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, 2016, for additional information about the policies and methodologies used in the aforementioned components of the ALLL.

The following table provides a rollforward of the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2017 and 2016:



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
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
Balance as of July 1, 2016	$	80,972		$	30,264		$	59,081		$	17,600		$	11,890		$	199,807
Charge-offs	(1,992		)	(49		)	(4,359		)	(373		)	(3,589		)	(10,362		)
Recoveries	725			651			5,591			239			906			8,112
Provision/(provision credit) for loan losses	7,161			1,554			(7,078		)	(877		)	3,240			4,000
Balance as of September 30, 2016	86,866			32,420			53,235			16,589			12,447			201,557
Balance as of January 1, 2016	$	73,637		$	25,159		$	80,614		$	18,947		$	11,885		$	210,242
Charge-offs	(16,386		)	(742		)	(17,867		)	(834		)	(10,441		)	(46,270		)
Recoveries	3,107			1,782			17,408			1,502			2,786			26,585
Provision/(provision credit) for loan losses	26,508			6,221			(26,920		)	(3,026		)	8,217			11,000
Balance as of September 30, 2016	86,866			32,420			53,235			16,589			12,447			201,557
Allowance - individually evaluated for impairment	5,187			216			29,461			14,611			139			49,614
Allowance - collectively evaluated for impairment	81,376			31,674			23,441			1,978			12,308			150,777
Allowance - purchased credit-impaired loans	303			530			333			—			—			1,166
Loans, net of unearned as of September 30, 2016:
Individually evaluated for impairment	49,351			3,302			158,909			94,071			340			305,973
Collectively evaluated for impairment	12,022,457			2,053,101			4,417,896			342,029			357,032			19,192,515
Purchased credit-impaired loans	46,490			9,192			1,566			—			51			57,299
Total loans, net of unearned income	$	12,118,298		$	2,065,595		$	4,578,371		$	436,100		$	357,423		$	19,555,787