Investment Securities

6 Months Ended

Jun. 30, 2011

Investment Securities

Investment Securities

Note 3 — Investment Securities

The following tables summarize FHN's available for sale ("AFS") securities on June 30, 2011 and 2010:

	On June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Securities available for sale:
U.S. Treasuries	$	46,073	$	177	$	—	$	46,250
Government agency issued mortgage-backed securities ("MBS")		1,445,021		56,746		—		1,501,767
Government agency issued collateralized mortgage obligations ("CMO")		1,386,962		36,932		—		1,423,894
Other U.S. government agencies		18,791		1,136		—		19,927
States and municipalities		19,365		—		—		19,365
Equity (a)		218,715		19		—		218,734
Other		511		29		—		540
Total securities available for sale (b)	$	3,135,438	$	95,039	$	—	$	3,230,477

(a)	Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.1 million. The remainder is money market, venture capital, and cost method investments.
(b)	Includes $2.9 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes. As of June 30, 2011, FHN had pledged $1.1 billion of the $2.9 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.

	On June 30, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
Securities available for sale:
U.S. Treasuries	$	68,315	$	253	$	—		$	68,568
Government agency issued MBS		852,915		62,686		—			915,601
Government agency issued CMO		1,054,579		41,927		—			1,096,506
Other U.S. government agencies		101,355		6,268		—			107,623
States and municipalities		41,875		—		—			41,875
Equity (a)		258,667		437		(4	)		259,100
Other		511		35		—			546
Total securities available for sale (b)	$	2,378,217	$	111,606	$	(4	)	$	2,489,819

(a)	Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.2 million. The remainder is money market, venture capital, and cost method investments. Additionally, $31.2 million is restricted pursuant to reinsurance contract agreements.
(b)	Includes $2.1 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes. As of June 30, 2010, FHN had pledged $1.3 billion of the $2.1 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.

National banks chartered by the federal government are, by law, members of the Federal Reserve System. Each member bank is required to own stock in its regional Federal Reserve Bank ("FRB"). Given this requirement, Federal Reserve stock may not be sold, traded, or pledged as collateral for loans. Membership in the Federal Home Loan Bank ("FHLB") network requires ownership of capital stock. Member banks are entitled to borrow funds from the FHLB and are required to pledge mortgage loans as collateral. Investments in the FHLB are non-transferable and, generally, membership is maintained primarily to provide a source of liquidity as needed.

The amortized cost and fair value by contractual maturity for the available for sale securities portfolio on June 30, 2011 are provided below:

	Available for Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value
Within 1 year	$	46,073	$	46,250
After 1 year; within 5 years		18,791		19,927
After 5 years; within 10 years		2,795		2,795
After 10 years		16,570		16,570
Subtotal		84,229		85,542
Government agency issued MBS and CMO		2,831,983		2,925,661
Equity and other securities		219,226		219,274
Total	$	3,135,438	$	3,230,477

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.

The table below provides information on realized gross gains and realized gross losses on sales from the available for sale portfolio for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended					Six Months Ended
(Dollars in thousands)	2011		2010			2011			2010
Gross gains on sales of securities	$	1	$	76		$	9,422		$	196
Gross (losses) on sales of securities		-		(1	)		(8,623	)		(1	)
Net gain/(loss) on sales of securities (a)	$	1	$	75		$	799		$	195
Venture capital investments (b)		—		—			—			(1,838	)
Net other than temporary impairment ("OTTI") recorded (c)		—		—			—			(188	)
Total securities gain/(loss)	$	1	$	75		$	799		$	(1,831	)

(a)	Proceeds related to these sales were $35.4 million for the three months ended June 30, 2010, and were $458.3 million and $35.7 million for the six months ended June 30, 2011 and 2010, respectively. Proceeds from sales during second quarter 2011 were immaterial.
(b)	Generally includes write-offs and/or unrealized fair value adjustments related to venture capital investments.
(c)	OTTI recorded in 2010 is related to equity securities.

There were no unrealized losses within the available for sale portfolio on June 30, 2011. The following table provides information on investments within the available for sale portfolio that have unrealized losses on June 30, 2010:

	On June 30, 2010
	Less than 12 months					12 months or longer				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses			Value		Losses		Value		Losses
Equity	$	40	$	(4	)	$	—	$	—	$	40	$	(4	)
Total temporarily impaired securities	$	40	$	(4	)	$	—	$	—	$	40	$	(4	)

FHN has reviewed investment securities that are in unrealized loss positions in accordance with its accounting policy for OTTI and does not consider them other-than-temporarily impaired. FHN does not intend to sell the debt securities and it is more-likely-than-not that FHN will not be required to sell the securities prior to recovery. The decline in value is primarily attributable to interest rates and not credit losses. For equity securities, FHN has both the ability and intent to hold these securities for the time necessary to recover the amortized cost. There were no other-than-temporary impairments of debt securities for the three months ended June 30, 2011 and 2010, or for the six months ended June 30, 2011. FHN recognized a $.2 million other-than-temporary impairment of an equity investment for the six months ended June 30, 2010.