Fair Value of Assets & Liabilities (Tables)

3 Months Ended

Mar. 31, 2019

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, 2019:



	March 31, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	232,019	$	—	$	232,019
Government agency issued MBS	—		292,020		—		292,020
Government agency issued CMO	—		295,476		—		295,476
Other U.S. government agencies	—		78,958		—		78,958
States and municipalities	—		81,513		—		81,513
Corporate and other debt	—		696,680		—		696,680
Equity, mutual funds, and other	—		3,664		—		3,664
Total trading securities—fixed income	—		1,680,330		—		$	1,680,330
Trading securities—mortgage banking	—		—		1,397		1,397
Loans held-for-sale (elected fair value)	—		—		15,751		15,751
Securities available-for-sale:
U.S. treasuries	—		99		—		99
Government agency issued MBS	—		2,385,809		—		2,385,809
Government agency issued CMO	—		1,931,784		—		1,931,784
Other U.S. government agencies	—		190,828		—		190,828
States and municipalities	—		39,423		—		39,423
Corporate and other debt	—		55,184		—		55,184
Interest-Only Strip (elected fair value)	—		—		13,195		13,195
Total securities available-for-sale	—		4,603,127		13,195		4,616,322
Other assets:
Deferred compensation mutual funds	41,097		—		—		41,097
Equity, mutual funds, and other	22,326		—		—		22,326
Derivatives, forwards and futures	36,976		—		—		36,976
Derivatives, interest rate contracts	—		80,777		—		80,777
Derivatives, other	—		375		—		375
Total other assets	100,399		81,152		—		181,551
Total assets	$	100,399	$	6,364,609	$	30,343	$	6,495,351
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	284,394	$	—	$	284,394
Other U.S.government agencies	—		16,817		—		16,817
Corporate and other debt	—		128,458		—		128,458
Total trading liabilities—fixed income	—		429,669		—		429,669
Other liabilities:
Derivatives, forwards and futures	36,688		—		—		36,688
Derivatives, interest rate contracts	—		41,409		—		41,409
Derivatives, other	—		56		28,970		29,026
Total other liabilities	36,688		41,465		28,970		107,123
Total liabilities	$	36,688	$	471,134	$	28,970	$	536,792

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



	December 31, 2018
(Dollars in thousands)	Level 1		Level 2			Level 3		Total
Trading securities—fixed income:
U.S. treasuries	$	—	$	169,799		$	—	$	169,799
Government agency issued MBS	—		133,373			—		133,373
Government agency issued CMO	—		330,456			—		330,456
Other U.S. government agencies	—		76,733			—		76,733
States and municipalities	—		54,234			—		54,234
Corporate and other debt	—		682,068			—		682,068
Equity, mutual funds, and other	—		(19		)	—		(19		)
Total trading securities—fixed income	—		1,446,644			—		1,446,644
Trading securities—mortgage banking	—		—			1,524		1,524
Loans held-for-sale (elected fair value)	—		—			16,273		16,273
Securities available-for-sale:
U.S. treasuries	—		98			—		98
Government agency issued MBS	—		2,420,106			—		2,420,106
Government agency issued CMO	—		1,958,695			—		1,958,695
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	—		4,616,568			9,902		4,626,470
Other assets:
Deferred compensation mutual funds	37,771		—			—		37,771
Equity, mutual funds, and other	22,248		—			—		22,248
Derivatives, forwards and futures	28,826		—			—		28,826
Derivatives, interest rate contracts	—		52,214			—		52,214
Derivatives, other	—		435			—		435
Total other assets	88,845		52,649			—		141,494
Total assets	$	88,845	$	6,115,861		$	27,699	$	6,232,405
Trading liabilities—fixed income:
U.S. treasuries	$	—	$	207,739		$	—	$	207,739
Other U.S.government agencies	—		98			—		98
Corporate and other debt	—		127,543			—		127,543
Total trading liabilities—fixed income	—		335,380			—		335,380
Other liabilities:
Derivatives, forwards and futures	30,236		—			—		30,236
Derivatives, interest rate contracts	—		71,853			—		71,853
Derivatives, other	—		84			31,540		31,624
Total other liabilities	30,236		71,937			31,540		133,713
Total liabilities	$	30,236	$	407,317		$	31,540	$	469,093

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, 2019 and 2018, on a recurring basis are summarized as follows:



	Three Months Ended March 31, 2019
(Dollars in thousands)	Trading securities				Interest- only strips- AFS				Loans held- for-sale				Net derivative liabilities
Balance on January 1, 2019	$	1,524			$	9,902			$	16,273			$	(31,540	)
Total net gains/(losses) included in:
Net income	21				(1,258		)		495				135
Purchases	—				86				—				—
Sales	—				(13,012		)		—				—
Settlements	(148		)		—				(1,017		)		2,435
Net transfers into/(out of) Level 3	—				17,477			(b)	—				—
Balance on March 31, 2019	$	1,397			$	13,195			$	15,751			$	(28,970	)
Net unrealized gains/(losses) included in net income	$	(30	)	(a)	$	(894	)	(c)	$	495		(a)	$	135		(d)



	Three Months Ended March 31, 2018
(Dollars in thousands)	Trading securities				Interest-only-strips-AFS				Loans held-for-sale				Net derivative liabilities
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	)	(d)


(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)	Included in Other expense.

Nonrecurring Fair Value Measurements

For assets measured at fair value on a nonrecurring basis which were still held on the Consolidated Condensed Statements of Condition at March 31, 2019, and December 31, 2018, 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, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Loans held-for-sale—other consumer	$	—	$	18,137	$	—	$	18,137
Loans held-for-sale—SBAs and USDA	—		494,445		1,006		495,451
Loans held-for-sale—first mortgages	—		—		519		519
Loans, net of unearned income (a)	—		—		59,657		59,657
OREO (b)	—		—		20,676		20,676
Other assets (c)	—		—		13,962		13,962



	Carrying value at December 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Loans held-for-sale—other consumer	$	—	$	18,712	$	—	$	18,712
Loans held-for-sale—SBAs and USDA	—		577,280		1,011		578,291
Loans held-for-sale—first mortgages	—		—		541		541
Loans, net of unearned income (a)	—		—		48,259		48,259
OREO (b)	—		—		22,387		22,387
Other assets (c)	—		—		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

Gains/(losses) on Nonrecurring Fair Value Measurements

For assets measured on a nonrecurring basis which were still held on the Consolidated Condensed Statements of Condition at period end, the following table provides information about the fair value adjustments recorded during the three months ended March 31, 2019 and 2018:



	Net gains/(losses) Three Months Ended March 31
(Dollars in thousands)	2019			2018
Loans held-for-sale—other consumer	$	(200	)	$	—
Loans held-for-sale—SBAs and USDA	(683		)	(206		)
Loans held-for-sale—first mortgages	15			5
Loans, net of unearned income (a)	200			502
OREO (b)	35			(1,160		)
Other assets (c)	(675		)	(1,137		)
	$	(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.

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, 2019 and December 31, 2018:

(Dollars in thousands)

Values Utilized

Level 3 Class

Fair Value at
March 31, 2019

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

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

13,195

Discounted cash flow

Constant prepayment rate

12%

Bond equivalent yield

15%- 16%

15%

Loans held-for-sale - residential real estate

16,270

Discounted cash flow

Prepayment speeds - First mortgage

2% - 10%

Prepayment speeds - HELOC

5% - 12%

7.5%

Foreclosure losses

50% - 66%

64%

Loss severity trends - First mortgage

3% - 25% of UPB

17%

Loss severity trends - HELOC

50% - 100% of UPB

50%

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

1,006

Discounted cash flow

Constant prepayment rate

8% - 12%

10%

Bond equivalent yield

Derivative liabilities, other

28,970

Discounted cash flow

Visa covered litigation resolution amount

$5.0 billion - $5.8 billion

$5.6 billion

Probability of resolution scenarios

15% - 25%

22%

Time until resolution

18 - 48 months

33 months

Loans, net of unearned
income (a)

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

Financial Statements/Auction values adjustment

0% - 25% of reported value

OREO (b)

20,676

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

Other assets (c)

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

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.

(Dollars in thousands)

Values Utilized

Level 3 Class

Fair Value at
December 31, 2018

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

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

9,902

Discounted cash flow

Constant prepayment rate

11% - 12%

11%

Bond equivalent yield

14% - 15%

14%

Loans held-for-sale - residential real estate

16,815

Discounted cash flow

Prepayment speeds - First mortgage

2% - 10%

Prepayment speeds - HELOC

5% - 12%

7.5%

Foreclosure losses

50% - 66%

63%

Loss severity trends - First mortgage

2% - 25% of UPB

17%

Loss severity trends - HELOC

50% - 100% of UPB

50%

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

1,011

Discounted cash flow

Constant prepayment rate

8% - 12%

10%

Bond equivalent yield

Derivative liabilities, other

31,540

Discounted cash flow

Visa covered litigation resolution amount

$5.0 billion - $5.8 billion

$5.6 billion

Probability of resolution scenarios

10% - 25%

23%

Time until resolution

18 - 48 months

36 months

Loans, net of unearned
income (a)

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

Financial Statements/Auction values adjustment

0% - 25% of reported value

OREO (b)

22,387

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10% of appraisal

Other assets (c)

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

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.

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, 2019
(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	$	15,751	$	22,568	$	(6,817	)
Nonaccrual loans	4,382		7,761		(3,379		)
Loans 90 days or more past due and still accruing	—		—		—
	December 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	$	16,273	$	23,567	$	(7,294	)
Nonaccrual loans	4,536		8,128		(3,592		)
Loans 90 days or more past due and still accruing	171		281		(110		)

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)	2019		2018
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held-for-sale	$	495	$	169

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, 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.

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:



	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.

The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other commitments as of March 31, 2019 and December 31, 2018:



	Contractual Amount				Fair Value
(Dollars in thousands)	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Unfunded Commitments:
Loan commitments	$	11,000,220	$	10,884,975	$	2,735	$	2,551
Standby and other commitments	404,249		446,958		5,052		5,043