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

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



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
Balance as of January 1, 2018	$	98,211		$	28,427		$	37,371		$	15,565		$	9,981		$	189,555
Charge-offs	(2,075		)	(44		)	(1,911		)	(160		)	(4,293		)	(8,483		)
Recoveries	1,519			6			4,383			65			1,149			7,122
Provision/(provision credit) for loan losses	2,583			668			(7,093		)	(35		)	2,877			(1,000		)
Balance as of March 31, 2018	100,238			29,057			32,750			15,435			9,714			187,194
Allowance - individually evaluated for impairment	4,555			—			23,049			11,311			359			39,274
Allowance - collectively evaluated for impairment	93,603			28,869			9,426			4,124			9,343			145,365
Allowance - purchased credit-impaired loans	2,080			188			275			—			12			2,555
Loans, net of unearned as of March 31, 2018:
Individually evaluated for impairment	40,758			2,077			124,975			81,090			702			249,602
Collectively evaluated for impairment	15,705,895			4,201,220			6,085,482			298,598			556,189			26,847,384
Purchased credit-impaired loans	81,655			31,138			36,095			—			3,919			152,807
Total loans, net of unearned income	$	15,828,308		$	4,234,435		$	6,246,552		$	379,688		$	560,810		$	27,249,793
Balance as of January 1, 2017	$	89,398		$	33,852		$	50,357		$	16,289		$	12,172		$	202,068
Charge-offs	(600		)	—			(3,849		)	(483		)	(3,481		)	(8,413		)
Recoveries	1,676			221			5,676			903			837			9,313
Provision/(provision credit) for loan losses	2,633			(3,185		)	(2,504		)	(816		)	2,872			(1,000		)
Balance as of March 31, 2017	93,107			30,888			49,680			15,893			12,400			201,968
Allowance - individually evaluated for impairment	3,775			192			28,701			11,532			122			44,322
Allowance - collectively evaluated for impairment	89,142			30,646			20,629			4,361			12,278			157,056
Allowance - purchased credit-impaired loans	190			50			350			—			—			590
Loans, net of unearned as of March 31, 2017:
Individually evaluated for impairment	44,970			3,096			146,472			88,743			269			283,550
Collectively evaluated for impairment	11,620,748			2,166,069			4,308,917			320,492			346,399			18,762,625
Purchased credit-impaired loans	38,278			4,146			1,422			—			53			43,899
Total loans, net of unearned income	$	11,703,996		$	2,173,311		$	4,456,811		$	409,235		$	346,721		$	19,090,074