees. At September 30, 2018, FHN’s repurchase and foreclosure ~~liability included certain known exposures from other whole loans sold.~~reserve.

MARKET UNCERTAINTIES AND PROSPECTIVE TRENDS

FHN’s future results could be affected both positively and negatively by several known trends. Key among those are FHN’s strategic initiatives, changes in the U.S. economy and outlook, government actions affecting interest rates, and potential changes in federal ~~policies.~~policies including changes to the government's approach to tariffs and the potential impact to our customers. In addition, legacy matters in the non-strategic segment could continue to impact FHN’s quarterly results in ways which are both difficult to predict and unrelated to current operations.

FHN has prioritized expense discipline to include reducing or controlling certain expenses including realization of expense efficiencies from the merger with CBF and investing in revenue-producing activities and critical infrastructure. FHN remains committed to organic growth through customer retention, key hires, targeted incentives, and other traditional means.

Performance by FHN, and the entire U.S. financial services industry, is affected considerably by the overall health of the U.S. economy. The most recent recession ended in 2009. Growth during the economic expansion since 2009 for many years was muted, compared to earlier recoveries, and somewhat inconsistent from one quarter to the next. ~~Though the~~The economic expansion is over 8 years old ~~currently the U.S. economy does not appear to be weakening or falling back into recession. In~~

~~fact, starting in 2017,~~and many aspects of the economy have strengthened. ~~A continuation of~~

The Federal Reserve raised short-term interest rates by .25 percent four times in 2018 following similar, but less frequent, raises starting in 2015. These actions, along with the ~~current expansion would support, rather than hinder, future loan and other financial activity growth.~~

~~Starting~~recent decline in ~~2015,~~long-term interest rates have flattened the yield curve. Early in 2019, the Federal Reserve ~~has shown a willingness to raise~~signaled the possibility of pausing further increases in short-term interest rates while economic trends are evaluated. If rates in ~~a measured fashion depending on economic data and trends. If~~fact remain stable, the ~~Fed continues to raise rates, FHN’s net interest margin~~yield curve eventually may steepen, which should benefit FHN; however, in the ~~future is likely to continue an improving trend. However, in many instances long-term rates~~meantime, various effects on FHN have ~~not risen as much or as quickly as short-term rates, resulting in a flatter yield curve~~been and ~~adverse pressure on net interest margin and our fixed income business.~~may remain uneven for some time. Moreover, if future economic data shows a risk of lower growth or recession, interest rates may ~~stall or even~~ fall, which likely would adversely impact FHN’s net interest margin. Falling and/or moderately volatile interest rates, however, should enhance activity within FHN’s Fixed Income business.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London InterBank Offered Rate (“LIBOR”), announced that it intends to halt persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, LIBOR as currently operated may not continue after 2021. FHN ~~cannot~~is not currently able to predict the ~~timing, resolution~~impact that the transition from LIBOR will have on the Company; however, because FHN has instruments with floating rate terms based on LIBOR, FHN may experience increases in interest, dividends, and other costs relative to these instruments subsequent to 2021. Additionally, the transition from LIBOR could impact or change FHN’s hedge accounting practices. FHN has initiated efforts to 1) develop an inventory of affected loans, securities, and derivatives, 2) evaluate and draft modifications as needed to address loans outstanding at the time of LIBOR retirement, 3) obtain an understanding of the potential effects ~~of potential new legislation. The potential legislative actions which currently seem the most likely~~for applicable securities and derivatives and 4) assess revisions to ~~be impactful to FHN include general regulatory reform and financial regulatory reform, both of which can affect the overall economy and FHN customers.~~product pricing structures based on alternative reference rates.

Lastly, while FHN has made significant progress in resolving matters from the legacy mortgage business, some matters remain unresolved. The timing or financial impact of resolution of these matters cannot be predicted with accuracy. Accordingly, the non-strategic segment is expected to occasionally and unexpectedly impact FHN’s overall quarterly results negatively or

positively with reserve accruals or releases. Also, although new legacy matters of significance arise at a much slower pace than in years past and some formerly common legal claims no longer can be made due to the passage of time, potential for new legacy matters remains.

Foreclosure Practices

FHN retains exposure for potential deficiencies in servicing related to its legacy servicing business and subservicing arrangements. Further details regarding these legacy matters are provided in ~~“Obligations~~"Obligations from Legacy Mortgage Businesses ~~– Overview –~~- Servicing ~~Obligations”~~Obligations" under ~~“Repurchase~~"Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations.”"

CRITICAL ACCOUNTING POLICIES

There have been no significant changes to FHN’s critical accounting policies as described in “Critical Accounting Policies” beginning on page 67 62 of Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

ACCOUNTING CHANGES ISSUED BUT NOT CURRENTLY EFFECTIVE

Refer to Note 1 – Financial Information for a detail of accounting standards that have been issued but are not currently effective, which section is incorporated into MD&A by this reference.

NON-GAAP INFORMATION

The following table provides a reconciliation of non-GAAP items presented in this MD&A to the most comparable GAAP presentation:

Table 24—Non-GAAP to GAAP Reconciliation


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2018			2017			2018			2017			2019			2018
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)	$	4,611,302		$	2,866,757		$	4,579,391		$	2,789,726		$	4,809,235		$	4,573,916
Less: Average noncontrolling interest (a)	295,431			295,431			295,431			295,431			295,431			295,431
Less: Average preferred stock (a)	95,624			95,624			95,624			95,624			95,624			95,624
(A) Total average common equity	$	4,220,247		$	2,475,702		$	4,188,336		$	2,398,671		$	4,418,180		$	4,182,861
Less: Average intangible assets (GAAP) (b)	1,572,886			280,575			1,570,139			258,138			1,584,694			1,568,029
(B) Average Tangible Common Equity (Non-GAAP)	$	2,647,361		$	2,195,127		$	2,618,197		$	2,140,533		$	2,833,486		$	2,614,832
Net Income Available to Common Shareholders
(C) Net income available to common shareholders (annualized) (GAAP)	$	1,072,318		$	267,148		$	591,617		$	283,652		$	401,642		$	367,531
Ratios
(C)/(A) Return on average common equity (“ROE”) (GAAP) (c)	25.41		%	10.79		%	14.13		%	11.83		%
(C)/(A) Return on average common equity (“ROCE”) (GAAP) (c)													9.09		%	8.79		%
(C)/(B) Return on average tangible common equity (“ROTCE”) (Non-GAAP) (d)	40.51			12.17			22.60			13.25			14.17			14.06

(a)Included in Total equity on the Consolidated Condensed Statements of Condition.

(b)Includes Goodwill and other intangible assets, net of amortization.

(c)Ratio is annualized net income available to common shareholders to average common equity.

(d)Ratio is annualized net income available to common shareholders to average tangible common equity.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

The information called for by this item is contained in

(a)

Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Item 2 of Part I of this report, including in particular the section entitled “Risk Management” beginning on page ~~120~~105 of this report and the subsections entitled “Market Risk Management” beginning on page ~~120~~105 and “Interest Rate Risk Management” beginning on page ~~122~~107 of this report, and


(b)	Note 1415 to the Consolidated Condensed Financial Statements appearing on pages ~~56-62~~48-54 of this report,

all of which materials are incorporated herein by reference. For additional information concerning market risk and our management of it, refer to: Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, including in particular the section entitled “Risk Management” beginning on page 5248 of that Report and the subsections entitled “Market Risk Management” beginning on page 5349 and “Interest Rate Risk Management” ~~appearing~~beginning on ~~pages 55-56~~page 51 of that Report; and Note 22 to the Consolidated Financial Statements appearing on pages ~~163-169~~150-156 of Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.


Item 4.	Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures. FHN’s management, with the participation of FHN’s chief executive officer and chief financial officer, has evaluated the effectiveness of FHN’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based on that evaluation, the chief executive officer and the chief financial officer have concluded that FHN’s disclosure controls and procedures were effective as of the end of the period covered by this report.


(b)	Changes in Internal Control over Financial Reporting. There have not been any changes in FHN’s internal control over financial reporting during FHN’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, FHN’s internal control over financial reporting.

Part II.

OTHER INFORMATION


Item 1	Legal Proceedings

The “Contingencies” section of Note 1011 to the Consolidated Condensed Financial Statements beginning on page 3936 of this ~~report~~Report is incorporated into this Item by reference.


Item 1A	Risk Factors

Not applicable


Item 2	Unregistered Sales of Equity Securities and Use of Proceeds



	(a) & (b)	Not Applicable

	(c)	The "Common Stock Purchase Programs” section including tables 9(a) and 9(b) and explanatory discussions included in Item 2 of Part I of this report under the heading “First Horizon National Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operations,” beginning on page ~~101~~88 of this report, is incorporated herein by reference.


		Although technically not called for by this Item, the disclosure under the caption "Cancellation of Dissenters' Shares," appearing on page 102 of this report, also is incorporated into this Item by reference.

Items 3 4, and 54

Not applicable


Item 5	Other Information

In the first quarter of 2019 there were no material amendments to the procedures, described in FHN's 2019 Proxy Statement under the caption "Shareholder Recommendations of Director Nominees; Shareholder Nominations," by which security holders may recommend nominees to FHN's Board of Directors.

In January 2019, FHN's Board of Directors amended FHN's bylaws to create a new process, if certain conditions are met, for a shareholder to nominate a person for election to the Board in advance of an annual meeting and to require FHN to include that nomination in FHN's annual meeting proxy statement. Additional information regarding this process is available in FHN's 2019 Proxy Statement under the captions: "Shareholder Recommendations of Director Nominees; Shareholder Nominations" and "Shareholder Proposal and Nomination Deadlines," which information is incorporated herein by reference.


Item 6.	Exhibits

(a) Exhibits

~~Exhibits marked * represent~~

In the Exhibit Table below: the “Filed Here” column denotes each exhibit which is filed or furnished (as applicable) with this report; the “Mngt Exh” column denotes each exhibit that represents a management ~~contracts~~contract or compensatory ~~plans~~plan or ~~arrangements~~arrangement required to be identified as ~~such~~such; and ~~filed as exhibits.~~

~~Exhibits marked ** are~~the “Furnished” column denotes each exhibit that is “furnished” pursuant to 18 U.S.C. Section 1350 or otherwise, and ~~are~~is not “filed” as part of this Report or as a separate disclosure document.

~~Exhibits marked *** contain or consist of interactive data file information which is unaudited and unreviewed.~~

In many agreements filed as exhibits, each party makes representations and warranties to other parties. Those representations and warranties are made only to and for the benefit of those other parties in the context of a business contract. ~~Such~~Exceptions to such representations and warranties may be partially or fully waived by such parties, or not enforced by such parties, in their discretion. No such representation or warranty may be relied upon by any other person for any purpose.



~~Exhibit~~	~~Description~~
~~3.1~~	~~Bylaws of FHN, as amended and restated October 23, 2018, incorporated by reference to Exhibit 3.1 to FHN's Current Report on Form 8-K dated October 23, 2018~~

4	FHN agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument defining the rights of the holders of the senior and subordinated long-term debt of FHN and its consolidated subsidiaries.

~~10.1~~	~~Rate Applicable to Participating Directors and Executive Officers under the Directors and Executives Deferred Compensation Plan~~

~~31(a)~~	~~Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of Sarbanes-Oxley Act of 2002)~~

~~31(b)~~	~~Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)~~

32(a)**	~~18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)~~

32(b)**	~~18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)~~

101***	The following financial information from First Horizon National Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL: (i) Consolidated Condensed Statements of Condition at September 30, 2018 and December 31, 2017; (ii) Consolidated Condensed Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017; (iii) Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017; (iv) Consolidated Condensed Statements of Equity for the Nine Months Ended September 30, 2018 and 2017; (v) Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017; (vi) Notes to Consolidated Condensed Financial Statements.

101.INS***	~~XBRL Instance Document~~

101.SCH***	~~XBRL Taxonomy Extension Schema~~

101.CAL***	~~XBRL Taxonomy Extension Calculation Linkbase~~

101.LAB***	~~XBRL Taxonomy Extension Label Linkbase~~

101.PRE***	~~XBRL Taxonomy Extension Presentation Linkbase~~

101.DEF***	~~XBRL Taxonomy Extension Definition Linkbase~~



Exh No	Description of Exhibit to this Report	Filed Here	Mngt Exh	Furn-ished	Incorporated by Referenced to
Exh No	Description of Exhibit to this Report	Filed Here	Mngt Exh	Furn-ished	Form	Exh No	Filing Date
3.1	Bylaws of First Horizon National Corporation, as amended and restated effective January 29, 2019, incorporated by reference to Exhibit 3.1 to FHN’s Current Report on Form 8-K dated January 29, 2019.				8-K	3.1	1/29/2019
4	FHN agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument defining the rights of the holders of the senior and subordinated long-term debt of FHN and its consolidated subsidiaries.
10.1	Form of Grant Notice for Executive Performance Stock Units [2019]	X	X
10.2	Form of Grant Notice for Executive Stock Options [2019]	X	X
10.3	Form of Grant Notice for Executive Restricted Stock Units [2019]	X	X
10.4	Sections of Director Policy pertaining to compensation [revised April 2019]	X	X
31(a)	Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of Sarbanes-Oxley Act of 2002)	X
31(b)	Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)	X
32(a)	18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)	X		X
32(b)	18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)	X		X
	XBRL Exhibits
101	The following financial information from First Horizon National Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in XBRL: (i) Consolidated Condensed Statements of Condition at March 31, 2019 and December 31, 2018; (ii) Consolidated Condensed Statements of Income for the Three Months Ended March 31, 2019 and 2018; (iii) Consolidated Condensed Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018; (iv) Consolidated Condensed Statements of Equity for the Three Months Ended March 31, 2019 and 2018; (v) Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018; (vi) Notes to Consolidated Condensed Financial Statements.	X
101. INS	XBRL Instance Document	X
101. SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101. PRE	XBRL Taxonomy Extension Presentation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X

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 thereunto duly authorized.



	FIRST HORIZON NATIONAL CORPORATION (Registrant)

Date: ~~November 7, 2018~~May 8, 2019	By:	/s/ William C. Losch III
	Name:	William C. Losch III
	Title:	Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

~~134~~117



Part I. Financial Information	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8173
Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~131~~114
Item 4. Controls and Procedures	~~131~~114

Part II. Other Information	~~132~~115
Item 1. Legal Proceedings	~~132~~115
Item 1A. Risk Factors	~~132~~115
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	~~132~~115
Item 3. Defaults Upon Senior Securities	~~132~~115
Item 4. Mine Safety Disclosures	~~132~~115
Item 5. Other Information	~~132~~115
Item 6. Exhibits	~~133~~116
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(b)
Signatures	~~134~~117



Common stock:
Stock options exercised	4,443			5,173
Cash dividends paid	(99,753		)	(58,850		)
Repurchase of shares (c)	(23,997		)	(5,285		)
Cash dividends paid - preferred stock - noncontrolling interest	(8,555		)	(8,523		)
Cash dividends paid - Series A preferred stock	(4,650		)	(4,650		)
Term borrowings:
Issuance	—			121,184
Payments/maturities	(17,565		)	(145,285		)
Increases in restricted and secured term borrowings	5,646			29,231
Net increase/(decrease) in:
Deposits	417,612			(572,621		)
Short-term borrowings	(1,496,739		)	1,261,395
Net cash provided/(used) by financing activities	(1,223,558		)	621,769
Net increase/(decrease) in cash and cash equivalents	(8,836		)	49,961
Cash and cash equivalents at beginning of period	1,452,046			1,037,794
Cash and cash equivalents at end of period	$	1,443,210		$	1,087,755
Supplemental Disclosures
Total interest paid	$	208,160		$	92,405
Total taxes paid	12,779			38,151
Total taxes refunded	1,576			8,201
Transfer from loans to OREO	11,388			5,564
Transfer from loans HFS to trading securities	907,788			829,668



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017		Fiscal Years Ended December 31
(Dollars in thousands)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017		2017		2016		2015

Proceeds from BOLI	$	160	$	5,850	$	11,440	$	2,740	$	2,425



	Capital Bank Financial Corporation
	As			Purchase Accounting/Fair
	Acquired			Value Adjustments (unaudited)								As recorded
(Dollars in thousands)	(unaudited)			2017				2018 (a)				by FHN
Assets:
Cash and cash equivalents	$	205,999		$	—			$	—			$	205,999
Trading securities	4,758			(4,758		)	(b)	—				—
Loans held-for-sale	—			134,003				(9,085		)		124,918
Securities available-for-sale	1,017,867			175,526				—				1,193,393
Securities held-to-maturity	177,549			(177,549		)		—				—
Loans	7,596,049			(320,372		)		867				7,276,544
Allowance for loan losses	(45,711		)	45,711				—				—
CBF Goodwill	231,292			(231,292		)		—				—
Other intangible assets	24,498			119,302				(2,593		)		141,207
Premises and equipment	196,298			37,054				(2,351		)		231,001
OREO	43,077			(9,149		)		(315		)		33,613
Other assets	617,232			41,320			(c)	(7,248		)	(c)	651,304
Total assets acquired	$	10,068,908		$	(190,204	)		$	(20,725	)		$	9,857,979

Liabilities:
Deposits	$	8,141,593		$	(849	)		$	(642	)		$	8,140,102
Securities sold under agreements to repurchase	26,664			—				—				26,664
Other short-term borrowings	390,391			—				—				390,391
Term borrowings	119,486			67,683				—				187,169
Other liabilities	59,995			4,291				2,908				67,194
Total liabilities assumed	8,738,129			71,125				2,266				8,811,520
Net assets acquired	$	1,330,779		$	(261,329	)		$	(22,991	)		1,046,459
Consideration paid:
Equity												(1,746,724		)
Cash												(469,609		)
Total consideration paid												(2,216,333		)
Goodwill												$	1,169,874



General Information	8274

Forward-Looking Statements	8375

Financial Summary	8476

Statement of Condition Review	9683

Capital	9986

Asset Quality	~~102~~89

Risk Management	~~120~~105

Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations	~~125~~110

Market Uncertainties and Prospective Trends	~~128~~112

Critical Accounting Policies	~~129~~113

Non-GAAP Information	~~130~~113