Investment Securities

9 Months Ended

Sep. 30, 2021

The following tables summarize FHN’s investment securities as of September 30, 2021 and December 31, 2020:


	September 30, 2021
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. treasuries	$	603	$	—	$	—	$	603
Government agency issued MBS	4,324		58		(37)		4,345
Government agency issued CMO	2,234		14		(31)		2,217
Other U.S. government agencies	794		6		(12)		788

States and municipalities	516		10		(1)		525
	$	8,471	$	88	$	(81)	8,478
AFS securities recorded at fair value through earnings:
SBA interest-only strips (a)							16
Total securities available for sale (b)							$	8,494

Securities held to maturity:
Government agency issued MBS	$	229	$	—	$	(1)	$	228
Government agency issued CMO	75		—		—		75
Total securities held to maturity	$	304	$	—	$	(1)	$	303

(a)SBA interest-only strips are recorded at elected fair value. See Note 17 - Fair Value of Assets and Liabilities for additional information.

(b)Includes $7.5 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


	December 31, 2020
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. treasuries	$	613	$	—	$	—	$	613
Government agency issued MBS	3,722		92		(2)		3,812
Government agency issued CMO	2,380		29		(3)		2,406
Other U.S. government agencies	672		12		—		684
Corporate and other debt	40		1		(1)		40
States and municipalities	445		15		—		460
	$	7,872	$	149	$	(6)	8,015
AFS securities recorded at fair value through earnings:
SBA interest-only strips (a)							32
Total securities available for sale (b)							$	8,047

Securities held to maturity:
Corporates and other debt	$	10	$	—	$	—	$	10
Total securities held to maturity	$	10	$	—	$	—	$	10

(a)SBA interest-only strips are recorded at elected fair value. See Note 17 - Fair Value of Assets and Liabilities for additional information.

(b)Includes $6.4 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.

The amortized cost and fair value by contractual maturity for the debt securities portfolio as of September 30, 2021 is provided below:


	Held to Maturity				Available for Sale
(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	654	$	654
After 1 year through 5 years	—		—		152		153
After 5 years through 10 years			—		347		355
After 10 years	—		—		760		770
Subtotal	—		—		1,913		1,932
Government agency issued MBS and CMO (a)	304		303		6,558		6,562
Total	$	304	$	303	$	8,471	$	8,494

(a)Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gross gains and losses on sales of AFS securities for the three and nine months ended September 30, 2021 and 2020 were insignificant. Cash proceeds from sales of AFS securities were $35 million and $68 million for the three and nine months ended September 30, 2021, respectively. Cash proceeds from sales of AFS securities for the three and nine months ended September 30, 2020 were $240 million and $249 million, respectively.

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of September 30, 2021 and December 31, 2020:


	As of September 30, 2021
	Less than 12 months				12 months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Government agency issued MBS	$	2,101	$	(33)	$	99	$	(4)	$	2,200	$	(37)
Government agency issued CMO	1,243		(25)		179		(6)		1,422		(31)
Other U.S. government agencies	495		(12)		—		—		495		(12)

States and municipalities	107		(1)		—		—		107		(1)
Total	$	3,946	$	(71)	$	278	$	(10)	$	4,224	$	(81)


	As of December 31, 2020
	Less than 12 months				12 months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. treasuries	$	307	$	—	$	—	$	—	$	307	$	—
Government agency issued MBS	426		(2)		—		—		426		(2)
Government agency issued CMO	586		(3)		—		—		586		(3)
Other U.S. government agencies	80		(1)		—		—		80		(1)

States and municipalities	1		—		—		—		1		—
Total	$	1,400	$	(6)	$	—	$	—	$	1,400	$	(6)

FHN has evaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for recognition of credit losses. No AFS debt securities were determined to have credit losses because the primary cause of the decline in value was attributable to changes in interest rates. Total AIR not included in the fair value or amortized cost basis of AFS debt securities was $23 million and $22 million as of September 30, 2021 and December 31, 2020, respectively. Consistent with FHN's review of the related securities, there were no credit-related write downs of AIR for AFS debt securities during the reporting period. Additionally, for AFS debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. Therefore, no write downs of these investments to fair value occurred during the reporting period.

For HTM securities, an allowance for credit losses is required to absorb estimated lifetime credit losses. FHN has assessed the risk of credit loss and has determined that no allowance for credit losses for HTM securities was necessary as of September 30, 2021 and December 31, 2020.

The carrying amount of equity investments without a readily determinable fair value was $73 million and $57 million at September 30, 2021 and December 31, 2020, respectively. The year-to-date 2021 and 2020 gross amounts of upward and downward valuation adjustments were not significant.

Unrealized gains of $1 million were recognized in the three months ended September 30, 2021 and 2020. Unrealized gains of $7 million were recognized for the nine months ended September 30, 2021, and unrealized losses of $4 million were recognized for the nine months ended September 30, 2020, respectively, for equity investments with readily determinable fair values.