Fair Value Of Assets And Liabilities

9 Months Ended

Sep. 30, 2014

Note 17 – Fair Value of Assets & Liabilities

FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.

Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.

Recurring Fair Value Measurements

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of September 30, 2014:

			September 30, 2014
(Dollars in thousands)			Level 1		Level 2		Level 3		Total
Trading securities - capital markets:
	U.S. treasuries		$	-	$	247,796	$	-	$	247,796
	Government agency issued MBS			-		301,559		-		301,559
	Government agency issued CMO			-		201,016		-		201,016
	Other U.S. government agencies			-		108,874		-		108,874
	States and municipalities			-		42,900		-		42,900
	Corporate and other debt			-		379,768		5		379,773
	Equity, mutual funds, and other			-		49,986		-		49,986
		Total trading securities - capital markets		-		1,331,899		5		1,331,904
Trading securities - mortgage banking:
	Principal only			-		-		4,415		4,415
	Interest only			-		-		232		232
	Subordinated bonds			-		-		1,471		1,471
		Total trading securities - mortgage banking		-		-		6,118		6,118
Loans held-for-sale				-		-		31,443		31,443
Securities available-for-sale:
	U.S. treasuries			-		100		-		100
	Government agency issued MBS			-		716,865		-		716,865
	Government agency issued CMO			-		2,623,685		-		2,623,685
	Other U.S. government agencies			-		-		1,929		1,929
	States and municipalities			-		8,705		1,500		10,205
	Equity, mutual funds, and other			26,080		-		-		26,080
		Total securities available-for-sale		26,080		3,349,355		3,429		3,378,864
Mortgage servicing rights				-		-		2,880		2,880
Other assets:
	Deferred compensation assets			24,901		-		-		24,901
	Derivatives, forwards and futures			3,181		-		-		3,181
	Derivatives, interest rate contracts			-		134,561		-		134,561
		Total other assets		28,082		134,561		-		162,643
		Total assets	$	54,162	$	4,815,815	$	43,875	$	4,913,852
Trading liabilities - capital markets:
	U.S. treasuries		$	-	$	278,306	$	-	$	278,306
	Other U.S. government agencies			-		4,964		-		4,964
	States and municipalities			-		543		-		543
	Corporate and other debt			-		248,421		-		248,421
		Total trading liabilities - capital markets		-		532,234		-		532,234
Other liabilities:
	Derivatives, forwards and futures			2,895		-		-		2,895
	Derivatives, interest rate contracts			-		112,907		-		112,907
	Derivatives, other			-		-		7,640		7,640
		Total other liabilities		2,895		112,907		7,640		123,442
		Total liabilities	$	2,895	$	645,141	$	7,640	$	655,676

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of September 30, 2013:

			September 30, 2013
(Dollars in thousands)			Level 1		Level 2		Level 3		Total
Trading securities - capital markets:
	U.S. treasuries		$	-	$	86,986	$	-	$	86,986
	Government agency issued MBS			-		407,876		-		407,876
	Government agency issued CMO			-		90,420		-		90,420
	Other U.S. government agencies			-		149,867		-		149,867
	States and municipalities			-		17,828		-		17,828
	Trading Loans			-		145,505		-		145,505
	Corporate and other debt			-		427,559		5		427,564
	Equity, mutual funds, and other			-		1,374		-		1,374
		Total trading securities - capital markets		-		1,327,415		5		1,327,420
Trading securities - mortgage banking:
	Principal only			-		-		5,096		5,096
	Interest only			-		-		10,618		10,618
		Total trading securities - mortgage banking		-		-		15,714		15,714
Loans held-for-sale				-		-		229,760		229,760
Securities available-for-sale:
	U.S. treasuries			-		39,996		-		39,996
	Government agency issued MBS			-		875,452		-		875,452
	Government agency issued CMO			-		2,025,121		-		2,025,121
	Other U.S. government agencies			-		-		2,528		2,528
	States and municipalities			-		13,655		1,500		15,155
	Venture capital			-		-		4,300		4,300
	Equity, mutual funds, and other			20,267		-		-		20,267
		Total securities available-for-sale		20,267		2,954,224		8,328		2,982,819
Mortgage servicing rights				-		-		116,686		116,686
Other assets:
	Deferred compensation assets			23,193		-		-		23,193
	Derivatives, forwards and futures			16,877		-		-		16,877
	Derivatives, interest rate contracts			-		198,239		-		198,239
		Total other assets		40,070		198,239		-		238,309
		Total assets	$	60,337	$	4,479,878	$	370,493	$	4,910,708
Trading liabilities - capital markets:
	U.S. treasuries		$	-	$	312,315	$	-	$	312,315
	Government agency issued MBS			-		521		-		521
	Government agency issued CMO			-		1,024		-		1,024
	Other U.S. government agencies			-		30,253		-		30,253
	States and municipalities			-		335		-		335
	Corporate and other debt			-		237,953		-		237,953
	Equity, mutual funds, and other			-		3,568		-		3,568
		Total trading liabilities - capital markets		-		585,969		-		585,969
Other short-term borrowings				-		-		11,715		11,715
Other liabilities:
	Derivatives, forwards and futures			9,770		-		-		9,770
	Derivatives, interest rate contracts			-		153,402		-		153,402
	Derivatives, other			-		1		2,745		2,746
		Total other liabilities		9,770		153,403		2,745		165,918
		Total liabilities	$	9,770	$	739,372	$	14,460	$	763,602

Changes in Recurring Level 3 Fair Value Measurements

The changes in Level 3 assets and liabilities measured at fair value for the three months ended September 30, 2014 and 2013, on a recurring basis are summarized as follows:

			Three Months Ended September 30, 2014
										Securities available-for-sale					Mortgage
			Trading			Loans held-				Investment			Venture		servicing				Net derivative
(Dollars in thousands)			securities			for-sale				portfolio			Capital		rights, net				liabilities
Balance on July 1, 2014			$	6,421			$	232,487			$	3,561	$	2,300		$	3,197			$	(4,725)
	Total net gains/(losses) included in:
		Net income		191				41,757				-		(995)			19				(3,236)
		Other comprehensive income /(loss)		-				-				(16)		-			-				-
	Purchases			-				522				-		-			-				-
	Issuances			-				-				-		-			-				-
	Sales			-				(236,975)				-		(5)			(152)				-
	Settlements			(489)				(5,967)				(116)		(1,300)			(184)				321
	Net transfers into/(out of) Level 3			-				(381)	(b)			-		-			-				-
Balance on September 30, 2014			$	6,123			$	31,443			$	3,429	$	-		$	2,880			$	(7,640)
Net unrealized gains/(losses) included in net income			$	191	(a)		$	1,828	(a)		$	-	$	-		$	17	(a)		$	(3,236)	(c)

			Three Months Ended September 30, 2013
										Securities available-for-sale					Mortgage								Other
			Trading			Loans held-				Investment			Venture		servicing				Net derivative				short-term
(Dollars in thousands)			securities			for-sale				portfolio			Capital		rights, net				liabilities				borrowings
Balance on July 1, 2013			$	15,877			$	235,080			$	4,354	$	4,300		$	113,853			$	(2,195)			$	(12,349)
	Total net gains/(losses) included in:
		Net income		1,944				(1,805)				-		-			8,932				(871)				634
		Other comprehensive income /(loss)		-				-				(17)		-			-				-				-
	Purchases			-				12,338				-		-			-				-				-
	Issuances			-				-				-		-			-				-				-
	Sales			-				-				-		-			-				-				-
	Settlements			(2,102)				(11,390)				(309)		-			(6,099)				321				-
	Net transfers into/(out of) Level 3			-				(4,463)	(b)			-		-			-				-				-
Balance on September 30, 2013			$	15,719			$	229,760			$	4,028	$	4,300		$	116,686			$	(2,745)			$	(11,715)
Net unrealized gains/(losses) included in net income			$	(1,540)	(a)		$	(1,805)	(a)		$	-	$	-		$	9,107	(a)		$	(871)	(c)		$	634	(a)

Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.
Transfers out of recurring loans held-for-sale level 3 balances reflect movements out of loans held-for-sale and into real estate acquired by foreclosure (level 3 nonrecurring).
Included in Other expense.

Changes in Recurring Level 3 Fair Value Measurements

The changes in Level 3 assets and liabilities measured at fair value for the nine months ended September 30, 2014 and 2013, on a recurring basis are summarized as follows:

			Nine Months Ended September 30, 2014
											Securities available-for-sale				Mortgage
			Trading			Loans held-				Investment			Venture		servicing				Net derivative
(Dollars in thousands)			securities			for-sale				portfolio			Capital		rights, net				liabilities
Balance on January 1, 2014			$	7,200			$	230,456			$	3,826	$	4,300		$	72,793			$	(2,915)
	Total net gains/(losses) included in:
		Net income		149				51,158				-		(2,995)			1,265				(5,678)
		Other comprehensive income / (loss)		-				-				(48)		-			-				-
	Purchases			1,559				5,104				-		-			-				-
	Issuances			-				-				-		-			-				-
	Sales			(1,715)				(236,975)				-		(5)			(70,071)				-
	Settlements			(1,070)				(14,767)				(349)		(1,300)			(1,107)				953
	Net transfers into/(out of) Level 3			-				(3,533)	(b)			-		-			-				-
Balance on September 30, 2014			$	6,123			$	31,443			$	3,429	$	-		$	2,880			$	(7,640)
Net unrealized gains/(losses) included in net income			$	225	(a)		$	1,828	(a)		$	-	$	-		$	50	(a)		$	(5,678)	(c)

			Nine Months Ended September 30, 2013
											Securities available-for-sale				Mortgage								Other
			Trading			Loans held-				Investment			Venture		servicing				Net derivative				short-term
(Dollars in thousands)			securities			for-sale				portfolio			Capital		rights, net				liabilities				borrowings
Balance on January 1, 2013			$	17,992			$	221,094			$	5,253	$	4,300		$	114,311			$	(2,175)			$	(11,156)
	Total net gains/(losses) included in:
		Net income		4,474				(3,940)				-		-			20,267				(1,522)				(559)
		Other comprehensive income /(loss)		-				-				(93)		-			-				-				-
	Purchases			-				49,847				-		-			-				-				-
	Issuances			-				-				-		-			-				-				-
	Sales			-				-				-		-			-				-				-
	Settlements			(6,747)				(25,990)				(1,132)		-			(17,892)				952				-
	Net transfers into/(out of) Level 3			-				(11,251)	(b)			-		-			-				-				-
Balance on September 30, 2013			$	15,719			$	229,760			$	4,028	$	4,300		$	116,686			$	(2,745)			$	(11,715)
Net unrealized gains/(losses) included in net income			$	3,127	(a)		$	(3,940)	(a)		$	-	$	-		$	20,424	(a)		$	(1,523)	(c)		$	(559)	(a)

Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.
Transfers out of recurring loans held-for-sale level 3 balances reflect movements out of loans held-for-sale and into real estate acquired by foreclosure (level 3 nonrecurring).
Included in Other expense.

In third quarter 2014, FHN completed sales of first lien mortgage loans from its loans held-for-sale portfolio. The sale populations primarily represented loans that had been originated with the intent to sell to FNMA or FHLMC and consisted of repurchased loans as well as loans that remained after FHN’s exit of mortgage origination activities in 2008. Smaller amounts of jumbo loans were also included in the sale, along with some loans insured under government programs. Almost all of these loans had been accounted for at elected fair value (a recurring measurement) with a small amount having been accounted for as LOCOM loans (a nonrecurring measurement). The contracted sale values for the loans reflected a substantial improvement in pricing for pre-2009 vintage first lien mortgages in comparison to FHN’s historical methodologies used to estimate fair value, which incorporate significant Level 3 inputs within a discounted cash flow model. Accordingly, the loans being sold were marked to the revised estimate of fair value during the quarter and the pricing evidence from the sale transactions is considered a Level 2 input within the valuation process for the remaining non-governmental guaranteed portion of first lien mortgage loans held-for-sale.

Nonrecurring Fair Value Measurements

From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of LOCOM accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheet at September 30, 2014 and 2013, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment, the related carrying value, and the fair value adjustments recorded during the respective periods.

									Three Months Ended		Nine Months Ended
	Carrying value at September 30, 2014								September 30, 2014		September 30, 2014
(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Net gains/(losses)		Net gains/(losses)
Loans held-for-sale - SBAs	$	-	$	7,552	$	-	$	7,552	$	(4)	$	39
Loans held-for-sale - first mortgages		-		-		981		981		(351)		(361)
Loans, net of unearned income (a)		-		-		46,634		46,634		1,259		2,504
Real estate acquired by foreclosure (b)		-		-		35,261		35,261		(707)		(2,098)
Other assets (c)		-		-		65,393		65,393		(698)		(2,779)
									$	(501)	$	(2,695)

									Three Months Ended		Nine Months Ended
	Carrying value at September 30, 2013								September 30, 2013		September 30, 2013
(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Net gains/(losses)		Net gains/(losses)
Loans held-for-sale - first mortgages	$	-	$	-	$	9,632	$	9,632	$	364	$	304
Loans, net of unearned income (a)		-		-		82,254		82,254		(1,177)		(3,154)
Real estate acquired by foreclosure (b)		-		-		50,030		50,030		(327)		(3,278)
Other assets (c)		-		-		69,115		69,115		(1,153)		(4,199)
									$	(2,293)	$	(10,327)
Certain previously reported amount have been reclassified to agree with current presentation.

Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral. Write-downs on these loans are recognized as part of provision.
Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
Represents tax credit investments.

In first quarter 2013, FHN exercised clean-up calls on first lien mortgage proprietary securitization trusts. In accordance with accounting requirements, FHN initially recognized the associated loans at fair value. Fair value was primarily determined through reference to observable inputs, including current market prices for similar loans. Since these loans were from the 2003 vintage, adjustments were made for the higher yields associated with the loans in comparison to more currently originated loans being sold. This resulted in recognition of an immaterial premium for these transactions.

Level 3 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 September 30, 2014 and 2013:

(Dollars in Thousands)
	Fair Value at
Level 3 Class	September 30, 2014		Valuation Techniques	Unobservable Input	Values Utilized
Trading securities - mortgage (a)	$	6,118	Discounted cash flow	Prepayment speeds	42% - 46%
				Discount rate	42% - 69%
Loans held-for-sale - residential real estate		32,424	Discounted cash flow	Prepayment speeds - First mortgage	6% - 10%
				Prepayment speeds - Heloc	5% - 15%
				Credit spreads	2% - 4%
				Delinquency adjustment factor	15% - 25% added to credit spread
				Loss severity trends - First mortgage	50% - 60% of UPB
				Loss severity trends - Heloc	50% - 100% of UPB
				Draw rate - Heloc	5% - 12%
Mortgage servicing rights (a)		2,880	Discounted cash flow	Prepayment speeds	15.2 CPR
				Discount rate	9.8%
				Cost to service	$141.40/Loan
				Earnings on escrow	1.385%
Derivative liabilities, other		7,640	Discounted cash flow	Visa covered litigation resolution amount	$4.9 billion - $5.7 billion
				Probability of resolution scenarios	10% - 30%
				Time until resolution	12 - 48 months
Loans, net of unearned income (b)		46,634	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
Real estate acquired by foreclosure (c)		35,261	Appraisals from comparable properties	Adjustment for value changes since appraisal	0% - 10% of appraisal
Other assets (d)		65,393	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

The unobservable inputs for principal-only and interest-only trading securities, MSR and subordinated bonds are discussed in the Mortgage servicing rights and other retained interests paragraph.
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral. Write-downs on these loans are recognized as part of provision.
Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
Represents tax credit investments.

(Dollars in Thousands)
	Fair Value at
Level 3 Class	September 30, 2013		Valuation Techniques	Unobservable Input	Values Utilized
Trading securities - mortgage	$	15,714	Discounted cash flow	Prepayment speeds	42% - 46%
				Discount rate	48% - 170%
Loans held-for-sale - residential real estate		239,392	Discounted cash flow	Prepayment speeds	6% - 10%
				Credit spreads	2% - 4%
				Delinquency adjustment factor	15% - 25% added to credit spread
				Loss severity trends	50% - 60% of UPB
Venture capital investments		4,300	Industry comparables	Adjustment for minority interest and small business status	40% - 50% discount
			Discounted cash flow	Discount rate	25% - 30%
				Earnings capitalization rate	20% - 25%
Mortgage servicing rights		116,686	Discounted cash flow	Prepayment speeds	18.7 CPR
				Discount rate	8.4%
				Cost to service	$118.70/Loan
				Earnings on escrow	1.385%
Other short-term borrowings		11,715	Discounted cash flow	(a)	(a)
Derivative liabilities, other		2,745	Discounted cash flow	Visa covered litigation resolution amount	$4.4 billion - $5.0 billion
				Probability of resolution scenarios	10% - 50%
				Time until resolution	6 - 30 months
Loans, net of unearned income (b)		82,254	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
Real estate acquired by foreclosure (c)		50,030	Appraisals from comparable properties	Adjustment for value changes since appraisal	0% - 10% of appraisal
Other assets (d)		69,115	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

The inputs and associated ranges for Other short-term borrowings mirror those of the related MSR.
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral. Write-downs on these loans are recognized as part of provision.
Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
Represents tax credit investments.

Mortgage servicing rights and other retained interests. Prepayment rates and credit spreads (part of the discount rate) are significant unobservable inputs used in the fair value measurement of FHN’s MSR and mortgage trading securities which include principal only strips, excess interest IO, and subordinated bonds. Cost to service and earnings on escrow are additional unobservable inputs included in the valuation of MSR. Increases in prepayment rates, credit spreads and costs to service in isolation would result in significantly lower fair value measurements for the associated assets. Conversely, decreases in prepayment rates, credit spreads and costs to service in isolation would result in significantly higher fair value measurements for the associated assets. An increase/(decrease) in earnings on escrow in isolation would be accompanied by an increase/(decrease) in the value of the related MSR. Generally, when market interest rates decline and other factors favorable to prepayments occur, there is a corresponding increase in prepayment rates as customers are expected to refinance existing mortgages under more favorable interest rate terms. Generally, changes in discount rates directionally mirror the changes in market interest rates. In third quarter 2013, FHN agreed to sell substantially all its remaining legacy mortgage servicing. Sales commenced in fourth quarter 2013 and were substantially completed in first quarter 2014. FHN used the price in the definitive agreement, as adjusted for the portion of pricing that was not specific to the MSR and excess interest, as a third-party pricing source in the valuation of the remaining servicing assets as of September 30, 2014.

Prior to the contracted servicing sale, the MSR Hedging Working Group reviewed the overall assessment of the estimated fair value of MSR and excess interests weekly and was responsible for approving the critical assumptions used by management to determine the estimated fair value of FHN’s retained interests. In addition, this working group reviewed the source of significant changes to the carrying values each quarter and was responsible for hedges and approving hedging strategies during periods when the MSR was hedged. Hedges were terminated upon execution of the definitive agreement to sell servicing. Subsequent to the contracted servicing sale, FHN's Corporate Accounting Department monitors sale activity and changes in the fair value of MSR and excess interest monthly.

Prior to the contracted servicing sale, FHN also engaged in a process referred to as “price discovery” on a quarterly basis to assess the reasonableness of the estimated fair value of retained interests. Price discovery was conducted through a process of obtaining the following information: (1) quarterly informal (and an annual formal) valuation of the servicing portfolio by prominent independent mortgage-servicing brokers and (2) a collection of surveys and benchmarking data made available by independent third parties that include peer participants in the mortgage banking business. Although there was no single source of market information that could be relied upon to assess the fair value of MSR or excess interests, FHN reviewed all information obtained during price discovery to determine whether the estimated fair value of MSR was reasonable when compared to market information.

Loans held-for-sale. Prepayment rates, credit spreads, and delinquency adjustment factors are significant unobservable inputs used in the fair value measurement of FHN’s residential real estate loans held-for-sale. Loss severity trends are also assessed to evaluate the reasonableness of fair value estimates resulting from discounted cash flows methodologies as well as to estimate fair value for newly repurchased loans and loans that are near foreclosure. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. Draw rates are an additional significant unobservable input for HELOCs. Increases (decreases) in the draw rate estimates for HELOCs would increase (decrease) their fair value. All observable and unobservable inputs are re-assessed monthly. Fair value measurements are reviewed at least monthly by FHN’s Corporate Accounting Department.

Venture capital investments. The unobservable inputs used in the estimation of fair value for Venture capital investments were adjustments for minority interest and small business status when compared to industry comparables, reduction of cash flow estimates due to industry uncertainty and the discount rate and earnings capitalization rate for a discounted cash flow analysis. For both valuation techniques, the inputs were intended to reflect the nature of the small business and the status of equity tranches held by FHN in relation to the overall valuation. The valuation of venture capital investments was reviewed at least quarterly by FHN’s Equity Investment Review Committee. Changes in valuation were discussed with respect to the appropriateness of the adjustments in relation to the associated triggering events.

Derivative liabilities. The determination of fair value for FHN’s derivative liabilities associated with its prior sales of Visa Class B shares include estimation of both the resolution amount for Visa’s Covered Litigation matters as well as the length of time until the resolution occurs. Significant increases (decreases) in either of these inputs in isolation would result in significantly higher (lower) fair value measurements for the derivative liabilities. Additionally, FHN performs a probability weighted multiple resolution scenario to calculate the estimated fair value of these derivative liabilities. Assignment of higher (lower) probabilities to the larger potential resolution scenarios would result in an increase (decrease) in the estimated fair value of the derivative liabilities. The valuation inputs and process are discussed with senior and executive management when significant events affecting the estimate of fair value occur. Inputs are compared to information obtained from the public issuances and filings of Visa, Inc. as well as public information released by other participants in the applicable litigation matters.

Loans, net of unearned income and Real estate acquired by foreclosure. Collateral-dependent loans and Real estate acquired by foreclosure are primarily valued using appraisals based on sales of comparable properties in the same or similar markets. Multiple appraisal firms are utilized to ensure that estimated values are consistent between firms. This process occurs within FHN’s Credit Risk Management and Loan Servicing functions (primarily consumer) and the Credit Risk Management Committee reviews valuation methodologies and loss information for reasonableness. Back testing is performed during the year through comparison to ultimate disposition values and is reviewed quarterly within the Credit Risk Management function. Other collateral (receivables, inventory, equipment, etc.) is valued through borrowing base certificates, financial statements and/or auction valuations. These valuations are discounted based on the quality of reporting, knowledge of the marketability/collectability of the collateral and historical disposition rates.

Other assets – tax credit investments. The estimated fair value of tax credit investments is generally determined in relation to the yield (i.e., future tax credits to be received) an acquirer of these investments would expect in relation to the yields experienced on current new issue and/or secondary market transactions. Thus, as tax credits are recognized, the future yield to a market participant is reduced, resulting in consistent impairment of the individual investments. Individual investments are reviewed for impairment quarterly, which may include the consideration of additional marketability discounts related to specific investments. Unusual valuation adjustments, and the associated triggering events, are discussed with senior and executive management, when appropriate. A portfolio review is conducted annually, with the assistance of a third party, to assess the reasonableness of current valuations.

Fair Value Option

FHN elected the fair value option on a prospective basis for almost all types of mortgage loans originated for sale purposes under the Financial Instruments Topic (“ASC 825”). FHN determined that the election reduced certain timing differences and better matched changes in the value of such loans with changes in the value of derivatives used as economic hedges for these assets at the time of election. After the 2008 divestiture of certain mortgage banking operations and the significant decline of mortgage loans originated for sale, FHN discontinued hedging the mortgage warehouse.

Repurchased loans are recognized within loans held-for-sale at fair value at the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent values from exceeding the initial fair value, determined at the time of repurchase but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declines in value.

Prior to 2010, FHN transferred certain servicing assets in transactions that did not qualify for sale treatment due to certain recourse provisions. In fourth quarter 2013, these recourse provisions expired and the transaction was recognized as a sale. Prior to fourth quarter 2013, the associated proceeds were recognized within other short-term borrowings in the Consolidated Statements of Condition. Since the servicing assets were recognized at fair value and changes in the fair value of the related financing liabilities mirrored the change in fair value of the associated servicing assets, management elected to account for the financing liabilities at fair value. Since the servicing assets had already been delivered to the buyer, the fair value of the financing liabilities associated with the transaction did not reflect any instrument-specific credit risk.

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.
		September 30, 2014
(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	$	31,443	$	49,145		$	(17,702)
	Nonaccrual loans		7,742		14,893			(7,151)
	Loans 90 days or more past due and still accruing		2,685		4,990			(2,305)


		September 30, 2013
(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	$	229,760	$	379,123		$	(149,363)
	Nonaccrual loans		69,116		147,116			(78,000)
	Loans 90 days or more past due and still accruing		9,046		19,402			(10,356)
Trading loans reported at fair value:
	Total loans		145,505		142,311			3,194

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				Nine Months Ended
			September 30				September 30
(Dollars in thousands)			2014		2013		2014		2013
Changes in fair value included in net income:
	Mortgage banking noninterest income
		Loans held-for-sale	$	41,757	$	(1,805)	$	51,158	$	(3,940)
		Other short-term borrowings		-		634		-		(559)
Changes in fair value included in net income:
	Capital market noninterest income
		Trading loans		-		1,867		-		1,867

For the three months ended September 30, 2014 and 2013, the amounts for residential real estate loans held-for-sale include a gain of $.6 million and a loss of $1.4 million, respectively, in pretax earnings that are attributable to changes in instrument-specific credit risk. For the nine months ended September 30, 2014 and 2013, the amounts for loans held-for-sale include a gain of $3.2 million and an immaterial gain, respectively, in pretax earnings that are attributable to changes in instrument-specific credit risk. The portion of the fair value adjustments related to credit risk was determined based on both a quality adjustment for delinquencies and the full credit spread on the non-conforming loans. Interest income on residential real estate loans held-for-sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Condensed Statements of Income as interest on loans held-for-sale.

Determination of Fair Value

In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments and MSR recorded at fair value in the Consolidated Condensed Statements of Condition and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.

Short-term financial assets. Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions and the Federal Reserve are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

Trading securities and trading liabilities. Trading securities and trading liabilities are recognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities. Broker-dealer long positions are valued at bid price in the bid-ask spread. Short positions are valued at the ask price. Inventory positions are valued using observable inputs including current market transactions, LIBOR and U.S. treasury curves, credit spreads, and consensus prepayment speeds. Trading loans are valued using observable inputs including current market transactions, swap rates, mortgage rates, and consensus prepayment speeds.

Trading securities also include retained interests in prior securitizations that qualify as financial assets, which primarily include interest-only strips, principal-only strips and subordinated bonds. In third quarter 2013, FHN agreed to sell substantially all of its remaining legacy mortgage servicing, including excess interest. Since that time FHN has used the price in the definitive agreement, as adjusted for the portion of pricing that was not specific to the excess interest, as a third-party pricing source in the valuation of the excess interest. FHN uses inputs including yield curves, credit spreads, and prepayment speeds to determine the fair value of principal-only strips. Subordinated bonds are bonds with junior priority and are valued using an internal model which includes contractual terms, frequency and severity of loss (credit spreads), prepayment speeds of the underlying collateral, and the yield that a market participant would require.

Prior to the third quarter 2013 sale, the fair value of excess interest was determined using prices from closely comparable assets such as MSR that were tested against prices determined using a valuation model that calculated the present value of estimated future cash flows. Inputs utilized in valuing excess interest were consistent with those used to value the related MSR. The fair value of excess interest typically changes based on changes in the discount rate and differences between modeled prepayment speeds and credit losses and actual experience. FHN used assumptions in the model that it believes are comparable to those used by brokers and other service providers. FHN also periodically compared its estimates of fair value and assumptions with brokers, service providers, recent market activity, and against its own experience.

Securities available-for-sale. Securities available-for-sale includes the investment portfolio accounted for as available-for-sale under ASC 320-10-25, federal bank stock holdings, short-term investments in mutual funds, and prior to September 30, 2014, venture capital investments. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates, and credit spreads. When available, broker quotes are used to support these valuations. Certain government agency debt obligations with limited trading activity are valued using a discounted cash flow model that incorporates a combination of observable and unobservable inputs. Primary observable inputs include contractual cash flows and the treasury curve. Significant unobservable inputs include estimated trading spreads and estimated prepayment speeds.

Investments in the stock of the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Condensed Statements of Condition which is considered to approximate fair value. Short-term investments in mutual funds are measured at the funds’ reported closing net asset values. Investments in equity securities are valued using quoted market prices. Prior to September 30, 2014, venture capital investments were typically measured using significant internally generated inputs including adjustments to industry comparables and discounted cash flows analysis.

Securities held-to-maturity. Securities held-to-maturity reflects debt securities for which management has the positive intent and ability to hold to maturity. To the extent possible, valuations of held-to-maturity securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves and credit spreads. Debt securities with limited trading activity are valued using a discounted cash flow model that incorporates a combination of observable and unobservable inputs. Primary observable inputs include contractual cash flows, the treasury curve and credit spreads from similar instruments. Significant unobservable inputs include estimated credit spreads for individual issuers and instruments as well as prepayment speeds, as applicable.

Loans held-for-sale. For applicable loans current transaction prices and /or bid values on similar assets are used in valuing residential real estate loans held-for-sale. Uncommitted bids may be adjusted based on other available market information. For all other loans FHN determines the fair value of residential real estate loans held-for-sale using a discounted cash flow model which incorporates both observable and unobservable inputs. Typical inputs include contractual cash flow requirements, current mortgage rates for similar products, estimated prepayment rates, credit spreads and delinquency penalty adjustments. Adjustments for delinquency and other differences in loan characteristics are typically reflected in the model’s discount rates. Loss severity trends and the value of underlying collateral are also considered in assessing the appropriate fair value for severely delinquent loans and loans in foreclosure. The valuation of HELOCs also incorporates estimates of loan draw rates as well as estimated cancellation rates for loans expected to become delinquent.

Loans held-for-sale also includes loans made by the Small Business Administration (“SBA”), which are accounted for at LOCOM. The fair value of SBA loans is determined using an expected cash flow model that utilizes observable inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the treasury curve. The fair value of other non-residential real estate loans held-for-sale is approximated by their carrying values based on current transaction values.

Loans, net of unearned income. Loans, net of unearned income are recognized at the amount of funds advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan losses. The fair value estimates for disclosure purposes differentiate loans based on their financial characteristics, such as product classification, vintage, loan category, pricing features, and remaining maturity.

The fair value of floating rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is considered to approximate book value due to the monthly repricing for commercial and consumer loans, with the exception of floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements in market rates. The fair value for floating rate 1-4 family mortgage loans is calculated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period.

Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the floating rate 1-4 family residential mortgage portfolio.

The fair value of fixed rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is estimated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the fixed rate mortgage and installment loan portfolios.

For all loan portfolio classes, adjustments are made to reflect liquidity or illiquidity of the market. Such adjustments reflect discounts that FHN believes are consistent with what a market participant would consider in determining fair value given current market conditions.

Individually impaired loans are measured using either a discounted cash flow methodology or the estimated fair value of the underlying collateral less costs to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loan’s effective interest rate for discounting expected cash flow amounts. Thus, this analysis is not considered a fair value measurement in accordance with ASC 820. However, the results of this methodology are considered to approximate fair value for the applicable loans. Expected cash flows are derived from internally-developed inputs primarily reflecting expected default rates on contractual cash flows. For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Carrying value is considered to reflect fair value for these loans.

Mortgage servicing rights. FHN recognizes all classes of MSR at fair value. In third quarter 2013, FHN agreed to sell substantially all of its remaining legacy mortgage servicing. Since that time FHN has used the price in the definitive agreement, as adjusted for the portion of pricing that was not specific to the MSR, as a third-party pricing source in the valuation of the MSR held at September 30, 2014.

Since sales of MSR tend to occur in private transactions and the precise terms and conditions of the sales are typically not readily available, there is a limited market to refer to in determining the fair value of MSR. As such, prior to the third quarter 2013 sale agreement, FHN primarily relied on a discounted cash flow model to estimate the fair value of its MSR. This model calculated estimated fair value of the MSR using predominant risk characteristics of MSR such as interest rates, type of product (fixed vs. variable), age (new, seasoned, or moderate), agency type and other factors. FHN used assumptions in the model that it believed were comparable to those used by brokers and other service providers. FHN also periodically compared its estimates of fair value and assumptions with brokers, service providers, recent market activity, and against its own experience.

Derivative assets and liabilities. The fair value for forwards and futures contracts is based on current transactions involving identical securities. Futures contracts are exchange-traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used.

Valuations of other derivatives (primarily interest rate related swaps, swaptions, caps, and collars) are based on inputs observed in active markets for similar instruments. Typical inputs include the LIBOR curve, Overnight Indexed Swap ("OIS") curve, option volatility, and option skew. In measuring the fair value of these derivative assets and liabilities, FHN has elected to consider credit risk based on the net exposure to individual counterparties. Credit risk is mitigated for these instruments through the use of mutual margining and master netting agreements as well as collateral posting requirements. Any remaining credit risk related to interest rate derivatives is considered in determining fair value through evaluation of additional factors such as customer loan grades and debt ratings. Foreign currency related derivatives also utilize observable exchange rates in the determination of fair value.

In conjunction with the sales of portions of its Visa Class B shares, FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The fair value of these derivatives has been determined using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighted scenarios for multiple estimates of Visa’s aggregate exposure to covered litigation matters, which include consideration of amounts funded by Visa into its escrow account for the covered litigation matters. Since this estimation process required application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability weighting assigned to each scenario, these derivatives have been classified within Level 3 in fair value measurements disclosures.

Real estate acquired by foreclosure. Real estate acquired by foreclosure primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value is determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal. Real estate acquired by foreclosure also includes properties acquired in compliance with HUD servicing guidelines which are carried at the estimated amount of the underlying government insurance or guarantee.

Nonearning assets. For disclosure purposes, nonearning assets include cash and due from banks, accrued interest receivable, and capital markets receivables. Due to the short-term nature of cash and due from banks, accrued interest receivable, and capital markets receivables, the fair value is approximated by the book value.

Other assets. For disclosure purposes, other assets consist of tax credit investments and deferred compensation assets that are considered financial assets. Tax credit investments are written down to estimated fair value quarterly based on the estimated value of the associated tax credits. Deferred compensation assets are recognized at fair value, which is based on quoted prices in active markets.

Defined maturity deposits. The fair value of these deposits is estimated by discounting future cash flows to their present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits include all certificates of deposit and other time deposits.

Undefined maturity deposits. In accordance with ASC 825, the fair value of these deposits is approximated by the book value. For the purpose of this disclosure, undefined maturity deposits include demand deposits, checking interest accounts, savings accounts, and money market accounts.

Short-term financial liabilities. The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are approximated by the book value. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization. Prior to fourth quarter 2013, Other short-term borrowings included a liability associated with transfers of MSR that did not qualify for sale accounting. This liability was accounted for at elected fair value, which was measured consistent with the related MSR, as previously described.

Term borrowings. The fair value of term borrowings is based on quoted market prices or dealer quotes for the identical liability when traded as an asset. When pricing information for the identical liability is not available, relevant prices for similar debt instruments are used with adjustments being made to the prices obtained for differences in characteristics of the debt instruments. If no relevant pricing information is available, the fair value is approximated by the present value of the contractual cash flows discounted by the investor’s yield which considers FHN’s and FTBNA’s debt ratings.

Other noninterest-bearing liabilities. For disclosure purposes, other noninterest-bearing liabilities include accrued interest payable and capital markets payables. Due to the short-term nature of these liabilities, the book value is considered to approximate fair value.

Loan commitments. Fair values of these commitments are based on fees charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Other commitments. Fair values of these commitments are based on fees charged to enter into similar agreements.

The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. Due to market illiquidity, the fair values for loans, net of unearned income, loans held-for-sale, and term borrowings as of September 30, 2014 and 2013, involve the use of significant internally-developed pricing assumptions for certain components of these line items. These assumptions are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. Assets and liabilities that are not financial instruments (including MSR) have not been included in the following table such as the value of long-term relationships with deposit and trust customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other assets and other liabilities. Accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of the Company.

The following tables summarize the book value and estimated fair value of financial instruments recorded in the Consolidated Condensed Statements of Condition as well as unfunded commitments as of September 30, 2014 and 2013.

			September 30, 2014
			Book		Fair Value
(Dollars in thousands)			Value		Level 1		Level 2		Level 3		Total
Assets:
Loans, net of unearned income and allowance for loan losses
	Commercial:
		Commercial, financial and industrial	$	8,407,459	$	-	$	-	$	8,348,656	$	8,348,656
		Commercial real estate		1,262,944		-		-		1,243,925		1,243,925
	Retail:
		Consumer real estate		5,012,593		-		-		4,875,939		4,875,939
		Permanent mortgage		552,568		-		-		492,930		492,930
		Credit card & other		337,812		-		-		339,667		339,667
Total loans, net of unearned income and allowance for loan losses				15,573,376		-		-		15,301,117		15,301,117

Short-term financial assets
	Interest-bearing cash			275,485		275,485		-		-		275,485
	Federal funds sold			55,242		-		55,242		-		55,242
	Securities purchased under agreements to resell			561,802		-		561,802		-		561,802
Total short-term financial assets				892,529		275,485		617,044		-		892,529

Trading securities (a)				1,338,022		-		1,331,899		6,123		1,338,022
Loans held-for-sale (a)				151,915		-		7,552		144,363		151,915
Securities available-for-sale (a) (b)				3,534,671		26,080		3,349,355		159,236		3,534,671
Securities held-to-maturity				4,286		-		-		5,380		5,380
Derivative assets (a)				137,742		3,181		134,561		-		137,742

Other assets
	Tax credit investments			65,393		-		-		65,393		65,393
	Deferred compensation assets			24,901		24,901		-		-		24,901
Total other assets				90,294		24,901		-		65,393		90,294

Nonearning assets
	Cash & due from banks			292,687		292,687		-		-		292,687
	Capital markets receivables			197,507		-		197,507		-		197,507
	Accrued interest receivable			71,755		-		71,755		-		71,755
Total nonearning assets				561,949		292,687		269,262		-		561,949
Total assets			$	22,284,784	$	622,334	$	5,709,673	$	15,681,612	$	22,013,619

Liabilities:
Deposits:
	Defined maturity		$	1,214,637	$	-	$	1,220,109	$	-	$	1,220,109
	Undefined maturity			14,930,134		-		14,930,134		-		14,930,134
Total deposits				16,144,771		-		16,150,243		-		16,150,243

Trading liabilities (a)				532,234		-		532,234		-		532,234

Short-term financial liabilities
	Federal funds purchased			928,159		-		928,159		-		928,159
	Securities sold under agreements to repurchase			479,384		-		479,384		-		479,384
	Other short-term borrowings			790,080		-		790,080		-		790,080
Total short-term financial liabilities				2,197,623		-		2,197,623		-		2,197,623

Term borrowings
	Real estate investment trust-preferred			45,879		-		-		49,350		49,350
	Term borrowings - new market tax credit investment			18,000		-		-		17,880		17,880
	Borrowings secured by residential real estate			70,720		-		-		61,031		61,031
	Other long term borrowings			1,356,539		-		1,346,281		-		1,346,281
Total term borrowings				1,491,138		-		1,346,281		128,261		1,474,542

Derivative liabilities (a)				123,442		2,895		112,907		7,640		123,442

Other noninterest-bearing liabilities
	Capital markets payables			329,960		-		329,960		-		329,960
	Accrued interest payable			30,984		-		30,984		-		30,984
Total other noninterest-bearing liabilities				360,944		-		360,944		-		360,944
Total liabilities			$	20,850,152	$	2,895	$	20,700,232	$	135,901	$	20,839,028

Classes are detailed in the recurring and nonrecurring measurement tables.
Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $66.0 million.

			September 30, 2013
			Book		Fair Value
(Dollars in thousands)			Value		Level 1		Level 2		Level 3		Total
Assets:
Loans, net of unearned income and allowance for loan losses
	Commercial:
		Commercial, financial and industrial	$	7,655,562	$	-	$	-	$	7,502,354	$	7,502,354
		Commercial real estate		1,162,718		-		-		1,115,304		1,115,304
	Retail:
		Consumer real estate		5,337,221		-		-		4,859,306		4,859,306
		Permanent mortgage		672,138		-		-		589,999		589,999
		Credit card & other		325,207		-		-		327,075		327,075
Total loans, net of unearned income and allowance for loan losses				15,152,846		-		-		14,394,038		14,394,038

Short-term financial assets
	Interest-bearing cash			184,179		184,179		-		-		184,179
	Federal funds sold			52,830		-		52,830		-		52,830
	Securities purchased under agreements to resell			576,355		-		576,355		-		576,355
Total short-term financial assets				813,364		184,179		629,185		-		813,364

Trading securities (a)				1,343,134		-		1,327,415		15,719		1,343,134
Loans held-for-sale (a)				371,640		-		-		371,640		371,640
Securities available-for-sale (a) (b)				3,186,943		20,267		2,954,224		212,452		3,186,943
Derivative assets (a)				215,116		16,877		198,239		-		215,116

Other assets
	Tax credit investments			69,115		-		-		69,115		69,115
	Deferred compensation assets			23,193		23,193		-		-		23,193
Total other assets				92,308		23,193		-		69,115		92,308

Nonearning assets
	Cash & due from banks			395,631		395,631		-		-		395,631
	Capital markets receivables			83,154		-		83,154		-		83,154
	Accrued interest receivable			71,889		-		71,889		-		71,889
Total nonearning assets				550,674		395,631		155,043		-		550,674
Total assets			$	21,726,025	$	640,147	$	5,264,106	$	15,062,964	$	20,967,217

Liabilities:
Deposits:
	Defined maturity		$	1,573,405	$	-	$	1,591,314	$	-	$	1,591,314
	Undefined maturity			14,710,504		-		14,710,504		-		14,710,504
Total deposits				16,283,909		-		16,301,818		-		16,301,818

Trading liabilities (a)				585,969		-		585,969		-		585,969

Short-term financial liabilities
	Federal funds purchased			1,062,901		-		1,062,901		-		1,062,901
	Securities sold under agreements to repurchase			427,232		-		427,232		-		427,232
	Other short-term borrowings			303,686		-		291,971		11,715		303,686
Total short-term financial liabilities				1,793,819		-		1,782,104		11,715		1,793,819

Term borrowings
	Real estate investment trust-preferred			45,811		-		-		47,000		47,000
	Term borrowings - new market tax credit investment			18,000		-		-		18,025		18,025
	Borrowings secured by residential real estate			329,574		-		-		194,905		194,905
	Other long term borrowings			1,377,903		-		1,365,535		-		1,365,535
Total term borrowings				1,771,288		-		1,365,535		259,930		1,625,465

Derivative liabilities (a)				165,918		9,770		153,403		2,745		165,918

Other noninterest-bearing liabilities
	Capital markets payables			53,784		-		53,784		-		53,784
	Accrued interest payable			33,924		-		33,924		-		33,924
Total other noninterest-bearing liabilities				87,708		-		87,708		-		87,708
Total liabilities			$	20,688,611	$	9,770	$	20,276,537	$	274,390	$	20,560,697

Classes are detailed in the recurring and nonrecurring measurement tables.
Level 3 includes restricted investments in FHLB-Cincinnati stock of $128.0 million and FRB stock of $66.0 million.

	Contractual Amount				Fair Value
(Dollars in thousands)	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
Unfunded Commitments:
Loan commitments	$	7,411,045	$	7,550,487	$	2,368	$	1,722
Standby and other commitments		320,286		302,160		4,879		4,819
Certain previously reported amounts have been reclassified to agree with current presentation.