Loans

9 Months Ended

Sep. 30, 2014

Note 4 – Loans

The following table provides the balance of loans by portfolio segment as of September 30, 2014 and 2013, and December 31, 2013:

			September 30			December 31
(Dollars in thousands)		2014		2013		2013
Commercial:
	Commercial, financial, and industrial	$	8,477,329	$	7,746,942	$	7,923,576
	Commercial real estate		1,278,394		1,173,711		1,133,279
Retail:
	Consumer real estate (a)		5,130,988		5,458,047		5,333,371
	Permanent mortgage (b)		572,789		697,694		662,242
	Credit card & other		352,517		332,162		336,606
Loans, net of unearned income		$	15,812,017	$	15,408,556	$	15,389,074
Allowance for loan losses			238,641		255,710		253,809
Total net loans		$	15,573,376	$	15,152,846	$	15,135,265

Balances as of September 30, 2014 and 2013, and December 31, 2013 include $81.1 million, $349.3 million, and $333.8 million of restricted and secured real estate loans, respectively. See Note 14 - Variable Interest Entities for additional information.
Balances as of September 30, 2013, and December 31, 2013 include $11.7 million and $11.2 million of restricted and secured real estate loans, respectively. See Note 14 - Variable Interest Entities for additional information.

COMPONENTS OF THE LOAN PORTFOLIO

The loan portfolio is disaggregated into 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 determined based on the initial measurement attribute (i.e., amortized cost or purchased credit-impaired ("PCI")), risk characteristics of the loan, and FHN’s method for monitoring and assessing credit risk. Commercial loan portfolio segments include commercial, financial and industrial ("C&I") and commercial real estate ("CRE"). Commercial classes within C&I include general C&I, loans to mortgage companies, the trust preferred loans ("TRUPS") (i.e. long-term unsecured loans to bank and insurance - related businesses) portfolio and PCI loans. Loans to mortgage companies includes commercial lines of credit to qualified mortgage companies exclusively for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Commercial classes within commercial real estate include income CRE, residential CRE and PCI loans. Retail loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio. Retail classes include HELOC, real estate ("R/E") installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other.

Concentrations

FHN has a concentration of residential real estate loans (36 percent of total loans), the majority of which is in the consumer real estate portfolio (32 percent of total loans). Loans to finance and insurance companies total $1.9 billion (22 percent of the C&I portfolio, or 12 percent of the total loans). FHN had loans to mortgage companies totaling $1.0 billion (11 percent of the C&I portfolio, or 6 percent of total loans) as of September 30, 2014. As a result, 33 percent of the C&I category was sensitive to impacts on the financial services industry.

Acquisition

On June 7, 2013, FHN acquired substantially all of the assets and liabilities of MNB from the FDIC. The acquisition included approximately $249 million of loans. These loans were initially recorded at fair value which incorporates expected credit losses, among other things, in accordance with ASC 805 resulting in no carryover of allowance for loan loss ("ALLL") from the acquiree. At acquisition, FHN designated certain loans as PCI (see discussion below) with the remaining loans accounted for under ASC 310-20, "Nonrefundable Fees and Other Costs". For loans accounted for under ASC 310-20, the difference between the loans' book value to MNB and the estimated fair value at the time of the acquisition will be accreted back into interest income over the remaining contractual life and the subsequent accounting and reporting will be similar to FHN's originated loan portfolio.

PCI Loans

ASC 310-30, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer," provides guidance for acquired loans that have experienced deterioration of credit quality between origination and the time of acquisition and for which the timely collection of the interest and principal is no longer reasonably assured. FHN considered several factors when determining whether a loan met the definition of a PCI loan at the time of acquisition including accrual status, loan grade, delinquency trends, prior partial charge-offs, as well as both originated versus refreshed credit scores and ratios when available.

PCI loans were initially recorded at fair value which was estimated by discounting expected cash flows at acquisition date. The expected cash flow includes all contractually expected amounts and incorporates an estimate for future expected credit losses, pre-payment assumptions, and yield requirement for a market participant, among other things. To the extent possible, certain PCI loans were aggregated into pools with composite interest rate and cash flows expected to be collected for the pool. Aggregation into loan pools is based on common risk characteristics that include similar credit risk or risk ratings, and one or more predominant risk characteristics. Generally, FHN pooled loans with smaller balances and common internal loan grades and portfolio types. Subsequent to the initial accounting at acquisition, each PCI pool is accounted for as a single unit.

Accretable yield is initially established at acquisition and is the excess of cash flows expected to be collected over the initial investment in the loan and is recognized in interest income over the remaining life of the loan, or pool of loans. Nonaccretable difference is the difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition. FHN estimates expected cash flows for PCI loans on a quarterly basis. Increases in expected cash flows from the last measurement will result in reversal of any nonaccretable difference (or allowance for loan losses to the extent any has been recorded) with a prospective positive impact on interest income. Decreases to the expected cash flows will result in an increase in the allowance for loan losses through increased provision expense.

FHN does not report PCI loans as nonperforming loans due to the accretion of interest income. Additionally, PCI loans that have been pooled and subsequently modified will not be reported as troubled debt restructurings since the pool is the unit of measurement.

The following table presents a rollforward of the accretable yield for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended					Nine Months Ended
		September 30				September 30
(Dollars in thousands)		2014		2013		2014		2013
Balance, beginning of period	$	16,509	$	6,432	$	13,490	$	-
Additions		-		-		335		6,650
Accretion		(1,829)		(821)		(5,413)		(1,039)
Adjustment for payoffs		(828)		(40)		(1,550)		(40)
Adjustment for charge-offs		(10)		-		(79)		-
Increase in accretable yield (a)		2,231		-		9,290		-
Balance, end of period	$	16,073	$	5,571	$	16,073	$	5,571

Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing of the cash flows.

At September 30, 2014, the ALLL related to PCI loans was $2.8 million and loan loss provision recognized during the three and nine months ended September 30, 2014 was $.4 million and $2.1 million, respectively. The following table reflects the outstanding principal balance and carrying amounts of the PCI loans as of September 30, 2014, and 2013, and December 31, 2013:

	September 30, 2014				September 30, 2013				December 31, 2013
(Dollars in thousands)	Carrying value		Unpaid balance		Carrying value		Unpaid balance		Carrying value		Unpaid balance
Commercial, financial and industrial (a)	$	5,028	$	6,155	$	7,712	$	9,509	$	7,077	$	9,169
Commercial real estate (a)		31,660		42,890		39,645		55,789		38,042		53,648
Consumer real estate (a)		585		875		888		1,300		878		1,291
Credit card and other (a)		11		16		15		22		12		21
Total	$	37,284	$	49,936	$	48,260	$	66,620	$	46,009	$	64,129

September 30, 2013 balances by portfolio have been re-presented to agree with current presentation.

Impaired Loans

The following tables provide information at September 30, 2014 and 2013, by class related to individually impaired loans and consumer TDR's. Recorded investment is defined as the amount of the investment in a loan, before valuation allowance but which does reflect any direct write-down of the investment. For purposes of this disclosure, PCI loans and LOCOM have been excluded.

									Three Months Ended				Nine Months Ended
		September 30, 2014							September 30, 2014				September 30, 2014
				Unpaid				Average		Interest		Average		Interest
		Recorded		Principal		Related		Recorded		Income		Recorded		Income
(Dollars in thousands)		Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
Impaired loans with no related allowance recorded:
Commercial:
	General C&I	$	15,594	$	17,185	$	-	$	15,542	$	-	$	16,910	$	-
	TRUPS		-		-		-		-		-		1,083		-
	Income CRE		6,819		14,379		-		6,829		-		7,670		-
	Residential CRE		1,148		1,827		-		1,148		-		574		-
	Total	$	23,561	$	33,391	$	-	$	23,519	$	-	$	26,237	$	-
Retail:
	HELOC (a)	$	14,036	$	34,693	$	-	$	15,713	$	-	$	16,324	$	-
	R/E installment loans (a)		5,640		7,221		-		6,552		-		8,729		-
	Permanent mortgage (a)		7,616		10,023		-		7,739		-		7,918		-
	Total	$	27,292	$	51,937	$	-	$	30,004	$	-	$	32,971	$	-
Impaired loans with related allowance recorded:
Commercial:
	General C&I	$	18,393	$	22,579	$	2,229	$	25,394	$	79	$	25,895	$	236
	TRUPS		13,490		13,700		3,810		8,505		-		13,540		-
	Income CRE		8,735		10,107		481		8,789		62		10,406		226
	Residential CRE		5,663		11,111		623		5,846		59		6,233		183
	Total	$	46,281	$	57,497	$	7,143	$	48,534	$	200	$	56,074	$	645
Retail:
	HELOC	$	81,422	$	82,813	$	17,061	$	79,352	$	448	$	75,476	$	1,339
	R/E installment loans		73,434		74,690		24,431		74,091		306		73,783		872
	Permanent mortgage		110,921		124,429		17,329		111,263		709		112,518		2,138
	Credit card & other		548		548		255		536		5		614		21
	Total	$	266,325	$	282,480	$	59,076	$	265,242	$	1,468	$	262,391	$	4,370
Total commercial		$	69,842	$	90,888	$	7,143	$	72,053	$	200	$	82,311	$	645
Total retail		$	293,617	$	334,417	$	59,076	$	295,246	$	1,468	$	295,362	$	4,370
Total impaired loans		$	363,459	$	425,305	$	66,219	$	367,299	$	1,668	$	377,673	$	5,015

All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.

								Three Months Ended				Nine Months Ended
		September 30, 2013							September 30, 2013			September 30, 2013
				Unpaid				Average		Interest		Average		Interest
		Recorded		Principal		Related		Recorded		Income		Recorded		Income
(Dollars in thousands)		Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
Impaired loans with no related allowance recorded:
Commercial:
	General C&I	$	34,193	$	43,677	$	-	$	40,812	$	-	$	51,845	$	108
	TRUPS		6,500		6,500		-		6,500		-		10,583		-
	Income CRE		12,939		24,219		-		17,959		-		24,828		168
	Residential CRE		-		182		-		5,483		-		10,860		122
	Total	$	53,632	$	74,578	$	-	$	70,754	$	-	$	98,116	$	398
Retail:
	HELOC (a)	$	18,323	$	40,867	$	-	$	19,016	$	-	$	20,032	$	-
	R/E installment loans (a)		11,632		15,102		-		11,913		-		12,166		-
	Permanent mortgage (a)		11,120		14,531		-		11,127		-		10,690		-
	Total	$	41,075	$	70,500	$	-	$	42,056	$	-	$	42,888	$	-
Impaired loans with related allowance recorded:
Commercial:
	General C&I	$	31,672	$	38,075	$	2,447	$	27,944	$	71	$	16,319	$	108
	TRUPS		33,610		33,610		13,255		38,655		-		39,185		-
	Income CRE		10,274		11,330		765		7,552		70		3,859		96
	Residential CRE		7,053		12,383		816		4,567		68		1,869		84
	Total	$	82,609	$	95,398	$	17,283	$	78,718	$	209	$	61,232	$	288
Retail:
	HELOC	$	68,903	$	71,708	$	15,702	$	68,287	$	483	$	65,005	$	1,373
	R/E installment loans		71,543		72,686		22,724		75,084		336		72,571		1,025
	Permanent mortgage		117,004		129,702		18,646		114,501		776		111,880		2,164
	Credit card & other		648		648		212		682		7		732		23
	Total	$	258,098	$	274,744	$	57,284	$	258,554	$	1,602	$	250,188	$	4,585
Total commercial		$	136,241	$	169,976	$	17,283	$	149,472	$	209	$	159,348	$	686
Total retail		$	299,173	$	345,244	$	57,284	$	300,610	$	1,602	$	293,076	$	4,585
Total impaired loans		$	435,414	$	515,220	$	74,567	$	450,082	$	1,811	$	452,424	$	5,271

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

All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.

Asset Quality Indicators

FHN employs a dual grade commercial risk grading methodology to assign an estimate for the probability of default ("PD") and the loss given default ("LGD") 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. Each PD grade corresponds to an estimated one-year default probability percentage; a PD 1 has the lowest expected default probability, and probabilities increase as grades progress down the scale. 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). Pass loan grades are required to be reassessed annually or earlier whenever there has been a material change in the financial condition of the borrower or risk characteristics of the relationship. All commercial loans over $1 million and certain commercial loans over $500,000 that are graded 13 or worse are reassessed on a quarterly basis. LGD grades are assigned based on a scale of 1-12 and represent FHN’s expected recovery based on collateral type in the event a loan defaults. See Note 5 - Allowance for Loan Losses for further discussion on the credit grading system.

The following tables provide the balances of commercial loan portfolio classes with associated allowance, disaggregated by PD grade as of September 30, 2014 and 2013.
	September 30, 2014
			Loans to												Allowance
	General		Mortgage				Income		Residential				Percentage		for Loan
(Dollars in thousands)	C&I		Companies		TRUPS (a)		CRE		CRE		Total		of Total		Losses
PD Grade:
1	$	441,590	$	-	$	-	$	221	$	63	$	441,874	5	%	$	-
2		355,805		-		-		2,854		244		358,903	4			338
3		412,110		46,838		-		28,750		93		487,791	5			264
4		446,092		148,852		-		28,815		296		624,055	6			671
5		947,041		177,435		-		239,166		4,717		1,368,359	14			2,741
6		1,090,900		275,710		-		184,961		5,579		1,557,150	16			1,790
7		1,178,283		193,667		-		262,318		6,405		1,640,673	17			2,777
8		747,305		88,114		-		183,145		4,195		1,022,759	10			2,339
9		540,472		18,251		-		107,636		2,619		668,978	7			4,559
10		291,984		8,774		-		39,306		1,216		341,280	3			4,001
11		314,927		-		-		33,214		2,825		350,966	4			7,538
12		106,550		-		-		29,250		928		136,728	1			1,383
13		115,198		-		325,882		8,085		1,938		451,103	5			6,716
14,15,16		153,611		-		-		37,882		4,915		196,408	2			40,279
Collectively evaluated for impairment		7,141,868		957,641		325,882		1,185,603		36,033		9,647,027	99			75,396
Individually evaluated for impairment		33,987		-		12,875		15,554		6,811		69,227	1			7,143
Purchased credit-impaired loans		5,076		-		-		32,588		1,805		39,469	-			2,781
Total commercial loans	$	7,180,931	$	957,641	$	338,757	$	1,233,745	$	44,649	$	9,755,723	100	%	$	85,320

	September 30, 2013
			Loans to												Allowance
	General		Mortgage				Income		Residential				Percent of		for Loan
(Dollars in thousands)	C&I		Companies		TRUPS (a)		CRE		CRE		Total		Total		Losses
PD Grade:
1	$	228,555	$	-	$	-	$	-	$	-	$	228,555	3	%	$	81
2		179,955		-		-		-		-		179,955	2			79
3		194,880		-		-		2,687		-		197,567	2			224
4		311,097		-		-		-		-		311,097	4			517
5		790,748		-		-		11,823		216		802,787	9			1,363
6		938,609		40,200		-		44,311		286		1,023,406	12			1,973
7		1,125,031		202,128		-		228,814		9,978		1,565,951	17			3,377
8		881,668		308,282		-		202,417		5,058		1,397,425	16			4,895
9		615,180		152,275		-		203,308		1,499		972,262	11			7,981
10		451,318		29,008		-		139,026		1,066		620,418	7			8,640
11		399,082		473		-		69,945		277		469,777	5			10,338
12		124,916		-		-		57,534		1,224		183,674	2			2,425
13		159,675		-		332,707		33,439		1,324		527,145	6			8,596
14,15,16		172,346		335		3,335		73,737		10,033		259,786	3			34,601
Collectively evaluated for impairment		6,573,060		732,701		336,042		1,067,041		30,961		8,739,805	99			85,090
Individually evaluated for impairment		65,865		-		36,864		23,213		7,053		132,995	1			17,283
Total commercial loans (b)	$	6,638,925	$	732,701	$	372,906	$	1,090,254	$	38,014	$	8,872,800	100	%	$	102,373

Balances as of September 30, 2014 and 2013, presented net of $26.2 million and $29.4 million, respectively, in lower of cost or market (“LOCOM”) valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade is "13".
September 30, 2013 table excludes PCI loans.

The retail 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 retail loan-types, FHN is able to utilize the Fair Isaac Corporation (“FICO”) score, among other attributes, to assess the 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 retail portfolio.

The following tables reflect period end balances and average FICO scores by origination vintage for the HELOC, real estate installment, and permanent mortgage classes of loans as of September 30, 2014 and 2013:

HELOC
	September 30, 2014						September 30, 2013
			Average		Average				Average		Average
(Dollars in thousands)	Period End		Origination		Refreshed		Period End		Origination		Refreshed
Origination Vintage	Balance		FICO		FICO		Balance		FICO		FICO
pre-2003	$	61,659		708		703	$	88,416		711		702
2003		111,031		722		709		163,576		728		714
2004		312,590		724		711		421,542		727		717
2005		476,226		732		722		548,756		733		720
2006		351,818		740		727		400,023		741		725
2007		369,635		744		729		421,964		744		728
2008		200,908		753		748		233,642		754		747
2009		105,576		752		743		121,555		750		744
2010		100,727		754		749		120,022		753		750
2011		100,842		759		753		119,553		758		754
2012		121,149		759		757		145,507		759		759
2013		158,256		759		760		111,976		762		761
2014		87,878		761		761		-		-		-
Total	$	2,558,295		741		732	$	2,896,532		741		730


R/E Installment Loans	September 30, 2014						September 30, 2013
			Average		Average				Average		Average
(Dollars in thousands)	Period End		Origination		Refreshed		Period End		Origination		Refreshed
Origination Vintage	Balance		FICO		FICO		Balance		FICO		FICO
pre-2003	$	16,278		680		684	$	26,603		682		684
2003		55,361		715		724		81,915		716		725
2004		44,484		700		697		58,244		701		699
2005		132,276		715		713		170,742		717		711
2006		143,601		714		701		183,847		716		701
2007		211,780		723		709		264,851		725		709
2008		67,730		721		715		91,883		723		720
2009		31,524		739		728		39,549		742		736
2010		107,417		748		755		131,004		747		754
2011		296,440		760		759		347,315		761		761
2012		628,622		764		765		707,972		764		764
2013		486,553		756		757		457,590		758		754
2014		350,627		755		754		-		-		-
Total	$	2,572,693		748		746	$	2,561,515		746		742


Permanent Mortgage	September 30, 2014						September 30, 2013
			Average		Average				Average		Average
(Dollars in thousands)	Period End		Origination		Refreshed		Period End		Origination		Refreshed
Origination Vintage	Balance		FICO		FICO		Balance		FICO		FICO
pre-2004	$	161,037		724		723	$	205,111		725		725
2004		18,190		713		713		24,595		712		693
2005		35,503		737		733		41,643		738		712
2006		65,722		731		734		81,932		731		711
2007		201,640		734		735		236,819		733		710
2008		90,697		742		736		107,594		741		714
Total	$	572,789		730		731	$	697,694		731		713

Nonaccrual and Past Due Loans

For all portfolio segments and classes other than PCI loans, loans are placed on nonaccrual status 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, or on a case-by-case basis if FHN continues to receive payments, but there are atypical loan structures or other borrower-specific issues. PCI loans are classified in the table below as accruing because of the accretion of interest. FHN has a meaningful portion of loans that are classified as nonaccrual even though loan payments are being received; these include residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy, and also current second lien loans behind first lien loans with performance issues. The determination of whether a TDR is placed on nonaccrual status generally follows the same internal policies and procedures as other portfolio loans. However, FHN will typically place a consumer real estate loan on nonaccrual status if it is 30 or more days delinquent at the time of modification and is determined to be a TDR, except for residential real estate secured loans discharged in bankruptcy (“discharged bankruptcies”) that are placed on nonaccrual regardless of delinquency status. Current stand-alone second liens are placed on nonaccrual status if they are junior to first liens that are 90 days or more past due or the first lien has been modified into a TDR.


The following table reflects accruing and non-accruing loans by class on September 30, 2014:

	Accruing								Non-Accruing
			30-89		90+						30-89		90+		Total
			Days		Days		Total				Days		Days		Non-		Total
(Dollars in thousands)	Current		Past Due		Past Due		Accruing		Current		Past Due		Past Due		Accruing		Loans
Commercial (C&I):
General C&I	$	7,140,246	$	5,515	$	1,717	$	7,147,478	$	5,603	$	1,469	$	21,305	$	28,377	$	7,175,855
Loans to mortgage companies		956,861		650		-		957,511		-		-		130		130		957,641
TRUPS (a)		325,882		-		-		325,882		12,875		-		-		12,875		338,757
Purchased credit-impaired loans		4,710		366		-		5,076		-		-		-		-		5,076
Total commercial (C&I)		8,427,699		6,531		1,717		8,435,947		18,478		1,469		21,435		41,382		8,477,329
Commercial real estate:
Income CRE		1,186,595		2,781		-		1,189,376		217		1,068		10,496		11,781		1,201,157
Residential CRE		40,249		189		-		40,438		1,254		-		1,152		2,406		42,844
Purchased credit-impaired loans		33,185		669		539		34,393		-		-		-		-		34,393
Total commercial real estate		1,260,029		3,639		539		1,264,207		1,471		1,068		11,648		14,187		1,278,394
Consumer real estate:
HELOC		2,437,982		23,816		11,645		2,473,443		68,785		5,784		10,283		84,852		2,558,295
R/E installment loans		2,515,705		12,721		4,965		2,533,391		29,306		2,585		6,768		38,659		2,572,050
Purchased credit-impaired loans		643		-		-		643		-		-		-		-		643
Total consumer real estate		4,954,330		36,537		16,610		5,007,477		98,091		8,369		17,051		123,511		5,130,988
Permanent mortgage		523,150		7,635		8,030		538,815		15,215		4,063		14,696		33,974		572,789
Credit card & other
Credit card		184,650		1,900		1,822		188,372		-		-		-		-		188,372
Other		162,088		1,190		164		163,442		-		-		692		692		164,134
Purchased credit-impaired loans		11		-		-		11		-		-		-		-		11
Total credit card & other		346,749		3,090		1,986		351,825		-		-		692		692		352,517
Total loans, net of unearned	$	15,511,957	$	57,432	$	28,882	$	15,598,271	$	133,255	$	14,969	$	65,522	$	213,746	$	15,812,017

Total TRUPS includes LOCOM valuation allowance of $26.2 million.


The following table reflects accruing and non-accruing loans by class on September 30, 2013:

	Accruing								Non-Accruing
			30-89		90+						30-89		90+		Total
			Days		Days		Total				Days		Days		Non-		Total
(Dollars in thousands)	Current		Past Due		Past Due		Accruing		Current		Past Due		Past Due		Accruing		Loans
Commercial (C&I):
General C&I	$	6,560,688	$	7,314	$	95	$	6,568,097	$	33,582	$	3,610	$	28,334	$	65,526	$	6,633,623
Loans to mortgage companies		731,684		682		-		732,366		-		-		335		335		732,701
TRUPS (a)		336,042		-		-		336,042		-		-		36,864		36,864		372,906
Purchased credit-impaired loans		7,092		468		152		7,712		-		-		-		-		7,712
Total commercial (C&I)		7,635,506		8,464		247		7,644,217		33,582		3,610		65,533		102,725		7,746,942
Commercial real estate:
Income CRE		1,071,839		5,438		435		1,077,712		6,791		-		13,802		20,593		1,098,305
Residential CRE		31,189		177		-		31,366		285		-		4,110		4,395		35,761
Purchased credit-impaired loans		38,595		637		413		39,645		-		-		-		-		39,645
Total commercial real estate		1,141,623		6,252		848		1,148,723		7,076		-		17,912		24,988		1,173,711
Consumer real estate:
HELOC		2,778,336		24,072		12,641		2,815,049		61,733		5,521		14,229		81,483		2,896,532
R/E installment loans		2,499,522		14,156		6,475		2,520,153		29,549		3,048		7,877		40,474		2,560,627
Purchased credit-impaired loans		888		-		-		888		-		-		-		-		888
Total consumer real estate		5,278,746		38,228		19,116		5,336,090		91,282		8,569		22,106		121,957		5,458,047
Permanent mortgage		643,385		5,097		12,239		660,721		13,518		1,321		22,134		36,973		697,694
Credit card & other
Credit card		186,749		1,480		1,258		189,487		-		-		-		-		189,487
Other		140,320		803		138		141,261		1,399		-		-		1,399		142,660
Purchased credit-impaired loans		15		-		-		15		-		-		-		-		15
Total credit card & other		327,084		2,283		1,396		330,763		1,399		-		-		1,399		332,162
Total loans, net of unearned	$	15,026,344	$	60,324	$	33,846	$	15,120,514	$	146,857	$	13,500	$	127,685	$	288,042	$	15,408,556

Total TRUPS includes LOCOM valuation allowance of $29.4 million.

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. FHN considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan.

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, particularly as it relates to commercial borrowers due to the complex nature of loan structures, business/industry risk, and borrower/guarantor structures. 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 of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, FHN also considers whether the borrower has provided additional collateral or guarantors, among other things, and whether such additions adequately compensate FHN for the restructured terms. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR.

For all classes within the commercial portfolio segment, TDRs are typically modified through forbearance agreements (generally 6 to 12 months). Forbearance agreements could include reduced interest rates, reduced payments, release of guarantor, or entering into short sale agreements. FHN’s proprietary modification programs for consumer loans are generally structured using parameters of U.S. government-sponsored programs such as Home Affordable Modification Program (“HAMP”). Within the HELOC and R/E installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt ratio. Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt ratio. After 5 years the interest rate steps up 1 percent every year thereafter until it reaches the Federal Home Loan Mortgage Corporation ("Freddie Mac," "Freddie," or "FHLMC") Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans. Within the credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout program, customers are granted a rate reduction to 0 percent and term extensions for up to 5 years to pay off the remaining balance.

Despite the absence of a loan modification, the discharge of personal liability through bankruptcy proceedings is considered a concession and as a result, FHN classifies all non-reaffirmed residential real estate loans after bankruptcy as nonaccruing TDRs.

On September 30, 2014 and 2013, FHN had $346.0 million and $369.4 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $60.9 million and $61.3 million, or 18 percent as of September 30, 2014, and 17 percent as of September 30, 2013. Additionally, $83.1 million and $133.9 million of loans held-for-sale as of September 30, 2014 and 2013, respectively were classified as TDRs.


The following table reflects portfolio loans that were classified as TDRs during the three and nine months ended September 30, 2014 and 2013:

		Three Months Ended September 30, 2014					Nine Months Ended September 30, 2014
			Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
			Outstanding		Outstanding			Outstanding		Outstanding
(Dollars in thousands)		Number	Recorded Investment		Recorded Investment		Number	Recorded Investment		Recorded Investment
Commercial (C&I):
General C&I		2	$	1,031	$	970	4	$	1,767	$	1,492
	Total commercial (C&I)	2		1,031		970	4		1,767		1,492
Commercial real estate:
Income CRE		-		-		-	2		421		421
Residential CRE		-		-		-	1		976		960
	Total commercial real estate	-		-		-	3		1,397		1,381
Consumer real estate:
HELOC		89		6,930		6,883	253		20,999		21,208
R/E installment loans		21		1,269		1,255	138		9,544		9,450
	Total consumer real estate	110		8,199		8,138	391		30,543		30,658
Permanent mortgage		6		1,639		1,672	30		8,314		7,839
Credit card & other		16		107		103	50		254		245
Total troubled debt restructurings		134	$	10,976	$	10,883	478	$	42,275	$	41,615

		Three Months Ended September 30, 2013					Nine Months Ended September 30, 2013
			Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
			Outstanding		Outstanding			Outstanding		Outstanding
(Dollars in thousands)		Number	Recorded Investment		Recorded Investment		Number	Recorded Investment		Recorded Investment
Commercial (C&I):
General C&I		2	$	1,161	$	1,134	10	$	17,350	$	17,313
	Total commercial (C&I)	2		1,161		1,134	10		17,350		17,313
Commercial real estate:
Income CRE		-		-		-	1		288		288
Residential CRE		-		-		-	-		-		-
	Total commercial real estate	-		-		-	1		288		288
Consumer real estate:
HELOC		72		5,212		5,194	279		21,729		21,479
R/E installment loans		70		4,589		4,541	346		24,264		24,100
	Total consumer real estate	142		9,801		9,735	625		45,993		45,579
Permanent mortgage		15		3,864		4,074	41		16,907		17,311
Credit card & other		13		44		39	41		198		187
Total troubled debt restructurings		172	$	14,870	$	14,982	718	$	80,736	$	80,678


The following table presents TDRs which re-defaulted during the three and nine months ended September 30, 2014 and 2013, and as to which the modification occurred 12 months or less prior to the re-default. Financing receivables that became classified as TDRs within the previous 12 months and for which there was a payment default during the period are calculated by first identifying TDRs that defaulted during the period and then determining whether they were modified within the 12 months prior to the default. For purposes of this disclosure, FHN generally defines payment default as 30 or more plus days past due.

		Three Months Ended			Nine Months Ended
		September 30, 2014			September 30, 2014
			Recorded			Recorded
(Dollars in thousands)		Number	Investment		Number	Investment
Commercial (C&I):
General C&I		2	$	59	4	$	512
	Total commercial (C&I)	2		59	4		512
Commercial real estate:
Income CRE		1		2,570	3		2,959
Residential CRE		-		-	-		-
	Total commercial real estate	1		2,570	3		2,959
Consumer real estate:
HELOC		2		212	6		374
R/E installment loans		1		132	8		500
	Total consumer real estate	3		344	14		874
Permanent mortgage		1		347	3		1,128
Credit card & other		-		-	2		4
Total troubled debt restructurings		7	$	3,320	26	$	5,477


		Three Months Ended			Nine Months Ended
		September 30, 2013			September 30, 2013
			Recorded			Recorded
(Dollars in thousands)		Number	Investment		Number	Investment
Commercial (C&I):
General C&I		6	$	1,870	8	$	5,977
	Total commercial (C&I)	6		1,870	8		5,977
Commercial real estate:
Income CRE		3		750	4		1,548
Residential CRE		-		-	1		33
	Total commercial real estate	3		750	5		1,581
Consumer real estate:
HELOC		1		35	10		512
R/E installment loans		3		229	6		350
	Total consumer real estate	4		264	16		862
Permanent mortgage		4		2,071	14		6,507
Credit card & other		8		34	15		61
Total troubled debt restructurings		25	$	4,989	58	$	14,988

The determination of whether a TDR is placed on nonaccrual status generally follows the same internal policies and procedures as other portfolio loans. However, FHN will typically place a consumer real estate loan on nonaccrual status if it is 30 or more days delinquent upon modification into a TDR. For commercial loans, nonaccrual TDRs that are reasonably assured of repayment according to their modified terms may be returned to accrual status by FHN upon a detailed credit evaluation of the borrower’s financial condition and prospects for repayment under the revised terms. For consumer loans, FHN’s evaluation supporting the decision to return a modified loan to accrual status includes consideration of the borrower’s sustained historical repayment performance for a reasonable period prior to the date on which the loan is returned to accrual status, which is generally a minimum of six months. FHN may also consider a borrower’s sustained historical repayment performance for a reasonable time prior to the restructuring in assessing whether the borrower can meet the restructured terms, as it may indicate that the borrower is capable of servicing the level of debt under the modified terms. Otherwise, FHN will continue to classify restructured loans as nonaccrual. Consistent with regulatory guidance, upon sustained performance and classification as a TDR over FHN’s year-end, the loan will be removed from TDR status as long as the modified terms were market-based at the time of modification.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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