Loans

9 Months Ended

Sep. 30, 2015

Note 4 – Loans

The following table provides the balance of loans by portfolio segment as of September 30, 2015 and 2014, and December, 31 2014:

		September 30				December 31
(Dollars in thousands)		2015		2014		2014
Commercial:
	Commercial, financial, and industrial	$	9,610,295	$	8,477,329	$	9,007,286
	Commercial real estate		1,488,044		1,278,394		1,277,717
Retail:
	Consumer real estate (a)		4,813,936		5,130,988		5,048,071
	Permanent mortgage		463,893		572,789		538,961
	Credit card & other		349,324		352,517		358,131
Loans, net of unearned income		$	16,725,492	$	15,812,017	$	16,230,166
Allowance for loan losses			210,814		238,641		232,448
Total net loans		$	16,514,678	$	15,573,376	$	15,997,718

(a) Balances as of September 30, 2015 and 2014, and December 31, 2014 include $59.3 million, $81.1 million, and $76.8 million of restricted real estate loans, respectively. See Note 13 - 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), 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 purchased credit-impaired (“PCI”) loans. Loans to mortgage companies includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Commercial classes within CRE 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 (32 percent of total loans), the majority of which is in the consumer real estate segment (29 percent of total loans). Loans to finance and insurance companies total $2.1 billion (22 percent of the C&I portfolio, or 13 percent of the total loans). FHN had loans to mortgage companies totaling $1.4 billion (14 percent of the C&I segment, or 8 percent of total loans) as of September 30, 2015. As a result, 36 percent of the C&I segment was sensitive to impacts on the financial services industry.

Purchased Credit-Impaired Loans

The following table presents a rollforward of the accretable yield for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended					Nine Months Ended
		September 30				September 30
(Dollars in thousands)		2015		2014		2015		2014
Balance, beginning of period	$	8,348	$	16,509	$	14,714	$	13,490
Additions		-		-		-		335
Accretion		(1,037)		(1,829)		(5,985)		(5,413)
Adjustment for payoffs		(835)		(828)		(2,931)		(1,550)
Adjustment for charge-offs		-		(10)		-		(79)
Increase in accretable yield (a)		500		2,231		1,178		9,290
Balance, end of period	$	6,976	$	16,073	$	6,976	$	16,073

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, 2015, the ALLL related to PCI loans was $2.9 million compared to $2.8 million at September 30, 2014. A loan loss provision expense of $.1 million was recognized during the three months ended September 30, 2015 as compared to a loan loss provision expense of $.4 million recognized during the three months ended September 30, 2014. A loan loss provision credit of $.4 million was recognized during the nine months ended September 30, 2015 as compared to a loan loss provision expense of $2.1 million recognized during the nine months ended September 30, 2014. The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of September 30, 2015 and 2014, and December 31, 2014:

	September 30, 2015				September 30, 2014				December 31, 2014
(Dollars in thousands)	Carrying value		Unpaid balance		Carrying value		Unpaid balance		Carrying value		Unpaid balance
Commercial, financial and industrial	$	4,767	$	5,353	$	5,028	$	6,155	$	5,044	$	5,813
Commercial real estate		17,998		21,138		31,660		42,890		32,553		43,246
Consumer real estate		1,968		2,636		585		875		598		868
Credit card and other		6		10		11		16		10		14
Total	$	24,739	$	29,137	$	37,284	$	49,936	$	38,205	$	49,941

Impaired Loans

The following tables provide information at September 30, 2015 and 2014, 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 net LOCOM have been excluded.

		September 30, 2015							Three Months Ended				Nine Months Ended
		September 30, 2015							September 30, 2015				September 30, 2015
				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	$	5,586	$	7,266	$	-	$	8,994	$	-	$	11,202	$	-
	Income CRE		2,468		9,389		-		3,328		-		4,631		-
	Residential CRE		-		-		-		-		-		191		-
	Total	$	8,054	$	16,655	$	-	$	12,322	$	-	$	16,024	$	-
Retail:
	HELOC (a)	$	11,000	$	28,486	$	-	$	11,788	$	-	$	12,455	$	-
	R/E installment loans (a)		4,404		5,756		-		4,682		-		4,696		-
	Permanent mortgage (a)		5,983		8,255		-		6,193		-		6,743		-
	Total	$	21,387	$	42,497	$	-	$	22,663	$	-	$	23,894	$	-
Impaired loans with related allowance recorded:
Commercial:
	General C&I	$	21,319	$	25,515	$	846	$	25,934	$	238	$	24,702	$	727
	TRUPS		13,369		13,700		5,310		13,384		-		13,414		-
	Income CRE		6,424		7,709		496		6,606		32		6,962		95
	Residential CRE		1,417		1,886		91		1,468		6		1,512		19
	Total	$	42,529	$	48,810	$	6,743	$	47,392	$	276	$	46,590	$	841
Retail:
	HELOC	$	89,199	$	91,382	$	17,200	$	88,245	$	474	$	86,359	$	1,383
	R/E installment loans		65,465		66,431		16,718		66,367		352		68,274		1,010
	Permanent mortgage		99,071		111,683		15,696		99,913		613		102,341		1,841
	Credit card & other		380		380		168		399		3		453		11
	Total	$	254,115	$	269,876	$	49,782	$	254,924	$	1,442	$	257,427	$	4,245
Total commercial		$	50,583	$	65,465	$	6,743	$	59,714	$	276	$	62,614	$	841
Total retail		$	275,502	$	312,373	$	49,782	$	277,587	$	1,442	$	281,321	$	4,245
Total impaired loans		$	326,085	$	377,838	$	56,525	$	337,301	$	1,718	$	343,935	$	5,086

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


		September 30, 2014							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.

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, 2015 and 2014:
	September 30, 2015
			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	$	529,836	$	-	$	-	$	707	$	-	$	530,543	5	%	$	127
2		590,614		-		-		10,835		126		601,575	5			322
3		453,831		327,776		-		90,588		-		872,195	8			311
4		822,515		315,061		-		110,165		302		1,248,043	11			949
5		1,190,085		239,391		-		234,729		7,015		1,671,220	15			6,901
6		1,201,553		350,401		-		347,740		2,793		1,902,487	17			10,630
7		1,278,443		98,262		-		354,457		4,670		1,735,832	16			13,891
8		747,760		18,189		-		150,375		561		916,885	8			13,953
9		377,998		26,240		-		42,995		2,212		449,445	4			8,310
10		188,711		-		-		30,515		89		219,315	2			4,635
11		186,974		-		-		28,004		747		215,725	2			5,861
12		80,836		-		-		9,095		516		90,447	1			2,975
13		112,423		-		305,382		3,600		260		421,665	4			4,256
14,15,16		123,345		-		-		23,195		1,277		147,817	1			14,533
Collectively evaluated for impairment		7,884,924		1,375,320		305,382		1,437,000		20,568		11,023,194	99			87,654
Individually evaluated for impairment		26,904		-		12,755		8,892		1,417		49,968	1			6,743
Purchased credit-impaired loans		5,010		-		-		18,533		1,634		25,177	-			2,414
Total commercial loans	$	7,916,838	$	1,375,320	$	318,137	$	1,464,425	$	23,619	$	11,098,339	100	%	$	96,811


	September 30, 2014
			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	$	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
Purchase 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

Balances as of September 30, 2015 and 2014, each presented net of $26.2 million in lower of cost or market (“LOCOM”) valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade is "13".

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 credit quality of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other 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, 2015 and 2014:

HELOC
	September 30, 2015						September 30, 2014
			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	$	42,651		707		702	$	61,659		708		703
2003		79,768		720		710		111,031		722		709
2004		215,749		722		709		312,590		724		711
2005		341,878		730		715		476,226		732		722
2006		288,858		738		728		351,818		740		727
2007		310,250		744		729		369,635		744		729
2008		176,625		753		749		200,908		753		748
2009		88,937		751		745		105,576		752		743
2010		84,594		754		748		100,727		754		749
2011		81,754		759		753		100,842		759		753
2012		103,906		760		756		121,149		759		757
2013		129,742		757		755		158,256		759		760
2014		115,449		761		764		87,878		761		761
2015		103,431		762		762		-		-		-
Total	$	2,163,592		742		733	$	2,558,295		741		732


R/E Installment Loans	September 30, 2015						September 30, 2014
			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	$	8,701		677		689	$	16,278		680		684
2003		35,532		712		721		55,361		715		724
2004		31,486		697		699		44,484		700		697
2005		96,162		714		710		132,276		715		713
2006		108,731		712		703		143,601		714		701
2007		163,909		721		708		211,780		723		709
2008		53,608		720		715		67,730		721		715
2009		23,384		735		730		31,524		739		728
2010		78,175		750		759		107,417		748		755
2011		242,096		760		760		296,440		760		759
2012		534,038		764		766		628,622		764		765
2013		424,674		756		757		486,553		756		757
2014		426,629		756		758		350,627		755		754
2015		423,219		758		754		-		-		-
Total	$	2,650,344		750		749	$	2,572,693		748		746


Permanent Mortgage	September 30, 2015						September 30, 2014
			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	$	120,411		722		718	$	161,037		724		723
2004		14,003		711		709		18,190		713		713
2005		30,637		736		733		35,503		737		733
2006		49,011		732		722		65,722		731		734
2007		168,663		734		713		201,640		734		735
2008		81,168		741		712		90,697		742		736
Total	$	463,893		730		716	$	572,789		730		731

Nonaccrual and Past Due Loans


The following table reflects accruing and non-accruing loans by class on September 30, 2015:

	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	$	7,888,633	$	6,095	$	349	$	7,895,077	$	5,359	$	1,553	$	9,839	$	16,751	$	7,911,828
Loans to mortgage companies		1,373,103		2,102		-		1,375,205		-		-		115		115		1,375,320
TRUPS (a)		305,382		-		-		305,382		-		-		12,755		12,755		318,137
Purchased credit-impaired loans		4,705		-		305		5,010		-		-		-		-		5,010
Total commercial (C&I)		9,571,823		8,197		654		9,580,674		5,359		1,553		22,709		29,621		9,610,295
Commercial real estate:
Income CRE		1,435,395		2,394		-		1,437,789		914		-		7,189		8,103		1,445,892
Residential CRE		21,905		80		-		21,985		-		-		-		-		21,985
Purchased credit-impaired loans		16,172		3,845		150		20,167		-		-		-		-		20,167
Total commercial real estate		1,473,472		6,319		150		1,479,941		914		-		7,189		8,103		1,488,044
Consumer real estate:
HELOC		2,056,044		19,459		10,146		2,085,649		63,667		5,150		9,126		77,943		2,163,592
R/E installment loans		2,599,513		11,423		3,211		2,614,147		26,293		2,174		5,258		33,725		2,647,872
Purchased credit-impaired loans		2,383		-		89		2,472		-		-		-		-		2,472
Total consumer real estate		4,657,940		30,882		13,446		4,702,268		89,960		7,324		14,384		111,668		4,813,936
Permanent mortgage		420,727		4,051		5,270		430,048		14,044		3,228		16,573		33,845		463,893
Credit card & other
Credit card		187,770		2,049		1,171		190,990		-		-		-		-		190,990
Other		156,664		718		202		157,584		-		-		743		743		158,327
Purchased credit-impaired loans		7		-		-		7		-		-		-		-		7
Total credit card & other		344,441		2,767		1,373		348,581		-		-		743		743		349,324
Total loans, net of unearned	$	16,468,403	$	52,216	$	20,893	$	16,541,512	$	110,277	$	12,105	$	61,598	$	183,980	$	16,725,492

Total TRUPS includes LOCOM valuation allowance of $26.2 million.


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		9,385		-		3,490		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		14,988		1,469		24,925		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	$	129,765	$	14,969	$	69,012	$	213,746	$	15,812,017

Total TRUPS includes LOCOM valuation allowance of $26.2 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 or forgiveness 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 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. As a result, FHN classifies all non-reaffirmed residential real estate loans discharged in Chapter 7 bankruptcy as nonaccruing TDRs.

On September 30, 2015 and 2014, FHN had $304.7 million and $346.0 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $51.2 million and $60.9 million, or 17 percent as of September 30, 2015, and 18 percent as of September 30, 2014. Additionally, $72.6 million and $83.1 million of loans held-for-sale as of September 30, 2015 and 2014, respectively were classified as TDRs.


The following tables reflect portfolio loans that were classified as TDRs during the three and nine months ended September 30, 2015 and 2014:

		Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
			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	$	1,388	$	1,325
	Total commercial (C&I)	-		-		-	2		1,388		1,325
Consumer real estate:
HELOC		56		6,918		6,820	158		17,882		17,674
R/E installment loans		20		988		974	58		4,254		4,267
	Total consumer real estate	76		7,906		7,794	216		22,136		21,941
Permanent mortgage		-		-		-	6		2,039		2,054
Credit card & other		3		11		10	15		59		56
Total troubled debt restructurings		79	$	7,917	$	7,804	239	$	25,622	$	25,376

		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


The following tables present TDRs which re-defaulted during the three and nine months ended September 30, 2015 and 2014, 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 days past due.

		Three Months Ended			Nine Months Ended
		September 30, 2015			September 30, 2015
			Recorded			Recorded
(Dollars in thousands)		Number	Investment		Number	Investment
Commercial (C&I):
General C&I		-	$	-	-	$	-
	Total commercial (C&I)	-		-	-		-
Commercial real estate:
Income CRE		-		-	-		-
Residential CRE		-		-	1		896
	Total commercial real estate	-		-	1		896
Consumer real estate:
HELOC		-		-	7		308
R/E installment loans		2		50	4		162
	Total consumer real estate	2		50	11		470
Permanent mortgage		-		-	-		-
Credit card & other		1		2	4		10
Total troubled debt restructurings		3	$	52	16	$	1,376


		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

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, a nonaccrual TDR that is reasonably assured of repayment according to its 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 a restructured loan 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.