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, 2018, 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, 2019 and 2018:



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
Balance as of January 1, 2019	$	98,947		$	31,311		$	26,439		$	11,000		$	12,727		$	180,424
Charge-offs	(3,101		)	(434		)	(2,800		)	(4		)	(4,188		)	(10,527		)
Recoveries	829			57			3,453			588			1,087			6,014
Provision/(provision credit) for loan losses	7,038			3,448			(3,019		)	(1,503		)	3,036			9,000
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		$	39,823		$	13,113		$	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			(7,094		)	(34		)	2,877			(1,000		)
Balance as of March 31, 2018	100,238			29,057			35,201			12,984			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			11,877			1,673			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			6,194,449			189,631			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		$	6,355,519		$	270,721		$	560,810		$	27,249,793

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