Fair Value Of Assets And Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

Schedule Of Assets And Liabilities Measured At Fair Value On A Recurring Basis

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of March 31, 2018:



	March 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	46,083	$	—	$	46,083
Government agency issued MBS	—		186,377		—		186,377
Government agency issued CMO	—		354,730		—		354,730
Other U.S. government agencies	—		157,046		—		157,046
States and municipalities	—		89,799		—		89,799
Corporates and other debt	—		921,255		—		921,255
Equity, mutual funds, and other	—		2,214		—		2,214
Total trading securities—fixed income	—		1,757,504		—		1,757,504
Trading securities—mortgage banking	—		—		1,926		1,926
Loans held-for-sale (elected fair value)	—		2,875		18,334		21,209
Securities available-for-sale:
U.S. treasuries	—		98		—		98
Government agency issued MBS	—		2,530,862		—		2,530,862
Government agency issued CMO	—		2,206,341		—		2,206,341
Other U.S. government agencies	—		29,623		—		29,623
States and municipalities	—		510		—		510
Corporates and other debt	—		55,988		—		55,988
Interest-only strips (elected fair value)	—		—		2,733		2,733
Total securities available-for-sale	—		4,823,422		2,733		4,826,155
Other assets:
Deferred compensation mutual funds	40,466		—		—		40,466
Equity, mutual funds, and other	26,967		—		—		26,967
Derivatives, forwards and futures	19,491		—		—		19,491
Derivatives, interest rate contracts	—		94,624		—		94,624
Derivatives, other	—		233		—		233
Total other assets	86,924		94,857		—		181,781
Total assets	$	86,924	$	6,678,658	$	22,993	$	6,788,575
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	631,606	$	—	$	631,606
Government agency issued MBS	—		379		—		379
Government agency issued CMO	—		2,061		—		2,061
States and municipalities	—		1,665		—		1,665
Corporates and other debt	—		191,651		—		191,651
Total trading liabilities—fixed income	—		827,362		—		827,362
Other liabilities:
Derivatives, forwards and futures	18,558		—		—		18,558
Derivatives, interest rate contracts	—		97,173		—		97,173
Derivatives, other	—		18		5,645		5,663
Total other liabilities	18,558		97,191		5,645		121,394
Total liabilities	$	18,558	$	924,553	$	5,645	$	948,756

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:



	December 31, 2017
(Dollars in thousands)	Level 1		Level 2			Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	128,995		$	—	$	128,995
Government agency issued MBS	—		227,038			—		227,038
Government agency issued CMO	—		275,014			—		275,014
Other U.S. government agencies	—		54,699			—		54,699
States and municipalities	—		34,573			—		34,573
Corporates and other debt	—		693,877			—		693,877
Equity, mutual funds, and other	—		(2		)	—		(2		)
Total trading securities—fixed income	—		1,414,194			—		1,414,194
Trading securities—mortgage banking	—		—			2,151		2,151
Loans held-for-sale	—		1,955			18,926		20,881
Securities available-for-sale:
U.S. treasuries	—		99			—		99
Government agency issued MBS	—		2,577,376			—		2,577,376
Government agency issued CMO	—		2,269,858			—		2,269,858
Corporates and other debt	—		55,782			—		55,782
Interest-only strips	—		—			1,270		1,270
Equity, mutual funds, and other	27,017		—			—		27,017
Total securities available-for-sale	27,017		4,903,115			1,270		4,931,402
Other assets:
Deferred compensation assets	39,822		—			—		39,822
Derivatives, forwards and futures	10,161		—			—		10,161
Derivatives, interest rate contracts	—		71,473			—		71,473
Total other assets	49,983		71,473			—		121,456
Total assets	$	77,000	$	6,390,737		$	22,347	$	6,490,084
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	506,679		$	—	$	506,679
Corporates and other debt	—		131,836			—		131,836
Total trading liabilities—fixed income	—		638,515			—		638,515
Other liabilities:
Derivatives, forwards and futures	9,535		—			—		9,535
Derivatives, interest rate contracts	—		69,842			—		69,842
Derivatives, other	—		39			5,645		5,684
Total other liabilities	9,535		69,881			5,645		85,061
Total liabilities	$	9,535	$	708,396		$	5,645	$	723,576

Summary Of Changes In Level 3 Assets And Liabilities Measured At Fair Value

The changes in Level 3 assets and liabilities measured at fair value for the three months ended March 31, 2018 and 2017, on a recurring basis are summarized as follows:



	Three Months Ended March 31, 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	16				1,592				169				(296		)
Purchases	—				—				28				—
Sales	—				(9,193		)		—				—
Settlements	(241		)		—				(789		)		296
Net transfers into/(out of) Level 3	—				9,064			(b)	—				—
Balance on March 31, 2018	$	1,926			$	2,733			$	18,334			$	(5,645	)
Net unrealized gains/(losses) included in net income	$	(25	)	(a)	$	19		(c)	$	169		(a)	$	(296	)	(e)



	Three Months Ended March 31, 2017
(Dollars in thousands)	Trading securities				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	17				922				(1		)
Purchases	—				32				—
Settlements	(255		)		(1,574		)		296
Net transfers into/(out of) Level 3	—				(83		)	(d)	—
Balance on March 31, 2017	$	2,335			$	21,221			$	(5,950	)
Net unrealized gains/(losses) included in net income	$	(27	)	(a)	$	922		(a)	$	(1	)	(e)


(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)	Included in Other expense.

Nonrecurring Fair Value Measurements

For assets measured at fair value on a nonrecurring basis which were still held on the balance sheet at March 31, 2018, and December 31, 2017, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value.



	Carrying value at March 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Loans held-for-sale—SBAs and USDA	$	—	$	531,671	$	1,435	$	533,106
Loans held-for-sale—first mortgages	—		—		615		615
Loans, net of unearned income (a)	—		—		28,873		28,873
OREO (b)	—		—		32,375		32,375
Other assets (c)	—		—		25,796		25,796



	Carrying value at December 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Loans held-for-sale—SBAs and USDA	$	—	$	465,504	$	1,473	$	466,977
Loans held-for-sale—first mortgages	—		—		618		618
Loans, net of unearned income (a)	—		—		26,666		26,666
OREO (b)	—		—		39,566		39,566
Other assets (c)	—		—		26,521		26,521


(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

Gains/(losses) on Noncurring Fair Value Measurements

For assets measured on a nonrecurring basis which were still held on the consolidated balance sheet at period end, the following table provides information about the fair value adjustments recorded during the three months ended March 31, 2018 and 2017:



	Net gains/(losses) Three Months Ended March 31
(Dollars in thousands)	2018			2017
Loans held-for-sale—SBAs and USDA	$	(206	)	$	(33	)
Loans held-for-sale—first mortgages	5			3
Loans, net of unearned income (a)	502			484
OREO (b)	(1,160		)	(445		)
Other assets (c)	(1,137		)	(942		)
	$	(1,996	)	$	(933	)


(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.

Schedule Of Unobservable Inputs Utilized In Determining The Fair Value Of Level 3 Recurring And Non-Recurring Measurements

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



(Dollars in thousands)
Level 3 Class	Fair Value at March 31, 2018		Valuation Techniques	Unobservable Input	Values Utilized
Available-for-sale- securities SBA-interest only strips	$	2,733	Discounted cash flow	Constant prepayment rate	11%
				Bond equivalent yield	12%- 14%
Loans held-for-sale - residential real estate	18,949		Discounted cash flow	Prepayment speeds - First mortgage	2% - 11%
				Prepayment speeds - HELOC	3% - 12%
				Foreclosure losses	50% - 70%
				Loss severity trends - First mortgage	5% - 25% of UPB
				Loss severity trends - HELOC	20% - 100% of UPB
Loans held-for-sale- unguaranteed interest in SBA loans	1,435		Discounted cash flow	Constant prepayment rate	8% - 12%
				Bond equivalent yield	9% - 10%
Derivative liabilities, other	5,645		Discounted cash flow	Visa covered litigation resolution amount	$4.2 billion - $5.0 billion
				Probability of resolution scenarios	10% - 30%
				Time until resolution	18 - 48 months
Loans, net of unearned income (a)	28,873		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
				Financial Statements/Auction values adjustment	0% - 25% of reported value
OREO (b)	32,375		Appraisals from comparable properties	Adjustment for value changes since appraisal	0% - 10% of appraisal
Other assets (c)	25,796		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


(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.



(Dollars in thousands)
Level 3 Class	Fair Value at December 31, 2017		Valuation Techniques	Unobservable Input	Values Utilized
Available-for-sale- securities SBA-interest only strips	$	1,270	Discounted cash flow	Constant prepayment rate	10% - 11%
				Bond equivalent yield	17%
Loans held-for-sale - residential real estate	19,544		Discounted cash flow	Prepayment speeds - First mortgage	2% - 12%
				Prepayment speeds - HELOC	5% - 12%
				Foreclosure losses	50% - 70%
				Loss severity trends - First mortgage	5% - 30% of UPB
				Loss severity trends - HELOC	15% - 100% of UPB
Loans held-for-sale- unguaranteed interest in SBA loans	1,473		Discounted cash flow	Constant prepayment rate	8% - 12%
				Bond equivalent yield	9% - 10%
Derivative liabilities, other	5,645		Discounted cash flow	Visa covered litigation resolution amount	$4.4 billion - $5.2 billion
				Probability of resolution scenarios	10% - 30%
				Time until resolution	18 - 48 months
Loans, net of unearned income (a)	26,666		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
				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
Other assets (c)	26,521		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


(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.

Summary Of Differences Between The Fair Value Carrying Amount Of Mortgages Held-For-Sale And Aggregate Unpaid Principal Amount

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.



	March 31, 2018
(Dollars in thousands)	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	$	21,209	$	29,531	$	(8,322	)
Nonaccrual loans	5,300		9,960		(4,660		)
Loans 90 days or more past due and still accruing	99		124		(25		)
	December 31, 2017
(Dollars in thousands)	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	)
Nonaccrual loans	5,783		10,881		(5,098		)
Loans 90 days or more past due and still accruing	—		—		—

Changes In Fair Value Of Assets And Liabilities Which Fair Value Option Included In Current Period Earnings

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 March 31
(Dollars in thousands)	2018		2017
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held-for-sale	$	169	$	922

Summary Of Book Value And Estimated Fair Value Of Financial Instruments

The following table summarizes the book value and estimated fair value of financial instruments recorded in the Consolidated Condensed Statements of Condition as of March 31, 2018:



	March 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	$	15,728,070	$	—	$	—	$	15,744,075	$	15,744,075
Commercial real estate	4,205,378		—		—		4,217,348		4,217,348
Consumer:
Consumer real estate	6,213,802		—		—		6,188,128		6,188,128
Permanent mortgage	364,253		—		—		371,219		371,219
Credit card & other	551,096		—		—		553,380		553,380
Total loans, net of unearned income and allowance for loan losses	27,062,599		—		—		27,074,150		27,074,150
Short-term financial assets:
Interest-bearing cash	309,351		309,351		—		—		309,351
Federal funds sold	62,541		—		62,541		—		62,541
Securities purchased under agreements to resell	910,670		—		910,670		—		910,670
Total short-term financial assets	1,282,562		309,351		973,211		—		1,282,562
Trading securities (a)	1,759,430		—		1,757,504		1,926		1,759,430
Loans held-for-sale
Mortgage loans (elected fair value) (a)	21,209		—		2,875		18,334		21,209
USDA & SBA loans- LOCOM	533,106		—		533,529		1,455		534,984
Other consumer loans- LOCOM	151,296		—		24,170		127,126		151,296
Mortgage loans- LOCOM	64,801		—		3,728		61,073		64,801
Total loans held-for-sale	770,412		—		564,302		207,988		772,290
Securities available-for-sale (a)	4,826,155		—		4,823,422		2,733		4,826,155
Securities held-to-maturity	10,000		—		—		9,817		9,817
Derivative assets (a)	114,348		19,491		94,857		—		114,348
Other assets:
Tax credit investments	116,023		—		—		109,970		109,970
Deferred compensation mutual funds	40,466		40,466		—		—		40,466
Equity, mutual funds, and other (b)	245,304		26,967		—		218,337		245,304
Total other assets	401,793		67,433		—		328,307		395,740
Total assets	$	36,227,299	$	396,275	$	8,213,296	$	27,624,921	$	36,234,492
Liabilities:
Defined maturity deposits	$	3,328,732	$	—	$	3,282,918	$	—	$	3,282,918
Trading liabilities (a)	827,362		—		827,362		—		827,362
Short-term financial liabilities:
Federal funds purchased	392,714		—		392,714		—		392,714
Securities sold under agreements to repurchase	672,154		—		672,154		—		672,154
Other short-term borrowings	1,332,141		—		1,332,141		—		1,332,141
Total short-term financial liabilities	2,397,009		—		2,397,009		—		2,397,009
Term borrowings:
Real estate investment trust-preferred	46,117		—		—		48,410		48,410
Term borrowings—new market tax credit investment	18,000		—		—		17,887		17,887
Secured borrowings	21,147		—		—		20,889		20,889
Junior subordinated debentures	187,615		—		—		187,615		187,615
Other long term borrowings	942,088		—		954,951		—		954,951
Total term borrowings	1,214,967		—		954,951		274,801		1,229,752
Derivative liabilities (a)	121,394		18,558		97,191		5,645		121,394
Total liabilities	$	7,889,464	$	18,558	$	7,559,431	$	280,446	$	7,858,435


(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 $130.5 million.

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.

The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other commitments as of March 31, 2018 and December 31, 2017:



	Contractual Amount				Fair Value
(Dollars in thousands)	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Unfunded Commitments:
Loan commitments	$	10,746,730	$	10,678,485	$	2,384	$	2,617
Standby and other commitments	418,598		420,728		5,729		5,274

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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