The loans and lease portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment and is generally determined based on risk characteristics of the loan and FHN’s method for monitoring and assessing credit risk and performance. FHN's loan and lease portfolio segments are commercial and consumer. The classes of loans and leases are: (1)

commercial, financial, and industrial, which includes commercial and industrial loans and leases and loans to mortgage companies, (2) commercial real estate, (3) consumer real estate, which includes both real estate installment and home equity lines of credit, and (4) credit card and other.

The following table provides the amortized cost basis of loans and leases by portfolio segment and class as of September 30, 2021 and December 31, 2020, excluding accrued interest of $143 million and $180 million, respectively, which is included in other assets in the Consolidated Balance Sheets.



(Dollars in millions)	September 30, 2021		December 31, 2020
Commercial:
Commercial and industrial (a) (b)	$	26,377	$	27,700
Loans to mortgage companies	5,139		5,404
Total commercial, financial, and industrial	31,516		33,104
Commercial real estate	12,194		12,275
Consumer:
HELOC	2,041		2,420
Real estate installment loans	8,746		9,305
Total consumer real estate	10,787		11,725
Credit card and other	938		1,128
Loans and leases	$	55,435	$	58,232
Allowance for loan and lease losses	(734)		(963)
Net loans and leases	$	54,701	$	57,269

(a)Includes equipment financing leases of $719 million and $587 million, respectively, as of September 30, 2021 and December 31, 2020.

(b)Includes PPP loans fully guaranteed by the SBA of $2.0 billion and $4.1 billion as of September 30, 2021 and December 31, 2020, respectively.

Restrictions

Loans and leases with carrying values of $37.4 billion and $38.6 billion were pledged as collateral for borrowings at September 30, 2021 and December 31, 2020, respectively.

Concentrations of Credit Risk

Most of FHN’s business activity is with clients located in the southern United States. FHN’s lending activity is concentrated in its market areas within those states. As of September 30, 2021, FHN had loans to mortgage companies of $5.1 billion and loans to finance and insurance companies of $3.2 billion. As a result, 26% of the C&I portfolio is sensitive to impacts on the financial services industry.

Credit Quality Indicators

FHN employs a dual grade commercial risk grading methodology to assign an estimate for the probability

of default and the loss given default for each commercial loan using factors specific to various industry, portfolio, or product segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 16. This credit grading system is intended to identify and measure the credit quality of the loan and lease portfolio by analyzing the migration between grading categories. It is also integral to the estimation methodology utilized in determining the ALLL since an allowance is established for pools of commercial loans based on the credit grade assigned. Each PD grade corresponds to an estimated one-year default probability percentage. PD grades are continually evaluated but require a formal scorecard annually. As a response to the COVID-19 pandemic, FHN identified a segment of its commercial portfolio that requires a quarterly re-grading process. As borrowers recover, they can be removed from the quarterly re-grading process with credit officer concurrence.

PD 1 through PD 12 are “pass” grades. PD grades 13-16 correspond to the regulatory-defined categories of special mention (13), substandard (14), doubtful (15), and loss (16). Special mention loans and leases have potential weaknesses that, if left uncorrected, may result in deterioration of FHN's credit position at some future date. Substandard commercial loans and leases have well-defined weaknesses and are

characterized by the distinct possibility that FHN will sustain some loss if the deficiencies are not corrected. Doubtful commercial loans and leases have the same weaknesses as substandard loans and leases with the added characteristics that the probability of loss is high and collection of the full amount is improbable.

The following tables provide the amortized cost basis of the commercial loan portfolio by year of origination and credit quality indicator as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	C&I
(Dollars in millions)	2021		2020		2019		2018		2017		Prior to 2017		LMC (a)		Revolving Loans		Revolving Loans Converted to Term Loans (b)		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (c)	$	5,822	$	4,208	$	3,809	$	1,682	$	1,294	$	2,551	$	5,139	$	5,972	$	13	$	30,490












Special Mention (PD grade 13)	20		37		74		59		38		48		—		154		4		434
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	41		111		74		106		30		53		—		129		48		592







Total C&I loans	$	5,883	$	4,356	$	3,957	$	1,847	$	1,362	$	2,652	$	5,139	$	6,255	$	65	$	31,516

(a) LMC includes non-revolving commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower's sale of those mortgage loans to third party investors. The loans are of short duration with maturities less than one year.

(b) C&I loans converted from revolving to term in 2021 were not material.


	December 31, 2020
	C&I
(Dollars in millions)	2020		2019		2018		2017		2016		Prior to 2016		LMC (a)		Revolving Loans		Revolving Loans Converted to Term Loans (b)		Total

Credit Quality Indicator:
Pass (PD grades 1 through 12) (c)	$	9,060	$	5,138	$	2,628	$	1,748	$	1,161	$	2,145	$	5,404	$	4,571	$	60	$	31,915












Special Mention (PD grade 13)	89		93		70		31		37		64		—		127		1		512
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	182		77		114		50		42		58		—		95		59		677







Total C&I loans	$	9,331	$	5,308	$	2,812	$	1,829	$	1,240	$	2,267	$	5,404	$	4,793	$	120	$	33,104

(b) $50 million of C&I loans were converted from revolving to term in 2020.


	September 30, 2021
	CRE
(Dollars in millions)	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving Loans Converted to Term Loans		Total

Credit Quality Indicator:
Pass (PD grades 1 through 12)	$	2,216	$	2,264	$	2,814	$	1,208	$	806	$	2,054	$	259	$	—	$	11,621
Special Mention (PD grade 13)	4		26		50		171		69		91		—		—		411
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	10		17		12		16		38		44		25		—		162







Total CRE loans	$	2,230	$	2,307	$	2,876	$	1,395	$	913	$	2,189	$	284	$	—	$	12,194


	December 31, 2020
	CRE
(Dollars in millions)	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans		Revolving Loans Converted to Term Loans		Total

Credit Quality Indicator:
Pass (PD grades 1 through 12)	$	2,477	$	3,311	$	1,750	$	1,140	$	946	$	1,800	$	259	$	19	$	11,702











Special Mention (PD grade 13)	48		24		117		75		71		54		—		—		389
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	30		13		21		42		27		33		18		—		184







Total CRE loans	$	2,555	$	3,348	$	1,888	$	1,257	$	1,044	$	1,887	$	277	$	19	$	12,275

The consumer portfolio is comprised primarily of smaller-balance loans which are very similar in nature in that most are standard products and are backed by residential real estate. Because of the similarities of consumer loan-types, FHN is able to utilize the FICO score, among other attributes, to assess the credit quality of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other consumer portfolio.

The following table reflects the amortized cost basis by year of origination and refreshed FICO scores for consumer real estate loans as of September 30, 2021

and December 31, 2020. Within consumer real estate, classes include HELOC and real estate installment. HELOCs are loans which during their draw period are classified as revolving loans. Once the draw period ends and the loan enters its repayment period, the loan converts to a term loan and is classified as a revolving loan converted to a term loan. All loans classified in the following tables as revolving loans or revolving loans converted to term loans are HELOCs. Real estate installment loans are originated as fixed term loans and are classified below in their vintage year. All loans in the following tables classified in a vintage year are real estate installment loans.


	September 30, 2021
	Consumer Real Estate
(Dollars in millions)	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving Loans Converted to Term Loans (a)		Total
FICO score 740 or greater	$	1,037	$	1,085	$	844	$	500	$	682	$	1,692	$	1,104	$	130	$	7,074
FICO score 720-739	135		143		111		78		107		119		164		24		881
FICO score 700-719	98		109		78		55		117		131		146		25		759
FICO score 660-699	99		137		101		97		148		147		215		48		992
FICO score 620-659	15		33		51		23		65		67		71		31		356
FICO score less than 620	226		52		30		41		193		100		48		35		725
Total	$	1,610	$	1,559	$	1,215	$	794	$	1,312	$	2,256	$	1,748	$	293	$	10,787

(a) $34 million of HELOC loans were converted from revolving to term in 2021.


	December 31, 2020
	Consumer Real Estate
(Dollars in millions)	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans		Revolving Loans Converted to Term Loans		Total
FICO score 740 or greater	$	1,186	$	1,167	$	703	$	610	$	674	$	1,719	$	1,275	$	159	$	7,493
FICO score 720-739	157		158		100		77		92		197		186		29		996
FICO score 700-719	122		107		78		76		73		221		177		34		888
FICO score 660-699	130		141		123		75		85		296		264		59		1,173
FICO score 620-659	45		61		37		28		35		127		92		36		461
FICO score less than 620	107		36		52		54		95		261		61		48		714
Total	$	1,747	$	1,670	$	1,093	$	920	$	1,054	$	2,821	$	2,055	$	365	$	11,725

The following tables reflect the amortized cost basis by year of origination and refreshed FICO scores for credit card and other loans as of September 30, 2021 and December 31, 2020.


	September 30, 2021
	Credit Card and Other
(Dollars in millions)	2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving Loans Converted to Term Loans (a)		Total
FICO score 740 or greater	$	55	$	38	$	33	$	27	$	18	$	70	$	212	$	5	$	458
FICO score 720-739	9		6		5		4		4		20		39		2		89
FICO score 700-719	6		6		5		5		4		24		42		1		93
FICO score 660-699	22		7		6		7		6		33		93		2		176
FICO score 620-659	3		3		3		4		3		19		21		1		57
FICO score less than 620	12		5		3		5		4		18		16		2		65
Total	$	107	$	65	$	55	$	52	$	39	$	184	$	423	$	13	$	938

(a) $4 million of other consumer loans were converted from revolving to term in 2021.


	December 31, 2020
	Credit Card and Other
(Dollars in millions)	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans		Revolving Loans Converted to Term Loans		Total
FICO score 740 or greater	$	57	$	52	$	59	$	37	$	23	$	116	$	159	$	5	$	508
FICO score 720-739	7		7		9		8		8		27		91		2		159
FICO score 700-719	9		8		9		8		4		38		37		3		116
FICO score 660-699	30		12		15		9		9		48		46		3		172
FICO score 620-659	5		5		7		5		10		24		20		1		77
FICO score less than 620	14		7		8		11		9		26		20		1		96
Total	$	122	$	91	$	107	$	78	$	63	$	279	$	373	$	15	$	1,128

Nonaccrual and Past Due Loans and Leases

Loans and leases are placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on a case-by-case basis if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccrual are loans for which FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy.

Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. In accordance with revised Interagency Guidance issued in 2020, FHN is

not required to designate loans with deferrals granted in response to COVID-19 as past due because of such deferrals. If a borrower defers payment, this may result in no contractual payments being past due, and as such, loans would not be considered past due during the period of deferral, and as a result, are excluded from loans past due 30-89 days and loans 90+ days past due in the tables below.

The following table reflects accruing and non-accruing loans and leases by class on September 30, 2021 and December 31, 2020:


	September 30, 2021
	Accruing								Non-Accruing
(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans and Leases
Commercial, financial, and industrial:
C&I (a)	$	26,196	$	36	$	1	$	26,233	$	119	$	9	$	16	$	144	$	26,377

Loans to mortgage companies	5,139		—		—		5,139		—		—		—		—		5,139

Total commercial, financial, and industrial	31,335		36		1		31,372		119		9		16		144		31,516
Commercial real estate:
CRE (b)	12,120		15		1		12,136		8		—		50		58		12,194



Consumer real estate:
HELOC (c)	1,979		5		7		1,991		37		2		11		50		2,041
Real estate installment loans (d)	8,625		23		5		8,653		51		4		38		93		8,746
Total consumer real estate	10,604		28		12		10,644		88		6		49		143		10,787
Credit card and other:
Credit card	274		3		2		279		—		—		—		—		279
Other	656		1		—		657		—		1		1		2		659
Total credit card and other	930		4		2		936		—		1		1		2		938
Total loans and leases	$	54,989	$	83	$	16	$	55,088	$	215	$	16	$	116	$	347	$	55,435

(a) $129 million of C&I loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.

(b) $52 million of CRE loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.

(c) $7 million of HELOC loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.

(d) $52 million of real estate installment loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.


	December 31, 2020
	Accruing								Non-Accruing
(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans
Commercial, financial, and industrial:
C&I (a)	$	27,541	$	15	$	—	$	27,556	$	88	$	12	$	44	$	144	$	27,700

Loans to mortgage companies	5,404		—		—		5,404		—		—		—		—		5,404


Total commercial, financial, and industrial	32,945		15		—		32,960		88		12		44		144		33,104
Commercial real estate:
CRE	12,194		23		—		12,217		10		42		6		58		12,275




Consumer real estate:
HELOC	2,336		13		11		2,360		43		3		14		60		2,420
Real estate installment loans	9,138		40		5		9,183		63		9		50		122		9,305

Total consumer real estate	11,474		53		16		11,543		106		12		64		182		11,725
Credit card and other:
Credit card	279		3		1		283		—		—		—		—		283
Other	838		6		—		844		1		—		1		2		845

Total credit card and other	1,117		9		1		1,127		1		—		1		2		1,128
Total loans and leases, net of unearned income	$	57,730	$	100	$	17	$	57,847	$	205	$	66	$	115	$	386	$	58,232

(a) $101 million of C&I loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.

Collateral-Dependent Loans

Collateral-dependent loans are defined as loans for which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty. At a minimum, the estimated value of the collateral for each loan equals the current book value.

As of September 30, 2021 and December 31, 2020, FHN had commercial loans with amortized cost of approximately $174 million and $167 million, respectively, that were based on the value of underlying collateral. Collateral-dependent C&I and CRE loans totaled $161 million and $13 million, respectively, at September 30, 2021. The collateral for these loans generally consists of business assets including land, buildings, equipment and financial assets. During the three and nine months ended September 30, 2021, FHN recognized charge-offs of approximately $9 million and $25 million, respectively, on these loans related to reductions in estimated collateral values.

Consumer HELOC and real estate installment loans with amortized cost based on the value of underlying real estate collateral were approximately $8 million and $21 million, respectively, as of September 30, 2021, and $9 million and $26 million, respectively, as of December 31, 2020. Charge-offs during the three and nine months ended September 30, 2021 were not significant for collateral-dependent consumer loans.

Troubled Debt Restructurings

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that FHN has granted a concession to the borrower. FHN may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future. Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions could include extension of the maturity date, reductions of the interest rate (which may make the rate lower than current market for a

new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR. In accordance with regulatory guidance, certain loan modifications that might ordinarily have qualified as TDRs were not accounted for as TDRs and have been excluded from the disclosures below. For loan modifications that were made during the three and nine months ended September 30, 2021 or the year ended December 31, 2020 that met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these modifications from consideration as TDRs, and has excluded loans with these qualifying modifications from designation as TDRs in the information and discussion that follows.

On September 30, 2021 and December 31, 2020, FHN had $239 million and $307 million of portfolio loans classified as TDRs, respectively. Additionally, $37 million and $42 million of loans held for sale as of September 30, 2021 and December 31, 2020, respectively, were classified as TDRs.

The following tables present the end of period balance for loans modified in a TDR during the periods indicated:


	Three Months Ended September 30, 2021					Three Months Ended September 30, 2020
(Dollars in millions)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

C&I	5	$	8	$	7	83	$	130	$	120





CRE	—	—		—		14	12		12


HELOC	2	—		—		35	3		2
Real estate installment loans	6	—		—		44	6		6

Credit card and other	8	—		—		10	—		—
Total TDRs	21	$	8	$	7	186	$	151	$	140

	Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020
(Dollars in millions)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

C&I	32	$	37	$	34	87	$	141	$	129


CRE	1	12		10		14	12		12


HELOC	21	2		2		47	4		4
Real estate installment loans	41	8		8		94	15		15

Credit card and other	36	—		—		50	—		—
Total TDRs	131	$	59	$	54	292	$	172	$	160

The following tables present TDRs which re-defaulted during the three and nine months ended September 30, 2021 and 2020, and as to which the modification occurred 12 months or less prior to the re-default. For purposes of this disclosure, FHN generally defines payment default as 30 or more days past due.


	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
(Dollars in millions)	Number	Recorded Investment		Number	Recorded Investment

C&I	6	$	3	—	$	—


CRE	4	10		—	—


HELOC	—	—		1	—
Real estate installment loans	1	1		6	1

Credit card and other	1	—		7	—
Total TDRs	12	$	14	14	$	1

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
(Dollars in millions)	Number	Recorded Investment		Number	Recorded Investment

C&I	18	$	5	—	$	—


CRE	6	19		—	—


HELOC	1	—		8	—
Real estate installment loans	8	4		16	1

Credit card and other	2	—		21	—
Total TDRs	35	$	28	45	$	1