Table of Contents

FIRST HORIZON NATIONAL CORPORATION

INDEX

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PART I.

1. FINANCIAL INFORMATION

---------------------------

Item 1. Financial Statements



The Consolidated Condensed Statements of Condition (unaudited)	2

The Consolidated Condensed Statements of Income (unaudited)	3

The Consolidated Condensed Statements of Comprehensive Income (unaudited)	4

The Consolidated Condensed Statements of Equity (unaudited)	5

The Consolidated Condensed Statements of ~~Equity~~Cash Flows (unaudited)	6

~~The Consolidated Condensed Statements of Cash Flows (unaudited)~~	7

The Notes to the Consolidated Condensed Financial Statements (unaudited)	98
Note 1 Financial Information	98
Note 2 Acquisitions and Divestitures	14
~~Note 3 Investment Securities~~	16
Note ~~4 Loans~~3 Investment Securities	1918
Note 4 Loans	21
Note 5 Allowance for Loan Losses	30
~~Note 6 Intangible Assets~~	32
~~Note 7 Other Income and Other Expense~~	33
Note ~~8 Components of Other Comprehensive Income/(loss)~~	34
~~Note 9 Earnings Per Share~~6 Intangible Assets	36
Note ~~10 Contingencies~~7 Other Income and Other ~~Disclosures~~Expense	37
Note 8 Components of Other Comprehensive Income/(loss)	38
Note 9 Earnings Per Share	39
Note 10 Contingencies and Other Disclosures	40
Note 11 Pension, Savings, and Other Employee Benefits	43
Note 12 Business Segment Information	44
~~Note 12 Business Segment Information~~	46
Note 13 Variable Interest Entities	4847
Note 14 Derivatives	5351
Note 15 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions	58
Note 16 Fair Value of Assets & Liabilities	60
Note ~~16 Fair Value of Assets & Liabilities~~17 Restructuring, Repositioning, and Efficiency	6275
Note 18 Other Events	76

This financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial condition and results of operations for the interim periods presented.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 1

CONSOLIDATED CONDENSED STATEMENTS OF CONDITION



	First Horizon National Corporation
	(Unaudited)			December 31
	March 31			December 31
(Dollars in thousands, except per share amounts)	2020			2019
Assets:
Cash and due from banks	$	537,564		$	633,728
Federal funds sold	30,050			46,536
Securities purchased under agreements to resell (Note 15)	562,435			586,629
Total cash and cash equivalents	1,130,049			1,266,893
Interest-bearing cash	670,525			482,405
Trading securities	1,877,514			1,346,207
Loans held-for-sale (a)	595,601			593,790
Securities available-for-sale (Note 3)	4,544,907			4,445,403
Securities held-to-maturity (Note 3)	10,000			10,000
Loans, net of unearned income (Note 4) (b)	33,378,303			31,061,111
Less: Allowance for loan losses (Note 5)	444,490			200,307
Total net loans	32,933,813			30,860,804
Goodwill (Note 6)	1,432,787			1,432,787
Other intangible assets, net (Note 6)	124,892			130,200
Fixed income receivables	180,569			40,114
Premises and equipment, net (March 31, 2020 and December 31, 2019 include $7.5 million and $9.7 million, respectively, classified as held-for-sale)	447,812			455,006
Other real estate owned (“OREO”) (c)	15,837			17,838
Derivative assets (Note 14)	696,250			183,115
Other assets	2,536,822			2,046,338
Total assets	$	47,197,378		$	43,310,900
Liabilities and equity:
Deposits:
Savings	$	13,860,342		$	11,664,906
Time deposits, net	3,058,198			3,618,337
Other interest-bearing deposits	8,561,302			8,717,341
Interest-bearing	25,479,842			24,000,584
Noninterest-bearing	8,939,808			8,428,951
Total deposits	34,419,650			32,429,535
Federal funds purchased	476,013			548,344
Securities sold under agreements to repurchase (Note 15)	788,595			716,925
Trading liabilities	452,611			505,581
Other short-term borrowings	4,060,673			2,253,045
Term borrowings	792,751			791,368
Fixed income payables	91,274			49,535
Derivative liabilities (Note 14)	234,984			67,480
Other liabilities	825,247			873,079
Total liabilities	42,141,798			38,234,892
Equity:
First Horizon National Corporation Shareholders’ Equity:
Preferred stock - Series A, non-cumulative perpetual, no par value, liquidation preference of $100,000 per share - (shares authorized - 1,000; shares issued - 1,000 on March 31, 2020 and December 31, 2019)	95,624			95,624
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 311,862,565 on March 31, 2020 and 311,469,056 on December 31, 2019)	194,914			194,668
Capital surplus	2,938,670			2,931,451
Undivided profits	1,667,105			1,798,442
Accumulated other comprehensive loss, net (Note 8)	(136,164		)	(239,608		)
Total First Horizon National Corporation Shareholders’ Equity	4,760,149			4,780,577
Noncontrolling interest	295,431			295,431
Total equity	5,055,580			5,076,008
Total liabilities and equity	$	47,197,378		$	43,310,900

First Horizon National Corporation
(Unaudited) December 31
September 30
(Dollars in thousands, except per share amounts) 2017 2016
Assets:
Cash and due from banks $ 347,802
$ 373,274
Federal funds sold 76,316
50,838
Securities purchased under agreements to resell (Note 15) 663,637
613,682
Total cash and cash equivalents 1,087,755
1,037,794
Interest-bearing cash 604,326
1,060,034
Trading securities 1,469,402
897,071
Loans held-for-sale (a) 339,780
111,248
Securities available-for-sale (Note 3) 3,963,138
3,943,499
Securities held-to-maturity (Note 3) 10,000
14,347
Loans, net of unearned income (Note 4) (b) 20,166,091
19,589,520
Less: Allowance for loan losses (Note 5) 194,867
202,068
Total net loans 19,971,224
19,387,452
Goodwill (Note 6) 236,335
191,371
Other intangible assets, net (Note 6) 43,157
21,017
Fixed income receivables 68,750
57,411
Premises and equipment, net (September 30, 2017 and December 31, 2016 include $4.3 million and $5.8 million, respectively, classified as held-for-sale) 293,393
289,385
Other real estate owned (“OREO”) (c) 12,522
16,237
Derivative assets (Note 14) 80,976
121,654
Other assets 1,441,878
1,406,711
Total assets $ 29,622,636
$ 28,555,231
Liabilities and equity:
Deposits:
Savings $ 8,592,315
$ 9,428,197
Time deposits 1,112,098
1,355,133
Other interest-bearing deposits 5,909,596
5,948,439
Interest-bearing 15,614,009
16,731,769
Noninterest-bearing 6,485,245
5,940,594
Total deposits 22,099,254
22,672,363
Federal funds purchased 292,650
414,207
Securities sold under agreements to repurchase (Note 15) 516,867
453,053
Trading liabilities 579,028
561,848
Other short-term borrowings 1,637,419
83,177
Term borrowings 1,059,507
1,040,656
Fixed income payables 44,304
21,002
Derivative liabilities (Note 14) 83,146
135,897
Other liabilities 426,910
467,944
Total liabilities $ 26,739,085
$ 25,850,147
Equity:
First Horizon National Corporation Shareholders’ Equity:
Preferred stock - Series A, non-cumulative perpetual, no par value, liquidation preference of $100,000 per share - (shares authorized - 1,000; shares issued - 1,000 on September 30, 2017 and December 31, 2016) 95,624
95,624
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 234,230,515 on September 30, 2017 and 233,623,686 on December 31, 2016) 146,395
146,015
Capital surplus 1,401,359
1,386,636
Undivided profits 1,177,126
1,029,032
Accumulated other comprehensive loss, net (Note 8) (232,384 ) (247,654 )
Total First Horizon National Corporation Shareholders’ Equity 2,588,120
2,409,653
Noncontrolling interest 295,431
295,431
Total equity 2,883,551
2,705,084
Total liabilities and equity $ 29,622,636
$ 28,555,231

See accompanying notes to consolidated condensed financial statements.


(a)	~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 include ~~$12.8~~$4.7 million and ~~$19.3~~$6.8 million, respectively, of held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure.


(b)	~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 include ~~$24.8~~$20.8 million and ~~$28.5~~$18.8 million, respectively, of held-to-maturity consumer mortgage loans secured by residential real estate ~~properties~~ in process of foreclosure.


(c)	~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 include ~~$7.1~~$7.8 million and ~~$8.1~~$9.2 million, respectively, of foreclosed residential real estate.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 2

C~~ONSOLIDATED~~

CONSOLIDATED CONDENSED STATEMENTS OF INCOME



	First Horizon National Corporation
	Three Months Ended March 31
(Dollars and shares in thousands except per share data, unless otherwise noted) (Unaudited)	2020		2019
Interest income:
Interest and fees on loans	$	326,599	$	331,938
Interest on investment securities available-for-sale	27,756		31,843
Interest on investment securities held-to-maturity	131		131
Interest on loans held-for-sale	6,899		9,877
Interest on trading securities	13,117		13,548
Interest on other earning assets	3,866		13,278
Total interest income	378,368		400,615
Interest expense:
Interest on deposits:
Savings	26,333		39,914
Time deposits	13,943		20,254
Other interest-bearing deposits	14,213		22,042
Interest on trading liabilities	3,292		2,816
Interest on short-term borrowings	9,864		6,744
Interest on term borrowings	7,921		14,337
Total interest expense	75,566		106,107
Net interest income	302,802		294,508
Provision/(provision credit) for loan losses	145,000		9,000
Net interest income after provision/(provision credit) for loan losses	157,802		285,508
Noninterest income:
Fixed income	95,635		53,749
Deposit transactions and cash management	30,290		31,621
Brokerage, management fees and commissions	15,405		12,633
Bankcard income	7,253		6,952
Trust services and investment management	7,195		7,026
Bank-owned life insurance ("BOLI")	4,589		4,402
Equity securities gains/(losses), net (Note 3)	25		31
All other income and commissions (Note 7)	14,364		24,631
Total noninterest income	174,756		141,045
Adjusted gross income after provision/(provision credit) for loan losses	332,558		426,553
Noninterest expense:
Employee compensation, incentives, and benefits	183,470		177,925
Occupancy	19,563		20,693
Computer software	16,027		15,139
Operations services	11,692		11,488
Equipment rentals, depreciation, and maintenance	8,552		8,829
Advertising and public relations	7,456		7,242
Professional fees	6,996		12,299
FDIC premium expense	6,742		4,273
Communications and courier	5,528		6,453
Amortization of intangible assets	5,308		6,216
Contract employment and outsourcing	4,936		3,371
Legal fees	1,823		2,831
All other expense (Note 7)	33,226		19,331
Total noninterest expense	311,319		296,090
Income/(loss) before income taxes	21,239		130,463
Provision/(benefit) for income taxes	4,767		27,058
Net income/(loss)	$	16,472	$	103,405
Net income attributable to noncontrolling interest	2,852		2,820
Net income/(loss) attributable to controlling interest	$	13,620	$	100,585
Preferred stock dividends	1,550		1,550
Net income/(loss) available to common shareholders	$	12,070	$	99,035
Basic earnings/(loss) per share (Note 9)	$	0.04	$	0.31
Diluted earnings/(loss) per share (Note 9)	$	0.04	$	0.31
Weighted average common shares (Note 9)	311,597		317,435
Diluted average common shares (Note 9)	313,170		319,581

First Horizon National Corporation
Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars and shares in thousands except per share data, unless otherwise noted) (Unaudited) 2017 2016 2017 2016
Interest income:
Interest and fees on loans $ 205,220
$ 174,039
$ 578,264
$ 495,516
Interest on investment securities available-for-sale 25,575
23,655
76,867
72,082
Interest on investment securities held-to-maturity 131
197
460
592
Interest on loans held-for-sale 6,123
1,445
10,916
3,904
Interest on trading securities 8,262
6,793
24,033
22,564
Interest on other earning assets 2,834
843
11,757
3,354
Total interest income 248,145
206,972
702,297
598,012
Interest expense:
Interest on deposits:
Savings 10,920
4,939
31,324
13,275
Time deposits 2,591
2,496
8,342
7,293
Other interest-bearing deposits 6,759
2,592
15,976
7,422
Interest on trading liabilities 3,298
3,331
11,282
11,152
Interest on short-term borrowings 4,998
1,254
9,293
3,585
Interest on term borrowings 9,762
7,165
25,854
21,752
Total interest expense 38,328
21,777
102,071
64,479
Net interest income 209,817
185,195
600,226
533,533
Provision/(provision credit) for loan losses —
4,000
(3,000 ) 11,000
Net interest income after provision/(provision credit) for loan losses 209,817
181,195
603,226
522,533
Noninterest income:
Fixed income 55,758
71,748
161,546
216,638
Deposit transactions and cash management 28,011
27,221
80,434
81,049
Brokerage, management fees and commissions 11,937
10,828
35,872
31,908
Trust services and investment management 6,953
6,885
21,304
20,674
Bankcard income 6,170
6,260
17,230
18,077
Bank-owned life insurance 3,539
3,997
11,137
11,129
Debt securities gains/(losses), net (Note 3 and Note 8) 1
—
450
1,654
Equity securities gains/(losses), net (Note 3) 5
(200 ) 5
(181 )
All other income and commissions (Note 7) 43
21,806
29,051
47,416
Total noninterest income 112,417
148,545
357,029
428,364
Adjusted gross income after provision/(provision credit) for loan losses 322,234
329,740
960,255
950,897
Noninterest expense:
Employee compensation, incentives, and benefits 137,798
145,103
411,818
425,624
Occupancy 13,619
12,722
38,759
38,062
Computer software 11,993
10,400
35,077
33,213
Operations services 10,805
10,518
33,204
30,939
Equipment rentals, depreciation, and maintenance 6,626
6,085
20,013
19,426
Professional fees 6,566
4,859
20,971
14,342
FDIC premium expense 6,062
5,721
17,728
15,490
Advertising and public relations 5,205
6,065
13,901
15,519
Communications and courier 4,328
3,883
12,245
10,672
Contract employment and outsourcing 2,762
2,443
8,975
7,365
Legal fees 2,052
4,750
10,831
15,520
Amortization of intangible assets 1,964
1,299
5,160
3,898
Repurchase and foreclosure provision/(provision credit) (609 ) (218 ) (22,580 ) (31,618 )
All other expense (Note 7) 27,698
19,928
70,889
88,855
Total noninterest expense 236,869
233,558
676,991
687,307
Income/(loss) before income taxes 85,365
96,182
283,264
263,590
Provision/(benefit) for income taxes 13,596
28,547
57,903
82,802
Net income/(loss) $ 71,769
$ 67,635
$ 225,361
$ 180,788
Net income attributable to noncontrolling interest 2,883
2,883
8,555
8,586
Net income/(loss) attributable to controlling interest $ 68,886
$ 64,752
$ 216,806
$ 172,202
Preferred stock dividends 1,550
1,550
4,650
4,650
Net income/(loss) available to common shareholders $ 67,336
$ 63,202
$ 212,156
$ 167,552
Basic earnings/(loss) per share (Note 9) $ 0.29
$ 0.27
$ 0.91
$ 0.72
Diluted earnings/(loss) per share (Note 9) $ 0.28
$ 0.27
$ 0.90
$ 0.71
Weighted average common shares (Note 9) 233,749
231,856
233,438
232,690
Diluted average common shares (Note 9) 236,340
234,092
236,372
234,775
Cash dividends declared per common share $ 0.09
$ 0.07
$ 0.27
$ 0.21

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

See accompanying notes to consolidated condensed financial statements.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 3

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME


	First Horizon National Corporation											First Horizon National Corporation
	Three Months Ended September 30						Nine Months Ended September 30					Three Months Ended March 31
(Dollars in thousands) (Unaudited)	2017			2016			2017			2016		2020		2019
Net income/(loss)	$	71,769		$	67,635		$	225,361		$	180,788	$	16,472	$	103,405
Other comprehensive income/(loss), net of tax:
Net unrealized gains/(losses) on securities available-for-sale	3,917			(7,887		)	11,292			47,310		88,278		48,615
Net unrealized gains/(losses) on cash flow hedges	(734		)	(1,570		)	(493		)	3,121		13,061		5,387
Net unrealized gains/(losses) on pension and other postretirement plans	1,895			963			4,471			2,933		2,105		1,463
Other comprehensive income/(loss)	5,078			(8,494		)	15,270			53,364		103,444		55,465
Comprehensive income	76,847			59,141			240,631			234,152		119,916		158,870
Comprehensive income attributable to noncontrolling interest	2,883			2,883			8,555			8,586		2,852		2,820
Comprehensive income attributable to controlling interest	$	73,964		$	56,258		$	232,076		$	225,566	$	117,064	$	156,050
Income tax expense/(benefit) of items included in Other comprehensive income:
Net unrealized gains/(losses) on securities available-for-sale	$	2,430		$	(4,902	)	$	7,002		$	29,402	$	28,787	$	15,958
Net unrealized gains/(losses) on cash flow hedges	(455		)	(975		)	(306		)	1,940		4,260		1,768
Net unrealized gains/(losses) on pension and other postretirement plans	1,175			598			2,772			1,823		686		480

See accompanying notes to consolidated condensed financial statements.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 4

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

First Horizon National Corporation
2017 2016
(Dollars in thousands except per share data) (Unaudited)
Controlling
Interest

Noncontrolling
Interest
Total
Controlling
Interest

Noncontrolling
Interest
Total
Balance, January 1 $ 2,409,653
$ 295,431
$ 2,705,084
$ 2,344,155
$ 295,431
$ 2,639,586
Net income/(loss) 216,806
8,555
225,361
172,202
8,586
180,788
Other comprehensive income/(loss) (a) 15,270
—
15,270
53,364
—
53,364
Comprehensive income/(loss) 232,076
8,555
240,631
225,566
8,586
234,152
Cash dividends declared:
Preferred stock ($4,650 per share for the nine months ended September 30, 2017 and 2016) (4,650 ) —
(4,650 ) (4,650 ) —
(4,650 )
Common stock ($.27 and $.21 per share for the nine months ended September 30, 2017 and 2016, respectively) (63,777 ) —
(63,777 ) (49,578 ) —
(49,578 )
Common stock repurchased (b) (5,285 ) —
(5,285 ) (96,801 ) —
(96,801 )
Common stock issued for:
Stock options and restricted stock - equity awards 5,132
—
5,132
18,710
—
18,710
Stock-based compensation expense 14,971
—
14,971
12,378
—
12,378
Dividends declared - noncontrolling interest of subsidiary preferred stock —
(8,555 ) (8,555 ) —
(8,586 ) (8,586 )
Tax benefit/(benefit reversal) - stock based compensation expense —
—
—
(629 ) —
(629 )
Balance, September 30 $ 2,588,120
$ 295,431
$ 2,883,551
$ 2,449,151
$ 295,431
$ 2,744,582



First Horizon National Corporation
Three months ended March 31, 2020
(Dollars and shares in thousands, except per share data) (unaudited)	Common Shares		Total			Preferred Stock		Common Stock			Capital Surplus			Undivided Profits			Accumulated Other Comprehensive Income/(Loss) (a)			Noncontrolling Interest
Balance, December 31, 2019	311,469		$	5,076,008		$	95,624	$	194,668		$	2,931,451		$	1,798,442		$	(239,608	)	$	295,431
Adjustment to reflect adoption of ASU 2016-13	—		(96,057		)	—		—			—			(96,057		)	—			—
Beginning balance, as adjusted	311,469		4,979,951			95,624		194,668			2,931,451			1,702,385			(239,608		)	295,431
Net income/(loss)	—		16,472			—		—			—			13,620			—			2,852
Other comprehensive income/(loss)	—		103,444			—		—			—			—			103,444			—
Comprehensive income/(loss)	—		119,916			—		—			—			13,620			103,444			2,852
Cash dividends declared:
Preferred stock ($1,550 per share)	—		(1,550		)	—		—			—			(1,550		)	—			—
Common stock ($.15 per share)	—		(47,350		)	—		—			—			(47,350		)	—			—
Common stock repurchased	(141	)	(2,064		)	—		(88		)	(1,976		)	—			—			—
Common stock issued for:
Stock options and restricted stock - equity awards	652		4,140			—		407			3,733			—			—			—
Stock-based compensation expense	—		7,281			—		—			7,281			—			—			—
Dividends declared - noncontrolling interest of subsidiary preferred stock	—		(2,852		)	—		—			—			—			—			(2,852		)
Other (b)	(117	)	(1,892		)	—		(73		)	(1,819		)	—			—			—
Balance, March 31, 2020	311,863		$	5,055,580		$	95,624	$	194,914		$	2,938,670		$	1,667,105		$	(136,164	)	$	295,431

~~See accompanying notes to consolidated condensed financial statements.~~


(a)	Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of Other comprehensive income/(loss) have been attributed solely to FHN as the controlling interest holder.


(b)	~~2016 includes $93.5~~Represents shares canceled in connection with the resolution of remaining Capital Bank Financial Corporation ("CBF") dissenters' appraisal process.



Three months ended March 31, 2019
(Dollars and shares in thousands, except per share data) (unaudited)	Common Shares		Total			Preferred Stock		Common Stock			Capital Surplus			Undivided Profits			Accumulated Other Comprehensive Income/(Loss) (a)			Noncontrolling Interest
Balance, December 31, 2018	318,573		$	4,785,380		$	95,624	$	199,108		$	3,029,425		$	1,542,408		$	(376,616	)	$	295,431
Adjustment to reflect adoption of ASU 2016-02	—		(1,011		)	—		—			—			(1,011		)	—			—
Beginning balance, as adjusted	318,573		4,784,369			95,624		199,108			3,029,425			1,541,397			(376,616		)	295,431
Net income/(loss)	—		103,405			—		—			—			100,585			—			2,820
Other comprehensive income/(loss)	—		55,465			—		—			—			—			55,465			—
Comprehensive income/(loss)	—		158,870			—		—			—			100,585			55,465			2,820
Cash dividends declared:
Preferred stock ($1,550 per share)	—		(1,550		)	—		—			—			(1,550		)	—			—
Common stock ($.14 per share)	—		(44,864		)	—		—			—			(44,864		)	—			—
Common stock repurchased (b)	(3,594	)	(53,436		)	—		(2,246		)	(51,190		)	—			—			—
Common stock issued for:
Stock options and restricted stock - equity awards	382		520			—		239			281			—			—			—
Stock-based compensation expense	—		5,432			—		—			5,432			—			—			—
Dividends declared - noncontrolling interest of subsidiary preferred stock	—		(2,820		)	—		—			—			—			—			(2,820		)
Balance, March 31, 2019	315,361		$	4,846,521		$	95,624	$	197,101		$	2,983,948		$	1,595,568		$	(321,151	)	$	295,431

See accompanying notes to consolidated condensed financial statements.


(a)	Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of Other comprehensive income/(loss) have been attributed solely to FHN as the controlling interest holder.


(b)	Includes $51.5 million repurchased under share repurchase programs.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 5

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


	First Horizon National Corporation						First Horizon National Corporation
	Nine months ended September 30						Three months ended March 31
(Dollars in thousands) (Unaudited)	2017			2016			2020			2019
Operating Activities
Net income/(loss)	$	225,361		$	180,788		$	16,472		$	103,405
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:
Provision/(provision credit) for loan losses	(3,000		)	11,000			145,000			9,000
Provision/(benefit) for deferred income taxes	(547		)	68,100			(18,600		)	7,238
Depreciation and amortization of premises and equipment	25,052			24,032			10,516			11,400
Amortization of intangible assets	5,160			3,898			5,308			6,216
Net other amortization and accretion	22,921			19,536			3,664			1,257
Net (increase)/decrease in derivatives	(14,670		)	1,330			(323,845		)	(51,821		)
Fair value adjustment on interest-only strips	(107		)	—			1,295			1,258
Repurchase and foreclosure provision/(provision credit)	(20,000		)	(31,618		)
(Gains)/losses and write-downs on OREO, net	44			(543		)	(68		)	(290		)
Litigation and regulatory matters	7,409			25,285
Stock-based compensation expense	14,971			12,378			7,281			5,432
Equity securities (gains)/losses, net	(5		)	181			(25		)	(31		)
Debt securities (gains)/losses, net	(450		)	(1,654		)
(Gain)/loss on extinguishment of debt	14,329			—
Net (gains)/losses on sale/disposal of fixed assets	(13		)	2,519			458			(42		)
Qualified pension plan contribution	—			(165,000		)
(Gain)/loss on BOLI							366			(1,032		)
Loans held-for-sale:
Purchases and originations	(1,252,300		)	(73,404		)	(587,593		)	(513,788		)
Gross proceeds from settlements and sales	1,252,477			43,653			180,810			135,855
(Gain)/loss due to fair value adjustments and other	2,485			878			(1,129		)	19,291
Net (increase)/decrease in:
Trading securities	(433,897		)	(441,205		)	(133,755		)	192,101
Fixed income receivables	(11,339		)	(28,337		)	(140,455		)	(7,921		)
Interest receivable	(7,171		)	(2,014		)	(1,089		)	(5,970		)
Other assets	(49,225		)	(69,855		)	(477,645		)	56,985
Net increase/(decrease) in:
Trading liabilities	17,180			136,207			(52,970		)	94,289
Fixed income payables	(73,187		)	45,825			41,739			90,718
Interest payable	8,869			505			(8,882		)	16,570
Other liabilities	(35,770		)	(24,795		)	(66,858		)	(47,631		)
Total adjustments	(530,784		)	(443,098		)	(1,416,477		)	19,084
Net cash provided/(used) by operating activities	(305,423		)	(262,310		)	(1,400,005		)	122,489
Investing Activities
Available-for-sale securities:
Sales	3,360			1,543			8,703			13,012
Maturities	420,136			526,112			224,406			157,502
Purchases	(426,129		)	(557,216		)	(213,950		)	(83,512		)
Held-to-maturity securities:
Prepayments and maturities	4,740			—
Premises and equipment:
Sales	2,577			9,636			2,185			4,080
Purchases	(30,395		)	(41,304		)	(7,603		)	(6,995		)
Proceeds from sales of OREO	9,235			22,887			3,185			3,791
Proceeds from BOLI							1,610			3,208
Net (increase)/decrease in:
Loans (a)	(586,426		)	(1,895,345		)
Loans							(2,312,423		)	(448,321		)
Interests retained from securitizations classified as trading securities	648			2,120			64			148
Interest-bearing cash	459,840			383,002			(188,120		)	264,357
Cash (paid)/received for acquisition, net	(123,971		)	—
Net cash provided/(used) by investing activities	(266,385		)	(1,548,565		)	(2,481,943		)	(92,730		)
Financing Activities
Common stock:
Stock options exercised	5,173			18,710			4,144			520
Cash dividends paid	(58,850		)	(47,144		)	(44,077		)	(38,759		)
Repurchase of shares (b)	(5,285		)	(96,801		)
Repurchase of shares (a)							(2,064		)	(53,436		)
Cancellation of common shares (b)							(1,892		)	—
Cash dividends paid - preferred stock - noncontrolling interest							(2,883		)	(2,883		)
Cash dividends paid - Series A preferred stock							(1,550		)	(1,550		)
Term borrowings:
Payments/maturities							—			(1,179		)
Increases in restricted and secured term borrowings							(3,656		)	3,120

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 6

Cash dividends paid - preferred stock - noncontrolling interest (8,523 ) (8,523 )
Cash dividends paid - Series A preferred stock (4,650 ) (4,650 )
Term borrowings:
Issuance 121,184
100
Payments/maturities (145,285 ) (264,599 )
Increases in restricted and secured term borrowings 29,231
—
Net increase/(decrease) in:
Deposits (572,621 ) 1,607,412
Short-term borrowings 1,261,395
732,858
Net cash provided/(used) by financing activities 621,769
1,937,363
Net increase/(decrease) in cash and cash equivalents 49,961
126,488
Cash and cash equivalents at beginning of period 1,037,794
1,031,063
Cash and cash equivalents at end of period $ 1,087,755
$ 1,157,551
Supplemental Disclosures
Total interest paid $ 92,405
$ 63,337
Total taxes paid 38,151
11,580
Total taxes refunded 8,201
3,854
Transfer from loans to OREO 5,564
8,226

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



Net increase/(decrease) in:
Deposits	1,990,115			(220,104		)
Short-term borrowings	1,806,967			92,057
Net cash provided/(used) by financing activities	3,745,104			(222,214		)
Net increase/(decrease) in cash and cash equivalents	(136,844		)	(192,455		)
Cash and cash equivalents at beginning of period	1,266,893			1,405,325
Cash and cash equivalents at end of period	$	1,130,049		$	1,212,870
Supplemental Disclosures
Total interest paid	$	83,866		$	88,774
Total taxes paid	5,240			1,008
Total taxes refunded	2			27,522
Transfer from loans to OREO	1,116			1,607
Transfer from loans HFS to trading securities	397,616			425,808

See accompanying notes to consolidated condensed financial statements.

(a) 2019 includes $51.5 million repurchased under share repurchase programs.


~~(a)~~	~~2016 includes $537.4 million UPB of loans acquired from GE Capital.~~


~~(b)~~	~~2016 includes $93.5 million repurchased under share repurchase programs.~~

(b) Represents shares canceled in connection with the resolution of remaining CBF dissenters' appraisal process.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 7

Notes to the Consolidated Condensed Financial Statements (Unaudited)

Note 1 – Financial Information

Basis of Accounting. The unaudited interim consolidated condensed financial statements of First Horizon National Corporation (“FHN”), including its subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which it operates. This preparation requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions are based on information available as of the date of the financial statements and could differ from actual results. In the opinion of management, all necessary adjustments have been made for a fair presentation of financial position and results of operations for the periods presented. These adjustments are of a normal recurring nature unless otherwise disclosed in this Quarterly Report on Form 10-Q. The operating results for the interim ~~2017~~2020 period are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements in ~~Exhibit 13~~Item 8 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Revenues. Revenue is recognized when the performance obligations under the terms of a contract with a customer are satisfied in an amount that reflects the consideration FHN expects to be entitled. FHN derives a significant portion of its revenues from fee-based services. Noninterest income from transaction-based fees is generally recognized immediately upon completion of the transaction. Noninterest income from service-based fees is generally recognized over the period in which FHN provides the service. Any services performed over time generally require that FHN render services each period and therefore FHN measures progress in completing these services based upon the passage of time and recognizes revenue as invoiced.

See Note 1– Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2019, for a discussion of FHN's key revenues.

Contract Balances. As of March 31, 2020, accounts receivable related to products and services on non-interest income were $8.4 million. For the three months ended March 31, 2020, FHN had no material impairment losses on non-interest accounts receivable and there were no material contract assets, contract liabilities or deferred contract costs recorded on the Consolidated Condensed Statements of Condition as of March 31, 2020. Credit risk is assessed on these accounts receivable each reporting period and the amount of estimated uncollectible receivables is not significant.

Transaction Price Allocated to Remaining Performance Obligations. For the three months ended March 31, 2020, revenue recognized from performance obligations related to prior periods was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less and contracts where revenue is recognized as invoiced, is not material.

Refer to Note 12– Business Segment Information for a reconciliation of disaggregated revenue by major product line and reportable segment.

Debt Investment Securities.Debt securities that may be sold prior to maturity are classified as available-for-sale (“AFS”) and are carried at fair value. The unrealized gains and losses on debt securities AFS, including securities for which no credit impairment exists, are excluded from earnings and are reported, net of tax, as a component of other comprehensive income within shareholders’ equity and the Consolidated Condensed Statements of Comprehensive Income. Debt securities which management has the intent and ability to hold to maturity (“HTM”) are reported at amortized cost. Interest-only strips that are classified as securities AFS are valued at elected fair value. See Note 16 - Fair Value of Assets and Liabilities for additional information. Realized gains and losses (i.e., from sales) for debt investment securities are determined by the specific identification method and reported in noninterest income.

In periods subsequent to 2019, the evaluation of credit risk for HTM debt securities mirrors the process described below for loans held-for-investment. AFS debt securities are reviewed for potential credit impairment at the individual security level. The evaluation of credit risk includes consideration of third-party and government guarantees (both explicit and implicit), senior or subordinated status, credit ratings of the issuer, the effects of interest rate changes since purchase and observable market information such as issuer-specific credit spreads. Credit losses for AFS debt securities are generally recognized through establishment of an allowance for credit losses that cannot exceed the amount by which amortized cost exceeds fair value. Charge offs are recorded as reductions of the security’s amortized cost and the credit allowance. Subsequent improvements in estimated credit losses result in reduction of the credit allowance, but not beyond zero. However, if FHN has the intent to sell or if it is more-likely-than-not that it will be compelled to sell a security with an unrecognized loss, the difference between the security's carrying value and fair value is recognized

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 8

Note 1 – Financial Information (Continued)

through earnings and a new amortized cost basis is established for the security (i.e., no allowance for credit losses is recognized).

FHN has elected to exclude accrued interest receivable (“AIR”) from the fair value and amortized cost basis on AFS debt securities when assessing whether these securities have experienced credit impairment. Additionally, FHN has elected to not measure an allowance for credit losses on AIR for AFS debt securities based on its policy to write off uncollectible interest in a timely manner, which generally occurs when delinquency reaches no more than 90 days for all security types. Any such write offs are recognized as a reduction of interest income. AIR for AFS debt securities is included within Other assets in the Consolidated Condensed Statement of Condition.

In periods prior to 2020, both AFS and HTM securities were reviewed quarterly for possible other-than-temporary impairment (“OTTI”). The review included an analysis of the facts and circumstances of each individual investment such as the degree of loss, the length of time the fair value had been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and FHN’s intent and ability to hold the security.

Declines in value judged to be other-than-temporary (“OTTI”) based on FHN’s analysis of the facts and circumstances related to an individual investment, including securities that FHN had the intent to sell, were determined by the specific identification method. For HTM debt securities, OTTI recognized was typically credit-related and was reported in noninterest income. For impaired AFS debt securities that FHN did not intend to sell and was not required to sell prior to recovery but for which credit losses existed, the OTTI recognized was allocated between the total impairment related to credit losses which was reported in noninterest income, and the impairment related to all other factors which was excluded from earnings and reported, net of tax, as a component of other comprehensive income within shareholders’ equity and the Consolidated Condensed Statements of Comprehensive Income.

Fed Funds Sold and Purchased. Fed funds sold and purchased represent unsecured overnight funding arrangements between participants in the Federal Reserve system primarily to assist banks in meeting their regulatory cash reserve requirements. Fed Funds sold are evaluated for credit risk each reporting period. Due to the short duration of each transaction and the history of no credit losses, no credit loss has been recognized.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase.FHN purchases short-term securities under agreements to resell which are accounted for as collateralized financings except where FHN does not have an agreement to sell the same or substantially the same securities before maturity at a fixed

or determinable price. All of FHN’s securities purchased under agreements to resell are recognized as collateralized financings. Securities delivered under these transactions are delivered to either the dealer custody account at the FRB or to the applicable counterparty. Securities sold under agreements to repurchase are offered to cash management customers as an automated, collateralized investment account. Securities sold under agreements to repurchase are also used by the consumer/commercial bank to obtain favorable borrowing rates on its purchased funds. All of FHN's securities sold under agreements to repurchase are secured borrowings. Collateral is valued daily and FHN may require counterparties to deposit additional securities or cash as collateral, or FHN may return cash or securities previously pledged by counterparties, or FHN may be required to post additional securities or cash as collateral, based on the contractual requirements for these transactions.

FHN’s fixed income business utilizes securities borrowing arrangements as part of its trading operations. Securities borrowing transactions generally require FHN to deposit cash with the securities lender. The amount of cash advanced is recorded within Securities purchased under agreements to resell in the Consolidated Condensed Statements of Condition. These transactions are not considered purchases and the securities borrowed are not recognized by FHN. FHN does not conduct securities lending transactions.

Securities purchased under agreements to resell and securities borrowing arrangements are evaluated for credit risk each reporting period. As presented in Note 15 - Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions, these agreements are collateralized by the related securities and collateral maintenance provisions with counterparties, including replenishment and adjustment on a transaction specific basis. This collateral includes both the securities collateral for each transaction as well as offsetting securities sold under agreements to repurchase with the same counterparty. Given the history of no credit losses and collateralized nature of these transactions, no credit loss has been recognized.

Loans. Generally, loans are stated at principal amounts outstanding, net of unearned income. Interest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan origination fees and direct costs as well as premiums and discounts are amortized as level yield adjustments over the respective loan terms. Unamortized net fees or costs, premiums and discounts are recognized in interest income upon early repayment of the loans. Cash collections from loans that were fully charged off prior to acquisition are recognized in noninterest income. Loan commitment fees are generally deferred and amortized on a straight-line basis over the commitment period.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 9

Note 1 – Financial Information (Continued)

FHN has elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis on for its held-for-investment loan portfolio. FHN has also elected to not measure an allowance for credit losses on AIR for loans held-for-investment based on its policy to write off uncollectible interest in a timely manner, which occurs when a loan is placed on nonaccrual status. Such write offs are recognized as a reduction of interest income. AIR for held-for-investment loans is included within Other assets in the Consolidated Condensed Statements of Condition.

Purchased Credit-Deteriorated Loans. Subsequent to 2019, FHN evaluates all acquired loans to determine if they have experienced a more-than-insignificant deterioration in credit quality since origination (“PCD loans”). PCD loans can be identified on either an 1) individual or 2) pooled basis when the loans share similar risk characteristics. FHN evaluates various absolute factors to assist in the identification of PCD loans, including criteria such as, existing PCD status, risk rating of special mention or lower, nonaccrual or impaired status, identification of prior TDRs, and delinquency status. FHN also utilizes relative factors to identify PCD loans such as commercial loan grade migration, expansion of borrower credit spreads, declines in external risk ratings and changes in consumer loan characteristics (e.g., FICO decline or LTV increase). In addition, factors reflective of broad economic considerations are also considered in identifying PCD loans. These include industry, collateral type, and geographic location for the borrower’s operations. Internal factors for origination of new loans that are similar to the acquired loans are also evaluated to assess loans for PCD status, including increases in required yields, necessity of borrowers’ providing additional collateral and/or guarantees and changes in acceptable loan duration. Other indicators may also be used to evaluate loans for PCD status depending on borrower-specific communications and actions, such public statements, initiation of loan modification discussions and obtaining emergency funding from alternate sources.

Upon acquisition, the expected credit losses are allocated to the purchase price of individual PCD loans to determine each individual assets amortized cost basis, typically resulting in a reduction of the discount that is accreted prospectively to interest income. At the acquisition date and prospectively, only the unpaid principal balance is incorporated within the estimation of expected credit losses for PCD loans. Otherwise, the process for estimate of expected credit losses is consistent with that discussed below. As discussed below FHN applies undiscounted cash flow methodologies for the estimation of expected credit losses, which results in the calculated amount of credit losses at acquisition that is added to the amortized cost basis of the related PCD loans to exceed the discounted value of estimated credit losses included in the loan valuation.

Purchased Credit-Impaired Loans. Prior to 2020, ASC 310-30 “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” established guidance for acquired loans that exhibited deterioration of credit quality between origination and the time of acquisition and for which the timely collection of the interest and principal was not reasonably assured (“PCI loans”). PCI loans were initially recorded at fair value which was estimated by discounting expected cash flows at acquisition date. The expected cash flows included all contractually expected amounts (including interest) and incorporated an estimate for future expected credit losses, pre-payment assumptions, and yield requirement for a market participant, among other things. To the extent possible, certain PCI loans were aggregated into pools with composite interest rate and cash flows expected to be collected for the pool. Aggregation into loan pools was based upon common risk characteristics that include similar credit risk or risk ratings, and one or more predominant risk characteristics. Each PCI pool was accounted for as a single unit.

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

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

Subsequent to 2019, PCI loans have transitioned to purchased-credit-deteriorated status and are accounted for as discussed above.

Allowance for Loan Losses. The nature of the process by which FHN determines the appropriate ALLL requires the exercise of considerable judgment. See Note 5 - Allowance for Loan Losses for a discussion of FHN’s ALLL methodology and a description of the models utilized in the estimation process for the commercial and consumer loan portfolios. The discussion herein reflects periods before and after implementation of a change in credit loss estimation processes that was effective January 1, 2020.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 10

Note 1 – Financial Information (Continued)

Future adjustments to the ALLL may be necessary if economic or other conditions differ substantially from the assumptions used in making the estimates or, if required by regulators, based upon information at the time of their examinations or upon future regulatory guidance. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

Subsequent to 2019

The ALLL is maintained at a level that management determines is sufficient to absorb current expected credit losses (“CECL”) in the loan portfolio. Management uses analytical models to estimate expected credit losses in the loan portfolio as of the balance sheet date. The models are carefully reviewed to identify trends that may not be captured in the modeled loss estimates. Management uses qualitative adjustments for those items not reflected in the modeled loss information such as recent changes from the macroeconomic forecasts utilized in model calculations, results of additional stressed modeling scenarios, observed and/or expected changes affecting borrowers in specific industries or geographic areas, exposure to large lending relationships and expected recoveries of prior charge offs.

The ALLL is increased by the provision for loan losses and is decreased by loan charge-offs. The ALLL is determined in accordance with ASC 326-20 "Financial Instruments - Credit Losses.” Credit loss estimation is based on the amortized cost of Loans, net, which includes the following:

1. Unpaid principal balance for originated assets or acquisition price for purchased assets

2. Accrued interest (see elections discussed previously)

3. Accretion or amortization of premium, discount, and net deferred fees or costs

4. Collection of cash

5. Charge-offs

6. Foreign exchange adjustments (none for FHN)

7. Fair value hedge accounting adjustments (none for FHN)

Premiums, discounts and net deferred origination costs/fees affect the calculated amount of expected credit losses but they are not considered when determining the amount of expected credit losses that are recorded.

Under CECL, loans must be pooled when they share similar risk characteristics with other loans. Loans that do not share similar risk characteristics are evaluated individually. Expected credit loss is estimated for the remaining life of loan(s), which is limited to the remaining contractual term(s), adjusted for prepayment estimates, which are included as separate inputs into modeled loss estimates. Renewals and extensions are not anticipated unless they are included in existing loan documentation

and are not unconditionally cancellable by the lender. However, losses are estimated over the estimated remaining life of reasonably expected TDRs which can extend beyond the current remaining contractual term.

Estimates of expected credit losses incorporate consideration of available information that is relevant to assessing the collectability of future cash flows. This includes internal and external information relating to past events, current conditions and reasonable and supportable forecasts of future conditions. FHN utilizes internal historical loss information as the initial point for estimating expected credit losses. Given the duration of historical information available, FHN considers its internal loss history to fully incorporate the effects of prior credit cycles. The historical loss information may be adjusted in situations where current loan characteristics (e.g., underwriting criteria) differ from those in existence at the time the historical losses occurred. Historical loss information is also adjusted for differences in economic conditions, macroeconomic forecasts and other factors management considers relevant over a period extending beyond the measurement date which is considered reasonable and supportable. This reasonable and supportable period is followed by a reversion period after which loss estimates are based on long-term historical loss averages.

FHN generally measures expected credit losses using undiscounted cash flow methodologies. Credit enhancements (e.g., guarantors) are considered in the estimation of uncollectible cash flows. Estimation of expected credit losses for loan agreements involving collateral maintenance provisions include consideration of the value of the collateral and replenishment requirements, with the maximum loss limited to the difference between the amortized cost of the loan and the fair value of the collateral. Expected credit losses for loans for which foreclosure is probable are measured at the fair value of collateral, less estimated costs to sell when disposition through sale is anticipated. Additionally, certain loans are valued at the fair value of collateral when repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. Expected credit losses for TDRs are measured in accordance with ASC 310-40, which generally requires a discounted cash flow methodology, whereby the loans are measured based on the present value of expected future payments discounted at the loan’s original effective interest rate.

Expected recoveries of previously charged-off amounts are also included as a qualitative adjustment in the estimation of expected credit losses, which reduces the amount of the allowance recognized.Estimates of recoveries on previously charged-off assets included in the valuation account do not exceed the aggregate of amounts previously written off and expected to be written off.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 11

Note 1 – Financial Information (Continued)

Since CECL requires estimation of credit for the entire expected life of loans, loss estimates are highly sensitive to changes in macroeconomic forecasts, especially when those forecasts change dramatically in short time periods. Additionally, under CECL credit loss estimates are more likely to increase rapidly in periods of loan growth.

Expected credit losses for unfunded commitments are estimated for periods where the commitment is not unconditionally cancellable by FHN. The measurement of expected credit losses for unfunded commitments mirrors that of loans with the additional estimate of future draw rates (timing and amount).

Prior to 2020

The ALLL was maintained at a level that management determined was sufficient to absorb estimated probable incurred losses in the loan portfolio. The ALLL was increased by the provision for loan losses and loan recoveries and was decreased by loan charge-offs. The ALLL was determined in accordance with ASC 450-20-50 "Contingencies - Accruals for Loss Contingencies" and was composed of reserves for commercial loans evaluated based on pools of credit graded loans and reserves for pools of smaller-balance homogeneous consumer and commercial loans. The reserve factors applied to these pools were an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics. Additionally, the ALLL included specific reserves established in accordance with ASC 310-10-35 for loans determined by management to be individually impaired as well as reserves associated with PCI loans. Management used analytical models to estimate probable incurred losses in the loan portfolio as of the balance sheet date. The models, which were primarily driven by historical losses, were carefully reviewed to identify trends that may not have been captured in the historical loss factors used in the models. Management used qualitative adjustments for those items not yet captured in the models like then-current events, recent trends in the portfolio, current underwriting guidelines, and local and macroeconomic trends, among other things.

Key components of the estimation process were as follows: (1) commercial loans determined by management to be individually impaired loans were evaluated individually and specific reserves were determined based on the difference between the outstanding loan amount and the estimated net realizable value of the collateral (if collateral dependent), the present value of expected future cash flows or by observable market prices; (2) individual commercial loans not considered to be individually impaired were segmented based on similar credit risk characteristics and evaluated on a pool basis; (3) reserve rates for the commercial segment were calculated based on historical net charge-offs and were subject to adjustment by management to reflect current events, trends, and conditions (including economic considerations and trends);

(4) management’s estimate of probable incurred losses reflected the reserve rates applied against the balance of loans in the commercial segment of the loan portfolio; (5) consumer loans were generally segmented based on loan type; (6) reserve amounts for each consumer portfolio segment were calculated using analytical models based on delinquency trends and net loss experience and were subject to adjustment by management to reflect current events, trends, and conditions (including economic considerations and trends); and (7) the reserve amount for each consumer portfolio segment reflected management’s estimate of probable incurred losses in the consumer segment of the loan portfolio.

Impairment related to individually impaired loans was measured in accordance with ASC 310-10. All commercial portfolio segments, commercial TDRs and other individually impaired commercial loans were measured based on the present value of expected future payments discounted at the loan’s effective interest rate (“the DCF method”), observable market prices, or for loans that are solely dependent on the collateral for repayment, the net realizable value (collateral value less estimated costs to sell). Impaired loans also included consumer TDRs.

Summary of Accounting Changes. ~~Effective January 1, 2017, FHN adopted~~In June 2016, the ~~provisions~~FASB issued ASU 2016-13, “Measurement of ~~Accounting Standards Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting,~~Credit Losses on Financial Instruments,” which ~~makes several revisions~~revises the measurement and recognition of credit losses for assets measured at amortized cost (e.g., HTM loans and debt securities) and AFS debt securities. Under ASU 2016-13, for assets measured at amortized cost, the current expected credit loss (“CECL”) is measured as the difference between amortized cost and the net amount expected to ~~equity compensation accounting.~~be collected. This represents a departure from prior GAAP as the “incurred loss” methodology for recognizing credit losses delayed recognition until it was probable a loss had been incurred. Under CECL the new guidance all excess tax benefits and deficiencies that occur when an award vests, is exercised, or expires are recognized in income tax expense as discrete period items. Previously, these transactions were typically recorded directly within equity. Consistent with this change, excess tax benefits and deficiencies are no longer included within estimated proceeds when performing the treasury stock method for calculationfull amount of ~~diluted earnings per share. Excess tax benefits are also~~expected credit losses will be recognized at the time ~~an award~~of loan origination. The measurement of current expected credit losses is ~~exercised or vests compared~~based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Additionally, current disclosures of credit quality indicators in relation to the ~~previous requirement~~amortized cost of financing receivables are further disaggregated by year of origination. ASU 2016-13 leaves the methodology for measuring credit losses on AFS debt securities largely unchanged, with the maximum credit loss representing the difference between amortized cost and fair value. However, such credit losses are recognized through an allowance for credit losses, which permits recovery of previously recognized credit losses if circumstances change.

ASU 2016-13 also revises the recognition of credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 12

Note 1 – Financial Information (Continued)

origination (“PCD assets”). For PCD assets, the initial allowance for credit losses is added to ~~delay recognition until~~ the ~~deduction reduces taxes payable. The presentation of excess tax benefits~~purchase price. Only subsequent changes in the ~~statement~~allowance for credit losses are recorded as a credit loss expense for PCD assets. Interest income for PCD assets is recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. Previously, credit losses for purchased credit-impaired assets were included in the initial basis of the assets with subsequent declines in credit resulting in expense while subsequent improvements in credit were reflected as an increase in the future yield from the assets. For non-PCD assets, expected credit losses are recognized through earnings upon acquisition and the entire premium or discount accreted to interest income over the remaining life of the loan. Credit allowances for acquired non-PCD assets are established through immediate recognition of credit loss expense (similar to originated loans) and do not consider purchase discounts related to estimated credit losses.

The provisions of ASU 2016-13 were generally adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in the year of adoption. Prospective implementation is required for debt securities for which an other-than-temporary-impairment (“OTTI”) had been previously recognized. Amounts previously recognized in accumulated other comprehensive income (“AOCI”) as of the date of adoption that relate to improvements in cash flows ~~shifted~~expected to be collected continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption are recorded in earnings when received. A prospective transition approach was used for existing PCD assets where, upon adoption, the amortized cost basis was increased to offset the initial recognition of the allowance for credit losses. Thus, an ~~operating activity from~~entity was not be required to reassess its purchased financial assets that existed as of the ~~prior classification~~date of adoption to determine whether they would have met at acquisition the new criteria of more-than-insignificant credit deterioration since origination. An entity accretes the remaining noncredit discount (based on the revised amortized cost basis) into interest income at the effective interest rate at the adoption date.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. FHN’s most significant implementation activities included review of loan portfolio segments and classes, identification and evaluation of collateral dependent loans and loans secured by collateral replenishment arrangements, selection of measurement methodologies and related model development, data accumulation and verification, development of loan life estimates, identification of reasonable and supportable forecast periods, selection of time lines and methods for

reversion to unadjusted historical information, multiple preliminary analysis including parallel runs against existing loan loss estimation processes, and design and evaluation of internal controls over the new estimation processes. FHN utilizes undiscounted cash flow methods for loans except for troubled debt restructurings, which require use of discounted cash flow methodologies.

A significant portion of the adoption impact for ASU 2016-13 relates to increased reserves within the consumer portfolios, given the longer contractual maturities associated with many of these products as well as increased reserves for acquired loans that previously considered purchase discounts. Based on its implementation efforts, FHN recorded the following adoption adjustments effective January 1, 2020.



(Dollars in thousands)	January 1, 2020
Loans, net of unearned income (a)	$	2,980
Allowance for loan losses	(106,394		)
Other assets (deferred taxes)	31,330
Total assets	$	(72,084	)

Other liabilities (unfunded commitments)	$	23,973
Undivided profits	(96,057		)
Total liabilities and equity	$	(72,084	)

(a) The effect on loans represents the increase in amortized cost for recognition of the allowance for credit losses on PCD loans.

FHN also assessed several asset classes other than loans that are within the scope of CECL and determined that the adoption effects for the change in measurement of credit risk were minimal for these classes. This includes Fed funds sold which have no history of credit losses due to their short (typically overnight) duration and counterparty risk assessment processes. This also includes securities borrowed and securities purchased under agreements to resell which have collateral maintenance agreements that incorporate master netting provisions resulting in minimal uncollateralized positions as of any date as evidenced by the disclosures provided in Note 15 - Master Netting and Similar Agreements-Repurchase, Reverse Repurchase, and Securities Borrowing Transactions. Additionally, FHN also evaluated the composition of its AFS securities and determined that the changes in ASU 2016-13 did not have an effect on the current portfolio.

In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which provides an election to either 1) not measure or 2) measure separately an allowance for credit losses for accrued interest receivable (“AIR"). Entities electing to not measure an allowance for AIR must write off uncollectible

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 13

Note 1 – Financial Information (Continued)

interest in a timely manner. Additionally, an election is provided for the write off of uncollectible interest to be recorded either as a ~~financing activity.~~

~~ASU 2016-09 also provides an accounting policy election to recognize forfeitures~~reversal of ~~awards as they occur when estimating stock-based compensation expense rather than~~interest income or a charge against the previous requirement to estimate forfeitures from inception. Further, ASU 2016-09 permits employers to use a net-settlement feature to withhold taxes on equity compensation awards up to the maximum statutory tax rate without affecting the equity classification of the award. Under previous guidance, withholding of equity awards in excess of the minimum statutory requirement resulted in liability classificationallowance for the entire award. The related cash remittance by the employer for employee taxes is treated as a financing activity in the statement of cash flows. Transition to the new guidance was accomplished throughcredit losses or a combination of ~~retrospective (cash flows)~~both. Disclosures are required depending upon which elections are made.

ASU 2019-04 also clarifies that when loans and securities are transferred between balance sheet categories (e.g., ~~cumulative-effect adjustment~~loans from held-for-investment to ~~equity (forfeitures)~~held-for-sale or securities from held-to-maturity to available-for-sale) the associated allowance for credit losses should be reversed to income and prospective ~~methodologies (tax windfalls~~accounting follows the requirements for the new classification. Further, ASU 2019-04 clarifies that recoveries should be incorporated within the estimation of the allowance for credit losses. Expected recoveries should not exceed the aggregate amount of prior write offs and ~~shortfalls).~~expected future write offs. The inclusion of expected recoveries in the measurement of expected credit losses may result in a negative credit allowance in certain circumstances. Additionally, for collateral dependent financial assets, the allowance for credit losses that is added to the amortized cost basis should not exceed amounts previously written off.

ASU 2019-04 also makes several changes when a discounted cash flow approach is used to measure expected credit losses. ASU 2019-04 removes ASU 2016-03’s prohibition of using projections of future interest rate environments when using a discounted cash flow method to measure expected credit losses on variable-rate financial instruments. If an entity uses projections or expectations of future interest rate environments in estimating expected cash flows, the same assumptions should be used in determining the effective interest rate used to discount those expected cash flows. The effective interest rate should also be adjusted to consider the effects of ~~adopting~~expected prepayments on the timing of expected future cash flows. ASU ~~2016-09 have~~2019-04 provides an election to adjust the effective interest rate used in discounting expected cash flows to isolate credit risk in measuring the allowance for credit losses. Further, the discount rate should not be adjusted for subsequent changes in expected prepayments if a financial asset is restructured in a troubled debt restructuring.

Related to collateral-dependent financial assets, ASU 2019-04 requires inclusion of estimated costs to sell in the measurement of expected credit losses in situations where the entity intends to sell rather than operate the collateral. Additionally, the estimated costs to sell should be undiscounted when the entity intends to sell rather than operate the collateral.

Finally, ASU 2019-04 specifies that contractual renewal or extension options, except those treated as derivatives, should be included in the determination of the contractual term for a financial asset when included in the original or

modified contract as of the reporting date if they are not unconditionally cancellable by the entity.

The effective date and transition requirements for these components of ASU 2019-04 are consistent with the requirements for ASU 2016-13 and FHN incorporated these changes and revisions within its implementation efforts. Based on its previous existing practices for the timely write off uncollectible AIR, FHN elected to not measure an allowance for credit losses for AIR and to continue recognition of related write offs as a reversal of interest income.

In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses, Targeted Transition Relief,” which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis that are in the scope of ASU 2016-13, applied on an instrument-by-instrument basis. The fair value option election does not apply to HTM debt securities. The effective date and transition requirements for ASU 2019-05 are consistent with the requirements for ASU 2016-13. FHN did not elect to apply the fair value option to any asset classes that are in scope for CECL.

In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses” which clarifies that expected recoveries should be included in the amortized cost basis previously written off or expected to be written off in the valuation allowance for PCD assets. ASU 2019-11 also clarifies that recoveries or expected recoveries of the unamortized noncredit discount or premium should not be included in the allowance for credit losses. ASU 2019-11 provides specific transition relief for existing troubled debt restructurings and extends the disclosure relief of ASU 2019-04 for accrued interest receivable balances to additional relevant disclosures involving amortized cost basis. Related to the assessment of credit risk for collateralized assets, ASU 2019-11 indicates that an entity should assess whether it reasonably expects the borrower will be able to continually replenish collateral securing the financial asset to apply the practical expedient of ASU 2016-13 while also requiring an estimation of expected credit losses for any difference between the amount of the amortized cost basis that is greater than the fair value of the collateral securing the financial asset.

The effective date and transition requirements for ASU 2019-11 are consistent with the requirements for ASU 2016-13 and FHN incorporated these changes and revisions within its implementation efforts and the effects are embedded within the adoption effects of ASU 2016-13. Consistent with non-PCD assets, the effect of including recoveries and expected recoveries within the measurement of expected credit losses for PCD assets may result in a negative credit allowance in certain circumstances.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 14

Note 1 – Financial Information (Continued)

On March 22, 2020, The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau issued guidance (the “Interagency Guidance”) that interprets, but does not suspend, ASC 310-40 related to the identification of troubled debt restructurings (“TDRs”). Also on that day, the FASB issued a statement indicating that the Interagency Guidance had been ~~significant.~~developed in consultation with the staff of the FASB who concurred in the approach.

~~Effective January~~The Interagency Guidance indicates that a lender can conclude that a borrower is not experiencing financial difficulty if either 1) short-term (e.g., six months) modifications are made in response to the economic effects of the Coronavirus disease 2019 (“COVID-19”) pandemic, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented, or 2) the modification or deferral program is mandated by the federal government or a state government. Accordingly, any loan modification made in response to COVID-19 pandemic that meets either of these practical expedients would not be considered a TDR because the borrower is not experiencing financial difficulty. Consistent with this perspective, financial institutions are generally not expected to designate loans with deferrals granted due to COVID-19 as past due or nonaccrual because of a deferral.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides relief from certain requirements under U.S. GAAP. Section 4013 of the CARES Act provides entities optional temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) under ASC 310-40 in certain situations. Section 4013 of the CARES Act permits the suspension of ASC 310-40 for loan modifications that are made by financial institutions in response to the COVID-19 pandemic if 1) the borrower was not more than 30 days past due as of December 31, 2019, and 2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan. The CARES provisions apply to loan modifications relating to COVID-19 that are made between March 1, ~~2017, FHN early adopted~~2020 and the earlier of December 31, 2020 or 60 days after the national emergency related to COVID-19 ends.

On April 3, 2020, the Chief Accountant of the SEC issued a statement indicating that the staff would not object to the conclusion that elective application of the provisions of ~~ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” which requires recognition~~CARES Act are in accordance with GAAP for the periods that such elections are available.

On April 7, 2020, revised Interagency Guidance was issued to reflect the interaction of the ~~income tax consequences of an intra-entity transfer of an asset other than inventory when~~CARES Act provisions and the ~~transfer occurs. Therefore, ASU 2016-16 reverses~~Interagency Guidance, clarifying that the ~~previous requirement to delay recognition~~CARES Act guidance can be applied for regulatory purposes. Loan modifications outside the scope of the ~~tax consequences~~CARES Act and organizations that elect to not apply the CARES Act guidance should continue to apply ASC 310-40 as interpreted by the Interagency Guidance.

FHN has evaluated the provisions of ~~these transactions until~~ the ~~associated assets~~CARES Act and the Interagency Guidance related to loan modification programs instituted as a result of the COVID-19 pandemic. FHN’s programs involve the deferral of principal and interest payments, fee waivers and extensions for shorter terms (i.e., 6 months or less) or in response to government modification requirements which are ~~sold to an outside party. Adoption~~consistent with the terms of ~~ASU 2016-16 did not have a significant effect on FHN.~~the Interagency Guidance. Depending upon the duration and severity of the economic effects of the COVID-19 pandemic, additional loan modification programs may be implemented in the future which will be separately evaluated under the CARES Act and the Interagency Guidance.

Accounting Changes Issued but Not Currently Effective

In ~~May 2014,~~March 2020, the FASB issued ASU ~~2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 does not change revenue recognition~~2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides several optional expedients and exceptions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial ~~assets.~~reporting. The ~~core principle~~provisions of ASU ~~2014-09 is~~2020-04 primarily affect 1) contract modifications (e.g., loans, leases, debt, and derivatives) made in anticipation that a reference rate (e.g., LIBOR) will be discontinued and 2) the application of hedge accounting for existing relationships affected by those modifications. The provisions of ASU 2020-04 are effective upon release and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity ~~should recognize revenue to depict~~has elected certain optional expedients for and that are retained through the ~~transfer~~end of ~~promised goods or services to customers in an amount that reflects~~ the ~~consideration to which the entity expects to be entitled in exchange~~hedging relationship. FHN has been identifying contracts affected by reference rate reform and developing modification plans for those goods or services. This is accomplished through a five-step recognition framework involving 1) the identification of contracts with customers, 2) identification of performance obligations, 3) determination of the transaction price, 4) allocation of the transaction price to the performance obligations and 5) recognition of revenue as performance obligations are satisfied. Additionally, qualitative and quantitative information is required for disclosure regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In February 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations,” which provides additional guidance on whether an entity should recognize revenue on a gross or net basis, based on which party controls the specified good or service before that good or service is transferred to a customer. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which clarifies the original guidance included in ASU 2014-09 for identification of the goods or services provided to customers and enhances the implementation guidance for licensing arrangements. ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” was issued in May 2016 to provide additional guidance for the implementation and application of ASU 2014-09. “Technical Corrections and Improvements” ASU 2016-20 was issued in December 2016 and

~~Note 1 – Financial Information (Continued)~~

provides further guidance on certain issues. These ASUs are effective in annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Transition to the new requirements may be made by retroactively revising prior financial statements (with certain practical expedients permitted) or by a cumulative effect through retained earnings. If the latter option is selected, additional disclosures are required for comparability. FHN is evaluating their effects on its revenue recognition practices. Currently,contracts. FHN anticipates that it will ~~elect to adopt~~utilize the ~~provisions of the revenue recognition standards through a cumulative effect to retained earnings with comparability disclosures~~optional expedients and exceptions provided ~~throughout 2018. Based on reviews of its various revenues that are within the scope of~~by ASU ~~2014-09, FHN has not identified a significant change~~2020-04 in ~~it's revenue recognition practices. However, FHN's implementation efforts are ongoing and additional information may change this assessment.~~

In February 2017, the FASB issued ASU 2017-05, “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” which clarifies the meaning and application of the term in substance nonfinancial asset in transactions involving both financial and nonfinancial assets. If substantially all of the fair value of the assets that are promised to the counterparty in a contract are concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of revenue recognition guidance for nonfinancial assets. ASU 2017-05 also clarifies that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it with the amount of revenue recognized based on the allocation guidance provided in ASU 2014-09. ASU 2017-05 also requires an entity to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it 1) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Topic 810 and 2) transfers control of the asset in accordance with the provisions of ASU 2014-09. Once an entity transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial asset, it is required to measure any noncontrolling interest it receives (or retains) at fair value. ASU 2017-05 has the same effective date and transition provisions as ASU 2014-09 and the two standards must be adopted simultaneously although the transition methods may be different. FHN is evaluating the effects of ASU 2017-05 on its revenue recognition practices. Currently, FHN anticipates that it will elect to adopt the provisions of ASU 2017-05 through a cumulative effect to retained earnings with comparability disclosures provided throughout 2018.

~~In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 makes several revisions to the~~situations where they mitigate potential accounting presentation and disclosure for financial instruments. Equity investments (except those accounted for under the equity method, those that result in consolidation of the investee, and those held by entities subject to specialized industry accounting which already apply fair value through earnings) are required to be measured at fair value with changes in fair value recognized in net income. This excludes FRB and FHLB stock holdings which are specifically exempted from the provisions of ASU 2016-01. An entity may elect to measure equity investmentsoutcomes that do not ~~have readily determinable market values at cost minus impairment, if any, plus~~faithfully represent management’s intent or minus changes resulting from observable price changes in orderly transactions for the identical or similar instruments from the same issuer. ASU 2016-01 also requires a qualitative impairment review for equity investments without readily determinable fair values, with measurement at fair value required if impairmentrisk management activities which is determined to exist. For liabilities for which fair value has been elected, ASU 2016-01 revises current accounting to record the portion of fair value changes resulting from instrument-specific credit risk within other comprehensive income rather than earnings. FHN has not elected fair value accounting for any existing financial liabilities. Additionally, ASU 2016-01 clarifies that the need for a valuation allowance on a deferred tax asset related to available-for-sale securities should be assessed in combination with all other deferred tax assets rather than being assessed in isolation. ASU 2016-01 also makes several changes to existing fair value presentation and disclosure requirements, including a provision that all disclosures must use an exit price concept in the determination of fair value. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Transition will be through a cumulative effect adjustment to retained earnings for equity investments with readily determinable fair values. Equity investments without readily determinable fair values, for which the accounting election is made, will have any initial fair value marks recorded through earnings prospectively after adoption.

Upon adoption, FHN will reclassify all equity investments out of available-for-sale securities, leaving only debt securities within this classification. FHN has evaluated the nature of its current equity investments and determined that substantially all qualify for the election available to assets without readily determinable fair values, including its holdings of Visa Class B shares. Accordingly, FHN intends to apply this election and any fair value marks for these investments will be recognized through earnings on a prospective basis subsequent to adoption. FHN continues to evaluate the appropriate characteristics of “similar” instruments as well as related valuation inputs and methodologies for its equity investments without readily determinable fair values. The requirements of ASU 2016-01 related to assessment of deferred tax assets and disclosure of the fair value of financial instruments will not have a significant effect on FHN because its current accounting and disclosure practices conform to the requirements of ASU 2016-01. FHN also continues to evaluate the impact of ASU 2016-01 on other aspects of its current accounting and disclosure practices.

~~Note 1 – Financial Information (Continued)~~

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires a lessee to recognize in its statement of condition a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 leaves lessor accounting largely unchanged from prior standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. All other leases must be classified as financing or operating leases which depends on the relationship of the lessee’s rights to the economic value of the leased asset. For finance leases, interest on the lease liability is recognized separately from amortization of the right-of-use asset in earnings, resulting in higher expense in the earlier portion of the lease term. For operating leases, a single lease cost is calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

In transition to ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply, which would result in continuing to account for leases that commence before the effective date in accordance with previous requirements (unless the lease is modified) except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous requirements. ASU 2016-02 also requires expanded qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from lease arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. FHN is evaluating the impact of ASU 2016-02 on its current accounting and disclosure practices.

In March 2016, the FASB issued ASU 2016-04, “Recognition of Breakage of Certain Prepaid Stored-Value Products,” which indicates that liabilities related to the sale of prepaid stored-value products are considered financial liabilities and should have a breakage estimate applied for estimated unused funds. ASU 2016-04 does not apply to stored-value products that can only be redeemed for cash, are subject to escheatment or are linked to a segregated bank account. ASU 2016-04 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. FHN is evaluating the impact of ASU 2016-04 on its current accounting and disclosure practices.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” which revises the measurement and recognition of credit losses for assets measured at amortized cost (e.g., held-to-maturity (“HTM”) loans and debt securities) and available-for-sale (“AFS”) debt securities. Under ASU 2016-13, for assets measured at amortized cost, the current expected credit loss (“CECL”) is measured as the difference between amortized cost and the net amount expected to be collected. This represents a departure from existing GAAP as the “incurred loss” methodology for recognizing credit losses delays recognition until it is probable a loss has been incurred. The measurement of current expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Additionally, current disclosures of credit quality indicators in relation to the amortized cost of financing receivables will be further disaggregated by year of origination. ASU 2016-13 leaves the methodology for measuring credit losses on AFS debt securities largely unchanged, with the maximum credit loss representing the difference between amortized cost and fair value. However, such credit losses will be recognized through an allowance for credit losses, which permits recovery of previously recognized credit losses if circumstances change.

ASU 2016-13 also revises the recognition of credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”). For PCD assets, the initial allowance for credit losses is added to the purchase price. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for PCD assets. Interest income for PCD assets will be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. Currently, credit losses for purchased credit-impaired assets are included in the initial basis of the assets with subsequent declines in credit resulting in expense while subsequent improvements in credit are reflected as an increase in the future yield from the assets.

The provisions of ASU 2016-13 will be generally adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in the year of adoption. Prospective implementation is required for debt securities for which an other-than-temporary-impairment (“OTTI”) had been previously recognized. Amounts previously recognized in accumulated other comprehensive income (“AOCI”) as of the date of adoption that relate to improvements in cash flows expected to be collected will continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption will be recorded in earnings when received. A prospective transition approach will be used for existing PCD assets where, upon adoption, the amortized cost basis

~~Note 1 – Financial Information (Continued)~~

will be adjusted to reflect the addition of the allowance for credit losses. Thus, an entity will not be required to reassess its purchased financial assets that exist as of the date of adoption to determine whether they would have met at acquisition the new criteria of more-than-insignificant credit deterioration since origination. An entity will accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income at the effective interest rate at the adoption date.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in fiscal years beginning after December 15, 2018. FHN continues to evaluate the impact of ASU 2016-13. FHN has met with industry experts, initiated training for key employees associated with the new standard, and defined an initial approach that it is currently testing. Once testing is completed, FHN will then begin to develop the formal models and processes that will be required in the implementation of the new standard.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which clarifies multiple cash flow presentation issues including providing guidance as to classification on the cash flow statement for certain cash receipts and cash payments where diversity in practice exists. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The provisions of ASU 2016-15 will be applied retroactively and will result in proceeds from bank-owned life insurance (“BOLI”) being classified as an investing activity rather than their prior classification as an operating activity.

In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” which requires the disaggregation of the service cost component from the other components of net benefit cost for pension and postretirement plans. Service cost must be included in the same income statement line item as other compensation-related expenses. All other components of net benefit cost are required to be presented in the income statement separately from the service cost component, with disclosure of the line items where these amounts are recorded. The presentation requirements of ASU 2017-07 must be applied retrospectively and adoption is required for annual periods beginning after December 15, 2017, including interim periods within those annual periods. FHN’s disclosures for pension and postretirement costs provide details of the service cost and all other components for expenses recognized for its applicable benefit plans. These amounts are currently included in Employee compensation, incentives, and benefits expense in the Consolidated Condensed Statements of Income. Upon adoption of ASU 2017-07 FHN will reclassify the expense components other than service cost into All other expense and revise its disclosures accordingly. The amounts to be reclassified are presented in Note 11—Pension, Savings, and Other Employee Benefits in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and in Note 18—Pension, Savings, and Other Employee Benefits in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016.

In March 2017, the FASB issued ASU 2017-08, “Premium Amortization on Purchased Callable Debt Securities” which shortens the amortization period for securities that have explicit, noncontingent call features that are callable at fixed prices and on preset dates. In contrast to the current requirement for premium amortization to extend to the contractual maturity date, ASU 2017-08 requires the premium to be amortized to the earliest call date. ASU 2017-08 does not change the amortization of discounts, which will continue to be amortized to maturity. The new guidance does not apply to debt securities where the prepayment date is not preset or the price is not known in advance, which includes debt securities that qualify for amortization based on estimated prepayment rates. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. Transition is accomplished through a cumulative-effect adjustment directly to retained earnings as of the beginning of the year of adoption. Based upon the current composition of its debt securities portfolios, FHN does not anticipate a significant effect upon adoption.

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities” which revises the financial reporting for hedging relationships through changes to both the designation and measurement requirements for qualifying hedge relationships and the presentation of hedge results. ASU 2017-12 expands permissible risk component hedging strategies, including the designation of a contractually specified interest rate (e.g., a bank’s prime rate) in hedges of cash flows from variable rate financial instruments. Additionally, ASU 2017-12 makes significant revisions to fair value hedging activities, including the ability to measure the fair value changes for a hedged item solely for changes in the benchmark interest rate, permitting partial-term hedges, limiting consideration of prepayment risk for hedged debt instruments solely to the effects of changes in the benchmark interest rate and allowing for certain hedging strategies to be applied to closed portfolios of prepayable debt instruments. ASU 2017-12 also provides elections for the exclusion of certain portions of a hedging instrument’s change in fair value from the assessment of hedge effectiveness. If elected, the fair value changes of these excluded components may be recognized immediately or recorded into other comprehensive income with recycling into earnings using a rational and systematic methodology over the life of the hedging instrument.

~~Note 1 – Financial Information (Continued)~~

Under ASU 2017-12 some of the documentation requirements for hedge accounting relationships are relaxed, but the highly effective threshold has been retained. Hedge designation documentation and a prospective qualitative assessment are still required at hedge inception, but the initial quantitative analysis may be delayed until the end of the quarter the hedge is commenced. If certain criteria are met, an election can be made to perform future effectiveness assessments using a purely qualitative methodology. ASU 2017-12 also revises the income statement presentation requirements for hedging activities. For fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of effectiveness is recorded to the same income statement line item used to present the earnings effect of the hedged item. For cash flow hedges, the entire fair value change of the hedging instrument that is included in the assessment of hedge effectiveness is initially recorded in other comprehensive income and later recycled into earnings as the hedged transaction(s) affect net income with the income statement effects recorded in the same financial statement line item used to present the earnings effect of the hedged item.

~~ASU 2017-12 also makes revisions to the current disclosure requirements for hedging activities to reflect the presentation of hedging results~~ consistent with the ~~changes to income statement classification and to improve the disclosure~~purpose of the ~~hedging results on the balance sheet. ASU 2017-12 is effective for fiscal years beginning after December~~standard.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 15 2018 with early adoption permitted in any period after issuance. Adoption for all existing hedging relationships is performed through a cumulative effect adjustment to the applicable balance sheet accounts with an offset to retained earnings as of the beginning of the fiscal year.

FHN is evaluating the effects of adopting ASU 2017-12 on its current and potential future hedging relationships. Currently, FHN anticipates early adoption in the first quarter of 2018. Upon adoption of ASU 2017-12, FHN will prospectively record components of hedging results for its fair value and cash flow hedges previously recognized in other expense within either interest income or interest expense. Additionally, FHN will make cumulative effect adjustments to the hedged items, accumulated other comprehensive income and retained earnings as of the beginning of 2018. The magnitude of the cumulative effect adjustments and prospective effects are expected to be insignificant for FHN’s existing hedge relationships.

Note 2 – Acquisitions and Divestitures

On ~~May~~November 4, ~~2017,~~2019, FHN and ~~Capital Bank Financial Corp.~~IBERIABANK Corporation (“~~Capital Bank” or "CBF"~~IBKC”) announced that they had entered into an agreement and plan of ~~merger.~~merger under which IBKC will merge with FHN in a merger-of-equals transaction. IBKC, headquartered in Lafayette, Louisiana, has 319 offices in 12 states, mostly in the southern and southeastern U.S., and has reported $32.2 billion of total assets, $24.5 billion in loans, and $25.5 billion in deposits, at March 31, 2020. IBKC‘s common stock is listed on The NASDAQ Stock Market, LLC under the symbol IBKC. Under the merger agreement, each share of IBKC common stock will be converted into 4.584 shares of FHN common

stock. After closing, FHN expects IBKC common shares will be converted into approximately 44 percent of the then-outstanding shares of FHN common stock. The merger agreement requires FHN to expand its board of directors to 17 persons; after closing, 8 board positions will be held by current IBKC directors, and 9 will be held by current FHN directors. FHN expects the transaction to close in second quarter 2020, subject to regulatory approvals and other customary conditions. Merger and integration expenses related to the pending merger of equals with IBKC are recorded in FHN’s Corporate segment.

Total merger expenses for the IBKC merger recognized for the three months ended March 31, 2020 are presented in the table below:



	Three Months Ended March 31
(Dollars in thousands)	2020
Professional fees (a)	$	662
Employee compensation, incentives and benefits (b)	689
Miscellaneous expense (c)	254
Total IBKC acquisition expense	$	1,605

(a) Primarily comprised of fees for legal, accounting, and merger consultants.

(b) Primarily comprised of fees for severance and retention.

On November 8, 2019, FHN announced an agreement for First Horizon Bank to purchase 30 branches from SunTrust Bank in conjunction with SunTrust Banks, Inc.'s merger with BB&T Corporation, which created Truist Financial Corp. As part of the agreement, FHN will ~~acquire Capital Bank, which is headquartered~~assume approximately $2.4 billion of branch deposits for a 3.40 percent deposit premium and purchase approximately $410 million of branch loans. The branches are in ~~Charlotte,~~communities in North Carolina (20 branches), Virginia (8 branches),

and ~~reported approximately $10 billion of assets at June 30, 2017. At~~Georgia (2 branches). FHN expects the time of announcement Capital Bank operated 193 branches in North and South Carolina, Tennessee, Florida and Virginia. Collectively, Capital Bank shareholders will receive approximately $411 million in cash plus FHN common shares which are expected to represent approximately 29 percent of FHN’s outstanding common shares immediately after consummation of the merger. The total transaction value, measured at the time of announcement, was approximately $2.2 billion. The agreement calls for two members of Capital Bank’s board of directors to join FHN’s board after closing. The transaction is expectedpurchase to close in ~~fourth~~third quarter ~~2017,~~2020, subject to ~~regulatory approval of the sale of two branches~~customary closing conditions.

See Note 2- Acquisitions and ~~customary conditions.~~

~~On April 3, 2017, FTN Financial acquired substantially all of the assets and assumed substantially all of the liabilities of Coastal Securities, Inc. (“Coastal”), a national leader~~Divestitures in the ~~trading, securitization, and analysis of Small Business Administration (“SBA”) loans,~~Notes to Consolidated Financial Statements on Form 10-K for ~~approximately $131 million in~~ cash. Coastal, which was based in Houston, TX, also traded United States Department of Agriculture (“USDA”) loans and fixed income products and provided municipal underwriting and advisory services to its clients. Coastal’s government-guaranteed loan products, combined with FTN Financial’s existing SBA trading activities, have established an additional major product sector for FTN Financial.

~~The following schedule details acquired assets and liabilities and consideration paid, as well as adjustments to record~~ the ~~assets and liabilities at their estimated fair values as of April 3, 2017:~~

Coastal Securities, Inc.
Purchase Accounting/
As Fair Value As recorded
(Dollars in thousands) Acquired Adjustments by FHN
Assets:
Cash and due from banks $ 7,502
$ —
$ 7,502
Interest-bearing cash 4,132
—
4,132
Trading securities 423,662
(284,580 ) 139,082
Loans held-for-sale —
236,088
236,088
Investment securities —
1,413
1,413
Other intangible assets, net —
27,300
27,300
Premises and equipment, net 1,229
—
1,229
Other assets 1,658
14
1,672
Total assets acquired $ 438,183
$ (19,765 ) $ 418,418

Liabilities:
Securities sold under agreements to repurchase $ 201,595
$ —
$ 201,595
Other short-term borrowings 33,509
—
33,509
Fixed income payables 143,647
(47,158 ) 96,489
Other liabilities 958
(642 ) 316
Total liabilities assumed 379,709
(47,800 ) 331,909
Net Assets Acquired $ 58,474
$ 28,035
86,509
Consideration paid:
Cash (131,473 )
Goodwill $ 44,964

In relation to the acquisition, FHN has recorded $45.0 million in goodwill, representing the excess of acquisition consideration over the estimated fair value of net assets acquired (refer to Note 6 - Intangible Assetsyear ended December 31, 2019, for additional ~~information),~~information about FHN's other acquisitions.

Expenses related to FHN's merger and ~~all~~integration activities are recorded in FHN's Corporate segment.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 16

Table of which is expected to be deductible for tax purposes. The goodwill is the result of adding an experienced workforce, establishing an additional major product sector for FTN Financial, expected synergies, and other factors. FHN's operating results for 2017Contents

Note 2 – Acquisitions and Divestitures (Continued)

~~include the operating results of the acquired assets~~Total other merger and ~~assumed liabilities of Coastal subsequent to the acquisition on April 3, 2017.~~

~~For~~integration expense recognized for the three ~~and nine~~ months ended ~~September 30, 2017, FHN recognized $8.2 million~~March 31, 2020 and ~~$14.6 million, respectively,~~2019 are presented in the table below:



	Three Months Ended March 31
(Dollars in thousands)	2020			2019
Professional fees (a)	$	799		$	1,867
Employee compensation, incentives and benefits (b)	396			1,517
Contract employment and outsourcing (c)	306			—
Occupancy (d)	(25		)	118
Miscellaneous expense (e)	822			1,069
All other expense (f)	1,874			1,089
Total	$	4,172		$	5,660

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

(a) Primarily comprised of ~~acquisition~~fees for legal, accounting, and ~~integration-related~~merger consultants.

(b) Primarily comprised of fees for severance and retention.

(d) Primarily relates to expenses ~~primarily~~ associated with ~~the CBF~~lease exits.

(e) Consists of fees for operations services, communications and ~~Coastal acquisitions. These expenses were primarily included in Professional fees, Legal fees, Employee compensation, incentives~~courier, equipment rentals, deprecation and ~~benefits,~~maintenance, supplies, travel and ~~All~~entertainment, computer software, and advertising and public relations.

(f) Primarily relates to contract termination charges, internal technology development costs, costs of shareholder matters and asset impairments, as well as other ~~expense on the Consolidated Condensed Statements of Income.~~miscellaneous expenses.

On September 16, 2016, FTBNA acquired $537.4 million in unpaid principal balance (“UPB”) of restaurant franchise loans from GE Capital’s Southeast and Southwest regional portfolios. Subsequent to the acquisition the acquired loans were combined with existing FTBNA relationships to establish a franchise finance specialty banking business.

In addition to the transactions mentioned above, FHN acquires or divests assets from time to time in transactions that are considered business combinations or divestitures but are not material to FHN individually or in the aggregate. ~~The most recent transaction of that type closed in October 2017, when FTBNA~~In April 2019, FHN sold a subsidiary acquired the operations and certain assets of Professional Mortgage Company, Inc. ("PMC"). PMC is a provider of institutional debt capital and commercial mortgage loan servicing. Eleven professionals joined FTBNA's commercial real estate ("CRE") team

as ~~a result~~part of the ~~transaction, expanding~~CBF merger in 2017 that did not fit within FHN's risk profile. The sale resulted in the ~~capabilities~~removal of ~~its CRE platform.~~approximately $25 million UPB of subprime consumer loans from Loans held-for-sale on FHN's Consolidated Condensed Statements of Condition.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 17

Note 3 – Investment Securities

The following tables summarize FHN’s investment securities on ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~

2019:


	September 30, 2017									March 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	—		$	100	$	100	$	—	$	—		$	100
Government agency issued mortgage-backed securities (“MBS”)	2,081,677		15,993		(10,165		)	2,087,505		2,303,720		98,797		—			2,402,517
Government agency issued collateralized mortgage obligations (“CMO”)	1,701,467		4,295		(19,767		)	1,685,995		1,578,623		48,320		—			1,626,943
Equity and other (a)	186,413		2		—			186,415
Other U.S. government agencies										366,453		7,268		(1,224		)	372,497
Corporates and other debt										40,000		621		—			40,621
States and municipalities										74,578		4,572		(25		)	79,125
	$	3,969,657	$	20,290	$	(29,932	)	3,960,015		$	4,363,474	$	159,578	$	(1,249	)	4,521,803
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (b)								3,123
Total securities available-for-sale (c)								$	3,963,138
SBA-interest only strips (a)																	23,104
Total securities available-for-sale (b)																	$	4,544,907
Securities held-to-maturity:
Corporate bonds	$	10,000	$	—	$	(15	)	$	9,985
Corporates and other debt										$	10,000	$	—	$	(176	)	$	9,824
Total securities held-to-maturity	$	10,000	$	—	$	(15	)	$	9,985	$	10,000	$	—	$	(176	)	$	9,824


(a)	~~Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million. The remainder is money market, mutual funds, and cost method investments.~~


~~(b)~~	SBA-interest only strips are recorded at elected fair value. See Note 16 - Fair Value for additional information.


~~(c)~~(b)	Includes ~~$3.3~~$4.0 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


	December 31, 2016									December 31, 2019
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	—		$	100	$	100	$	—	$	—		$	100
Government agency issued MBS	2,217,593		14,960		(23,866		)	2,208,687		2,316,381		34,692		(2,556		)	2,348,517
Government agency issued CMO	1,566,986		4,909		(23,937		)	1,547,958		1,667,773		9,916		(7,197		)	1,670,492
Equity and other (a)	186,756		—		(2		)	186,754
Other U.S. government agencies										303,463		3,750		(1,121		)	306,092
Corporates and other debt										40,054		486		—			40,540
States and municipalities										57,232		3,324		(30		)	60,526
										$	4,385,003	$	52,168	$	(10,904	)	4,426,267
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (a)																	19,136
Total securities available-for-sale (b)	$	3,971,435	$	19,869	$	(47,805	)	$	3,943,499								$	4,445,403
Securities held-to-maturity:
States and municipalities	$	4,347	$	393	$	—		$	4,740
Corporate bonds	10,000		33		—			10,033
Corporates and other debt										$	10,000	$	1	$	—		$	10,001
Total securities held-to-maturity	$	14,347	$	426	$	—		$	14,773	$	10,000	$	1	$	—		$	10,001


(a)	~~Includes restricted investments in FHLB-Cincinnati stock~~SBA-interest only strips are recorded at elected fair value. See Note 16 - Fair Value of ~~$87.9 million~~Assets and ~~FRB stock of $68.6 million. The remainder is money market, mutual funds, and cost method investments.~~Liabilities for additional information.


(b)	Includes ~~$3.3~~$3.8 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 18

Table of Contents

Note 3 – Investment Securities (Continued)

The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturity debt securities portfolios on ~~September 30, 2017~~March 31, 2020 are provided below:


	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	—	$	—	$	—	$	—	$	54,958	$	55,730
After 1 year; within 5 years	—		—		100		120		—		—		189,021		195,624
After 5 years; within 10 years	10,000		9,985		—		1,464		10,000		9,824		3,581		8,480
After 10 years	—		—		—		1,639		—		—		233,571		255,613
Subtotal	10,000		9,985		100		3,223		10,000		9,824		481,131		515,447
Government agency issued MBS and CMO (a)	—		—		3,783,144		3,773,500		—		—		3,882,343		4,029,460
Equity and other	—		—		186,413		186,415
Total	$	10,000	$	9,985	$	3,969,657	$	3,963,138	$	10,000	$	9,824	$	4,363,474	$	4,544,907


(a)	Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The table below provides information on gross gains and gross losses from debt investment securities for the three ~~and nine~~ months ended ~~September 30:~~March 31, 2020 and 2019.


	Three Months Ended September 30					Nine Months Ended September 30					Three Months Ended March 31
(Dollars in thousands)	2017		2016			2017		2016			2020		2019
Gross gains on sales of securities	$	6	$	—		$	455	$	3,999		$	—	$	—
Gross (losses) on sales of securities	—		—			—		(2,326		)	—		—
Net gain/(loss) on sales of securities (a) (b)	6		—			455		1,673
Net OTTI recorded (c)	—		(200		)	—		(200		)
Total securities gain/(loss)	$	6	$	(200	)	$	455	$	1,473
Net gain/(loss) on sales of securities (a)											$	—	$	—

(a)

Cash proceeds ~~from the sale of available-for-sale securities for the three and nine months ended September 30, 2017 were not material. There were no cash proceeds from the sale of available-for-sale securities~~ for the three months ended ~~September 30, 2016. Cash proceeds from the sale of available-for-sale securities for the nine months ended September 30, 2016~~March 31, 2020 and 2019 were ~~$1.5 million and included a $1.7 million gain from an exchange of approximately $294 million of AFS debt securities.~~not material.


~~(b)~~	~~Nine months ended September 30, 2017 includes a $.4 million gain associated with the call of a $4.4 million held-to-maturity municipal bond.~~


~~(c)~~	~~OTTI recorded is related to equity securities.~~

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:



	As of March 31, 2020
	Less than 12 months					12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Other U.S. government agencies	$	88,334	$	(1,224	)	$	—	$	—	$	88,334	$	(1,224	)
States and municipalities	1,466		(25		)	—		—		1,466		(25		)
Total temporarily impaired securities	$	89,800	$	(1,249	)	$	—	$	—	$	89,800	$	(1,249	)



	As of December 31, 2019
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Government agency issued MBS	$	174,983	$	(495	)	$	192,755	$	(2,061	)	$	367,738	$	(2,556	)
Government agency issued CMO	378,815		(1,970		)	361,124		(5,227		)	739,939		(7,197		)
Other U.S. government agencies	98,471		(1,121		)	—		—			98,471		(1,121		)
States and municipalities	3,551		(30		)	—		—			3,551		(30		)
Total temporarily impaired securities	$	655,820	$	(3,616	)	$	553,979	$	(7,288	)	$	1,209,799	$	(10,904	)

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 19

As of September 30, 2017
Less than 12 months 12 months or longer Total
(Dollars in thousands)
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
Government agency issued CMO $ 885,926
$ (10,936 ) $ 311,471
$ (8,831 ) $ 1,197,397
$ (19,767 )
Government agency issued MBS 875,307
(8,770 ) 34,184
(1,395 ) 909,491
(10,165 )
Total temporarily impaired securities 1,761,233
(19,706 ) 345,655
(10,226 ) 2,106,888
(29,932 )

Table of Contents

Note 3 – Investment Securities (Continued)

As of December 31, 2016
Less than 12 months 12 months or longer Total
(Dollars in thousands)
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
Government agency issued CMO $ 1,059,471
$ (19,052 ) $ 116,527
$ (4,885 ) $ 1,175,998
$ (23,937 )
Government agency issued MBS 1,912,126
(23,866 ) —
—
1,912,126
(23,866 )
Total debt securities 2,971,597
(42,918 ) 116,527
(4,885 ) 3,088,124
(47,803 )
Equity 7
(2 ) —
—
7
(2 )
Total temporarily impaired securities $ 2,971,604
$ (42,920 ) $ 116,527
$ (4,885 ) $ 3,088,131
$ (47,805 )

For periods subsequent to 2019, FHN has ~~reviewed investment~~evaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for ~~OTTI and does~~recognition of credit losses. No AFS debt securities were determined to have credit losses because the primary cause of the decline in value was attributable to changes in interest rates. Total AIR not ~~consider them other-than-temporarily impaired. For~~included in the fair value or amortized cost basis of AFS debt securities was $12.3 million as of March 31, 2020. Consistent with its review of the related securities, there were no credit-related write downs of AIR for AFS debt securities during the reporting period. Additionally, for AFS debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. Therefore, no write downs of these investments to fair value occurred during the reporting period.

For periods prior to 2020, FHN reviewed debt investment securities that were in unrealized loss positions in accordance with its accounting policy for OTTI and did not consider them other-than-temporarily impaired.

For debt securities with unrealized losses, FHN did not intend to sell them and it is more-likely-than-not that FHN would not be required to sell them prior to recovery. The decline in value iswas primarily attributable to changes in interest rates and not credit losses. ~~For~~

The carrying amount of equity ~~securities, FHN has both~~investments without a readily determinable fair value was $25.9 million and $25.6 million at March 31, 2020 and December 31, 2019, respectively. The year-to-date 2020 and 2019 gross amounts of upward and downward valuation adjustments were not significant.

Unrealized losses of $5.7 million and unrealized gains of $3.4 million were recognized in the ~~ability~~three months ended March 31, 2020 and ~~intent to hold these securities~~2019, respectively, for ~~the time necessary to recover the amortized cost.~~equity investments with readily determinable fair values.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 20

Note 4 – Loans

The following table provides the balance (amortized cost basis) of loans, net of unearned income, by portfolio segment as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:



	March 31		December 31
(Dollars in thousands)	2020		2019
Commercial:
Commercial, financial, and industrial	$	22,124,430	$	20,051,091
Commercial real estate	4,639,692		4,337,017
Consumer:
Consumer real estate (a)	6,119,383		6,177,139
Credit card & other	494,798		495,864
Loans, net of unearned income	$	33,378,303	$	31,061,111
Allowance for loan losses	444,490		200,307
Total net loans	$	32,933,813	$	30,860,804

September 30 December 31
(Dollars in thousands) 2017 2016
Commercial:
Commercial, financial, and industrial $ 12,791,844
$ 12,148,087
Commercial real estate 2,251,015
2,135,523
Consumer:
Consumer real estate (a) 4,369,717
4,523,752
Permanent mortgage 403,082
423,125
Credit card & other 350,433
359,033
Loans, net of unearned income $ 20,166,091
$ 19,589,520
Allowance for loan losses 194,867
202,068
Total net loans $ 19,971,224
$ 19,387,452


(a)	~~Balances as of September 30, 2017 and December 31, 2016, include $26.2 million and $35.9 million of restricted real estate loans, respectively. See Note 13—Variable Interest Entities~~In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all prior periods were revised for ~~additional information.~~comparability.

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.~~estate ("CRE"). Commercial classes within C&I include general C&I, loans to mortgage companies ("LMC"), 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 (for periods prior to 2020). Loans to mortgage companies include 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.~~loans (for periods prior to 2020). Consumer loan portfolio segments include consumer real estate, ~~permanent mortgage,~~ and the credit card and other portfolio. Consumer classes include home equity lines of credit (“HELOCs”), real estate (“R/E”) installment and PCI loans (for periods prior to 2020) within the consumer real estate segment ~~permanent mortgage (which is both a segment and a class),~~ and credit card and other.

Credit Risk Characteristics Inherent in the Loan Portfolio

Credit risk is the risk of loss due to adverse changes in a borrower’s or counterparty’s ability to meet its financial obligations under agreed upon terms. FHN is subject to credit risk in lending, trading, investing, liquidity/funding, and asset management activities although lending activities have the most exposure to credit risk. The nature and

amount of credit risk depends on the types of transaction, the structure of those transactions, collateral received, the use of guarantors and the parties involved.

FHN assesses and manages credit risk through a series of policies, processes, measurement systems, and controls. FHN’s credit risk function ensures subject matter experts are providing oversight, support and credit approvals, particularly in the specialty lending areas where industry-specific knowledge is required. Management emphasizes general portfolio servicing such that emerging risks are able to be identified early enough to correct potential deficiencies, prevent further credit deterioration, and mitigate credit losses.

Commercial Loans

The C&I portfolio is comprised of loans used for general business purposes. Typical products including working capital lines of credit, term loan financing of owner-occupied real estate and fixed assets, and trade credit enhancement through letters of credit. FHN utilizes deal teams comprised of relationship managers (RMs), portfolio managers (PMs), credit analysts and other specialists to identify, mitigate, document, and manage ongoing risk. Their function includes enhanced analytical support during loan origination and servicing, monitoring the financial condition of the borrower, and tracking compliance with loan agreements. FHN strives to identify problem assets early through comprehensive policies and guidelines, targeted portfolio reviews, more frequent servicing on lower rated borrowers, and an emphasis on frequent grading.

To the extent a guarantor/sponsor is used to support a commercial lending decision, FHN analyzes capability to pay, factoring in, among other things, liquidity and direct/indirect cash flows. A strong, legally enforceable guaranty can mitigate the risk of default or loss, justify a less severe rating, and consequently reduce the level of allowance or charge-off that might otherwise be deemed appropriate.

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Loans to mortgage companies include 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. Approximately 90 percent of the loans to mortgage companies are collateralized with government guaranteed loans. The loans are of short duration with maturities less than one year.

TRUPS loans are long-term unsecured loans to bank and insurance-related businesses. TRUPS lending was originally extended as a form of “bridge” financing to participants in the pooled trust preferred securitization program offered primarily to smaller banking (generally less than $15 billion in total assets) and insurance institutions through FHN’s fixed income business. Origination of TRUPS lending ceased in early 2008. Individual TRUPS are regraded at least quarterly as part of FHN’s commercial loan review process.

Commercial Real Estate loans include financings for commercial construction and nonconstruction loans. The income-producing CRE class contains loans and draws on lines and letters of credit to commercial real estate developers for the construction and mini-permanent financing of income-producing real estate. The residential CRE class includes loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town homes and on a limited basis, for developing residential subdivisions. Active residential CRE lending is primarily focused in certain core markets with nearly all new originations made to “strategic” clients. FHN considers a “strategic” residential CRE borrower as a homebuilder who demonstrates the ability to withstand cyclical downturns, maintains active development and investment activities providing for regular financing opportunities, and is fundamentally sound as evidenced by a prudent loan structure, appropriate covenants and recourse, and capable and willing sponsors in markets with positive homebuilding and economic dynamics. The credit administration and ongoing monitoring of these portfolios consists of multiple internal control processes including stressing a borrower’s or project’s financial capacity utilizing numerous attributes such as interest rates, vacancy, and discount rates. Key information captured from the various portfolios is aggregated and utilized to assist with the assessment and adequacy of the ALLL and to steer portfolio management strategies.

Consumer Loans

The consumer real estate portfolio is primarily comprised of home equity lines and installment loans within FHN’s regional banking segment and jumbo mortgages and one-time-close (“OTC”) completed construction loans in FHN’s non-strategic segment that were originated through pre-2009 mortgage businesses. The corporate segment also includes loans that were previously included in off-balance sheet proprietary securitization trusts that were brought back into the loan portfolios at fair value through the

execution of cleanup calls due to the relatively small balances left in the securitization and should continue to run-off. Generally performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices. FHN obtains first lien performance information from third parties and through loss mitigation activities, and places a stand-alone second lien loan on nonaccrual if performance issues with the first lien are discovered.

FHN performs continuous HELOC account review processes in order to identify higher-risk home equity lines and initiate preventative and corrective actions. The reviews consider a number of account activity patterns and characteristics such as the number of times delinquent within recent periods, changes in credit bureaus score since origination, scored degradation, performance of the first lien, and account utilization. In accordance with FHN’s interpretation of regulatory guidance, FHN may block future draws on accounts in order to mitigate risk of loss to FHN.

The credit card and other portfolio is primarily comprised of automobile loans, credit card receivables, and other consumer-related credits.

As discussed in Note 1 - Summary of Significant Accounting Policies, the ALLL estimation process was revised on January 1, 2020 to reflect the adoption of ASU 2016-13. All information contained in the following disclosures reflects the application of requirements from the adoption of ASU 2016-13 for periods after 2019. Information for periods prior to 2020 has been retained with the content consistent with prior disclosures.

Concentrations

FHN has a concentration of residential real estate loans ~~(24 percent of total loans), the majority of which is in the consumer real estate segment (22~~(19 percent of total loans). Loans to finance and insurance companies total $2.8 billion ~~(22~~(13 percent of the C&I portfolio, or 148 percent of the total loans). FHN had loans to mortgage companies totaling ~~$2.0~~$5.7 billion ~~(15~~(26 percent of the C&I segment, or 1017 percent of total loans) as of ~~September 30, 2017.~~March 31, 2020. As a result, 3739 percent of the C&I segment is sensitive to impacts on the financial services industry.

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. This credit grading system is intended to identify and measure the credit quality of the loan portfolio by analyzing the migration of loans between grading categories. PD grades assigned through FHN’s risk rating process are used as a loan level input to inform probability of default forecasts under certain macroeconomic scenarios. Each PD grade corresponds to an estimated one-year default probability percentage; a PD 1 has the lowest expected default

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Note 4 – Loans (Continued)

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. Loan grading discipline is regularly reviewed internally by Credit

Assurance Services to determine if the process continues to result in accurate loan grading across the portfolio. FHN may utilize availability of guarantors/sponsors to support lending decisions during the credit underwriting process and when determining the assignment of internal loan grades. 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 amortized cost basis of the commercial loan portfolio by year of origination and credit quality indicator as of March 31, 2020:



	C&I
(Dollars in thousands)	2020		2019		2018		2017		2016		prior to 2016 (a)		LMC (b)		Revolving Loans		Revolving Loans converted to term loans (c)		Total
PD Grade:
1	$	27,293	$	100,359	$	125,095	$	81,397	$	112,175	$	117,965	$	—	$	156,041	$	223	$	720,548
2	33,244		239,750		95,269		81,542		176,068		112,586		—		108,408		51		846,918
3	15,083		165,433		52,645		96,725		65,932		119,415		1,028,798		219,037		14,042		1,777,110
4	144,129		318,374		155,173		140,516		158,705		149,248		958,145		372,890		277		2,397,457
5	149,048		604,067		306,849		161,921		127,011		228,347		927,946		507,991		14,230		3,027,410
6	187,540		713,579		244,128		241,828		107,498		201,660		1,740,304		801,860		16,485		4,254,882
7	270,190		903,326		395,680		167,749		91,881		156,238		806,853		794,174		447		3,586,538
8	224,670		626,348		217,091		178,183		33,476		115,727		140,372		495,002		7,096		2,037,965
9	128,773		332,262		92,720		91,648		60,522		93,750		68,707		419,388		2,055		1,289,825
10	65,206		128,169		113,744		56,088		60,659		53,920		25,023		191,883		996		695,688
11	29,742		95,269		65,404		64,494		75,508		52,240		—		109,709		3,618		495,984
12	25,376		36,918		46,792		41,370		19,248		28,881		17,766		114,052		1,112		331,515
13	18,233		32,564		12,153		11,247		84,321		39,710		—		63,993		383		262,604
14,15,16	35,268		22,351		51,983		26,586		17,414		14,493		—		124,557		7,242		299,894
Collectively evaluated for impairment	1,353,795		4,318,769		1,974,726		1,441,294		1,190,418		1,484,180		5,713,914		4,478,985		68,257		22,024,338
Individually evaluated for impairment	—		12,771		12,642		14,552		1,827		24,145		—		33,988		167		100,092
Total C&I loans	$	1,353,795	$	4,331,540	$	1,987,368	$	1,455,846	$	1,192,245	$	1,508,325	$	5,713,914	$	4,512,973	$	68,424	$	22,124,430


(a)	TRUPS loans were originated prior to 2016. Total balance of TRUPS as of March 31, 2020 is $215.4 million, with $3.3 million in PD 3, $42.4 million in PD 4, $84.5 million in PD 5, $27.3 million in PD 6, $7.4 million in PD 7, $31.9 million in PD 9, and $18.6 million in PD 10.


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


(c)	$14.1 million of C&I loans were converted from revolving to term in first quarter 2020.

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Note 4 – Loans (Continued)



	Income CRE
(Dollars in thousands)	2020		2019		2018		2017		2016		prior to 2016		Revolving Loans		Revolving Loans converted to term loans		Total
PD Grade:
1	$	22,307	$	—	$	398	$	—	$	130	$	1,102	$	—	$	—	$	23,937
2	445		30,859		651		333		1,211		2,410		—		—		35,909
3	62,707		207,828		78,203		75,629		65,898		29,466		68,770		188		588,689
4	65,474		287,116		98,370		122,518		75,032		63,680		934		3,234		716,358
5	192,596		296,099		160,253		233,104		114,572		35,705		36,944		10,729		1,080,002
6	81,162		215,741		143,419		143,142		34,758		133,573		33,021		195		785,011
7	122,282		224,637		140,601		85,853		19,369		35,968		36,633		2,432		667,775
8	15,635		76,102		54,998		15,421		29,382		50,736		6,239		132		248,645
9	25,288		29,485		23,192		27,916		4,169		39,457		38		—		149,545
10	15,437		15,563		7,260		3,805		8,973		17,006		—		150		68,194
11	1,696		19,007		11,372		22,561		3,931		16,481		128		—		75,176
12	—		15,050		2,445		697		554		10,877		71		232		29,926
13	418		9,672		913		2,185		223		1,325		138		—		14,874
14,15,16	7,021		19,536		45		30,449		129		3,635		20,384		—		81,199
Collectively evaluated for impairment	612,468		1,446,695		722,120		763,613		358,331		441,421		203,300		17,292		4,565,240
Individually evaluated for impairment	—		—		—		—		—		163		—		—		163
Total CRE-IP	$	612,468	$	1,446,695	$	722,120	$	763,613	$	358,331	$	441,584	$	203,300	$	17,292	$	4,565,403



	Residential CRE
(Dollars in thousands)	2020		2019		2018		2017		2016		prior to 2016		Revolving Loans		Revolving Loans converted to term loans		Total
PD Grade:
1	$	—	$	—	$	—	$	—	$	—	$	23	$	—	$	—	$	23
2	—		—		—		—		—		—		—		—		—
3	—		—		272		175		—		106		—		—		553
4	95		886		—		313		—		124		—		—		1,418
5	—		—		—		—		79		—		—		—		79
6	5,568		6,252		42		338		44		349		—		—		12,593
7	—		527		2,904		1,795		—		190		21,382		—		26,798
8	150		312		463		—		—		153		100		—		1,178
9	—		—		263		—		498		79		—		—		840
10	—		735		266		—		—		77		—		—		1,078
11	3,517		20,693		3,471		161		—		477		—		—		28,319
12	—		—		—		—		—		161		—		—		161
13	1,006		—		45		—		—		9		—		—		1,060
14,15,16	15		28		—		—		—		146		—		—		189
Collectively evaluated for impairment	10,351		29,433		7,726		2,782		621		1,894		21,482		—		74,289
Individually evaluated for impairment	—		—		—		—		—		—		—		—		—
Total CRE-RES	$	10,351	$	29,433	$	7,726	$	2,782	$	621	$	1,894	$	21,482	$	—	$	74,289

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The following table provides the balances of commercial loan portfolio classes with associated allowance, disaggregated by PD grade as of December 31, 2019.



	December 31, 2019
(Dollars in thousands)	General C&I		Loans to Mortgage Companies		TRUPS (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses
PD Grade:
1	$	696,040	$	—	$	—	$	1,848	$	—	$	697,888	3	%	$	69
2	767,048		—		—		48,906		38		815,992		4		165
3	743,123		877,210		3,314		474,067		806		2,098,520		9		274
4	1,237,772		692,971		46,375		680,223		477		2,657,818		11		738
5	1,986,761		670,402		72,512		993,628		1,700		3,725,003		15		8,265
6	2,511,290		1,410,387		27,263		717,062		17,027		4,683,029		19		12,054
7	2,708,707		509,616		18,378		641,345		30,925		3,908,971		16		20,409
8	1,743,364		136,771		—		269,407		16,699		2,166,241		9		22,514
9	1,101,873		77,139		31,909		169,586		13,007		1,393,514		6		17,484
10	563,635		21,229		18,536		59,592		2,153		665,145		3		10,197
11	495,140		—		—		81,682		2,302		579,124		2		13,454
12	262,906		15,158		—		28,807		1,074		307,945		1		8,471
13	232,823		—		—		32,966		1,126		266,915		1		8,142
14,15,16	263,076		—		—		43,400		626		307,102		1		29,318
Collectively evaluated for impairment	15,313,558		4,410,883		218,287		4,242,519		87,960		24,273,207		100		151,554
Individually evaluated for impairment	82,438		—		—		1,563		—		84,001		—		6,196
Purchased credit-impaired loans	25,925		—		—		4,155		820		30,900		—		848
Total commercial loans	$	15,421,921	$	4,410,883	$	218,287	$	4,248,237	$	88,780	$	24,388,108	100	%	$	158,598

(a) Balances presented net of a $19.1 million valuation allowance.

The consumer portfolio is comprised primarily of smaller-balance loans which are very similar in nature in that most are standard products and are backed by residential real estate. Because of the similarities of consumer loan-types, FHN is able to utilize the 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 consumer portfolio.

The following table reflects the amortized cost basis by year of origination and refreshed FICO scores for consumer real estate as of March 31, 2020. Within consumer real estate, classes include home equity line of credit ("HELOC") and real estate installment. HELOCs are loans which during their draw period are classified as revolving loans. Once the draw period ends and the loan enters its repayment period, the loan converts to a term loan and is classified as revolving loans converted to term loans. All loans classified in the following table as revolving loans or revolving loans converted to term loans are HELOCs. Real estate installment loans are originated as a fixed term loan and are classified below in their vintage year from prior to 2016 to 2020. All loans in the following table classified in a vintage year are real estate installment loans.

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	Consumer Real Estate
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans		Revolving Loans converted to term loans (a)		Total
FICO score 740 or greater	$	134,032	$	586,720	$	451,497	$	438,007	$	541,683	$	1,346,587	$	646,462	$	142,848	$	4,287,836
FICO score 720-739	25,129		80,851		50,344		42,134		78,632		135,173		75,392		31,629		519,284
FICO score 700-719	10,325		63,306		32,469		36,606		35,111		130,881		58,913		29,201		396,812
FICO score 660-699	27,489		54,870		38,198		33,127		45,329		175,873		80,018		54,440		509,344
FICO score 620-659	1,026		21,260		9,708		11,482		16,651		72,843		28,433		31,527		192,930
FICO score less than 620	339		12,792		9,706		11,477		12,671		91,003		26,318		48,871		213,177
Total	$	198,340	$	819,799	$	591,922	$	572,833	$	730,077	$	1,952,360	$	915,536	$	338,516	$	6,119,383

(a) $9.0 million of HELOC loans were converted from revolving to term in first quarter 2020.

The following table reflects the amortized cost basis by year of origination and refreshed FICO scores for other consumer loans as of March 31, 2020.



	Other Consumer
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior to 2016		Revolving Loans		Revolving Loans converted to term loans (a)		Total
FICO score 740 or greater	$	9,410	$	41,336	$	24,423	$	12,035	$	5,338	$	21,272	$	176,917	$	3,293	$	294,024
FICO score 720-739	1,509		6,235		3,799		1,911		1,054		2,954		36,173		709		54,344
FICO score 700-719	2,236		5,986		2,551		2,103		924		2,674		23,185		934		40,593
FICO score 660-699	3,219		8,803		4,355		3,221		1,524		4,041		32,282		1,700		59,145
FICO score 620-659	449		2,760		1,945		912		1,196		2,213		13,020		632		23,127
FICO score less than 620	279		1,458		1,190		752		3,034		4,573		10,781		1,498		23,565
Total	$	17,102	$	66,578	$	38,263	$	20,934	$	13,070	$	37,727	$	292,358	$	8,766	$	494,798

(a) $1.5 million of other consumer loans were converted from revolving to term in first quarter 2020.

The following table reflects the percentage of balances outstanding by average, refreshed FICO scores for the HELOC and real estate installment classes of loans as of December 31, 2019.



	December 31, 2019
(Dollars in thousands)	HELOC		R/E Installment Loans (b)
FICO score 740 or greater	62.0	%	71.9	%
FICO score 720-739	8.6		8.3
FICO score 700-719	7.6		6.3
FICO score 660-699	10.8		8.1
FICO score 620-659	4.7		2.8
FICO score less than 620 (a)	6.3		2.6
Total	100.0	%	100.0	%


(a)	For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loan have seasoned.


(b)	In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all prior periods were revised for comparability.

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Nonaccrual and Past Due Loans

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on a case-by-case basis if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans that FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy, and second liens, regardless of delinquency status, behind first liens that are 90 or more days past due, are bankruptcies, or are TDRs. Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status.

The following table reflects accruing and non-accruing loans by class on March 31, 2020:



	Accruing								Non-Accruing
(Dollars in thousands)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans
Commercial (C&I):
General C&I (a)	$	16,081,865	$	17,049	$	166	$	16,099,080	$	60,387	$	2,505	$	33,189	$	96,081	$	16,195,161
Loans to mortgage companies	5,713,914		—		—		5,713,914		—		—		—		—		5,713,914
TRUPS (b)	215,355		—		—		215,355		—		—		—		—		215,355
Total commercial (C&I)	22,011,134		17,049		166		22,028,349		60,387		2,505		33,189		96,081		22,124,430
Commercial real estate:
Income CRE	4,562,822		419		—		4,563,241		29		816		1,317		2,162		4,565,403
Residential CRE	74,222		39		—		74,261		—		28		—		28		74,289
Total commercial real estate	4,637,044		458		—		4,637,502		29		844		1,317		2,190		4,639,692
Consumer real estate:
HELOC	1,186,834		10,213		5,828		1,202,875		41,506		3,547		6,124		51,177		1,254,052
R/E installment loans	4,801,281		17,741		6,304		4,825,326		24,162		2,420		13,423		40,005		4,865,331
Total consumer real estate	5,988,115		27,954		12,132		6,028,201		65,668		5,967		19,547		91,182		6,119,383
Credit card & other:
Credit card	189,247		1,893		1,715		192,855		—		—		—		—		192,855
Other	300,308		1,144		131		301,583		153		38		169		360		301,943
Total credit card & other	489,555		3,037		1,846		494,438		153		38		169		360		494,798
Total loans, net of unearned income	$	33,125,848	$	48,498	$	14,144	$	33,188,490	$	126,237	$	9,354	$	54,222	$	189,813	$	33,378,303

(a) $36.1 million of general C&I loans are nonaccrual loans with no related allowance.

(b) TRUPS is presented net of the valuation allowance of $18.9 million.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 27

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Note 4 – Loans (Continued)

The following table reflects accruing and non-accruing loans by class on December 31, 2019:



	Accruing								Non-Accruing
(Dollars in thousands)	Current		30-89 Days Past Due		90+ Days Past Due		Total Accruing		Current		30-89 Days Past Due		90+ Days Past Due		Total Non- Accruing		Total Loans
Commercial (C&I):
General C&I	$	15,314,292	$	7,155	$	237	$	15,321,684	$	36,564	$	14,385	$	23,363	$	74,312	$	15,395,996
Loans to mortgage companies	4,410,883		—		—		4,410,883		—		—		—		—		4,410,883
TRUPS (a)	218,287		—		—		218,287		—		—		—		—		218,287
Purchased credit-impaired loans	23,840		287		1,798		25,925		—		—		—		—		25,925
Total commercial (C&I)	19,967,302		7,442		2,035		19,976,779		36,564		14,385		23,363		74,312		20,051,091
Commercial real estate:
Income CRE	4,242,044		679		—		4,242,723		—		19		1,340		1,359		4,244,082
Residential CRE	87,487		7		—		87,494		—		466		—		466		87,960
Purchased credit-impaired loans	4,752		128		95		4,975		—		—		—		—		4,975
Total commercial real estate	4,334,283		814		95		4,335,192		—		485		1,340		1,825		4,337,017
Consumer real estate:
HELOC	1,217,344		9,156		5,669		1,232,169		43,007		4,227		7,472		54,706		1,286,875
R/E installment loans (b)	4,812,446		12,894		9,170		4,834,510		20,710		1,076		9,202		30,988		4,865,498
Purchased credit-impaired loans	18,720		2,770		3,276		24,766		—		—		—		—		24,766
Total consumer real estate	6,048,510		24,820		18,115		6,091,445		63,717		5,303		16,674		85,694		6,177,139
Credit card & other:
Credit card	198,917		1,076		1,178		201,171		—		—		—		—		201,171
Other	291,700		1,802		337		293,839		101		44		189		334		294,173
Purchased credit-impaired loans	323		98		99		520		—		—		—		—		520
Total credit card & other	490,940		2,976		1,614		495,530		101		44		189		334		495,864
Total loans, net of unearned income	$	30,841,035	$	36,052	$	21,859	$	30,898,946	$	100,382	$	20,217	$	41,566	$	162,165	$	31,061,111

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


(a)	TRUPS is presented net of the valuation allowance of $19.1 million.


(b)	In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all prior periods were revised for comparability.

Troubled Debt Restructurings

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

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

for a new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR.

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 the former 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

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 28

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Note 4 – Loans (Continued)

points to a minimum of 1 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate generally returns to the original interest rate prior to modification; for certain modifications, the modified interest rate increases 2 percent per year until the original interest rate prior to modification is achieved. Prior to 2020, Consumer real estate mortgage TDRs (previously classified as permanent mortgage) were 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-to-income ratio. After 5 years, the interest rate stepped up 1 percent every year until it reached the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 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 March 31, 2020 and December 31, 2019, FHN had $194.7 million and $206.3 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $13.9 million, or 7 percent as of March 31, 2020, and $19.7 million, or 10 percent as of December 31, 2019. Additionally, $50.5 million and $51.1 million of loans held-for-sale as of March 31, 2020 and December 31, 2019, respectively, were classified as TDRs.

The following tables reflect portfolio loans that were classified as TDRs during the three months ended March 31, 2020 and 2019:



	March 31, 2020					March 31, 2019
(Dollars in thousands)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial (C&I):
General C&I	3	$	5,927	$	4,433	2	$	13,895	$	13,820
Total commercial (C&I)	3	5,927		4,433		2	13,895		13,820
Consumer real estate:
HELOC	8	912		891		19	2,104		2,084
R/E installment loans	10	1,511		1,497		47	7,425		7,413
Total consumer real estate	18	2,423		2,388		66	9,529		9,497
Credit card & other	24	158		146		15	74		71
Total troubled debt restructurings	45	$	8,508	$	6,967	83	$	23,498	$	23,388

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 29

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Note 4 – Loans (Continued)

The following tables present TDRs which re-defaulted during the three months ended March 31, 2020 and 2019, and as to which the modification occurred 12 months or less prior to the re-default. For purposes of this disclosure, FHN generally defines payment default as 30 or more days past due.



	March 31, 2020			March 31, 2019
(Dollars in thousands)	Number	Recorded Investment		Number	Recorded Investment
Commercial (C&I):
General C&I	—	$	—	—	$	—
Total commercial (C&I)	—	—		—	—
Consumer real estate:
HELOC	4	960		1	33
R/E installment loans	5	344		—	—
Total consumer real estate	9	1,304		1	33
Credit card & other	7	31		8	18
Total troubled debt restructurings	16	$	1,335	9	$	51

Accrued Interest

In accordance with its accounting policy elections, FHN has excluded AIR from the amortized cost basis of Loans, net of unearned income. AIR is included within Other assets in the Consolidated Condensed Statements of Condition and the amounts by portfolio segment are presented in the following table.



	March 31
(Dollars in thousands)	2020
Commercial:
Commercial, financial, and industrial	$	55,215
Commercial real estate	11,233
Consumer:
Consumer real estate	16,154
Credit card & other	1,672
Total accrued interest	$	84,274

Purchased Credit-Impaired Loans

The following table presents a rollforward of the accretable yield for the ~~three and nine months~~year ended ~~September 30, 2017 and 2016:~~

December 31, 2019:


	Three Months Ended September 30						Nine months ended September 30						Year Ended
(Dollars in thousands)	2017			2016			2017			2016			2019
Balance, beginning of period	$	4,045		$	6,171		$	6,871		$	8,542		$	13,375
Addition	—			2,883			—			2,883
Accretion	(642		)	(837		)	(2,412		)	(2,984		)	(5,792		)
Adjustment for payoffs	(198		)	(179		)	(1,232		)	(4,408		)	(2,438		)
Adjustment for charge-offs	—			—			—			(674		)	(479		)
Adjustment for pool excess recovery (a)	—			—			(222		)	—			—
Increase/(decrease) in accretable yield (b)	(2		)	686			112			5,398
Increase in accretable yield (b)													5,513
Disposals													(4		)
Other	—			—			86			(33		)	(367		)
Balance, end of period	$	3,203		$	8,724		$	3,203		$	8,724		$	9,808


(a)	Represents the removal of accretable difference for the remaining loans in a pool which is now in a recovery state.


(b)	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, 2017,~~December 31, 2019, the ALLL related to PCI loans was ~~$3.1 million compared to $.7 million at December 31, 2016. A loan loss provision expense~~$2.0 million. Net charge-offs related to PCI loans ~~of $2.6 million was recognized~~ during ~~the three months ended September 30, 2017, as compared to $.3 million recognized during the three months ended September 30, 2016.~~2019 were $5.8 million. The loan loss provision expense related to PCI loans during 2019 was $1.3 million.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 30

Table of ~~$2.4 million was recognized during the nine months ended September 30, 2017. The loan loss provision related to PCI loans was not material during the nine months ended September 30, 2016.~~Contents

Note 4 – Loans (Continued)

The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of ~~September 30, 2017 and~~ December 31, ~~2016:~~2019:



	December 31, 2019
(Dollars in thousands)	Carrying value		Unpaid balance
Commercial, financial and industrial	$	24,973	$	25,938
Commercial real estate	5,078		5,466
Consumer real estate	23,681		26,245
Credit card and other	489		567
Total	$	54,221	$	58,216

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value Unpaid balance Carrying value Unpaid balance
Commercial, financial and industrial $ 17,903
$ 21,239
$ 40,368
$ 41,608
Commercial real estate 3,842
4,933
4,763
6,514
Consumer real estate 940
1,259
1,172
1,677
Credit card and other —
—
52
64
Total $ 22,685
$ 27,431
$ 46,355
$ 49,863

~~Note 4 – Loans (Continued)~~

Impaired Loans

Note 13 – Variable Interest Entities

ASC 810 defines a VIE as a legal entity where (a) the equity investors, as a group, lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, (b) the equity investors, as a group, lack either, (1) the power through voting rights, or similar rights, to direct the activities of an entity that most significantly impact the entity’s economic performance, (2) the obligation to absorb the expected losses of the entity, or (3) the right to receive the expected residual returns of the entity, or (c) the entity is structured with non-substantive voting rights. A variable interest is a contractual ownership or other interest that fluctuates with changes in the fair value of the VIE’s net assets exclusive of variable interests. Under ASC 810, as amended, a primary beneficiary is required to consolidate a VIE when it has a variable interest in a VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant.

Consolidated Variable Interest Entities

FHN holds variable interests in a proprietary HELOC securitization trust it established as a source of liquidity for consumer lending operations. Based on its restrictive nature, the trust is considered a VIE as the holders of equity at risk do not have the power through voting rights or similar rights to direct the activities that most significantly impact the trust’s economic performance. The retention of mortgage service rights ("MSR") and a residual interest results in FHN potentially absorbing losses or receiving benefits that are significant to the trust. FHN is considered the primary beneficiary, as it is assumed to have the power, as Master Servicer, to most significantly impact the activities of the VIE. Consolidation of the trust results in the recognition of the trust proceeds as restricted borrowings since the cash flows on the securitized loans can only be used to settle the obligations due to the holders of trust securities. Through first quarter 2016 the trust experienced a rapid amortization period and FHN was obligated to provide subordinated funding. During the period, cash payments from borrowers were accumulated to repay outstanding debt securities while FHN continued to make advances to borrowers when they drew on their lines of credit. FHN then transferred the newly generated receivables into the securitization trust. FHN is reimbursed for these advances only after other parties in the securitization have received all of the cash flows to which they are entitled. If loan losses requiring draws on the related monoline insurers’ policies (which protect bondholders in the securitization) exceed a certain level, FHN may not receive reimbursement for all of the funds advanced to borrowers, as the senior bondholders and the monoline insurers typically have priority for repayment. Amounts funded from monoline insurance policies are considered restricted term borrowings in FHN’s Consolidated Condensed Statements of Condition. Except for recourse due to breaches of representations and warranties made by FHN in connection with the sale of the loans to the trust, the creditors of the trust hold no recourse to the assets of FHN.

FHN has established certain rabbi trusts related to deferred compensation plans offered to its employees. FHN contributes employee cash compensation deferrals to the trusts and directs the underlying investments made by the trusts. The assets of these trusts are available to FHN’s creditors only in the event that FHN becomes insolvent. These trusts are considered VIEs as there is no equity at risk in the trusts since FHN provided the equity interest to its employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities that most significantly impact the economic performance of the rabbi trusts through its ability to direct the underlying investments made by the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are significant to the trusts due to its right to receive any asset values in excess of liability payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi trust’s assets.

~~Note 13 – Variable Interest Entities (Continued)~~

The following table summarizes ~~VIEs~~the carrying value of assets and liabilities associated with rabbi trusts used for deferred compensation plans which are consolidated by FHN as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~

2019:




(Dollars in thousands)	March 31, 2020		December 31, 2019
Assets:
Other assets	$	82,904	$	91,873
Total assets	$	82,904	$	91,873
Liabilities:
Other liabilities	$	61,517	$	70,830
Total liabilities	$	61,517	$	70,830

September 30, 2017 December 31, 2016

On-Balance Sheet
Consumer Loan
Securitization

Rabbi Trusts Used for
Deferred Compensation
Plans

On-Balance Sheet
Consumer Loan
Securitization

Rabbi Trusts Used for
Deferred Compensation
Plans
(Dollars in thousands)
Carrying Value Carrying Value Carrying Value Carrying Value
Assets:
Cash and due from banks $ —
N/A
$ —
N/A
Loans, net of unearned income 26,210
N/A
35,873
N/A
Less: Allowance for loan losses —
N/A
587
N/A
Total net loans 26,210
N/A
35,286
N/A
Other assets 47
$ 77,997
283
$ 74,160
Total assets $ 26,257
$ 77,997
$ 35,569
$ 74,160
Liabilities:
Term borrowings $ 13,354
N/A
$ 23,126
N/A
Other liabilities 3
$ 58,785
3
$ 54,746
Total liabilities $ 13,357
$ 58,785
$ 23,129
$ 54,746

Nonconsolidated Variable Interest Entities

Low Income Housing Partnerships. First ~~Tennessee Housing Corporation (“FTHC”~~Horizon Community Investment Group, Inc. ("FHCIG"), a wholly-owned subsidiary of ~~FTBNA,~~First Horizon Bank, makes equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital and to support FHN’s community reinvestment initiatives. The activities of the limited partnerships include the identification, development, and operation of multi-family housing units that are leased to qualifying residential tenants generally within FHN’s primary geographic region. LIHTC partnerships are considered VIEs as ~~FTHC,~~FHCIG, the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the performance of the entity through

voting rights or similar rights. ~~FTHC~~FHCIG could absorb losses that are significant to the LIHTC partnerships as it has a risk of loss for its capital contributions and funding commitments to each partnership. The general partners are considered the primary beneficiaries as managerial functions give them the power to direct the activities that most significantly impact the entities’ economic performance and the managing members are exposed to all losses beyond ~~FTHC’s~~FHCIG’s initial capital contributions and funding commitments.

FHN accounts for all qualifying LIHTC investments under the proportional amortization method. Under this method an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense/

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Note 13 – Variable Interest Entities (Continued)

(benefit). LIHTC investments that do not qualify for the proportional amortization method are accounted for using the equity method. Expenses associated with these

investments were ~~not significant~~$.2 million and $.5 million for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~ 2019, respectively.

The following table summarizes the impact to the Provision/(benefit) for income taxes on the Consolidated Condensed Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, and ~~2016~~2019 for LIHTC investments accounted for under the proportional amortization method.



	Three Months Ended March 31
(Dollars in thousands)	2020			2019
Provision/(benefit) for income taxes:
Amortization of qualifying LIHTC investments	$	5,561		$	3,998
Low income housing tax credits	(4,598		)	(3,629		)
Other tax benefits related to qualifying LIHTC investments	(2,555		)	(1,610		)

Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars in thousands)

2017 2016 2017 2016
Provision/(benefit) for income taxes:
Amortization of qualifying LIHTC investments $ 3,774
$ 5,445
$ 8,414
$ 10,073
Low income housing tax credits (3,103 ) (2,615 ) (8,101 ) (7,672 )
Other tax benefits related to qualifying LIHTC investments (2,478 ) (6,131 ) (4,307 ) (8,310 )

~~Note 13 – Variable Interest Entities (Continued)~~

Other Tax Credit Investments. First Tennessee New Markets Corporation (“FTNMC”), a wholly-owned subsidiary of ~~FTBNA,~~First Horizon Bank, periodically makes equity investments through wholly-owned subsidiaries as a non-managing member in various limited liability companies (“LLCs”) that sponsor community development projects utilizing the New Market Tax Credit (“NMTC”) pursuant to Section 45 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital and to support FHN’s community reinvestment initiatives. The activities of the LLCs include providing investment capital for low-income communities within FHN’s primary geographic region. A portion of the funding of FTNMC’s investment in a NMTC LLC is obtained via a loan from an unrelated third-party that is typically a community development enterprise. The NMTC LLCs are considered VIEs as FTNMC, the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the performance of the entity through voting rights or similar rights. While FTNMC could absorb losses that are significant to the NMTC LLCs as it has a risk of loss for its initial capital contributions, the managing members are considered the primary beneficiaries as managerial functions give them the power to direct the activities that most significantly impact the NMTC LLCs’ economic performance and the managing members are exposed to all losses beyond FTNMC’s initial capital contributions.

~~FTHC~~FHCIG also makes equity investments as a limited partner or non-managing member in entities that receive Historic Tax Credits pursuant to Section 47 of the Internal Revenue Code. As of March 31, 2020 and December 31, 2019, there were no investments funded through loans from community development enterprises. The purpose of these entities is the rehabilitation of historic buildings with the tax credits provided to incent private investment in the historic cores of cities and towns. These entities are considered VIEs as ~~FTHC,~~FHCIG, the holder of the equity investment at risk, does

not have the ability to direct the activities that most significantly affect the performance of the entity through voting rights or similar rights. ~~FTHC~~FHCIG could absorb losses that are significant to the entities as it has a risk of loss for its capital contributions and funding commitments to each partnership. The managing members are considered the primary beneficiaries as managerial functions give them the power to direct the activities that most significantly impact the entities’ economic performance and the managing members are exposed to all losses beyond ~~FTHC’s~~FHCIG’s initial capital contributions and funding commitments.

Small Issuer Trust Preferred Holdings. ~~FTBNA~~First Horizon Bank holds variable interests in trusts which have issued mandatorily redeemable preferred capital securities (“trust preferreds”) for smaller banking and insurance enterprises. ~~FTBNA~~First Horizon Bank has no voting rights for the trusts’ activities. The trusts’ only assets are junior subordinated debentures of the issuing enterprises. The creditors of the trusts hold no recourse to the assets of ~~FTBNA.~~First Horizon Bank. These trusts meet the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the trusts’ economic performance. Based on the nature of the trusts’ activities and the size of ~~FTBNA’s~~First Horizon Bank’s holdings, ~~FTBNA~~First Horizon Bank could potentially receive benefits or absorb losses that are significant to the trusts regardless of whether a majority of a trust’s securities are held by ~~FTBNA.~~First Horizon Bank. However, since ~~FTBNA~~First Horizon Bank is solely a holder of the trusts’ securities, it has no rights which would give it the power to direct the activities that most significantly impact the trusts’ economic performance and thus it is not considered the primary beneficiary of the trusts. ~~FTBNA~~First Horizon Bank has no contractual requirements to provide financial support to the trusts.

On-Balance Sheet Trust Preferred Securitization. In 2007, ~~FTBNA~~First Horizon Bank executed a securitization of certain small issuer trust preferreds for which the

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Note 13 – Variable Interest Entities (Continued)

underlying trust meets the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entity’s economic performance. ~~FTBNA~~First Horizon Bank could potentially receive benefits or absorb losses that are significant to the trust based on the size and priority of the interests it retained in the securities issued by the trust. However, since ~~FTBNA~~First Horizon Bank did not retain servicing or other decision making rights, ~~FTBNA~~First Horizon Bank is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the trust’s economic performance. Accordingly, ~~FTBNA~~First Horizon Bank has accounted for the funds received through the securitization as a term borrowing in its Consolidated Condensed Statements of Condition. ~~FTBNA~~First Horizon Bank has no contractual requirements to provide financial support to the trust.

Proprietary Residential Mortgage Securitizations. FHN holds variable interests (primarily principal-only strips) in proprietary residential mortgage securitization trusts it established prior to 2008 as a source of liquidity for its mortgage banking operations. ~~Prior to fourth quarter 2016 these interests included MSR and interest-only strips.~~ Except for recourse due to breaches of representations and warranties made by FHN in connection with the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts. Based on their restrictive nature, the trusts are considered VIEs as the holders of equity at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the trusts’ economic performance. ~~While it held MSR, FHN was assumed to have the power as servicer to most significantly impact the activities of such VIEs.~~ However, ~~in situations where~~ FHN did not have the ability to participate in significant portions of a securitization trust’s cash flows and FHN was not considered the primary beneficiary of the trust. Therefore, these trusts were not consolidated by FHN.

~~Note 13 – Variable Interest Entities (Continued)~~

Holdings in Agency Mortgage-Backed Securities. FHN holds securities issued by various Agency securitization trusts. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities’ economic performance. FHN could potentially receive benefits or absorb losses that are significant to the trusts based on the nature of the trusts’ activities and the size of FHN’s holdings. However, FHN is solely a holder of the trusts’ securities and does not have the power to direct the activities that most significantly impact the trusts’ economic performance, and is not considered the primary beneficiary of the trusts. FHN has no contractual requirements to provide financial support to the trusts.

Commercial Loan Troubled Debt Restructurings. For certain troubled commercial loans, ~~FTBNA~~ First Horizon Bank

restructures the terms of the borrower’s debt in an effort to increase the probability of receipt of amounts contractually due. Following a troubled debt restructuring, the borrower entity typically meets the definition of a VIE as the initial determination of whether an entity is a VIE must be reconsidered as events have proven that the entity’s equity is not sufficient to permit it to finance its activities without additional subordinated financial support or a restructuring of the terms of its financing.

As ~~FTBNA~~First Horizon Bank does not have the power to direct the activities that most significantly impact such troubled commercial borrowers’ operations, it is not considered the primary beneficiary even in situations where, based on the size of the financing provided, ~~FTBNA~~First Horizon Bank is exposed to potentially significant benefits and losses of the borrowing entity. ~~FTBNA~~First Horizon Bank has no contractual requirements to provide financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt that allows for preparation of the underlying collateral for sale.

Sale Leaseback Transaction. ~~FTB~~First Horizon Bank has entered into an agreement with a single asset leasing entity for the sale and leaseback of an office building. In conjunction with this transaction, ~~FTB~~First Horizon Bank loaned funds to a related party of the buyer that were used for the purchase price of the building. ~~FTB~~First Horizon Bank also entered into a construction loan agreement with the single asset entity for renovation of the building. Since this transaction did not qualify as a sale prior to 2019, it ~~is being~~was accounted for using the deposit method which ~~creates~~created a net asset or liability for all cash flows between ~~FTB~~First Horizon Bank and the buyer. Upon adoption of ASU 2016-02 the transaction qualified as a seller-financed sale-leaseback. The buyer-lessor in this transaction meets the definition of a VIE as it does not have sufficient equity at risk since ~~FTB~~First Horizon Bank is providing the funding for the purchase and renovation. A related party of the buyer-lessor has the power to direct the activities that most significantly impact the operations and could potentially receive benefits or absorb losses that are significant to the transactions, making it the primary beneficiary. Therefore, ~~FTB~~First Horizon Bank does not consolidate the leasing entity.

Proprietary Trust Preferred Issuances. In conjunction with the acquisition of CBF, FHN acquired junior subordinated debt underlying multiple issuances of trust preferred debt by institutions previously acquired by CBF. All of the remaining trusts are considered VIEs because the ownership interests from the capital contributions to these trusts are not considered “at risk” in evaluating whether the holders of the equity investments at risk in the trusts have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities’ economic performance. Thus, FHN cannot be the trusts’ primary beneficiary because its ownership interests in the trusts are not considered variable interests as they are not

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 49

Table of Contents

Note 13 – Variable Interest Entities (Continued)

considered “at risk”. Consequently, none of the trusts are consolidated by FHN.

The following table summarizes FHN’s nonconsolidated VIEs as of ~~September 30, 2017:~~

March 31, 2020:


(Dollars in thousands)	Maximum Loss Exposure		Liability Recognized		Classification	Maximum Loss Exposure		Liability Recognized		Classification
Type
Low income housing partnerships	$	96,007	$	34,236	(a)	$	241,435	$	123,720	(a)
Other tax credit investments (b) (c)	20,444		—		Other assets
Other tax credit investments (b)						6,161		—		Other assets
Small issuer trust preferred holdings ~~(d)~~(c)	332,873		—		Loans, net of unearned income	234,214		—		Loans, net of unearned income
On-balance sheet trust preferred securitization	48,902		65,272		(e)	32,261		81,912		(d)
Proprietary residential mortgage securitizations	2,300		—		Trading securities	785		—		Trading securities
Holdings of agency mortgage-backed securities ~~(d)~~(c)	4,173,080		—		(f)	5,126,372		—		(e)
Commercial loan troubled debt restructurings ~~(g)~~(f)	21,763		—		Loans, net of unearned income	42,109		—		Loans, net of unearned income
Sale-leaseback transaction	14,827		—		(h)	18,052		—		(g)
Proprietary trust preferred issuances (h)						—		167,014		Term borrowings

(a)

Maximum loss exposure represents ~~$61.8~~$117.7 million of current investments and ~~$34.2~~$123.7 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future funding events, and are also recognized in Other liabilities. FHN currently expects to be required to fund these accrued commitments by the end of ~~2020.~~2023.


(b)	A liability is not recognized as investments are written down over the life of the related tax credit. Maximum loss exposure represents the value of current investments.


(c)	Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities.


(d)	Includes $112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by $81.9 million classified as Term borrowings.


(e)	Includes $1.1 billion classified as Trading securities and $4.0 billion classified as Securities available-for-sale.


(f)	Maximum loss exposure represents $41.6 million of current receivables and $.5 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.


(g)	Maximum loss exposure represents the current loan balance plus additional funding commitments.


(h)	No exposure to loss due to nature of FHN's involvement.

The following table summarizes FHN’s nonconsolidated VIEs as of December 31, 2019:



(Dollars in thousands)	Maximum Loss Exposure		Liability Recognized		Classification
Type
Low income housing partnerships	$	237,668	$	136,404	(a)
Other tax credit investments (b) (c)	6,282		—		Other assets
Small issuer trust preferred holdings (d)	238,397		—		Loans, net of unearned income
On-balance sheet trust preferred securitization	33,265		80,908		(e)
Proprietary residential mortgage securitizations	941		—		Trading securities
Holdings of agency mortgage-backed securities (d)	4,537,685		—		(f)
Commercial loan troubled debt restructurings (g)	45,169		—		Loans, net of unearned income
Sale-leaseback transaction	18,111		—		(h)
Proprietary trust preferred issuances (i)	—		167,014		Term borrowings


(a)	Maximum loss exposure represents $101.3 million of current investments and $136.4 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future funding events, and are also recognized in Other liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2023.


(b)	A liability is not recognized as investments are written down over the life of the related tax credit.


(c)	Maximum loss exposure represents current investment balance. ~~Of the initial investment, $18.0 million was~~As of December 31, 2019, there were no investments funded through loans from community development enterprises.


(d)	Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities.


(e)	Includes $112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by ~~$65.3~~$80.9 million classified as Term borrowings.


(f)	Includes ~~$.4~~$.5 billion classified as Trading securities and ~~$3.8~~$4.0 billion classified as Securities available-for-sale.


(g)	Maximum loss exposure represents ~~$21.1~~$43.4 million of current receivables and ~~$.6~~$1.8 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.


(h)	Maximum loss exposure represents the current loan balance plus additional funding commitments less amounts received from the buyer-lessor.

~~The following table summarizes FHN’s nonconsolidated VIEs as of December 31, 2016:~~

(Dollars in thousands)
Maximum
Loss Exposure

Liability
Recognized
Classification
Type

Low income housing partnerships $ 73,582
$ 17,398
(a)
Other tax credit investments (b) (c) 21,898
—
Other assets
Small issuer trust preferred holdings (d) 332,985
—
Loans, net of unearned income
On-balance sheet trust preferred securitization 49,361
64,812
(e)
Proprietary residential mortgage securitizations 2,568
—
Trading securities
Holdings of agency mortgage-backed securities (d) 4,163,313
—
(f)
Commercial loan troubled debt restructurings (g) 42,696
—
Loans, net of unearned income
Sale-leaseback transaction 11,827
—
(h)

~~(a)~~(i)

~~Maximum~~No exposure to loss ~~exposure represents $56.2 million~~due to nature of current investments and $17.4 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future funding events, and are also recognized in Other liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2017.FHN's involvement.


~~(b)~~	~~A liability is not recognized as investments are written down over the life of the related tax credit.~~


~~(c)~~	~~Maximum loss exposure represents current investment balance. Of the initial investment, $18.0 million was funded through loans from community development enterprises.~~


~~(d)~~	~~Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities.~~


~~(e)~~	~~Includes $112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by $64.8 million classified as Term borrowings.~~


~~(f)~~	~~Includes $.4 billion classified as Trading securities and $3.8 billion classified as Securities available-for-sale.~~


~~(g)~~	Maximum loss exposure represents $37.5 million of current receivables and $5.2 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.


~~(h)~~	~~Maximum loss exposure represents the current loan balance plus additional funding commitments less amounts received from the buyer-lessor.~~

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 50

Note 14 – Derivatives

In the normal course of business, FHN utilizes various financial instruments (including derivative contracts and credit-related agreements) through its fixed income and risk management operations, as part of its risk management strategy and as a means to meet customers’ needs. Derivative instruments are subject to credit and market risks in excess of the amount recorded on the balance sheet as required by GAAP. The contractual or notional amounts of these financial instruments do not necessarily represent the amount of credit or market risk. However, they can be used to measure the extent of involvement in various types of financial instruments. Controls and monitoring procedures for these instruments have been established and are routinely reevaluated. The Asset/Liability Committee (“ALCO”) controls, coordinates, and monitors the usage and effectiveness of these financial instruments.

Credit risk represents the potential loss that may occur if a party to a transaction fails to perform according to the terms of the contract. The measure of credit exposure is the replacement cost of contracts with a positive fair value. FHN manages credit risk by entering into financial instrument transactions through national exchanges, primary dealers or approved counterparties, and by using mutual margining and master netting agreements whenever possible to limit potential exposure. FHN also maintains collateral posting requirements with certain counterparties to limit credit risk. ~~Commencing in first quarter 2017, a central clearinghouse revised the treatment of daily~~Daily margin posted or received ~~from collateral to~~with central clearinghouses is considered a legal ~~settlements~~settlement of the related derivative ~~contracts. This change resulted~~contracts which results in a ~~reduction in derivative assets and liabilities and corresponding reductions in collateral posted and received as these amounts are now presented~~ net bypresentation for each contract in the Consolidated Condensed Statements of Condition. ~~This change~~Treatment of daily margin as a settlement has no effect on hedge accounting or gains/losses for the applicable derivative contracts. On ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively, FHN had ~~$34.5~~$214.4 million and ~~$47.8~~$136.6 million of cash receivables and ~~$28.2~~$160.7 million and ~~$32.8~~$53.0 million of cash payables related to collateral posting under master netting arrangements, inclusive of collateral posted related to contracts with adjustable collateral posting thresholds and over-collateralized positions, with derivative counterparties. With exchange-traded contracts, the credit risk is limited to the clearinghouse used. For non-exchange traded instruments, credit risk may occur when there is a gain in the fair value of the financial instrument and the counterparty fails to perform according to the terms of the contract and/or when the collateral proves to be of insufficient value. See additional discussion regarding master netting agreements and collateral posting requirements later in this note under the heading “Master Netting and Similar Agreements.” Market risk represents the potential loss due to the decrease in the value of a financial instrument caused primarily by changes in interest rates or the prices of debt instruments. FHN manages market risk by establishing and monitoring limits on the types and degree of risk that may be undertaken.

FHN continually measures this risk through the use of models that measure value-at-risk and earnings-at-risk.

Derivative Instruments. FHN enters into various derivative contracts both ~~in a dealer capacity~~ to facilitate customer transactions and as a risk management tool. Where contracts have been created for customers, FHN enters into upstream transactions with dealers to offset its risk exposure. Contracts with dealers that require central clearing are novated to a clearing agent who becomes FHN’s counterparty. Derivatives are also used as a risk management tool to hedge FHN’s exposure to changes in interest rates or other defined market risks.

Forward contracts are over-the-counter contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Futures contracts are exchange-traded contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Interest rate option contracts give the purchaser the right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a specified price, during a specified period of time. Caps and floors are options that are linked to a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve the exchange of interest payments at specified intervals between two parties without the exchange of any underlying principal. Swaptions are options on interest rate swaps that give the purchaser the right, but not the obligation, to enter into an interest rate swap agreement during a specified period of time.

Trading Activities

FHN’s fixed income segment trades U.S. Treasury, U.S. Agency, government-guaranteed loan, mortgage-backed, corporate and municipal fixed income securities, and other securities for distribution to customers. When these securities settle on a delayed basis, they are considered forward contracts. Fixed income also enters into interest rate contracts, including caps, swaps, and floors, for its customers. In addition, fixed income enters into futures and option contracts to economically hedge interest rate risk associated with a portion of its securities inventory. These transactions are measured at fair value, with changes in fair value recognized currently in fixed income noninterest income. Related assets and liabilities are recorded on the Consolidated Condensed Statements of Condition as Derivative assets and Derivative liabilities. The ~~FTN~~FHN Financial Risk Committee and the Credit Risk Management Committee collaborate to mitigate credit risk related to these transactions. Credit risk is controlled

~~Note 14 – Derivatives (Continued)~~

through credit approvals, risk control limits, and ongoing monitoring procedures. Total trading revenues were ~~$45.0~~$78.4 million and ~~$59.0~~$44.5 million for the three months ended ~~September 30, 2017~~

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 51

Table of Contents

Note 14 – Derivatives (Continued)

March 31, 2020 and ~~2016, respectively, and $133.3 million and $185.9 million for the nine months ended September 30, 2017 and 2016,~~2019, respectively. Trading revenues are inclusive of both derivative and non-derivative financial instruments, and are included in ~~fixed~~Fixed income

noninterest ~~income.~~income on the Consolidated Condensed Statements of Income.

The following tables summarize FHN’s derivatives associated with fixed income trading activities as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:

September 30, 2017
(Dollars in thousands) Notional Assets Liabilities
Customer Interest Rate Contracts $ 1,954,439
$ 30,564
$ 12,256
Offsetting Upstream Interest Rate Contracts 1,954,439
12,119
28,012
Option Contracts Purchased 40,000
69
—
Forwards and Futures Purchased 4,506,883
3,648
5,296
Forwards and Futures Sold 4,499,160
6,355
2,331



	March 31, 2020
(Dollars in thousands)	Notional		Assets		Liabilities
Customer interest rate contracts	$	3,395,932	$	232,886	$	1,509
Offsetting upstream interest rate contracts	3,395,932		8,822		16,735
Forwards and futures purchased	8,641,017		156,687		8,508
Forwards and futures sold	9,435,099		8,829		163,096



	December 31, 2019
(Dollars in thousands)	Notional		Assets		Liabilities
Customer interest rate contracts	$	2,697,522	$	65,768	$	6,858
Offsetting upstream interest rate contracts	2,697,522		2,583		3,994
Option contracts purchased	40,000		131		—
Forwards and futures purchased	9,217,350		17,029		3,187
Forwards and futures sold	9,403,112		3,611		16,620

December 31, 2016
(Dollars in thousands) Notional Assets Liabilities
Customer Interest Rate Contracts $ 1,697,992
$ 39,495
$ 14,996
Offsetting Upstream Interest Rate Contracts 1,697,992
14,996
39,495
Option Contracts Purchased 17,500
63
—
Option Contracts Written 5,000
—
8
Forwards and Futures Purchased 2,916,750
6,257
26,659
Forwards and Futures Sold 3,085,396
27,330
6,615

Interest Rate Risk Management

FHN’s ALCO focuses on managing market risk by controlling and limiting earnings volatility attributable to changes in interest rates. Interest rate risk exists to the extent that interest-earning assets and interest-bearing liabilities have different maturity or repricing characteristics. FHN uses derivatives, primarily swaps, that are designed to moderate the impact on earnings as interest rates change. Interest paid or received for swaps utilized by FHN to hedge the fair value of long term debt is recognized as an adjustment of the interest expense of the liabilities whose risk is being managed. FHN’s interest rate risk management policy is to use derivatives to hedge interest rate risk or market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain interest rate swaps and caps as a part of a product offering to commercial customers that includes customer derivatives paired with upstream offsetting market instruments that, when completed, are designed to mitigate interest rate risk.

These contracts do not qualify for hedge accounting and are measured at fair value with gains or losses included in

current earnings in Noninterest expense on the Consolidated Condensed Statements of Income.

FHN ~~has~~ designated a derivative transaction in a hedging strategy to manage interest rate risk on $400.0 million of senior debt issued by ~~FTBNA which matures~~First Horizon Bank prior to its maturity in December 2019. This ~~qualifies~~qualified for hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating, receive fixed interest rate swap to hedge the interest rate risk of the senior debt. ~~The balance sheet impact of this swap was $.2~~First Horizon Bank early redeemed the $400.0 million ~~in Derivative liabilities as of September 30, 2017 and $1.6 million in Derivative assets as of December 31, 2016. There was an insignificant level of ineffectiveness related to this hedge.~~senior debt on November 1, 2019.

FHN has designated a derivative transaction in a hedging strategy to manage interest rate risk on $500.0 million of senior debt which matures in December 2020. This qualifies for hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating, receive fixed interest rate swap to hedge the interest rate risk of the senior debt. The balance sheet impact of this swap was $.6 million and $7.3 million in Derivative liabilities as of September 30, 2017 and December 31, 2016, respectively. There was an insignificant level of ineffectiveness related to this hedge.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 52

Table of Contents

Note 14 – Derivatives (Continued)

The following tables summarize FHN’s derivatives associated with interest rate risk management activities as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:


	September 30, 2017							March 31, 2020
(Dollars in thousands)	Notional		Assets		Liabilities			Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer Interest Rate Contracts	$	1,540,036	$	16,607	$	12,675
Offsetting Upstream Interest Rate Contracts	1,540,036		11,612		15,350
Customer interest rate contracts								$	3,433,278	$	282,434	$	503
Offsetting upstream interest rate contracts								3,433,278		5,750		23,066
Debt Hedging
Hedging Instruments:
Interest Rate Swaps	$	900,000	N/A		$	779
Interest rate swaps								$	500,000	$	61	N/A
Hedged Items:
Term Borrowings	N/A		N/A		$	900,000	(a)
Term borrowings:
Par								N/A		N/A		$	500,000
Cumulative fair value hedging adjustments								N/A		N/A		2,862
Unamortized premium/(discount) and issuance costs								N/A		N/A		(519		)
Total carrying value								N/A		N/A		$	502,343



	December 31, 2019
(Dollars in thousands)	Notional		Assets		Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts	$	3,044,067	$	90,394	$	3,515
Offsetting upstream interest rate contracts	3,044,067		3,537		9,735
Debt Hedging
Hedging Instruments:
Interest rate swaps	$	500,000	N/A		$	69
Hedged Items:
Term borrowings:
Par	N/A		N/A		$	500,000
Cumulative fair value hedging adjustments	N/A		N/A		(1,604		)
Unamortized premium/(discount) and issuance costs	N/A		N/A		(740		)
Total carrying value	N/A		N/A		$	497,656

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 53

Table of Contents

Note 14 – Derivatives (Continued)

December 31, 2016
(Dollars in thousands) Notional Assets Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:

Customer Interest Rate Contracts $ 1,357,920
$ 17,566
$ 14,277

Offsetting Upstream Interest Rate Contracts 1,357,920
14,277
18,066

Debt Hedging
Hedging Instruments:
Interest Rate Swaps $ 900,000
$ 1,628
$ 7,276

Hedged Items:
Term Borrowings N/A
N/A
$ 900,000
(a)


~~(a)~~	~~Represents par value of term borrowings being hedged.~~

The following table summarizes gains/(losses) on FHN’s derivatives associated with interest rate risk management activities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~

2019:


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
		2017			2016			2017			2016				2020			2019
(Dollars in thousands)		Gains/(Losses)			Gains/(Losses)			Gains/(Losses)			Gains/(Losses)				Gains/(Losses)			Gains/(Losses)
Customer Interest Rate Contracts Hedging	Customer Interest Rate Contracts Hedging													Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer Interest Rate Contracts (a)		$	(180	)	$	(1,964	)	643			18,749
Offsetting Upstream Interest Rate Contracts (a)		180			1,964			(643		)	(18,749		)
Customer interest rate contracts (a)															$	195,552		$	29,112
Offsetting upstream interest rate contracts (a)															(195,552		)	(29,112		)
Debt Hedging
Hedging Instruments:
Interest Rate Swaps (a)		$	(966	)	$	(7,254	)	$	(1,958	)	$	19,352
Interest rate swaps (b)															$	4,934		$	4,279
Hedged Items:
Term Borrowings (a) (b)		941			7,152			1,870			(19,059		)
Term borrowings (a) (c)															(4,465		)	(4,266		)


(a)	Gains/losses included in ~~the~~ All other expense ~~section of~~within the Consolidated Condensed Statements of Income.


(b)	Gains/losses included in the Interest expense.


(c)	Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.

~~Note 14 – Derivatives (Continued)~~


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Note 18 – Other Events

In April 2020, First Horizon Bank issued $450 million of 5.750% Subordinated Notes due May 1, 2030. Interest payments are due semi-annually on May 1 and November 1, commencing November 1, 2020. The sale of the Notes resulted in net proceeds to the Company of approximately $446 million.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 76

---------------------------

ITEM 2. MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATION

---------------------------

TABLE OF ITEM 2 TOPICS

FIRST HORIZON NATIONAL ~~CORPORATION~~CORP. 1Q20 FORM 10-Q REPORT 77

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~

~~CONDITION AND RESULTS OF OPERATIONS~~

~~GENERAL INFORMATION~~



General Information

First Horizon National Corporation (“FHN”) began as a community bank chartered in ~~1864~~1864. FHN's sole class of common stock, $.625 par value, is listed and astrades on the New York Stock Exchange LLC under the symbol FHN.

FHN is the parent company of ~~September 30, 2017, was one~~First Horizon Bank. First Horizon Bank's principal divisions and subsidiaries operate under the brands of First Horizon Bank, First Horizon Advisors, and FHN Financial. FHN offers regional banking, wealth management and capital market services through the ~~40 largest publicly traded banking organizations in the United States in terms~~First Horizon family of ~~asset size.~~

~~FHN’s two major brands—~~companies. First ~~Tennessee~~Horizon Bank and ~~FTN Financial—provide customers with a broad range of products and services.~~ First ~~Tennessee ("FTBNA" or the "Bank") provides~~Horizon Advisors provide consumer and commercial banking ~~services throughout Tennessee~~ and ~~other selected markets~~wealth management services. FHN Financial, which operates partly through a division of First Horizon Bank and ~~is the largest bank headquartered in the state of Tennessee. FTN Financial (“FTNF”)~~partly through subsidiaries, is an industry leader in fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad. First Horizon Bank has over 270 banking offices in seven southeastern U.S. states, and FHN Financial has 29 offices in 18 states across the U.S.

Segments

FHN is composed of the following operating segments:

Regional banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial customers primarily in ~~Tennessee~~the southeast U.S. and other selected markets. Regional banking also provides investments, wealth management, financial planning, trust services and asset management, mortgage banking, credit card, and cash management. Additionally, the regional banking segment includes correspondent banking which provides credit, depository, and other banking related services to other financial institutions nationally.

Fixed income segment consists of fixed income securities sales, trading, underwriting, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory services, and derivative sales.

Corporate segment consists of unallocated corporate expenses, expense on subordinated debt issuances, bank-owned life insurance, unallocated interest income associated with excess equity, net impact of raising incremental capital, revenue and expense associated with deferred compensation plans, funds management, tax credit investment activities, derivative valuation adjustments related to prior sales of Visa Class B shares, ~~loss~~gain/(loss) on extinguishment of debt, ~~and acquisition~~acquisition- and integration-related ~~costs.~~costs, expenses associated with

rebranding initiatives, and various charges related to restructuring, repositioning, and efficiency efforts.

Non-strategic segment consists of ~~the wind-down national~~run-off consumer lending activities, ~~legacy~~pre-2009 mortgage banking elements, ~~including servicing fees,~~ and the associated ancillary revenues and expenses related to these businesses. Non-strategic also includes the wind-down trust preferred loan portfolio and exited businesses.

In October 2017, FTBNA acquired the operations and certain assets of Professional Mortgage Company, Inc. ("PMC"). PMC is a provider of institutional debt capital and commercial mortgage loan servicing. Eleven professionals joined FTBNA's commercial real estate ("CRE") team as a result of the transaction, expanding the capabilities of its CRE platform.

Significant Pending Transactions

On ~~May~~November 4, ~~2017,~~2019, FHN and ~~Capital Bank Financial Corp. (“Capital Bank" or "CBF”~~IBERIABANK Corporation ("IBKC") announced that they had entered into an agreement and plan of merger under which IBKC will merge with FHN ~~will acquire Capital Bank, which is~~in a merger-of-equals transaction. IBKC, headquartered in ~~Charlotte, North Carolina. Capital Bank~~Lafayette, Louisiana, has 319 offices in 12 states, mostly in the southern and southeastern U.S., and has reported ~~approximately $10~~$32.2 billion of total assets, $24.5 billion in loans, and $25.5 billion in deposits, at ~~June 30, 2017.~~March 31, 2020. IBKC's common stock is listed on The NASDAQ Stock Market, LLC under the symbol IBKC. Under the merger agreement, each share of IBKC common stock will be converted into 4.584 shares of FHN common stock. After closing, FHN expects IBKC common shares will be converted into approximately 44 percent of the then-outstanding shares of FHN common stock. The merger agreement requires FHN to expand its board of directors to seventeen persons; after closing, eight board positions will be held by current IBKC directors, and nine will be held by current FHN directors. FHN expects the transaction ~~is expected~~ to close in ~~fourth~~second quarter, ~~2017,~~ subject to regulatory ~~approval~~approvals and other customary closing conditions.

On November 8, 2019, FHN announced an agreement for First Horizon Bank to purchase 30 branches from SunTrust Bank in conjunction with SunTrust Banks, Inc.'s merger with BB&T Corporation, which created Truist Financial Corp. As part of the ~~sale~~agreement, FHN will assume approximately $2.4 billion of ~~two~~branch deposits for a 3.40 percent deposit premium and purchase approximately $410 million of branch loans. The branches are in communities in North Carolina (20 branches), Virginia (8 branches), and Georgia (2 branches). FHN expects the purchase to close in third quarter 2020, subject to customary closing conditions.

~~On April 3, 2017, FTNF~~In second quarter 2019, FHN sold a subsidiary acquired ~~substantially all~~as part of the ~~assets and assumed substantially all of the liabilities of Coastal Securities, Inc. (“Coastal”~~Capital Bank Financial Corporation ("CBF") merger (in 2017), ~~a national leader~~that did not fit within FHN's risk profile. The sale resulted in the ~~trading, securitization, and analysis~~removal of ~~Small Business Administration (“SBA”)~~approximately $25 million UPB of subprime consumer loans ~~for approximately $131 million in cash. Coastal, which was based in Houston, TX, also traded United States Department~~from Loans held-for-sale on FHN's Consolidated Condensed Statements of ~~Agriculture (“USDA”) loans and fixed income products and provided municipal underwriting and advisory services~~Condition.

In relation to ~~its clients. Coastal’s government-guaranteed loan products were combined with FTNF's existing SBA trading activities to establish an additional major product sector for FTNF.~~all acquisitions, FHN's operating results include the operating results of the acquired assets and

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 78

assumed liabilities subsequent to the acquisition date.

On September 16, 2016, FTBNA acquired $537.4 million of UPB in restaurant franchise loans from GE Capital. The acquired loans were combined with existing FTBNA relationships to establish a franchise finance specialty banking business.

Refer to Note 2 – Acquisitions and Divestitures in this report and in ~~Exhibit 13~~Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 for additional information.

For the purpose of this management’s discussion and analysis (“MD&A”), earning assets have been expressed as averages, unless otherwise noted, and loans have been disclosed net of unearned income. The following financial discussion should be read with the accompanying ~~audited~~unaudited Consolidated Condensed Financial Statements and Notes in this report. Additional information including the ~~2016~~2019 financial statements, notes, and MD&A is provided in ~~Exhibit 13~~Item 7 and 8 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

ADOPTION OF ACCOUNTING UPDATES

Effective January 1, 2020 FHN adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," (CECL); which resulted in a $106.4 million increase to the allowance for loan losses ("ALLL") and a $24.0 million increase to the reserve for unfunded commitments, resulting in a $96.1 million decrease of retained earnings (net of taxes). See Note 1– Financial Information for additional information.

Non-GAAP Measures

Certain measures are included in the narrative and tables in this MD&A that are “non-GAAP”, meaning (under U.S. financial reporting rules) they are not presented in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN.

Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the capital position or financial results of FHN. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by banking regulators in reviewing capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory standards.

Regulatory measures used in this MD&A include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets (“RWA”), which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.

The non-GAAP measure presented in this filing is return on average tangible common equity (“ROTCE”). Refer to table 2523 for a reconciliation of the non-GAAP to GAAP measure and presentation of the most comparable GAAP item.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 79

~~FORWARD-LOOKING STATEMENTS~~



Forward-Looking Statements

This MD&A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to FHN’s beliefs, plans, goals, expectations, and estimates. Forward-looking statements ~~are statements that~~ are not a representation of historical information but instead pertain to future operations, strategies, financial results, or other developments. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends identify forward-looking statements.

Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies, many of which are beyond FHN’s control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change. Examples of uncertainties and contingencies include, among other important factors: ~~global,~~ general ~~and local~~ economic and ~~business~~financial market conditions, including ~~economic recession or depression;~~expectations of and actual timing and amount of interest rate movements including the ~~stability or~~slope of the yield curve, competition, customer and investor responses to these conditions, ability to execute business plans, geopolitical developments, recent and future legislative and regulatory developments, natural disasters, the potential impacts on FHN’s businesses of the coronavirus COVID-19 pandemic, including negative impacts from quarantines, market declines and volatility, ~~of values~~ and ~~activity~~changes in ~~the residential housing and commercial real estate markets;~~customer behavior related to COVID-19, potential requirements for FHN to repurchase, or compensate for losses from, previously sold or securitized mortgages or securities based on such mortgages; potential claims alleging mortgage servicing failures, individually, on a class basis, or as master servicer of securitized loans; potential claims relating to participation in government programs, especially lending or other financial services programs; expectations of and actual timing and amount of interest rate movements, including the slope and shape of the yield curve, which can have a significant impact on a financial services institution; market and monetary fluctuations, including fluctuations in mortgage markets; inflation or deflation; customer, investor, competitor, regulatory, and legislative responses to any or all of these conditions; the financial condition of borrowers and other counterparties; competition within and outside the financial services industry;

geopolitical developments including possible terrorist activity; natural disasters; effectiveness and cost-efficiency of FHN’s hedging practices; technological changes; fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN ~~directly~~ or ~~affecting~~ its customers, business counterparties or competitors; demand for FHN’s product offerings; new products and services in the industries in which FHN operates; the increasing use of new technologies to interact with customers and others; and critical accounting estimates. Other factors are those inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other real estate prices, fluctuation of collateral values, and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission (“SEC”), the Financial Accounting Standards Board (“FASB”), the ~~Office~~Tennessee Department of ~~the Comptroller of the Currency (“OCC”~~Financial Institutions ("TDFI"), and its Commissioner, the Board of Governors of the Federal Reserve System (“Federal Reserve” or “Fed”), the Federal Deposit Insurance Corporation (“FDIC”), the Financial Industry Regulatory Authority (“FINRA”), the U.S. Department of the Treasury (“U.S. Treasury”), the Municipal Securities Rulemaking Board (“MSRB”), the Consumer Financial Protection Bureau (“CFPB”), the Office of the Comptroller of the Currency ("OCC"), the Financial Stability Oversight Council (“Council”), the Public Company Accounting Oversight Board (“PCAOB”), and other regulators and agencies; pending, threatened, or possible future regulatory, administrative, and judicial outcomes, actions, and proceedings; current or future Executive orders; changes in laws and regulations applicable to FHN; and FHN’s success in executing its business plans and strategies and managing the risks involved in the foregoing, could cause actual results to differ, perhaps materially, from those contemplated by the forward-looking statements.

FHN assumes no obligation to update or revise any forward-looking statements that are made in this Quarterly Report of which this MD&A is a part or otherwise from time to time. Actual results could differ and expectations could change, possibly materially, because of one or more factors, including those presented in this Forward-Looking Statements section, in other sections of this MD&A, in other parts of and exhibits to this Quarterly Report on Form 10-Q for the period ended ~~September 30, 2017,~~March 31, 2020, and in documents incorporated into this Quarterly Report.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 80

~~FINANCIAL SUMMARY~~



Financial Summary

As previously mentioned, effective January 1, 2020, FHN adopted ASU 2016-13, (CECL). Application of CECL methodology creates larger immediate impacts on credit loss estimates in unanticipated rapid declines in economic projections when compared to the prior incurred loss estimation methodology. The sudden, steep decline in the economic forecast associated with the Coronavirus Disease 2019 (“COVID-19”) pandemic late in first quarter 2020 resulted in a significant increase in loan loss provision expense and the reserve for unfunded commitments, negatively impacting FHN’s operating results in first quarter 2020.

In ~~third~~first quarter ~~2017,~~2020, FHN reported net income available to common shareholders of ~~$67.3~~$12.1 million, or $.28 per diluted share, compared to net income of $63.2 million, or $.27 per diluted share in third quarter 2016. For the nine months ended September 30, 2017, FHN reported net income available to common shareholders of $212.2 million, or $.90$.04 per diluted share, compared to net income available to common ~~shareholders~~ of ~~$167.6~~$99.0 million, or ~~$.71~~$.31 per diluted share ~~for~~in first quarter 2019. The decline in results in first quarter 2020 relative to the ~~nine months ended September 30, 2016. Results improved for both periods primarily~~prior year was driven by a significant increase in loan loss provision expense and an increase in ~~net interest~~the reserve for unfunded commitments, somewhat offset by higher revenue.

Total revenue increased 10 percent to $477.6 million in first quarter 2020 from $435.6 million in first quarter 2019. NII increased to $302.8 million in first quarter 2020 from $294.5 million in first quarter 2019 primarily due to strong loan and deposit growth, favorable deposit costs, and the maturity of $400 million of senior debt in fourth quarter 2019. Lower loan yields compared to first quarter 2019 negatively impacted NII in first quarter 2020, offsetting a portion of the overall increase in NII. Noninterest income ~~("NII") and~~increased 24 percent, or $33.7 million, in first quarter 2020 driven by higher fixed income revenue, somewhat offset by a decrease in deferred compensation income relative to first quarter 2019.

Noninterest expense increased 5 percent to $311.9 million in first quarter 2020 from $296.1 million in first quarter 2019. The expense increase in first quarter 2020, was due in large part to an increase in credit expense on unfunded

commitments associated with economic uncertainty attributable to the ~~provision for income taxes,~~COVID-19 pandemic, as well as higher personnel-related expenses, somewhat offset by lower ~~noninterest income relative~~restructuring and rebranding related expenses.

Asset quality trends in first quarter 2020 were relatively consistent with trends in first quarter 2019. The NPL ratio and 30+ delinquencies improved from .65 percent and .23 percent, respectively in first quarter 2019 to ~~2016. Total expenses including loan loss provision were flat for the quarterly period, but declined for the year-to-date period which also contributed~~.57 percent and .19 percent, respectively in first quarter 2020. Net charge offs increased from .07 percent in first quarter 2019 to ~~the improvement~~.10 percent in results for the nine months ended September 30, 2017. The decline in provision for income taxes for both the three and nine months ended September 30, 2017 was due to favorable effective tax rate adjustmentsfirst quarter 2020 primarily ~~associated with the reversal of a capital loss deferred tax valuation allowance in 2017.~~

Total revenue was $322.2 million and $957.3 million, respectively, for the three and nine months ended September 30, 2017 compared to $333.7 million and $961.9 million for the three and nine months ended September 30, 2016. NII increased 13 percent for both periods, largely driven by the impact of higher short-term market rates and net loan growth. Noninterest income declined 24 percent and 17 percent, respectively, for the three and nine months ended September 30, 2017 due to lower fixed income revenue and a loss from the repurchase of equity securities previously included in a financing transaction.

Noninterest expense increased 1 percent to $236.9 million for the three months ended September 30, 2017 and decreased 2 percent to $677.0 million for the nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. Expenses increased in third quarter 2017 largely driven by higher acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions and an increase in net loss accruals related to legal matters, but were favorably impacted by lower variable compensation expense within the fixed income segment and a decline in legal fees relative to third quarter 2016. For the nine months ended September 30, 2017, expense decreased primarily due to a net decline in the loss accruals related to legal matters, as well as lower personnel-related expenses and legal fees. A net increase in acquisition- and integration-related costs and a smaller expense reversal to the mortgage repurchase provision for the nine months ended 2017 compared to the nine months ended September 30, 2016, offset a portion of the expense decline for the year-to-date period.

On a consolidated basis, credit quality remained strong in 2017, with non-performing loans and the allowance for loan losses decreasing relative to the comparative periods of the prior year. There was no provision for loan losses in third quarter 2017 compared to provision expense of $4.0 million in third quarter 2016. For the nine months ended September 30, 2017 the provision for loan losses was a provision credit of $3.0 million compared to provision expense of $11.0 million for the nine months ended September 30, 2016.two credits.

Return on average common equity (“~~ROE”~~ROCE”) and ROTCE were ~~10.79~~1.05 percent and ~~12.17~~1.59 percent, respectively, in ~~third~~first quarter ~~2017~~2020 compared to ~~10.80~~9.09 percent and ~~11.90~~14.17 percent, respectively, in ~~third~~first quarter ~~2016.~~2019. Return on average assets (“ROA”) ~~improved~~declined to ~~.99~~.15 percent in ~~third~~first quarter ~~2017~~2020 from ~~.97~~1.03 percent in ~~third~~first quarter ~~2016. For~~2019. Key financial ratios were negatively impacted in first quarter 2020 by the nine months ended September 30, 2017 ROE, ROTCE, and ROA improved to 11.83 percent, 13.25 percent, and 1.04 percent, respectively from 9.81 percent, 10.83 percent, and .89 percent, respectively, for the nine months ended September 30, 2016.large increase in loan loss provision expense. Common ~~equity tier~~Equity Tier 1, Tier 1, Total ~~capital,~~Capital, and Leverage ratios were ~~10.04~~8.54 percent, ~~11.20~~9.52 percent, ~~12.18~~10.78 percent, and ~~9.60~~9.00 percent, respectively, in ~~third~~first quarter ~~2017 compared to 9.81~~2020 down from 9.62 percent, ~~11.03~~10.65 percent, ~~12.09~~11.78 percent, and ~~9.52~~9.02 percent, respectively, in ~~third~~first quarter ~~2016.~~2019 driven by an increase in risk-weighted assets due to higher loan balances and an increase in fixed income market risk assets. Average assets increased 5to $43.6 billion in first quarter 2020 from $40.9 billion in first quarter 2019. Average loans and average deposits increased to $30.5 billion and $32.9 billion, respectively, in first quarter 2020, up 12 percent and 71 percent ~~respectively, for the three and nine months ended September 30, 2017 to $28.9 billion~~ from $27.6 billion and $27.0 billion, respectively, for the three and nine months ended September 30, 2016. Average loans were $19.8 billion and $19.3 billion, respectively, for the three and nine months ended September 30, 2017, a 6 percent and 8 percent increase relative to the same periods in 2016.first quarter 2019. Period-end ~~and average~~ Shareholders’ equity increased to ~~$2.9~~$5.1 billion in ~~third~~first quarter ~~2017~~2020 from ~~$2.7~~$4.8 billion in ~~third~~first quarter ~~2016.~~2019. Average Shareholders’ equity increased to $5.0 billion in first quarter 2020 from $4.8 billion in first quarter 2019.



Business Line Review

~~BUSINESS LINE REVIEW~~

Regional Banking

Pre-tax income within the regional banking segment was $25.6 million in first quarter 2020, down from $147.0 million in first quarter 2019. The decrease in pre-tax income was primarily driven by an increase in loan loss provision expense, and higher credit expense on unfunded commitments somewhat offset by increase in revenue.

Total revenue increased 6 percent to $382.0 million in first quarter 2020 from $359.1 million in first quarter 2019, driven by increases in NII and noninterest income. The

increase in NII was primarily due to strong loan and deposit growth and favorable deposit costs, which more than offset lower loan yields compared to first quarter 2019. Noninterest income increased 12 percent or $8.8 million to ~~$114.7~~$81.9 million in ~~third~~first quarter ~~2017~~2020 from ~~$102.0~~$73.0 million in ~~third~~the prior year. The increase in noninterest income was primarily driven by an increase in fees from derivative sales, higher brokerage, management fees and commissions, and an increase in other service charges revenue, partially offset by lower fees from deposit transactions and cash management activities relative to first quarter ~~2016.~~2019.

must be maintained on the Common Equity Tier 1, Tier 1 Capital and Total Capital ratios to avoid restrictions on dividends, share repurchases and certain discretionary bonuses.

As of ~~September 30, 2017,~~March 31, 2020, each of FHN and ~~FTBNA~~First Horizon Bank had sufficient capital to qualify as well-capitalized institutions. FHN also had sufficient capital to meet the capital conservation buffer requirement while First Horizon Bank fell slightly below based on its Total Capital Ratio. (See discussion on dividend limitations for First Horizon Bank in the “Liquidity Risk Management” section of this MD&A.) In April 2020, First Horizon Bank generated additional Tier 2 capital through the issuance of $450 million of subordinated notes. The first quarter 2020 capital ratios for both FHN and First Horizon Bank are calculated under the interim final rule issued by the banking regulators in late March 2020 to delay the effects of CECL on regulatory capital for two years, followed by a ~~well-capitalized institution.~~three-year transition period. For both FHN and First Horizon Bank, the risk-based regulatory capital ratios ~~remained consistent~~decreased in ~~the third~~first quarter ~~of 2017~~2020 relative to fourth quarter ~~2016 as the capital generated from net income less dividends offset the impact of~~2019 primarily due to increased ~~disallowed intangible~~risk-weighted assets ~~related~~due to ~~the Coastal acquisition, the continued phased-in implementation of the Basel III regulations,~~period-end commercial loan growth (primarily loans to mortgage companies) and higher draw activity in March, coupled with an increase in ~~risk-weighted~~market risk assets ~~primarily as~~driven by a ~~result of increased period end loans. Over the same period, the regulatory capital ratios for FTBNA declined~~spike in VaR due ~~primarily~~ to ~~common dividends paid to the parent company to provide additional liquidity for the CBF acquisition. For fourth quarter 2017 and through 2018,~~extreme volatility in March. During 2020, capital ratios are expected to remain above well-capitalized standards.

Common Stock Purchase Programs

Pursuant to board authority, FHN may repurchase shares of its common stock from time to time and will evaluate the level of capital and take action designed to generate or use capital, as appropriate, for the interests of the shareholders, subject to legal and regulatory restrictions. Two common stock purchase programs currently authorized are discussed below. FHN’s board has not authorized a preferred stock purchase program.

General ~~Program.~~ Authority

On January ~~22, 2014,~~23, 2018, FHN announced a ~~$100~~$250 million share purchase authority with an expiration date of January 31, ~~2016.~~2020. On ~~July 21, 2015,~~January 29, 2019, FHN announced a ~~$100~~$250 million increase in that authority along with an extension of the expiration date to January 31, 2017, and on April 26, 2016, FHN announced a $150 million increase and further extension to January 31, 2018. The program currently authorizes total purchases of up to $350 million and expires on January 31, 2018. As of September 30, 2017, $160.3 million in purchases had been made under this authority at an average price per share of $12.86, $12.84 excluding commissions.2021. Purchases may be made in the open market or through privately negotiated transactions and are subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions. ~~During third quarter 2017, FHN did not repurchase any common shares~~As of March 31, 2020, $229.3 million in purchases had been made under ~~the program. In third quarter 2016 FHN repurchased $7.1 million~~this authority at an average price per share of ~~common shares under the program. FHN~~$15.09, $15.07 excluding commissions. Management currently does not anticipate ~~repurchasing any~~purchasing a material number of shares under this ~~authorization through~~authority during the ~~closing~~first half of 2020 due to the ~~CBF Bank acquisition.~~pending merger of equals with IBKC.

~~The following tables provide information related to securities repurchased by FHN during third quarter 2017:~~

Table ~~9a—~~10a—Issuer Purchases of Common Stock

- General ~~Repurchase Authority:~~

Authority

~~(Dollar values and volume in thousands, except per share data)~~

~~Total number~~
~~of shares~~
~~purchased~~

~~Average price~~
~~paid per share~~

~~Total number of~~
~~shares purchased~~
~~as part of publicly~~
~~announced programs~~

~~Maximum approximate dollar value that may yet be purchased under the programs~~

~~2017~~

~~July 1 to July 31~~

—

~~N/A~~

—

~~189,690~~

~~August 1 to August 31~~

—

~~N/A~~

—

~~189,690~~

~~September 1 to September 30~~

—

~~N/A~~

—

~~189,690~~

~~Total~~

—

~~N/A~~

—



(Dollar values and volume in thousands, except per share data)	Total number of shares purchased	Average price paid per share (a)	Total number of shares purchased as part of publicly announced programs	Maximum approximate dollar value that may yet be purchased under the programs
2020
January 1 to January 31	—	NA	—	$	270,654
February 1 to February 29	—	NA	—	270,654
March 1 to March 31	—	NA	—	270,654
Total	—	N/A	—

~~N/A—Not applicable~~(a) Represents total costs including commissions paid.

Compensation ~~Plan Program.~~Authority

A consolidated compensation plan share purchase program was announced on August 6, 2004. This program consolidated into a single share purchase program all of the previously authorized compensation plan share programs as well as the renewal of the authorization to purchase shares for use in connection with two compensation plans for which the share purchase authority had expired.

The total amount authorized under this consolidated compensation plan share purchase program, inclusive of a program amendment on April 24, 2006, is 29.6 million shares calculated before adjusting for stock dividends distributed through January 1, 2011. The authorization has been reduced for that portion which relates to compensation plans for which no options remain outstanding. The shares may be purchased over the option exercise period of the various compensation plans on or before December 31, 2023. ~~On September 30, 2017, the maximum number of shares that may be purchased under the program was 25.5 million shares.~~ Purchases may be made in the

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 93

open market or through privately negotiated transactions and are subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions. As of March 31, 2020, the

maximum number of shares that may be purchased under the program was 24.3 million shares. Management currently does not anticipate purchasing a material number of shares under this authority during ~~the fourth quarter 2017 or through 2018.~~2020.

Table ~~9b—~~10b—Issuer Purchase of Common Stock

- Compensation ~~Plan-Related Repurchase Authority:~~

Authority

(Volume in thousands, except per share data)
Total number
of shares
purchased

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced programs

Maximum number
of shares that may
yet be purchased
under the programs
2017
July 1 to July 31 2
$ 17.50
2
25,475
August 1 to August 31 16
$ 17.70
16
25,459
September 1 to September 30 *
$ 17.82
*
25,458
Total 18
$ 17.68
18

* - Amount less than 500 shares



(Volume in thousands, except per share data)	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced programs	Maximum number of shares that may yet be purchased under the programs
2020
January 1 to January 31	26	$	16.81	26	24,431
February 1 to February 29	7	16.30		7	24,424
March 1 to March 31	108	14.05		108	24,316
Total	141	$	14.67	141



Asset Quality

~~ASSET QUALITY~~

Loan Portfolio Composition

FHN groups its loans into portfolio segments based on internal classifications reflecting the manner in which the ALLL is established and how credit risk is measured, monitored, and reported. From time to time, and if conditions are such that certain subsegments are uniquely affected by economic or market conditions or are experiencing greater deterioration than other components of the loan portfolio, management may determine the ALLL at a more granular level. Commercial loans are composed of commercial, financial, and industrial (“C&I”) and commercial real estate (“CRE”). Consumer loans are composed of consumer real estate; ~~permanent mortgage;~~ and credit card and other. In first quarter 2020, FHN consolidated its permanent mortgage portfolio into consumer real estate. Loans previously classified in permanent mortgage included primarily jumbo mortgages and one-time-close (“OTC”) completed construction loans in the non-strategic segment that were originated through pre-2009 mortgage businesses. FHN has a concentration of residential real estate loans ~~(24 percent of total loans), the majority of which is in the consumer real estate portfolio (22~~ (19 percent of total loans). Industry concentrations are discussed under the heading C&I below.

Consolidated key asset quality metrics for each of these portfolios can be ~~found~~found in Table 17 – Asset ~~Quality~~Quality by Portfolio. Credit underwriting guidelines are outlined in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, in the Loan Portfolio Composition discussion in the Asset Quality Section

beginning on page 2667 and continuing to page ~~46.~~87. FHN’s credit underwriting guidelines and loan product offerings as of ~~September 30, 2017,~~March 31, 2020, are generally consistent with those reported and disclosed in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2019.

COMMERCIAL LOAN PORTFOLIOS

C&I

The C&I portfolio was ~~$12.8~~$22.1 billion on ~~September 30, 2017,~~March 31, 2020, and is comprised of loans used for general business ~~purposes and primarily composed of relationship customers in Tennessee and other selected markets.~~purposes. Typical products include working capital lines of credit, term loan financing of owner-occupied real estate and fixed assets, and trade credit enhancement through letters of ~~credit.~~credit. The largest geographical concentrations of balances as of March 31, 2020, are in Tennessee (29 percent), North Carolina (10 percent), California (9 percent), Texas (6 percent), Florida (6 percent), Georgia (4 percent), South Carolina (3 percent), and Virginia (3 percent), with no other state representing more than 3 percent of the portfolio.

The following table provides the composition of the C&I portfolio by industry as of ~~September 30, 2017,~~March 31, 2020, and December 31, ~~2016.~~2019. For purposes of this disclosure, industries are determined based on the North American Industry Classification System (“NAICS”) industry codes used by Federal statistical agencies in classifying business establishments for the collection, analysis, and publication of statistical data related to the U.S. business economy.

Table ~~10—~~11—C&I Loan Portfolio by Industry

September 30, 2017 December 31, 2016
(Dollars in thousands)
Amount Percent Amount Percent
Industry:

Finance & insurance $ 2,844,411
22 % $ 2,573,713
21 %
Loans to mortgage companies 1,966,155
15
2,045,189
17
Health care & social assistance 966,706
8
893,629
7
Real estate rental & leasing (a) 943,496
7
769,457
6
Wholesale trade 938,663
7
826,226
7
Accommodation & food service 913,774
7
987,973
8
Manufacturing 870,324
7
762,947
6
Public administration 583,834
5
565,119
5
Transportation & warehousing 583,432
5
578,586
5
Other (education, arts, entertainment, etc) (b) 2,181,049
17
2,145,248
18
Total C&I loan portfolio $ 12,791,844
100 % $ 12,148,087
100 %

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 94



	March 31, 2020				December 31, 2019
(Dollars in thousands)	Amount		Percent		Amount		Percent
Industry:
Loans to mortgage companies	$	5,713,914	26	%	$	4,410,883	22	%
Finance & insurance	2,797,370		13		2,778,411		14
Real estate rental & leasing (a)	1,584,095		7		1,454,336		7
Health care & social assistance	1,527,531		7		1,499,178		8
Accommodation & food service	1,504,690		7		1,364,833		7
Wholesale trade	1,464,847		6		1,372,147		7
Manufacturing	1,343,586		6		1,150,701		6
Other (education, arts, entertainment, etc) (b)	6,188,397		28		6,020,602		29
Total C&I loan portfolio	$	22,124,430	100	%	$	20,051,091	100	%


(a)	Leasing, rental of real estate, equipment, and goods.


(b)	Industries in this category each comprise less than 5 percent for ~~2017.~~2020.

Industry Concentrations

Loan concentrations are considered to exist for a financial institution when there are loans to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. 3739 percent of FHN’s C&I portfolio (Finance and insurance plus Loans to mortgage companies) could be affected by items that uniquely impact the financial services ~~industry.~~industry. Except “Finance and Insurance” and “Loans to Mortgage Companies”, as discussed below, on~~September 30, 2017,~~ March 31, 2020, FHN did not have any other concentrations of C&I loans in any single industry of 10 percent or more of total loans.

Loans to Mortgage Companies

The balance of loans to mortgage companies was 26 percent of the C&I portfolio as of March 31, 2020, 22 percent as of December 31, 2019 and 13 percent as of March 31, 2019, and includes balances related to both home purchase and refinance activity. This portfolio class, which generally fluctuates with mortgage rates and seasonal factors, 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. Generally, lending to mortgage lenders increases when there is a decline in mortgage rates and decreases when rates rise. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In first quarter 2020, 46 percent of the loans funded were home purchases and 54 percent were refinance transactions.

Finance and Insurance

The finance and insurance component ~~represents 22 percent~~represents 13 percent of the C&I portfolio as of March 31, 2020 compared to 14 percent as of December 31, 2019, and includes TRUPS (i.e., long-term unsecured loans to bank

and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of ~~September 30, 2017,~~March 31, 2020, asset-based lending to consumer finance companies represents ~~approximately~~approximately $1.2 billion ofof the finance and insurance component.

TRUPS lending was originally extended as a form of “bridge” financing to participants in the pooled trust preferred securitization program offered primarily to smaller banking (generally less than $15 billion in total assets) and insurance institutions through FHN’s fixed income business. Origination of TRUPS lending ceased in early 2008. Individual TRUPS are re-graded at least quarterly as part of FHN’s commercial loan review process. The terms of these loans generally include a scheduled 30 year balloon payoff and include an option to defer interest for up to 20 consecutive quarters. As of ~~September 30, 2017, and December~~March 31, ~~2016, one~~2020, no TRUP relationship was on interest deferral.

As of ~~September 30, 2017,~~March 31, 2020, the unpaid principal balance (“UPB”) of trust preferred loans totaled ~~$332.9~~$234.2 million ($~~206.6~~173.6 million of bank TRUPS and ~~$126.3~~$60.7 million of insurance TRUPS) with the UPB of other bank-related loans totaling ~~$345.8~~$282.3 million. Inclusive of a valuation allowance on TRUPS of ~~$25.5~~$18.9 million, total reserves (ALLL plus the valuation allowance) for TRUPS and other bank-related loans were ~~$26.8~~$29.9 million or 46 percent of outstanding UPB.

~~Loans to Mortgage Companies~~

The balance of loans to mortgage companies was 15 percent of the C&I portfolio as of September 30, 2017, 17 percent of the C&I portfolio as of December 31, 2016, and 20 percent of the C&I portfolio as of September 30, 2016, and includes balances related to both home purchase and refinance activity. This portfolio class, which generally fluctuates with mortgage rates and seasonal factors, 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. Generally, lending to mortgage lenders increases when there is a decline in mortgage rates and decreases when rates rise.

C&I Asset Quality Trends

~~Overall, the~~The C&I portfolio trends ~~remain strong~~remained stable in ~~2017, continuing in line with recent historical performance.~~ first quarter 2020; however, the impact of economic uncertainty attributable to the COVID-19 pandemic could negatively impact future trends. The C&I ALLL increased ~~$8.8~~$132.0 million from December 31, ~~2016,~~2019, to ~~$98.2~~$254.5 million as of ~~September 30, 2017.~~ March 31, 2020, primarily due to the sudden, steep decline

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 95

in the economic forecast attributable to the COVID-19 pandemic and the adoption of ASU 2016-13.

The allowance as a percentage of period-end loans increased 54 basis points to ~~.77~~1.15 percent as of ~~September 30, 2017, from .74~~March 31, 2020, compared to .61 percent as of ~~December 31, 2016.~~year-end 2019. Nonperforming C&I loans ~~decreased $13.8~~increased $21.8 million from December 31, ~~2016,~~2019, to ~~$18.9~~$96.1 million on ~~September 30, 2017.~~March 31, 2020. The nonperforming loan (“NPL”) ratio ~~decreased 12 basis points from December 31, 2016,~~increased to ~~.15~~.43 percent of C&I loans as of ~~September 30, 2017. The 30+ delinquency ratio increased to .27 percent as of September 30, 2017,~~March 31, 2020, from ~~.08~~.37 percent as of December 31, ~~2016,~~2019. The increase in NPLs was primarily driven by ~~two larger relationships,~~ one credit.

The 30+ delinquency ratio increased 3 basis points to .08 percent as of ~~which is a purchased credit-impaired loan. Third~~ March 31, 2020. First quarter ~~2017~~2020 experienced net charge-offs of ~~$3.1~~$5.8 million compared to ~~$1.6~~$3.3 million ~~of net recoveries in fourth quarter 2016~~ and ~~$1.3~~$2.3 million of net charge-offs in ~~third~~fourth quarter ~~2016.~~ 2019 and first quarter 2019, respectively. First quarter 2020 net charge-offs were primarily driven by one credit.

The following table shows C&I asset quality trends by segment.

Table ~~11—~~12—C&I Asset Quality Trends by Segment



	2020
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	122,426		$	60		$	122,486
ASU Adoption 2016-13	9,086			9,696			18,782
Charge-offs	(6,751		)	—			(6,751		)
Recoveries	931			4			935
Provision/(provision credit) for loan losses	118,970			94			119,064
Allowance for loan losses as of March 31	$	244,662		$	9,854		$	254,516
Net charge-offs % (qtr. annualized)	0.12		%	NM			0.12		%
Allowance / net charge-offs	10.45		x	NM			10.88		x

	As of March 31
Period-end loans	$	21,798,168		$	326,262		$	22,124,430
Nonperforming loans	96,081			—			96,081
Troubled debt restructurings	40,439			—			40,439
30+ Delinq. % (a)	0.07		%	0.50		%	0.08		%
NPL %	0.44			—			0.43
Allowance / loans %	1.12			3.02			1.15

	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	97,617		$	1,330		$	98,947
Charge-offs	(3,101		)	—			(3,101		)
Recoveries	801			28			829
Provision/(provision credit) for loan losses	7,076			(38		)	7,038
Allowance for loan losses as of March 31	$	102,393		$	1,320		$	103,713
Net charge-offs % (qtr. annualized)	0.06		%	NM			0.06		%
Allowance / net charge-offs	10.98		x	NM			11.26		x

	As of December 31
Period-end loans	$	19,721,457		$	329,634		$	20,051,091
Nonperforming loans	74,312			—			74,312
Troubled debt restructurings	42,199			—			42,199
30+ Delinq. % (a)	0.05		%	—		%	0.05		%
NPL %	0.38			—			0.37
Allowance / loans %	0.62			0.02			0.61

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 90,958
$ 1,421
$ 92,379

Charge-offs (3,723 ) —
(3,723 )
Recoveries 586
15
601

Provision/(provision credit) for loan losses 9,039
(91 ) 8,948

Allowance for loan losses as of September 30 $ 96,860
$ 1,345
$ 98,205

Net charge-offs % (qtr. annualized) 0.10 %              NM 0.10 %
Allowance / net charge-offs 7.83 x              NM 7.97 x

As of September 30
Period-end loans $ 12,373,245
$ 418,599
$ 12,791,844

Nonperforming loans 15,828
3,097
18,925

Troubled debt restructurings 16,336
—
16,336

30+ Delinq. % (a) 0.28 % — % 0.27 %
NPL % 0.13
0.74
0.15

Allowance / loans % 0.78
0.32
0.77

2016
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 79,597
$ 1,375
$ 80,972

Charge-offs (1,992 ) —
(1,992 )
Recoveries 711
14
725

Provision/(provision credit) for loan losses 7,151
10
7,161

Allowance for loan losses as of September 30 $ 85,467
$ 1,399
$ 86,866

Net charge-offs % (qtr. annualized) 0.05 %              NM 0.04 %
Allowance / net charge-offs 16.76 x              NM 17.23 x

As of December 31
Period-end loans $ 11,728,160
$ 419,927
$ 12,148,087

Nonperforming loans 28,619
4,117
32,736

Troubled debt restructurings 34,334
—
34,334

30+ Delinq. % (a) 0.08 % — % 0.08 %
NPL % 0.24
0.98
0.27

Allowance / loans % 0.75
0.33
0.74

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 96

Commercial Real Estate

The CRE portfolio was ~~$2.3~~$4.6 billion on ~~September 30, 2017.~~March 31, 2020. The CRE portfolio includes both financings for commercial construction and nonconstruction loans. The largest geographical concentrations of balances as of March 31, 2020 are in North Carolina (28 percent), Tennessee (20 percent), Florida (13 percent), South Carolina (8 percent), Texas (8 percent), Georgia (6 percent), and Kentucky (3 percent), with no other state representing more than 3 percent of the portfolio. This portfolio is segregated between the income-producing CRE class which contains loans, draws on lines and letters of credit to commercial real estate developers for the construction and mini-permanent financing of income-producing real estate, and the residential CRE class. Subcategories of income CRE consist of office (27 percent), multi-family ~~(31~~(22 percent), retail ~~(22~~(19 percent), ~~office (18~~industrial (13 percent), hospitality ~~(12 percent), industrial~~ (12 percent), land/land development (1 percent), and other (4(6 percent).

The residential CRE class includes loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town ~~homes. Active~~homes, and on a limited basis, for developing residential subdivisions. After the fulfillment of existing commitments over the near term, the residential CRE ~~lending has been minimal~~class will be in a wind-down state with nearly all new originations limited to tactical advances to facilitate workout strategies with existing clients and selected new transactions with “strategic” clients. FHN considers a “strategic” residential CRE borrower as a homebuilder within the ~~regional banking footprint who remained profitable during~~expectation of full runoff in the ~~most recent down cycle.~~foreseeable future.

CRE Asset Quality Trends

The CRE portfolio ~~had continued stable performance~~ as of ~~September 30, 2017,~~March 31, 2020 was not significantly affected by the global COVID-19 pandemic, with nonperforming loans ~~down $1.1~~up $.4 million ~~from~~from December 31, ~~2016, net recoveries in third quarter 2017, and minimal past due activity.~~2019. However, economic uncertainty attributable to COVID-19 could impact future CRE portfolio trends. The allowance ~~decreased $4.2 million from December 31, 2016,~~increased to ~~$29.7~~$47.6 million as of ~~September 30, 2017.~~March 31, 2020, from $36.1 million as of December 31, 2019 primarily due to COVID-19. Allowance as a percentage of loans ~~decreased 27~~increased 20 basis points from ~~December 31, 2016, to 1.32~~.83 percent as of ~~September 30, 2017.~~December 31, 2019, to 1.03 percent as of March 31, 2020. Nonperforming loans as a percentage of total CRE loans ~~improved 6~~increased 1 basis ~~points~~point from ~~year-end~~December 31, 2019, to ~~.07~~.05 percent as of ~~September 30, 2017.~~ March 31, 2020.

Accruing delinquencies as a percentage of period-end loans ~~increased~~decreased to .01 percent as of March 31, 2020, from .02 percent as of ~~September 30, 2017 from .01 percent as of year-end 2016. FHN recognized net recoveries of $.3 million~~December 31, 2019. Net charge-offs were not significant in ~~third~~first quarter ~~2017 compared to $.6 million~~2020 and were $377 thousand in ~~third~~first quarter ~~2016.~~ 2019.

The following table shows commercial real estate asset quality trends by segment.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 97

Table ~~12—~~13—Commercial Real Estate Asset Quality Trends by Segment

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 30,470
$ —
$ 30,470

Charge-offs —
—
—

Recoveries 267
11
278

Provision/(provision credit) for loan losses (1,054 ) (11 ) (1,065 )
Allowance for loan losses as of September 30 $ 29,683
$ —
$ 29,683

Net charge-offs % (qtr. annualized)              NM              NM              NM
Allowance / net charge-offs              NM              NM              NM

As of September 30
Period-end loans $ 2,251,015
$ —
$ 2,251,015

Nonperforming loans 1,640
—
1,640

Troubled debt restructurings 4,780
—
4,780

30+ Delinq. % (a) 0.02 % — % 0.02 %
NPL % 0.07
—
0.07

Allowance / loans % 1.32
—
1.32

2016
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 30,264
$ —
$ 30,264

Charge-offs (49 ) —
(49 )
Recoveries 636
15
651

Provision/(provision credit) for loan losses 1,569
(15 ) 1,554

Allowance for loan losses as of September 30 $ 32,420
$ —
$ 32,420

Net charge-offs % (qtr. annualized)              NM              NM              NM
Allowance / net charge-offs              NM              NM              NM

As of December 31
Period-end loans $ 2,135,523
$ —
$ 2,135,523

Nonperforming loans 2,776
—
2,776

Troubled debt restructurings 3,124
—
3,124

30+ Delinq. % (a) 0.01 % — % 0.01 %
NPL % 0.13
—
0.13

Allowance / loans % 1.59
—
1.59

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



	2020
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	33,729		$	2,383		$	36,112
ASU Adoption 2016-13	(5,191		)	(2,157		)	(7,348		)
Charge-offs	(581		)	—			(581		)
Recoveries	573			—			573
Provision/(provision credit) for loan losses	18,399			470			18,869
Allowance for loan losses as of March 31	$	46,929		$	696		$	47,625
Net charge-offs % (qtr. annualized)	—		%	—			—		%
Allowance / net charge-offs	NM			NM			NM

	As of March 31
Period-end loans	$	4,608,103		$	31,589		$	4,639,692
Nonperforming loans	2,190			—			2,190
Troubled debt restructurings	1,153			—			1,153
30+ Delinq. % (a)	0.01		%	—		%	0.01		%
NPL %	0.05			—			0.05
Allowance / loans %	1.02			2.20			1.03

	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	31,311		$	—		$	31,311
Charge-offs	(434		)	—			(434		)
Recoveries	57			—			57
Provision/(provision credit) for loan losses	3,448			—			3,448
Allowance for loan losses as of March 31	$	34,382		$	—		$	34,382
Net charge-offs % (qtr. annualized)	0.04		%	NM			0.04		%
Allowance / net charge-offs	22.50		x	NM			22.50		x

	As of December 31
Period-end loans	$	4,292,199		$	44,818		$	4,337,017
Nonperforming loans	1,825			—			1,825
Troubled debt restructurings	1,200			—			1,200
30+ Delinq. % (a)	0.02		%	—		%	0.02		%
NPL %	0.04			—			0.04
Allowance / loans %	0.79			5.32			0.83

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 98

CONSUMER LOAN PORTFOLIOS

Consumer Real Estate

The consumer real estate portfolio was ~~$4.4~~$6.1 billion on ~~September 30, 2017,~~March 31, 2020, and is primarily composed of home equity lines and installment loans including restricted balances (loans consolidated under ASC 810). The largest geographical concentrations of balances as of ~~September 30, 2017,~~March 31, 2020, are inin Tennessee ~~(72~~(55 percent), ~~California (4~~North Carolina (15 percent), Florida (14 percent), and ~~North Carolina (4~~California (3 percent), with no other state ~~representing~~representing more than 3 percent of the ~~portfolio.~~portfolio. As of ~~September 30, 2017,~~March 31, 2020, approximately ~~74 percent~~85 percent of the consumer real estate portfolio was in a first lien position. At origination, weighted average FICO score of this portfolio was ~~751~~755 and refreshed FICO scores averaged ~~749 as of September 30, 2017, as compared to 750 and 747, respectively, as of December~~754 on March 31, ~~2016.~~2020. Generally, ~~performance~~performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

Home equity lines of credit (“HELOCs”) comprise ~~$1.5~~$1.3 billion of the consumer real estate portfolio as of ~~September 30, 2017.~~March 31, 2020. FHN’s HELOCs typically have a 5 or 10 year draw period followed by a 10 or 20 year repayment period, respectively. During the draw period, a borrower is able to draw on the line and is only required to make interest payments. The line is automatically frozen if a borrower becomes 45 days or more past due on payments. Once the draw period has concluded, the line is closed and the borrower is required to make both principal and interest

payments monthly until the loan matures. The principal payment generally is fully amortizing, but payment amounts will adjust when variable rates reset to reflect changes in the prime rate.

As of ~~September 30, 2017,~~March 31, 2020, approximately ~~60 percent~~ 78 percent of FHN's HELOCs are in the draw period compared to approximately 6276 percent as of December 31, ~~2016.~~2019. Based on when draw periods are scheduled to end per the line agreement, it is expected that ~~$362.6~~ $306.7 million, or 4232 percent ofof HELOCs currently in the draw period, will enter the repayment period during the next 60 months. Delinquencies and charge-off rates for HELOCs that have entered the repayment period are initially higher than HELOCs still in the draw period because of the increased minimum payment requirement; however, after some seasoning, performance of these loans usually begins to stabilize. The home equity lines of the consumer real estate portfolio are being monitored closely for those nearing the end of the draw period and borrowers are initially being contacted at least 24 months before the repayment period begins to remind the customer of the terms of their agreement and to inform them of options.

The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period.

Table ~~13—~~14—HELOC Draw To Repayment Schedule


	September 30, 2017				December 31, 2016				March 31, 2020				December 31, 2019
(Dollars in thousands)	Repayment Amount		Percent		Repayment Amount		Percent		Repayment Amount		Percent		Repayment Amount		Percent
Months remaining in draw period:
0-12	$	112,207	13	%	$	212,665	20	%	$	46,788	5	%	$	47,455	5	%
13-24	69,367		8		127,662		12		59,132		6		58,843		6
25-36	56,098		6		73,331		7		64,613		7		65,833		7
37-48	57,254		7		68,768		6		60,114		6		67,692		7
49-60	67,625		8		68,792		7		76,089		8		75,246		7
>60	510,670		58		514,126		48		665,293		68		666,001		68
Total	$	873,221	100	%	$	1,065,344	100	%	$	972,029	100	%	$	981,070	100	%

Consumer Real Estate Asset Quality Trends

Overall, performance of the consumer real estate portfolio remained ~~strong~~stable in ~~third~~first quarter ~~2017. Specifically, the regional bank’s asset quality metrics were relatively stable from a year ago, with the exception of NPLs as a percentage of loans which increased 9 basis points from year-end~~2020. Economic uncertainty attributable to ~~.61 percent as of September 30, 2017.~~COVID-19 could impact future trends. The non-strategic segment is a run-off portfolio and while the absolute dollars of delinquencies and nonaccruals as well as the 30+ accruing delinquencies ratio improved from year-end, nonperforming loans ratios ~~deteriorated~~deteriorated. That trend of increasing deterioration of ratios in the non-strategic

segment is likely to continue and may become more skewed as the portfolio shrinks and some of the stronger borrowers payoff or refinance elsewhere. NPLs as a percentage of loans increased 10 basis point from year-end to 1.49 percent as of March 31, 2020. The ALLL ~~decreased $9.4~~increased $94.6 million from December 31, ~~2016,~~2019, to ~~$40.9~~$123.0 million as of ~~September 30, 2017, with the majority of the decline attributable~~March 31, 2020, primarily due to the ~~non-strategic segment.~~adoption of ASU 2016-13. The allowance as a percentage of loans ~~declined 17~~increased 155 basis points to ~~.94~~2.01 percent as of ~~September 30, 2017,~~March 31, 2020, compared to year-end. The balance of nonperforming loans ~~declined $6.0~~increased $5.5 million to ~~$76.8~~ $91.2

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 99

million ~~on September 30, 2017.~~as of March 31, 2020. Loans delinquent 30 or more days and still accruing declined from ~~$42.1~~$42.9 million as of December 31, ~~2016,~~2019, to ~~$32.4~~$40.1 million as of ~~September 30, 2017.~~March 31, 2020. The portfolio realized net recoveries of ~~$2.6~~$1.2 million in ~~third~~first quarter ~~2017~~2020 compared to net recoveries of ~~$2.2~~$3.3 million in

fourth quarter ~~2016~~2019 and net recoveries of $1.2 million in ~~third~~first quarter ~~2016.~~ 2019.

The following table shows consumer real estate asset quality trends by segment.

Table ~~14—~~15—Consumer Real Estate Asset Quality Trends by Segment

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 17,881
$ 28,188
$ 46,069

Charge-offs (1,492 ) (2,109 ) (3,601 )
Recoveries 1,105
5,083
6,188

Provision/(provision credit) for loan losses (562 ) (7,155 ) (7,717 )
Allowance for loan losses as of September 30 $ 16,932
$ 24,007
$ 40,939

Net charge-offs % (qtr. annualized) 0.04 %              NM              NM
Allowance / net charge-offs 11.04 x              NM              NM

As of September 30
Period-end loans $ 3,713,951
$ 655,766
$ 4,369,717

Nonperforming loans 22,707
54,138
76,845

Troubled debt restructurings 46,292
89,566
135,858

30+ Delinq. % (a) 0.38 % 2.80 % 0.74 %
NPL % 0.61
8.26
1.76

Allowance / loans % 0.46
3.66
0.94

2016
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 24,278
$ 34,803
$ 59,081

Charge-offs (1,074 ) (3,285 ) (4,359 )
Recoveries 985
4,606
5,591

Provision/(provision credit) for loan losses (3,965 ) (3,113 ) (7,078 )
Allowance for loan losses as of September 30 $ 20,224
$ 33,011
$ 53,235

Net charge-offs % (qtr. annualized) 0.01 %              NM              NM
Allowance / net charge-offs 57.14 x              NM              NM

As of December 31
Period-end loans $ 3,642,894
$ 880,858
$ 4,523,752

Nonperforming loans 18,865
63,947
82,812

Troubled debt restructurings 47,478
105,982
153,460

30+ Delinq. % (a) 0.49 % 2.76 % 0.93 %
NPL % 0.52
7.26
1.83

Allowance / loans % 0.52
3.56
1.11



	2020
	Three months ended
(Dollars in thousands)	Regional Bank			Corporate			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	13,340		N/A			$	15,103		$	28,443
ASU Adoption 2016-13	88,004			N/A			4,988			92,992
Charge-offs	(488		)	N/A			(1,822		)	(2,310		)
Recoveries	690			N/A			2,865			3,555
Provision/(provision credit) for loan losses	1,412			N/A			(1,070		)	342
Allowance for loan losses as of March 31	$	102,958		N/A			$	20,064		$	123,022
Net charge-offs % (qtr. annualized)	NM			N/A			NM			NM
Allowance / net charge-offs	NM			N/A			NM			NM

	As of March 31
Period-end loans	$	5,716,888		$	30,613		$	371,882		$	6,119,383
Nonperforming loans	44,536			1,302			45,344			91,182
Troubled debt restructurings	43,360			2,041			106,992			152,393
30+ Delinq. % (a)	0.51		%	5.39		%	2.56		%	0.66		%
NPL %	0.78			4.25			12.19			1.49
Allowance / loans %	1.80			N/A			5.40			2.01

	2019
	Three months ended (a)
(Dollars in thousands)	Regional Bank			Corporate			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	14,555		N/A			$	22,884		$	37,439
Charge-offs	(1,641		)	N/A			(1,163		)	(2,804		)
Recoveries	1,036			N/A			3,005			4,041
Provision/(provision credit) for loan losses	1,253			N/A			(5,775		)	(4,522		)
Allowance for loan losses as of March 31	$	15,203		N/A			$	18,951		$	34,154
Net charge-offs % (qtr. annualized)	0.04		%	N/A			NM			NM
Allowance / net charge-offs	6.20		x	N/A			NM			NM

	As of December 31 (a)
Period-end loans	$	5,738,455		$	31,473		$	407,211		$	6,177,139
Nonperforming loans	37,014			1,327			47,353			85,694
Troubled debt restructurings	46,031			2,457			113,758			162,246
30+ Delinq. % (b)	0.50		%	5.29		%	3.10		%	0.70		%
NPL %	0.65			4.22			11.63			1.39
Allowance / loans %	0.23			N/A			3.71			0.46

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	~~30+ Delinquency % includes~~In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all ~~accounts delinquent more than one month and still accruing interest.~~

~~Permanent Mortgage~~

The permanent mortgage portfolio was $.4 billion on September 30, 2017. This portfolio is primarily composed of jumbo mortgages and one-time-close (“OTC”) completed construction loans in the non-strategic segment that were originated through legacy businesses. The regional banking segment primarily includes recently acquired mortgage loans associated with FHN’s CRA initiatives. The corporate segment includes loans that were previously included in off-balance sheet proprietary securitization trusts. These loans were brought back into the loan portfolios at fair value through the execution of cleanup calls due to the relatively small balances left in the securitization and should continue to run-off. Approximately 19 percent of loan balances as of September 30, 2017, are in California, but the remainder of the portfolio is somewhat geographically diverse. Non-strategic and corporate segment run-off contributed to a majority of the $20.0 million net decrease in permanent mortgage period-end balances from December 31, 2016, to September 30, 2017.

The permanent mortgage portfolios within the non-strategic and corporate segments are run-off portfolios. As a result, asset quality metrics may become skewed as the portfolio shrinks and some of the stronger borrowers payoff or refinance elsewhere. The ALLL decreased $.6 million as of September 30, 2017, from $16.3 million as of December 31, 2016. TDR reserves (which are estimates of losses for the expected life of the loan) comprise 80 percent of the ALLL for the permanent mortgage portfolio as of September 30, 2017. Consolidated accruing delinquencies as a percentage of total loans decreased 85 basis points from year-end to 1.51 percent as of September 30, 2017. Nonperforming loans increased slightly from December 31, 2016, to $27.4 million as of September 30, 2017. The portfolio experienced net recoveries of $.4 million in third quarter 2017 compared to net charge-offs of $.1 million in third quarter 2016. The following table shows permanent mortgage asset quality trends by segment.

~~Table 15—Permanent Mortgage Asset Quality Trends by Segment~~

2017
Three months ended
(Dollars in thousands) Regional Bank Corporate (a) Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 1,981
         N/A $ 14,417
$ 16,398
Charge-offs —
         N/A (173 ) (173 )
Recoveries —
         N/A 542
542
Provision/(provision credit) for loan losses 287
         N/A (1,335 ) (1,048 )
Allowance for loan losses as of September 30 $ 2,268
         N/A $ 13,451
$ 15,719
Net charge-offs % (qtr. annualized) — %          N/A          NM          NM
Allowance / net charge-offs          NM          N/A          NM          NM

As of September 30
Period-end loans $ 106,002
$ 57,891
$ 239,189
$ 403,082
Nonperforming loans 435
2,173
24,842
27,450
Troubled debt restructurings 955
3,676
79,450
84,081
30+ Delinq. % (b) 0.72 % 4.22 % 1.20 % 1.51 %
NPL % 0.41
3.75
10.39
6.81
Allowance / loans % 2.14
         N/A 5.62
3.90

2016
Three months ended
(Dollars in thousands) Regional Bank Corporate (a) Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 579
         N/A $ 17,021
$ 17,600
Charge-offs —
         N/A (373 ) (373 )
Recoveries —
         N/A 239
239
Provision/(provision credit) for loan losses 461
         N/A (1,338 ) (877 )
Allowance for loan losses as of September 30 $ 1,040
         N/A $ 15,549
$ 16,589
Net charge-offs % (qtr. annualized) — %          N/A 0.18 % 0.12 %
Allowance / net charge-offs          NM          N/A 29.16 x 31.11 x

As of December 31
Period-end loans $ 76,973
$ 71,380
$ 274,772
$ 423,125
Nonperforming loans 393
1,186
25,602
27,181
Troubled debt restructurings 878
3,792
89,256
93,926
30+ Delinq. % (b) 0.72 % 4.37 % 2.29 % 2.36 %
NPL % 0.51
1.66
9.32
6.42
Allowance / loans % 1.58
         N/A 5.49
3.85

~~NM—Not meaningful~~

~~Loans are expressed net of unearned income.~~


~~(a)~~	~~An allowance has not been established~~prior periods were revised for ~~these loans as the valuation adjustment taken upon exercise of clean-up calls included expected losses.~~comparability.


(b)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 100

Credit Card and Other

The credit card and other portfolio, which is primarily within the regional banking segment, was ~~$.4~~$.5 billion as of ~~September 30, 2017,~~March 31, 2020, and primarily includes credit card receivables, other consumer-related credits, and automobile loans. The allowance ~~decreased~~increased to ~~$10.3~~$19.3 million as of ~~September 30, 2017,~~March 31, 2020, from ~~$12.2~~$13.3 million as of December 31, ~~2016.~~2019, primarily driven by the sudden, steep decline in the

economic forecast attributable to the COVID-19 pandemic and the adoption of ASU 2016-13. Loans 30 days or more delinquent and accruing as a percentage of loans ~~decreased 28~~increased 6 basis points from December 31, ~~2016,~~2019, to ~~.89~~.99 percent as of ~~September 30, 2017. In third~~March 31, 2020. Net charge-offs were $2.6 million in first quarter ~~2017, FHN recognized $2.5 million of net charge-offs in the credit card and other portfolio,~~2020 compared to ~~$2.7~~$3.1 million in ~~third~~first quarter ~~2016. The following table shows credit card and other asset quality trends by segment.~~2019.

Table 16—Credit Card and Other Asset Quality Trends by Segment

2017
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 11,917
$ 24
$ 11,941

Charge-offs (3,100 ) (73 ) (3,173 )
Recoveries 617
54
671

Provision/(provision credit) for loan losses 842
40
882

Allowance for loan losses as of September 30 $ 10,276
$ 45
$ 10,321

Net charge-offs % (qtr. annualized) 2.83 % 1.14 % 2.80 %
Allowance / net charge-offs 1.04 x 0.60 x 1.04 x

As of September 30
Period-end loans $ 343,864
$ 6,569
$ 350,433

Nonperforming loans —
126
126

Troubled debt restructurings 500
44
544

30+ Delinq. % (a) 0.88 % 1.44 % 0.89 %
NPL % —
1.92
0.04

Allowance / loans % 2.99
0.69
2.95

2016
Three months ended
(Dollars in thousands) Regional Bank Non-Strategic Consolidated
Allowance for loan losses as of July 1 $ 11,633
$ 257
$ 11,890

Charge-offs (3,550 ) (39 ) (3,589 )
Recoveries 835
71
906

Provision/(provision credit) for loan losses 3,328
(88 ) 3,240

Allowance for loan losses as of September 30 $ 12,246
$ 201
$ 12,447

Net charge-offs % (qtr. annualized) 3.06 % NM 2.95 %
Allowance / net charge-offs 1.13 x NM 1.17 x

As of December 31
Period-end loans $ 351,198
$ 7,835
$ 359,033

Nonperforming loans —
142
142

Troubled debt restructurings 274
32
306

30+ Delinq. % (a) 1.16 % 1.73 % 1.17 %
NPL % —
1.82
0.04

Allowance / loans % 3.42
2.26
3.39



	2020
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	13,235		$	31		$	13,266
ASU Adoption 2016-13	1,607			361			1,968
Charge-offs	(3,408		)	(403		)	(3,811		)
Recoveries	915			264			1,179
Provision/(provision credit) for loan losses	6,654			71			6,725
Allowance for loan losses as of March 31	$	19,003		$	324		$	19,327
Net charge-offs % (qtr. annualized)	2.14		%	1.82		%	2.12		%
Allowance / net charge-offs	1.89		x	0.58		x	1.83		x

	As of March 31
Period-end loans	$	468,183		$	26,615		$	494,798
Nonperforming loans	109			251			360
Troubled debt restructurings	667			32			699
30+ Delinq. % (a)	0.90		%	2.60		%	0.99		%
NPL %	0.02			0.94			0.07
Allowance / loans %	4.06			1.21			3.91

	2019
	Three months ended
(Dollars in thousands)	Regional Bank			Non-Strategic			Consolidated
Allowance for loan losses as of January 1	$	12,595		$	132		$	12,727
Charge-offs	(3,002		)	(1,186		)	(4,188		)
Recoveries	745			342			1,087
Provision/(provision credit) for loan losses	2,179			857			3,036
Allowance for loan losses as of March 31	$	12,517		$	145		$	12,662
Net charge-offs % (qtr. annualized)	2.10		%	4.35		%	2.44		%
Allowance / net charge-offs	1.37		x	0.04		x	1.01		x

	As of December 31
Period-end loans	$	460,742		$	35,122		$	495,864
Nonperforming loans	36			298			334
Troubled debt restructurings	615			38			653
30+ Delinq. % (a)	0.69		%	4.05		%	0.93		%
NPL %	0.01			0.85			0.07
Allowance / loans %	2.87			0.09			2.68

NM—Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 101

The following table provides additional asset quality data by loan portfolio:

Table 17—Asset Quality by Portfolio


	September 30			December 31			March 31			December 31
	2017			2016			2020			2019
Key Portfolio Details
C&I
Period-end loans ($ millions)	$	12,792		$	12,148		$	22,124		$	20,051
30+ Delinq. % (a)	0.27		%	0.08		%	0.08		%	0.05		%
NPL %	0.15			0.27			0.43			0.37
Charge-offs % (qtr. annualized)	0.10			NM			0.12			0.07
Allowance / loans %	0.77		%	0.74		%	1.15		%	0.61		%
Allowance / net charge-offs	7.97		x	NM			10.88		x	9.25		x
Commercial Real Estate
Period-end loans ($ millions)	$	2,251		$	2,136		$	4,640		$	4,337
30+ Delinq. % (a)	0.02		%	0.01		%	0.01		%	0.02		%
NPL %	0.07			0.13			0.05			0.04
Charge-offs % (qtr. annualized)	NM			0.09			—			NM
Allowance / loans %	1.32		%	1.59		%	1.03		%	0.83		%
Allowance / net charge-offs	NM			17.56		x	NM			NM
Consumer Real Estate(b)
Period-end loans ($ millions)	$	4,370		$	4,524		$	6,119		$	6,177
30+ Delinq. % (a)	0.74		%	0.93		%	0.66		%	0.70		%
NPL %	1.76			1.83			1.49			1.39
Charge-offs % (qtr. annualized)	NM			NM			NM			NM
Allowance / loans %	0.94		%	1.11		%	2.01		%	0.46		%
Allowance / net charge-offs	NM			NM			NM			NM
Permanent Mortgage
Period-end loans ($ millions)	$	403		$	423
30+ Delinq. % (a)	1.51		%	2.36		%
NPL %	6.81			6.42
Charge-offs % (qtr. annualized)	NM			NM
Allowance / loans %	3.90		%	3.85		%
Allowance / net charge-offs	NM			NM
Credit Card and Other
Period-end loans ($ millions)	$	350		$	359		$	495		$	496
30+ Delinq. % (a)	0.89		%	1.17		%	0.99		%	0.93		%
NPL %	0.04			0.04			0.07			0.07
Charge-offs % (qtr. annualized)	2.80			3.25			2.12			2.29
Allowance / loans %	2.95		%	3.39		%	3.91		%	2.68		%
Allowance / net charge-offs	1.04		x	1.04		x	1.83		x	1.14		x

NM – Not meaningful

Loans are expressed net of unearned income.


(a)	30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.


(b)	In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all prior periods were revised for comparability.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 102

Allowance for Loan Losses

Management’s policy is to maintain the ALLL at a level sufficient to ~~absorb estimated probable incurred~~recognize current expected credit losses inon the amortized cost basis of the loan portfolio. The total allowance for loan losses ~~decreased~~increased to ~~$194.9~~$444.5 million on ~~September 30, 2017,~~March 31, 2020, from ~~$202.1~~$200.3 million on December 31, ~~2016.~~2019. The ALLL as of ~~September 30, 2017,~~March 31, 2020, reflects ~~strong asset quality with~~ the ~~consumer real estate portfolio continuing~~adoption of ASU 2016-13 on January 1, 2020 and the sudden, steep decline in the economic forecast attributable to ~~stabilize, historically low levels of net charge-offs, and declining non-strategic balances.~~the COVID-19 pandemic. The ratio of allowance for ~~loan~~credit losses to total loans, net of unearned income, ~~decreased~~increase 69 basis points to ~~.97~~1.33 percent on ~~September 30, 2017, from 1.03~~March 31, 2020, compared to .64 percent on December 31, ~~2016.~~2019.

The provision for loan losses is the charge to or release of earnings necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of ~~probable incurred~~current expected losses inon the amortized cost basis of the loan portfolio. ~~There~~Provision expense was no$145.0 million in first quarter 2020, compared to $9.0 million provision expense ~~recorded~~ in ~~third~~first quarter ~~2017 compared~~2019. The increase is primarily attributable to ~~a provision expense of $4.0 million in third quarter 2016.~~the declining economic forecast attributable to the COVID-19 pandemic.

FHN expects asset quality trends to ~~remain relatively stable for~~be impacted by the ~~near term if~~economic uncertainty attributable to the ~~slow growth of the economy continues.~~COVID-19 pandemic. The C&I portfolio ~~is expected~~reflects a broad mix of categories with the heaviest concentration in loans to ~~continue to show stable trends but short-term variability (both positive and negative) is possible primarily due to the size of the credits within this portfolio.~~mortgage companies which carry minimal credit risk. The CRE portfolio metrics ~~should~~could be ~~relatively consistent as FHN expects stable property values over~~impacted by the ~~near term;~~COVID-19 pandemic due to travel and occupancy restrictions set by state and local governments affecting CRE- Hospitality and CRE-Retail. The consumer portfolio could be impacted by the COVID-19 pandemic if consumer unemployment continues to rise and customers are unable to continue making loan payments. The consumer portfolio however ~~oversupply of any CRE product type, changes in the lending environment, or economic uncertainty could result in decreased property values (which could happen abruptly).~~is high quality with no subprime and minimal exposure to high risk lending. The remaining non-strategic consumer real estate ~~and permanent mortgage portfolios~~ should continue to steadily wind ~~down.~~down; however, it could be impacted if unemployment continues to rise and borrowers have difficulty making loan payments. Asset quality metrics within non-strategic ~~may~~have become skewed as the portfolio continues to shrink. Continued stabilization in performance of the consumer real estate portfolio assumes an ongoing economic recovery as consumer delinquency and loss rates are correlated with life events that affect borrowers' finances, unemployment trends, and strength of the housing market.

Consolidated Net Charge-offs

~~Overall, net charge-offs continue to be at historical lows. Third~~In first quarter ~~2017~~2020, FHN experienced net charge-offs of ~~$2.4~~$7.2 million compared to ~~$2.3~~$4.5 million of net charge-offs in ~~third~~first quarter ~~2016.~~2019.

The commercial portfolio experienced ~~$2.8~~$5.8 million of net charge-offs in ~~third~~first quarter ~~2017~~2020 compared to ~~$.7~~$2.6 million in ~~third~~net charge-offs in first quarter ~~2016.~~2019. In addition, the consumer real estate portfolio experienced net recoveries of $1.2 million in both first quarter 2020 and first quarter 2019. Credit card and other consumer experienced net charge-offs of $2.6 million in ~~third~~first quarter ~~2017~~2020 compared to ~~$1.2~~$3.1 million ~~in net recoveries during third quarter 2016. Permanent mortgage and credit card and other remained relatively flat compared to~~ a year ago.

Nonperforming Assets

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on a case-by-case basis if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans in which FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy, and second liens, regardless of delinquency status, behind first liens that are 90 or more days past due, are bankruptcies, or are TDRs. These, along with OREO, excluding OREO from government insured mortgages, represent nonperforming assets (“NPAs”).

Total nonperforming assets (including NPLs HFS) ~~decreased~~increased to ~~$140.2~~$207.3 million on ~~September 30, 2017,~~March 31, 2020, from ~~$164.6~~$181.9 million on December 31, ~~2016.~~2019. The nonperforming assets ratio (nonperforming assets excluding NPLs HFS to total period-end loans plus OREO and other assets) ~~decreased~~increased to ~~.66~~.61 percent as of ~~September 30, 2017, compared to .80~~March 31, 2020, from .57 percent as of December 31, ~~2016.~~2019. Portfolio nonperforming loans ~~declined $20.7~~increased to $189.8 million as of March 31, 2020, from $162.2 million as of December 31, ~~2016, to $125.0 million on September 30, 2017.~~2019. The ~~decline~~increase in nonperforming loans was ~~primarily~~ driven by ~~decreases within~~ the C&I ~~and consumer real estate portfolios. This decrease in the C&I portfolio was largely driven by payoffs.~~portfolio.

The ratio of the ALLL to NPLs in the loan portfolio was ~~1.56~~2.34 times as of ~~September 30, 2017,~~March 31, 2020, compared to ~~1.39~~1.24 times as of December 31, ~~2016.~~2019. Certain nonperforming loans in both the commercial and consumer portfolios are deemed collateral-dependent and are charged down to an estimate of collateral value less costs to sell. Because loss content has been recognized through a partial charge-off, typically reserves are not recorded.

Table 1819 provides an activity rollforward of OREO balances for ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019. The balance of OREO, exclusive of inventory from government insured mortgages, decreased to ~~$7.9~~$13.9 million as of ~~September 30, 2017, from $13.7 million~~March 31, 2020, from $20.7 million as of ~~September 30, 2016, as FHN has executed sales~~March 31, 2019, driven by the sale of ~~existing OREO and continued efforts to avoid foreclosures by~~

~~restructuring loans and working with borrowers. Additionally,~~OREO. Moreover, property values have stabilized which also affects the balance of OREO.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 103

Table 18—Rollforward of OREO



	Three Months Ended March 31
(Dollars in thousands)	2020			2019
Beginning balance	$	15,660		$	22,387
Valuation adjustments	(27		)	35
New foreclosed property	928			1,607
Disposal	(2,680		)	(3,353		)
Ending balance, March 31 (a)	$	13,881		$	20,676

Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
Beginning balance $ 7,038
$ 14,150
$ 11,235
$ 24,977
Valuation adjustments (41 ) (711 ) (662 ) (1,561 )
New foreclosed property 2,434
3,745
5,280
7,291
Disposals:
Single transactions (1,554 ) (3,506 ) (7,976 ) (17,029 )
Ending balance, September 30 (a) $ 7,877
$ 13,678
$ 7,877
$ 13,678


(a)	Excludes OREO and receivables related to government insured mortgages of ~~$6.5~~$7.8 million and ~~$6.4~~$3.4 million as of ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively.

The following table provides consolidated asset quality information for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, and as of ~~September 30, 2017,~~March 31, 2020, and December 31, ~~2016:~~2019:

Table 19—Asset Quality Information


	Three Months Ended September 30						Three Months Ended March 31
(Dollars in thousands)	2017			2016			2020			2019
Allowance for loan losses:
Beginning balance on July 1	$	197,257		$	199,807
Beginning balance on January 1							$	200,307		$	180,424
ASU Adoption 2016-13							106,394			—
Provision/(provision credit) for loan losses	—			4,000			145,000			9,000
Charge-offs	(10,670		)	(10,362		)	(13,453		)	(10,527		)
Recoveries	8,280			8,112			6,242			6,014
Ending balance on September 30	$	194,867		$	201,557
Ending balance on March 31							$	444,490		$	184,911
Reserve for remaining unfunded commitments	4,372			4,802			39,303			8,014
Total allowance for loan losses and reserve for unfunded commitments	$	199,239		$	206,359		$	483,793		$	192,925
Key ratios
Allowance / net charge-offs (a)	20.55		x	22.51		x	15.33		x	10.10		x
Net charge-offs % (b)	0.05		%	0.05		%	0.10		%	0.07		%

	As of September 30			As of December 31			As of March 31			As of December 31
Nonperforming Assets by Segment	2017			2016			2020			2019
Regional Banking:
Nonperforming loans (c)	$	40,610		$	50,653		$	142,916		$	113,187
OREO (d)	2,848			5,081
OREO (e)							10,278			12,347
Total Regional Banking	43,458			55,734			153,194			125,534
Non-Strategic:
Nonperforming loans (c)	82,203			93,808			45,595			47,651
Nonperforming loans held-for-sale net of fair value adjustment (c)	7,314			7,741			3,611			4,047
OREO (d)	5,029			6,154
OREO (e)							3,603			3,313
Total Non-Strategic	94,546			107,703			52,809			55,011
Corporate:
Nonperforming loans (c)	2,173			1,186			1,302			1,327
Total Corporate	2,173			1,186			1,302			1,327
Total nonperforming assets (c) (d)	$	140,177		$	164,623		$	207,305		$	181,872

NM - Not meaningful.


(a)	Ratio is total allowance divided by annualized net charge-offs.


(b)	Ratio is annualized net charge-offs divided by quarterly average loans, net of unearned income.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 104


(c)	Excludes loans that are 90 or more days past due and still accruing interest.


(d)	Excludes OREO from government-insured mortgages.


	As of September 30			As of December 31			As of March 31			As of December 31
	2017			2016			2020			2019
Loans and commitments:
Total period-end loans, net of unearned income	$	20,166,091		$	19,589,520		$	33,378,303		$	31,061,111
Potential problem assets (a)	280,358			290,354			411,122			346,896
Loans 30 to 89 days past due	45,248			42,570			48,498			36,052
Loans 90 days past due (b) (c)	30,950			23,385			14,144			21,859
Loans held-for-sale 30 to 89 days past due ~~(d)~~(c)	34,325			6,462			4,164			3,732
Loans held-for-sale 30 to 89 days past due—guaranteed portion (d) (e)	33,877			6,248
Loans held-for-sale 90 days past due (c) (d)	10,075			14,868
Loans held-for-sale 90 days past due—guaranteed portion (c) (d) (e)	9,932			14,657
Loans held-for-sale 30 to 89 days past due—guaranteed portion (c) (d)							4,049			3,424
Loans held-for-sale 90 days past due (c)							5,397			6,484
Loans held-for-sale 90 days past due—guaranteed portion (c) (d)							5,165			6,417
Remaining unfunded commitments	$	8,868,115		$	8,744,649		$	10,966,768		$	12,355,220
Key ratios
Allowance / loans %	0.97		%	1.03		%	1.33		%	0.64		%
Allowance / NPL	1.56		x	1.39		x	2.34		x	1.24		x
NPA % ~~(f)~~(e)	0.66		%	0.80		%	0.61		%	0.57		%
NPL %	0.62		%	0.74		%	0.57		%	0.52		%


(a)	Includes past due loans.


(b)	Excludes loans classified as held-for-sale.


(c)	Amounts are not included in nonperforming/nonaccrual loans.


(d)	~~2017 includes loans related to the Coastal acquisition.~~


~~(e)~~	Guaranteed loans include FHA, VA, SBA, USDA, and GNMA loans repurchased through the GNMA buyout program.


~~(f)~~(e)	Ratio is non-performing assets related to the loan portfolio to total loans plus OREO and other assets.

Past Due Loans and Potential Problem Assets

Past due loans are loans ~~contractually~~contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. Loans in the portfolio that are 90 days or more past due and still accruing were ~~$31.0~~$14.1 million on ~~September 30, 2017,~~March 31, 2020, compared to ~~$23.4~~$21.9 million on December 31, ~~2016. The increase was due in large part to one relationship, which is a purchased credit-impaired loan.~~2019. Loans 30 to 89 days past due ~~increased to $45.2~~were $48.5 million on ~~September 30, 2017, from $42.6~~March 31, 2020, compared to $36.1 million on December 31, ~~2016.~~2019. The increase was primarily driven by the C&I portfolio.

Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms and includes loans past due 90 days or more and still accruing. This definition is believed to be substantially consistent with the standards established by ~~the OCC~~Federal banking regulators for loans classified as substandard. Potential problem assets in the loan ~~portfolio~~portfolio were ~~$280.4~~$411.1 million on ~~September 30, 2017, $290.4~~March 31, 2020, $346.9 million on December 31, ~~2016,~~2019, and ~~$255.4~~$270.4 million on ~~September 30, 2016.~~March 31, 2019. The ~~decline from year-end~~increase in potential problem assets compared to December 31, 2019 was due to a net ~~decrease~~increase in classified commercial loans ~~driven by~~within the ~~payoff of a few credits.~~C&I portfolio. The current expectation of losses from potential problem assets has been included in management’s analysis for assessing the ~~adequacy~~adequacy of the allowance for loan losses.

Troubled Debt Restructuring and Loan Modifications

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when appropriate 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. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, FHN identifies and reports that loan as a Troubled Debt Restructuring (“TDR”). See Note 4 – Loans for further discussion regarding TDRs and loan modifications.

On ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, FHN had ~~$241.6~~$194.7 million and ~~$285.2~~$206.3 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of ~~$38.6~~$13.9 million and ~~$44.9~~$19.7 million, or 167 percent and 10 percent of TDR balances, as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019, respectively. Additionally, FHN had ~~$63.2~~$50.5 million and ~~$69.3~~$51.1 million of HFS loans classified as TDRs as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. ~~Total held-to-maturity TDRs decreased by $43.6 million with the majority of the decline attributable to consumer real estate, commercial and~~

~~permanent mortgage loans. Generally, the volume of new TDRs, particularly within the consumer real estate and permanent mortgage portfolios, has substantially declined.~~FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 105

The following table provides a summary of TDRs for the periods ended ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:

Table 20—Troubled Debt Restructurings


(Dollars in thousands)	As of September 30, 2017		As of December 31, 2016		As of March 31, 2020		As of December 31, 2019
Held-to-maturity:
Permanent mortgage:
Consumer real estate (a):
Current	$	65,215	$	73,500	98,965		105,525
Delinquent	1,657		2,751		4,871		4,634
Non-accrual ~~(a)~~(b)	17,209		17,675		48,557		52,087
Total permanent mortgage	84,081		93,926
Consumer real estate:
Current	87,732		100,383
Delinquent	3,889		4,618
Non-accrual ~~(b)~~	44,237		48,459
Total consumer real estate	135,858		153,460		152,393		162,246
Credit card and other:
Current	512		288		654		615
Delinquent	32		18		45		38
Non-accrual	—		—
Non-accrual ~~(b)~~					—		—
Total credit card and other	544		306		699		653
Commercial loans:
Current	16,412		21,887		10,401		10,558
Delinquent	88		—		—		—
Non-accrual	4,616		15,571		31,191		32,841
Total commercial loans	21,116		37,458		41,592		43,399
Total held-to-maturity	$	241,599	$	285,150	$	194,684	$	206,298
Held-for-sale:
Current	$	43,864	$	46,625	$	38,914	$	39,014
Delinquent	13,956		16,436		7,555		8,008
Non-accrual	5,347		6,283		4,042		4,106
Total held-for-sale	63,167		69,344		50,511		51,128
Total troubled debt restructurings	$	304,766	$	354,494	$	245,195	$	257,426


(a)	~~Balances as of September 30, 2017 and December 31, 2016, include $5.5 million and $5.3 million, respectively, of discharged bankruptcies.~~In first quarter 2020, the Permanent Mortgage portfolio was combined into Consumer Real Estate portfolio, all prior periods were revised for comparability.


(b)	Balances as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, include ~~$14.9~~$12.1 million and ~~$15.3~~$12.6 million, respectively, of discharged bankruptcies.

~~RISK MANAGEMENT~~

~~Except as discussed below, there~~



Risk Management

There have been no significant changes to FHN’s risk management practices as described under “Risk Management” beginning on page 4788 of ~~Exhibit 13~~Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

MARKET RISK MANAGEMENT

~~Except as discussed below, there~~There have been no significant changes to FHN’s market risk management practices as described under “Market Risk Management” beginning onon page 4889 of ~~Exhibit 13~~Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Value-at-Risk (“VaR”) and Stress Testing

VaR is a statistical risk measure used to estimate the potential loss in value from adverse market movements over an assumed fixed holding period within a stated confidence level. FHN employs a model to compute daily VaR measures for its trading securities inventory. FHN computes VaR using historical simulation with a 1-year lookback period at a 99 percent confidence level and 1-day and 10-day time horizons. Additionally, FHN computes a Stressed VaR (“SVaR”) measure. The SVaR computation uses the same model but with model inputs reflecting historical data from a continuous 12-month period that reflects a period of significant financial stress appropriate for our trading securities portfolio.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 106

A summary of FHN’s VaR and SVaR measures for 1-day and 10-day time horizons is as follows:

Table 21—VaR and SVaR Measures


	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017						As of September 30, 2017		Three Months Ended March 31, 2020						As of March 31, 2020
(Dollars in thousands)	Mean		High		Low		Mean		High		Low				Mean		High		Low
1-day
VaR	$	1,620	$	3,310	$	521	$	1,450	$	3,310	$	521	$	3,174	$	2,291	$	6,783	$	1,023	$	4,970
SVaR	4,575		7,781		2,150		4,023		7,781		1,775		6,805		8,526		17,727		4,592		4,970
10-day
VaR	4,112		8,039		870		3,538		8,039		870		6,302		6,940		24,880		1,807		18,568
SVaR	15,021		22,511		7,833		13,390		24,550		4,916		18,602		26,510		43,221		15,887		18,568

	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016						As of September 30, 2016		Three Months Ended March 31, 2019						As of March 31, 2019
(Dollars in thousands)	Mean		High		Low		Mean		High		Low				Mean		High		Low
1-day
VaR	$	814	$	1,040	$	606	$	769	$	1,411	$	393	$	880	$	1,433	$	1,907	$	1,018	$	1,307
SVaR	3,823		5,641		2,253		3,607		5,789		1,748		4,017		8,243		9,629		6,242		8,144
10-day
VaR	1,917		3,167		1,170		1,848		4,058		751		2,998		3,390		4,280		2,592		3,046
SVaR	12,439		18,221		7,105		11,703		18,221		3,263		12,055		21,757		28,086		16,032		21,812

							Year Ended December 31, 2016						As of December 31, 2016		Year Ended December 31, 2019						As of December 31, 2019
(Dollars in thousands)							Mean		High		Low				Mean		High		Low
1-day
VaR							$	821	$	1,745	$	393	$	932	$	1,068	$	1,907	$	503	$	1,325
SVaR							3,643		5,789		1,748		2,830		6,198		9,629		3,157		4,579
10-day
VaR							2,088		5,852		751		2,136		2,824		7,000		1,499		2,233
SVaR							11,671		18,483		3,263		6,443		17,367		28,086		8,803		14,975

First quarter 2020 VaR and SVaR increased due to extreme volatility as a result of economic uncertainty associated with the COVID-19 pandemic.

FHN’s overall VaR measure includes both interest rate risk and credit spread risk. Separate measures of these component risks are as follows:

Table 22—Schedule of Risks Included in VaR


	As of September 30, 2017				As of September 30, 2016				As of December 31, 2016				As of March 31, 2020				As of March 31, 2019				As of December 31, 2019
(Dollars in thousands)	1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day		1-day		10-day
Interest rate risk	$	2,055	$	8,334	$	683	$	1,436	$	917	$	1,771	$	1,255	$	2,628	$	560	$	1,412	$	693	$	3,929
Credit spread risk	370		701		785		2,710		537		1,391		2,301		11,758		398		726		417		828

First quarter 2020 VaR and SVaR increased due to extreme volatility as a result of economic uncertainty associated with the COVID-19 pandemic.

The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static. Because FHN’s Fixed Income division procures fixed income securities for purposes of distribution to customers, its trading securities inventory turns over ~~multiple times daily, on average.~~ regularly.

Additionally, Fixed Income traders actively manage the trading securities

inventory continuously throughout each trading day. Accordingly, FHN’s trading securities inventory is highly dynamic, rather than static. As a result, it would be rare for Fixed Income to incur a negative

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 107

revenue day in its fixed income activities of the level indicated by its VaR measurements.

In addition to being used in FHN’s daily market risk management process, the VaR and SVaR measures are also used by FHN in computing its regulatory market risk capital requirements in accordance with the Market Risk Capital rules. For additional information regarding FHN's capital adequacy refer to the "Capital" section of this MD&A.

FHN also performs stress tests on its trading securities portfolio to calculate the potential loss under various assumed market scenarios. Key assumed stresses used in those tests are:

Down 25 bps - assumes an instantaneous downward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Up 25 bps - assumes an instantaneous upward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Curve flattening - assumes an instantaneous flattening of the interest rate yield curve through an increase in short-term rates and a decrease in long-term rates. The 2-year point on the Treasury yield curve is assumed to increase 15 basis points and the 10-year point on the Treasury yield curve is assumed to decrease 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Curve steepening - assumes an instantaneous steepening of the interest rate yield curve through a decrease in short-term rates and an increase in long-term rates. The 2-year point on the Treasury yield curve is assumed to decrease 15 basis points and the 10-year point on the Treasury yield curve is assumed to increase 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Credit spread widening - assumes an instantaneous increase in credit spreads (the difference between yields on Treasury securities and non-Treasury securities) of 25 basis points.

Model Validation

Trading risk management personnel within Fixed Income have primary responsibility for model risk management with respect to the model used by FHN to compute its VaR measures and perform stress testing on the trading inventory. Among other procedures, these personnel monitor model results and perform periodic backtesting as part of an ongoing process of validating the accuracy of the model. These model risk management activities are subject to annual review by FHN’s Model Validation Group, an independent assurance group charged with oversight responsibility for FHN’s model risk management.

INTEREST RATE RISK MANAGEMENT

~~Except as disclosed below, there~~There have been no significant changes to FHN's interest rate risk management practices as described under "Interest Rate Risk Management" beginning onon page ~~50 of Exhibit 13~~90 of Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2019.

Net Interest Income Simulation Analysis

The information provided in this section, including the discussion regarding the outcomes of simulation analysis and rate shock analysis, is forward-looking. Actual results, if the assumed scenarios were to occur, could differ because of interest rate movements, the ability of management to execute its business plans, and other factors, including those presented in the Forward-Looking Statements section of this MD&A.

Management uses a simulation model to measure interest rate risk and to formulate strategies to improve balance sheet positioning, earnings, or both, within FHN’s interest rate risk, liquidity, and capital guidelines. Interest rate exposure is measured by forecasting 12 months of NII under various interest rate scenarios and comparing the percentage change in NII for each scenario to a base case scenario where interest rates remain unchanged. Assumptions are made regarding future balance sheet composition, interest rate movements, and loan and deposit pricing. In addition, assumptions are made about the magnitude of asset prepayments and earlier than anticipated deposit withdrawals. The results of these scenarios help FHN develop strategies for managing exposure to interest rate risk. While management believes the assumptions used and scenarios selected in its simulations are reasonable, simulation modeling provides only an estimate, not a precise calculation, of exposure to any given change in interest rates.

Based on a static balance sheet as of ~~September 30, 2017, net interest income exposure~~March 31, 2020, NII exposures over the next 12 months assuming a rate ~~shock~~shocks of plus 25 basis points, 50 basis points, 100 basis points, and 200 basis points isare estimated to have a favorable ~~variance~~variances of ~~1.0~~2.2 percent, ~~2.1~~3.5 percent, ~~4.1~~5.1 percent, and ~~7.7~~6.5 percent, respectively ofcompared to base ~~net interest income.~~NII. A steepening yield curve scenario where long-term rates increase by 50 basis points and short-term rates are static, results in a favorable NII variance ~~in net interest income~~ of ~~0.6 percent of base net interest income.~~1.7 percent. A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in an unfavorable NII variance ~~in net interest income~~ of ~~1.2 percent of base net interest income. A rate shock~~1.9 percent. Rate shocks of minus 25 basis points and ~~minus~~ 50 basis points ~~results~~result in an unfavorable ~~variance in net interest income~~NII variances of ~~1.5~~4.1 percent and ~~4.4 percent, respectively, of base net interest income.~~8.7 percent. These hypothetical scenarios are used to create a risk measurement framework, and do not necessarily represent management’s current view of future interest rates or market developments. ~~FHN reports its interest rate risk profile~~

During March 2020, the Federal Reserve lowered the Fed Funds range to 0.00% - 0.25%. However, due to

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 108

dislocation in the short end of the curve, LIBOR has remained elevated compared to the ~~Board quarterly.~~Fed Funds rate. As most of FHN’s assets are indexed to LIBOR while most of FHN’s floating liabilities are indexed to Fed Funds, this has a material impact on the shock scenarios.

FHN’s net interest income may be impacted by the disruption from the recent COVID-19 crisis. The increase in the unemployment rate, customer loan deferral requests, the impact of government assistance programs, and other developments could influence net interest income results. FHN is monitoring the current economic situation and potential exposures closely.

CAPITAL RISK MANAGEMENT AND ADEQUACY

There have been no significant changes to FHN's capital management practices as described under "Capital Risk Management and Adequacy" on ~~page 51~~page 91 of ~~Exhibit 13~~ Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

OPERATIONAL RISK MANAGEMENT

~~Except as discussed below, there~~There have been no significant changes to FHN's operational risk management practices as described under "Operational Risk Management" beginning on ~~page 52~~page 91 of ~~Exhibit 13~~ Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~FHN operates a Merger Project Office to manage the execution risk in connection with the Capital Bank merger.~~2019.

COMPLIANCE RISK MANAGEMENT

There have been no significant changes to FHN's compliance risk management practices as described under "Compliance Risk Management" on page 5292 of ~~Exhibit 13~~ Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

CREDIT RISK MANAGEMENT

There have been no significant changes to FHN's credit risk management practices as described under "Credit Risk Management" beginning on page 5292 of ~~Exhibit 13~~ Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

LIQUIDITY RISK MANAGEMENT

ALCO also focuses on liquidity management: the funding of assets with liabilities of appropriate duration, while mitigating the risk of unexpected cash needs. ALCO and the Board of Directors have adopted a Liquidity Policy. The objective of the Liquidity Policy is to ensure that FHN meets its cash and collateral obligations promptly, in a cost-effective manner and with the highest degree of reliability. The maintenance of adequate levels of asset and liability liquidity should provide FHN with the ability to meet both expected and unexpected cash and collateral needs. Key liquidity ratios, asset liquidity levels and the amount available from funding sources are reported to ALCO on a regular basis. FHN’s Liquidity Policy

establishes liquidity limits that are deemed appropriate for FHN’s risk profile.

In accordance with the Liquidity Policy, ALCO manages FHN’s exposure to liquidity risk through a dynamic, real time forecasting methodology. Base liquidity forecasts are reviewed by ALCO and are updated as financial conditions dictate. In addition to the baseline liquidity reports, robust stress testing of assumptions and funds availability are periodically reviewed. FHN maintains a contingency funding plan that may be executed, should unexpected difficulties arise in accessing funding that affects FHN, the industry as a whole, or both. Subject to market conditions and compliance with applicable regulatory requirements from time to time, funds are available from a number of sources including the available-for-sale securities portfolio, dealer and commercial customer repurchase agreements, access to the overnight and term Federal Funds markets, incremental borrowing capacity at the ~~FHLB~~FHLB ($~~1.4~~2.1 billion was available at ~~September 30, 2017)~~March 31, 2020), brokered deposits, loan sales, syndications, and access to the Federal Reserve ~~Banks.~~Bank.

Core deposits are a significant source of funding and have historically been a stable source of liquidity for banks. Generally, core deposits represent funding from a financial institution's customer base which provide inexpensive, predictable pricing. The Federal Deposit Insurance Corporation insures these deposits to the extent authorized by law. Generally, these limits are $250 thousand per account owner for interest bearing and non-interest bearing accounts. The ratio of total loans, excluding loans HFS and restricted real estate loans, to core deposits was ~~104~~100 percent on ~~September 30, 2017 compared~~March 31, 2020 compared to ~~105~~98 percent on December 31, ~~2016.~~

2019.

FHN also may use unsecured short-term borrowings as a source of liquidity. Currently, the largest concentration of unsecured borrowings is federal funds purchased from correspondent bank ~~correspondent~~ customers. These funds are considered to be substantially more stable than funds purchased in the national broker markets for federal funds due to the long, historical, and reciprocal nature of banking services provided by FHN to these correspondent banks. The remainder of FHN’s wholesale short-term borrowings is securities sold under agreements to repurchase transactions accounted for as secured borrowings with Regional Banking’s business customers or Fixed Income’s broker dealer counterparties.

Both FHN and ~~FTBNA~~First Horizon Bank may access the debt markets in order to provide funding through the issuance of senior or subordinated unsecured debt subject to market conditions and compliance with applicable regulatory requirements. In ~~2014, FTBNA~~April 2020, First Horizon Bank issued ~~$400~~$450 million of ~~fixed rate senior~~subordinated notes. These subordinated notes ~~due in December 2019. In October 2015,~~qualify as Tier 2 capital for First Horizon Bank as well as FHN, ~~issued $500 million of fixed rate senior notes due in December 2020.~~up to certain regulatory limits for minority interest capital instruments.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 109

Both FHN and ~~FTBNA~~First Horizon Bank have the ability to generate liquidity by issuing preferred equity, and (for FHN) by issuing common equity, subject to market conditions and compliance with applicable regulatory requirements. In January 2013, FHN issued $100 million of Non-Cumulative Perpetual Preferred Stock, Series A. As of ~~September 30, 2017, FTBNA~~March 31, 2020, First Horizon Bank and subsidiaries had outstanding preferred shares of $295.4 million, which are reflected as noncontrolling interest on the Consolidated Condensed Statements of Condition.

Parent company liquidity is primarily provided by cash flows stemming from dividends and interest payments collected from subsidiaries. These sources of cash represent the primary sources of funds to pay cash dividends to shareholders and principal and interest to debt holders of FHN. The amount paid to the parent company through ~~FTBNA~~First Horizon Bank common dividends is managed as part of FHN’s overall cash management process, subject to applicable regulatory restrictions.Certain regulatory restrictions exist regarding the ability of ~~FTBNA~~First Horizon Bank to transfer funds to FHN in the form of cash, common dividends, loans, or advances. At any given time, the pertinent portions of those regulatory restrictions allow ~~FTBNA~~First Horizon Bank to declare preferred or common dividends without prior regulatory approval in an aggregate amount equal to ~~FTBNA’s~~First Horizon Bank’s retained net income for the two most recent completed years plus the current year to date. For any period, ~~FTBNA’s~~First Horizon Bank’s ‘retained net income’ generally is equal to ~~FTBNA’s~~First Horizon Bank’s regulatory net income reduced by the preferred and common dividends declared by ~~FTBNA. Excess dividends in either of the two most recent completed years may be offset with available retained net income in the two years immediately preceding it.~~First Horizon Bank. Applying the dividend restrictions imposed under applicable federal and state rules ~~FTBNA’s~~as outlined above, the Bank’s total amount available for dividends was ~~negative $64.7~~$294.7 million as of ~~September 30, 2017 compared~~April 1, 2020. Additionally, a capital conservation buffer of 50 basis points above well-capitalized levels (equal to ~~negative $132.5 million~~an extra 2.5 percent above minimum levels) must be maintained on the Common Equity Tier 1, Tier 1 Capital and Total Capital ratios to avoid restrictions on dividends. Since the Total Capital ratio for First Horizon Bank fell slightly below the required buffer as of ~~December~~March 31, ~~2016. Consequently, FTBNA could not pay comm~~on2020, these capital conservation buffer rules limit the amount of dividends that the Bank can declare in second quarter 2020 to its sole common stockholder, FHN, or to its preferred shareholders without prior regulatory ~~approval. FTBNA applied for~~approval at $70.9 million. First Horizon Bank declared and ~~received approval from the OCC to declare and pay~~paid common dividends to ~~FHN in first, second, third and fourth quarter 2017 in~~ the ~~amounts of $40 million, $50 million, $80 million,~~ ~~and $80 million, respectively, and~~parent company in the amount of ~~$250~~$65 million in ~~2016. FTBNA~~first quarter 2020 and $345.0 million in 2019. First Horizon Bank declared and paid preferred dividends in ~~each~~first quarter ~~to date of 2017~~2020 and each quarter of ~~2016, with OCC approval as necessary.~~2019. Additionally, ~~FTBNA~~First Horizon Bank declared preferred dividends in ~~fourth~~second quarter ~~2017, with OCC approval.~~2020, payable in July 2020.

Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board. These factors include FHN’s current and

prospective capital, liquidity, and other needs, applicable regulatory restrictions, and also availability of funds to FHN through a dividend from ~~FTBNA.~~First Horizon Bank. FHN is subject to the capital conservation buffer requirements as described in the above paragraph for First Horizon Bank. Additionally, ~~the Federal Reserve and the OCC~~banking regulators generally require insured banks and bank holding companies to pay cash dividends only out of current operating earnings. Consequently, the decision of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results. FHN paid a cash dividend of ~~$.09~~$.15 per common share on ~~October 2, 2017,~~ April 1, 2020, and in ~~October 2017~~April 2020 the Board approved a ~~$.09~~$.15 per common share cash dividend payable on ~~January 2, 2018,~~July 1, 2020, to shareholders of record on ~~November 3, 2017.~~June 12, 2020. FHN paid a cash dividend of $1,550.00 per preferred share on ~~October~~April 10, ~~2017,~~2020, and in ~~October 2017~~April 2020 the Board approved a $1,550.00 per preferred share cash dividend payable on ~~January~~July 10, ~~2018,~~2020, to shareholders of record on ~~December 22, 2017.~~June 25, 2020.

CASH FLOWS

The Consolidated Condensed Statements of Cash Flows provide information on cash flows from operating, investing, and financing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019. The level of cash and cash equivalents ~~increased $50.0~~decreased $136.8 million during ~~2017 compared to an increase of $126.5~~first quarter 2020 and $192.5 million in ~~2016, as cash provided by financing activities more than offset cash used by operating and investing activities during both periods.~~first quarter 2019.

Net cash provided byin financing activities was ~~$621.8 million~~$3.7 billion in ~~2017,~~first quarter 2020, largely driven by an ~~increase in~~inflow of deposits and higher short-term borrowings (primarily FHLB ~~borrowings) used to fund loan growth, somewhat offset by a decline in market-indexed deposits.~~stock). Net cash used by investing activities was ~~$266.4 million~~$2.5 billion in ~~2017, as~~first quarter 2020, driven by strong loan growth and cash paid to acquire Coastal, was partially offset by a $459.8 million decrease in interest bearing cash. Net cash used by operating activities was $305.4 million in 2017. Operating cash decreased in the 2017 primarily due to net cash outflows of $501.2 million related to fixed income trading activities and

~~cash outflows of $85.0 million related to operating assets and liabilities, but were somewhat offset by favorably driven cash-related net income items.~~

~~Net cash provided by financing activities was $1.9 billion in 2016. Financing cash inflows in 2016 were positively affected by a $1.6 billion~~an increase in deposits and a $732.9 million increase in short-term borrowings, but were partially offset by $264.6 million in payments of long-term borrowings, which included the maturity of $250 million of subordinated notes. Net cash used by investing activities was $1.6 billion in 2016 and was primarily due to a $1.9 billion increase in loans, which included $537.4 million UPB of loans acquired from GE Capital. Cash outflows were partially offset by a $383.0 million decrease in interest-bearing cash. Net cash used by operating activities was ~~$262.3 million~~$1.4 billion in ~~2016. Operating cash decreased in 2016~~first quarter 2020 primarily ~~driven by~~due to net cash outflows of ~~net~~$407.9 million related to loans held-for-sale as purchases and originations outpaced proceeds from sales and settlements, $285.4 million related to fixed income trading activities and $323.8 million related to an increase in derivatives.

Net cash used in financing activities was $222.2 million in first quarter 2019, largely driven by a decrease in deposits, share repurchases and cash dividends paid during first quarter 2019, somewhat offset by an increase in other short-term borrowings, primarily FFP. Net cash used by investing activities was $92.7 million in first quarter 2019, largely driven by increases in loan balances somewhat offset by a decrease in interest-bearing cash and a net decrease in AFS debt securities, as maturities and sales outpaced purchases. Net cash provided by operating activities was $122.5 million in first quarter 2019 primarily due to net cash inflows of ~~$287.5~~$369.2 million ~~a $165~~related to fixed income trading activities and favorably driven cash-related

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 110

net income items, somewhat offset by outflows of $358.6 million ~~cash contribution~~related to ~~the qualified pension plan and net changes in operating assets and liabilities of $94.7 million.~~loans held-for-sale.

~~REPURCHASE OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS, AND OTHER CONTRACTUAL OBLIGATIONS~~



Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations

Obligations from ~~Legacy~~Pre-2009 Mortgage Businesses

[~~Certain mortgage-related terms used in this section are defined in “Mortgage-Related Glossary” below.]~~

~~Overview~~

Prior to September 2008 FHN originated loans through its ~~legacy mortgage~~pre-2009 mortgage business, primarily first lien home loans, with the intention of selling them. Sales typically were effected either as non-recourse whole loan sales or through non-recourse proprietary securitizations. Conventional conforming single-family residential mortgage loans were sold predominately to two ~~GSEs:~~government-sponsored entities, or "GSEs": Fannie Mae and Freddie Mac. Also, federally insured or guaranteed whole loans were pooled, and payments to investors were guaranteed through Ginnie Mae. Many mortgage loan originations, especially nonconforming mortgage loans, were sold to investors, or certificate-holders, predominantly through FHFirst Horizon proprietary securitizations but also, to a lesser extent, through other whole loans sold to private non-Agency purchasers. FHN used only one trustee for all of its FHFirst Horizon proprietary securitizations. In addition to First Horizon proprietary securitization and other whole loan sales activities, FHN also originated ~~mortgage loans eligible for FHA insurance or VA guaranty. In addition, FHN originated~~ and ~~sold HELOCs and sec~~ond lien mortgages through other whole loans sold to private purchasers and, to a lesser extent, through FH proprietary securitizations. Currently, only one FH securitization of HELOCs remains outstanding.

For non-recourse loan sales, FHN has exposure for repurchase of loans, make-whole damages, or other related damages, arising from claims that FHN breached its representations and warranties made at closing to the purchasers, including GSEs, other whole loan purchasers, and the trustee of FH proprietary securitizations.

During the time these legacy activities were conducted, FHN frequently sold mortgage loans “with servicing retained.” As a result, FHN accumulated substantial amounts of MSR on its balance sheet, as well as contractual servicing obligations and related deposits and receivables. FHN conducted a significant servicing business under its First Horizon Home Loans brand.

~~MI was required by GSE rules for certain of the loans sold to GSEs and was also provided for certain of the loans that were securitized. MI generally was provided for first lien loans~~sometimes sold or securitized ~~having an LTV ratio at origination~~second-lien, line of ~~greater than 80 percent.~~credit, and government-insured mortgage loans.

In 2007, market conditions deteriorated to the point where mortgage-backed securitizations could no longer be sold economically; FHN’s last securitization occurred that year. FHN continued selling mortgage loans to GSEs until August 31, 2008, when FHN sold its national mortgage origination and servicing platforms along with a portion of its servicing assets and obligations. FHN then contracted to have its remaining servicing obligations sub-serviced. Since the platform saleFrom these pre-2009 activities, FHN has ~~sold substantially all remaining servicing assets and~~incurred substantial losses stemming from obligations ~~in several transactions, concluding in 2014.~~

~~Repurchase and Make-Whole Obligations~~

~~Starting in 2009 FHN received a high number of claims either~~ to repurchase loans, ~~from the purchaser~~pay make-whole amounts, or ~~to pay the purchaser to “make them whole” for economic losses incurred. These~~otherwise resolve claims ~~have been driven primarily by loan delinquencies. In repurchase~~that loans which FHN originated, or ~~make-whole claims a loan purchaser typically asserts that specified loans violated representations and warranties FHN made when the~~FHN's servicing of those loans, were ~~sold. A significant majority of~~deficient in a manner for which FHN was liable. Many years ago, FHN established a repurchase and foreclosure liability, or reserve, in connection with those claims. FHN has settled many claims, ~~received overall have come from GSEs,~~ and the ~~remainder are from purchasers of other whole loan sales. FHN has not received~~reserve is reduced each time a ~~loan repurchase or make-whole~~ claim ~~from the FH proprietary securitization trustee.~~

~~Generally, FHN reviews each claim and MI cancellation notice individually. FHN’s responses include appeal, provide additional information, deny the claim (rescission), repurchase the loan or remit a make-whole payment, or reflect cancellation of MI.~~

~~After several years resolving repurchase and make-whole claims with each GSE on a loan-by-loan basis,~~is settled. As discussed in 2013 and 2014 FHN entered into DRAs with the GSEs, resolving a large fraction of potential claims. Starting in 2014 the overall number of such claims diminished substantially, primarily as a result of the DRAs. Each DRA resolved obligations associated with loans originated from 2000 to 2008, but certain obligations and loans were excluded. Under each DRA, FHN remains responsible for repurchase obligations related to certain excluded defects (such as title defects and violations of the GSE’s Charter Act) and FHN continues to have loan repurchase or monetary compensation obligations under the DRAs related to private mortgage insurance rescissions, cancellations, and denials (with certain exceptions). FHN also has exposure related to loans where there has been a prior bulk sale of servicing, as well as certain other whole-loan sales. With respect to loans where there has been a prior bulk sale of servicing, FHN is not responsible for MI cancellations and denials to the extent attributable to the acts of the current servicer.

While large portions of repurchase claims from the GSEs were settled with the DRAs, comprehensive settlement of repurchase, make-whole, and indemnity claims with non-Agency claimants is not practical. Such claims that are not resolved by the parties can, and sometimes have, become litigation.

~~FH Proprietary Securitization Actions~~

FHN has potential financial exposure from FH proprietary securitizations outside of the repurchase/make-whole process. Several investors in certificates sued FHN and others starting in 2009, and several underwriters or other counterparties have demanded that FHN indemnify and defend them in securitization lawsuits. The pending suits generally assert that disclosures made to investors in the offering and sale of certificates were legally deficient. A number of those matters have settled or otherwise been resolved. See Note 10 –- Contingencies and Other Disclosures, FHN's principal remaining exposures for ~~a discussion~~those activities relate to (i) indemnification claims by underwriters, loan purchasers, and other parties which assert that FHN-originated loans caused or contributed to losses which FHN is legally obliged to indemnify, and (ii) indemnification or other claims related to FHN's servicing of ~~certain actions pending against FHN in relation to FH proprietary securitizations.~~pre-2009 mortgage loans.

Servicing Obligations

~~FHN’s~~FHN's national servicing business was sold as part of the platform sale in 2008. A significant amount of ~~MSR~~mortgage servicing rights ("MSR") was sold at that time, and a significant amount was retained. The related servicing activities, including foreclosure and loss mitigation practices, not sold in 2008 were outsourced ~~through~~including a ~~three-year~~ subservicing arrangement ~~(the “2008 subservicing agreement”) with the platform buyer (the “2008 subservicer”). The 2008 subservicing agreement expired~~initiated in 2011 ~~when FHN entered into a replacement agreement with a new subservicer~~ (the ~~“2011 subservicer”~~"2011 subservicer"). In fourth quarter 2013 and first quarter 2014, FHN ~~contracted to sell~~sold and transferred a substantial majority of its

remaining servicing obligations and servicing assets (including advances) to the 2011 subservicer. ~~The servicing was transferred to the buyer in stages, and was substantially completed in first quarter 2014.~~ The servicing still retained by FHN is not significant and continues to be subserviced.

As servicer, FHN had contractual obligations to the owners of the loans (primarily GSEs) and securitization trustees to handle billing, custodial, and other tasks related to each loan. Each subservicer undertook to perform those obligations on ~~FHN’s~~FHN's behalf during the applicable subservicing period, although FHN legally remained the servicer of record for those loans that were subserviced.

The 2008 subservicer has been subject to a consent decree, and entered into a settlement agreement, with regulators related to alleged deficiencies in servicing and foreclosure practices. The 2008 subservicer has made demands of FHN, under the 2008 subservicing agreement, to pay certain resulting costs and damages totaling $43.5 million. FHN disagrees with those demands and has made no payments. This disagreement has the potential to result in litigation and, in any such future litigation, the claim against FHN may be substantial.

~~A certificate holder has contacted~~ FHN, claiming that it has been damaged from alleged deficiencies in servicing loans held in certain FH proprietary securitization trusts. The holder has sued the FH securitization trustee on related grounds, but has not yet sued FHN. FHN cannot predict how this matter will proceed nor can FHN predict whether this matter ultimately will be material to FHN.

As mentioned in Note ~~10—~~10 - Contingencies and Other ~~Disclosures—~~Disclosures - FHN has received a notice of indemnification claims from its 2011 subservicer, Nationstar Mortgage LLC, currently doing business as ~~“Mr.~~"Mr. Cooper.”" The notice asserts several categories of indemnity obligations by FHN to Nationstar in connection with mortgage loans under the subservicing arrangement and under the purchase transaction. This matter currently is not in formal litigation, but litigation in the future is possible.

~~Origination Data~~

From 2005 through 2008, FHN originated and sold $69.5 billion of mortgage loans to the Agencies. This includes $57.6 billion of loans sold to GSEs and $11.9 billion of loans guaranteed by Ginnie Mae. Although FHN conducted these businesses before 2005, GSE loans originated in 2005 through 2008 account for a substantial majority of all repurchase requests/make-whole claims received since the 2008 platform sale.

From 2005 through 2007, $26.7 billion of mortgage loans were included in FH proprietary securitizations. The last FH securitization occurred in 2007. On September 30, 2017, the remaining UPB of loans held in FH proprie~~tary securitizations was~~ ~~$3.2 billion, comprised of $2.3 billion of Alt-A loans and $0.9 billion~~ ~~of Jumbo loans.~~

~~Mortgage-Related Glossary~~



~~Agencies~~	~~the two GSEs and Ginnie Mae~~	~~HELOC~~	~~home equity line of credit~~

~~certificates~~	~~securities sold to investors representing interests in mortgage loan securitizations~~	~~HUD~~	~~Dept. of Housing and Urban Development~~

~~DOJ~~	~~U.S. Department of Justice~~	~~LTV~~	~~loan-to-value, a ratio of the loan amount divided by the home value~~

~~DRA~~	~~definitive resolution agreement with a GSE~~	MI	~~private mortgage insurance, insuring against borrower payment default~~

~~Fannie Mae, Fannie, FNMA~~	~~Federal National Mortgage Association~~	~~MSR~~	~~mortgage servicing rights~~

~~FH proprietary securitization~~	~~securitization of mortgages sponsored by FHN under its First Horizon brand~~	~~nonconforming loans~~	~~loans that did not conform to Agency program requirements~~

~~FHA~~	~~Federal Housing Administration~~	~~other whole loans sold~~	~~mortgage loans sold to private, non-Agency purchasers~~

~~Freddie Mac, Freddie, FHLMC~~	~~Federal Home Loan Mortgage Corporation~~	~~2008 platform sale, platform sale, 2008 sale~~	~~FHN’s sale of its national mortgage origination and servicing platforms in 2008~~

~~Ginnie Mae, Ginnie, GNMA~~	~~Government National Mortgage Association~~	~~pipeline or active pipeline~~	~~pipeline of mortgage repurchase, make-whole, & certain related claims against FHN~~

~~GSEs~~	~~Fannie Mae and Freddie Mac~~	VA	~~Veterans Administration~~

~~Active Pipeline~~

FHN accumulates the amount of repurchase requests, make-whole claims, and certain other related claims into the “active pipeline.” The active pipeline includes the amount of claims for loan repurchase, make-whole payments, loans as to which MI has been canceled, and information requests from purchasers of loans originated and sold through FHN’s legacy mortgage banking business. MI was required for certain of the loans sold to GSEs or that were securitized. Although unresolved MI cancellation notices are not formal repurchase requests, FHN includes those loans in the active pipeline. Additionally, FHN is responsible for covering losses for purchasers to the extent there is a shortfall in MI insurance coverage (MI curtailment). Generally, the amount of a loan subject to a repurchase/make-whole claim, or with open MI issues, remains in the active pipeline throughout the resolution process with a claimant. Through June 2016 the active pipeline decreased, due in part to settlements and other resolutions, but also due to significant reductions in inflows. The pipeline is now relatively flat at a much

~~lower level due to a slower pace of inflows and resolutions. On September 30, 2017, the active pipeline was~~ ~~$52.9 million,~~ ~~slightly higher than~~ ~~$51.7 million on December 31, 2016.~~

~~The following table provides a detail of the active pipeline as of September 30, 2017 and December 31, 2016:~~

~~Table 23—Active Pipeline~~

September 30, 2017 December 31, 2016
(Dollars in thousands) Number Amount Number Amount
Repurchase/make whole requests:
Agencies 34
$ 4,979
23
$ 4,196
Non-Agency whole loan-related 119
18,126
126
19,214
MI 156
25,307
147
23,171
Other requests (a) 33
4,488
37
5,122
Total 342
$ 52,900
333
$ 51,703


~~(a)~~	~~Other requests typically include requests for additional information from both GSE and non-GSE purchasers.~~

~~On September 30, 2017, Agencies accounted for approximately 63 perce~~nt of the total active pipeline, inclusive of MI cancellation notices, MI curtailments, and all other claims. MI curtailment requests, the largest portion of the active pipeline, are intended only to cover the shortfall in MI insurance proceeds. As a result, FHN’s loss from MI curtailments as a percentage of UPB generally is significantly lower than that of a repurchase or make-whole claim. At September 30, 2017, the active pipeline contained no loan repurchase or make-whole requests from the FH proprietary securitization trustee related to first lien mortgage loans based on claims related to breaches of representations and warranties related to origination.

Repurchase Accrual Methodology

~~Over the past several years~~ FHN’s approach for determining the adequacy of the repurchase and foreclosure reserve has evolved, sometimes substantially, based on changes in information available. Repurchase/make-whole rates vary based on purchaser, vintage, and claim type. For those loans repurchased or covered by a make-whole payment, cumulative average loss severities range between 50 and 60 percent of the UPB.

Repurchase Accrual Approach

Repurchase/Make-whole and Damages obligations and estimates for probable incurred losses associated with loan populations excluded from the DRAs are significant components of FHN’s remaining repurchase liability as of September 30, 2017. Other components of that liability primarily relate to other whole loans sold, MI rescissions, and loans included in bulk servicing sales effected prior to the DRAs.

In determining ~~the~~potential loss content, ~~of GSE loans subject to repurchase requests excluded from the DRAs (primarily loans included in bulk sales),~~claims are analyzed by purchaser, vintage, and claim type. FHN ~~applies a vintage level estimate of loss to all loans sold to the GSEs that were not included in the settlements and which have not had a prior repurchase resolution. First, pre-payment, default, and~~considers various inputs including claim rate estimates, are applied by vintage to estimate the aggregate claims expected but not yet resolved. Historical loss factors for each sale vintage and repurchase rates are then applied to estimate total loss content. Loss content related to other whole loan sales is estimated by applying the historical average repurchase and loss severity rates, mortgage insurance cancellations, and mortgage insurance curtailment requests. Inputs are applied to the current UPB in the active pipeline to calculate estimated losses attributable to the current pipeline. FHN then uses an internal model to calculate loss content by applying historical average repurchase and loss severity rates to historical average inflows. For purposes of estimating loss content, FHN also considers MI cancellations. When assessing loss content related to loans where MI has been cancelled, FHN applies historical loss factors (including repurchase rates and loss severity ratios) to the total unresolved MI cancellationsclaims in the active pipeline, as well as ~~applying these factors~~ to historical average inflows to estimate loss ~~content. Additionally, FHN identifies estimated losses~~content related to ~~MI curtailment requests.~~potential future inflows. Management also evaluates the nature of claims from purchasers and/or servicers of loans sold to determine if qualitative adjustments are appropriate.

Repurchase and Foreclosure Liability

The repurchase and foreclosure liability is comprised of ~~reserves~~accruals to cover estimated loss content in the active pipeline ~~as well as~~(consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, and estimated loss content related to certain known claims not currently

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 111

included in the active pipeline. The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the settlements with the GSEs, as well as other whole loans sold, mortgage insurance cancellations rescissions, and loans included in bulk servicing sales effected prior to the settlements with the GSEs. FHN compares the

estimated probable incurred losses determined under the applicable loss estimation

approaches ~~described above~~ for the respective periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision.

The ~~following table provides a rollforward of the legacy mortgage repurchase liability for the three and nine months ended September 30, 2017 and 2016:~~

~~Table 24—Reserves for Repurchase and Foreclosure Losses~~

Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
Legacy Mortgage
Beginning balance $ 34,599
$ 67,383
$ 65,309
$ 114,947
Provision/(provision credit) for repurchase and foreclosure losses (a) (609 ) (218 ) (22,580 ) (31,618 )
Net realized losses (124 ) (203 ) (8,863 ) (16,367 )
Balance on September 30 $ 33,866
$ 66,962
$ 33,866
$ 66,962

~~(a) Nine months ended September 30, 2017 and 2016 include $20.0 million and $31.4 million, respectively, related to the settlement of certain repurchase claims.~~

~~Other FHN Mortgage Exposures~~

FHN’s FHA and VA program lending was substantial prior to the 2008 platform sale, and has continued at a much lower level since then. As lender, FHN made certain representations and warranties as to the compliance of the loans with program requirements. Over the past several years, most recently in first quarter 2015, FHN occasionally has recognized significant losses associated with settling claims and potential claims by government agencies, and by private parties asserting claims on behalf of agencies, related to these origination activities. At September 30, 2017, FHN had not accrued a liability for any matter related to these government lending programs, and no pending or known threatened matter related to these programs represented a material loss contingency described in Note 10 – Contingencies and Other Disclosures.

At September 30, 2017, FHN had not accrued a liability for exposure for repurchase of first-lien loans related to FH proprietary securitizations arising from claims from the trustee that FHN breached its representations and warranties in FH proprietary securitizations at closing. FHN’s trustee is a defendant in lawsuits in which the plaintiffs have asserted that the trustee has duties to review loans and otherwise to act against loan originators and loan servicers, including FHN, outside of the duties specified in the applicable trust documents; FHN is not a defendant and is not able to assess what, if any, exposure FHN may have as a result of them.

FHN is defending, directly or as indemnitor, certain pending lawsuits brought by purchasers of certificates in FH proprietary securitizations or their assignees. FHN believes a new lawsuit based on federal securities claims that offering disclosures were deficient cannot be brought at this time due to the running of applicable limitation periods, but other investor claims, based on other legal theories, might still be possible. Due to the sales of MSR from 2008 through 2014, FHN has limited visibility into current loan information such as principal payoffs, refinance activity, delinquency trends, and loan modification activity.

Many non-GSE purchasers of whole loans from FHN included those loans in their own securitizations. Regarding such other whole loans sold, FHN made representations and warranties concerning the loans and provided indemnity covenants to the purchaser/securitizer. Typically the purchaser/securitizer assigned key contractual rights against FHN to the securitization trustee. As mentioned above, repurchase, make-whole, indemnity, and other monetary claims related to specific loans are included in the active pipeline and repurchase reserve. In addition, currently the following categories of actions are pending which involve FHN and other whole loans sold: (i) FHN has received indemnification requests from purchasers of loans or their assignees in cases where FHN is not a defendant; (ii) FHN has received subpoenas seeking loan reviews in cases where FHN is not a defendant; (iii) FHN has received repurchase, indemnity, and other demands from purchasers or their assignees; and (iv) FHN is a defendant in legal actions involving FHN-originated other whole loans sold. At September 30, 2017, FHN’s repurchase and foreclosure liability ~~included certain known exposures~~decreased to $13.5 million on March 31, 2019 from ~~other whole loans sold.~~$14.5 million on December 31, 2019.

Certain government entities have subpoenaed information from FHN and others. These entities include the FDIC (on behalf of certain failed banks) and the FHLBs of San Francisco, Atlanta, and Seattle, among others. These entities purport to act on

~~behalf of several purchasers of FH proprietary securitizations, and of non-FH securitizations which included other whole loans sold. Collectively, the subpoenas seek information conce~~rning: a number of FH proprietary securitizations and/or underlying loan originations; and originations of certain other whole loans sold which, in many cases, were included by the purchaser in its own securitizations. Some subpoenas fail to identify the specific investments made or loans at issue. Moreover, FHN has limited information regarding at least some of the loans under review. Unless and until a review (if related to specific loans) becomes an identifiable repurchase claim, the associated loans are not considered part of the active pipeline.

~~MARKET UNCERTAINTIES AND PROSPECTIVE TRENDS~~



Market Uncertainties and Prospective Trends

FHN’s future results could be affected both positively and negatively by several known trends. Key among those are ~~FHN’s strategic initiatives,~~ changes in the U.S. and global economy and outlook, government actions affecting interest rates, availability and the administration of stimulus relief for the economy and FHN’s customers related to the recent global COVID-19 pandemic, political uncertainty, potential changes in federal ~~policies.~~policies and the potential impact to our customers, and FHN’s strategic initiatives. In addition, ~~legacy~~pre-2009 mortgage business matters in the ~~non-strategic~~Non-strategic segment ~~are likely to~~could continue to impact FHN’s quarterly results in ways w~~hich~~which are both difficult to predict and unrelated to current operations.

FHN has prioritized expense discipline to include reducing or controlling certain expenses and investing in revenue-producing activities and critical infrastructure. FHN has actively pursued acquisition opportunities while maintaining a disciplined approach to valuations; to date all which closed have been moderate in size. FHN has been and remains amenable to a much more impactful acquisition, including FHN's agreement to acquire Capital Bank which will increase FHN's proforma size to approximately $40 billion in assets. FHN remains committed to organic growth through customer retention, key hires, targeted incentives, and other traditional means.

Performance by FHN, and the entire U.S. financial services industry, is affected considerably by the overall health of the U.S. ~~economy.~~and global economy and outlook. Furthermore, FHN may be directly or indirectly impacted by global events that impact our customers and their businesses. The ~~most~~ recent ~~recession ended~~global COVID-19 pandemic has led to periods of significant volatility in ~~2009. Growth during the economic expansion since 2009 largely has been muted, compared to earlier recoveries,~~financial commodities (including oil and somewhat inconsistent from one quarter to the next. Though the economic expansion is 8 years old, currently the U.S. economy does not appear to be weakening or falling back into recession. A continuation of the current expansion would support, rather than hinder, future loangas) and other ~~financial activity growth by our customers.~~markets, has adversely affected FHN’s ability to conduct normal business, has adversely affected FHN customers, and is likely to harm FHN’s business and future results of operations.

~~The~~In March 2020 the Federal Reserve ~~has raised~~lowered short-term interest rates ~~by 25 basis points three times~~twice and started a “quantitative easing” program intended to lower longer-term interest rates and foster access to credit. The effective yields of 10-year and 30-year U.S. Treasury securities achieved record low rates and the U.S. Congress enacted relief legislation which, among other things, is intended to provide emergency credit to businesses at risk for failure from government and public actions related to the COVID-19 pandemic, and to mitigate an economic recession. These changes in interest rates and the volatility in the past four quarters and has signaled a willingness to continue to raise rates in a measured fashion depending on economic data and trends. Although another increase is expected late in 2017, increases after that may be less frequent than in 2017. If the Fed continues to raise rates, FHN’s net interest margin in the future ismarket are likely to continue an improving trend. A steeper yield curve should also bolster activity within FHN’s Fixed Income business. However, if future economic data shows a risk of lower growth or recession, interest rates may stall or even fall, which likely would adverselynegatively impact FHN’s net interest margin. ~~Falling and/or moderately volatile interest rates, however, should enhance activity within FHN’s Fixed Income business. Also, if Fed actions cause long-term rates~~In the near term, amortization of net processing fees related to ~~rise slower than short-term rates, then~~government relief programs, including the ~~yield curve would flatten, which would adversely impact FHN’s~~Paycheck Protection Program ("PPP"), may offset a portion of the net interest ~~margin.~~margin decline. In addition, credit spreads have widened. For new loans, wider spreads should help mitigate net interest margin compression. However, FHN will not be able to capture the widened spreads quickly for outstanding floating-rate loans.

The economic effects of the COVID-19 pandemic have significantly altered business in the U.S. and globally leading to partial or full business closures, individuals being furloughed or laid off, significant increases in unemployment, and workers being partially or wholly ordered to work from home. Disruption to FHN’s customers due to governmental and societal responses to COVID-19 are likely to adversely affect FHN’s loan and deposit fee income as well as create downward loan migration and a corresponding increase in loan loss expense and reserves. In addition, loan charge-offs likely will increase over time, especially if economic disruption related to COVID-19 continues for more than a few months. Furthermore, government programs under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and other guidance intended to provide relief to customers through temporary modifications and deferrals, may in some instances mask or postpone reporting of credit problems and potential defaults. In these circumstances, current credit quality indicators may not be reflective of the underlying health of FHN's portfolios.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on the businesses of FHN for the remainder of 2020 or afterward.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London InterBank Offered Rate (“LIBOR”), announced that it intends to halt persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, LIBOR as currently operated may not continue after 2021. FHN is not currently able to predict the impact that the transition from LIBOR will have on the Company; however, because FHN has instruments with floating rate terms based on LIBOR, FHN may experience increases in interest, dividends, and other costs relative to these instruments subsequent to 2021. Additionally, the transition from LIBOR could impact or change FHN’s hedge accounting practices. FHN has initiated efforts to 1) develop an inventory of affected loans, securities, and derivatives, 2) evaluate and draft modifications as needed to address loans outstanding at the time of LIBOR retirement, 3) obtain an understanding of the potential

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 112

effects for applicable securities and derivatives and 4) assess revisions to product pricing structures based on alternative reference rates. In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides several optional expedients and exceptions to ease the potential burden in accounting for reference rate reform. Refer to the Accounting Changes Issued but Not Currently Effective section of Note 1 - Financial Information for additional information. Additionally, the IRS has released a proposal that is intended to facilitate the transition of existing contracts from LIBOR to new reference rates without triggering modification accounting or taxable exchange treatment for those contracts. This proposal contains specific guidance that must be met in order to qualify for the beneficial transition approach and FHN is considering this guidance in its transition plans.

FHN ~~cannot predict~~has prioritized expense discipline to include reducing or controlling certain expenses including realization of expense efficiencies from its 2017 merger with CBF and investing in revenue-producing activities, customer-facing technology, and critical infrastructure. FHN remains committed to organic growth through customer retention, key hires, targeted incentives, and other traditional means.

When FHN closes its proposed merger with IBKC, under applicable accounting guidance FHN will be required to record IBKC's loans at estimated fair value as of the ~~timing, resolution~~closing date. In addition, FHN will be required to assess the current (at that time) expected credit losses associated with IBKC loans. That credit loss assessment will be separate from the fair value estimation, and ~~effects of potential new legislation. The potential legislative actions~~will result in a charge to FHN's income for certain loans for the period in which ~~currently seem~~closing occurs. FHN is not able make that assessment at this time, but believes that the ~~most likely~~associated charge to income will be ~~impactful~~substantial to ~~FHN include corporate tax reform, general regulatory reform, and financial regulatory reform, all of which can affect the overall economy and FHN customers.~~quarterly income.

Lastly, while FHN has ~~made significant progress in resolving~~resolved most matters from the ~~legacy~~pre-2009 mortgage business, ~~several matters~~some remain unresolved. The timing or financial impact of resolution of these matters ~~most of which are in litigation,~~ cannot be predicted with accuracy. Accordingly, the non-strategic segment ~~is expected to~~may occasionally and unexpectedly impact FHN’s overall quarterly results negatively or positively with reserve accruals or releases. Also, although new ~~legacy~~pre-2009 mortgage business matters of significance arise at a much slower pace than in years past and some formerly common legal claims no longer can be made due to the passage of time, potential for new ~~legacy~~pre-2009 mortgage business matters remains.

Foreclosure Practices

~~All lenders are affected by the heightened regulation of servicing, foreclosure, and loss mitigation practices, at both federal and state levels, implemented since 2009. In addition,~~ FHN retains exposure for potential deficiencies in servicing related to its ~~legacy~~pre-2009 mortgage servicing business and subservicing arrangements. Further details regarding these ~~legacy~~ matters are provided in ~~“Obligations~~

"Obligations from ~~Legacy~~Pre-2009 Mortgage Businesses ~~– Overview –~~- Servicing ~~Obligations”~~Obligations" under ~~“Repurchase~~"Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations.”"

FHN response to the COVID-19 pandemic

~~CRITICAL ACCOUNTING POLICIES~~As previously mentioned, the COVID-19 pandemic has, and will continue, to directly and indirectly impact FHN and our customers. FHN has adapted many operations to help ensure the health and safety of employees and customers during these uncertain times. Among other things, FHN has implemented remote work policies, branch activities handled by appointment or via drive-through only, as well as additional sick time and child care assistance for employees. Additionally, FHN’s foundation has donated $2.5 million to support community relief efforts.

~~There~~Loans

FHN is actively monitoring the COVID-19 pandemic and its impact on customers and FHN’s credit quality. In response, FHN is proactively reaching out to customers to discuss challenges and solutions, is providing line draws and new extensions to existing customers, is providing support for small businesses through the PPP (discussed in more detail below) and other stimulus programs, as well as providing lending and deposit assistance through deferrals and waived fees. Additionally, in certain sectors, FHN has reduced or stopped new lending.

Paycheck Protection Program

On March 27, 2020, the CARES Act was signed into law. Sections 1102 and 1106 of the CARES Act include a PPP that made $349 billion of funds available for qualifying businesses to receive fully-guaranteed loans via the Small Business Administration’s Section 7(a) lending program. These loans are potentially fully forgivable, depending upon the borrower’s use of the funds and maintenance of employment levels.

PPP loans are intended to provide cash-flow assistance to nonprofit and small business employers for expenses incurred between February 15, 2020, and June 30, 2020. Generally, the maximum loan amount per qualified borrower is the lesser of 1) 250 percent of average monthly payroll costs (e.g., salaries and wages up to $100,000 and benefits) during the previous one-year period plus the outstanding amount of any existing SBA Economic Injury Disaster Loan made from January 1, 2020 through April 3, 2020, that is being refinanced under the PPP and 2) $10 million. Eligible borrowers include any of the following that were in operation on February 15, 2020:

Businesses, including nonprofit organizations under Internal Revenue Code (“IRC”) Section 501(c)(3), veterans’ organizations under IRC Section 501(c)(19), and tribal organizations, that

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 113

have 500 or fewer employees (or the Small Business Administration’s employee-based or revenue-based industry size standard, if higher).

Businesses in the food and accommodations industry (as defined in NAICS 724) with 500 or fewer employees per location.

Sole proprietors, independent contractors, and self-employed individuals.

All PPP loans carry the same terms which are as follows:

Fixed interest rate of 1 percent per annum

Maturity date of two years, with the ability to prepay earlier with no fees

First payment deferred for six months

Waiver of “credit elsewhere” SBA 7(a) requirement

No collateral or personal guarantees required

No borrower fees charged to obtain such loans

Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on PPP loans to the extent that the proceeds are used to cover eligible payroll, interest, rent, and utility costs over the eight-week period after the loan is made as long as the borrower retains its employees and their compensation levels. However, no more than 25 percent of loan forgiveness may be attributable to eligible rent, utilities and interest. In addition, loans qualifying for forgiveness will not be included in the borrower’s taxable income.

Lenders making these PPP loans are paid a fee by the Small Business Administration on the date the loans are made. Lender fees are based on the following sliding scale.

Loans $350,000 and under: 5.00%

Loans greater than $350,000 to $2 million: 3.00%

Loans greater than $2 million: 1.00%

Borrowers can use agents to assist in the preparation of their PPP applications. Those agents are paid from the SBA fees received from the originating bank. Additionally, originating banks have certain internal costs of originating PPP loans. For applicable loans, agent fees are paid by originating banks based on the following scale.

Loans $350,000 and under: 1.00%

Loans greater than $350,000 to $2 million: 0.50%

Loans greater than $2 million: 0.25%

The SBA provides a 100 percent guarantee on PPP loans, which is an increase to the existing guarantee percentages under current SBA loan programs. In the event that a lender sells a PPP loan on the secondary market, the guarantee will transfer with the loan. Lenders are not required to conduct any verification regarding loan forgiveness provided that a borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the eligibility of the expenditures made. Lenders will be held harmless if they rely on such documentation. Lenders must make a decision on the forgiveness within 60 days. Section 1106 of the CARES Act indicates that any lender or purchaser of PPP loans may report to the SBA an expected forgiveness amount, and the SBA will purchase the expected forgiveness amounts, plus any interest accrued to date, within 15 days after such requests are received. Requests for forgiveness may occur as early as seven weeks after the loan is originated.

As part of FHN’s efforts to support customers through various stimulus programs, FHN originated 6,761 of PPP loans with an aggregate principal of $1.7 billion in April 2020. For these loans, FHN anticipates recognizing net origination fees of approximately $45 to $50 million. Additional lower origination volumes are anticipated in May. FHN has decided to hold its PPP loans for investment. Therefore, the net amount of SBA fees and total direct origination costs are deferred as a discount to the recorded carrying value of the PPP loans. This discount is being amortized prospectively to interest income. SBA loan forgiveness payments are considered prepayments of the related loans. Under existing accounting principles, amortization of net origination fees can reflect expected prepayment activity if prepayments are determined to be probable and both the timing and volume can be reasonably estimated. Based on the terms of the PPP loans, including the expected end of the payment deferral period, FHN estimates that substantially all of the prepayment-eligible portions of PPP loans will be prepaid in 2020 as these loans are forgiven. These estimated prepayments will result in a similar amount of the net fees being recognized in interest income in 2020.

Since PPP loans carry a full SBA guarantee, they do not have any credit risk and will not affect the amount of provision and ALLL recorded. Consistent with this view, the CARES Act indicates that investors should assign a risk weight of zero to PPP loans for regulatory capital purposes.

The initial funding for the $359 billion PPP loans was exhausted by April 16, 2020. However, on April 24, 2020, an additional $320 billion of funding was approved for the PPP. These funds will likely be exhausted in early May.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 114

Lending Assistance for Borrowers

Other customer support initiatives include incremental lending assistance for borrowers through delayed payment programs and fee waivers. The following table provides the UPB of loans related to deferrals granted to FHN’s customers that have been processed through April 30, 2020.



(Dollars in thousands)	As of April 30, 2020
Commercial:
General C&I	$	1,582,903
Loans to mortgage companies	—
TRUPS	—
Income CRE	1,061,452
Residential CRE	1,715
Total Commercial	$	2,646,070
Consumer:
HELOC	$	69,531
R/E installment loans	494,205
Credit Card & Other	3,279
Total Consumer	567,015
Total	$	3,213,085

Commercial deferrals processed are comprised primarily of general commercial (39 percent or $1.0 billion), commercial real estate (28 percent or $731.3 million - primarily within our Mid-Atlantic, Southeast Tennessee,

and Middle Tennessee markets), franchise finance (13 percent or $334.9 million), business banking (8 percent or $208.9 million), and private client (6 percent - $152.0 million).

Deposits

Deposit levels were also significantly impacted in April due to the impacts of COVID-19 pandemic which resulted in an increase in period-end deposits of $3.7 billion, or 11 percent, from March 31, 2020 levels. This increase was due to an increase in commercial deposits as FHN saw many firms deposit funds (from lines of credit, PPP loans, operational revenues, etc.) into non-interest bearing operating accounts in order to increase their liquidity positions. Additionally, as various government stimulus programs were rolled out FHN saw increases in deposits from the Healthcare industry as Medicare reimbursements related to COVID-19 became available and a jump in deposits in Correspondent banking due to stimulus and PPP funds deposited into client banks. Consumer deposit inflows were also impacted by approximately $300 million in initial stimulus payments in mid-April.



Critical Accounting Policies

Except for the changes to the following Allowance for Loan Losses section, there have been no significant changes to FHN’s critical accounting policies as described in “Critical Accounting Policies” beginning on page 64 99 of ~~Exhibit 13~~Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

ALLOWANCE FOR LOAN LOSSES

Management’s policy is to maintain the ALLL at a level sufficient to absorb expected credit losses in the loan portfolio. Management performs periodic and systematic detailed reviews of its loan portfolio to identify trends and to assess the overall collectability of the loan portfolio. Management believes the accounting estimate related to the ALLL is a “critical accounting estimate” as: (1) changes in it can materially affect the provision for loan losses and net income, (2) it requires management to predict borrowers’ likelihood or capacity to repay, including evaluation of inherently uncertain future economic conditions, (3) prepayment activity must be projected to estimate of the life of loans that often are shorter than contractual terms, (4) it requires estimation of a reasonable and supportable forecast period for credit losses for loan portfolio segments before reversion to historical loss levels over the remaining life of a loan and (5) expected future recoveries of amounts previously charged off must be estimated. Accordingly, this is a highly subjective process and requires significant judgment since it is difficult to evaluate current and future economic conditions in relation to an overall credit cycle and estimate the timing and extent of loss events that are expected to occur prior to end of a loan’s estimated life. The ALLL is increased by the provision for loan losses and recoveries and is decreased by charged-off loans. Principal loan amounts are charged off against the ALLL in the period in which the loan or any portion of the loan is deemed to be uncollectible. This critical accounting estimate applies to the regional banking, non-strategic, and corporate segments. A management committee comprised of representatives from Risk Management, Finance, Credit, and Treasury performs a quarterly review of the assumptions used in FHN’s ALLL analytical models, makes qualitative assessments of the loan portfolio, and determines if qualitative adjustments should be recommended to the modeled results. On a quarterly basis, as a part of Enterprise Risk reporting and discussion, management addresses credit reserve adequacy and credit losses with the Executive and Risk Committee of FHN’s Board of Directors.

FHN believes that the critical assumptions underlying the accounting estimates made by management include: (1) the commercial loan portfolio has been properly risk graded based on information about borrowers in specific industries and specific issues with respect to single borrowers; (2) borrower specific information made available to FHN is current and accurate; (3) the loan portfolio has been segmented properly and individual loans have similar credit risk characteristics and will behave similarly; (4) the lives for loan portfolio pools have been estimated properly, including consideration of expected prepayments; (5) the economic forecasts utilized in the modeling of expected credit losses are reflective of future economic conditions; (6) entity-specific historical loss information has been properly assessed for all loan portfolio segments as the

initial basis for estimating expected credit losses; (7) the reasonable and supportable periods for loan portfolio segments have been properly determined; (8) the reversion methodologies and timeframes for migration from the reasonable and supportable period to the use of historical loss rates are reasonable; (9) expected recoveries of prior charge off amounts have been properly estimated; and (10) qualitative adjustments to modeled loss results reasonably reflect expected future credit losses as of the date of the financial statements.

While management uses the best information available to establish the ALLL, future adjustments to the ALLL and methodology may be necessary if economic or other conditions differ substantially from the assumptions used in making the estimates. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

See Note 1 - Summary of Significant Accounting Policies and Note 5 - Allowance for Loan Losses for detail regarding FHN’s processes, models, and methodology for determining the ALLL.

ACCOUNTING CHANGES ISSUED BUT NOT CURRENTLY EFFECTIVE

Refer to Note 1 – Financial Information for a detail of accounting standards that have been issued but are not currently effective, which section is incorporated into MD&A by this reference.

~~NON-GAAP INFORMATION~~



Non-GAAP Information

The following table provides a reconciliation of non-GAAP items presented in this MD&A to the most comparable GAAP presentation:

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 115

Table ~~25—~~23—Non-GAAP to GAAP Reconciliation



	Three Months Ended March 31
(Dollars in thousands)	2020			2019
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)	$	5,002,394		$	4,809,235
Less: Average noncontrolling interest (a)	295,431			295,431
Less: Average preferred stock (a)	95,624			95,624
(A) Total average common equity	$	4,611,339		$	4,418,180
Less: Average intangible assets (GAAP) (b)	1,560,340			1,584,694
(B) Average Tangible Common Equity (Non-GAAP)	$	3,050,999		$	2,833,486
Net Income Available to Common Shareholders
(C) Net income available to common shareholders (annualized) (GAAP)	$	48,545		$	401,642
Ratios
(C)/(A) Return on average common equity (“ROCE”) (GAAP) (c)	1.05		%	9.09		%
(C)/(B) Return on average tangible common equity (“ROTCE”) (Non-GAAP) (d)	1.59			14.17

Three Months Ended
September 30 Nine Months Ended
September 30
(Dollars in thousands)
2017 2016 2017 2016
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP) $ 2,866,757
$ 2,718,319
$ 2,789,726
$ 2,672,894
Less: Average noncontrolling interest (a) 295,431
295,431
295,431
295,431
Less: Average preferred stock (a) 95,624
95,624
95,624
95,624
(A) Total average common equity $ 2,475,702
$ 2,327,264
$ 2,398,671
$ 2,281,839
Less: Average intangible assets (GAAP) (b) 280,575
214,260
258,138
215,552
(B) Average Tangible Common Equity (Non-GAAP) $ 2,195,127
$ 2,113,004
$ 2,140,533
$ 2,066,287
Net Income Available to Common Shareholders
(C) Net income available to common shareholders (annualized) (GAAP) $ 267,148
$ 251,434
$ 283,652
$ 223,810
Ratios
(C)/(A) Return on average common equity (“ROE”) (GAAP) (c) 10.79 % 10.80 % 11.83 % 9.81 %
(C)/(B) Return on average tangible common equity (“ROTCE”) (Non-GAAP) (d) 12.17
11.90
13.25
10.83

(a)Included in Total equity on the Consolidated Condensed Statements of Condition.

(b)Includes Goodwill and other intangible assets, net of amortization.

(c)Ratio is annualized net income available to common shareholders to average common equity.

(d)Ratio is annualized net income available to common shareholders to average tangible common equity.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 116


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information called for by this item is contained in



(a)	Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Item 2 of Part I of this report, including in particular the section entitled “Risk Management” beginning on page ~~114~~106 of this report and the subsections entitled “Market Risk Management” beginning on page ~~114~~106 and “Interest Rate Risk Management” beginning on page ~~116~~108 of this report, and


(b)	Note 14 to the Consolidated Condensed Financial Statements appearing on pages ~~53-59~~51-57 of this report,

all of which materials are incorporated herein by reference. For additional information concerning market risk and our management of it, refer to: Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in ~~Exhibit 13~~ Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, including in particular the section entitled “Risk Management” beginning on page 4788 of that Report and the subsections entitled “Market Risk Management” beginning on page 4889 and “Interest Rate Risk Management” ~~appearing~~beginning on ~~pages 50-51~~page 90 of that ~~Report;~~Report; and Note 22 to the Consolidated Financial Statements appearing on pages ~~153-158~~194-200 of ~~Exhibit 13~~Item 8 to FHN’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.


~~Item 4.~~	~~Controls and Procedures~~

Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures. FHN’s management, with the participation of FHN’s chief executive officer and chief financial officer, has evaluated the effectiveness of FHN’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based on that evaluation, the chief executive officer and the chief financial officer have concluded that FHN’s disclosure controls and procedures were effective as of the end of the period covered by this report.


(b)	Changes in Internal Control over Financial Reporting. There have not been any changes in FHN’s internal control over financial reporting during FHN’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, FHN’s internal control over financial reporting.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 117

---------------------------

Part II.

OTHER INFORMATION

---------------------------


~~Item 1~~	~~Legal Proceedings~~

Item 1. Legal Proceedings

The “Contingencies” section of Note 10 to the Consolidated Condensed Financial Statements beginning on page 3740 of this Report is incorporated into this Item by reference.


~~Item 1A~~	~~Risk Factors~~

~~Not~~Item 1A. Risk Factors

The following supplements Item 1A of our annual report on Form 10-K for the year ended December 31, 2019. It relates to most discussions within that Item, particularly discussions under the captions: “Operational Risks,” “Risks Associated with Economic Downturns and Changes,” “Risks Associated with Monetary Events,” “Reputation Risks,” “Credit Risks,” “Service Risks,” “Regulatory, Legislative, and Legal Risks,” “Risks of Expense Control,” “Insurance,” “Liquidity and Funding Risks,” “Credit Ratings,” “Interest Rate and Yield Curve Risks,” “Asset Inventories and Market Risks,” and “Stockholding and Governance Risks.”

Supplemental Risk Factor Disclosures related to COVID-19

The recent global COVID-19 pandemic has led to periods of significant volatility in financial, commodities (including oil and gas) and other markets, has adversely affected FHN’s ability to conduct normal business, has adversely affected FHN customers, and is likely to harm FHN’s businesses and future results of operations.

In December 2019, a coronavirus (COVID-19) was reported in China, and has since spread to most countries in the world, including the United States. Starting in late February 2020, financial market volatility increased dramatically based on concerns that COVID-19, and the steps being undertaken in many countries to mitigate its spread, would significantly disrupt economic activity.

In March 2020, financial market volatility increased further, with several one-day stock market swings that resulted in significant market declines. Additionally, in March: market pricing deteriorated in virtually all sectors and asset classes except U.S. Treasury securities; the World Health Organization declared COVID-19 to be a pandemic; the U.S. President declared the COVID-19 pandemic to be a national emergency, allowing several federal disaster programs to be accessed by states and cities; many states and cities in the U.S. declared health emergencies, lockdowns, travel restrictions, and quarantines, prohibiting gatherings of more than a small number of people and ordering or urging most businesses and workplaces to close or operate on a very restricted basis; the Federal Reserve lowered short-term interest rates twice and started a “quantitative easing” program intended to lower longer-term interest rates and foster access to credit; the effective yields of 10-year and 30-year U.S. Treasury securities achieved record low rates; and the U.S. Congress enacted relief legislation which, among other things, is intended to provide emergency credit to businesses at risk for failure

from government and public actions related to the COVID-19 pandemic, and to mitigate an economic recession which has not been officially declared but is widely believed to have begun in March. Government programs instituted recently include loan programs administered by banks and other private-sector lenders, liquidity programs administered by the U.S. Treasury, and favorable accounting and regulatory treatment (for lenders) of certain loan payment deferrals.

The economic effects of these and related actions and events in the U.S. have included: large numbers of partial or full business closures; large numbers of people being furloughed or laid off; large increases in unemployment; large numbers of workers being partially or wholly ordered to work from home; large numbers of businesses at risk of insolvency as revenues drop off precipitously, especially in businesses related to travel, leisure, and physical personal services; large numbers of investors realizing substantial losses in their portfolios and retirement funds; and large numbers of consumers being unwilling to undertake significant discretionary spending. In addition, worldwide demand for oil has fallen sharply in conjunction with the pandemic resulting in sharp drops in oil prices and sharp drops in the values of oil-related assets. Further, certain banking organizations globally have limited share buybacks and other capital actions. The most significant effects already experienced by FHN, and actions already taken by FHN, are mentioned in Part I, Item 2 of this report under the captions “Financial Summary,” “Income Statement Review,” “Asset Quality,” and “Market Uncertainties and Prospective Trends,” beginning on pages 81, 83, 94, and 112 of this report, respectively.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on the businesses of FHN for the remainder of 2020 or afterward. FHN’s efforts to mitigate

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 118

the adverse impacts of COVID-19 may not be effective, and in any case are likely to be only a partial mitigate. The full extent of impacts resulting from the COVID-19 pandemic and other events beyond the control of FHN will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity of the pandemic and further actions taken to prevent, treat, or mitigate the spread of COVID-19, among others. Moreover, global markets for oil and gas have been, and may continue to be, severely impacted by events beyond the control of FHN. The current low commodity prices, especially if sustained, could have a negative impact on the economies of several states in which FHN conducts business, as well as FHN’s customers, businesses, and assets in those states.

In addition, the COVID-19 pandemic could result in business disruption to FHN, and if unable to recover from such a business disruption on a timely basis, FHN’s businesses, financial condition, and results of operations would be adversely affected. The efforts to integrate the businesses of IBKC and those of FHN may also be delayed and adversely affected by the COVID-19 pandemic, and become more costly. FHN may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect FHN’s financial condition and results of operations.

Changes in interest rates due to Federal Reserve actions and market forces, mentioned above, are likely to negatively impact FHN’s net interest margin (a measure of the average profit margin applicable to

lending). In addition, “spreads” (the difference between U.S. Treasury borrowing rates and private sector borrowing rates) have widened. For new loans, wider spreads should help mitigate net interest margin compression. However, FHN will not be able to capture the widened spreads quickly for outstanding floating-rate loans: for loans pre-dating the COVID-19 crisis, spreads are fixed by the loan contracts based on pre-COVID pricing.

FHN’s customers have been adversely impacted by governmental and societal responses to COVID-19; those impacts are likely to adversely affect FHN’s noninterest income from loans and deposits as well as create downward loan migration (a reduction in loan-grading) and a corresponding increase in loan loss provision expense and reserves. In addition, loan charge-offs likely will increase over time, especially if economic disruption related to COVID-19 continues for more than a few months.

In the U.S., initial government responses to the COVID-19 pandemic were intended mainly to slow the spread of illness, regardless of the impact on economic activity. As governments relax restrictions in an effort re-invigorate the economy, it is not clear how well or how quickly the economy will recover. Substantial uncertainty regarding COVID-19, and the resulting economic damage, likely will continue until a substantial percentage of the population no longer fears contracting it.


~~Item 2~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



	(a) & (b)	Not Applicable

	(c)	The "Common Stock Purchase Programs” section including tables ~~9(a)~~10(a) and ~~9(b)~~10(b) and explanatory discussions included in Item 2 of Part I of this report under the heading “First Horizon National Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operations,” beginning on page 9693 of this report, is incorporated herein by reference.

Items ~~3, 4,~~3., 4., and 55.

Not applicable

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 119


~~Item 6.~~	~~Exhibits~~

Item 6. Exhibits

(a) Exhibits

~~Exhibits marked * represent~~In the Exhibit Table below: the “Filed Here” column denotes each exhibit which is filed or furnished (as applicable) with this report; the “Mngt Exh” column denotes each exhibit that represents a management ~~contracts~~contract or compensatory ~~plans~~plan or ~~arrangements~~arrangement required to be identified as ~~such~~such; and ~~filed as exhibits.~~

~~Exhibits marked ** are~~the “Furnished” column denotes each exhibit that is “furnished” pursuant to 18 U.S.C. Section 1350 or otherwise, and ~~are~~is not “filed” as part of this Report or as a separate disclosure document.

~~Exhibits marked *** contain or consist of interactive data file information which is unaudited and unreviewed.~~

In many agreements filed as exhibits, each party makes representations and warranties to other parties. Those representations and warranties are made only to and for the benefit of those other parties in the context of a business contract. ~~Such~~Exceptions to such representations and warranties may be partially or fully waived by such parties, or not enforced by such parties, in their discretion. No such representation or warranty may be relied upon by any other person for any purpose.



~~Exhibit~~	~~Description~~
Exh No	Description of Exhibit to this Report	Filed Here	Mngt Exh	Furn-ished	Incorporated by Reference to
Exh No	Description of Exhibit to this Report	Filed Here	Mngt Exh	Furn-ished	4Form	Exh No	Filing Date
4.2	FHN agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument defining the rights of the holders of the senior and subordinated long-term debt of FHN and its consolidated subsidiaries.

10.1*10.1	~~Rate Applicable to Participating Directors and~~Form of Grant Notice for Executive ~~Officers under the Directors and Executives Deferred Compensation Plan~~Performance Stock Units [2020]
X	X
10.2*10.2	~~Portions~~Form of ~~FTN Financial Incentive Compensation Plan (as amended and restated October 2017) applicable to the annual bonus opportunity~~Grant Notice for Executive Stock Options [2020]	X	X
10.3	Form of ~~the President-FTN Financial under the Management Incentive Plan. This Exhibit applies to that bonus opportunity pursuant to FHN's bylaws, the charter~~Grant Notice for Executive Restrictive Stock Units [2020]	X	X
10.4	Form of ~~the Board's Compensation Committee, and action by the Committee taken on July 18, 2006.~~Grant Notice for MIP-Driven Cash-Settled RSUs (FHN Financial) [2020]
X	X
31(a)	Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of Sarbanes-Oxley Act of 2002)
X
31(b)	Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)
X
32(a)**	18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
X		X
32(b)**	18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
X		X
101***	XBRL Exhibits
101	The following financial information from First Horizon National Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2020, formatted in Inline XBRL: (i) Consolidated Condensed Statements of Condition at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016;~~2019; (ii) Consolidated Condensed Statements of Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016;~~2019; (iii) Consolidated Condensed Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016;~~2019; (iv) Consolidated Condensed Statements of Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016;~~2019; (v) Consolidated Condensed Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016;~~2019; (vi) Notes to Consolidated Condensed Financial Statements.

101.INS***101. INS	XBRL Instance ~~Document~~Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH***101. SCH	Inline XBRL Taxonomy Extension Schema
X
101.CAL***101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
X
101.LAB***101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
X
101.PRE***101. PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
X
101.DEF***101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase	X
104	Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101)	X

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 120

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	FIRST HORIZON NATIONAL CORPORATION (Registrant)

Date: ~~November 7, 2017~~May 8, 2020	By:	/s/ William C. Losch III
	Name:	William C. Losch III
	Title:	Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

~~129~~

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 121



TN		62-0803242
(State or other jurisdiction incorporation of organization)		(IRS Employer Identification No.)

165 ~~MADISON AVENUE~~ ~~MEMPHIS, TENNESSEE~~ Madison Avenue
Memphis,	Tennessee	38103
(Address of principal executive office)		(Zip Code)



Title of Each Class	Trading Symbol(s)	Name of Exchange on which Registered
$.625 Par Value Common Capital Stock	FHN	New York Stock Exchange LLC
Depositary Shares, each representing a 1/4,000th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A	FHN PR A	New York Stock Exchange LLC
	FHN PR A	New York Stock Exchange LLC



Large ~~accelerated filer~~Accelerated Filer	☒	Accelerated filer	☐	Non-accelerated filer	☐

Smaller reporting company	☐	Emerging Growth Company	☐	~~(Do not check if a smaller reporting company)~~



Class		Outstanding on ~~September 30, 2017~~March 31, 2020
Common Stock, $.625 par value		~~234,230,515~~311,862,565



Part I. Financial Information	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	7877
Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~126~~117
Item 4. Controls and Procedures	~~126~~117

Part II. Other Information	~~127~~118
Item 1. Legal Proceedings	~~127~~118
Item 1A. Risk Factors	~~127~~118
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	~~127~~119
Item 3. Defaults Upon Senior Securities	~~127~~119
Item 4. Mine Safety Disclosures	~~127~~119
Item 5. Other Information	~~127~~119
Item 6. Exhibits	~~128~~120
Exhibit 10.1
Exhibit 10.2
Exhibit ~~31(a)~~10.3
Exhibit ~~31(b)~~10.4
Exhibit ~~32(a)~~31(a)
Exhibit ~~32(b)~~31(b)
~~Signatures~~Exhibit 32(a)	~~129~~

Exhibit 32(b)
Signatures


	121



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Cash dividends paid - preferred stock - noncontrolling interest	(8,523		)	(8,523		)
Cash dividends paid - Series A preferred stock	(4,650		)	(4,650		)
Term borrowings:
Issuance	121,184			100
Payments/maturities	(145,285		)	(264,599		)
Increases in restricted and secured term borrowings	29,231			—
Net increase/(decrease) in:
Deposits	(572,621		)	1,607,412
Short-term borrowings	1,261,395			732,858
Net cash provided/(used) by financing activities	621,769			1,937,363
Net increase/(decrease) in cash and cash equivalents	49,961			126,488
Cash and cash equivalents at beginning of period	1,037,794			1,031,063
Cash and cash equivalents at end of period	$	1,087,755		$	1,157,551
Supplemental Disclosures
Total interest paid	$	92,405		$	63,337
Total taxes paid	38,151			11,580
Total taxes refunded	8,201			3,854
Transfer from loans to OREO	5,564			8,226



	Coastal Securities, Inc.
	Purchase Accounting/
	As		Fair Value			As recorded
(Dollars in thousands)	Acquired		Adjustments			by FHN
Assets:
Cash and due from banks	$	7,502	$	—		$	7,502
Interest-bearing cash	4,132		—			4,132
Trading securities	423,662		(284,580		)	139,082
Loans held-for-sale	—		236,088			236,088
Investment securities	—		1,413			1,413
Other intangible assets, net	—		27,300			27,300
Premises and equipment, net	1,229		—			1,229
Other assets	1,658		14			1,672
Total assets acquired	$	438,183	$	(19,765	)	$	418,418

Liabilities:
Securities sold under agreements to repurchase	$	201,595	$	—		$	201,595
Other short-term borrowings	33,509		—			33,509
Fixed income payables	143,647		(47,158		)	96,489
Other liabilities	958		(642		)	316
Total liabilities assumed	379,709		(47,800		)	331,909
Net Assets Acquired	$	58,474	$	28,035		86,509
Consideration paid:
Cash						(131,473		)
Goodwill						$	44,964


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


	Three Months Ended September 30								Nine months ended September 30								Three Months Ended March 31
	2017				2016				2017				2016					2019
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded:
Commercial:
General C&I	$	5,771	$	—	$	13,708	$	—	$	8,706	$	—	$	12,088	$	—		$	55,765	$	180
Loans to mortgage companies																		—		—
Income CRE	—		—		1,234		—		—		—		2,057		—			1,556		13
Residential CRE																		—		—
Total	$	5,771	$	—	$	14,942	$	—	$	8,706	$	—	$	14,145	$	—		$	57,321	$	193
Consumer:
HELOC (a)	$	10,225	$	—	$	11,273	$	—	$	10,536	$	—	$	11,100	$	—		$	7,597	$	—
R/E installment loans (a)	4,182		—		4,158		—		4,014		—		4,333		—			8,637		—
Permanent mortgage (a)	5,693		—		4,280		—		5,701		—		4,292		—
Total	$	20,100	$	—	$	19,711	$	—	$	20,251	$	—	$	19,725	$	—		$	16,234	$	—
Impaired loans with related allowance recorded:
Commercial:
General C&I	$	26,144	$	193	$	33,433	$	289	$	29,136	$	597	$	29,896	$	668		$	7,294	$	—
TRUPS	3,117		—		3,258		—		3,157		—		3,291		—			2,863		—
Income CRE	1,628		11		3,211		15		1,737		39		4,376		55			367		4
Residential CRE	1,044		—		1,355		5		1,210		10		1,376		17			—		—
Total	$	31,933	$	204	$	41,257	$	309	$	35,240	$	646	$	38,939	$	740		$	10,524	$	4
Consumer:
HELOC	$	74,894	$	554	$	87,919	$	546	$	78,859	$	1,695	$	88,266	$	1,527		$	65,013	$	522
R/E installment loans	47,628		315		57,775		357		49,634		950		58,890		1,019			108,059		822
Permanent mortgage	79,305		616		90,697		544		82,186		1,805		92,716		1,602
Credit card & other	452		3		348		4		351		8		353		10			690		5
Total	$	202,279	$	1,488	$	236,739	$	1,451	$	211,030	$	4,458	$	240,225	$	4,158		$	173,762	$	1,349
Total commercial	$	37,704	$	204	$	56,199	$	309	$	43,946	$	646	$	53,084	$	740		$	67,845	$	197
Total consumer	$	222,379	$	1,488	$	256,450	$	1,451	$	231,281	$	4,458	$	259,950	$	4,158		$	189,996	$	1,349
Total impaired loans	$	260,083	$	1,692	$	312,649	$	1,760	$	275,227	$	5,104	$	313,034	$	4,898		$	257,841	$	1,546


~~(a)~~	Balances as of September 30, 2017 and December 31, 2016, presented net of a $25.5 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade is “13”.


~~(a)~~	~~For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loans have seasoned.~~



	Three Months Ended September 30, 2017					Nine Months Ended September 30, 2017
(Dollars in thousands)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial (C&I):
General C&I	—	$	—	$	—	2	$	842	$	836
Total commercial (C&I)	—	—		—		2	842		836
Consumer real estate:
HELOC	45	4,451		4,396		107	9,333		9,139
R/E installment loans	15	1,630		1,622		43	3,386		3,306
Total consumer real estate	60	6,081		6,018		150	12,719		12,445
Permanent mortgage	2	34		32		11	2,043		2,028
Credit card & other	37	261		251		66	426		411
Total troubled debt restructurings	99	$	6,376	$	6,301	229	$	16,030	$	15,720

	Three Months Ended September 30, 2016					Nine Months Ended September 30, 2016
(Dollars in thousands)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial (C&I):
General C&I	2	$	419	$	419	7	$	20,302	$	19,194
Total commercial (C&I)	2	419		419		7	20,302		19,194
Commercial real estate:
Income CRE	1	100		99		1	100		99
Total commercial real estate	1	100		99		1	100		99
Consumer real estate:
HELOC	48	5,720		5,573		200	18,418		18,189
R/E installment loans	10	345		337		44	4,569		4,846
Total consumer real estate	58	6,065		5,910		244	22,987		23,035
Permanent mortgage	2	710		704		6	1,551		1,544
Credit card & other	10	45		44		15	66		64
Total troubled debt restructurings	73	$	7,339	$	7,176	273	$	45,006	$	43,936



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate (a)			Credit Card and Other			Total
Balance as of January 1, 2020	$	122,486		$	36,112		$	28,443		$	13,266		$	200,307
Adoption of ASU 2016-13	18,782			(7,348		)	92,992			1,968			106,394
Charge-offs	(6,751		)	(581		)	(2,310		)	(3,811		)	(13,453		)
Recoveries	935			573			3,555			1,179			6,242
Provision for loan losses	119,064			18,869			342			6,725			145,000
Balance as of March 31, 2020	254,516			47,625			123,022			19,327			444,490
Allowance - individually evaluated for impairment	11,401			—			13,394			468			25,263
Allowance - collectively evaluated for impairment	243,115			47,625			109,628			18,859			419,227
Loans, net of unearned as of March 31, 2020:
Individually evaluated for impairment	100,092			163			152,393			699			253,347
Collectively evaluated for impairment	22,024,338			4,639,529			5,966,990			494,099			33,124,956
Total loans, net of unearned income	$	22,124,430		$	4,639,692		$	6,119,383		$	494,798		$	33,378,303
Balance as of January 1, 2019	$	98,947		$	31,311		$	37,439		$	12,727		$	180,424
Charge-offs	(3,101		)	(434		)	(2,804		)	(4,188		)	(10,527		)
Recoveries	829			57			4,041			1,087			6,014
Provision/(provision credit) for loan losses	7,038			3,448			(4,522		)	3,036			9,000
Balance as of March 31, 2019	103,713			34,382			34,154			12,662			184,911
Allowance - individually evaluated for impairment	3,437			—			23,923			446			27,806
Allowance - collectively evaluated for impairment	98,135			34,382			9,108			12,067			153,692
Allowance - purchased credit-impaired loans	2,141			—			1,123			149			3,413
Loans, net of unearned as of March 31, 2019:
Individually evaluated for impairment	83,253			1,879			189,332			684			275,148
Collectively evaluated for impairment	17,056,034			3,936,727			6,141,585			504,271			27,638,617
Purchased credit-impaired loans	36,825			8,337			29,846			1,275			76,283
Total loans, net of unearned income	$	17,176,112		$	3,946,943		$	6,360,763		$	506,230		$	27,990,048



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
Balance as of July 1, 2017	$	92,379		$	30,470		$	46,069		$	16,398		$	11,941		$	197,257
Charge-offs	(3,723		)	—			(3,601		)	(173		)	(3,173		)	(10,670		)
Recoveries	601			278			6,188			542			671			8,280
Provision/(provision credit) for loan losses	8,948			(1,065		)	(7,717		)	(1,048		)	882			—
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Balance as of January 1, 2017	$	89,398		$	33,852		$	50,357		$	16,289		$	12,172		$	202,068
Charge-offs	(6,188		)	(20		)	(11,401		)	(1,499		)	(9,805		)	(28,913		)
Recoveries	2,877			639			17,007			1,933			2,256			24,712
Provision/(provision credit) for loan losses	12,118			(4,788		)	(15,024		)	(1,004		)	5,698			(3,000		)
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Allowance - individually evaluated for impairment	6,895			126			23,936			12,601			246			43,804
Allowance - collectively evaluated for impairment	88,529			29,557			16,649			3,118			10,075			147,928
Allowance - purchased credit-impaired loans	2,781			—			354			—			—			3,135
Loans, net of unearned as of September 30, 2017:
Individually evaluated for impairment	32,028			2,320			135,858			84,081			544			254,831
Collectively evaluated for impairment	12,739,091			2,244,895			4,232,564			319,001			349,889			19,885,440
Purchased credit-impaired loans	20,725			3,800			1,295			—			—			25,820
Total loans, net of unearned income	$	12,791,844		$	2,251,015		$	4,369,717		$	403,082		$	350,433		$	20,166,091
Balance as of July 1, 2016	$	80,972		$	30,264		$	59,081		$	17,600		$	11,890		$	199,807
Charge-offs	(1,992		)	(49		)	(4,359		)	(373		)	(3,589		)	(10,362		)
Recoveries	725			651			5,591			239			906			8,112
Provision/(provision credit) for loan losses	7,161			1,554			(7,078		)	(877		)	3,240			4,000
Balance as of September 30, 2016	86,866			32,420			53,235			16,589			12,447			201,557
Balance as of January 1, 2016	$	73,637		$	25,159		$	80,614		$	18,947		$	11,885		$	210,242
Charge-offs	(16,386		)	(742		)	(17,867		)	(834		)	(10,441		)	(46,270		)
Recoveries	3,107			1,782			17,408			1,502			2,786			26,585
Provision/(provision credit) for loan losses	26,508			6,221			(26,920		)	(3,026		)	8,217			11,000
Balance as of September 30, 2016	86,866			32,420			53,235			16,589			12,447			201,557
Allowance - individually evaluated for impairment	5,187			216			29,461			14,611			139			49,614
Allowance - collectively evaluated for impairment	81,376			31,674			23,441			1,978			12,308			150,777
Allowance - purchased credit-impaired loans	303			530			333			—			—			1,166
Loans, net of unearned as of September 30, 2016:
Individually evaluated for impairment	49,351			3,302			158,909			94,071			340			305,973
Collectively evaluated for impairment	12,022,457			2,053,101			4,417,896			342,029			357,032			19,192,515
Purchased credit-impaired loans	46,490			9,192			1,566			—			51			57,299
Total loans, net of unearned income	$	12,118,298		$	2,065,595		$	4,578,371		$	436,100		$	357,423		$	19,555,787


(a)	~~2017 increase~~2020 decrease in gross carrying amounts and accumulated amortization associated with ~~the Coastal acquisition.~~$54.9 million of customer relationships fully amortized at December 31, 2019.


(b)	Balance primarily includes noncompete covenants, as well as $.3 million related to state banking licenses not subject to amortization.



(Dollars in thousands)
Year	Amortization
Remainder of 2020	$	15,852
2021	19,547
2022	17,412
2023	16,117
2024	14,679
2025	12,580



(Dollars in thousands)	Regional Banking		Fixed Income		Total
December 31, 2018	$	1,289,819	$	142,968	$	1,432,787
Additions	—		—		—
March 31, 2019	$	1,289,819	$	142,968	$	1,432,787

December 31, 2019	$	1,289,819	$	142,968	$	1,432,787
Additions	—		—		—
March 31, 2020	$	1,289,819	$	142,968	$	1,432,787


(a)	Amounts are driven by market conditions and are mirrored by changes in deferred compensation expense which is included in employee compensation expense. First quarter 2020 decrease was driven by negative equity market valuations.


(b)	First quarter 2020 increase largely associated with a sudden, steep decline in economic forecast attributable to the COVID-19 pandemic.



(Dollars in thousands)	Securities AFS			Cash Flow Hedges			Pension and Post-retirement Plans			Total
Balance as of January 1, 2020	$	31,079		$	3,227		$	(273,914	)	$	(239,608	)
Net unrealized gains/(losses)	88,278			13,155			—			101,433
Amounts reclassified from AOCI	—			(94		)	2,105			2,011
Other comprehensive income/(loss)	88,278			13,061			2,105			103,444
Balance as of March 31, 2020	$	119,357		$	16,288		$	(271,809	)	$	(136,164	)

Balance as of January 1, 2019	$	(75,736	)	$	(12,112	)	$	(288,768	)	$	(376,616	)
Net unrealized gains/(losses)	48,615			3,936			—			52,551
Amounts reclassified from AOCI	—			1,451			1,463			2,914
Other comprehensive income/(loss)	48,615			5,387			1,463			55,465
Balance as of March 31, 2019	$	(27,121	)	$	(6,725	)	$	(287,305	)	$	(321,151	)



(Dollars in thousands)	Three Months Ended March 31
Details about AOCI	2020			2019			Affected line item in the statement where net income is presented
Cash flow hedges:
Realized (gains)/losses on cash flow hedges	(124		)	1,927			Interest and fees on loans
Tax expense/(benefit)	30			(476		)	Provision/(benefit) for income taxes
	(94		)	1,451
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial gain/(loss)	2,791			1,943			All other expense
Tax expense/(benefit)	(686		)	(480		)	Provision/(benefit) for income taxes
	2,105			1,463
Total reclassification from AOCI	$	2,011		$	2,914



	Three Months Ended March 31
(Shares in thousands)	2020		2019
Stock options excluded from the calculation of diluted EPS	3,031		2,613
Weighted average exercise price of stock options excluded from the calculation of diluted EPS	$	18.73	$	21.77
Other equity awards excluded from the calculation of diluted EPS	4,264		1,922



	Pension Benefits						Other Benefits
(Dollars in thousands)	2020			2019			2020			2019
Components of net periodic benefit cost
Service cost	$	8		$	8		$	25		$	24
Interest cost	5,909			7,575			304			351
Expected return on plan assets	(6,168		)	(9,173		)	(311		)	(269		)
Amortization of unrecognized:
Prior service cost/(credit)	—			—			8			—
Actuarial (gain)/loss	3,224			2,435			(75		)	(117		)
Net periodic benefit cost/(credit)	$	2,973		$	845		$	(49	)	$	(11	)


(a)	First quarter 2020 increase in provision expense primarily associated with a sudden, steep decline in the economic forecast attributable to the COVID-19 pandemic.


(b)	First quarter 2020 decrease due to fluctuations in deferred compensation income driven by equity market valuations and mirrored by changes in deferred compensation expense, which is included in employee compensation expense.


(c)	2020 and 2019 include restructuring-related costs associated with efficiency initiatives; refer to Note 17 - Restructuring, Repositioning, and Efficiency for additional information. 2020 and 2019 include acquisition-related expenses; refer to Note 2 - Acquisitions and Divestitures for additional information.


(a)	Includes $9.3 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers."


(b)	Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.


(c)	Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.


(d)	First quarter 2020 Corporate balance includes negative deferred compensation income driven by equity market valuations.


(a)	Includes $7.3 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards



	September 30, 2017				December 31, 2016
	On-Balance Sheet Consumer Loan Securitization		Rabbi Trusts Used for Deferred Compensation Plans		On-Balance Sheet Consumer Loan Securitization		Rabbi Trusts Used for Deferred Compensation Plans
(Dollars in thousands)	Carrying Value		Carrying Value		Carrying Value		Carrying Value
Assets:
Cash and due from banks	$	—	N/A		$	—	N/A
Loans, net of unearned income	26,210		N/A		35,873		N/A
Less: Allowance for loan losses	—		N/A		587		N/A
Total net loans	26,210		N/A		35,286		N/A
Other assets	47		$	77,997	283		$	74,160
Total assets	$	26,257	$	77,997	$	35,569	$	74,160
Liabilities:
Term borrowings	$	13,354	N/A		$	23,126	N/A
Other liabilities	3		$	58,785	3		$	54,746
Total liabilities	$	13,357	$	58,785	$	23,129	$	54,746