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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________  
FORM 10-Q

 ______________________________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to                     
Commission File Number 001-15185

____________________________________ 
First Horizon National Corporationfhn-20210331_g1.jpg

(Exact name of registrant as specified in its charter)
 

______________________________________  
TN62-0803242
(State or other jurisdiction
incorporation of organization)		(IRS Employer
Identification No.)
TN165 Madison Avenue62-0803242
(State or other jurisdiction
incorporation of organization)
Memphis,		Tennessee
(IRS Employer
Identification No.)
38103
165 MADISON AVENUE
MEMPHIS, TENNESSEE
38103
(Address of principal executive office)(Zip Code)

(Registrant’s telephone number, including area code) (901) 523-4444
______________________________________ 
(Former name, former address and former fiscal year, if changed since last report)
 ______________________________________


Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Exchange on which Registered
$.625 Par Value Common Capital Stock FHNNew 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 ANew York Stock Exchange LLC
Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series B		FHN PR BNew York Stock Exchange LLC
Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series C		FHN PR CNew York Stock Exchange LLC
Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series D		FHN PR DNew York Stock Exchange LLC
Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series E		FHN PR ENew York Stock Exchange LLC
Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series F*		FHN PR FNew York Stock Exchange LLC
* Denotes class of security issued and outstanding on the date this report is filed, but not at March 31, 2021. Listing on the New York Stock Exchange is expected, but not final at time of filing.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated Filer☒Accelerated filer☐Non-accelerated filer☐
Smaller reporting company☐Emerging Growth Company☐(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No


APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding on September 30, 2017March 31, 2021
Common Stock, $.625 par value234,230,515552,374,489




fhn-20210331_g1.jpg
Table of Contents
FIRST HORIZON NATIONAL CORPORATION
INDEX
1
3
4
15
Item 1. Financial Statements
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7868
Item 3. Quantitative and Qualitative Disclosures about Market Risk
12699
Item 4. Controls and Procedures
12699
127100
Item 1. Legal Proceedings
127100
Item 1A. Risk Factors
127100
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
127100
Item 3. Defaults Upon Senior Securities
127100
Item 4. Mine Safety Disclosures
127100
Item 5. Other Information
127100
Item 6. Exhibits
128101
Exhibit 10.1
Exhibit 10.2
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(b)
Signatures
129


PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
103


GLOSSARY OF ACRONYMS AND TERMS

The following is a list of common acronyms and terms used throughout this report:


ACLAllowance for credit losses
ADRAverage daily revenue
AFSAvailable for sale
AIRAccrued interest receivable
ALCOAsset/Liability Committee
ALLLAllowance for loan and lease losses
ALMAsset/liability management
AOCIAccumulated other comprehensive income
ASCFASB Accounting Standards Codification
AssociatePerson employed by FHN
ASUAccounting Standards Update
BankFirst Horizon Bank
BOLIBank-owned life insurance
C&ICommercial, financial, and industrial loan portfolio
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CBFCapital Bank Financial
CCARComprehensive Capital Analysis and Review
CDCertificate of deposit
CECLCurrent expected credit loss
CEOChief Executive Officer
CFPBConsumer Financial Protection Bureau
CMOCollateralized mortgage obligations
CompanyFirst Horizon Corporation
CorporationFirst Horizon Corporation
CRACommunity Reinvestment Act
CRECommercial Real Estate
CRMCCredit Risk Management Committee
DSCRDebt service coverage ratios
DTADeferred tax asset
DTIDebt-to-income
DTLDeferred tax liability
EPSEarnings per share
ESOPEmployee stock ownership plan
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation

Federal ReserveFederal Reserve Board
FFPFederal funds purchased
FFSFederal funds sold
FHAFederal Housing Administration
FHLBFederal Home Loan Bank
FHLMC /
Freddie Mac		Federal Home Loan Mortgage Corporation
FHNFirst Horizon Corporation
FHNFFHN Financial; FHN's fixed income division
FICOFair Isaac Corporation
FINRAFinancial Industry Regulatory Authority
FNMA / Fannie MaeFederal National Mortgage Association
First HorizonFirst Horizon Corporation
FRBFederal Reserve Bank or the Federal Reserve Board
FTBNAFirst Tennessee Bank National Association (former name of the Bank)
FTEFully taxable equivalent
FTHCFirst Tennessee Housing Corporation
FTNFFTN Financial (former name of FHNF)
FTNMCFirst Tennessee New Markets Corporation
FTRESCFT Real Estate Securities Company, Inc.
GAAPGenerally accepted accounting principles (U.S.)
GNMAGovernment National Mortgage Association or Ginnie Mae
GSEGovernment sponsored enterprises, in this report references Fannie Mae and Freddie Mac
HELOCHome equity line of credit
HFSHeld for Sale
HTMHeld to maturity
HUDDepartment of Housing and Urban Development
IBKCIBERIABANK Corporation
IBKC mergerFHN's merger of equals with IBKC that closed July 2020
ISDAInternational Swap and Derivatives Association
IRSInternal Revenue Service

FIRST HORIZON CORPORATION11Q21 FORM 10-Q REPORT

LGDLoss given default
LIBORLondon Inter-Bank Offered Rate
LIHTCLow Income Housing Tax Credit
LLCLimited Liability Company
LMCLoans to mortgage companies
LOCOMLower of cost or market
LRRDLoan Rehab and Recovery Department
LTVLoan-to-value
MBSMortgage-backed securities
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MSRMortgage servicing rights
MSRBMunicipal Securities Rulemaking Board
NAICSNorth American Industry Classification System
NIINet interest income
NIMNet interest margin
NMNot meaningful
NMTCNew Market Tax Credit
NOLNet operating loss
NPANonperforming asset
Non-PCDNon-Purchased Credit Deteriorated Financial Assets
NPLNonperforming loan
NSFNon-sufficient funds
OCCOffice of the Comptroller of the Currency
OISOvernight indexed swap
OREOOther Real Estate Owned
OTCOne-time close, a mortgage product which allowed simplified conversion of a construction loan to permanent financing
OTTIOther than temporary impairment
PCAOBPublic Company Accounting Oversight Board
PCDPurchased Credit Deteriorated Financial Assets
PCIPurchased credit impaired
PDProbability of default
PMPortfolio managers
PPPPaycheck Protection Program
PSUPerformance Stock Unit
REReal estate
RMRelationship managers
ROAReturn on assets
ROCEReturn on average common shareholders' equity

ROTCEReturn on tangible common equity
ROURight-of-use
RPLReasonably Possible Loss
RSURestricted stock unit
RULCReserve for unfunded lending commitments
RWARisk-weighted assets
SBASmall Business Administration
SECSecurities and Exchange Commission
SVaRStressed Value-at-Risk
TATangible assets
TCETangible common equity
TDRTroubled Debt Restructuring
TRUPTrust preferred loan
UPBUnpaid principal balance
USDAUnited States Department of Agriculture
VaRValue-at-Risk
VIEVariable Interest Entities
we / us / ourFirst Horizon Corporation
FIRST HORIZON CORPORATION21Q21 FORM 10-Q REPORT

Forward-Looking Statements
This report, including material incorporated into it, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements pertain to FHN's beliefs, plans, goals, expectations, and estimates. Forward-looking statements are not a representation of historical information, but instead pertain to future operations, strategies, financial results, or other developments. Forward-looking statements can be identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends.
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 and could cause FHN’s actual future results and outcomes to differ materially from those contemplated or implied by forward-looking statements or historical performance. Examples of uncertainties and contingencies include, among other important factors:
•the possibility that the anticipated benefits of the IBKC merger will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in any or all of FHN’s market areas;
•the possibility that the IBKC merger may be more expensive to integrate than anticipated, including as a result of unexpected factors or events;
•potential adverse reactions or changes to business or associate relationships resulting from the IBKC merger;
•the potential impacts on FHN’s businesses and clients of the COVID-19 pandemic, including negative impacts from quarantines and other public restrictions, market declines and volatility, and changes in client behavior;
•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;
•global, general and local economic and business conditions, including economic recession or depression;
•the stability or volatility of values and activity in the residential housing and commercial real estate markets;
•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;
•the financial condition of borrowers and other counterparties;
•competition within and outside the financial services industry;
•the occurrence of natural or man-made disasters, including pestilence, conflicts, or terrorist attacks, or other adverse external events;
•the effectiveness and cost-efficiency of FHN’s hedging practices;
•fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN or its clients, business counterparties, or competitors;
•FHN’s ability to adapt products and services to changing industry standards and client preferences;
•risks 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 client profiles;
FIRST HORIZON CORPORATION31Q21 FORM 10-Q REPORT

•changes in the regulation of the U.S. financial services industry;
•changes in laws, regulations, and administrative actions, including executive orders, whether or not specific to the financial services industry;
•changes in accounting policies, standards, and interpretations;
•evolving capital and liquidity standards under applicable regulatory rules;
•accounting policies and processes requiring management to make estimates about matters that are uncertain; and
•other factors that may affect the future results of FHN.
FHN cautions readers of this report that the list above is not exhaustive as of the date of this report. Further,
FHN assumes no obligation to update or revise any forward-looking statements that are made in this report or in any other statement, release, report, or filing from time to time. Actual results could differ and FHN’s estimates and expectations could change, possibly materially, because of one or more factors, including those factors listed above or presented elsewhere in this report or those factors listed in material incorporated by reference into this report. In evaluating forward-looking statements and assessing FHN’s prospects, readers of this report should carefully consider the factors mentioned above along with the additional risk and uncertainty factors discussed in Item 1A of Part II of this report and in the forepart, and in Items 1, 1A, and 7, of FHN’s most recent Annual Report on Form 10-K, along with any additional factors which might materially affect future results and outcomes.
Non-GAAP Information
Certain measures included in this report are “non-GAAP,” meaning they are not presented in accordance with U.S. GAAP 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 financial condition, capital position, and financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports. The non-GAAP measures presented in this report are: pre-provision net revenue, return on average tangible common equity, tangible common equity to tangible assets, adjusted tangible common equity to risk-weighted assets, and tangible book value per common share. Table 20 appearing in the MD&A (Item 2 of Part I) of this report provides a reconciliation of non-GAAP items presented in this report to the most comparable GAAP presentation.
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 report 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, which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.
FIRST HORIZON CORPORATION41Q21 FORM 10-Q REPORT

PART I. FINANCIAL INFORMATION
Item 1.     Financial Statements
Consolidated Balance Sheets (unaudited)
6
The Consolidated Condensed Statements of Income (unaudited)
37
The Consolidated Condensed Statements of Comprehensive Income (unaudited)
58
The Consolidated Condensed Statements of Changes in Equity (unaudited)
69
The Consolidated Condensed Statements of Cash Flows (unaudited)
710
The Notes to the Consolidated Condensed Financial Statements (unaudited)
911
Note 1 Financial InformationBasis of Presentation and Accounting Policies
911
Note 2 Acquisitions and Divestitures
1412
Note 3 Investment Securities
1614
Note 4 Loans and Leases
1917
Note 5 Allowance for LoanCredit Losses
3025
Note 6 Intangible AssetsMortgage Banking Activity
3227
Note 7 Other IncomeGoodwill and Other ExpenseIntangible Assets
3328
Note 8 Preferred Stock
29
Note 89 Components of Other Comprehensive Income/(loss)Income (Loss)
3430
Note 910 Earnings Per Share
3631
Note 1011 Contingencies and Other Disclosures
3732
Note 11 Pension, Savings, and Other Employee Benefits12 Retirement Plans
4435
Note 1213 Business Segment Information
4636
Note 1314 Variable Interest Entities
4839
Note 1415 Derivatives
5342
Note 1516 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions
6049
Note 1617 Fair Value of Assets &and Liabilities
6251
Note 18 Other Events
67
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 CORPORATION51Q21 FORM 10-Q REPORT

CONSOLIDATED CONDENSED STATEMENTS OF CONDITIONBALANCE SHEETS
  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
(Unaudited)December 31,
March 31,
(Dollars in millions, except per share amounts)20212020
Assets
Cash and due from banks$1,169 $1,203 
Interest-bearing deposits with banks11,635 8,351 
Federal funds sold and securities purchased under agreements to resell520 445 
Trading securities1,076 1,176 
Securities available for sale at fair value8,351 8,047 
Loans held for sale (including $449 and $405 at fair value, respectively)811 1,022 
Loans and leases (including $17 and $16 at fair value, respectively)58,600 58,232 
Allowance for loan and lease losses(914)(963)
Net loans and leases57,686 57,269 
Premises and equipment719 759 
Goodwill1,511 1,511 
Other intangible assets339 354 
Other assets3,696 4,072 
Total assets$87,513 $84,209 
Liabilities
Noninterest-bearing deposits$25,046 $22,173 
Interest-bearing deposits48,120 47,809 
Total deposits73,166 69,982 
Trading liabilities454 353 
Short-term borrowings2,203 2,198 
Term borrowings1,671 1,670 
Other liabilities1,712 1,699 
Total liabilities79,206 75,902 
Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 26,250 shares470 470 
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 552,374,489 and 555,030,652 shares, respectively345 347 
Capital surplus5,036 5,074 
Retained earnings2,402 2,261 
Accumulated other comprehensive loss, net(241)(140)
FHN shareholders' equity8,012 8,012 
Noncontrolling interest295 295 
Total equity8,307 8,307 
Total liabilities and equity$87,513 $84,209 
See accompanying notes to consolidated condensed financial statements.
(a)FIRST HORIZON CORPORATIONSeptember 30, 2017 and December 31, 2016 include $12.8 million and $19.3 million, respectively, of held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure.61Q21 FORM 10-Q REPORT
(b)September 30, 2017 and December 31, 2016 include $24.8 million and $28.5 million, respectively, of held-to-maturity consumer mortgage loans secured by residential real estate properties in process of foreclosure.
(c)September 30, 2017 and December 31, 2016 include $7.1 million and $8.1 million, respectively, of foreclosed residential real estate.



CONSOLIDATED CONDENSEDCONSOLIDATED STATEMENTS OF INCOME
  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.


CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
  First Horizon National Corporation
  Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands) (Unaudited) 2017 2016 2017 2016
Net income/(loss) $71,769
 $67,635
 $225,361
 $180,788
Other comprehensive income/(loss), net of tax:        
Net unrealized gains/(losses) on securities available-for-sale 3,917
 (7,887) 11,292
 47,310
Net unrealized gains/(losses) on cash flow hedges (734) (1,570) (493) 3,121
Net unrealized gains/(losses) on pension and other postretirement plans 1,895
 963
 4,471
 2,933
Other comprehensive income/(loss) 5,078
 (8,494) 15,270
 53,364
Comprehensive income 76,847
 59,141
 240,631
 234,152
Comprehensive income attributable to noncontrolling interest 2,883
 2,883
 8,555
 8,586
Comprehensive income attributable to controlling interest $73,964
 $56,258
 $232,076
 $225,566
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
Net unrealized gains/(losses) on cash flow hedges (455) (975) (306) 1,940
Net unrealized gains/(losses) on pension and other postretirement plans 1,175
 598
 2,772
 1,823
See accompanying notes to consolidated condensed financial statements.



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
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 million repurchased under share repurchase programs.



CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
  First Horizon National Corporation
  Nine months ended September 30
(Dollars in thousands) (Unaudited) 2017 2016
Operating Activities    
Net income/(loss) $225,361
 $180,788
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:    
Provision/(provision credit) for loan losses (3,000) 11,000
Provision/(benefit) for deferred income taxes (547) 68,100
Depreciation and amortization of premises and equipment 25,052
 24,032
Amortization of intangible assets 5,160
 3,898
Net other amortization and accretion 22,921
 19,536
Net (increase)/decrease in derivatives (14,670) 1,330
Fair value adjustment on interest-only strips (107) —
Repurchase and foreclosure provision/(provision credit) (20,000) (31,618)
(Gains)/losses and write-downs on OREO, net 44
 (543)
Litigation and regulatory matters 7,409
 25,285
Stock-based compensation expense 14,971
 12,378
Equity securities (gains)/losses, net (5) 181
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
Qualified pension plan contribution —
 (165,000)
Loans held-for-sale:    
Purchases and originations (1,252,300) (73,404)
Gross proceeds from settlements and sales 1,252,477
 43,653
(Gain)/loss due to fair value adjustments and other 2,485
 878
Net (increase)/decrease in:    
Trading securities (433,897) (441,205)
Fixed income receivables (11,339) (28,337)
Interest receivable (7,171) (2,014)
Other assets (49,225) (69,855)
Net increase/(decrease) in:    
Trading liabilities 17,180
 136,207
Fixed income payables (73,187) 45,825
Interest payable 8,869
 505
Other liabilities (35,770) (24,795)
Total adjustments (530,784) (443,098)
Net cash provided/(used) by operating activities (305,423) (262,310)
Investing Activities    
Available-for-sale securities:    
Sales 3,360
 1,543
Maturities 420,136
 526,112
Purchases (426,129) (557,216)
Held-to-maturity securities:    
Prepayments and maturities 4,740
 —
Premises and equipment:    
Sales 2,577
 9,636
Purchases (30,395) (41,304)
Proceeds from sales of OREO 9,235
 22,887
Net (increase)/decrease in:    
Loans (a) (586,426) (1,895,345)
Interests retained from securitizations classified as trading securities 648
 2,120
Interest-bearing cash 459,840
 383,002
Cash (paid)/received for acquisition, net (123,971) —
Net cash provided/(used) by investing activities (266,385) (1,548,565)
Financing Activities    
Common stock:    
Stock options exercised 5,173
 18,710
Cash dividends paid (58,850) (47,144)
Repurchase of shares (b) (5,285) (96,801)


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
 Three Months Ended
March 31,
(Dollars in millions, except per share data; shares in thousands) (Unaudited)20212020
Interest income
Interest and fees on loans and leases$507 $327 
Interest and fees on loans held for sale7 7 
Interest on securities available for sale29 27 
Interest on trading securities7 13 
Interest on other earning assets2 4 
Total interest income552 378 
Interest expense
Interest on deposits24 54 
Interest on trading liabilities1 3 
Interest on short-term borrowings1 10 
Interest on term borrowings18 8 
Total interest expense44 75 
Net interest income508 303 
Provision for credit losses(45)154 
Net interest income after provision for credit losses553 149 
Noninterest income
Fixed income126 96 
Mortgage banking and title income53 2 
Deposit transactions and cash management42 30 
Brokerage, management fees and commissions20 16 
Trust services and investment management12 7 
Bankcard income11 7 
Other income34 16 
Total noninterest income298 174 
Noninterest expense
Personnel expense318 183 
Net occupancy expense37 20 
Computer software28 16 
Legal and professional fees14 9 
Operations services16 12 
Equipment expense11 9 
Amortization of intangible assets14 5 
Other expense106 48 
Total noninterest expense544 302 
Income before income taxes307 21 
Income tax expense71 5 
Net income236 16 
Net income attributable to noncontrolling interest3 3 
Net income attributable to controlling interest233 13 
Preferred stock dividends8 1 
Net income available to common shareholders225 12 
Basic earnings per common share$0.41 $0.04 
Diluted earnings per common share$0.40 $0.04 
Weighted average common shares552,249 311,597 
Diluted average common shares557,532 313,170 
Certain previously reported amounts have been reclassified to agree with current presentation.
See accompanying notes to consolidated condensed financial statements.

(a)FIRST HORIZON CORPORATION2016 includes $537.4 million UPB of loans acquired from GE Capital.71Q21 FORM 10-Q REPORT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
March 31,
(Dollars in millions) (Unaudited)20212020
Net income$236 $16 
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale(103)89 
Net unrealized gains (losses) on cash flow hedges(2)13 
Net unrealized gains (losses) on pension and other postretirement plans4 2 
Other comprehensive income (loss)(101)104 
Comprehensive income135 120 
Comprehensive income attributable to noncontrolling interest3 3 
Comprehensive income attributable to controlling interest$132 $117 
Income tax expense (benefit) of items included in Other comprehensive income:
Net unrealized gains (losses) on securities available for sale$(33)$29 
Net unrealized gains (losses) on cash flow hedges(1)4 
Net unrealized gains (losses) on pension and other postretirement plans1 1 
See accompanying notes to consolidated financial statements.

(b)FIRST HORIZON CORPORATION2016 includes $93.5 million repurchased under share repurchase programs.81Q21 FORM 10-Q REPORT




CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Three months ended March 31, 2021
Preferred StockCommon Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)SharesAmountSharesAmountCapital
Surplus		Retained EarningsAccumulated
Other
Comprehensive
Income (Loss) (a)		Noncontrolling InterestTotal
Balance, December 31, 202026,250 $470 555,031 $347 $5,074 $2,261 $(140)$295 $8,307 
Net income— — — — — 233 — 3 236 
Other comprehensive income (loss)— — — — — — (101)— (101)
Comprehensive income (loss)— — — — — 233 (101)3 135 
Cash dividends declared:
Preferred stock— — — — — (8)— — (8)
Common stock ($0.15 per share)— — — — — (84)— — (84)
Common stock repurchased (b)— — (3,864)(2)(60)— — — (62)
Common stock issued for:
Stock options and restricted stock - equity awards— — 1,208 0 12 — — — 12 
Stock-based compensation expense— — — — 10 — — — 10 
Dividends declared - noncontrolling interest of subsidiary preferred stock— — — — — — — (3)(3)
Balance, March 31, 202126,250 $470 552,375 $345 $5,036 $2,402 $(241)$295 $8,307 
(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 $59 million repurchased under share repurchase programs.

Three months ended March 31, 2020
Preferred StockCommon Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)SharesAmountSharesAmountCapital
Surplus		Retained EarningsAccumulated
Other
Comprehensive
Income (Loss) (a)		Noncontrolling InterestTotal
Balance, December 31, 20191,000 $96 311,469 $195 $2,931 $1,798 $(239)$295 $5,076 
Adjustment to reflect adoption of ASU 2016-13— — — — — (96)— — (96)
Beginning balance, as adjusted1,000 96 311,469 195 2,931 1,702 (239)295 4,980 
Net income— — — — — 13 — 3 16 
Other comprehensive income (loss)— — — — — — 104 — 104 
Comprehensive income (loss)— — — — — 13 104 3 120 
Cash dividends declared:
Preferred stock ($1,550 per share)— — — — — (1)— — (1)
Common stock ($0.15 per share)— — — — — (48)— — (48)
Common stock repurchased— — (141)0 (2)— — — (2)
Common stock issued for:
Stock options and restricted stock - equity awards— — 652 0 4 — — — 4 
Stock-based compensation expense— — — — 7 — — — 7 
Dividends declared - noncontrolling interest of subsidiary preferred stock— — — — — — — (3)(3)
Other (b)— — (117)0 (1)— — — (1)
Balance, March 31, 20201,000 $96 311,863 $195 $2,939 $1,666 $(135)$295 $5,056 
(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)Represents shares canceled in connection with the resolution of remaining Capital Bank Financial Corporation ("CBF") dissenters' appraisal process.

See accompanying notes to consolidated financial statements.
FIRST HORIZON CORPORATION91Q21 FORM 10-Q REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS

 Three months ended March 31,
(Dollars in millions) (Unaudited)20212020
Operating Activities
Net income$236 $16 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision (provision credit) for credit losses(45)154 
Deferred income tax expense (benefit)(3)(19)
Depreciation and amortization of premises and equipment16 11 
Amortization of intangible assets14 5 
Net other amortization and accretion(14)4 
Net (increase) decrease in derivatives322 (324)
Stock-based compensation expense10 7 
Net (gains) losses on sale/disposal of fixed assets34 0 
Loans held for sale:
Purchases and originations(943)(588)
Gross proceeds from settlements and sales683 181 
(Gain) loss due to fair value adjustments and other(35)(1)
Other operating activities, net789 (846)
Total adjustments828 (1,416)
Net cash provided by (used in) operating activities1,064 (1,400)
Investing Activities
Proceeds from sales of securities available for sale26 9 
Proceeds from maturities of securities available for sale591 224 
Purchases of securities available for sale(1,065)(214)
Proceeds from sales of premises and equipment1 2 
Purchases of premises and equipment(10)(8)
Proceeds from BOLI1 2 
Net increase in loans and leases(338)(2,312)
Net increase in interest-bearing deposits with banks(3,284)(188)
Other investing activities, net6 3 
Net cash used in investing activities(4,072)(2,482)
Financing Activities
Common stock:
Stock options exercised12 4 
Cash dividends paid(84)(44)
Repurchase of shares(62)(2)
Cancellation of common shares0 (2)
Cash dividends paid - preferred stock - noncontrolling interest(3)(3)
Cash dividends paid - preferred stock(8)(2)
Net increase in deposits3,190 1,990 
Net increase in short-term borrowings4 1,807 
Increases (decreases) in restricted and secured term borrowings0 (3)
Net cash provided by financing activities3,049 3,745 
Net increase (decrease) in cash and cash equivalents41 (137)
Cash and cash equivalents at beginning of period1,648 1,267 
Cash and cash equivalents at end of period$1,689 $1,130 
Supplemental Disclosures
Total interest paid$39 $84 
Total taxes paid2 5 
Total taxes refunded4 0 
Transfer from loans to OREO0 1 
Transfer from loans HFS to trading securities498 398 
Transfer from loans to loans HFS(3)0 
Certain previously reported amounts have been reclassified to agree with current presentation.
See accompanying notes to consolidated financial statements.
FIRST HORIZON CORPORATION101Q21 FORM 10-Q REPORT

Notes to the Consolidated Condensed Financial Statements (Unaudited)



Note 1 – Financial Information

Basis of Accounting.Presentation and Accounting Policies

The accompanying unaudited interim consolidated condensed financial statements of First Horizon National Corporation (“FHN”), including its subsidiaries, have been prepared in conformityaccordance with accounting principles generally accepted inGAAP for interim financial information and with the United Statesinstructions to Form 10-Q and Article 10 of AmericaRegulation S-X. Accordingly, they do not include all information 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 thenotes necessary for complete 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 accordance with GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all significant adjustments, consisting of normal and recurring items, considered necessary adjustments have been made for a fair presentation ofpresentation. These interim financial positionstatements should be read in conjunction with FHN's audited consolidated financial statements and results of operations for the periods presented. These adjustments are of a normal recurring nature unless otherwise disclosednotes in this QuarterlyFHN's Annual Report on Form 10-Q. The operating10-K for the year ended December 31, 2020. Operating results for the interim 2017 period are not necessarily indicative of the results that may be expected going forward. For further information, referfor the full year.

All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts reported in prior years have been reclassified to conform to the audited consolidatedcurrent period presentation. See the Glossary of Acronyms and Terms included in this Report for terms used herein.

Accounting Changes With Extended Transition Periods

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 (or recognizing the effects of) reference rate reform on financial statementsreporting. The provisions of ASU 2020-04 primarily affect 1) contract modifications (e.g., loans, leases, debt, and derivatives) made in Exhibit 13anticipation 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 FHN’s Annual Report on Form 10-Kcontracts, 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 has elected certain optional expedients for and that are retained through the end of the hedging relationship. FHN has been identifying contracts affected by reference rate reform and developing modification
plans for those contracts. FHN has elected to utilize the optional expedients and exceptions provided by ASU 2020-04 for certain contract modifications. FHN anticipates that it will continue to utilize the expedients and exceptions in situations where they mitigate potential accounting outcomes that do not faithfully represent management’s intent or risk management activities, consistent with the purpose of the standard.

In January 2021, the FASB issued ASU 2021-01, "Scope" to expand the scope of ASU 2020-04 to apply to certain contract modifications that were implemented in October 2020 by derivative clearinghouses for the year ended December 31, 2016.

Summaryuse of Accounting Changes. Effective January 1, 2017, FHN adopted the provisions of Accounting Standards Update (“ASU”) 2016-09, “ImprovementsSecure Overnight Funding Rate (SOFR) in discounting, margining and price alignment for centrally cleared derivatives, including derivatives utilized in hedging relationships. ASU 2021-01 also applies to Employee Share-Based Payment Accounting,” which makes several revisions to equity compensation accounting. Under 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 calculation of diluted earnings per share. Excess tax benefits are also recognized at the time an award is exercised or vests compared to the previous requirement to delay recognition until the deduction reduces taxes payable. The presentation of excess tax benefits in the statement of cash flows shifted to an operating activity from the prior classification as a financing activity.

ASU 2016-09 also provides an accounting policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than 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 classification for the entire award. The related cash remittancederivative contracts affected by the employer for employee taxes is treated as a financing activitychange in the statementdiscounting convention regardless of cash flows. Transitionwhether they are centrally cleared (i.e., bi-lateral contracts can also be modified) and regardless of whether they reference LIBOR. ASU 2021-01 was effective immediately upon issuance with retroactive application permitted. FHN elected to the new guidance was accomplished through a combination of retrospective (cash flows), cumulative-effect adjustment to equity (forfeitures) and prospective methodologies (tax windfalls and shortfalls). The effects of adopting ASU 2016-09 have not been significant.

Effective January 1, 2017, FHN early adoptedretroactively apply the provisions of ASU 2016-16, “Intra-Entity Transfers2021-01 because FHN's centrally cleared derivatives were affected by the change in discounting convention and because FHN has other bi-lateral derivative contracts that may be modified to conform to the use of Assets Other Than Inventory” which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Therefore, ASU 2016-16 reverses the previous requirement to delay recognition of the tax consequences of these transactions until the associated assets are sold to an outside party.SOFR for discounting. Adoption of ASU 2016-16 did not have a significant effect on FHN.

Accounting Changes Issued but Not Currently Effective

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 does not change revenue recognition forFHN's reported financial assets. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goodscondition or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange 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 andearnings.

9
FIRST HORIZON CORPORATION111Q21 FORM 10-Q REPORT


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, FHN anticipates that it will elect to adopt the provisions of the revenue recognition standards through a cumulative effect to retained earnings with comparability disclosures provided throughout 2018. Based on reviews of its various revenues that are within the scope of ASU 2014-09, FHN has not identified a significant change 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 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 investments that do not have readily determinable market values at cost minus impairment, if any, plus 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 impairment 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.

10


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

11


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.


12


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 of the hedging results on the balance sheet. ASU 2017-12 is effective for fiscal years beginning after December 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 4, 2017,July 1, 2020, FHN and Capital Bank Financial Corp. (“Capital Bank” or "CBF") announced that they had entered into an agreementIBERIABANK Corporation closed their merger-of-equals transaction. FHN issued approximately 243 million shares of FHN common stock, plus 3 new series of preferred stock (Series B, Series C, and plan of merger. Under the agreement FHN will acquire Capital Bank, which is headquarteredSeries D) in Charlotte, North Carolina, and reported approximately $10 billion of assetsa transaction valued at June 30, 2017.$2.5 billion. At the time of announcement Capital Bankclosing, IBKC operated 193 branches319 offices in North12 states, mostly in the southern U.S.

The merger-of-equals transaction has been accounted for as a business combination.
Accordingly, the assets acquired and South Carolina, Tennessee, Florida and Virginia. Collectively, Capital Bank shareholders will receive approximately $411 million in cash plus FHN common shares whichliabilities assumed are expected to represent approximately 29 percent of FHN’s outstanding common shares immediately after consummationgenerally presented at their fair values as of the merger.merger date. The total transactiondetermination of fair value measured at the time of announcement, was approximately $2.2 billion. The agreement calls for two members of Capital Bank’s board of directorsrequires management to join FHN’s board after closing. The transaction ismake estimates about discount rates, future expected to closecash flows, market conditions and other future events that are highly subjective in fourth quarter 2017,nature and subject to regulatory approval of the sale of two branches and customary conditions.change.
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 in the trading, securitization, and analysis of Small Business Administration (“SBA”) loans, 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 a preliminary allocation of merger consideration to the valuations of the identifiable tangible and intangible assets acquired and liabilities assumed from IBKC as of July 1, 2020.
(Dollars in millions)IBERIABANK Corporation
Assets:
Cash and due from banks$395 
Interest-bearing deposits with banks1,683 
Securities available for sale at fair value3,544 
Loans held for sale320 
Loans and leases (a)25,921 
Allowance for loan and lease losses(284)
Other intangible assets240 
Premises and equipment311 
OREO9 
Other assets1,156 
Total assets acquired$33,295 
Liabilities:
Deposits$28,232 
Short-term borrowings209 
Term borrowings1,200 
Other liabilities618 
Total liabilities assumed$30,259 
Net assets acquired$3,036 
Consideration paid:
Consideration for outstanding common stock$2,243 
Consideration for equity awards28 
Consideration for preferred stock231 
Total consideration paid$2,502 
Preliminary purchase accounting gain$(534)
(a)     Includes $1.3 billion of initial net investments in sales-type and direct financing leases.

In relation to the merger-of-equals transaction, FHN recorded a preliminary $533 million purchase accounting gain in 2020 and an additional $1 million purchase accounting gain during the first quarter of 2021, representing the shortfall of the purchase price under the acquisition accounting value of net assets
acquired, net of deferred taxes. The preliminary purchase accounting gain is not taxable. Due to the fact that certain back office functions (including loan processing) have not been integrated, the ongoing evaluation of post-merger activity, and the extended information gathering and management review
FIRST HORIZON CORPORATION121Q21 FORM 10-Q REPORT

Note 2 – Acquisitions and Divestitures (Continued)
processes required to properly record acquired assets and liabilities, FHN considers its valuations of IBKC's loans and consideration paid,leases, other assets, tax receivables and payables, other liabilities and acquired contingencies to be provisional as well as adjustmentsmanagement continues to recordidentify and assess information regarding the nature of these assets and liabilities at their estimatedand reviews the associated valuation assumptions and methodologies. Accordingly, the amounts recorded for current and deferred tax assets and liabilities are also considered provisional as FHN continues to evaluate the nature and extent of permanent and temporary (timing) differences between the book and tax bases of the acquired assets and liabilities assumed. Additionally, the accounting policies of both FHN and IBKC are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.
All measurement period adjustments made during the first three months of 2021 have been deemed insignificant individually and in the aggregate. FHN will finalize its valuation of the IBKC merger-of-equals transaction within the measurement period (i.e., no
later than July 1, 2021). See Note 2, Acquisitions and Divestitures, in the 2020 Annual Report on Form 10-K for the year ended December 31, 2020, for a description of the methods used to determine the fair values as of April 3, 2017:significant assets acquired and liabilities assumed presented above.
  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
On July 17, 2020, First Horizon Bank completed its purchase of 30 branches from Truist Bank. As of December 31, 2020, the valuation of the acquired assets and liabilities assumed from the Truist branches acquisition was final. In relation to the acquisition, FHN has recorded $45.0$78 million in goodwill, representing the excess of acquisition consideration over the estimated fair value of net assets acquiredacquired. All goodwill has been attributed to FHN's Regional Banking segment (refer to Note 67 - Intangible Assets for additional information), and all of which is expected to be deductible for tax purposes. The. This goodwill iswas the result of adding an experienced workforce, establishing an additional major product sector for FTN Financial, expected synergies, operational efficiencies and other factors. Expenses related to FHN's operating results for 2017merger and integration activities are recorded in FHN's Corporate segment.

Note 2 – Acquisitions and Divestitures (Continued)

include the operating results of the acquired assetsTotal merger and assumed liabilities of Coastal subsequent to the acquisition on April 3, 2017.
Forintegration expense recognized for the three and nine months ended September 30, 2017, FHN recognized $8.2 millionMarch 31, 2021 and $14.6 million, respectively,2020 are presented in the table below:
Three Months Ended
March 31,
(Dollars in millions)20212020
Personnel expense (a)$21 $1 
Legal and professional fees (b)3 2 
Net occupancy expense (c)3 0 
Other expense (d)43 3 
Total$70 $6 
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)    Primarily comprised of acquisitionfees for severance and integration-relatedretention.
(b)    Primarily comprised of fees for legal, accounting, and merger consultants.    
(c)    Primarily relates to expenses primarily associated with the CBFlease exits.
(d)    Consists of fees for operations services, communications and Coastal acquisitions. These expenses were primarily included in Professional fees, Legal fees, Employee compensation, incentivesdelivery, equipment rentals, depreciation and benefits,maintenance, supplies, travel and All other expense on the Consolidated Condensed Statementsentertainment, computer software, advertising and public relations, contract termination charges, internal technology development costs, costs of Income.shareholder matters and asset impairments.
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 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.


FIRST HORIZON CORPORATION131Q21 FORM 10-Q REPORT

Note 3 – Investment Securities
The following tables summarize FHN’s investment securities on September 30, 2017March 31, 2021 and December 31, 2016:2020:
 March 31, 2021
(Dollars in millions)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Securities available for sale:
U.S. treasuries$610 $0 $0 $610 
Government agency issued MBS4,009 68 (39)4,038 
Government agency issued CMO2,463 19 (41)2,441 
Other U.S. government agencies733 5 (13)725 
Corporate and other debt40 0 0 40 
States and municipalities467 9 (1)475 
$8,322 $101 $(94)8,329 
AFS securities recorded at fair value through earnings:
SBA-interest only strips (a)22 
Total securities available for sale (b)$8,351 
(a)SBA-interest only strips are recorded at elected fair value. See Note 17 - Fair Value of Assets and Liabilities for additional information.
(b)Includes $7.0 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
 December 31, 2020
(Dollars in millions)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Securities available for sale:
U.S. treasuries$613 $0 $0 $613 
Government agency issued MBS3,722 92 (2)3,812 
Government agency issued CMO2,380 29 (3)2,406 
Other U.S. government agencies672 12 0 684 
Corporate and other debt40 1 (1)40 
States and municipalities445 15 0 460 
$7,872 $149 $(6)8,015 
AFS securities recorded at fair value through earnings:
SBA-interest only strips (a)32 
Total securities available for sale (b)$8,047 
(a)SBA-interest only strips are recorded at elected fair value. See Note 17 - Fair Value of Assets and Liabilities for additional information.
(b)Includes $6.4 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.

  September 30, 2017
(Dollars in thousands) 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities available-for-sale:        
U.S. treasuries $100
 $—
 $—
 $100
Government agency issued mortgage-backed securities (“MBS”) 2,081,677
 15,993
 (10,165) 2,087,505
Government agency issued collateralized mortgage obligations (“CMO”) 1,701,467
 4,295
 (19,767) 1,685,995
Equity and other (a) 186,413
 2
 —
 186,415
  $3,969,657
 $20,290
 $(29,932) 3,960,015
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
Securities held-to-maturity:        
Corporate bonds $10,000
 $—
 $(15) $9,985
Total securities held-to-maturity $10,000
 $—
 $(15) $9,985
(a)FIRST HORIZON CORPORATIONIncludes 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.141Q21 FORM 10-Q REPORT
(b)SBA-interest only strips are recorded at elected fair value. See Note 16 - Fair Value for additional information.
(c)Includes $3.3 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.
Table of Contents
  December 31, 2016
(Dollars in thousands) 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities available-for-sale:         
U.S. treasuries $100
 $—
 $—
 $100
Government agency issued MBS 2,217,593
 14,960
 (23,866) 2,208,687
Government agency issued CMO 1,566,986
 4,909
 (23,937) 1,547,958
Equity and other (a) 186,756
 —
 (2) 186,754
Total securities available-for-sale (b) $3,971,435
 $19,869
 $(47,805) $3,943,499
Securities held-to-maturity:        
States and municipalities $4,347
 $393
 $—
 $4,740
Corporate bonds 10,000
 33
 —
 10,033
Total securities held-to-maturity $14,347
 $426
 $—
 $14,773
(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)Includes $3.3 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


Note 3 – Investment Securities (Continued)

The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturitydebt securities portfoliosportfolio on September 30, 2017 areMarch 31, 2021 is provided below:
Available for Sale
 Held-to-Maturity Available-for-Sale
(Dollars in thousands) 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
(Dollars in millions)(Dollars in millions)Amortized
Cost		Fair
Value
Within 1 year $—
 $—
 $—
 $—
Within 1 year$758 $759 
After 1 year; within 5 years —
 —
 100
 120
After 5 years; within 10 years 10,000
 9,985
 —
 1,464
After 1 year through 5 yearsAfter 1 year through 5 years146 148 
After 5 years through 10 yearsAfter 5 years through 10 years345 348 
After 10 years —
 —
 —
 1,639
After 10 years601 617 
Subtotal 10,000
 9,985
 100
 3,223
Subtotal1,850 1,872 
Government agency issued MBS and CMO (a) —
 —
 3,783,144
 3,773,500
Government agency issued MBS and CMO (a)6,472 6,479 
Equity and other —
 —
 186,413
 186,415
Total $10,000
 $9,985
 $3,969,657
 $3,963,138
Total$8,322 $8,351 
 
(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(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.
Gross gains and gross losses on sales of debt investment securities and cash proceeds from investmentthe sale of available-for-sale securities for the three and nine months ended September 30:March 31, 2021 and 2020 were insignificant.
 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands)2017 2016 2017 2016
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
(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 were $1.5 million and included a $1.7 million gain from an exchange of approximately $294 million of AFS debt securities.
(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, 2017March 31, 2021 and December 31, 2016:2020:

 As of March 31, 2021
 Less than 12 months12 months or longerTotal
(Dollars in millions)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Government agency issued MBS$1,772 $(39)$0 $0 $1,772 $(39)
Government agency issued CMO1,508 (41)0 0 1,508 (41)
Other U.S. government agencies405 (13)0 0 405 (13)
States and municipalities82 (1)0 0 82 (1)
Total$3,767 $(94)$0 $0 $3,767 $(94)
 
  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)

Note 3 – Investment Securities (Continued)

 As of December 31, 2020
 Less than 12 months12 months or longerTotal
(Dollars in millions)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
U.S. treasuries$307 $0 $0 $0 $307 $0 
Government agency issued MBS426 (2)0 0 426 (2)
Government agency issued CMO586 (3)0 0 586 (3)
Other U.S. government agencies80 (1)0 0 80 (1)
States and municipalities1 0 0 0 1 0 
Total$1,400 $(6)$0 $0 $1,400 $(6)
  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)
FHN has reviewed investmentevaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for OTTIrecognition 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 included in
the fair value or amortized cost basis of AFS debt securities was $24 million and does not consider them other-than-temporarily impaired. For$22 million as of March 31, 2021 and December 31, 2020, respectively. Consistent with FHN's 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
FIRST HORIZON CORPORATION151Q21 FORM 10-Q REPORT
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Note 3 – Investment Securities (Continued)
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.
The declinecarrying amount of equity investments without a readily determinable fair value was $70 million and $57 million at March 31, 2021 and December 31, 2020, respectively. The year-to-date 2021 and 2020 gross amounts of upward and downward valuation adjustments were not significant.
Unrealized gains of $3 million were recognized in value is primarily attributable to changes in interest ratesthe three months ended March 31, 2021 and not credit losses. For2020, respectively, for equity securities, FHN has both the ability and intent to hold these securities for the time necessary to recover the amortized cost.

investments with readily determinable fair values.



FIRST HORIZON CORPORATION161Q21 FORM 10-Q REPORT

Note 4 – Loans and Leases
The following table provides the balance of loans net of unearned income, by portfolio segment as of September 30, 2017 and December 31, 2016:
  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 for additional information.
COMPONENTS OF THE LOAN PORTFOLIO
The loanlease portfolio is disaggregated into portfolio 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 a disaggregation of a portfolio segment and 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. Commercialrisk and performance. FHN's loan and lease portfolio segments include are commercial and consumer. The classes of loans and leases are: (1)
commercial, financial, and industrial, (“C&I”)which includes commercial and commercial real estate. Commercial classes within C&I include general C&I,industrial loans and leases and loans to mortgage companies, the trust preferred loans (“TRUPS”) (i.e. long-term unsecured loans to bank and insurance-related businesses) portfolio and purchased credit-impaired (“PCI”) loans. Loans to mortgage companies include(2) 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. Consumer loan portfolio segments includereal estate, (3) consumer real estate, permanent mortgage,which includes both real estate installment and the credit card and other portfolio. Consumer classes include home equity lines of credit, (“HELOCs”), real estate (“R/E”) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and(4) credit card and other.
Concentrations
FHN has a concentrationThe following table provides the amortized cost basis of residential real estate loans (24 percentand leases by portfolio segment and class as of total loans), the majorityMarch 31, 2021 and December 31, 2020, excluding accrued interest of $182 million and $180 million, respectively, which is included in Other assets in the consumer real estate segment (22 percentConsolidated Balance Sheets.
(Dollars in millions)March 31, 2021December 31, 2020
Commercial:
Commercial and industrial (a) (b)$28,421 $27,700 
Loans to mortgage companies5,530 5,404 
   Total commercial, financial, and industrial33,951 33,104 
Commercial real estate12,470 12,275 
Consumer:
HELOC2,270 2,420 
Real estate installment loans8,783 9,305 
   Total consumer real estate11,053 11,725 
Credit card and other1,126 1,128 
Loans and leases$58,600 $58,232 
Allowance for loan and lease losses(914)(963)
Net loans and leases$57,686 $57,269 
(a)Includes equipment financing leases of total loans). $614 million and $587 million, respectively, as of March 31, 2021 and December 31, 2020.
(b)Includes PPP loans fully guaranteed by the SBA of $5.1 billion and $4.1 billion as of March 31, 2021 and December 31, 2020, respectively.

Restrictions

Loans to finance and insurance companies total $2.8leases with carrying values of $38.1 million and $38.6 billion (22 percentwere pledged as collateral for borrowings at March 31, 2021 and December 31, 2020, respectively.

Concentrations of Credit Risk
Most of the C&I portfolio, or 14 percentFHN’s business activity is with clients located in the southern United States. FHN’s lending activity is concentrated in its market areas within those states. As of the total loans).March 31, 2021, FHN had loans to mortgage companies totaling $2.0of $5.5 billion (15 percentand loans to finance and insurance companies of $3.1 billion. As a result, 25% of the C&I segment, or 10 percent of total loans) as of September 30, 2017. As a result, 37 percent of the C&I segmentportfolio is sensitive to impacts on the financial services industry.









Note 4 – Loans (Continued)

Purchased Credit-Impaired Loans
The following table presents a rollforward of the accretable yield for the three and nine months ended September 30, 2017 and 2016:
  Three Months Ended
September 30		 Nine months ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
Balance, beginning of period $4,045
 $6,171
 $6,871
 $8,542
Addition —
 2,883
 —
 2,883
Accretion (642) (837) (2,412) (2,984)
Adjustment for payoffs (198) (179) (1,232) (4,408)
Adjustment for charge-offs —
 —
 —
 (674)
Adjustment for pool excess recovery (a) —
 —
 (222) —
Increase/(decrease) in accretable yield (b) (2) 686
 112
 5,398
Other —
 —
 86
 (33)
Balance, end of period $3,203
 $8,724
 $3,203
 $8,724
(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, the ALLL related to PCI loans was $3.1 million compared to $.7 million at December 31, 2016. A loan loss provision expense 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. The loan loss provision expense related to PCI loans 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.
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:
  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
The following tables provide information at September 30, 2017 and December 31, 2016, by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment in a loan, excluding any valuation allowance but including any direct write-down of the investment. For purposes of this disclosure, PCI loans and the TRUPs valuation allowance have been excluded.
  September 30, 2017 December 31, 2016
(Dollars in thousands) Recorded
Investment		 Unpaid
Principal
Balance		 Related
Allowance		 Recorded
Investment		 Unpaid
Principal
Balance		 Related
Allowance
Impaired loans with no related allowance recorded:            
Commercial:            
General C&I $2,055
 $10,769
 $—
 $10,419
 $16,636
 $—
Income CRE —
 —
 —
 —
 —
 —
Total $2,055
 $10,769
 $—
 $10,419
 $16,636
 $—
Consumer:            
HELOC (a) $10,513
 $20,372
 $—
 $11,383
 $21,662
 $—
R/E installment loans (a) 4,431
 5,135
 —
 3,957
 4,992
 —
Permanent mortgage (a) 5,481
 7,604
 —
 5,311
 7,899
 —
Total $20,425
 $33,111
 $—
 $20,651
 $34,553
 $—
Impaired loans with related allowance recorded:            
Commercial:            
General C&I $26,876
 $27,345
 $5,970
 $34,334
 $34,470
 $3,294
TRUPS 3,097
 3,700
 925
 3,209
 3,700
 925
Income CRE 1,525
 1,525
 43
 1,831
 2,209
 62
Residential CRE 795
 1,263
 83
 1,293
 1,761
 132
Total $32,293
 $33,833
 $7,021
 $40,667
 $42,140
 $4,413
Consumer:            
HELOC $74,009
 $76,587
 $14,174
 $84,711
 $87,126
 $15,927
R/E installment loans 46,905
 47,708
 9,762
 53,409
 54,559
 12,875
Permanent mortgage 78,600
 90,003
 12,601
 88,615
 100,983
 12,470
Credit card & other 544
 544
 246
 306
 306
 133
Total $200,058
 $214,842
 $36,783
 $227,041
 $242,974
 $41,405
Total commercial $34,348
 $44,602
 $7,021
 $51,086
 $58,776
 $4,413
Total consumer $220,483
 $247,953
 $36,783
 $247,692
 $277,527
 $41,405
Total impaired loans $254,831
 $292,555
 $43,804
 $298,778
 $336,303
 $45,818
(a)All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.

Note 4 – Loans (Continued)

  Three Months Ended September 30 Nine months ended September 30
  2017 2016 2017 2016
(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
Impaired loans with no related allowance recorded:                
Commercial:                
     General C&I $5,771
 $—
 $13,708
 $—
 $8,706
 $—
 $12,088
 $—
     Income CRE —
 —
 1,234
 —
 —
 —
 2,057
 —
     Total $5,771
 $—
 $14,942
 $—
 $8,706
 $—
 $14,145
 $—
Consumer:                
     HELOC (a) $10,225
 $—
 $11,273
 $—
 $10,536
 $—
 $11,100
 $—
     R/E installment loans (a) 4,182
 —
 4,158
 —
 4,014
 —
 4,333
 —
     Permanent mortgage (a) 5,693
 —
 4,280
 —
 5,701
 —
 4,292
 —
     Total $20,100
 $—
 $19,711
 $—
 $20,251
 $—
 $19,725
 $—
Impaired loans with related allowance recorded:                
Commercial:                
     General C&I $26,144
 $193
 $33,433
 $289
 $29,136
 $597
 $29,896
 $668
     TRUPS 3,117
 —
 3,258
 —
 3,157
 —
 3,291
 —
     Income CRE 1,628
 11
 3,211
 15
 1,737
 39
 4,376
 55
     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
Consumer:                
     HELOC $74,894
 $554
 $87,919
 $546
 $78,859
 $1,695
 $88,266
 $1,527
     R/E installment loans 47,628
 315
 57,775
 357
 49,634
 950
 58,890
 1,019
     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
     Total $202,279
 $1,488
 $236,739
 $1,451
 $211,030
 $4,458
 $240,225
 $4,158
Total commercial $37,704
 $204
 $56,199
 $309
 $43,946
 $646
 $53,084
 $740
Total consumer $222,379
 $1,488
 $256,450
 $1,451
 $231,281
 $4,458
 $259,950
 $4,158
Total impaired loans $260,083
 $1,692
 $312,649
 $1,760
 $275,227
 $5,104
 $313,034
 $4,898
(a)All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.
AssetCredit 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 and lease portfolio by analyzing the migration of loans between grading categories. It is also integral to the estimation methodology utilized in determining the allowance for loan lossesALLL since an allowance is established for pools of commercial loans based on the credit grade assigned. Each PD grade corresponds to an estimated one-year default probability percentage;percentage. PD grades are continually evaluated, but require a PD 1 hasformal scorecard annually. As a response to the lowest expected default probability,COVID-19 pandemic, FHN identified a segment of its commercial portfolio that requires a quarterly re-
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Note 4 – Loans and probabilities increase as grades progress downLeases (Continued)
grading process. As borrowers recover, they can be removed from the scale. quarterly re-grading process with credit officer concurrence.
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 gradesSpecial mention loans and leases have potential weaknesses that, if left uncorrected, may result in deterioration of FHN's credit position at some future date. Substandard commercial loans and
leases have well-defined weaknesses and are required to be reassessed annually or earlier whenever there has been a material change incharacterized by the financial conditiondistinct possibility that FHN will sustain some loss if the deficiencies are not corrected. Doubtful commercial loans and leases have the same weaknesses as substandard loans and leases with the added characteristics that the probability of loss is high and collection 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 disciplinefull amount 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.improbable.

Note 4 – Loans (Continued)

The following tables provide the balancesamortized cost basis of the commercial loan portfolio classes with associated allowance, disaggregated by PD gradeyear of origination and credit quality indicator as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
March 31, 2021
 C&I
(Dollars in millions)20212020201920182017Prior to 2017LMC (a)Revolving
 Loans		Revolving
Loans converted
to term loans (b)		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (c)$2,368 $7,915 $4,572 $2,174 $1,600 $3,038 $5,530 $5,535 $14 $32,746 
Special Mention (PD grade 13)5 68 65 51 28 81 0 189 7 494 
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)35 148 80 124 35 94 0 148 47 711 
Total C&I loans$2,408 $8,131 $4,717 $2,349 $1,663 $3,213 $5,530 $5,872 $68 $33,951 
(a)     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.
(b)    C&I loans converted from revolving to term in 2021 were not material.
(c)    2021 and 2020 balances include PPP loans.
  September 30, 2017
(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 $583,818
 $—
 $—
 $1,832
 $—
 $585,650
 4% $81
2 905,992
 —
 —
 3,777
 112
 909,881
 6
 385
3 500,056
 643,772
 —
 156,694
 —
 1,300,522
 9
 277
4 1,026,592
 578,566
 —
 295,781
 212
 1,901,151
 13
 955
5 1,460,107
 211,846
 —
 443,751
 2,053
 2,117,757
 14
 7,697
6 1,519,911
 362,685
 —
 413,342
 6,114
 2,302,052
 14
 9,857
7 1,705,394
 60,135
 —
 446,493
 8,372
 2,220,394
 14
 13,297
8 1,042,209
 34,623
 —
 259,813
 4,908
 1,341,553
 9
 20,963
9 556,662
 60,954
 —
 66,082
 4,276
 687,974
 5
 11,376
10 395,187
 —
 —
 31,570
 6,558
 433,315
 3
 8,502
11 217,190
 13,548
 —
 24,878
 4,819
 260,435
 2
 6,730
12 185,929
 —
 —
 10,798
 2,709
 199,436
 1
 7,065
13 142,729
 —
 304,236
 38,979
 91
 486,035
 3
 6,927
14,15,16 226,924
 26
 —
 10,062
 819
 237,831
 2
 23,974
Collectively evaluated for impairment 10,468,700
 1,966,155
 304,236
 2,203,852
 41,043
 14,983,986
 99
 118,086
Individually evaluated for impairment 28,931
 —
 3,097
 1,525
 795
 34,348
 1
 7,021
Purchased credit-impaired loans 20,725
 —
 —
 3,792
 8
 24,525
 —
 2,781
Total commercial loans $10,518,356
 $1,966,155
 $307,333
 $2,209,169
 $41,846
 $15,042,859
 100% $127,888
FIRST HORIZON CORPORATION181Q21 FORM 10-Q REPORT
Table of Contents


Note 4 – Loans and Leases (Continued)

December 31, 2020
C&I
(Dollars in millions)20202019201820172016Prior to 2016LMC (a)Revolving
 Loans		Revolving
Loans converted
to term loans (b)		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (c)$9,060 $5,138 $2,628 $1,748 $1,161 $2,145 $5,404 $4,571 $60 $31,915 
Special Mention (PD grade 13)89 93 70 31 37 64 0 127 1 512 
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)182 77 114 50 42 58 0 95 59 677 
Total C&I loans$9,331 $5,308 $2,812 $1,829 $1,240 $2,267 $5,404 $4,793 $120 $33,104 
(a)    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.
(b)    $50 million of C&I loans were converted from revolving to term in 2020.
(c)    2020 balances include PPP loans.

March 31, 2021
CRE
(Dollars in millions)20212020201920182017Prior to 2017Revolving
 Loans		Revolving
Loans converted
to term loans		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12)$514 $2,346 $3,350 $1,612 $1,024 $2,652 $320 $0 $11,818 
Special Mention (PD grade 13)0 74 38 178 77 109 0 0 476 
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)0 18 12 21 43 57 25 0 176 
Total CRE loans$514 $2,438 $3,400 $1,811 $1,144 $2,818 $345 $0 $12,470 

December 31, 2020
CRE
(Dollars in millions)20202019201820172016Prior to 2016Revolving
 Loans		Revolving
Loans converted
to term loans		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12)$2,477 $3,311 $1,750 $1,140 $946 $1,800 $259 $19 $11,702 
Special Mention (PD grade 13)48 24 117 75 71 54 0 0 389 
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)30 13 21 42 27 33 18 0 184 
Total CRE loans$2,555 $3,348 $1,888 $1,257 $1,044 $1,887 $277 $19 $12,275 



  December 31, 2016
(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 $465,179
 $—
 $—
 $1,078
 $—
 $466,257
 3% $77
2 791,183
 —
 —
 11,742
 87
 803,012
 6
 403
3 491,386
 462,486
 —
 153,670
 —
 1,107,542
 8
 304
4 978,282
 332,107
 —
 222,422
 —
 1,532,811
 11
 953
5 1,232,401
 275,209
 —
 365,653
 702
 1,873,965
 13
 6,670
6 1,540,519
 614,109
 —
 338,344
 9,338
 2,502,310
 17
 10,403
7 1,556,117
 317,283
 —
 352,390
 2,579
 2,228,369
 16
 14,010
8 963,359
 30,974
 —
 425,503
 2,950
 1,422,786
 10
 25,986
9 611,774
 4,299
 —
 105,277
 4,417
 725,767
 5
 13,857
10 355,359
 8,663
 —
 50,484
 9,110
 423,616
 3
 8,400
11 238,230
 —
 —
 20,600
 6,541
 265,371
 2
 6,556
12 170,531
 —
 —
 15,395
 4,168
 190,094
 1
 6,377
13 121,276
 —
 304,236
 6,748
 311
 432,571
 3
 4,225
14,15,16 194,572
 59
 —
 16,313
 1,659
 212,603
 1
 20,297
Collectively evaluated for impairment 9,710,168
 2,045,189
 304,236
 2,085,619
 41,862
 14,187,074
 99
 118,518
Individually evaluated for impairment 44,753
 —
 3,209
 1,831
 1,293
 51,086
 1
 4,413
Purchased credit-impaired loans 40,532
 —
 —
 4,583
 335
 45,450
 —
 319
Total commercial loans $9,795,453
 $2,045,189
 $307,445
 $2,092,033
 $43,490
 $14,283,610
 100% $123,250
(a)FIRST HORIZON CORPORATIONBalances 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”.191Q21 FORM 10-Q REPORT
Table of Contents

Note 4 – Loans and Leases (Continued)
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”)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 percentageamortized cost basis by year of balances outstanding by average,origination and refreshed FICO scores for
consumer real estate loans as of March 31, 2021 and December 31, 2020. Within consumer real estate, classes include HELOC and real estate installment. HELOCs are loans which during their draw period are classified as revolving loans. Once the HELOC,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 tables 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. All loans in the following tables classified in a vintage year are real estate installment and permanent mortgage classesloans.
March 31, 2021
 Consumer Real Estate
(Dollars in millions)20212020201920182017Prior to 2017Revolving
 Loans		Revolving
Loans converted
to term loans (a)		Total
FICO score 740 or greater$131 $1,195 $1,060 $613 $529 $2,230 $1,200 $150 $7,108 
FICO score 720-7398 163 142 91 69 249 179 27 928 
FICO score 700-71915 129 103 75 72 267 173 31 865 
FICO score 660-69913 121 120 115 69 329 238 53 1,058 
FICO score 620-6591 40 57 31 21 134 83 35 402 
FICO score less than 620108 58 32 41 50 302 56 45 692 
Total$276 $1,706 $1,514 $966 $810 $3,511 $1,929 $341 $11,053 
(a) $11 million of HELOC loans as of September 30, 2017 and December 31, 2016:were converted from revolving to term in 2021.

December 31, 2020
 Consumer Real Estate
(Dollars in millions)20202019201820172016Prior to 2016Revolving
 Loans		Revolving Loans converted to term loansTotal
FICO score 740 or greater$1,186 $1,167 $703 $610 $674 $1,719 $1,275 $159 $7,493 
FICO score 720-739157 158 100 77 92 197 186 29 996 
FICO score 700-719122 107 78 76 73 221 177 34 888 
FICO score 660-699130 141 123 75 85 296 264 59 1,173 
FICO score 620-65945 61 37 28 35 127 92 36 461 
FICO score less than 620107 36 52 54 95 261 61 48 714 
Total$1,747 $1,670 $1,093 $920 $1,054 $2,821 $2,055 $365 $11,725 


  September 30, 2017 December 31, 2016
  HELOC 
R/E Installment
Loans
 
Permanent
Mortgage
 HELOC 
R/E Installment
Loans
 
Permanent
Mortgage
FICO score 740 or greater 58.5%  71.8%  45.1%  56.9%  70.3%  45.0% 
FICO score 720-739 8.8
  8.1
  12.8
  8.8
  8.3
  9.5
 
FICO score 700-719 8.2
  6.6
  11.0
  8.6
  6.8
  9.2
 
FICO score 660-699 12.1
  8.4
  15.3
  13.2
  8.4
  17.1
 
FICO score 620-659 5.6
  2.7
  7.0
  5.6
  3.5
  9.1
 
FICO score less than 620 (a) 6.8
  2.4
  8.8
  6.9
  2.7
  10.1
 
Total 100.0%  100.0%  100.0%  100.0%  100.0%  100.0% 
(a)FIRST HORIZON CORPORATIONFor 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.201Q21 FORM 10-Q REPORT

Table of Contents


Note 4 – Loans and Leases (Continued)

The following tables reflect the amortized cost basis by year of origination and refreshed FICO scores for credit card and other loans as of March 31, 2021 and December 31, 2020.
March 31, 2021
 Credit Card and Other
(Dollars in millions)20212020201920182017Prior to 2017Revolving
 Loans		Revolving
Loans converted
to term loans (a)		Total
FICO score 740 or greater$13 $51 $43 $53 $32 $119 $279 $6 $596 
FICO score 720-7392 8 7 6 7 30 36 2 98 
FICO score 700-7193 8 7 8 6 38 35 2 107 
FICO score 660-6992 29 10 14 8 52 41 3 159 
FICO score 620-6591 4 4 6 4 31 19 1 70 
FICO score less than 62011 9 6 7 10 30 21 2 96 
Total$32 $109 $77 $94 $67 $300 $431 $16 $1,126 
(a) $2 million of other consumer loans were converted from revolving to term in 2021.

December 31, 2020
 Credit Card and Other
(Dollars in millions)20202019201820172016Prior to 2016Revolving
 Loans		Revolving Loans converted to term loansTotal
FICO score 740 or greater$57 $52 $59 $37 $23 $116 $159 $5 $508 
FICO score 720-7397 7 9 8 8 27 91 2 159 
FICO score 700-7199 8 9 8 4 38 37 3 116 
FICO score 660-69930 12 15 9 9 48 46 3 172 
FICO score 620-6595 5 7 5 10 24 20 1 77 
FICO score less than 62014 7 8 11 9 26 20 1 96 
Total$122 $91 $107 $78 $63 $279 $373 $15 $1,128 

Nonaccrual and Past Due Loans and Leases
Loans and leases are 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 nonaccrual are loans for which FHN continues to receive payments including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy.
Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. In accordance with revised Interagency Guidance issued in 2020, FHN is not required to designate loans with deferrals granted in response to COVID-19 as past due because of such deferrals. If a borrower defers payment, this may result in no contractual payments being past due, and as such, loans would not be considered past due during the period of deferral, and as a result, are excluded from loans past due 30-89 days and loans 90+ days past due in the tables below.

FIRST HORIZON CORPORATION211Q21 FORM 10-Q REPORT
Table of Contents

Note 4 – Loans and Leases (Continued)
The following table reflects accruing and non-accruing loans and leases by class on September 30, 2017:March 31, 2021 and December 31, 2020:
March 31, 2021
 AccruingNon-Accruing 
(Dollars in millions)Current30-89
Days
Past Due		90+
Days
Past Due		Total
Accruing		Current30-89
Days
Past Due		90+
Days
Past Due		Total
Non-
Accruing		Total
Loans
Commercial, financial, and industrial:
C&I (a) (b)$28,251 $26 $0 $28,277 $102 $7 $35 $144 $28,421 
Loans to mortgage companies5,530 0 0 5,530 0 0 0 0 5,530 
Total commercial, financial, and industrial33,781 26 0 33,807 102 7 35 144 33,951 
Commercial real estate:
CRE12,392 11 0 12,403 20 3 44 67 12,470 
Consumer real estate:
HELOC2,198 6 9 2,213 43 2 12 57 2,270 
Real estate installment loans8,623 33 4 8,660 72 8 43 123 8,783 
Total consumer real estate10,821 39 13 10,873 115 10 55 180 11,053 
Credit card and other:
Credit card273 2 0 275 0 0 0 0 275 
Other845 3 0 848 1 1 1 3 851 
Total credit card and other1,118 5 0 1,123 1 1 1 3 1,126 
Total loans and leases$58,112 $81 $13 $58,206 $238 $21 $135 $394 $58,600 

(a) $100 million of C&I loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.
(b) C&I loans include TRUPS loans of $210 million, which is net of an amortizing discount of $18 million.

December 31, 2020
 AccruingNon-Accruing 
(Dollars in millions)Current30-89
Days
Past Due		90+
Days
Past Due		Total
Accruing		Current30-89
Days
Past Due		90+
Days
Past Due		Total
Non-
Accruing		Total
Loans
Commercial, financial, and industrial:
C&I (a) (b)$27,541 $15 $0 $27,556 $88 $12 $44 $144 $27,700 
Loans to mortgage companies5,404 0 0 5,404 0 0 0 0 5,404 
Total commercial, financial, and industrial32,945 15 0 32,960 88 12 44 144 33,104 
Commercial real estate:
CRE12,194 23 0 12,217 10 42 6 58 12,275 
Consumer real estate:
HELOC2,336 13 11 2,360 43 3 14 60 2,420 
Real estate installment loans9,138 40 5 9,183 63 9 50 122 9,305 
Total consumer real estate11,474 53 16 11,543 106 12 64 182 11,725 
Credit card and other:
Credit card279 3 1 283 0 0 0 0 283 
Other838 6 0 844 1 0 1 2 845 
Total credit card and other1,117 9 1 1,127 1 0 1 2 1,128 
Total loans and leases, net of unearned income$57,730 $100 $17 $57,847 $205 $66 $115 $386 $58,232 

(a) $101 million of C&I loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance.
(b) C&I loans include TRUPs loans of $210 million, which is net of an amortizing discount of $18 million.

  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 $10,462,376
 $19,324
 $129
 $10,481,829
 $5,260
 $1,252
 $9,290
 $15,802
 $10,497,631
Loans to mortgage companies 1,966,129
 —
 —
 1,966,129
 —
 —
 26
 26
 1,966,155
TRUPS (a) 304,236
 —
 —
 304,236
 —
 —
 3,097
 3,097
 307,333
Purchased credit-impaired loans 6,080
 70
 14,575
 20,725
 —
 —
 —
 —
 20,725
Total commercial (C&I) 12,738,821
 19,394
 14,704
 12,772,919
 5,260
 1,252
 12,413
 18,925
 12,791,844
Commercial real estate:                  
Income CRE 2,204,042
 490
 —
 2,204,532
 105
 —
 740
 845
 2,205,377
Residential CRE 41,043
 —
 —
 41,043
 —
 —
 795
 795
 41,838
Purchased credit-impaired loans 3,800
 —
 —
 3,800
 —
 —
 —
 —
 3,800
Total commercial real estate 2,248,885
 490
 —
 2,249,375
 105
 —
 1,535
 1,640
 2,251,015
Consumer real estate:                  
HELOC 1,375,690
 14,312
 8,518
 1,398,520
 43,188
 3,217
 9,020
 55,425
 1,453,945
R/E installment loans 2,883,593
 5,855
 3,609
 2,893,057
 15,510
 2,875
 3,035
 21,420
 2,914,477
Purchased credit-impaired loans 1,198
 —
 97
 1,295
 —
 —
 —
 —
 1,295
Total consumer real estate 4,260,481
 20,167
 12,224
 4,292,872
 58,698
 6,092
 12,055
 76,845
 4,369,717
Permanent mortgage 369,546
 3,333
 2,753
 375,632
 12,557
 577
 14,316
 27,450
 403,082
Credit card & other:                  
Credit card 191,714
 1,254
 1,081
 194,049
 —
 —
 —
 —
 194,049
Other 155,460
 610
 188
 156,258
 —
 —
 126
 126
 156,384
Purchased credit-impaired loans —
 —
 —
 —
 —
 —
 —
 —
 —
Total credit card & other 347,174
 1,864
 1,269
 350,307
 —
 —
 126
 126
 350,433
Total loans, net of unearned income $19,964,907
 $45,248
 $30,950
 $20,041,105
 $76,620
 $7,921
 $40,445
 $124,986
 $20,166,091

(a) TRUPS is presented net
FIRST HORIZON CORPORATION221Q21 FORM 10-Q REPORT
Table of the valuation allowance of $25.5 million.Contents












Note 4 – Loans and Leases (Continued)

Collateral-Dependent Loans
The following table reflects accruing
Collateral-dependent loans are defined as loans for which repayment is expected to be derived substantially through the operation or sale of the collateral and non-accruing loans by class onwhere the borrower is experiencing financial difficulty. At a minimum, the estimated value of the collateral for each loan equals the current book value.

As of March 31, 2021 and December 31, 2016:2020, FHN had commercial loans with amortized cost of approximately $247 million and $167 million that was based on the value of underlying collateral. Collateral-dependent C&I and CRE loans totaled $180 million and $67 million, respectively, at March 31, 2021. The collateral for these loans generally consists of business assets including land, buildings, equipment and financial assets. During the three months ended March 31, 2021, FHN recognized charge-offs of approximately $13 million on these loans related to reductions in estimated collateral values.

  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 $9,720,231
 $5,199
 $23
 $9,725,453
 $16,106
 $374
 $12,988
 $29,468
 $9,754,921
Loans to mortgage companies 2,041,408
 3,722
 —
 2,045,130
 —
 —
 59
 59
 2,045,189
TRUPS (a) 304,236
 —
 —
 304,236
 —
 —
 3,209
 3,209
 307,445
Purchased credit-impaired loans 40,113
 185
 234
 40,532
 —
 —
 —
 —
 40,532
Total commercial (C&I) 12,105,988
 9,106
 257
 12,115,351
 16,106
 374
 16,256
 32,736
 12,148,087
Commercial real estate:                  
Income CRE 2,085,455
 14
 —
 2,085,469
 232
 460
 1,289
 1,981
 2,087,450
Residential CRE 42,182
 178
 —
 42,360
 —
 —
 795
 795
 43,155
Purchased credit-impaired loans 4,809
 109
 —
 4,918
 —
 —
 —
 —
 4,918
Total commercial real estate 2,132,446
 301
 —
 2,132,747
 232
 460
 2,084
 2,776
 2,135,523
Consumer real estate:                  
HELOC 1,602,640
 17,997
 10,859
 1,631,496
 46,964
 4,201
 8,922
 60,087
 1,691,583
R/E installment loans 2,794,866
 7,844
 5,158
 2,807,868
 17,989
 2,383
 2,353
 22,725
 2,830,593
Purchased credit-impaired loans 1,319
 164
 93
 1,576
 —
 —
 —
 —
 1,576
Total consumer real estate 4,398,825
 26,005
 16,110
 4,440,940
 64,953
 6,584
 11,275
 82,812
 4,523,752
Permanent mortgage 385,972
 4,544
 5,428
 395,944
 11,867
 2,194
 13,120
 27,181
 423,125
Credit card & other:                  
Credit card 188,573
 1,622
 1,456
 191,651
 —
 —
 —
 —
 191,651
Other 166,062
 992
 134
 167,188
 —
 —
 142
 142
 167,330
Purchased credit-impaired loans 52
 —
 —
 52
 —
 —
 —
 —
 52
Total credit card & other 354,687
 2,614
 1,590
 358,891
 —
 —
 142
 142
 359,033
Total loans, net of unearned income $19,377,918
 $42,570
 $23,385
 $19,443,873
 $93,158
 $9,612
 $42,877
 $145,647
 $19,589,520
(a) TRUPS is presented netConsumer HELOC and real estate installment loans with amortized cost based on the value of underlying real estate collateral were approximately $9 million and $24 million, respectively, as of March 31, 2021, and $9 million and $26 million, respectively, as of December 31, 2020. Charge-offs during the valuation allowance of $25.5 million.









Note 4 – Loans (Continued)

three months ended March 31, 2021 were not significant for collateral-dependent consumer loans.
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.
In accordance with regulatory guidance, certain loan modifications that might ordinarily have qualified as TDRs were not accounted for as TDRs and have been excluded from the disclosures below. For all classes withinloan modifications that were made during the commercial portfolio segment,three months ended March 31, 2021 or the year ended December 31, 2020 that met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these modifications from consideration as 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 consumerand has excluded loans are generally structured using parameters of U.S. government-sponsored programs suchwith these qualifying modifications from designation as TDRs in the former Home Affordable Modification Program (“HAMP”). Within the HELOCinformation and R/E installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-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. Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans. Within the credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout program, customers are granted a rate reduction to 0 percent and term extensions for up to 5 years to pay off the remaining balance.
Despite the absence of a loan modification, the discharge of personal liability through bankruptcy proceedings is considered a concession. As a result, FHN classifies all non-reaffirmed residential real estate loans discharged in Chapter 7 bankruptcy as nonaccruing TDRs.discussion that follows.
On September 30, 2017March 31, 2021 and December 31, 2016,2020, FHN had $241.6$288 million and $285.2$307 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $38.6$11 million, or 16 percent4% as of September 30, 2017,March 31, 2021, and $44.9$12 million, or 16 percent4% as of December 31, 2016.2020. Additionally, $63.2$41 million and $69.3$42 million of loans held-for-saleheld for sale as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively, were classified as TDRs.





FIRST HORIZON CORPORATION231Q21 FORM 10-Q REPORT
Table of Contents





Note 4 – Loans and Leases (Continued)

The following tables reflect portfoliopresent the end of period balance for loans that were classified as TDRsmodified in a TDR during the three and nine months ended September 30, 2017 and 2016:periods indicated:
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
(Dollars in millions)NumberPre-Modification Outstanding Recorded  InvestmentPost-Modification Outstanding Recorded  InvestmentNumberPre-Modification Outstanding Recorded  InvestmentPost-Modification Outstanding Recorded  Investment
Commercial, financial, and industrial:
C&I17 $8 $8 3 $6 $4 
Commercial real estate:
 CRE1 12 10 0 0 0 
Consumer real estate:
HELOC12 2 2 8 1 1 
Real estate installment loans9 2 2 10 2 2 
Total consumer real estate21 4 4 18 3 3 
Credit card and other13 0 0 24 0 0 
Total TDRs52 $24 $22 45 $9 $7 
  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









Note 4 – Loans (Continued)

The following tables present TDRs which re-defaulted during the three and nine months ended September 30, 2017March 31, 2021 and 2016, and2020, 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.
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
(Dollars in millions)NumberRecorded
Investment		NumberRecorded
Investment
Commercial, financial, and industrial:
C&I7 $1 0 $0 
Commercial real estate:
 CRE0 0 0 0 
Consumer real estate:
HELOC1 0 4 1 
Real estate installment loans3 2 5 0 
Total consumer real estate4 2 9 1 
Credit card and other0 0 7 0 
Total TDRs11 $3 16 $1 

  Three Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2017
(Dollars in thousands) Number 
Recorded
Investment
 Number 
Recorded
Investment
Commercial (C&I):        
General C&I 1
 $1,763
 4
 $9,770
Total commercial (C&I) 1
 1,763
 4
 9,770
Commercial real estate:        
Income CRE 1
 88
 1
 88
Total commercial real estate 1
 88
 1
 88
Consumer real estate:        
HELOC —
 —
 4
 685
Total consumer real estate —
 —
 4
 685
Permanent mortgage 1
 89
 2
 627
Credit card & other 2
 12
 5
 30
Total troubled debt restructurings 5
 $1,952
 16
 $11,200
         
  Three Months Ended
September 30, 2016		 Nine Months Ended
September 30, 2016
(Dollars in thousands) Number Recorded
Investment		 Number Recorded
Investment
Consumer real estate:        
HELOC —
 $—
 2
 $138
R/E installment loans —
 —
 1
 180
Total consumer real estate —
 —
 3
 318
Total troubled debt restructurings —
 $—
 3
 $318


FIRST HORIZON CORPORATION241Q21 FORM 10-Q REPORT

Note 5 – Allowance for LoanCredit Losses
The ALLL includes the following components: reserves for commercial loans evaluated based on pools of credit graded loans and reserves for pools of smaller-balance homogeneous consumer loans, both determined in accordance with ASC 450-20-50. The reserve factors applied to these pools are an
Management's estimate of probable incurredexpected credit losses based on management’s evaluation of historical net losses from loans with similar characteristics and are subject to qualitative adjustments by management to reflect current events, trends, and conditions (including economic considerations and trends). The current economic conditions and trends, performance of the housing market, unemployment levels, labor participation rate, regulatory guidance, and both positive and negative portfolio segment-specific trends, are examples of additional factors considered by management in determining the ALLL. Additionally, management considers the inherent uncertainty of quantitative models that are driven by historical loss data. Management evaluates the periods of historical losses that are the basis for the loss rates used in the quantitative models and selects historical loss periods that are believed to be the most reflective of losses inherent in the loan and lease portfolios is recorded in the ALLL and the RULC, collectively the ACL. The ALLL and the RULC are reported on the Consolidated Balance Sheets in the Allowance for loan and lease losses and in Other liabilities, respectively. Provision for credit losses related to the loans and leases portfolio and the unfunded lending commitments are reported in the Consolidated Statements of Income as Provision for credit losses.
The ACL is maintained at a level management believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the balance sheet date. Management also periodically reviews analysisloan and lease portfolio and unfunded lending commitments. The determination of the loss emergence periodACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments considering a number of relevant underling factors, including key assumptions and evaluation of quantitative and qualitative information.
In accordance with its accounting policy elections, FHN does not recognize a separate allowance for expected credit losses for AIR and records reversals
of AIR as reductions of interest income. FHN reverses previously accrued but uncollected interest when an asset is placed on nonaccrual status. As of March 31, 2021 and December 31, 2020, FHN recognized approximately $1 million in allowance for expected credit losses on COVID-19 deferrals that do not qualify for the election which is not reflected in the table below. AIR and the related allowance for expected credit losses is included as a component of Other assets.
The total amount of interest reversals from loans placed on nonaccrual status and the amount of time it takesincome recognized on nonaccrual loans during the three months ended ended March 31, 2021 and 2020 were not material.
Expected credit losses for a loss to be confirmed (initial charge-off) after a loss event has occurred. FHN performs extensive studies as it relates tounfunded commitments are estimated for periods where the historical loss periods used incommitment is not unconditionally cancellable. The measurement of expected credit losses for unfunded commitments mirrors that of loans and leases with the modeladditional estimate of future draw rates (timing and the loss emergence period and model assumptions are adjusted accordingly. The ALLL also includes reserves determined in accordance with ASC 310-10-35 for loans determined by management to be individually impaired and an allowance associated with PCI loans. See Note 1 – Summary of Significant Accounting Policies and Note 5 - Allowance for Loan Losses in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2016, for additional information about the policies and methodologies used in the aforementioned components of the ALLL.

Note 5 – Allowance for Loan Losses (Continued)amount).

The following table provides a rollforward of the ALLL and RULC by portfolio type for the three months ended March 31, 2021 and 2020:
(Dollars in millions)Commercial, Financial, and Industrial (a)Commercial Real EstateConsumer Real EstateCredit Card and OtherTotal
Allowance for loan and lease losses:
Balance as of January 1, 2021$453 $242 $242 $26 $963 
Charge-offs(16)(3)(1)(3)(23)
Recoveries6 2 6 1 15 
Provision (provision credit) for loan and lease losses(1)(8)(25)(6)(41)
Balance as of March 31, 2021$442 $232 $222 $18 $914 
Reserve for remaining unfunded commitments:
Balance as of January 1, 2021$65 $10 $10 $0 $85 
Provision (provision credit) for remaining unfunded commitments(3)1 (2)0 (4)
Balance as of March 31, 2021$62 $11 $8 $0 $81 
Allowance for loan losses:
Balance as of January 1, 2020, as adjusted (b)$142 $29 $121 $15 $307 
Charge-offs(7)(1)(2)(4)(14)
Recoveries 1 1 3 1 6 
Provision for loan losses 119 19 0 7 145 
Balance as of March 31, 2020$255 $48 $122 $19 $444 
Reserve for remaining unfunded commitments:
Balance as of January 1, 2020, as adjusted (b)$21 $3 $6 $0 $30 
Provision for remaining unfunded commitments6 3 0 0 9 
Balance as of March 31, 2020$27 $6 $6 $0 $39 
(a) C&I loans as of March 31, 2021 include $5.1 billion in PPP loans which due to the government guarantee and forgiveness provisions are considered to have no credit risk and therefore have no allowance for loan losses by portfolio segmentand lease losses.
(b) Balance, as adjusted, reflects the adoption of ASU 2016-13 (CECL) effective January 1, 2020.
FIRST HORIZON CORPORATION251Q21 FORM 10-Q REPORT
Table of Contents

Note 5- Allowance for Credit Losses (Continued)

The difference in the ACL as of March 31, 2021 as compared to December 31, 2020 reflects improvement in the macroeconomic outlook.

In developing credit loss estimates for its loan and lease portfolios, FHN selected Moody’s baseline forecast as the primary source for its macroeconomic inputs, which included assumptions that were generally in line with Blue Chip Economic Indicators, including unemployment rates for 2021 and 2022 and GDP growth rates for the threesame periods, as well as assumptions around further business disruption related to COVID-19 and ninean unchanged target Fed funds range until mid 2023.

As there can be no certainty that actual economic performance will precisely follow any specific macroeconomic forecast, FHN also evaluated other macroeconomic forecasts provided by Moody’s and adjusted the modeled outputs through a qualitative adjustment to account for uncertainties inherent in the macroeconomic forecast process. Additionally, where macroeconomic forecast variables used in the models did not take into effect the impact of federal stimulus and bank-supported payment deferral and forbearance programs on the timing of grade migration and recognition of loss content, management adjusted model outputs qualitatively to account for this assistance.
During the year ended December 31, 2020 and the three months ended September 30, 2017March 31, 2021, FHN also considered stressed loan portfolios or industries that are most exposed to the effects of the COVID-19 pandemic and 2016:added qualitative adjustments, where needed, to account for the risks not captured in modeled results. Management also made qualitative adjustments to reflect estimated recoveries based on a review of prior charge off and recovery levels, for default risk associated with large balances with individual borrowers, for estimated loss amounts not reflected in historical factors due to specific portfolio risk, and for instances where limited data for acquired loans is considered to affect modeled results.
(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


FIRST HORIZON CORPORATION261Q21 FORM 10-Q REPORT


Note 6 – Intangible AssetsMortgage Banking Activity
On July 1, 2020, as part of the IBKC merger, FHN obtained IBKC's mortgage banking operations which includes origination and servicing of residential first lien mortgages that conform to standards established by GSEs that are major investors in U.S. home mortgages, but can also consist of junior lien loans secured by residential property. These loans are primarily sold to private companies that are unaffiliated with the GSEs on a servicing-released basis. Gains and losses on these mortgage loans are included in Mortgage banking and title income on the
Consolidated Statements of Income. Prior to the merger, FHN’s mortgage banking operations were not significant; however, at March 31, 2021, FHN had approximately $53 million of loans that remained from pre-2009 Mortgage Business operations. Activity related to the pre-2009 mortgage loans was primarily limited to payments and write-offs in 2020 and 2021, with no new originations or loan sales, and only an insignificant amount of repurchases. These loans are excluded from the disclosure below.
The following is a summarytable summarizes activity relating to residential mortgage loans held for sale as of other intangible assetsthe three months ended March 31, 2021 and the year ended December 31, 2020.

(Dollars in millions)March 31, 2021December 31, 2020
Balance at beginning of period$409 $4 
Acquired0 320 
Originations and purchases446 2,499 
Sales, net of gains(421)(2,405)
Mortgage loans transferred from (to) held for investment3 (9)
Balance at end of period$437 $409 

Mortgage Servicing Rights
Effective with the IBKC merger, FHN made an election to record mortgage servicing rights at the lower of cost or market value and amortize over the remaining servicing life of the loans, with consideration given to prepayment assumptions. Mortgage servicing rights are included in Other assets on the Consolidated Condensed StatementsBalance Sheets. Mortgage servicing rights had the following carrying values as of Condition:the periods indicated.
March 31, 2021
(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Mortgage servicing rights$31 $(4)$27 
December 31, 2020
(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Mortgage servicing rights$28 $(3)$25 
  September 30, 2017 December 31, 2016
(Dollars in thousands) 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Value
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Value
Core deposit intangibles $16,850
 $(6,154) $10,696
 $16,850
 $(4,721) $12,129
Customer relationships (a) 76,865
 (49,496) 27,369
 54,865
 (46,302) 8,563
Other (a) (b) 5,622
 (530) 5,092
 555
 (230) 325
Total $99,337
 $(56,180) $43,157
 $72,270
 $(51,253) $21,017
(a)2017 increase associated with the Coastal acquisition.
(b)Balance primarily includes noncompete covenants, as well as $.3 million related to state banking licenses not subject to amortization.
Amortization expenseIn addition, there was $2.0 millionan insignificant amount of non-mortgage and $1.3commercial servicing rights as of March 31, 2021 and December 31, 2020. Total mortgage servicing fees included in Mortgage banking and title income were $1 million for the three months ended September 30, 2017March 31, 2021, and 2016, respectively, and $5.2 million and $3.9 millionwere insignificant for the ninethree months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 the estimated aggregated amortization expense is expected to be:March 31, 2020.
(Dollars in thousands)  
Year Amortization
Remainder of 2017 $1,964
2018 7,483
2019 7,179
2020 4,303
2021 4,123
2022 3,356
Gross goodwill, accumulated impairments,
FIRST HORIZON CORPORATION271Q21 FORM 10-Q REPORT

Note 7 – Goodwill and accumulated divestiture related write-offs were determined beginning JanuaryOther Intangible Assets

Goodwill

On July 1, 2012, when2020, FHN completed its merger-of-equals transaction with IBKC. In connection with the merger, FHN recorded a change in$534 million purchase accounting requirements resultedgain, based on preliminary fair value estimates.

On July 17, 2020, FHN completed its purchase of 30 branches from Truist Bank. In relation to the acquisition, FHN recorded $78 million in goodwill, being assessed based on fair value estimates. See Note 2 - Acquisitions and Divestituresfor additional information regarding these transactions.

FHN performed the required annual goodwill impairment rather than being amortized. Grosstest as of October 1, 2020. The annual impairment test did not indicate impairment in any of FHN’s reporting units as of the testing date. Following the testing date, management evaluated the events and circumstances that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary.
As further discussed in Note 13 - Business Segment Information, FHN reorganized its management reporting structure during the fourth quarter of $200.0 million2020 and, accordingly, its segment reporting structure and goodwill reporting units. In connection with accumulated impairments and accumulated divestiture-related write-offs of $114.1 million and $85.9 million, respectively, were previously allocatedthe reorganization, management reallocated goodwill to the non-strategic segment, resultingnew reporting units using a relative fair value approach.

Accounting estimates and assumptions were made about FHN’s future performance and cash flows, as well as other prevailing market factors (e.g., interest rates, economic trends, etc.) when determining fair value as part of the goodwill impairment test. While management used the best information available to estimate future performance for each reporting unit, future adjustments to management’s projections may be necessary if conditions differ substantially from the assumptions used in $0 net goodwill allocated tomaking the non-strategic segment as of September 30, 2017 and December 31, 2016. The regional banking and fixed income segments do not have any accumulated impairments or divestiture related write-offs. estimates.


The following is a summary of goodwill by reportable segment included in the Consolidated Condensed Statements of ConditionBalance Sheets as of September 30, 2017March 31, 2021 and December 31, 2016.2020.
(Dollars in millions)Regional
Banking		Specialty BankingTotal
December 31, 2019$802 $631 $1,433 
Additions78 0 78 
December 31, 2020$880 $631 $1,511 
December 31, 2020$880 $631 $1,511 
Additions and adjustments0 0 0 
March 31, 2021$880 $631 $1,511 

(Dollars in thousands) 
Regional
Banking
 
Fixed
Income
 Total
December 31, 2015 $93,303
 $98,004
 $191,307
Additions 64
 —
 64
September 30, 2016 $93,367
 $98,004
 $191,371
December 31, 2016 $93,367
 $98,004
 $191,371
Additions (a) —
 44,964
 44,964
September 30, 2017 $93,367
 $142,968
 $236,335
Other intangible assets


(a) See Note 2 - Acquisitions and Divestitures for further details regarding goodwill related to acquisitions.


Note 7 – Other Income and Other Expense
Following is detail of AllThe following table, which excludes fully amortized intangibles, presents other income and commissions and All other expense as presentedintangible assets included in the Consolidated Condensed Statements of Income:Balance Sheets:
 March 31, 2021December 31, 2020
(Dollars in millions)Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Value		Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Value
Core deposit intangibles$371 $(93)$278 $371 $(81)$290 
Customer relationships37 (9)28 37 (8)29 
Other (a)41 (8)33 41 (6)35 
Total$449 $(110)$339 $449 $(95)$354 
(a)Includes noncompete covenants and purchased credit card intangible assets. Also includes title plant intangible assets and state banking licenses which are not subject to amortization.
  Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
All other income and commissions:        
ATM interchange fees

 $3,137
 $3,081
 $8,998
 $8,918
Other service charges 2,954
 3,004
 9,047
 8,713
Mortgage banking

 1,354
 5,524
 3,883
 7,395
Electronic banking fees 1,282
 1,398
 3,911
 4,176
Letter of credit fees

 1,211
 981
 3,369
 3,157
Deferred compensation 1,128
 1,038
 4,446
 2,162
Insurance commissions 567
 1,262
 2,042
 2,301
Gain/(loss) on extinguishment of debt (a) (14,329) —
 (14,329) —
Other 2,739
 5,518
 7,684
 10,594
Total $43
 $21,806
 $29,051
 $47,416
All other expense:        
Litigation and regulatory matters $8,162
 $260
 $8,403
 $25,785
Travel and entertainment 2,798
 2,478
 8,308
 7,035
Other insurance and taxes 2,396
 2,625
 7,229
 8,952
Customer relations 1,361
 1,442
 4,240
 4,804
Employee training and dues 1,198
 1,360
 4,194
 4,088
Supplies 928
 1,158
 2,884
 3,114
Tax credit investments 762
 788
 2,646
 2,325
Miscellaneous loan costs 757
 676
 2,078
 1,958
OREO 303
 815
 953
 125
Other 9,033
 8,326
 29,954
 30,669
Total $27,698
 $19,928
 $70,889
 $88,855

FIRST HORIZON CORPORATION281Q21 FORM 10-Q REPORT
(a) Loss on extinguishment of debt for the three and nine months ended September 30, 2017 relates to the repurchase of equity securities previously included in a financing transaction.









Note 8 - Preferred Stock

The following table presents a summary of FHN's non-cumulative perpetual preferred stock:

(Dollars in millions)March 31, 2021December 31, 2020
Issuance DateEarliest Redemption Date (a)Annual Dividend RateDividend PaymentsShares OutstandingLiquidation AmountCarrying AmountCarrying Amount
Series A1/31/20134/10/20186.200 %Quarterly1,000 $100 $96 $96 
Series B7/2/20208/1/20256.625 %(b)Semi-annually8,000 80 77 77 
Series C7/2/20205/1/20266.600 %(c)Quarterly5,750 58 59 59 
Series D7/2/20205/1/20246.100 %(d)Semi-annually10,000 100 93 93 
Series E5/28/202010/10/20256.500 %Quarterly1,500 150 145 145 
26,250 $488 $470 $470 
(a) Denotes earliest optional redemption date. Earlier redemption is possible, at FHN's election, if certain regulatory capital events occur.
(b) Fixed dividend rate will reset on August 1, 2025 to three-month LIBOR plus 4.262%.
(c) Fixed dividend rate will reset on May 1, 2026 to three-month LIBOR plus 4.920%.
(d) Fixed dividend rate will reset on May 1, 2024 to three-month LIBOR plus 3.859%.

Subsidiary Preferred Stock
First Horizon Bank has issued 300,000 shares of Class A Non-Cumulative Perpetual Preferred Stock (Class A Preferred Stock) with a liquidation preference of $1,000 per share. Dividends on the Class A Preferred Stock, if declared, accrue and are payable each quarter, in arrears, at a floating rate equal to the greater of the three month LIBOR plus 0.85% or 3.75% per annum. These securities qualify fully as Tier 1 capital for First Horizon Bank, while for FHN they qualify partially as Tier 1 capital and partially as Tier 2 capital. On March 31, 2021 and December 31, 2020, $295 million of Class A Preferred Stock was recognized as Noncontrolling interest on the Consolidated Balance Sheets.
FIRST HORIZON CORPORATION291Q21 FORM 10-Q REPORT



Note 9 – Components of Other Comprehensive Income/(loss)Income (Loss)
The following table provides the changes in accumulated other comprehensive income/income (loss) by component, net of tax, for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
(Dollars in millions)Securities AFSCash Flow
Hedges		Pension and
Post-retirement
Plans		Total
Balance as of January 1, 2021$108 $12 $(260)$(140)
Net unrealized gains (losses)(103)(3)2 (104)
Amounts reclassified from AOCI0 1 2 3 
Other comprehensive income (loss)(103)(2)4 (101)
Balance as of March 31, 2021$5 $10 $(256)$(241)
(Dollars in thousands) Securities AFS Cash Flow
Hedges		 Pension and
Post-retirement
Plans		 Total
Balance as of July 1, 2017 $(9,857) $(1,024) $(226,581) $(237,462)
Net unrealized gains/(losses) 3,918
 (91) 490
 4,317
Amounts reclassified from AOCI (1) (643) 1,405
 761
Other comprehensive income/(loss) 3,917
 (734) 1,895
 5,078
Balance as of September 30, 2017 $(5,940) $(1,758) $(224,686) $(232,384)
         
Balance as of January 1, 2017 $(17,232) $(1,265) $(229,157) $(247,654)
Net unrealized gains/(losses) 11,570
 1,906
 490
 13,966
Amounts reclassified from AOCI (278) (2,399) 3,981
 1,304
Other comprehensive income/(loss) 11,292
 (493) 4,471
 15,270
Balance as of September 30, 2017 $(5,940) $(1,758) $(224,686) $(232,384)

(Dollars in thousands) Securities AFS Cash Flow
Hedges		 Pension and
Post-retirement
Plans		 Total
Balance as of July 1, 2016 $58,591
 $4,691
 $(215,616) $(152,334)
Net unrealized gains/(losses) (7,887) (1,211) —
 (9,098)
Amounts reclassified from AOCI —
 (359) 963
 604
Other comprehensive income/(loss) (7,887) (1,570) 963
 (8,494)
Balance as of September 30, 2016 $50,704
 $3,121
 $(214,653) $(160,828)
         
Balance as of January 1, 2016 $3,394
 $—
 $(217,586) $(214,192)
Net unrealized gains/(losses) 48,330
 4,228
 —
 52,558
Amounts reclassified from AOCI (1,020) (1,107) 2,933
 806
Other comprehensive income/(loss) 47,310
 3,121
 2,933
 53,364
Balance as of September 30, 2016 $50,704
 $3,121
 $(214,653) $(160,828)











Note 8 – Components of Other Comprehensive Income/(loss) (Continued)

(Dollars in millions)Securities AFSCash Flow
Hedges		Pension and
Post-retirement
Plans		Total
Balance as of January 1, 2020$31 $3 $(273)$(239)
Net unrealized gains (losses)89 13 0 102 
Amounts reclassified from AOCI0 0 2 2 
Other comprehensive income (loss)89 13 2 104 
Balance as of March 31, 2020$120 $16 $(271)$(135)
Reclassifications from AOCI, and related tax effects, were as follows:
(Dollars in millions)Three Months Ended
March 31,		 
Details about AOCI20212020Affected line item in the statement where net income is presented
Cash flow hedges:
Realized (gains) losses on cash flow hedges$2 $0 Interest and fees on loans and leases
Tax expense (benefit)(1)0 Income tax expense
1 0 
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial (gain) loss4 3 All other expense
Tax expense (benefit)(2)(1)Income tax expense
2 2 
Total reclassification from AOCI$3 $2 

(Dollars in thousands) Three Months Ended
September 30		 Nine Months Ended
September 30		  
Details about AOCI 2017 2016 2017 2016 Affected line item in the statement where net income is presented
Securities AFS:          
Realized (gains)/losses on securities AFS $(1) $—
 $(450) $(1,654) Debt securities gains/(losses), net
Tax expense/(benefit) —
 —
 172
 634
 Provision/(benefit) for income taxes
  (1) —
 (278) (1,020)  
Cash flow hedges:          
Realized (gains)/losses on cash flow hedges (1,041) (582) (3,886) (1,795) Interest and fees on loans
Tax expense/(benefit) 398
 223
 1,487
 688
 Provision/(benefit) for income taxes
  (643) (359) (2,399) (1,107)  
Pension and Postretirement Plans:          
Amortization of prior service cost and net actuarial gain/(loss) 2,277
 1,561
 6,450
 4,756
 Employee compensation, incentives, and benefits
Tax expense/(benefit) (872) (598) (2,469) (1,823) Provision/(benefit) for income taxes
  1,405
 963
 3,981
 2,933
  
Total reclassification from AOCI $761
 $604
 $1,304
 $806
  


FIRST HORIZON CORPORATION301Q21 FORM 10-Q REPORT

Note 910 – Earnings Per Share
The following table provides reconciliationscomputations of net income to net income available tobasic and diluted earnings per common shareholders and the difference between average basic common shares outstanding and average diluted common shares outstanding:share were as follows:
  Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars and shares in thousands, except per share data) 2017 2016 2017 2016
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
         
Weighted average common shares outstanding—basic 233,749
 231,856
 233,438
 232,690
Effect of dilutive securities 2,591
 2,236
 2,934
 2,085
Weighted average common shares outstanding—diluted 236,340
 234,092
 236,372
 234,775
         
Net income/(loss) per share available to common shareholders $0.29
 $0.27
 $0.91
 $0.72
Diluted income/(loss) per share available to common shareholders $0.28
 $0.27
 $0.90
 $0.71
 Three Months Ended
March 31,
(Dollars in millions, except per share data; shares in thousands)20212020
Net income$236 $16 
Net income attributable to noncontrolling interest3 3 
Net income attributable to controlling interest23313
Preferred stock dividends8 1
Net income available to common shareholders22512 
Weighted average common shares outstanding—basic552,249 311,597 
Effect of dilutive securities5,283 1,573 
Weighted average common shares outstanding—diluted557,532 313,170 
Basic earnings per common share$0.41 $0.04 
Diluted earnings per common share$0.40 $0.04 
The following table presents outstanding options and other equity awards that were excluded from the calculation of diluted earnings per share because they were either anti-dilutive (the exercise price was higher than the weighted-average market price for the period) or the performance conditions have not been met:
 
 Three Months Ended
March 31,
(Shares in thousands)20212020
Stock options excluded from the calculation of diluted EPS3,827 3,031 
Weighted average exercise price of stock options excluded from the calculation of diluted EPS$18.11 $18.73 
Other equity awards excluded from the calculation of diluted EPS2,784 4,264 

  Three Months Ended
September 30		 Nine Months Ended
September 30
(Shares in thousands) 2017 2016 2017 2016
Stock options excluded from the calculation of diluted EPS 2,595
 2,793
 2,490
 2,996
Weighted average exercise price of stock options excluded from the calculation of diluted EPS $25.00
 $24.95
 $25.70
 $25.21
Other equity awards excluded from the calculation of diluted EPS 1,002
 371
 325
 51


FIRST HORIZON CORPORATION311Q21 FORM 10-Q REPORT

Note 1011 – Contingencies and Other Disclosures
CONTINGENCIES
Contingent Liabilities Overview
Contingent liabilities arise in the ordinary course of business. Often they are related to lawsuits, arbitration, mediation, and other forms of litigation. Various litigation matters currently are threatened or pending against FHN and its subsidiaries. Also, FHN at times receives requests for information, subpoenas, or other inquiries from federal, state, and local regulators, from other government authorities, and from other parties concerning various matters relating to FHN’s current or former lines of business.businesses. Certain matters of that sort are pending at this time,most times, and FHN is cooperating ingenerally cooperates when those matters.matters arise. Pending and threatened litigation matters sometimes are settled by the parties, and sometimes pending matters are resolved in court or before an arbitrator, and sometimesor are settled by the parties.withdrawn. Regardless of the manner of resolution, frequently the most significant changes in status of a matter occur over a short time period, often following a lengthy period of little substantive activity. In view of the inherent difficulty of predicting the outcome of these matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, or where claims or other actions may be possible but have not been brought, FHN cannot reasonably determine what the eventual outcome of the matters will be, what the timing of the ultimate resolution of these matters may be, or what the eventual loss or impact related to each matter may be. FHN establishes a loss contingency liability for a litigation matter when loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. If loss for a matter is probable and a range of possible loss outcomes is the best estimate available, accounting guidance requires a liability to be established at the low end of the range.
Based on current knowledge, and after consultation with counsel, management is of the opinion that loss contingencies related to threatened or pending litigation matters should not have a material adverse effect on the consolidated financial condition of FHN, but may be material to FHN’s operating results for any particular reporting period depending, in part, on the results from that period.
Material Loss Contingency Matters
Summary
As used in this Note, except for matters that are reported as having been substantially settled or otherwise substantially resolved, FHN's “material loss
contingency matters” generally fall into at least one of the following categories: (i) FHN has determined material loss to be probable and has established a material loss liability in accordance with applicable financial accounting guidance, other than certain matters reported as having been substantially settled or otherwise substantially resolved;guidance; (ii) FHN has determined material loss to be probable but is not reasonably able to estimate an amount or range of material loss liability; or (iii) FHN has determined that material loss is not probable but is reasonably possible, and that the amount or range of that reasonably possible material loss is estimable. As defined in applicable accounting guidance, loss is reasonably possible if there is more than a remote chance of a material loss outcome for FHN. Set forth below areFHN provides contingencies note disclosures for certain pending or threatened litigation matters each quarter, including all matters mentioned in categories (i) or (ii) and, occasionally, certain matters mentioned in category (iii). In addition, in this Note, certain other matters, or groups of matters, are discussed relating to FHN’s formerpre-2009 mortgage origination and servicing businesses. In all litigation matters discussed in this Note, unless settled or otherwise resolved, FHN believes it has meritorious defenses and intends to pursue those defenses vigorously.
FHN reassesses the liability for litigation matters each quarter as the matters progress. At September 30, 2017,March 31, 2021, the aggregate amount of liabilities established for all such loss contingency matters was $8.8$1 million. These liabilities are separate from those discussed under the heading “Repurchase“Mortgage Loan Repurchase and Foreclosure Liability” below.
In each material loss contingency matter, except as otherwise noted, there is more than a remote chance that any of the following outcomes will occur: the plaintiff will substantially prevail; the defense will substantially prevail; the plaintiff will prevail in part; or the matter will be settled by the parties. At September 30, 2017,March 31, 2021, FHN estimates that for all material loss contingency matters, estimable reasonably possible losses in future periods in excess of currently established liabilities could aggregate in a range from zero0 to approximately $52less than $1 million.
As a result of the general uncertainties discussed above and the specific uncertainties discussed for each matter mentioned below, it is possible that the ultimate future loss experienced by FHN for any particular matter may materially exceed the amount, if any, of currently established liability for that matter. That possibility exists both for matters included in the estimated reasonably possible loss (“RPL”) range mentioned above and for matters not included in that range.


37
FIRST HORIZON CORPORATION321Q21 FORM 10-Q REPORT


Note 1011 – Contingencies and Other Disclosures (Continued)

Material Matters
A former shareholder of CBF has filed a putative class action suit, Searles v. DeMartini et al, No. 2020-0136 (Del. Chancery), against certain former directors, officers, and shareholders of CBF, alleging, among other things, that defendants breached certain fiduciary duties in connection with CBF's merger with FHN along with multiple co-defendants, is defending lawsuits brought by investors which claim thatin 2017. Plaintiff claims unspecified damages related to the offering documents under which certificates relating to First Horizon branded securitizations were sold to them were materially deficient. One of those matters is viewed as material currently: Federal Deposit Insurance Corporation (“FDIC”) as receiver for Colonial Bank, in the U.S. District Court for the Southern District of New York (Case No. 12 Civ. 6166 (LLS)(MHD)). The plaintiff in that suit claims to have purchased (and later sold) certificates totaling $83.4 million, relating to a number of separate securitizations. Plaintiff demands damagesmerger consideration and prejudgment interest, among several remedies sought. The current RPL estimate for this matter is subject to significant uncertainties regarding: the dollar amounts claimed; the potential remedies that might be available or awarded; the outcome of any settlement discussions; the availability of significantly dispositive defenses; and the incomplete status of the discovery process. Additional information concerning FHN’s former mortgage businesses is provided below in “Obligations from Legacy Mortgage Businesses.”
Underwriters are co-defendants in the FDIC-New York matter and have demanded, under provisions in the applicable underwriting agreements, that FHN indemnify them for their expenses and any losses they may incur. In addition, FHN has received indemnity demands from underwriters in certain other suits as to which investors claim to have purchased certificates in FH proprietary securitizations but as to which FHN has not been named a defendant.
For most pending indemnity claims involving FH proprietary securitizationsopportunity loss. FHN is unable to estimate an RPL range for this matter due to significant uncertainties regarding: claims as to whichwhether a class will be certified and, if so, the claimant specifies no dollar amount;composition of the class; the amount of potential remediesdamages that might be available or awarded;awarded, if any; of any such damages amount, the availability of significantly dispositive defenses such as statutes of limitations or repose;amount that FHN would be obliged to indemnify; whether applicable insurance will be sufficient to cover FHN's exposure; and the outcome of potentially dispositive early-stage motions such as motionsdiscovery.
Exposures from pre-2009 Mortgage Business
FHN is contending with indemnification claims related to dismiss;"other whole loans sold," which were mortgage loans originated by FHN before 2009 and sold outside of an FHN securitization. These claims generally assert that FHN-originated loans contributed to losses in connection with mortgage loans securitized by the incomplete statusbuyer of the discovery process;loans. The claims generally do not include specific deficiencies for specific loans sold by FHN. Instead, the lack ofclaims generally assert that FHN is liable for a precise statement of damages; and lack of precedent claims. The alleged purchase pricesshare of the certificates subjectclaimant's loss estimated by assessing the totality of the other whole loans sold by FHN to pendingclaimant in relation to the totality of the larger number of loans securitized by claimant. FHN is unable to estimate an RPL range for these matters due to significant uncertainties regarding: the number of, and the facts underlying, the loan originations which claimants assert are indemnifiable; the applicability of FHN’s contractual indemnity covenants to those facts and originations; and, in those cases where an indemnity claim may be supported, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.
FHN also has indemnification claims excluding the FDIC-New York matter, total $409.9 million.
In late October, 2017, FHN received a notice of indemnification claimsrelated to servicing obligations. The most significant is from Nationstar Mortgage LLC, currently doing business as “Mr. Cooper.” Nationstar was the purchaser of FHN’s mortgage servicing obligations and assets in 2013 and 2014 and, starting in 2011,was FHN’s subservicer. The noticeNationstar 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. FHN is unable to
estimate an RPL range for this matter due to significant uncertainties regarding: the exact nature of each of Nationstar’s claims and its position in respect of each; the number of, and the facts underlying, the claimed instances of indemnifiable events; the applicability of FHN’s contractual indemnity covenants to those facts and events; and, in those cases where the facts and events might support an indemnity claim, whether any legal defenses, counterclaims, other counter-positions, or third-party claims might eliminate or reduce claims against FHN or their impact on FHN.
FHN has additional potential exposures related to its formerpre-2009 mortgage businesses. A few of those matters have become litigation which FHN currently estimates are immaterial, some are non-litigation claims or threats, some are mere subpoenas or other requests for information, and in some areas FHN has no indication of any active or threatened dispute. Some of those matters might eventually result in loan repurchases or make-whole payments and could be included in the repurchase liability discussed below,settlements, and some might eventually result in damages or other litigation-oriented liability, including indemnity payments,adverse litigation outcomes, but none are included in the material loss contingency liabilities mentioned above or in the RPL range mentioned above. Additional information concerning such exposures is provided below in “Obligations from Legacy above..
Mortgage Businesses.”
Matters Related to Capital Bank Financial Transaction Settled

As mentioned in Note 10 within Item 1 of FHN’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, (1) on July 14, 2017, a complaint captioned Robert Garfield v. First Horizon National Corporation, et al., No. CH-17-1022, was filed on behalf of a putative class of FHN shareholders against FHN, its directors, and Capital Bank Financial Corp. (“Capital Bank Financial”) in the Court of Chancery of Shelby County, Tennessee (30th Judicial District), in connection with FHN’s agreement to acquire Capital Bank Financial by merger. In addition, Capital Bank Financial and the individual members of the Capital Bank Financial board of directors were named as defendants in three substantially similar putative derivative and class action lawsuits filed by alleged shareholders of Capital Bank Financial; (2) Bushansky v. Capital Bank Financial Corp., et al., No. 3:17-cv-00422 (W.D. North Carolina filed July 17, 2017); (3) Parshall v. Capital Bank Financial Corp., et al., No. 3:17-cv-00428 (W.D. North Carolina filed July 19, 2017); and (4) McNamara v. Capital Bank Financial Corp., et al., No. 3:17-cv-00439 (W.D. North Carolina filed July 25, 2017). The Parshall complaint also named FHN as a defendant. During the third quarter of 2017, those four matters were settled and dismissed. Amounts expended by FHN were not material.

38
Table of Headers

Note 10 – Contingencies and Other Disclosures (Continued)


Material Gain Contingency Matter
In second quarter 2015 FHN reached an agreement with DOJ and HUD to settle potential claims related to FHN’s underwriting and origination of loans insured by FHA. Under that agreement FHN paid $212.5 million. FHN believes that certain insurance policies, having an aggregate policy limit of $75 million, provide coverage for FHN’s losses and related costs. The insurers have denied and/or reserved rights to deny coverage. FHN sued the insurers to enforce the policies under Tennessee law. The trial court granted summary judgment to the defendants, and FHN has appealed. In connection with this litigation FHN seeks to partly recoup previously recognized expenses associated with the settled matter. Under applicable financial accounting guidance FHN has determined that although material gain from this litigation is not probable, there is a reasonably possible (more than remote) chance of a material gain outcome for FHN. FHN cannot determine a probable outcome that may result from this matter because of the uncertainty of the potential outcomes of the legal proceedings and also due to significant uncertainties regarding: legal interpretation of the relevant contracts; potential remedies that might be available or awarded; and the ultimate effect of counterclaims asserted by the defendants. Additional information concerning FHN’s former mortgage businesses is provided below in “Obligations from Legacy Mortgage Businesses.”
Obligations from Legacy Mortgage Businesses
Loss contingencies mentioned above under “Material Matters” stem from FHN’s former mortgage origination and servicing businesses. FHN retains potential for further exposure, in addition to the matters mentioned, from those former businesses. The following discussion provides context and other information to enhance an understanding of those matters and exposures.
Overview
Prior to September 2008 FHN originated loans through its legacy 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: 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 FH 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 FH proprietary securitizations. FHN also originated mortgage loans eligible for FHA insurance or VA guaranty. In addition, FHN originated and sold HELOCs and second 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 consolidated 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 sold or securitized having an LTV ratio at origination of greater than 80 percent.
In 2007, market conditions deteriorated to the point where mortgage-backed securitizations no longer could 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 contracted to have its remaining servicing obligations sub-serviced. Since the platform sale FHN has sold substantially all remaining servicing assets and obligations.
Certain mortgage-related terms used in this “Contingencies” section are defined in “Mortgage-Related Glossary” at the end of this Overview.
Repurchase and Make-Whole Obligations

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Starting in 2009, FHN received a high number of claims either to repurchase loans from the purchaser or to pay the purchaser to “make them whole” for economic losses incurred. These claims have been driven primarily by loan delinquencies. In repurchase or make-whole claims a loan purchaser typically asserts that specified loans violated representations and warranties FHN made when the loans were sold. A significant majority of claims received overall have come from GSEs, and the remainder are from purchasers of other whole loan sales. FHN has not received 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, 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.
Servicing Obligations
FHN’s national servicing business was sold as part of the platform sale in 2008. A significant amount of 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 a three-year subservicing arrangement (the “2008 subservicing agreement”) with the platform buyer (the “2008 subservicer”). The 2008 subservicing agreement expired in 2011 when FHN entered into a replacement agreement with a new subservicer (the “2011 subservicer”). In fourth quarter 2013, FHN contracted to sell 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 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 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

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sued FHN. FHN cannot predict how this matter will proceed nor can FHN predict whether this matter ultimately will be material to FHN.
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.
Mortgage-Related Glossary
Agenciesthe two GSEs and Ginnie MaeHELOChome equity line of credit
certificatessecurities sold to investors representing interests in mortgage loan securitizationsHUDDept. of Housing and Urban Development
DOJU.S. Department of JusticeLTVloan-to-value, a ratio of the loan amount divided by the home value
DRAdefinitive resolution agreement with a GSEMIprivate mortgage insurance, insuring against borrower payment default
Fannie Mae, Fannie,
FNMA
Federal National Mortgage AssociationMSRmortgage servicing rights
FH proprietary
securitization
securitization of mortgages sponsored by FHN under its First Horizon brandnonconforming loansloans that did not conform to Agency program requirements
FHAFederal Housing Administrationother whole loans soldmortgage loans sold to private, non-Agency purchasers
Freddie Mac, Freddie, FHLMCFederal Home Loan Mortgage Corporation
2008 platform sale, 2008 sale,
platform sale
FHN’s sale of its national mortgage origination and servicing platforms in 2008
Ginnie Mae, Ginnie,
GNMA
Government National Mortgage Associationpipeline or active pipelinepipeline of mortgage repurchase, make-whole, & certain related claims against FHN
GSEsFannie Mae and Freddie MacVAVeterans Administration
Repurchase and Foreclosure Liability
TheFHN’s repurchase and foreclosure liability, primarily related to its pre-2009 mortgage businesses, is comprised of reservesaccruals to cover estimated loss content in the active pipeline (consisting of mortgage loan repurchase, make-whole, foreclosure/servicing demands and certain related exposures), estimated future inflows, as well asand estimated loss content related to certain known claims not currently included in the active pipeline. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches 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.
Based on currently available information and experience to date, FHN has evaluated its loan repurchase, make-whole, foreclosure, and certain related exposures and has accrued for losses of $34.6 million and $66.0$16 million as of September 30, 2017March 31, 2021 and December 31, 2016, respectively, including a smaller amount related to equity-lending junior lien loan sales.2020. Accrued liabilities for FHN’s estimate of these obligations are reflected in Other liabilities on the Consolidated Condensed Statements of Condition.Balance Sheets. Charges/expense reversals to increase/decrease the liability are included within Repurchase and foreclosure provision/(provision credit)Other income on the Consolidated Condensed Statements of Income. The decline in the repurchase and

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foreclosure liability since year-end is the result of the settlement of certain repurchase claims. The estimates are based upon currently available information and fact patterns that exist as of theeach balance sheet datesdate and could be subject to future changes. Changes to any one of
FIRST HORIZON CORPORATION331Q21 FORM 10-Q REPORT

Note 11 – Contingencies and Other Disclosures (Continued)
these factors could significantly impact the estimate of FHN’s liability.
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 above.
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 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 sales of MSR starting in 2008, 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, including one of the material matters mentioned above. At September 30, 2017, FHN’s repurchase and foreclosure liability considered certain known exposures from other whole loans sold.
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 concerning: 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.
OTHER DISCLOSURES
Visa Matters
FHN is a member of the Visa USA network. In October 2007, the Visa organization of affiliated entities completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc. (“Visa”). Upon completion of the reorganization, the members of the Visa USA network remained contingently liable for certain Visa litigation matters (the “Covered Litigation”). Based on its proportionate membership share of Visa USA, FHN recognized a contingent liability in fourth quarter 2007 related to this contingent obligation. In March 2008, Visa completed its initial public offering (“IPO”) and funded an escrow account from its IPO proceeds to be used to make payments related to the Visa litigation matters. FHN received approximately 2.4 million Class B shares in conjunction with Visa’s IPO.

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Conversion of these shares into Class A shares of Visa is prohibited until the final resolution of the covered litigation. In conjunction with the prior sales of Visa Class B shares in December 2010 and September 2011, FHN and the purchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio is adjusted when Visa deposits funds into the escrow account to cover certain litigation. As of September 30, 2017 and December 31, 2016, the derivative liabilities were $5.5 million and $6.2 million, respectively.
In July 2012, Visa and MasterCard announced a joint settlement (the “Settlement”) related to the Payment Card Interchange matter, one of the Covered Litigation matters. Based on the amount of the Settlement attributable to Visa and an assessment of FHN’s contingent liability accrued for Visa litigation matters, the Settlement did not have a material impact on FHN. The Settlement was vacated upon appeal in June 2016 and the Supreme Court declined to hear the case in March 2017. Accordingly, the outcome of this matter remains uncertain. Additionally, other Covered Litigation matters are also pending judicial resolution. So long as any Covered Litigation matter remains pending, FHN’s ability to transfer its Visa holdings is restricted, with limited exceptions.
FHN holds approximately 1.1 million Visa Class B shares. FHN’s Visa shares are not considered to be marketable and therefore are included in the Consolidated Condensed Statements of Condition at their historical cost of $0. As of September 30, 2017, the conversion ratio is 165 percent reflecting a Visa stock split in March 2015, and the contingent liability is $.8 million. Future funding of the escrow would dilute this conversion ratio by an amount that is not determinable at present. Based on the closing price on September 30, 2017, assuming conversion into Class A shares at the current conversion ratio, FHN’s Visa holdings would have a value of approximately $193 million. Recognition of this value is dependent upon the final resolution of the remainder of Visa’s Covered Litigation matters without further reduction of the conversion ratio.
Indemnification Agreements and Guarantees
In the ordinary course of business, FHN enters into indemnification agreements for legal proceedings against its directors and officers and standard representations and warranties for underwriting agreements, merger and acquisition agreements, loan sales, contractual commitments, and various other business transactions or arrangements.
The extent of FHN’s obligations under these agreements depends upon the occurrence of future events; therefore, it is not possible to estimate a maximum potential amount of payouts that could be required by such agreements.


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Note 1112 – Pension, Savings, and Other Employee BenefitsRetirement Plans
Pension plan.

FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or before September 1, 2007. Pension benefits are based on years of service, average compensation near retirement or other termination, and estimated social security benefits at age 65. Benefits under the plan are “frozen” so that years of service and compensation changes after 2012 do not affect the benefit owed. Minimum contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. Decisions to contribute to the plan are based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. FHN contributed $165 million to the qualified pension plan in third quarter 2016. The contribution hadmade no effect on FHN’s 2016 Consolidated Statements of Income. FHN did not make any contributions to the qualified pension plan in the nine months ended September 30, 2017.2020. Management does not currently anticipate that FHN will make a contribution to the qualified pension plan for the remainderremainder of 2017.2021.
FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the qualified pension plan have been limited by tax rules. These other non-qualified plans are unfunded, and contributions to these plans cover all benefits paid under the non-qualified plans. Payments made under the non-qualified plans were $5.1$5 million for 2016.2020. FHN anticipates making benefit payments under the non-qualified plans of $5.0$5 million in 2017.2021.
Service cost is included in Personnel expense in the Consolidated Statements of Income. All other components of net periodic benefit cost are included in Other expense.
For more information on FHN's pension plan and other postretirement benefit plans, see Note 18 - Pension, Savings plan. FHN provides all qualifying full-time employees with the opportunity to participateand Other Employee Benefits in FHN's tax qualified 401(k) savings plan. The qualified plan allows employees to defer receipt of earned salary, up to tax law limits,2020 Annual Report on a tax-advantaged basis. Accounts, which are held in trust, may be invested in a wide range of mutual funds and in FHN common stock. Up to tax law limits, FHN provides a 100 percent match for the first 6 percent of salary deferred, with company matching contributions invested according to a participant’s current investment elections. Through a non-qualified savings restoration plan, FHN provides a restorative benefit to certain highly-compensated employees who participate in the savings plan and whose contribution elections are capped by tax limitations.Form 10-K.
Other employee benefits. FHN provides postretirement life insurance benefits to certain employees and also provides postretirement medical insurance benefits to retirement-eligible employees. The postretirement medical plan is contributory with FHN contributing a fixed amount for certain participants. FHN’s postretirement benefits include certain prescription drug benefits.
The components of net periodic benefit cost for the three months ended September 30 areMarch 31 were as follows:
 Pension Benefits
(Dollars in millions)20212020
Components of net periodic benefit cost
Interest cost$4 $6 
Expected return on plan assets(4)(6)
Amortization of unrecognized:
Actuarial (gain) loss2 3 
Other2 0 
Net periodic benefit cost$4 $3 

  Pension Benefits Other Benefits
(Dollars in thousands) 2017 2016 2017 2016
Components of net periodic benefit cost        
Service cost $9
 $10
 $26
 $28
Interest cost 7,276
 7,648
 328
 335
Expected return on plan assets (9,230) (9,797) (236) (227)
Amortization of unrecognized:        
Prior service cost/(credit) 13
 48
 23
 43
Actuarial (gain)/loss 2,380
 1,971
 (140) (143)
Net periodic benefit cost/(credit) $448
 $(120) $1
 $36

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Note 11 – Pension, Savings, and Other Employee Benefits (Continued)

The components of net periodic benefit cost for the nine months ended September 30 are as follows:

  Pension Benefits Other Benefits
(Dollars in thousands) 2017 2016 2017 2016
Components of net periodic benefit cost        
Service cost $28
 $30
 $80
 $83
Interest cost 22,035
 23,412
 979
 969
Expected return on plan assets (27,011) (29,342) (710) (685)
Amortization of unrecognized:        
Prior service cost/(credit) 39
 147
 71
 128
Actuarial (gain)/loss 7,140
 6,106
 (425) (608)
Net periodic benefit cost/(credit) $2,231
 $353
 $(5) $(113)







Note 1213 – Business Segment Information
During the fourth quarter of 2020, FHN reorganized its internal management structure and, accordingly, its segment reporting structure. Historically, FHN's reportable business segments were Regional Banking, Fixed Income, Corporate, and Non-strategic. On July 1, 2020, FHN and IBKC closed their merger of equals transaction. This transaction prompted organizational changes to better integrate and execute the combined Company's strategic priorities across all lines of businesses. As a result, FHN revised its reportable segments as described below. Prior period segment information has four businessbeen reclassified to conform to the current period presentation.

FHN is composed of the following operating segments: regional banking, fixed income, corporate, and non-strategic. The regional banking

•Regional Banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial customersclients primarily in Tennesseethe southern U.S. and other selected markets. Regional bankingBanking also provides investments,investment, wealth management, financial planning, trust services and asset management credit card,services for consumer clients.

•Specialty Banking segment consists of lines of business that deliver product offerings and cash management. Additionally, the regional banking segment includesservices with specialized industry knowledge.Specialty Banking’s lines of business include asset-based lending, mortgage warehouse lending, commercial real estate, franchise finance, correspondent banking, which provides credit, depository,equipment finance, mortgage, and othertitle insurance.In addition to traditional lending and deposit taking, Specialty Banking also delivers treasury management solutions, loan syndications, international banking related services to other financial institutions nationally. The fixed income segment consistsand SBA lending. Additionally, Specialty Banking has
a line of business focused on 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. The corporate

•Corporate segment consists primarily of unallocated corporate expenses, expense on subordinated debt issuances, bank-owned life insurance, unallocated interest income associated with excess equity, net impactsupport functions including risk management, audit, accounting, finance, executive office, and corporate communications. Shared support services such as human resources, properties, technology, credit risk and bank operations are allocated to the activities of raising incrementalRegional Banking, Specialty Banking and Corporate. Additionally, the Corporate segment includes centralized management of capital and funding to support the business activities of the company including management of wholesale funding, liquidity, and capital management and allocation. The Corporate segment also includes the 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 on extinguishment of debt, and acquisition- and integration-related costs. The non-strategic segment consists of the wind-down national consumer lending activities, legacyrun-off businesses such as pre-2009 mortgage banking elements, including servicing fees,run-off consumer and the associated ancillary revenues and expenses related to these businesses. Non-strategic also includes the wind-down trust preferred loan portfolioportfolios, and other exited businesses.
Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also modify its methodology of allocating expenses and equity among segments which could change historical segment results. Business segment revenue, expense, asset, and equity levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, to an extent they are subjective. Generally, all assignments and allocations have been consistently applied for all periods presented. The following table reflects the amounts of consolidated revenue, expense, tax, and average assets for each segment for the three and nine months ended September 30:

  Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
Consolidated        
Net interest income $209,817
 $185,195
 $600,226
 $533,533
Provision/(provision credit) for loan losses —
 4,000
 (3,000) 11,000
Noninterest income 112,417
 148,545
 357,029
 428,364
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 (a) 13,596
 28,547
 57,903
 82,802
Net income/(loss) $71,769
 $67,635
 $225,361
 $180,788
Average assets $28,874,827
 $27,609,702
 $28,852,679
 $27,021,137

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Note 1213 – Business Segment Information (Continued)

The following tables reflect financial information for each reportable business segment for the three months ended March 31 2021 and 2020:
  Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands) 2017 2016 2017 2016
Regional Banking        
Net interest income $209,319
 $190,508
 $604,680
 $541,135
Provision/(provision credit) for loan losses 8,552
 8,544
 11,910
 34,195
Noninterest income 64,369
 65,128
 188,082
 185,679
Noninterest expense 150,464
 145,050
 451,175
 454,970
Income/(loss) before income taxes 114,672
 102,042
 329,677
 237,649
Provision/(benefit) for income taxes 41,267
 37,027
 118,986
 84,736
Net income/(loss) $73,405
 $65,015
 $210,691
 $152,913
Average assets $19,158,458
 $17,582,899
 $18,519,584
 $16,704,462
Fixed Income        
Net interest income $5,979
 $2,411
 $12,109
 $8,224
Noninterest income 55,802
 72,073
 161,829
 217,278
Noninterest expense 53,105
 59,423
 155,791
 180,850
Income/(loss) before income taxes 8,676
 15,061
 18,147
 44,652
Provision/(benefit) for income taxes 2,979
 5,518
 5,949
 16,195
Net income/(loss) $5,697
 $9,543
 $12,198
 $28,457
Average assets $2,586,997
 $2,305,986
 $2,388,984
 $2,348,640
Corporate        
Net interest income/(expense) $(13,990) $(18,193) $(43,060) $(48,401)
Noninterest income (b) (9,477) 5,134
 2,217
 15,766
Noninterest expense 23,935
 14,929
 65,390
 44,320
Income/(loss) before income taxes (47,402) (27,988) (106,233) (76,955)
Provision/(benefit) for income taxes (a) (34,255) (16,736) (83,019) (40,695)
Net income/(loss) $(13,147) $(11,252) $(23,214) $(36,260)
Average assets $5,698,161
 $5,880,268
 $6,421,890
 $6,024,736
Non-Strategic        
Net interest income $8,509
 $10,469
 $26,497
 $32,575
Provision/(provision credit) for loan losses (8,552) (4,544) (14,910) (23,195)
Noninterest income 1,723
 6,210
 4,901
 9,641
Noninterest expense 9,365
 14,156
 4,635
 7,167
Income/(loss) before income taxes 9,419
 7,067
 41,673
 58,244
Provision/(benefit) for income taxes 3,605
 2,738
 15,987
 22,566
Net income/(loss) $5,814
 $4,329
 $25,686
 $35,678
Average assets $1,431,211
 $1,840,549
 $1,522,221
 $1,943,299
Three Months Ended March 31, 2021
(Dollars in millions)Regional BankingSpecialty BankingCorporateConsolidated
Net interest income (expense)$426 $159 $(77)$508 
Provision for credit losses(32)(7)(6)(45)
Noninterest income100 185 13 298 
Noninterest expense (a)272 154 118 544 
Income (loss) before income taxes286 197 (176)307 
Income tax expense (benefit)66 47 (42)71 
Net income (loss)$220 $150 $(134)$236 
Average assets$42,371 $21,503 $21,527 $85,401 
(a) Includes $33 million in asset impairments related to IBKC merger integration efforts in the Corporate segment.
Three Months Ended March 31, 2020
(Dollars in millions)Regional BankingSpecialty BankingCorporateConsolidated
Net interest income (expense)$194 $109 $0 $303 
Provision for credit losses98 54 2 154 
Noninterest income73 104 (3)174 
Noninterest expense173 111 18 302 
Income (loss) before income taxes(4)48 (23)21 
Income tax expense (benefit)(2)11 (4)5 
Net income (loss)$(2)$37 $(19)$16 
Average assets$19,044 $16,890 $7,618 $43,552 
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) Provision/(benefit) for
The following tables reflect a disaggregation of FHN’s noninterest income taxes for consolidated resultsby major product line and the Corporatereportable segment for the three and nine months ended September 30, 2017, relativeMarch 31, 2021 and 2020:
Three months ended March 31, 2021
(Dollars in millions)Regional BankingSpecialty BankingCorporateConsolidated
Noninterest income:
Fixed income (a)$1 $125 $0 $126 
Mortgage banking and title income0 52 1 53 
Deposit transactions and cash management38 3 1 42 
Brokerage, management fees and commissions20 0 0 20 
Trust services and investment management12 0 0 12 
Bankcard income11 0 0 11 
Other income (b)18 5 11 34 
Total noninterest income$100 $185 $13 $298 
(a)Includes $10 million of underwriting, portfolio advisory, and other noninterest income in scope of ASC 606, "Revenue From Contracts With Customers."
(b)Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commissions in scope of ASC 606.

FIRST HORIZON CORPORATION371Q21 FORM 10-Q REPORT

Note 13 – Business Segment Information (Continued)
Three months ended March 31, 2020
(Dollars in millions)Regional BankingSpecialty BankingCorporateConsolidated
Noninterest income:
Fixed income (a)$0 $96 $0 $96 
Mortgage banking and title income0 2 0 2 
Deposit transactions and cash management26 3 1 30 
Brokerage, management fees and commissions16 0 0 16 
Trust services and investment management7 0 0 7 
Bankcard income6 1 0 7 
Other income (b)18 2 (4)16 
Total noninterest income$73 $104 $(3)$174 
Certain previously reported amounts have been reclassified to the prior year periods, was affected by a declineagree with current presentation.

(a)Includes $9 million of underwriting, portfolio advisory, and other noninterest income in the effective tax ratescope of ASC 606, "Revenue From Contracts With Customers."
(b)Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commissions in 2017 primarily related to the reversalscope of the valuation allowance for the deferred tax asset related to its 2012 federal capital loss carryforward based on capital gain transactions initiated in second quarter 2017. See Note 15 – Income Taxes in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2016, for additional information related to FHN's valuation allowance related to its capital loss carryforward.ASC 606.
(b) Three and nine months ended September 30, 2017 includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.



FIRST HORIZON CORPORATION381Q21 FORM 10-Q REPORT


Note 1314 – Variable Interest Entities
ASC 810 defines a
FHN makes equity investments in various entities that are considered VIEs, as defined by GAAP. A VIE as a legal entity where (a) the equity investors, as a group, lacktypically does not have 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. Afrom other parties. The Company’s variable interest is aarises from contractual, ownership or other interest that fluctuatesmonetary interests in the entity, which change with changesfluctuations in the fair value of the VIE’sentity's net assets exclusive of variable interests. Under ASC 810, as amended,assets. FHN consolidates a VIE if FHN is the primary beneficiary of the entity. FHN is required to consolidatethe primary beneficiary of a VIE when it has aif FHN's 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")VIE and a residual interest results in FHNthe right to receive benefits (or the obligation to absorb losses) that could potentially absorbing losses or receiving benefits that arebe significant to the trust.VIE. To determine whether or not a variable interest held could potentially be significant to the VIE, FHN considers both qualitative and quantitative factors regarding the nature, size and form of its involvement with the VIE. FHN assesses whether or not it 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 flowsa VIE 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 an ongoing basis.

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.Variable Interest Entities
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.








48


Note 13 – Variable Interest Entities (Continued)

The following table summarizes VIEsthe carrying value of assets and liabilities associated with rabbi trusts used for deferred compensation plans which are consolidated by FHN as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
(Dollars in millions)(Dollars in millions)March 31, 2021December 31, 2020
Assets:Assets:
 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
Other assets$200 $195 
Total assets $26,257
 $77,997
 $35,569
 $74,160
Total assets$200 $195 
Liabilities:        Liabilities:
Term borrowings $13,354
 N/A
 $23,126
 N/A
Other liabilities 3
 $58,785
 3
 $54,746
Other liabilities$173 $165 
Total liabilities $13,357
 $58,785
 $23,129
 $54,746
Total liabilities$173 $165 
Nonconsolidated Variable Interest Entities
Low Income Housing Tax Credit Partnerships. Through designated wholly-owned subsidiaries, First Tennessee Housing Corporation (“FTHC”), a wholly-owned subsidiary of FTBNA,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.LIHTC. 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, the holder of the equity investment at risk, does notmanaged by unrelated general partners that have the abilitypower to direct the activities thatwhich most significantly affect the performance of the entity through voting rights or similar rights. FTHC 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 consideredpartnerships. FHN is therefore not the primary beneficiaries as managerial functions give thembeneficiary of any LIHTC partnerships. Accordingly, FHN does not consolidate these VIEs and accounts for these investments in other assets on 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 initial capital contributions and funding commitments.Consolidated Balance Sheets.
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/(benefit).expense. 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 significantmaterial for the three and nine months ended September 30, 2017March 31, 2021 and 2016. 2020.
FIRST HORIZON CORPORATION391Q21 FORM 10-Q REPORT

Note 14 – Variable Interest Entities (Continued)
The following table summarizes the impact to the Provision/(benefit) for income taxesIncome tax expense on the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2017,March 31, 2021 and 20162020 for LIHTC investments accounted for under the proportional amortization method.
Three Months Ended
March 31,
(Dollars in millions)20212020
Income tax expense (benefit):
Amortization of qualifying LIHTC investments$9 $6 
Low income housing tax credits(9)(5)
Other tax benefits related to qualifying LIHTC investments(3)(3)

  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)


49


Note 13 – Variable Interest Entities (Continued)

Other Tax Credit Investments.Through designated subsidiaries, First Tennessee New Markets Corporation (“FTNMC”), a wholly-owned subsidiary of FTBNA,Horizon Bank periodically makes equity investments through wholly-owned subsidiaries as a non-managing member in various limited liability companies (“LLCs”)LLCs that sponsor community development projects utilizing the New Market Tax Credit (“NMTC”) pursuant to Section 45 of the Internal Revenue Code.NMTC. First Horizon Bank also makes equity investments as a limited partner or non-managing member in entities that receive tax credits from solar and historic tax credits. 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 LLCsThese entities are considered VIEs as FTNMC,First Horizon Bank's subsidiaries represent the holderholders of the equity investment at risk, doesbut do 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.entities.
FTHC 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. 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, 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 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 initial capital contributions and funding commitments.
Small Issuer Trust Preferred Holdings. FTBNAFirst Horizon Bank holds variable interests in trusts which have issued mandatorily redeemable preferred capital securities (“trust preferreds”) for smaller banking and insurance enterprises. FTBNAFirst 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. 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 holdings, FTBNA 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. However, since FTBNAFirst Horizon Bank. Since 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. FTBNAFirst Horizon Bank has no contractual requirements to provide financial support to the trusts.
On-Balance Sheet Trust Preferred Securitization. In 2007, FTBNAFirst Horizon Bank executed a securitization of certain small issuer trust preferreds for which the 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 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 FTBNASince First Horizon Bank did not retain servicing or other decision making rights, FTBNAFirst 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, FTBNAFirst Horizon Bank has accounted for the funds received through the securitization as a term borrowing in its Consolidated Condensed Statements of Condition. FTBNABalance Sheets. 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, FHN was not considered the primary beneficiary of the trust. Therefore, these trusts were not consolidated by FHN.

50


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, FTBNAFirst 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 FTBNAFirst 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, FTBNAFirst Horizon Bank is exposed to potentially significant benefits and losses of the borrowing entity. FTBNAFirst Horizon Bank has no contractual requirements to
FIRST HORIZON CORPORATION401Q21 FORM 10-Q REPORT

Note 14 – Variable Interest Entities (Continued)
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
Proprietary Trust Preferred Issuances. FTB 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 loaned funds to a related partyits acquisitions, FHN acquired junior subordinated debt underlying multiple issuances of trust preferred debt. All of the buyer that were used fortrusts are considered VIEs because the purchase priceownership interests from the capital
contributions to these trusts are not considered “at risk” in evaluating whether the holders of the building. FTB 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, it is being accounted for using the deposit method which creates a net asset or liability for all cash flows between FTB and the buyer. The buyer-lessor in this transaction meets the definition of a VIE as it does not have sufficient equity investments at risk since FTB is providingin the funding fortrusts have the purchase and renovation. A related party of the buyer-lessor has the powerability to direct the activities that most significantly impact the operations and could potentially receive benefits or absorb losses thatentities’ economic performance. Thus, FHN cannot be the trusts’ primary beneficiary because its ownership interests in the trusts are significant tonot considered variable interests as they are not considered “at risk”. Consequently, none of the transactions, making it the primary beneficiary. Therefore, FTB does not consolidate the leasing entity.trusts are consolidated by FHN.
















51


Note 13 – Variable Interest Entities (Continued)



The following table summarizes FHN’s nonconsolidated VIEs as of September 30, 2017:March 31, 2021:
(Dollars in millions) 
Maximum
Loss Exposure		Liability
Recognized		Classification
Type 
Low income housing partnerships$345 $126 (a)
Other tax credit investments (b)68 42 Other assets
Small issuer trust preferred holdings (c)210 0 Loans and leases
On-balance sheet trust preferred securitization32 83 (d)
Holdings of agency mortgage-backed securities (c)7,053 0 (e)
Commercial loan troubled debt restructurings (f)169 0 Loans and leases
Proprietary trust preferred issuances (g)0 287 Term borrowings
(a)Maximum loss exposure represents $219 million of current investments and $126 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 2024.
(Dollars in thousands) 
 
Maximum
Loss Exposure
 
Liability
Recognized
 Classification
Type 
      
Low income housing partnerships $96,007
 $34,236
 (a)
Other tax credit investments (b) (c) 20,444
 —
 Other assets
Small issuer trust preferred holdings (d) 332,873
 —
 Loans, net of unearned income
On-balance sheet trust preferred securitization 48,902
 65,272
 (e)
Proprietary residential mortgage securitizations 2,300
 —
 Trading securities
Holdings of agency mortgage-backed securities (d) 4,173,080
 —
 (f)
Commercial loan troubled debt restructurings (g) 21,763
 —
 Loans, net of unearned income
Sale-leaseback transaction 14,827
 —
 (h)
(b)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.
(a)Maximum loss exposure represents $61.8 million of current investments and $34.2 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.
(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 $65.3 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 $21.1 million of current receivables and $.6 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.

(d)Includes $112 million classified as Loans and leases and $2 million classified as Trading securities which are offset by $83 million classified as Term borrowings.
(e)Includes $0.6 billion classified as Trading securities and $6.5 billion classified as Securities available for sale.
(f)Maximum loss exposure represents $166 million of current receivables and $3 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
(g)No exposure to loss due to nature of FHN's involvement.
The following table summarizes FHN’s nonconsolidated VIEs as of December 31, 2016:2020:
(Dollars in millions)Maximum
Loss Exposure		Liability
Recognized		Classification
Type 
Low income housing partnerships$338 $132 (a)
Other tax credit investments (b)64 42 Other assets
Small issuer trust preferred holdings (c)210 0 Loans and leases
On-balance sheet trust preferred securitization32 82 (d)
Holdings of agency mortgage-backed securities (c)7,063 0 (e)
Commercial loan troubled debt restructurings (f)186 0 Loans and leases
Proprietary trust preferred issuances (g)0 287 Term borrowings
(a)Maximum loss exposure represents $206 million of current investments and $132 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 2024.
(b)Maximum loss exposure represents 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 million classified as Loans and leases and $2 million classified as Trading securities which are offset by $82 million classified as Term borrowings.
(e)Includes $0.8 billion classified as Trading securities and $6.2 billion classified as Securities available for sale.
(f)Maximum loss exposure represents $176 million of current receivables and $10 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
(g)No exposure to loss due to nature of FHN's involvement.
(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)FIRST HORIZON CORPORATIONMaximum loss exposure represents $56.2 million 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 2017.411Q21 FORM 10-Q REPORT
(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.



Note 1415 – 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’clients’ 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”)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 dailyDaily margin posted or received from collateral towith central clearinghouses is considered a legal settlementssettlement of the related derivative contracts. This change resultedcontracts 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 StatementsBalance Sheets. Treatment of Condition. This changedaily margin as a settlement has no effect on hedge accounting or gains/losses for the applicable derivative contracts. On September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively, FHN had $34.5$234 million and $47.8$280 million of cash receivables and $28.2$122 million and $32.8$166 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 customerclient transactions and as a risk management tool. Where contracts have been created for customers,clients, 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 segmentFHNF 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.clients. When these securities settle on a delayed basis, they are considered forward contracts. Fixed incomeFHNF also enters into interest rate contracts, including caps, swaps, and floors, for its customers.clients. In addition, fixed incomeFHNF 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
FIRST HORIZON CORPORATION421Q21 FORM 10-Q REPORT

Note 15 – Derivatives (Continued)
recognized currently in fixed income noninterest income. Related assets and liabilities are recorded on the Consolidated Condensed Statements of ConditionBalance Sheets as Derivativederivative assets and Derivativederivative liabilities within Other assets and Other liabilities. The FTN FinancialFHNF 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$115 million and $59.0$78 million for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and $133.3 million and $185.9 million for the nine months ended September 30, 2017 and 2016,2020, respectively. Trading revenues are inclusive of both derivative and non-derivative financial instruments, and are included in fixedFixed income noninterest income.on the Consolidated Statements of Income.
The following tables summarize FHN’s derivatives associated with fixed incomeFHNF's trading activities as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
  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, 2021
(Dollars in millions)NotionalAssetsLiabilities
Customer interest rate contracts$3,877 $111 $60 
Offsetting upstream interest rate contracts3,877 6 13 
Option contracts purchased3 0 0 
Forwards and futures purchased15,777 12 108 
Forwards and futures sold16,495 119 8 
 
 December 31, 2020
(Dollars in millions)NotionalAssetsLiabilities
Customer interest rate contracts$3,950 $207 $7 
Offsetting upstream interest rate contracts3,950 2 17 
Forwards and futures purchased10,795 62 0 
Forwards and futures sold11,633 1 65 
  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 customersclients 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 hashad designated a derivative transaction in a hedging strategy to manage interest rate risk on $400.0$500 million of senior debt issued by FTBNA which maturesprior to its maturity in December 2019.2020. This qualifiestransaction 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 hedgeearly redeemed the interest rate risk of the senior debt. The balance sheet impact of this swap was $.2$500 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.
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 DecemberNovember 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

FIRST HORIZON CORPORATION431Q21 FORM 10-Q REPORT



Note 1415 – Derivatives (Continued)

The following tables summarize FHN’s derivatives associated with interest rate risk management activities as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
 March 31, 2021
(Dollars in millions)NotionalAssetsLiabilities
Customer Interest Rate Contracts Hedging 
Hedging Instruments and Hedged Items: 
Customer interest rate contracts$7,057 $255 $30 
Offsetting upstream interest rate contracts7,057 4 24 
  September 30, 2017  
(Dollars in thousands) 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
  
Debt Hedging        
Hedging Instruments:        
Interest Rate Swaps $900,000
  N/A
 $779
  
Hedged Items:        
Term Borrowings N/A
 N/A
 $900,000
 (a) 

 December 31, 2020
(Dollars in millions)NotionalAssetsLiabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items: 
Customer interest rate contracts$6,868 $436 $1 
Offsetting upstream interest rate contracts6,868 5 35 

  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/gains (losses) on FHN’s derivatives associated with interest rate risk management activities for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
Three Months Ended
March 31,
20212020
(Dollars in millions)Gains (Losses)Gains (Losses)
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts (a)$214 $196 
Offsetting upstream interest rate contracts (a)(214)(196)
Debt Hedging
Hedging Instruments:
Interest rate swaps (b)$0 $5 
Hedged Items:
Term borrowings (a) (c)0 (4)
(a)Gains (losses) included in Other expense within the Consolidated Statements of Income.
(b)Gains (losses) included in 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.

Cash Flow Hedges
  Three Months Ended
September 30		 Nine Months Ended
September 30
  2017 2016 2017 2016
(Dollars in thousands) Gains/(Losses) Gains/(Losses) Gains/(Losses) Gains/(Losses)
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)
Debt Hedging        
Hedging Instruments:        
Interest Rate Swaps (a) $(966) $(7,254) $(1,958) $19,352
Hedged Items:        
Term Borrowings (a) (b) 941
 7,152
 1,870
 (19,059)
(a)Gains/losses included in the All other expense section of the Consolidated Condensed Statements of Income.
(b)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)

In first quarter 2016,Prior to 2021, FHN entered into ahad pay floating, receive fixed interest rate swap in a hedging strategyswaps designed to manage its exposure to the variability in cash flows related to the interest payments for the following five years on $250 million principal of debt instruments, which primarily consistconsisted of held-to-maturity trust preferred loans thatloans. In conjunction with the IBKC merger, FHN acquired interest rate contracts (floors and collars) which have variable interest payments based on 3-month LIBOR. In first quarter 2017, FHN initiatedbeen re-designated as cash flow hedges of $650 million notional amount that have durations between three and seven years.hedges. The debt
instruments primarily consist of held-to-maturity commercial loans that have variable interest payments based on 1-month LIBOR. These qualify for hedge accounting as
In a cash flow hedges under ASC 815-20. Changes inhedge, the fair value of these derivatives are recorded as a component of AOCI, to the extent that the hedging relationships are effective. Amounts are reclassified from AOCI to earnings as the hedged cash flows affect earnings. FTB measures the ineffectiveness using the Hypothetical Derivative Method. AOCI is adjusted to an amount that reflects the lesser of either the cumulative change in fair value of the swaps or the cumulativeentire change in the fair value of the hypothetical derivative instruments. To the extent that any ineffectiveness existsinterest rate swap included in the assessment of hedge relationships, the amounts areeffectiveness is initially recorded in OCI and is subsequently reclassified from OCI to current period earnings. Interest paidearnings (interest income or received for these swaps is recognized as an adjustment to interest incomeexpense) in the same period that the hedged item affects earnings.


FIRST HORIZON CORPORATION441Q21 FORM 10-Q REPORT

Note 15 – Derivatives (Continued)
The following tables summarize FHN’s derivative activities associated with cash flow hedges as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 March 31, 2021
(Dollars in millions)NotionalAssetsLiabilities
Cash Flow Hedges 
Hedging Instruments: 
Interest rate contracts$1,250 $27 $0 
Hedged Items:
Variability in cash flows related to debt instruments (primarily loans)N/A$1,250 N/A
 
  September 30, 2017
(Dollars in thousands) Notional Assets Liabilities
Cash Flow Hedges 
      
Hedging Instruments: 
      
Interest Rate Swaps $900,000
  N/A
 $916
Hedged Items:      
Variability in Cash Flows Related to Debt Instruments (Primarily Loans) N/A
 $900,000
 N/A
December 31, 2020
 December 31, 2016
(Dollars in thousands) Notional Assets Liabilities
(Dollars in millions)(Dollars in millions)NotionalAssetsLiabilities
Cash Flow Hedges      Cash Flow Hedges
Hedging Instruments:
      
Hedging Instruments:
Interest Rate Swaps $250,000
 N/A
 $2,045
Interest rate contractsInterest rate contracts$1,250 $32 $0 
Hedged Items:      Hedged Items:
Variability in Cash Flows Related to Debt Instruments (Primarily Loans) N/A
 $250,000
 N/A
Variability in cash flows related to debt instruments (primarily loans)Variability in cash flows related to debt instruments (primarily loans)N/A$1,250 N/A
The following table summarizes gains/gains (losses) on FHN’s derivatives associated with cash flow hedges for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
Three Months Ended
March 31,
20212020
(Dollars in millions)Gains (Losses)Gains (Losses)
Cash Flow Hedges
Hedging Instruments:
Interest rate contracts (a)$8 $17 
       Gain (loss) recognized in Other comprehensive income (loss)(3)13 
       Gain (loss) reclassified from AOCI into Interest income1 0 
(a)Approximately $25 million of pre-tax gains are expected to be reclassified into earnings in the next twelve months.


Other Derivatives

As part of the IBKC merger, FHN acquired mortgage banking operations that include the origination and sale of loans into the secondary market. As part of the origination of loans, FHN enters into interest rate lock commitments with borrowers. Additionally, FHN enters into forward sales contracts with buyers for delivery of loans at a future date.

Both of these contracts qualify as freestanding derivatives and are recognized at fair value through earnings. The notional and fair values of these contracts are presented in the table below. Balances and activity for periods prior to the IBKC merger were not significant.


March 31, 2021
(Dollars in millions)NotionalAssetsLiabilities
Mortgage Banking Hedges
Option contracts written$702 $9 $1 
Forward contracts purchased878 14 0 

  Three Months Ended
September 30		 Nine Months Ended
September 30
  2017 2016 2017 2016
(Dollars in thousands) Gains/(Losses) Gains/(Losses) Gains/(Losses) Gains/(Losses)
Cash Flow Hedges      
Hedging Instruments:        
Interest Rate Swaps (a) (b) $(1,190) $(2,545) $(800) $5,061
Hedged Items:        
Variability in Cash Flows Related to Debt Instruments (Primarily Loans) N/A
 N/A
 N/A
 N/A
(a)FIRST HORIZON CORPORATIONAmount represents the pre-tax gains/(losses) included within AOCI.451Q21 FORM 10-Q REPORT
(b)Includes approximately $1.2 million of losses expected to be reclassified into earnings in the next twelve months.


Note 1415 – Derivatives (Continued)

Prior to third quarter 2017, FHN hedged held-to-maturity trust preferred loans which had an initial fixed rate term before conversion to a floating rate. FHN had entered into pay fixed, receive floating interest rate swaps to hedge the interest rate risk associated with the initial term. Interest paid or received for these swaps was recognized as an adjustment of the interest income of the assets whose risk was being hedged. Basis adjustments remaining at the end of the hedge term were amortized as an adjustment to interest income over the remaining life of the loans.Gains or losses were included in Other income and commissions on the Consolidated Condensed Statements of Income. These hedges expired in third quarter 2017.
December 31, 2020
(Dollars in millions)NotionalAssetsLiabilities
Mortgage Banking Hedges
Option contracts written$667 $20 $0 
Forward contracts purchased725 0 6 
The following table summarizes FHN’s derivative activitiesgains (losses) on FHN's derivatives associated with held-to-maturity trust preferred loans as of Decembermortgage banking activities for the three month period ended March 31, 2016:2021.
  December 31, 2016
(Dollars in thousands) Notional Assets   Liabilities
Loan Portfolio Hedging        
Hedging Instruments: 
        
Interest Rate Swaps $6,500
 N/A
   $208
Hedged Items: 
        
Trust Preferred Loans (a) N/A
 $6,500
 (b)  N/A
(a)Assets included in the Loans, net of unearned income section of the Consolidated Condensed Statements of Condition.
Three Months Ended
March 31,
(b)Represents principal balance being hedged.
The following table summarizes gains/(losses) on FHN’s derivatives associated with held-to-maturity trust preferred loans for the three and nine months ended September 30, 2016:
  September 30, 2016
  Three Months Ended Nine Months Ended
(Dollars in thousands) Gains/(Losses) Gains/(Losses)
Loan Portfolio Hedging    
Hedging Instruments:    
Interest Rate Swaps $93
 $201
Hedged Items:    
Trust Preferred Loans (a) $(92) $(199)
2021
(a)(Dollars in millions)Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.Gains (Losses)
Mortgage Banking Hedges
Option contracts written$(11)
Forward contracts purchased23
Other Derivatives
In conjunction with the sales of a portionsale of its Visa Class B shares, FHN and the purchaser entered into derivative transactions whereby FHN will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the derivative liabilities associated with the sales of Visa Class B shares were $5.5$20 million and $6.2$13 million, respectively. See Note 17 - Fair Value of Assets & Liabilities for discussion of the Visa Matters section of Note 10 – Contingenciesvaluation inputs and Other Disclosuresprocesses for more information regarding FHN’s Visa shares.these Visa-related derivatives.
FHN utilizes cross currency swaps and cross currency interest rate swaps to economically hedge its exposure to foreign currency risk and interest rate risk associated with non-U.S. dollar denominated loans. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, these loans were valued at $1.3$10 million and $3.8$12 million, respectively. The balance sheet amount and the gains/losses associated with these derivatives were not significant.
Related to its loan participation/syndication activities, FHN enters into risk participation agreements, under which it assumes exposure for, or receives indemnification for, borrowers’ performance on underlying interest rate derivative contracts. As of March 31, 2021 and December 31, 2020, the notional values of FHN’s risk participations were $237 million and $233 million of derivative assets and $501 million and $464 million of derivative liabilities, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at March 31, 2021 and December 31, 2020, the exposure from these agreements would not be material based on the fair value of the underlying swaps.
In conjunction with the IBKC merger, FHN obtained certain certificates of deposit with the rate of return based on an equity index which is considered an embedded derivative as a written option that must be separately recognized. The risks of the written option are offset by purchasing an option with terms that mirror the written option, which is also carried at fair value on the Company’s Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, FHN had recognized $2 million and $1 million, respectively, of both assets and liabilities associated with these contracts.

Master Netting and Similar Agreements
As previously discussed, FHN uses master netting agreements, mutual margining agreements and collateral posting requirements to minimize credit risk on derivative contracts. Master netting and similar agreements are used when counterparties have multiple derivatives contracts that allow for a “right of setoff,” meaning that a counterparty may net offsetting positions and collateral with the same counterparty under the contract to determine a net receivable or payable. The

Note 14 – Derivatives (Continued)

following discussion provides an overview of these arrangements which may vary due to the derivative type and market in which a derivative transaction is executed.

Interest rate derivatives are subject to agreements consistent with standard agreement forms of the International Swap and Derivatives Association (“ISDA”).ISDA. Currently, all interest rate derivative contracts are entered into as over-the-counter transactions and collateral posting requirements are based on the net asset or liability position with each respective counterparty. For contracts that require central clearing, novation to a counterparty with access to a clearinghouse occurs and initial margin is posted.
FIRST HORIZON CORPORATION461Q21 FORM 10-Q REPORT

Note 15 – Derivatives (Continued)
Cash margin received (posted) that is considered settlements for the derivative contracts is included in the respective derivative asset (liability) value. Cash margin that is considered collateral received (posted) for interest rate derivatives is recognized as a liability (asset) on FHN’s Consolidated Condensed Statements of Condition.Balance Sheets.
Interest rate derivatives with customersclients that are smaller financial institutions typically require posting of collateral by the counterparty to FHN. This collateral is subject to a threshold with daily adjustments based upon changes in the level or fair value of the derivative position. Positions and related collateral can be netted in the event of default. Collateral pledged by a counterparty is typically cash or securities. The securities pledged as collateral are not recognized within FHN’s Consolidated Condensed Statements of Condition.Balance Sheets. Interest rate derivatives associated with lending arrangements share the collateral with the related loan(s). The derivative and loan positions may be netted in the event of default. For disclosure purposes, the entire collateral amount is allocated to the loan.
Interest rate derivatives with larger financial institutions entered into prior to required central clearing typically contain provisions whereby the collateral posting thresholds under the agreements adjust based on the credit ratings of both counterparties. If the credit rating of FHN and/or FTBNAFirst Horizon Bank is lowered, FHN could be required to post additional collateral with the counterparties. Conversely, if the credit rating of FHN and/or FTBNAFirst Horizon Bank is increased, FHN could have collateral released and be required to post less collateral in the future. Also, if a counterparty’s credit ratings were to decrease, FHN and/or FTBNAFirst Horizon Bank could require the posting of additional collateral; whereas if a counterparty’s credit ratings were to increase, the counterparty could require the release of excess collateral. Collateral for these arrangements is adjusted daily based on changes in the net fair value position with each counterparty.
The net fair value, determined by individual counterparty, of all derivative instruments with adjustable collateral posting thresholds was $27.4$85 million of assets and $34.6$33 million of liabilities on September 30, 2017,March 31, 2021, and $35.9$200 million of assets and $49.0 $5
million of liabilities on December 31, 2016.2020. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, FHN had received collateral of $113.6$248 million and $137.6$320 million and posted collateral of $26.2$5 million and $39.3$34 million, respectively, in the normal course of business related to these agreements.
Certain agreements entered into prior to required central clearing also contain accelerated termination provisions, inclusive of the right of offset, if a counterparty’s credit rating falls below a specified level. If a counterparty’s debt rating (including FHN’s and FTBNA’s)First Horizon Bank’s) were to fall below these minimums, these provisions would be triggered, and the counterparties could terminate the agreements and require immediate settlement of all derivative contracts under the agreements. The net fair value, determined by individual counterparty, of all interest rate derivative instruments with credit-risk-related contingent accelerated termination provisions was $27.4$102 million of assets and $14.9$40 million of liabilities on September 30, 2017,March 31, 2021, and $35.9$216 million of assets and $19.6$17 million of liabilities on December 31, 2016.2020. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, FHN had received collateral of $113.6$265 million and $137.5$343 million and posted collateral of $9.0$10 million and $12.9$53 million, respectively, in the normal course of business related to these contracts.
FHN’s fixed income segmentFHNF buys and sells various types of securities for its customers.clients. When these securities settle on a delayed basis, they are considered forward contracts, and are generally not subject to master netting agreements. For futures and options, FHN transacts through a third party, and the transactions are subject to margin and collateral maintenance requirements. In the event of default, open positions can be offset along with the associated collateral.
For this disclosure, FHN considers the impact of master netting and other similar agreements which allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net derivative asset or liability position with the related securities and cash collateral. The application of the collateral cannot reduce the net derivative asset or liability position below zero, and therefore any excess collateral is not reflected in the following tables.
FIRST HORIZON CORPORATION471Q21 FORM 10-Q REPORT

Note 15 – Derivatives (Continued)
The following table provides details of derivative assets and collateral received as presented on the Consolidated Condensed Statements of ConditionBalance Sheets as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 

    Gross amounts not offset in the Balance Sheets 
(Dollars in millions)Gross amounts
of recognized
assets		Gross amounts
offset in the
Balance Sheets		Net amounts of
assets presented
in the Balance Sheets (a)		Derivative
liabilities
available for
offset		Collateral
received		Net amount
Derivative assets:
March 31, 2021
Interest rate derivative contracts$412 $0 $412 $(42)$(232)$138 
Forward contracts131 0 131 (33)(5)93 
$543 $0 $543 $(75)$(237)$231 
December 31, 2020
Interest rate derivative contracts$702 $0 $702 $(7)$(327)$368 
Forward contracts63 0 63 (14)(20)29 
$765 $0 $765 $(21)$(347)$397 
Note 14 – Derivatives (Continued)(a)Included in Other assets on the Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, $16 million and $4 million, respectively, of derivative assets have been excluded from these tables because they are generally not subject to master netting or similar agreements.

        
Gross amounts not offset in the
Statements of Condition
  
(Dollars in thousands) 
Gross amounts
of recognized
assets
 
Gross amounts
offset in the
Statements of
Condition
 
Net amounts of
assets presented
in the Statements
of Condition (a)
 
Derivative
liabilities
available for
offset
 
Collateral
Received
 Net amount
Derivative assets:            
September 30, 2017 (b) $70,902
 $—
 $70,902
 $(23,283) $(43,379) $4,240
December 31, 2016 (b) 87,962
 —
 87,962
 (25,953) (52,888) 9,121
(a)Included in Derivative assets on the Consolidated Condensed Statements of Condition. As of September 30, 2017 and December 31, 2016, $10.1 million and $33.7 million, respectively, of derivative assets (primarily fixed income forward contracts) have been excluded from these tables because they are generally not subject to master netting or similar agreements.
(b)Amounts are comprised entirely of interest rate derivative contracts.
The following table provides details of derivative liabilities and collateral pledged as presented on the Consolidated Condensed Statements of ConditionBalance Sheets as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
    Gross amounts not offset
 in the Balance Sheets		 
(Dollars in millions)Gross amounts
of recognized
liabilities		Gross amounts
offset in the
Balance Sheets		Net amounts of
liabilities presented
in the Balance Sheets (a)		Derivative
assets 
available for
offset		Collateral
pledged		Net amount
Derivative liabilities:
March 31, 2021
Interest rate derivative contracts$128 $0 $128 $(42)$(12)$74 
Forward contracts115 0 115 (33)(34)48 
$243 $0 $243 $(75)$(46)$122 
December 31, 2020
Interest rate derivative contracts$60 $0 $60 $(7)$(31)$22 
Forward contracts65 0 65 (14)(51)0 
$125 $0 $125 $(21)$(82)$22 
(a)Included in Other liabilities on the Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, $21 million and $22 million, respectively, of derivative liabilities (primarily Visa-related derivatives) have been excluded from these tables because they are generally not subject to master netting or similar agreements.
        
Gross amounts not offset in the
Statements of Condition
  
(Dollars in thousands) 
Gross amounts
of recognized
liabilities
 
Gross amounts
offset in the
Statements of
Condition
 
Net amounts of
liabilities presented
in the Statements
of Condition (a)
 
Derivative
assets available
for offset
 
Collateral
pledged
 Net amount
Derivative liabilities:            
September 30, 2017 (b) $69,988
 $—
 $69,988
 $(23,283) $(42,686) $4,019
December 31, 2016 (b) 96,363
 —
 96,363
 (25,953) (60,746) 9,664
(a)FIRST HORIZON CORPORATIONIncluded in Derivative liabilities on the Consolidated Condensed Statements of Condition. As of September 30, 2017 and December 31, 2016, $13.2 million and $39.5 million, respectively, of derivative liabilities (primarily fixed income forward contracts) have been excluded from these tables because they are generally not subject to master netting or similar agreements.481Q21 FORM 10-Q REPORT
(b)Amounts are comprised entirely of interest rate derivative contracts.



Note 1516 – Master Netting and Similar Agreements—Repurchase, Reverse Repurchase, and Securities Borrowing Transactions
For repurchase, reverse repurchase and securities borrowing transactions, FHN and each counterparty have the ability to offset all open positions and related collateral in the event of default. Due to the nature of these transactions, the value of the collateral for each transaction approximates the value of the corresponding receivable or payable. For repurchase agreements through FHN’s fixed income business (Securities(securities purchased under agreements to resell and Securitiessecurities sold under agreements to repurchase), transactions are collateralized by securities and/or government guaranteed loans which are delivered on the settlement date and are maintained throughout the term of the transaction. For FHN’s repurchase agreements through banking activities (Securities(securities sold under agreements to repurchase), securities are typically pledged at settlement and not released until maturity. For asset positions, the collateral is not included on FHN’s Consolidated Condensed Statements of Condition.Balance Sheets. For
liability positions, securities collateral pledged by FHN is generally represented within FHN’s trading or available-for-sale securities portfolios.
For this disclosure, FHN considers the impact of master netting and other similar agreements that allow FHN to settle all contracts with a single counterparty on a net basis and to offset the net asset or liability position with the related securities collateral. The application of the collateral cannot reduce the net asset or liability position below zero, and therefore any excess collateral is not reflected in the tables below.
Securities purchased under agreements to resell is included in Federal funds sold and securities purchased under agreements to resell in the Consolidated Balance Sheets. Securities sold under agreements to repurchase is included in Short-term borrowings.
The following table provides details of Securitiessecurities purchased under agreements to resell as presented on the Consolidated Condensed Statements of Condition and collateral pledged by counterparties as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
        
Gross amounts not offset in the
Statements of Condition
  
(Dollars in thousands) 
Gross amounts
of recognized
assets
 
Gross amounts
offset in the
Statements of
Condition
 
Net amounts of
assets presented
in the Statements
of Condition
 
Offsetting
securities sold
under agreements
to repurchase
 
Securities collateral
(not recognized on
FHN’s Statements
of Condition)
 Net amount
Securities purchased under agreements to resell:            
September 30, 2017 $663,637
 $—
 $663,637
 $(1,044) $(655,136) $7,457
December 31, 2016 613,682
 —
 613,682
 (1,628) (603,813) 8,241
    Gross amounts not offset in the
Balance Sheets		 
(Dollars in millions)Gross amounts
of recognized
assets		Gross amounts
offset in the
Balance Sheets		Net amounts of
assets presented
in the Balance Sheets		Offsetting
securities sold
under agreements
to repurchase		Securities collateral
(not recognized on
FHN’s Balance Sheets)		Net amount
Securities purchased under agreements to resell:
March 31, 2021$463 $0 $463 $0 $(461)$2 
December 31, 2020380 0 380 0 (379)1 
The following table provides details of Securitiessecurities sold under agreements to repurchase as presented on the Consolidated Condensed Statements of Condition and collateral pledged by FHN as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
        
Gross amounts not offset in the
Statements of Condition
  
(Dollars in thousands) 
Gross amounts
of recognized
liabilities
 
Gross amounts
offset in the
Statements of
Condition
 
Net amounts of
liabilities presented
in the Statements
of Condition
 
Offsetting
securities
purchased under
agreements to resell
 
Securities/
government
guaranteed loans
collateral
 Net amount
Securities sold under agreements to repurchase:            
September 30, 2017 $516,867
 $—
 $516,867
 $(1,044) $(515,673) $150
December 31, 2016 453,053
 —
 453,053
 (1,628) (451,414) 11






Note 15 – Master Netting and Similar Agreements—Repurchase, Reverse Repurchase, and Securities Borrowing Transactions (Continued)

    Gross amounts not offset in the
Balance Sheets		 
(Dollars in millions)Gross amounts
of recognized
liabilities		Gross amounts
offset in the
Balance Sheets		Net amounts of
liabilities presented
in the Balance Sheets		Offsetting
securities
purchased under
agreements to resell		Securities/
government
guaranteed loans
collateral		Net amount
Securities sold under agreements to repurchase:
March 31, 2021$1,098 $0 $1,098 $0 $(1,098)$0 
December 31, 20201,187 0 1,187 0 (1,187)0 
Due to the short duration of Securitiessecurities sold under agreements to repurchase and the nature of collateral involved, the risks associated with these transactions are considered minimal.
FIRST HORIZON CORPORATION491Q21 FORM 10-Q REPORT

Note 16 – Master Netting and Similar Agreements—Repurchase, Reverse Repurchase, and Securities Borrowing Transactions (Continued)
The following tables provide details, by collateral type, of the remaining contractual maturity of Securitiessecurities sold under agreements to repurchase as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 
 March 31, 2021
(Dollars in millions)Overnight and
Continuous		Up to 30 DaysTotal
Securities sold under agreements to repurchase:
U.S. treasuries$294 $0 $294 
Government agency issued MBS584 0 584 
Government agency issued CMO13 0 13 
Other U.S. government agencies82 0 82 
Government guaranteed loans (SBA and USDA)125 0 125 
Total securities sold under agreements to repurchase$1,098 $0 $1,098 
December 31, 2020
(Dollars in millions)Overnight and
Continuous		Up to 30 DaysTotal
Securities sold under agreements to repurchase:
U.S. treasuries$284 $0 $284 
Government agency issued MBS616 0 616 
Government agency issued CMO10 0 10 
Other U.S. government agencies151 0 151 
Government guaranteed loans (SBA and USDA)126 0 126 
Total securities sold under agreements to repurchase$1,187 $0 $1,187 
  September 30, 2017
(Dollars in thousands) 
Overnight and
Continuous
 Up to 30 Days Total
Securities sold under agreements to repurchase:      
U.S. treasuries $18,970
 $—
 $18,970
Government agency issued MBS 276,903
 5,521
 282,424
Government agency issued CMO 50,554
 5,749
 56,303
Government guaranteed loans (SBA and USDA) 159,170
 —
 159,170
Total Securities sold under agreements to repurchase $505,597
 $11,270
 $516,867
       
  December 31, 2016
(Dollars in thousands) 
Overnight and
Continuous
 Up to 30 Days Total
Securities sold under agreements to repurchase:      
U.S. treasuries $14,864
 $—
 $14,864
Government agency issued MBS 421,771
 —
 421,771
Government agency issued CMO —
 16,418
 16,418
Total Securities sold under agreements to repurchase $436,635
 $16,418
 $453,053


FIRST HORIZON CORPORATION501Q21 FORM 10-Q REPORT

Note 1617 – Fair Value of Assets &and Liabilities
FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:
 
•Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets.

•Level 2—Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3—Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.
Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.


















62























FIRST HORIZON CORPORATION511Q21 FORM 10-Q REPORT

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

Recurring Fair Value Measurements
The following table presentstables present the balancebalances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2017:March 31, 2021 and December 31, 2020:
 March 31, 2021
(Dollars in millions)Level 1Level 2Level 3Total
Trading securities:
U.S. treasuries$0 $51 $0 $51 
Government agency issued MBS0 384 0 384 
Government agency issued CMO0 190 0 190 
Other U.S. government agencies0 237 0 237 
States and municipalities0 10 0 10 
Corporate and other debt0 204 0 204 
Total trading securities0 1,076 0 1,076 
Loans held for sale (elected fair value)0 437 12 449 
Loans held for investment (elected fair value)0 0 17 17 
Securities available for sale:
U.S. treasuries0 610 0 610 
Government agency issued MBS0 4,038 0 4,038 
Government agency issued CMO0 2,441 0 2,441 
Other U.S. government agencies0 725 0 725 
States and municipalities0 475 0 475 
Corporate and other debt0 40 0 40 
Interest-only strips (elected fair value)0 0 22 22 
Total securities available for sale0 8,329 22 8,351 
Other assets:
Deferred compensation mutual funds122 0 0 122 
Equity, mutual funds, and other25 0 0 25 
Derivatives, forwards and futures145 0 0 145 
Derivatives, interest rate contracts0 414 0 414 
Derivatives, other0 2 0 2 
Total other assets292 416 0 708 
Total assets$292 $10,258 $51 $10,601 
Trading liabilities:
U.S. treasuries$0 $361 $0 $361 
Other U.S.government agencies0 20 0 20 
Government agency issued MBS0 8 0 8 
Corporate and other debt0 65 0 65 
Total trading liabilities0 454 0 454 
Other liabilities:
Derivatives, forwards and futures116 0 0 116 
Derivatives, interest rate contracts0 128 0 128 
Derivatives, other0 2 21 23 
Total other liabilities116 130 21 267 
Total liabilities$116 $584 $21 $721 

  September 30, 2017
(Dollars in thousands) Level 1 Level 2 Level 3 Total
Trading securities—fixed income:        
U.S. treasuries $—
 $157,483
 $—
 $157,483
Government agency issued MBS —
 155,260
 —
 155,260
Government agency issued CMO —
 244,321
 —
 244,321
Other U.S. government agencies —
 186,573
 —
 186,573
States and municipalities —
 61,290
 —
 61,290
Corporate and other debt —
 655,976
 5
 655,981
Equity, mutual funds, and other —
 6,194
 —
 6,194
Total trading securities—fixed income —
 1,467,097
 5
 1,467,102
Trading securities—mortgage banking —
 —
 2,300
 2,300
Loans held-for-sale —
 1,727
 20,081
 21,808
Securities available-for-sale:        
U.S. treasuries —
 100
 —
 100
Government agency issued MBS —
 2,087,505
 —
 2,087,505
Government agency issued CMO —
 1,685,995
 —
 1,685,995
Interest-only strips —
 —
 3,123
 3,123
Equity, mutual funds, and other 24,756
 —
 —
 24,756
Total securities available-for-sale 24,756
 3,773,600
 3,123
 3,801,479
Other assets:        
Deferred compensation assets 34,951
 —
 —
 34,951
Derivatives, forwards and futures 10,003
 —
 —
 10,003
Derivatives, interest rate contracts —
 70,971
 —
 70,971
Derivatives, other —
 2
 —
 2
Total other assets 44,954
 70,973
 —
 115,927
Total assets $69,710
 $5,313,397
 $25,509
 $5,408,616
Trading liabilities—fixed income:        
U.S. treasuries $—
 $424,461
 $—
 $424,461
Government agency issued CMO —
 1,372
 —
 1,372
Other U.S. government agencies —
 998
 —
 998
Corporate and other debt —
 152,197
 —
 152,197
Total trading liabilities—fixed income —
 579,028
 —
 579,028
Other liabilities:        
Derivatives, forwards and futures 7,627
 —
 —
 7,627
Derivatives, interest rate contracts —
 69,988
 —
 69,988
Derivatives, other —
 1
 5,530
 5,531
Total other liabilities 7,627
 69,989
 5,530
 83,146
Total liabilities $7,627
 $649,017
 $5,530
 $662,174




63
FIRST HORIZON CORPORATION521Q21 FORM 10-Q REPORT

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

 December 31, 2020
(Dollars in millions)Level 1Level 2Level 3Total
Trading securities:
U.S. treasuries$0 $81 $0 $81 
Government agency issued MBS0 633 0 633 
Government agency issued CMO0 212 0 212 
Other U.S. government agencies0 62 0 62 
States and municipalities0 7 0 7 
Corporate and other debt0 181 0 181 
Total trading securities0 1,176 0 1,176 
Loans held for sale (elected fair value)0 393 12 405 
Loans held for investment (elected fair value)0 0 16 16 
Securities available for sale:
U.S. treasuries0 613 0 613 
Government agency issued MBS0 3,812 0 3,812 
Government agency issued CMO0 2,406 0 2,406 
Other U.S. government agencies0 684 0 684 
States and municipalities0 460 0 460 
Corporate and other debt0 40 0 40 
Interest-only strips (elected fair value)0 0 32 32 
Total securities available for sale0 8,015 32 8,047 
Other assets:
Deferred compensation mutual funds118 0 0 118 
Equity, mutual funds, and other25 0 0 25 
Derivatives, forwards and futures63 0 0 63 
Derivatives, interest rate contracts0 702 0 702 
Derivatives, other0 4 0 4 
Total other assets206 706 0 912 
Total assets$206 $10,290 $60 $10,556 
Trading liabilities:
U.S. treasuries$0 $307 $0 $307 
Government agency issued MBS0 3 0 3 
Corporates and other debt0 43 0 43 
Total trading liabilities0 353 0 353 
Other liabilities:
Derivatives, forwards and futures71 0 0 71 
Derivatives, interest rate contracts0 60 0 60 
Derivatives, other0 4 14 18 
Total other liabilities71 64 14 149 
Total liabilities$71 $417 $14 $502 
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:



  December 31, 2016
(Dollars in thousands) Level 1 Level 2 Level 3 Total
Trading securities—fixed income:        
U.S. treasuries $—
 $146,988
 $—
 $146,988
Government agency issued MBS —
 256,611
 —
 256,611
Government agency issued CMO —
 150,058
 —
 150,058
Other U.S. government agencies —
 52,314
 —
 52,314
States and municipalities —
 60,351
 —
 60,351
Corporate and other debt —
 227,934
 5
 227,939
Equity, mutual funds, and other —
 242
 —
 242
Total trading securities—fixed income —
 894,498
 5
 894,503
Trading securities—mortgage banking —
 —
 2,568
 2,568
Loans held-for-sale —
 2,345
 21,924
 24,269
Securities available-for-sale:        
U.S. treasuries —
 100
 —
 100
Government agency issued MBS —
 2,208,687
 —
 2,208,687
Government agency issued CMO —
 1,547,958
 —
 1,547,958
Equity, mutual funds, and other 25,249
 —
 —
 25,249
Total securities available-for-sale 25,249
 3,756,745
 —
 3,781,994
Other assets:        
Mortgage servicing rights —
 —
 985
 985
Deferred compensation assets 32,840
 —
 —
 32,840
Derivatives, forwards and futures 33,587
 —
 —
 33,587
Derivatives, interest rate contracts —
 88,025
 —
 88,025
Derivatives, other —
 42
 —
 42
Total other assets 66,427
 88,067
 985
 155,479
Total assets $91,676
 $4,741,655
 $25,482
 $4,858,813
Trading liabilities—fixed income:        
U.S. treasuries $—
 $381,229
 $—
 $381,229
Other U.S. government agencies —
 844
 —
 844
Corporate and other debt —
 179,775
 —
 179,775
Total trading liabilities—fixed income —
 561,848
 —
 561,848
Other liabilities:        
Derivatives, forwards and futures 33,274
 —
 —
 33,274
Derivatives, interest rate contracts —
 96,371
 —
 96,371
Derivatives, other —
 7
 6,245
 6,252
Total other liabilities 33,274
 96,378
 6,245
 135,897
Total liabilities $33,274
 $658,226
 $6,245
 $697,745





64
FIRST HORIZON CORPORATION531Q21 FORM 10-Q REPORT

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

Changes in Recurring Level 3 Fair Value Measurements
The changes in Level 3 assets and liabilities measured at fair value for the three months ended September 30, 2017March 31, 2021 and 2016,2020 on a recurring basis are summarized as follows:
  Three Months Ended September 30, 2017  
(Dollars in thousands) 
Trading
securities
   Interest- only strips- AFS   
Loans held-
for-sale
   
Net  derivative
liabilities
  
Balance on July 1, 2017 $2,464
   $1,163
   $20,587
   $(5,700)  
Total net gains/(losses) included in:                
Net income 92
   (160)   390
   (129)  
Purchases —
   —
   43
   —
  
Settlements (251)   —
   (939)   299
  
Net transfers into/(out of) Level 3 —
   2,120
 (b) —
 (d) —
  
Balance on September 30, 2017 $2,305
   $3,123
   $20,081
   $(5,530)  
Net unrealized gains/(losses) included in net income $62
 (a) $(72) (c) $390
 (a) $(129) (e) 
 Three Months Ended March 31, 2021 
(Dollars in millions)Interest- only strips- AFSLoans held
for sale		Loans held for investmentNet  derivative
liabilities
Balance on January 1, 2021$32 $12 $16 $(14)
Total net gains (losses) included in net income5 1 0 (9)
Purchases0 0 0 0 
Sales(27)0 0 0 
Settlements0 (1)(2)2 
Net transfers into (out of) Level 312 (b)0 3 0 
Balance on March 31, 2021$22 $12 $17 $(21)
Net unrealized gains (losses) included in net income$2 (c)$1 (a)$0 $(9)(d)
 
 Three Months Ended March 31, 2020 
(Dollars in millions)Trading
securities		Interest-only-strips-AFSLoans held for saleNet  derivative
liabilities
Balance on January 1, 2020$1 $19  $14 $(23)
Total net gains (losses) included in net income0 (1) 0 0 
Purchases0 5 0 0 
Sales0 (8)0 0 
Settlements0 0 (1)2 
Net transfers into (out of) Level 30 8 (b)0 0 
Balance on March 31, 2020$1 $23  $13 $(21)
Net unrealized gains (losses) included in net income$0 (a)$(1)(c)$0 (a)$0 (d)
(a)Primarily included in mortgage banking and title income on the Consolidated Statements of Income.
(b)Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held for sale (Level 2 nonrecurring).
(c)Primarily included in Fixed income on the Consolidated Statements of Income.
(d)Included in Other expense.

There were 0 net unrealized gains (losses) for Level 3 assets and liabilities included in other comprehensive income as of March 31, 2021 and 2020.







  Three Months Ended September 30, 2016  
(Dollars in thousands) 
Trading
securities
   Loans  held-for-sale   
Securities
available-
for-sale
   
Mortgage
servicing
rights, net
  
Net  derivative
liabilities
  
Balance on July 1, 2016 $2,826
   $25,738
   $1,500
   $1,406
  $(6,835)  
Total net gains/(losses) included in:                   
Net income 304
   1,604
   —
   —
  (4)  
Purchases —
   198
   —
   —
  —
  
Settlements (346)   (2,146)   (1,500)   (160)  299
  
Net transfers into/(out of) Level 3 —
   (2,858) (d)  —
   —
  —
  
Balance on September 30, 2016 $2,784
   $22,536
   $—
   $1,246
  $(6,540)  
Net unrealized gains/(losses) included in net income $244
 (a)  $1,604
 (a)  $—
   $—
  $(4) (e) 
(a)FIRST HORIZON CORPORATIONPrimarily included in mortgage banking income on the Consolidated Condensed Statements of Income.541Q21 FORM 10-Q REPORT
(b)Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).
(c)Primarily included in fixed income on the Consolidated Condensed Statements of Income.
(d)Transfers out of loans held-for-sale level 3 measured on a recurring basis generally reflect movements into OREO (level 3 nonrecurring).
(e)Included in Other expense.







65

Note 1617 – Fair Value of Assets &and Liabilities (Continued)


Changes in Recurring Level 3 Fair Value Measurements
The changes in Level 3 assets and liabilities measured at fair value for the nine months ended September 30, 2017 and 2016, on a recurring basis are summarized as follows:
  Nine Months Ended September 30, 2017  
(Dollars in thousands) 
Trading
securities
   Interest-only strips- AFS  
Loans held-
for-sale
   
Net  derivative
liabilities
  
Balance on January 1, 2017 $2,573
   $—
  $21,924
   $(6,245)  
Total net gains/(losses) included in:     
         
Net income 380
   107
  1,722
   (179)  
Purchases —
   1,413
  118
   —
  
Sales —
   (3,291)  —
   —
  
Settlements (648)   —
  (3,340)   894
  
Net transfers into/(out of) Level 3 —
   4,894
 (b)(343) (d)  —
  
Balance on September 30, 2017 $2,305
   $3,123
  $20,081
   $(5,530)  
Net unrealized gains/(losses) included in net income $264
 (a) $(122) (c)$1,722
 (a) $(179) (e) 
  Nine Months Ended September 30, 2016  
(Dollars in thousands) 
Trading
securities
   Loans  held-for-sale   
Securities
available-
for-sale
  
Mortgage
servicing
rights, net
  
Net  derivative
liabilities
  
Balance on January 1, 2016 $4,377
   $27,418
   $1,500
  $1,841
  $(4,810)  
Total net gains/(losses) included in:                  
Net income 506
   2,375
   —
  31
  (2,627)  
Purchases —
   673
   —
  —
  —
  
Sales —
  
—
  
—
  (205)  —
  
Settlements (2,099)   (4,643)   (1,500)  (421)  897
  
Net transfers into/(out of) Level 3 —
   (3,287) (d)  —
  —
  —
  
Balance on September 30, 2016 $2,784
   $22,536
   $—
  $1,246
  $(6,540)  
Net unrealized gains/(losses) included in net income $324
 (a)  $2,375
 (a)  $—
  $—
  $(2,627) (e) 
(a)Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.
(b)Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).
(c)Primarily included in fixed income on the Consolidated Condensed Statements of Income.
(d)Transfers out of loans held-for-sale level 3 measured on a recurring basis generally reflect movements into OREO (level 3 nonrecurring).
(e)Included in Other expense.





66
Table of Contents
Note 16 – Fair Value of Assets & Liabilities (Continued)


Nonrecurring Fair Value Measurements
From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market (“LOCOM”)(LOCOM) accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheetConsolidated Balance Sheets at September 30, 2017,March 31, 2021, and December 31, 2016,2020, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value.
  Carrying value at September 30, 2017
(Dollars in thousands) Level 1 Level 2 Level 3 Total
Loans held-for-sale—SBAs and USDA $—
 $244,089
 $1,484
 $245,573
Loans held-for-sale—first mortgages —
 —
 611
 611
Loans, net of unearned income (a) —
 —
 23,210
 23,210
OREO (b) —
 —
 7,877
 7,877
Other assets (c) —
 —
 27,394
 27,394
 Carrying value at March 31, 2021
(Dollars in millions)Level 1Level 2Level 3Total
Loans held for sale—SBAs and USDA$0 $299 $1 $300 
Loans held for sale—first mortgages0 0 1 1 
Loans and leases (a)0 0 69 69 
OREO (b)0 0 11 11 
Other assets (c)0 0 11 11 
 
 Carrying value at December 31, 2020
(Dollars in millions)Level 1Level 2Level 3Total
Loans held for sale—SBAs and USDA$0 $508 $1 $509 
Loans held for sale—first mortgages0 0 1 1 
Loans and leases (a)0 0 77 77 
OREO (b)0 0 15 15 
Other assets (c)0 0 9 9 
  Carrying value at December 31, 2016
(Dollars in thousands) 
 Level 1 Level 2 Level 3 Total
Loans held-for-sale—SBAs $—
 $4,286
 $—
 $4,286
Loans held-for-sale—first mortgages —
 —
 638
 638
Loans, net of unearned income (a) —
 —
 31,070
 31,070
OREO (b) —
 —
 11,235
 11,235
Other assets (c) —
 —
 29,609
 29,609
(a)Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for credit losses.
(b)Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(a)Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell.
(b)Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(c)Represents tax credit investments accounted for under the equity method.
(c)Represents tax credit investments accounted for under the equity method.
For assets measured on a nonrecurring basis which were still held on the consolidated balance sheetConsolidated Balance Sheets at period end, the following table provides information about the fair value adjustments recorded during the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
Net gains (losses)
Three Months Ended March 31
(Dollars in millions)20212020
Loans held for sale—SBAs and USDA$(1)$(1)
Loans and leases (a)(7)(5)
$(8)$(6)
(a)Write-downs on these loans are recognized as part of provision for credit losses.



















  Net gains/(losses)
Three Months Ended September 30		 Net gains/(losses)
Nine months ended September 30
(Dollars in thousands) 2017 2016 2017 2016
Loans held-for-sale—SBAs and USDA $(86) $—
 $(1,259) $—
Loans held-for-sale—first mortgages 6
 10
 22
 17
Loans, net of unearned income (a) (2,388) 461
 (1,456) (3,249)
OREO (b) (41) (711) (662) (1,561)
Other assets (c) (762) (788) (2,646) (2,325)
  $(3,271) $(1,028) $(6,001) $(7,118)

(a)FIRST HORIZON CORPORATIONWrite-downs on these loans are recognized as part of provision for loan losses.551Q21 FORM 10-Q REPORT
(b)Represents losses of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(c)Represents tax credit investments accounted for under the equity method.


67

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

In third quarter 2017, FHN’s Corporate segment
For the three months ended March 31, 2021, FHN recognized $2.0$33 million of fixed asset impairments and $3 million of impairments on long-lived technologyfor lease assets primarily related to continuing acquisition integration efforts associated with reduction of leased office space and branch optimization. These amounts were primarily recognized in the Corporate segment.

For the three months ended March 31, 2020, FHN recognized an insignificant amount of impairment.

Lease asset impairments recognized represent the reduction in value of the right-of-use assets associated with an expansion of processing capacityleases that will be required upon completionare being exited in advance of the merger with CBF. The fair values of the assets impaired were determinedcontractual lease expiration.
Impairments are measured using a discounted cash flow approachmethodology, which reflected short estimated remaining lives andis considered estimated salvage values. The measurement methodologies are considereda Level 3 valuations. In first quarter 2016, FHN’s Regional Banking segment recognized $3.7 millionvaluation.
Impairments of impairments on long-lived tangible assets reflect locations where the associated with efforts to more efficiently utilize its bank branch locations. The affected branch locations represented a mixture ofland and building are either owned and leased sites.or leased. The fair values of owned sites were determined using estimated sales prices from appraisals and broker opinions less estimated costs to sell.sell with adjustments upon final disposition. The fair values of owned assets in leased sites (e.g., leasehold improvements) were determined using a discounted cash flow approach, based on the revised estimated useful lives of the related assets. Both measurement methodologies are considered Level 3 valuations. Impairment adjustments recognized upon disposition of a location are considered Level 2 valuations.





























FIRST HORIZON CORPORATION561Q21 FORM 10-Q REPORT

Note 17 – Fair Value of Assets and Liabilities (Continued)
Level 3 Measurements

The following tables provide information regarding the unobservable inputs utilized in determining the fair value of levelLevel 3 recurring and non-recurring measurements as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
(Dollars in millions)Values Utilized
Level 3 ClassFair Value at March 31, 2021Valuation TechniquesUnobservable InputRangeWeighted Average (d)
Available for sale securities SBA-interest only strips$22 Discounted cash flowConstant prepayment rate12%12%
Bond equivalent yield10% - 13%11%
Loans held for sale - residential real estate$13 Discounted cash flowPrepayment speeds - First mortgage4% - 13%5%
Foreclosure losses57% - 65%62%
Loss severity trends - First mortgage
9% - 17%
of UPB
12%
Loans held for sale - unguaranteed interest in SBA loans$1 Discounted cash flowConstant prepayment rate8% - 12%10%
Bond equivalent yield8%8%
Loans held for investment$17 Discounted cash flowConstant prepayment rate0% - 46%31%
Constant default rate0% - 15%1%
Loss severity trends0% - 93%7%
Derivative liabilities, other$21 Discounted cash flowVisa covered litigation resolution amount$5.4 billion - $6.0 billion$5.8 billion
Probability of resolution scenarios10% - 50%16%
   Time until resolution12 - 36 months26 months
Loans and leases (a)$69 Appraisals from comparable propertiesMarketability adjustments for specific properties
0% - 10%
of appraisal
NM
Other collateral valuationsBorrowing base certificates adjustment20% - 50% of gross valueNM
   Financial Statements/Auction values adjustment
0% - 25%
of reported value
NM
OREO (b)$11 Appraisals from comparable propertiesAdjustment for value changes since appraisal
0% - 10%
of appraisal
NM
Other assets (c)$11 Discounted cash flowAdjustments to current sales yields for specific properties0% - 15% adjustment to yieldNM
  Appraisals from comparable propertiesMarketability adjustments for specific properties
0% - 25%
of appraisal
NM
NM - Not meaningful
(a)Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for credit losses.
(b)Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(c)Represents tax credit investments accounted for under the equity method.
(d)Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.
(Dollars in thousands)
Level 3 Class Fair Value at
September 30, 2017		 Valuation Techniques Unobservable Input Values Utilized
Available-for-sale- securities SBA-interest only strips $3,123
 Discounted cash flow Constant prepayment rate 9% - 10%
      Bond equivalent yield 14%- 19%
Loans held-for-sale - residential real estate 20,692
 Discounted cash flow Prepayment speeds - First mortgage 2% - 12%
      Prepayment speeds - HELOC 3% - 12%
      Foreclosure losses 50% - 70%
      Loss severity trends - First mortgage 5% - 50% of UPB
      Loss severity trends - HELOC 15% - 100% of UPB
Loans held-for-sale- unguaranteed interest in SBA loans 1,484
 Discounted cash flow Constant prepayment rate 8% - 12%
      Bond equivalent yield 9% - 10%
Derivative liabilities, other 5,530
 Discounted cash flow Visa covered litigation resolution amount $4.4 billion - $5.2 billion
      Probability of resolution scenarios 10% - 30%
      Time until resolution 18 - 48 months
Loans, net of unearned
income (a)
 23,210
 Appraisals from comparable properties Marketability adjustments for specific properties 0% - 10% of appraisal
    Other collateral valuations Borrowing base certificates adjustment 20% - 50% of gross value
      Financial Statements/Auction values adjustment 0% - 25% of reported value
OREO (b) 7,877
 Appraisals from comparable properties Adjustment for value changes since appraisal 0% - 10% of appraisal
Other assets (c) 27,394
 Discounted cash flow Adjustments to current sales yields for specific properties 0% - 15% adjustment to yield
    Appraisals from comparable properties Marketability adjustments for specific properties 0% - 25% of appraisal
(a)FIRST HORIZON CORPORATIONRepresents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for loan losses.571Q21 FORM 10-Q REPORT

68

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

(Dollars in millions)Values Utilized
Level 3 ClassFair Value at December 31, 2020Valuation TechniquesUnobservable InputRangeWeighted Average (d)
Available for sale securities SBA-interest only strips$32 Discounted cash flowConstant prepayment rate12%12%
Bond equivalent yield15% - 17%15%
Loans held for sale - residential real estate$13 Discounted cash flowPrepayment speeds - First mortgage5% - 15%5%
Foreclosure losses59% - 70%63%
Loss severity trends - First mortgage
3% - 19%
of UPB
12%
Loans held for sale - unguaranteed interest in SBA loans$1 Discounted cash flowConstant prepayment rate8% - 12%10%
Bond equivalent yield7% - 8%7%
Loans held for investment$16 Discounted cash flowConstant prepayment rate0% - 26%11%
Constant default rate0% - 14%1%
Loss severity trends0% - 100%11%
Derivative liabilities, other$14 Discounted cash flowVisa covered litigation resolution amount$5.4 billion - $6.0 billion$5.8 billion
Probability of resolution scenarios10% - 50%16%
Time until resolution3 - 27 months19 months
Loans and leases (a)$77 Appraisals from comparable propertiesMarketability adjustments for specific properties
0% - 10%
of appraisal
NM
Other collateral valuationsBorrowing base certificates adjustment20% - 50% of gross valueNM
Financial Statements/Auction values adjustment
0% - 25%
of reported value
NM
OREO (b)$15 Appraisals from comparable propertiesAdjustment for value changes since appraisal
0% - 10%
of appraisal
NM
Other assets (c)$9 Discounted cash flowAdjustments to current sales yields for specific properties0% - 15% adjustment to yieldNM
Appraisals from comparable propertiesMarketability adjustments for specific properties
0% - 25%
of appraisal
NM
NM - Not meaningful
(a)Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for credit losses.
(b)Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(c)Represents tax credit investments accounted for under the equity method.
(d)Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.


(b)FIRST HORIZON CORPORATIONRepresents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.581Q21 FORM 10-Q REPORT
(c)Represents tax credit investments accounted for under the equity method.

Note 17 – Fair Value of Assets and Liabilities (Continued)
(Dollars in thousands)        
Level 3 Class Fair Value at
December 31, 2016		 Valuation Techniques Unobservable Input Values Utilized
Loans held-for-sale - residential real estate $22,562
 Discounted cash flow Prepayment speeds - First mortgage 2% - 13%
      Prepayment speeds - HELOC 3% - 15%
      Foreclosure Losses 50% - 70%
      Loss severity trends - First mortgage 5% - 50% of UPB
      Loss severity trends - HELOC 15% - 100% of UPB
Derivative liabilities, other 6,245
 Discounted cash flow Visa covered litigation resolution amount $4.4 billion - $5.2 billion
      Probability of resolution scenarios 10% - 30%
      Time until resolution 24 - 54 months
Loans, net of unearned income (a) 31,070
 Appraisals from comparable properties Marketability adjustments for specific properties 0% - 10% of appraisal
    Other collateral valuations Borrowing base certificates adjustment 20% - 50% of gross value
      Financial Statements/Auction values adjustment 0% - 25% of reported value
OREO (b) 11,235
 Appraisals from comparable properties Adjustment for value changes since appraisal 0% - 10% of appraisal
Other assets (c) 29,609
 Discounted cash flow Adjustments to current sales yields for specific properties 0% - 15% adjustment to yield
    Appraisals from comparable properties Marketability adjustments for specific properties 0% - 25% of appraisal
(a)Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for loan losses.
(b)Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.
(c)Represents tax credit investments accounted for under the equity method.
Securities AFS. Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of SBA interest only strips. Management additionally considers whether the loans underlying related SBA-interest only strips are delinquent, in default or prepaying, and adjusts the fair value down 20 - 100% depending on the length of time in default.


Loans held-for-sale.held for sale. Foreclosure losses and prepayment rates are significant unobservable inputs used in the fair value measurement of FHN’s residential real estate loans held-for-sale.held for sale. Loss severity trends are also assessed to evaluate the reasonableness of fair value estimates resulting from discounted cash flows methodologies as well as to estimate fair value for newly repurchased loans and loans that are near foreclosure. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. All observable and unobservable inputs are re-assessed quarterly. Fair value measurements are reviewed at least quarterly by FHN’s Corporate Accounting Department.


Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of unguaranteed interests in SBA loans. Unguaranteed interest in SBA loans held-for-saleheld for sale are carried at less than the outstanding balance due to credit risk estimates. Credit risk adjustments may be reduced if prepayment is likely or as consistent payment

69
Table of Contents
Note 16 – Fair Value of Assets & Liabilities (Continued)

history is realized. Management also considers other factors such as delinquency or default and adjusts the fair value accordingly.


Loans held for investment. Constant prepayment rate, constant default rate and loss severity trends are significant unobservable inputs used in the fair value measurement of loans held for investment. Increases (decreases) in each of these inputs in isolation result in negative (positive) effects on the valuation of the associated loans.

Derivative liabilities. In conjunction with the sales of portions of its Visa Class B shares, FHN and the purchaserpurchasers entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. FHN uses a discounted cash flow methodology in order to estimate the fair value of FHN’s derivative liabilities associated with its prior sales of Visa Class B shares. The methodology includes estimation of both the resolution amount for Visa’s Covered Litigation matters as well as the length of time until the resolution occurs. Significant increases (decreases) in either of these inputs in isolation would result in significantly higher (lower) fair value measurements for the derivative liabilities.
Additionally, FHN performs a probability weighted multiple resolution scenario to calculate the estimated fair value of these derivative liabilities. Assignment of higher (lower) probabilities to the larger potential resolution scenarios would result in an increase (decrease) in the estimated fair value of the derivative liabilities. Since this estimation process requires application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability weighting assigned to each scenario, these derivatives have been classified within Level 3 in fair value measurements disclosures. The valuation inputs
Loans and process are discussed with senior and executive management when significant events affecting the estimate of fair value occur. Inputs are compared to information obtained from the public issuances and filings of Visa, Inc. as well as public information released by other participants in the applicable litigation matters.
Loans, net of unearned incomeleases and Other Real Estate Owned. Collateral-dependent loans and OREO are primarily valued using appraisals based on sales of comparable properties in the same or similar markets. Multiple appraisal firms are utilized to ensure that estimated values are consistent between firms. This process occurs within FHN’s Credit Risk Management (commercial) and Default Servicing functions (primarily consumer). The Credit Risk Management Committee reviews dispositions and additions of OREO annually. Back testing is performed during the year through comparison to ultimate disposition values. Other collateral (receivables, inventory, equipment, etc.) is valued through borrowing base certificates, financial statements and/or auction valuations. These valuations are discounted based on the quality of reporting, knowledge of the marketability/collectability of the collateral and historical disposition rates.
Other assets – tax credit investments. The estimated fair value of tax credit investments accounted for under the equity method is generally determined in relation to the yield (i.e., future tax credits to be received) an acquirer of these investments would expect in relation to the yields experienced on current new issue and/or secondary market transactions. Thus, as tax credits are recognized, the future yield to a market participant is reduced, resulting in consistent impairment of the individual investments. Individual investments are reviewed for impairment quarterly, which may include the consideration of additional marketability discounts related to specific investments which typically includes consideration of the underlying property’s appraised value. Unusual valuation adjustments and the associated triggering events are discussed with senior and executive management when appropriate. A portfolio review is conducted annually, with the assistance of a third party, to assess the reasonableness of current valuations.
Fair Value Option
FHN has elected the fair value option on a prospective basis for almostsubstantially all types of mortgage loans originated for sale purposes underexcept for mortgage origination operations which utilize the Financial Instruments Topic (“ASC 825”).platform acquired from CBF. FHN determined that the election reduces certain timing differences and better matches changes in the value of such loans with changes in the value of derivatives and forward delivery commitments used as economic hedges for these assets at the time of election.
Repurchased loans relating to mortgage banking operations conducted prior to the IBKC merger are recognized within loans held-for-saleheld for sale at fair value at
FIRST HORIZON CORPORATION591Q21 FORM 10-Q REPORT

Note 17 – Fair Value of Assets and Liabilities (Continued)
the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent
values from exceeding the initial fair value, determined at the time of repurchase, but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declines in value.



70FHN also has a portion of mortgage loans held for investment for which the fair value option was elected upon origination and which continue to be accounted for at fair value.
Table of Contents
Note 16 – Fair Value of Assets & Liabilities (Continued)


The following tables reflect the differences between the fair value carrying amount of residential real estate loans held-for-saleheld for sale and held for investment measured at fair value in accordance with management’s election and the aggregate unpaid principal amount FHN is contractually entitled to receive at maturity.
 March 31, 2021
(Dollars in millions)Fair value
carrying
amount		Aggregate
unpaid
principal		Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held for sale reported at fair value:
Total loans$449 $445 $4 
Nonaccrual loans2 5 (3)
Loans held for investment reported at fair value:
Total loans$17 $17 $0 
Nonaccrual loans1 1 0 
 December 31, 2020
(Dollars in millions)Fair value
carrying
amount		Aggregate
unpaid
principal		Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held for sale reported at fair value:
Total loans$405 $442 $(37)
Nonaccrual loans2 5 (3)
Loans held for investment reported at fair value:
Total loans$16 $17 $(1)
Nonaccrual loans1 1 0 
  September 30, 2017
(Dollars in thousands) 
Fair value
carrying
amount
 
Aggregate
unpaid
principal
 
Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held-for-sale reported at fair value:      
Total loans $21,808
 $30,686
 $(8,878)
Nonaccrual loans 6,428
 11,551
 (5,123)
Loans 90 days or more past due and still accruing 44
 175
 (131)
  December 31, 2016
(Dollars in thousands) 
Fair value
carrying
amount
 
Aggregate
unpaid
principal
 
Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held-for-sale reported at fair value:      
Total loans $24,269
 $35,262
 $(10,993)
Nonaccrual loans 6,775
 12,910
 (6,135)
Loans 90 days or more past due and still accruing 211
 331
 (120)


Assets and liabilities accounted for under the fair value election are initially measured at fair value with subsequent changes in fair value recognized in earnings. Such changes in the fair value of assets and liabilities for which FHN elected the fair value option are included in current period earnings with classification in the income statement line item reflected in the following table:
 Three Months Ended
March 31,
(Dollars in millions)20212020
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held for sale$(9)$0 


 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in thousands)2017 2016 2017 2016
Changes in fair value included in net income:       
Mortgage banking noninterest income       
Loans held-for-sale$390
 $1,604
 $1,722
 $2,375
FIRST HORIZON CORPORATION601Q21 FORM 10-Q REPORT

Note 17 – Fair Value of Assets and Liabilities (Continued)
For the three months ended September 30, 2017,March 31, 2021 and 2016,2020, the amountsamount for residential real estate loans held-for-sale includeheld for sale included an insignificant amount of gains of $.1 million and $.5 million, respectively, in pretax earnings that are attributable to changes in instruments-specific credit risk. For the nine months ended September 30, 2017, and 2016, the amounts for residential real estate loans held-for-sale included gains of $.5 million and $.7 million, respectively, in pretax earnings that areis attributable to changes in instrument-specific credit risk. The portion of the fair value adjustments related to credit risk was determined based on estimated default rates and estimated loss severities. Interest income on residential real estate loans held-for-saleheld for sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Condensed Statements of Income as interest on loans held-for-sale.held for sale.
FHN has elected to account for retained interest-only strips from guaranteed SBA loans recorded in available-for-sale securities at fair value through earnings. Since these securities are subject to the risk that prepayments may result in FHN not recovering all or a portion of its recorded investment, the fair value election results in a more timely recognition of the effects of estimated prepayments through earnings rather than being recognized through other comprehensive income with periodic review for other-than-temporary impairment. Gains or losses are recognized through fixed income revenues and are presented in the recurring measurements table.
Determination of Fair Value
In accordance with ASC 820-10-35, fairFair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the

71
Table of Contents
Note 16 – Fair Value of Assets & Liabilities (Continued)

assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the Consolidated Condensed Statements of ConditionBalance Sheets and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.disclosed.
Short-term financial assets. Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions and the Federal Reserve are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.
Trading securities and trading liabilities. Trading securities and trading liabilities are recognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities. Broker-dealer long positions are valued at bid price in the bid-ask spread. Short positions are valued at the ask price. Inventory positions are valued using observable inputs including current market transactions, LIBOR and U.S. treasury curves,
benchmark yields, credit spreads, and consensus prepayment speeds. Trading loans are valued using observable inputs including current market transactions, swap rates, mortgage rates, and consensus prepayment speeds.
Trading securities also include retained interests in prior mortgage securitizations that qualify as financial assets, which include primarily principal-only strips. FHN uses inputs including yield curves, credit spreads, and prepayment speeds to determine the fair value of principal-only strips.
Securities available-for-sale. Securities available-for-sale includes the investment portfolio accountedavailable for as available-for-sale under ASC 320-10-25, federal bank stock holdings, and short-term investments in mutual funds.sale. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves,benchmark yields, consensus prepayment estimates,speeds, and credit spreads. When available,Trades from similar securities and broker quotes are used to support these valuations.
Investments in the stock of the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Condensed Statements of Condition which is considered to approximate fair value. Short-term investments in mutual funds are measured at the funds’ reported closing net asset values. Investments in equity securities are valued using quoted market prices when available. Cost method investments are valued at historical cost less any recorded impairment due to the illiquid nature of these investments.
Interest only strips are valued at elected fair value based on an income approach using an internal valuation model. The internal valuation model includes assumptions regarding projections of future cash flows, prepayment rates, default rates and interest only strip terms. These securities bear the risk of loan prepayment or default that may result in the CompanyFHN not recovering all or a portion of its recorded investment. When appropriate, valuations are adjusted for various factors including default or prepayment status of the underlying SBA loans. Because of the inherent uncertainty of valuation, those estimated values may be higher or lower than the values that would have been used had a ready market for the securities existed, and may change in the near term.
Securities held-to-maturity. Securities held-to-maturity reflects debt securitiesLoans held for which management hassale. FHN determines the positive intent and ability to hold to maturity. To the extent possible, valuationsfair value of held-to-maturity securities are performedloans held for sale using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves and credit spreads. Debt securities with limited trading activity are valued using aeither current transaction prices or discounted cash flow model that incorporates a combination of observable and unobservable inputs. Primary observable inputs include contractual cash flows, the treasury curve and credit spreads from similar instruments. Significant unobservable inputs include estimated credit spreads for individual issuers and instruments as well as prepayment speeds, as applicable.
Loans held-for-sale. Residential real estate loans held-for-salemodels. Fair values are valueddetermined using current transaction prices and/or values on similar assets when available, including committed bids for specific loans or loan portfolios. Uncommitted bids may be adjusted based on other available market information. For all other loans FHN determines the fair
Fair value of residential real estate loans held-for-saleheld for sale determined using a discounted cash flow model which incorporates both observable and unobservable inputs. Inputs in the discounted cash flow model include current mortgage rates for similar products, estimated prepayment rates, foreclosure losses, and various loan performance measures (delinquency, LTV, credit score). Adjustments for delinquency and other differences in loan characteristics are typically reflected in the model’s discount rates. Loss severity trends and the value of underlying collateral are also considered in assessing the appropriate fair value for severely delinquent loans and loans in foreclosure. The valuation of HELOCs also incorporates estimated cancellation rates for loans expected to become delinquent.
The Company
FIRST HORIZON CORPORATION611Q21 FORM 10-Q REPORT

Note 17 – Fair Value of Assets and Liabilities (Continued)
Non-mortgage consumer loans held for sale are valued using committed bids for specific loans or loan portfolios or current market pricing for similar assets with adjustments for differences in credit standing (delinquency, historical default rates for similar loans), yield, collateral values and prepayment rates. If pricing for similar assets is not available, a discounted cash flow methodology is utilized, which incorporates all of these factors into an estimate of investor required yield for the discount rate.
FHN utilizes quoted market prices of similar instruments or broker and dealer quotations to value the SBA and USDA guaranteed loans. The CompanyFHN values SBA-unguaranteed interests in loans held-for-saleheld for sale based on individual loan

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Note 16 – Fair Value of Assets & Liabilities (Continued)

characteristics, such as industry type and pay history which generally follows an income approach. Furthermore, these valuations are adjusted for changes in prepayment estimates and are reduced due to restrictions on trading. The fair value of other non-residential real estate loans held-for-saleheld for sale is approximated by their carrying values based on current transaction values.
Loans, net of unearned income. Loans, net of unearned income are recognizedMortgage loans held for investment at the amount of funds advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan losses. The fair value estimates for disclosure purposes differentiate loans based on their financial characteristics, such as product classification, vintage, loan category, pricing features, and remaining maturity.
option. The fair value of floating ratemortgage loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments madeheld for differences in loan characteristics. In situations where market pricing inputs are not available,investment at fair value option is considered to approximate book value due to the monthly repricing for commercial and consumer loans, with the exception of floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements in market rates. The fair value for floating rate 1-4 family mortgage loans is calculateddetermined by discounting future cash flows to their present value. Future cash flows are discounted to their present value bya third party using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the floating rate 1-4 family residential mortgage portfolio.
The fair value of fixed rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is estimated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the fixed rate mortgage and installment loan portfolios.
For all loan portfolio classes, adjustments are made to reflect liquidity or illiquidity of the market. Such adjustments reflect discounts that FHN believes are consistent with what a market participant would consider in determining fair value given current market conditions.
Individually impaired loans are measured using either a discounted cash flow model using various assumptions about future loan performance (constant prepayment rate, constant default rate and loss severity trends) and market discount rates.
Loans held for investment. The fair values of mortgage loans are estimated using an exit price methodology orthat is based on present values using the interest rate that would be charged for a similar loan to a borrower with similar risk, weighted for varying maturity dates and adjusted for a liquidity discount based on the estimated fair value oftime period to complete a sale transaction with a market participant.
Other loans and leases are valued based on present values using the underlying collateral less costs to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loan’s effective interest rate that would be charged for discounting expected cash flow amounts. Thus, this analysis is not considered a fair value measurement in accordancesimilar instrument to a borrower with ASC 820. However,similar risk, applicable to each category of instruments, and adjusted for a liquidity discount based on the results of this methodology are consideredestimated time period to approximate fair value for the applicable loans. Expected cash flows are derived from internally-developed inputs primarily reflecting expected default rates on contractual cash flows. complete a sale transaction with a market participant.
For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Carrying value is considered to reflect fair value for these loans.
Derivative assets and liabilities. The fair value for forwards and futures contracts is based on current transactions involving identical securities. Futures contracts are exchange-traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used.
Valuations of other derivatives (primarily interest rate related swaps)contracts) are based on inputs observed in active markets for similar instruments. TypicalTypically inputs include the LIBOR curve, Overnight Indexed Swap (“OIS”) curve,benchmark yields, option volatility and option skew. Starting in October 2020, centrally cleared derivatives are discounted using SOFR as required by clearinghouses. In measuring the fair value of these derivative assets and liabilities, FHN has elected to consider credit risk based on the net exposure to individual counterparties. Credit risk is mitigated for these instruments through the use of mutual margining and master netting agreements as well as collateral posting requirements. For derivative contracts with daily cash margin requirements that are considered settlements, the daily margin amount is netted within derivative assets or liabilities. Any remaining credit risk related to interest rate derivatives is considered in determining fair value through evaluation of additional factors such as customerclient loan grades and debt ratings. Foreign currency related derivatives also utilize observable exchange rates in the determination of fair value. The determination of fair value for FHN’s derivative liabilities associated with its prior sales of Visa Class B shares are classified within Level 3 in the fair value measurements disclosure as previously discussed in the unobservable inputs discussion.
The fair value of risk participations is determined in reference to the fair value of the related derivative contract between the borrower and the lead bank in the participation structure, which is determined consistent with the valuation process discussed above. This value is adjusted for the pro rata portion of the reference derivative’s notional value and an assessment of credit risk for the referenced borrower.
OREO. OREO primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value

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Note 16 – Fair Value of Assets & Liabilities (Continued)

is determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal.
Nonearning assets. For disclosure purposes, nonearning financial assets include cash and due from banks, accrued interest receivable, and fixed income receivables. Due to the short-term nature of cash and due from banks, accrued interest receivable, and fixed income receivables, the fair value is approximated by the book value.
Other assets. For disclosure purposes, other assets consist of tax credit investments, FRB and FHLB Stock, deferred compensation assets that are considered financial assets.mutual funds and equity investments (including other mutual funds) with readily determinable fair values. Tax credit
FIRST HORIZON CORPORATION621Q21 FORM 10-Q REPORT

Note 17 – Fair Value of Assets and Liabilities (Continued)
investments accounted for under the equity method are written down to estimated fair value quarterly based on the estimated value of the associated tax credits which incorporates estimates of required yield for hypothetical investors. The fair value of all other tax credit investments is estimated using recent transaction information with adjustments for differences in individual investments. Deferred compensation assetsmutual funds are recognized at fair value, which is based on quoted prices in active markets.
Investments in the stock of the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Balance Sheets which is considered to approximate fair value. Investments in mutual funds are measured at the funds’ reported closing net asset values. Investments in equity securities are valued using quoted market prices when available.
Defined maturity deposits. The fair value of these deposits is estimated by discounting future cash flows to their present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits include all time deposits.
Undefined maturity deposits. In accordance with ASC 825, the fair value of these deposits is approximated by the book value. For the purpose of this disclosure, undefined maturity deposits include demand deposits, checking interest accounts, savings accounts, and money market accounts.
Short-term financial liabilities. The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are approximated by the book value. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.
Term borrowings. The fair value of term borrowings is based on quoted market prices or dealer quotes for the identical liability when traded as an asset. When pricing information for the identical liability is not available, relevant prices for similar debt instruments are used with adjustments being made to the prices obtained for differences in characteristics of the debt instruments. If no relevant pricing information is available, the fair value is approximated by the present value of the contractual cash flows discounted by the investor’s yield which considers FHN’s and FTBNA’s debt ratings. Secured borrowings also consider the values of the associated assets and whether overcollateralization exists.
Other noninterest-bearing liabilities. For disclosure purposes, other noninterest-bearing financial liabilities include accrued interest payable and fixed income payables. Due to the short-term nature of these liabilities, the book value is considered to approximate fair value.
Loan commitments. Fair values of these commitments are based on fees charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties’ credit standing.
Other commitments. Fair values of these commitments are based on fees charged to enter into similar agreements.
The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, reduces the comparability of fair value disclosures between financial institutions. Due to market illiquidity, the fair values for loans net of unearned income,and leases, loans held-for-sale,held for sale, and term borrowings as of September 30, 2017March 31, 2021 and December 31, 2016,2020, involve the use of significant internally-developed pricing assumptions for certain components of these line items. The assumptions and valuations utilized for this disclosure are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. The valuations of legacy assets, particularly consumer loans and TRUPS loans within the non-strategicCorporate segment, and TRUP loans, are influenced by changes in economic conditions since origination and risk perceptions of the financial sector. These considerations affect the estimate of a potential acquirer’s cost of capital and cash flow volatility assumptions from these assets and the resulting fair value measurements may depart significantly from FHN’s internal estimates of the intrinsic value of these assets.
Assets and liabilities that are not financial instruments have not been included in the following table such as the value of long-term relationships with deposit and trust customers,clients, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other assets and other liabilities. Additionally, these measurements are solely for financial instruments as of the measurement date and do not consider the earnings potential of our various business lines. Accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of FHN.











74
FIRST HORIZON CORPORATION631Q21 FORM 10-Q REPORT

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

The following table summarizestables summarize the book value and estimated fair value of financial instruments recorded in the Consolidated Condensed Statements of ConditionBalance Sheets as of September 30, 2017:March 31, 2021 and December 31, 2020:
March 31, 2021
 Book
Value		Fair Value
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Loans and leases, net of allowance for loan and lease losses
Commercial:
Commercial, financial and industrial$33,509 $0 $0 $33,249 $33,249 
Commercial real estate12,238 0 0 12,265 12,265 
Consumer:
Consumer real estate10,831 0 0 11,283 11,283 
Credit card and other1,108 0 0 1,134 1,134 
Total loans and leases, net of allowance for loan and lease losses57,686 0 0 57,931 57,931 
Short-term financial assets:
Interest-bearing deposits with banks11,635 11,635 0 0 11,635 
Federal funds sold463 0 463 0 463 
Securities purchased under agreements to resell57 0 57 0 57 
Total short-term financial assets12,155 11,635 520 0 12,155 
Trading securities (a)1,076 0 1,076 0 1,076 
Loans held for sale:
Mortgage loans (elected fair value) (a)449 0 437 12 449 
USDA & SBA loans - LOCOM300 0 299 1 300 
Other loans - LOCOM4 0 4 0 4 
Mortgage loans - LOCOM58 0 0 58 58 
Total loans held for sale811 0 740 71 811 
Securities available for sale (a)8,351 0 8,329 22 8,351 
Derivative assets (a)561 145 416 0 561 
Other assets:
Tax credit investments410 0 0 400 400 
Deferred compensation mutual funds122 122 0 0 122 
Equity, mutual funds, and other (b)262 25 0 237 262 
Total other assets794 147 0 637 784 
Total assets$81,434 $11,927 $11,081 $58,661 $81,669 
Liabilities:
Defined maturity deposits$4,653 $0 $4,664 $0 $4,664 
Trading liabilities (a)454 0 454 0 454 
Short-term financial liabilities:
Federal funds purchased982 0 982 0 982 
Securities sold under agreements to repurchase1,098 0 1,098 0 1,098 
Other short-term borrowings122 0 122 0 122 
Total short-term financial liabilities2,202 0 2,202 0 2,202 
Term borrowings:
Real estate investment trust-preferred46 0 0 47 47 
Term borrowings—new market tax credit investment45 0 0 45 45 
Secured borrowings15 0 0 15 15 
Junior subordinated debentures239 0 0 237 237 
Other long term borrowings1,326 0 1,462 0 1,462 
Total term borrowings1,671 0 1,462 344 1,806 
Derivative liabilities (a)265 116 130 21 267 
Total liabilities$9,245 $116 $8,912 $365 $9,393 
(a)Classes are detailed in the recurring and nonrecurring measurement tables.
(b)Level 1 primarily consists of mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of $34 million and FRB stock of $202 million.
  September 30, 2017
  
Book
Value
 Fair Value
(Dollars in thousands) 
  Level 1 Level 2 Level 3 Total
Assets:          
Loans, net of unearned income and allowance for loan losses          
Commercial:          
Commercial, financial and industrial $12,693,639
 $—
 $—
 $12,658,237
 $12,658,237
Commercial real estate 2,221,332
 —
 —
 2,208,208
 2,208,208
Consumer:          
Consumer real estate 4,328,778
 —
 —
 4,252,704
 4,252,704
Permanent mortgage 387,363
 —
 —
 392,407
 392,407
Credit card & other 340,112
 —
 —
 340,168
 340,168
Total loans, net of unearned income and allowance for loan losses 19,971,224
 —
 —
 19,851,724
 19,851,724
Short-term financial assets:          
Interest-bearing cash 604,326
 604,326
 —
 —
 604,326
Federal funds sold 76,316
 —
 76,316
 —
 76,316
Securities purchased under agreements to resell 663,637
 —
 663,637
 —
 663,637
Total short-term financial assets 1,344,279
 604,326
 739,953
 —
 1,344,279
Trading securities (a) 1,469,402
 —
 1,467,097
 2,305
 1,469,402
Loans held-for-sale (a) 339,780
 —
 246,441
 94,000
 340,441
Securities available-for-sale (a) (b) 3,963,138
 24,756
 3,773,600
 164,782
 3,963,138
Securities held-to-maturity 10,000
 —
 —
 9,985
 9,985
Derivative assets (a) 80,976
 10,003
 70,973
 —
 80,976
Other assets:          
Tax credit investments 120,701
 —
 —
 121,435
 121,435
Deferred compensation assets 34,951
 34,951
 —
 —
 34,951
Total other assets 155,652
 34,951
 —
 121,435
 156,386
Nonearning assets:          
Cash & due from banks 347,802
 347,802
 —
 —
 347,802
Fixed income receivables 68,750
 —
 68,750
 —
 68,750
Accrued interest receivable 70,058
 —
 70,058
 —
 70,058
Total nonearning assets 486,610
 347,802
 138,808
 —
 486,610
Total assets $27,821,061
 $1,021,838
 $6,436,872
 $20,244,231
 $27,702,941
Liabilities:          
Deposits:          
Defined maturity $1,112,098
 $—
 $1,108,919
 $—
 $1,108,919
Undefined maturity 20,987,156
 —
 20,987,156
 —
 20,987,156
Total deposits 22,099,254
 —
 22,096,075
 —
 22,096,075
Trading liabilities (a) 579,028
 —
 579,028
 —
 579,028
Short-term financial liabilities:          
Federal funds purchased 292,650
 —
 292,650
 —
 292,650
Securities sold under agreements to repurchase 516,867
 —
 516,867
 —
 516,867
Other short-term borrowings 1,637,419
 —
 1,637,419
 —
 1,637,419
Total short-term financial liabilities 2,446,936
 —
 2,446,936
 —
 2,446,936
Term borrowings:          
Real estate investment trust-preferred 46,083
 —
 —
 49,350
 49,350
Term borrowings—new market tax credit investment 18,000
 —
 —
 17,959
 17,959
Secured borrowings 42,585
 —
 —
 42,184
 42,184
Other long term borrowings 952,839
 —
 968,297
 —
 968,297
Total term borrowings 1,059,507
 —
 968,297
 109,493
 1,077,790
Derivative liabilities (a) 83,146
 7,627
 69,989
 5,530
 83,146
Other noninterest-bearing liabilities:          
Fixed income payables 44,304
 —
 44,304
 —
 44,304
Accrued interest payable 19,205
 —
 19,205
 —
 19,205
Total other noninterest-bearing liabilities 63,509
 —
 63,509
 —
 63,509
Total liabilities $26,331,380
 $7,627
 $26,223,834
 $115,023
 $26,346,484
(a)FIRST HORIZON CORPORATIONClasses are detailed in the recurring and nonrecurring measurement tables.641Q21 FORM 10-Q REPORT
(b)Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.

75

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

 December 31, 2020
 Book
Value		Fair Value
(Dollars in millions)Level 1Level 2Level 3Total
Assets:
Loans and leases and allowance for loan and lease losses
Commercial:
Commercial, financial and industrial$32,651 $0 $0 $32,582 $32,582 
Commercial real estate12,033 0 0 12,079 12,079 
Consumer:
Consumer real estate11,483 0 0 11,903 11,903 
Credit card and other1,102 0 0 1,131 1,131 
Total loans and leases, net of allowance for loan and lease losses57,269 0 0 57,695 57,695 
Short-term financial assets:
Interest-bearing deposits with banks8,351 8,351 0 0 8,351 
Federal funds sold65 0 65 0 65 
Securities purchased under agreements to resell380 0 380 0 380 
Total short-term financial assets8,796 8,351 445 0 8,796 
Trading securities (a)1,176 0 1,176 0 1,176 
Loans held for sale:
Mortgage loans (elected fair value) (a)405 0 393 12 405 
USDA & SBA loans - LOCOM509 0 511 1 512 
Other loans - LOCOM31 0 31 0 31 
Mortgage loans - LOCOM77 0 0 77 77 
Total loans held for sale1,022 0 935 90 1,025 
Securities available for sale (a) 8,047 0 8,015 32 8,047 
Derivative assets (a)770 63 706 0 769 
Other assets:
Tax credit investments400 0 0 371 371 
Deferred compensation mutual funds118 118 0 0 118 
Equity, mutual funds, and other (b)288 25 0 263 288 
Total other assets806 143 0 634 777 
Total assets$77,886 $8,557 $11,277 $58,451 $78,285 
Liabilities:
Defined maturity deposits$5,070 $0 $5,083 $0 $5,083 
Trading liabilities (a)353 0 353 0 353 
Short-term financial liabilities:
Federal funds purchased845 0 845 0 845 
Securities sold under agreements to repurchase1,187 0 1,187 0 1,187 
Other short-term borrowings166 0 166 0 166 
Total short-term financial liabilities2,198 0 2,198 0 2,198 
Term borrowings:
Real estate investment trust-preferred46 0 0 47 47 
Term borrowings—new market tax credit investment45 0 0 45 45 
Secured borrowings15 0 0 15 15 
Junior subordinated debentures238 0 0 223 223 
Other long term borrowings1,326 0 1,455 0 1,455 
Total term borrowings1,670 0 1,455 330 1,785 
Derivative liabilities (a)149 71 64 14 149 
Total liabilities$9,440 $71 $9,153 $344 $9,568 
The following table summarizes the book value and estimated fair value of financial instruments recorded(a)Classes are detailed in the Consolidated Statementsrecurring and nonrecurring measurement tables.
(b)Level 1 primarily consists of Condition asmutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of December 31, 2016:$61 million and FRB stock of $202 million.



  December 31, 2016
  
Book
Value
 Fair Value
(Dollars in thousands)  Level 1 Level 2 Level 3 Total
Assets:          
Loans, net of unearned income and allowance for loan losses          
Commercial:          
Commercial, financial and industrial $12,058,689
 $—
 $—
 $11,918,374
 $11,918,374
Commercial real estate 2,101,671
 —
 —
 2,078,306
 2,078,306
Consumer:          
Consumer real estate 4,473,395
 —
 —
 4,385,669
 4,385,669
Permanent mortgage 406,836
 —
 —
 404,930
 404,930
Credit card & other 346,861
 —
 —
 347,577
 347,577
Total loans, net of unearned income and allowance for loan losses 19,387,452
 —
 —
 19,134,856
 19,134,856
Short-term financial assets:          
Interest-bearing cash 1,060,034
 1,060,034
 —
 —
 1,060,034
Federal funds sold 50,838
 —
 50,838
 —
 50,838
Securities purchased under agreements to resell 613,682
 —
 613,682
 —
 613,682
Total short-term financial assets 1,724,554
 1,060,034
 664,520
 —
 1,724,554
Trading securities (a) 897,071
 —
 894,498
 2,573
 897,071
Loans held-for-sale (a) 111,248
 —
 6,631
 104,617
 111,248
Securities available-for-sale (a) (b) 3,943,499
 25,249
 3,756,745
 161,505
 3,943,499
Securities held-to-maturity 14,347
 —
 —
 14,773
 14,773
Derivative assets (a) 121,654
 33,587
 88,067
 —
 121,654
Other assets:          
Tax credit investments 100,105
 —
 —
 98,400
 98,400
Deferred compensation assets 32,840
 32,840
 —
 —
 32,840
Total other assets 132,945
 32,840
 —
 98,400
 131,240
Nonearning assets:          
Cash & due from banks 373,274
 373,274
 —
 —
 373,274
Fixed income receivables 57,411
 —
 57,411
 —
 57,411
Accrued interest receivable 62,887
 —
 62,887
 —
 62,887
Total nonearning assets 493,572
 373,274
 120,298
 —
 493,572
Total assets $26,826,342
 $1,524,984
 $5,530,759
 $19,516,724
 $26,572,467
Liabilities:          
Deposits:          
Defined maturity $1,355,133
 $—
 $1,361,104
 $—
 $1,361,104
Undefined maturity 21,317,230
 —
 21,317,230
 —
 21,317,230
Total deposits 22,672,363
 —
 22,678,334
 —
 22,678,334
Trading liabilities (a) 561,848
 —
 561,848
 —
 561,848
Short-term financial liabilities:          
Federal funds purchased 414,207
 —
 414,207
 —
 414,207
Securities sold under agreements to repurchase 453,053
 —
 453,053
 —
 453,053
Other short-term borrowings 83,177
 —
 83,177
 —
 83,177
Total short-term financial liabilities 950,437
 —
 950,437
 —
 950,437
Term borrowings:          
Real estate investment trust-preferred 46,032
 —
 —
 49,350
 49,350
Term borrowings—new market tax credit investment 18,000
 —
 —
 17,918
 17,918
Borrowings secured by residential real estate 23,126
 —
 —
 21,969
 21,969
Other long term borrowings 953,498
 —
 965,066
 —
 965,066
Total term borrowings 1,040,656
 —
 965,066
 89,237
 1,054,303
Derivative liabilities (a) 135,897
 33,274
 96,378
 6,245
 135,897
Other noninterest-bearing liabilities:          
Fixed income payables 21,002
 —
 21,002
 —
 21,002
Accrued interest payable 10,336
 —
 10,336
 —
 10,336
Total other noninterest-bearing liabilities 31,338
 —
 31,338
 —
 31,338
Total liabilities $25,392,539
 $33,274
 $25,283,401
 $95,482
 $25,412,157

(a)FIRST HORIZON CORPORATIONClasses are detailed in the recurring and nonrecurring measurement tables.651Q21 FORM 10-Q REPORT
(b)Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.

76

Note 1617 – Fair Value of Assets &and Liabilities (Continued)

The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other commitments as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
 Contractual AmountFair Value
(Dollars in millions)March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Unfunded Commitments:
Loan commitments$20,881 $20,796 $1 $2 
Standby and other commitments720 751 6 6 
  Contractual Amount Fair Value
(Dollars in thousands) September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Unfunded Commitments:        
Loan commitments $8,868,115
 $8,744,649
 $2,388
 $2,924
Standby and other commitments 336,953
 277,549
 4,139
 4,037


FIRST HORIZON CORPORATION661Q21 FORM 10-Q REPORT

Note 18 – Other Events

Issuance of Series F Preferred Stock

On May 3, 2021, FHN issued 1,500 shares having an aggregate liquidation preference of $150 million of Series F Non-Cumulative Perpetual Preferred Stock for net proceeds of approximately $146 million. Dividends on the Series F Preferred Stock, if declared, accrue and are payable quarterly, in arrears, at a rate of 4.70% per annum. For the issuance, FHN issued depositary shares, each of which represents a fractional ownership interest in a share of FHN's preferred stock.


FIRST HORIZON CORPORATION671Q21 FORM 10-Q REPORT

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

TABLE OF ITEM 2 TOPICS
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
7969
8070
8171
9277
9578
9888
11491
11995
12496
12597
12598




FIRST HORIZON NATIONAL CORPORATION681Q21 FORM 10-Q REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS
General Information
GENERAL INFORMATION
INTRODUCTION
First Horizon National Corporation (“FHN”) began as(FHN) is a community bank chartered in 1864 and as of September 30, 2017, was one of the 40 largest publicly traded banking organizations in the United States in terms of asset size.
FHN’s two major brands—First Tennessee and FTN Financial—provide customers with a broad range of products and services. First Tennessee ("FTBNA" or the "Bank") provides consumer and commercial banking services throughout Tennessee and other selected markets and is the largest bankfinancial holding company headquartered in Memphis, Tennessee. FHN provides diversified financial services primarily through it principal subsidiary, First Horizon Bank. First Horizon Bank's principal divisions and subsidiaries operate under the statebrands of Tennessee. FTNFirst Horizon Bank, IBERIABANK, First Horizon Advisors, and FHN Financial. FHN offers regional banking, mortgage lending, title insurance, specialized commercial lending, commercial leasing and equipment financing, brokerage, wealth management and capital market services through the First Horizon family of companies. FHN Financial, (“FTNF”)which operates partly through a division of First Horizon Bank and 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 490 banking offices in 12 states and 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 customersFinancial has 29 offices in Tennessee and other selected markets. Regional banking also provides investments, financial planning, trust services and asset management, 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, and strategies for institutional clients in18 states across the U.S. In addition, FHN has 29 title services offices in three states and abroad,15 stand-alone mortgage lending offices in seven states.
This MD&A should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1, 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 on extinguishment of debt, and acquisition and integration-related costs.
Non-strategic segment consists of the wind-down national consumer lending activities, legacy 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.
On May 4, 2017, FHN and Capital Bank Financial Corp. (“Capital Bank" or "CBF”) announced that they had entered into an agreement and plan of merger under which FHN will acquire Capital Bank, which is headquartered in Charlotte, North Carolina. Capital Bank reported approximately $10 billion of assets at June 30, 2017. The transaction is expected to close in fourth quarter 2017, subject to regulatory approval of the sale of two branches and customary conditions.
On April 3, 2017, FTNF acquired substantially all of the assets and assumed substantially all of the liabilities of Coastal Securities, Inc. (“Coastal”), a national leader in the trading, securitization, and analysis of Small Business Administration (“SBA”) loans, 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 were combined with FTNF's existing SBA trading activities to establish an additional major product sector for FTNF. FHN's operating results include the operating results of the acquired assets and 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 Divestituresother information contained in this reportdocument and in Exhibit 13 to FHN’sFHN's 2020 Annual Report on Form 10-K10-K.
Recent Events
Merger of Equals
On July 1, 2020, FHN completed its merger of equals with IBERIABANK Corporation. Reported results for FHN reflect legacy FHN prior to the year ended December 31, 2016 for additional information.
Forcompletion of the purpose of this management’s discussionmerger and analysis (“MD&A”), earning assets have been expressed as averages, unless otherwise noted,results from both FHN and loans have been disclosed net of unearned income. The following financial discussion should be read withIBKC from the accompanying audited Consolidated Condensed Financial Statements and Notes in this report. Additional information including the 2016 financial statements, notes, and MD&A is provided in Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016.


Non-GAAP Measures
Certain measures are included in the narrative and tablesmerger closing date forward. As such, comparative income statement data in this MD&A that are “non-GAAP”, meaning (underfor the first quarter of 2020 is only for legacy FHN.
COVID-19 Pandemic
Government and societal reaction to the COVID-19 pandemic caused extraordinary disruption to the U.S. financial reporting rules) they are not presented in accordance with generally accepted accounting principles (“GAAP”)economy, as well as to the local economies within
FHN's footprint, during the final three quarters of 2020 and continuing into the first quarter of 2021. Business activity, especially lending, declined throughout 2020 and into first quarter this year. In certain business lines, FHN reduced or stopped new lending because of the pandemic.
In the fourth quarter of 2020, two extremely effective vaccines were approved in the U.S. Administration of those vaccines began late in 2020, nationwide but on a narrowly targeted basis. In the first quarter of 2021, vaccine production and also are not codifieddistribution increased, and a third vaccine was approved in the U.S. banking regulations currently applicablePublic vaccination in the U.S. has accelerated during the first four months of 2021. In many of FHN's markets, COVID-19 restrictions at least partially were eased by the end of March or during April, and FHN believes further easing is likely in the rest of 2021. COVID-19 restrictions still had a substantial impact on FHN and its clients in the first quarter of 2021, but FHN expects those impacts 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 understandingdiminish over the capital position or financial resultsrest 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 definedyear as the sum of core capital (including common equity and instruments that cannot be redeemed at the optionvaccinated percentage of the holder) adjustedU.S. population continues to climb. Within the U.S. economy, broadly speaking, manufacturing has largely recovered while services continue to lag significantly, especially in hospitality and leisure.
Risk of resurgence remains as new virus variants continue to be identified around the world. As a result, FHN continues to closely monitor the pandemic and its effects on clients, especially credit quality, on FHN's communities, and on the financial markets. FHN continues to reach out to clients to discuss challenges and solutions, to provide line draws and new extensions to existing clients, to provide support 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 25 for a reconciliation ofsmall businesses through the non-GAAP to GAAP measure and presentation of the most comparable GAAP item.
FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements 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,”Paycheck Protection Program and other expressions that indicate future eventsstimulus programs, and trends identify forward-looking statements.to provide lending and deposit assistance through deferrals and waived fees.
Forward-looking statements are necessarily based upon estimatesThe pandemic has resulted in modest operational disruptions for FHN. Clients' physical access to banking centers has been restricted off and assumptions that are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies,on in many of which are beyond FHN’s control,markets 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 conditions, including economic recession or depression; the stability or volatility of values and activity in the residential housing and commercial real estate markets; 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,non-client-facing associates have worked largely 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 ofremote basis. FHN has also implemented additional sick time 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 affecting FHN directly or affecting its customers, business counterparties or competitors; demandchild care assistance 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”), theassociates.



FIRST HORIZON CORPORATION691Q21 FORM 10-Q REPORT

Financial Summary
Quarterly Financial Accounting Standards Board (“FASB”), the Office of the Comptroller of the Currency (“OCC”), 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 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.Performance Summary



First Quarter 2021 versus Fourth Quarter 2020
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, and in documents incorporated into this Quarterly Report.
FINANCIAL SUMMARY
In thirdFirst quarter 2017, FHN reported2021 net income available to common shareholders of $67.3was $225 million, or $.28$0.40 per diluted share, compared to net income of $63.2$234 million, or $.27$0.42 per diluted share, in thirdfourth quarter 2016. For2020. First quarter 2021 results produced a return on average assets of 1.12% and a return on average common equity of 12.01% compared to 1.16% and 12.53% for fourth quarter 2020.
Net interest income of $508 million declined $14 million from fourth quarter 2020, driven by the nine months ended September 30, 2017, FHN reportedimpact of a decrease in average loans, day count and lower short-term rates partially offset by improved funding costs.
The provision for credit losses was a benefit of $45 million for the first quarter of 2021, compared to expense of $1 million for fourth quarter 2020, largely reflecting continued improvement in the overall macroeconomic outlook and a reduction in consumer loans.
Noninterest income of $298 million increased $10 million from fourth quarter 2020, primarily reflecting strong fixed income offset by decreases in mortgage banking and title income, deposit transaction and cash management fees, deferred compensation and derivative sales.
Noninterest expense of $544 million increased $36 million from fourth quarter 2020, largely as a result of IBKC merger integration expenses.
First Quarter 2021 versus First Quarter 2020
First quarter 2021 net income available to common shareholders of $212.2was $225 million, or $.90$0.40 per diluted share, compared to $12 million, or $0.04 per diluted share, in first quarter 2020 driven by the impact of the July 1, 2020 IBKC merger and a lower provision for credit losses. First quarter 2021 results produced a return on average assets of 1.12% and a return on average common equity of 12.01% compared to 0.15% and 1.05% for the first quarter 2020.
Net interest income increased 68% to $508 million compared to first quarter 2020, driven by an increase in average interest-earning assets as a result of the
IBKC merger and Truist branch acquisition. Results also reflect the benefit of deposit pricing discipline and PPP lending, which helped to partially offset the impact of lower interest rates.
The provision for credit losses was a benefit of $45 million for the first quarter of 2021, compared to expense of $154 million for first quarter 2020. The decrease in provision was primarily attributable to improvement in the overall macro-economic outlook.
Noninterest income of $298 million increased $124 million from first quarter 2020, primarily driven by the impact of the IBKC merger. Results also reflect an increase in fixed income revenue during the quarter.
Noninterest expense of $544 million increased $242 million from first quarter 2020, largely as a result of the IBKC merger. Noninterest expense for the first quarter of 2021 included $70 million in merger and acquisition-related costs compared to $6 million in first quarter 2020.
Financial Condition Summary
Total assets at March 31, 2021 of $87.5 billion increased $3.3 billion, or 4%, from $84.2 billion at December 31, 2020.
Period-end loans and leases of $58.6 billion increased $368 million, or 1%, from December 31, 2020 driven by a $1.0 billion increase in commercial loans primarily tied to PPP loans, offset by a $674 million decrease in consumer loans. Average loans and leases of $58.2 billion in first quarter 2021 increased $27.7 billion from $30.5 billion in first quarter 2020 primarily driven by the IBKC merger.
Period-end deposits of $73.2 billion increased $3.2 billion, or 5%, from December 31, 2020, largely reflecting growth in noninterest-bearing deposits from the impact of stimulus checks and PPP loan funding. Average deposits of $71.0 billion for first quarter 2021 increased from $32.9 billion for first quarter 2020.
FHN maintained strong capital measures. The Tier 1 risk-based capital and total risk-based capital ratios at March 31, 2021 were 11.05% and 12.84%, respectively, compared to 10.74% and 12.57% at December 31, 2020, respectively. The CET1 ratio was 9.97% at March 31, 2021 compared to 9.68% at December 31, 2020.
FIRST HORIZON CORPORATION701Q21 FORM 10-Q REPORT

Table 1 - Key Performance Indicators
As of or for the three months ended
(Dollars in millions, except per share data)March 31, 2021December 31, 2020March 31, 2020
Pre-provision net revenue (a)$262 $302 $175 
Diluted earnings per common share$0.40 $0.42 $0.04 
Return on average assets (b)1.12 %1.16 %0.15 %
Return on average common equity (c)12.01 %12.53 %1.05 %
Return on average tangible common equity (a) (d)15.90 %16.73 %1.59 %
Net interest margin (e)2.63 %2.71 %3.16 %
Noninterest income to total revenue (f)37.00 %35.86 %36.59 %
Efficiency ratio (g)67.54 %62.46 %63.26 %
Allowance for loan and lease losses to total loans and leases1.56 %1.65 %1.33 %
Net charge-offs to average loans and leases0.06 %0.19 %0.10 %
Total period-end equity to period-end assets9.49 %9.86 %10.71 %
Tangible common equity to tangible assets (a)6.64 %6.89 %6.81 %
Cash dividends declared per common share$0.15 $0.15 $0.15 
Book value per common share$13.65 $13.59 $14.96 
Tangible book value per common share (a)$10.29 $10.23 $9.96 
Common equity Tier 19.97 %9.68 %8.54 %
Market capitalization$9,341 $7,082 $2,514 
(a)    Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 20.
(b)    Calculated using annualized net income divided by average assets.
(c)    Calculated using annualized net income available to common shareholders divided by average common equity.
(d)    Calculated using annualized net income available to common shareholders divided by average tangible common equity.
(e)    Net interest margin is computed using total net interest income adjusted to an FTE basis assuming a statutory federal income tax rate of $167.621% and, where applicable, state income taxes.
(f)    Ratio is noninterest income excluding securities gains (losses) to total revenue excluding securities gains (losses).
(g)    Ratio is noninterest expense to total revenue excluding securities gains (losses).

Results of Operations
Net Interest Income/Net Interest Margin
Net interest income is FHN's largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans, leases and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). The level of net interest income is primarily a function of the difference between the effective yield on average interest-earning assets and the effective cost of interest-bearing liabilities. These factors are influenced by the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the FRB and market interest rates.
First Quarter 2021 versus Fourth Quarter 2020
Net interest income for first quarter 2021 decreased $14 million or $.71 per diluted share,from fourth quarter 2020. This decrease
reflected a $23 million decrease in interest income, the result of lower average loan balances, a decrease in day count, and lower short-term rates. Partially offsetting the decrease in interest income was a $9 million decrease in interest expense, driven by deposit pricing discipline, as the rate on deposits decreased 6 basis points from fourth quarter 2020, as well as a $243 million decrease in average long-term borrowings.
The net interest margin was 2.63% in first quarter 2021, down 8 basis points from fourth quarter 2020, while the net interest spread of 2.52% in first quarter 2021 was down 7 basis points. The decline in net interest margin for the nine monthsquarter ended September 30, 2016. Results improvedMarch 31, 2021 was primarily the result of a 13 basis point decrease in earning asset yields, largely driven by an unfavorable mix shift to lower yielding assets.
Average earning assets increased $1.7 billion to $78.7 billion for both periodsfirst quarter 2021 from $77.0 billion for fourth quarter of 2020, primarily driven by ana $3.1 billion increase in net interest income ("NII")average interest-bearing cash,
FIRST HORIZON CORPORATION711Q21 FORM 10-Q REPORT

partially offset by a $1.6 billion decrease in average loans and leases from a reduction in new originations, continued payoffs, and a decrease in the provision for income taxes, somewhatloans to mortgage companies, partially offset by lower noninterest income relative to 2016. Total expenses including loan loss provision were flat for the quarterly period, but declined for the year-to-date period whichgrowth in asset-based lending and commercial real estate. The mix shift also contributed to a decline in earning asset yield from the improvementprior quarter.
First Quarter 2021 versus First Quarter 2020
Net interest income increased $205 million in results forfirst quarter 2021 from $303 million infirst quarter 2020. The increase was primarily attributable to growth in average earning assets from the nine months ended September 30, 2017.IBKC merger and Truist branch acquisition in third quarter 2020, deposit pricing discipline, and PPP lending, partially offset by the negative impact of lower interest yields on loans from the decline of LIBOR and Prime rates.
The net interest margin in first quarter 2021 was down 53 basis points from 3.16% in first quarter 2020. The net interest spread of 2.52% in first quarter 2021 was down 37 basis points from the first quarter 2020. The decline in provisionnet interest margin for income taxes for both the three and nine monthsquarter ended September 30, 2017March 31, 2021 was due to favorable effective tax rate adjustments primarily associated with the reversalresult of a capital loss deferred tax valuation allowance108 basis point decrease in 2017.
Total revenue was $322.2 million and $957.3 million, respectively, forearning asset yields, as 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 thenegative impact of higherlower 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.
Return on average common equity (“ROE”) and ROTCE were 10.79 percent and 12.17 percent, respectively, in third quarter 2017 compared to 10.80 percent and 11.90 percent, respectively in third quarter 2016. Return on average assets (“ROA”) improved to .99 percent in third quarter 2017 from .97 percent in third quarter 2016. For 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. Common equity tier 1, Tier 1, Total capital, and Leverage ratios were 10.04 percent, 11.20 percent, 12.18 percent, and 9.60 percent, respectively, in third quarter 2017 compared to 9.81 percent, 11.03 percent, 12.09 percent and 9.52 percent, respectively, in third quarter 2016. Average assets increased 5 percent and 7 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. Period-end and average Shareholders’ equity increased to $2.9 billion in third quarter 2017 from $2.7 billion in third quarter 2016.




BUSINESS LINE REVIEW
Regional Banking

Pre-tax income within the regional banking segment increased 12 percent to $114.7 million in third quarter 2017 from $102.0 million in third quarter 2016. The increase in pre-tax income was primarily driven by higher revenue somewhat offset by an increase in expenses. For the nine months ended September 30, 2017, regional banking pre-tax income was $329.7 million compared to $237.6 million for the nine months ended September 30, 2016. The increase in pre-tax income for the nine months ended September 30, 2017 was driven by an increase in revenue coupled with a decline in expenses.
Total revenue increased 7 percent, or $18.1 million, to $273.7 million in third quarter 2017, from $255.6 million in third quarter 2016, driven by an increase in NII. The increase in NII was largely due to the favorable impact of higher interest rates on loans, higher average balances of commercial loans and noninterest-bearing deposits, as well as lower deposit costs relative to third quarter 2016. Noninterest income was $64.4 million and $65.1 million in third quarter 2017 and 2016, respectively. In third quarter 2017, fees from brokerage, management fees, and commissions increased as a result of increases in recurring revenue driven primarily by growth in FHN’s advisory business and favorable market conditions. Deposit transactions and cash management fee income also increased in third quarter 2017, largely driven by higher fee income associated with cash management activities. Noninterest income in third quarter 2016 was favorably impacted by a $1.8 million gain on the sale of property and higher fee income associated with derivative sales compared to third quarter 2017, resulting in a decline in noninterest income in third quarter 2017 relative to the prior year.
Provision expense was $8.6 million and $8.5 million in third quarter 2017 and 2016, respectively, reflecting continued strong performance in both the commercial and consumer portfolios. In third quarter 2017, reserves increased $2.8 million from second quarter driven by the C&I portfolio, partially offset by reserve decreases in both the consumerbenefit of purchase accounting accretion and commercial real estate portfolios. Net charge-offs were $5.7 million in third quarter 2017 compared to $3.5 million a year ago and the loan portfolio grew nearly $1.0 billion from third quarter 2016 driven by the C&I portfolio.
Noninterest expense was $150.5 million in third quarter 2017, up 4 percent from $145.1 million in third quarter 2016. ThePPP lending. An increase in expense was primarily driven by an $8.7 million net increase in loss accruals related to legal matters as a result of $4.4 million of loss accruals associated with trust services recognized in third quarter 2017 and a favorable $4.3 million reversal of loss accruals related to legal matters recognized in third quarter 2016. Expenses associated with advertising and public relations decreased from $5.0 million in third quarter 2016 to $4.0 million in third quarter 2017 due in large part to a promotional branding campaign in third quarter 2016.
Total revenue increased 9 percent to $792.8 million for the nine months ended September 30, 2017, from $726.8 million for the nine months ended September 30, 2016, driven by an increase in NII. The increase in NII for the year-to-date period was also driven by the favorable impact of higher interest rates on loans, higher average balances of commercial loans and noninterest-bearing deposits, and lower deposit costs relative to 2016. For the nine months ended September 30, 2017 and 2016, noninterest income was $188.1 million and $185.7 million, respectively. The increase in noninterest income was largely driven by an increase in brokerage, management fees, and commission income from the Bank's wealth management group and a $1.2 million increase in mortgage banking income, primarily related to FHN’s Community Reinvestment Act ("CRA") initiatives. Additionally, FHN recognized $.4 million in net securities gains for the nine months ended September 30, 2017 primarily the resulting from the call of a $4.4 million held-to-maturity municipal bond in second quarter 2017. Gains on the sale of fixed assets decreased $2.0 million for the nine months ended September 30, 2017 and fees from derivative transactions decreased $.9 million both reducing noninterest income in 2017 compared to 2016. Additionally, declines in fees from deposit transactions andexcess cash management and bankcard income also negatively impacted noninterest income for the nine months ended September 30, 2017net interest margin relative to the prior year. The decrease in feesDriven by disciplined deposit pricing, the cost of interest-bearing liabilities decreased 71 basis points from deposit transactions and cash management was primarily due to lower non-sufficient funds (“NSF”)/overdraft fees in first quarter 2017 driven by changes in consumer behavior and a modification of billing practices, somewhat mitigated by an increase in fee income associated with cash management activities. The decrease in bankcard income was the result of volume incentives received in 2016 driven by a significant new relationship.2020.
Provision expense was $11.9 millionAverage earning assets increased to $78.7 billion for first quarter 2021 from $38.8 billion for the nine months ended September 30, 2017 compared to $34.2 million for the nine months ended September 30, 2016. The net decrease in provision in 2017 reflects continued strong performance in both the commercial and consumer portfolios and historically low net charge-offs which continued to drive lower loss rates. Net charge-offs for the nine months ended September 30, 2017 decreased to $10.0 million from $20.4 million for the nine months ended September 30, 2016.
Noninterest expense decreased to $451.2 million for the nine months ended September 30, 2017 from $455.0 million for the nine months ended September 30, 2016. The decrease in noninterest expense was largely attributable tosame quarter of 2020, a $13.3 million net decline in loss accruals related to legal matters and a $4.3 million net decrease associated with fixed asset impairment charges.


Additionally, a recovery from a vendor recognized in first quarter 2017 related to previous overbillings also contributed to the expense decrease for the nine months ended September 30, 2017. During the nine months ended September 30, 2017 personnel expenses, operations services expenses and FDIC premium expense all increased relative to 2016, negatively impacting regional banking expenses. The$39.9 billion increase in personnel expense was largely driven by expenses associated with strategic hires in expansion markets and specialty areas, as well as higher incentive expense associated with loan/deposit growth and retention initiatives. The increase in operations services expense was primarily related to an increase in third party fees associated with FHN’s online digital banking platform and the increase in FDIC premium expense was due in large part to balance sheet growth.
Fixed Income
Pre-tax income in the fixed income segment was $8.7 million in third quarter 2017 compared to $15.1 million in third quarter 2016. For the nine months ended September 30, 2017, fixed income's pre-tax income was $18.1 million compared to $44.7 million for the nine months ended September 30, 2016. The decline in results in both periods was driven by lower revenues, somewhat offset by a decline in expenses.
NII increased from $2.4 million in third quarter 2016 to $6.0 million in third quarter 2017, primarily driven by an increase in loans held-for-sale as a resultthe IBKC merger and Truist branch acquisition.
FIRST HORIZON CORPORATION721Q21 FORM 10-Q REPORT

The following table presents the major components of the Coastal acquisition. Fixednet interest income product revenue decreased 24 percent to $45.0 million in thirdand net interest margin.
Table 2—Average Balances, Net Interest Income and Yields/Rates
Three Months Ended
(Dollars in millions)March 31, 2021December 31, 2020March 31, 2020
Average BalanceInterest Income/ExpenseYield/RateAverage BalanceInterest Income/ExpenseYield/RateAverage BalanceInterest Income/ExpenseYield/Rate
Assets:
Loans and leases:
Commercial loans and leases$45,703 $382 3.39 %$46,596 $405 3.46 %$23,891 $257 4.33 %
Consumer loans12,519 128 4.13 13,224 129 3.89 6,633 71 4.33 
Total loans and leases58,222 510 3.55 59,820 534 3.56 30,524 328 4.33 
Loans held for sale842 7 3.16 1,030 8 3.22 590 7 4.67 
Investment securities8,321 29 1.41 8,213 27 1.29 4,467 28 2.51 
Trading securities1,418 7 2.03 1,292 7 2.05 1,831 13 2.91 
Federal funds sold45 — 0.12 34 — 0.15 10 — 1.05 
Securities purchased under agreements to resell (a)554 — (0.14)405 — 0.02 817 2 1.13 
Interest-bearing deposits with banks9,269 2 0.10 6,201 2 0.10 549 2 1.13 
Total earning assets / Total interest income$78,671 $555 2.86 %$76,995 $578 2.99 %$38,788 $380 3.94 %
Cash and due from banks1,250 1,204 610 
Goodwill and other intangible assets, net1,857 1,871 1,560 
Allowance for loan and lease losses(949)(985)(354)
Other assets4,572 4,724 2,948 
Total assets$85,401 $83,809 $43,552 
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Savings$27,370 $12 0.19 %$27,090 $18 0.27 %$12,117 $26 0.87 %
Other interest-bearing deposits15,491 6 0.16 15,057 7 0.18 8,743 14 0.65 
Time deposits4,836 6 0.47 5,387 6 0.44 3,356 14 1.67 
Total interest-bearing deposits47,697 24 0.20 47,534 31 0.26 24,216 54 0.90 
Federal funds purchased996 — 0.10 831 — 0.10 747 2 1.19 
Securities sold under agreements to repurchase1,145 1 0.21 1,140 1 0.23 778 3 1.36 
Trading liabilities518 1 0.73 367 1 0.78 751 3 1.76 
Other short-term borrowings139 — 1.01 142 — 0.98 1,686 5 1.20 
Term borrowings1,670 18 4.39 1,913 20 4.16 791 8 4.01 
Total interest-bearing liabilities / Total interest expense$52,165 $44 0.34 %$51,927 $53 0.40 %$28,969 $75 1.05 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits23,284 22,105 8,666 
Other liabilities1,603 1,568 915 
Total liabilities77,052 75,600 38,550 
Shareholders' equity8,054 7,914 4,707 
Noncontrolling interest295 295 295 
Total shareholders' equity8,349 8,209 5,002 
Total liabilities and shareholders' equity$85,401 $83,809 $43,552 
Net earnings assets / Net interest income (TE) / Net interest spread$26,506 $511 2.52 %$25,068 $525 2.59 %$9,819 $305 2.89 %
Taxable equivalent adjustment(3)0.11 (3)0.12 (2)0.27 
Net interest income / Net interest margin (b)$508 2.63 %$522 2.71 %$303 3.16 %
(a) First quarter 2017 from $59.0 million in third quarter 2016, as average daily revenue (“ADR”) declined to $715 thousand in third quarter 2017 from $922 thousand in third quarter 2016. This decline reflects lower activity due to challenging market conditions (interest rate increases, a flattening2021 yield curve, and low levels of market volatility). Other product revenue was $10.8 million in third quarter 2017 down from $13.1 million in the prior year, primarilyis driven by lower fees from derivative and loan sales. Noninterest expense decreased 11 percent, or $6.3 million, to $53.1 million in third quarter 2017 from $59.4 million in third quarter 2016, due to lower variable compensation associated with the decrease in fixed income product revenue in third quarter 2017, somewhat offset by increased expenses due to the Coastal acquisition.negative market rates on reverse repurchase agreements
For the nine months ended September 30, 2017 and 2016, NII was $12.1 million and $8.2 million, respectively, also driven by an increase in loans held-for-sale. Fixed income product revenue was $133.3 million for the nine months ended September 30, 2017, down from $185.9 million in the prior year reflecting lower activity due to challenging market conditions (interest rate increases, a flattening yield curve, and low levels of market volatility). Other product revenue was $28.5 million and $31.4 million for the nine months ended September 30, 2017 and 2016, respectively. The decrease in other product revenue was largely due to lower fees from portfolio advisory services and derivative sales relative to the prior year. Noninterest expense decreased 14 percent, or $25.1 million, to $155.8 million for the nine months ended September 30, 2017 from $180.9 million for the nine months ended September 30, 2016. The expense decline during 2017 was primarily the result of lower variable compensation associated with the decrease in fixed income product revenue in 2017, somewhat offset by an increase in legal fees and increased expenses due to the Coastal acquisition.
Corporate
The pre-tax loss for the corporate segment was $47.4 million and $28.0 million for the quarters ended September 30, 2017 and 2016, respectively and $106.2 million and $77.0 million for the nine months ended September 30, 2017 and 2016, respectively.
Net interest expense was $14.0 million and $18.2 million, respectively in third quarter 2017 and 2016. The decline in(b) Calculated using total net interest expense was the resultincome adjusted for FTE assuming a statutory federal income tax rate of a higher yielding securities portfolio in 2017. Noninterest21% and, where applicable, state income (including securities gain/losses) was negative $9.5 million in third quarter 2017, compared to $5.1 million in third quarter 2016. The decrease in noninterest income was due to a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction recognized in third quarter 2017.taxes
Noninterest expense was $23.9 million in third quarter 2017 up from $14.9 million in third quarter 2016. The increase in expense
FIRST HORIZON CORPORATION731Q21 FORM 10-Q REPORT

.
Provision for third quarter 2017 was largely driven by $8.2 million of acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions.
Net interest expense was $43.1 million and $48.4 million, respectively for the nine months ended September 30, 2017 and 2016, respectively. The improvement in net interest expense for the year-to-date period of 2017 was also driven by a higher yielding securities portfolio. Noninterest income (including securities gain/losses) decreased to $2.2 million for the nine months ended September 30, 2017 from $15.8 million in the prior year. The decrease was primarily driven by a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction and a decline in net security gains. The decline in net securities gains was largely the result of a $1.7 million gain from an exchange of approximately $294 million of


available-for-sale (“AFS”) debt securities recognized in 2016. For the nine months ended September 30, 2017, deferred compensation income increased $2.3 million, offsetting a portion of the decline in noninterest income. Deferred compensation income fluctuates with changes in the market value of the underlying investments and is mirrored by changes in deferred compensation expense which is included in personnel expense.
Noninterest expense was $65.4 million and $44.3 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in noninterest expense in 2017 was largely due to a $13.7 million increase in acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions, a $3.7 million increase in salary expenses, and a $3.2 million charitable contribution to the First Tennessee Foundation made in second quarter 2017. To a lesser extent, higher deferred compensation expense also contributed to the expense increase for the nine months ended September 30, 2017, but was offset by $2.2 million of deferred compensation BOLI gains recognized in second quarter 2017. Additionally, a $2.4 million decrease of negative valuation adjustments associated with derivatives related to prior sales of Visa Class B shares offset a portion of the overall expense increase for the year-to-date period.
Non-Strategic
The non-strategic segment had pre-tax income of $9.4 million in third quarter 2017 compared to $7.1 million in third quarter 2016. For the nine months ended September 30, 2017, the non-strategic segment had pre-tax income of $41.7 million compared to $58.2 million for the nine months ended September 30, 2016. The increase in results for the quarterly period was driven by lower expenses in 2017 relative to the prior year which more than offset a decline in revenue. The decline in results for the year-to-date period was primarily driven by a lower loan loss provision credit in 2017 relative to the prior year and a decline in revenues, somewhat offset by lower expenses.
Total revenue was $10.2 million in third quarter 2017 down from $16.7 million in third quarter 2016. NII declined 19 percent to $8.5 million in third quarter 2017, consistent with the run-off of the non-strategic loan portfolios. Noninterest income (including securities gains/losses) was $1.7 million in third quarter 2017 down from $6.2 million in third quarter 2016. The decrease in noninterest income was largely attributable to a $4.4 million gain recognized in third quarter 2016 primarily related to recoveries associated with prior legacy mortgage servicing sales.
The provision for loan losses within the non-strategic segment was a provision credit of $8.6 million in third quarter 2017 compared to a provision credit of $4.5 million in the prior year. Overall, the non-strategic segment continued to reflect stable performance combined with lower loan balances as reserves declined by $9.1 million from December 31, 2016, to $38.8 million as of September 30, 2017.Credit Losses remain historically low as the non-strategic segment had net recoveries of $3.3 million in third quarter 2017 compared to net recoveries of $1.2 million a year ago.
Noninterest expense was $9.4 million in third quarter 2017 compared to $14.2 million in third quarter 2016. The decrease in expense was primarily driven by lower legal fees and by loss accruals related to legal matters which decreased from $4.5 million in third quarter 2016 to $3.6 million in third quarter 2017.
For the nine months ended September 30, 2017, total revenue was $31.4 million, down from $42.2 million for the nine months ended September 30, 2016. NII declined 19 percent to $26.5 million during 2017, consistent with the run-off of the non-strategic loan portfolios. Noninterest income (including securities gains/losses) decreased to $4.9 million in 2017 from $9.6 million in 2016. The decrease in noninterest income was largely attributable to the $4.4 million gain recognized in third quarter 2016 primarily related to recoveries associated with prior legacy mortgage servicing sales mentioned above.
The provision for loancredit losses withinincludes the non-strategic segment was a provision credit of $14.9 million for the nine months ended September 30, 2017 compared to a provision credit of $23.2 million for the nine months ended September 30, 2016. The same factors impacting the quarterly change in loan loss provisioning levels also drove the change for the year-to-date period.
For the nine months ended September 30, 2017, noninterest expense was $4.6 million compared to $7.2 million for the nine months ended September 30, 2016. The net decrease in expense during 2017 relative to the prior year was driven by a decline in legal fees and by lower loss accruals related to legal matters which were $3.7 million in 2017 compared to $8.0 million in 2016. A smaller expense reversal to the mortgage repurchase provision for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, offset a portion of the expense decline.


INCOME STATEMENT REVIEW
Total consolidated revenue decreased 3 percent to $322.2 million in third quarter 2017 from $333.7 million in third quarter 2016, as an increase in NII was more than offset by lower noninterest income. Total expenses increased to $236.9 million in third quarter 2017 from $233.6 million in third quarter 2016.
Total consolidated revenue for the nine months ended September 30, 2017 was $957.3 million compared to $961.9 million for the nine months ended September 30, 2016. The decrease in revenue for the 2017 relative to 2016 was the result of lower noninterest income (largely associated with a decline in fixed income product revenue) which more than offset an increase in NII. Total expenses decreased 2 percent to $677.0 million for the nine months ended September 30, 2017, from $687.3 million for the nine months ended September 30, 2016.
NET INTEREST INCOME
Net interest income increased 13 percent, or $24.6 million, to $209.8 million in third quarter 2017 from $185.2 million in third quarter 2016. The increase in NII in third quarter 2017 was primarily the result of the favorable impact of higher interest rates on loansloan and loan growth within regional banking. To a lesser extent, higher average balances of loans held-for-sale positively impacted NII in third quarter 2017. These increases were partially offset by the continued run-off the non-strategic loan portfolios. For the nine months ended September 30, 2017, NII increased 13 percent to $600.2 million from $533.5 million. The increase in NII for the year-to-date period was primarily driven by loan growth within regional bankinglease losses and the favorable impact of higher interest rates on loans, somewhat offset by the continued run-off of the non-strategic loan portfolios. Average earning assets were $26.6 billion and $25.3 billion in third quarter 2017 and 2016, respectively, and $26.6 billion and $24.8 billionprovision for the nine months ended September 30, 2017 and 2016, respectively. The increase in both periods relative to 2016 was primarily driven by loan growth within regional banking and an increase in loans held-for-sale ("HFS") associated with the Coastal acquisition. These increases were somewhat offset by continued run-off of the non-strategic loan portfolios, a decrease in securities purchased under agreements to resell and a smaller investment securities portfolio relative to the prior year. The increase in loans HFS was less for the year-to-date period, due to the timing of the Coastal acquisition. Additionally, for the nine months ended September 30, 2017 higher average balances of excess cash held at the Federal Reserve (“Fed”) contributed to the increase in average earning assets, but were somewhat offset by a decline in average fixed income trading securities.
For purposes of computing yields and the net interest margin, FHN adjusts net interest income to reflect tax exempt income on an equivalent pre-tax basis which provides comparability of net interest income arising from both taxable and tax-exempt sources. The consolidated net interest margin improved to 3.19 percent in third quarter 2017 from 2.96 percent in third quarter 2016. The net interest spread was 2.96 percent in third quarter 2017, up 13 basis points from 2.83 percent in third quarter 2016. For the nine months ended September 30, 2017, the net interest margin was 3.06 percent, up 14 basis points from 2.92 percent for the nine months ended September 30, 2016. The net interest spread increased to 2.86 percent for the nine months ended September 30, 2017 from 2.79 percent in 2016. The increase in NIM in both periods was primarily the result of the favorable impact of higher interest rates on loans. For the year-to-date period in 2017 NIM was negatively impacted by an increase in average excess cash held at the Fed.


Table 1—Net Interest Margin
 Three Months Ended
September 30		 Nine Months Ended
September 30
 2017 2016 2017 2016
Assets:       
Earning assets:       
Loans, net of unearned income:       
Commercial loans4.13% 3.63% 4.01% 3.60%
Consumer loans4.23
 4.08
 4.19
 4.08
Total loans, net of unearned income4.16
 3.76
 4.06
 3.74
Loans held-for-sale4.53
 4.36
 4.47
 4.23
Investment securities:       
U.S. treasuries1.26
 0.97
 1.08
 0.98
U.S. government agencies2.54
 2.34
 2.57
 2.40
States and municipalities—
 9.01
 9.43
 7.55
Corporate bonds5.25
 5.25
 5.25
 5.25
Other3.67
 2.44
 3.32
 2.50
Total investment securities2.60
 2.36
 2.61
 2.42
Trading securities3.06
 2.46
 3.00
 2.65
Other earning assets:       
Federal funds sold1.75
 0.99
 1.58
 1.12
Securities purchased under agreements to resell0.88
 0.08
 0.64
 0.11
Interest bearing cash1.24
 0.49
 0.92
 0.49
Total other earning assets1.03
 0.25
 0.82
 0.29
Interest income / total earning assets3.76% 3.30% 3.57% 3.27%
Liabilities:       
Interest-bearing liabilities:       
Interest-bearing deposits:       
Savings0.50% 0.23% 0.46% 0.22%
Other interest-bearing deposits0.46
 0.19
 0.37
 0.18
Time deposits0.97
 0.86
 0.94
 0.83
Total interest-bearing deposits0.51
 0.26
 0.46
 0.25
Federal funds purchased1.24
 0.52
 0.98
 0.51
Securities sold under agreements to repurchase1.06
 0.09
 0.70
 0.09
Fixed income trading liabilities2.19
 1.76
 2.26
 1.91
Other short-term borrowings1.22
 0.61
 1.24
 0.70
Term borrowings3.51
 2.67
 3.24
 2.52
Interest expense / total interest-bearing liabilities0.80
 0.47
 0.71
 0.48
Net interest spread2.96% 2.83% 2.86% 2.79%
Effect of interest-free sources used to fund earning assets0.23
 0.13
 0.20
 0.13
Net interest margin (a)
3.19% 2.96% 3.06% 2.92%
Certain previously reported amounts have been reclassified to agree with current presentation.

(a)Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 35 percent and, where applicable, state income taxes.

FHN’s net interest margin is primarily impacted by balance sheet factors such as interest-bearing cash levels, deposit balances, trading inventory levels, and commercial loan volume, as well as loan fees, cash basis income, and changes in short-term interest rates. FHN’s balance sheet is positioned to benefit primarily from a rise in short-term interest rates. For the remainder of 2017, NIM will depend on the levels of interest-bearing cash; extent of Fed interest rate increases; commercial loan


balances, particularly in specialty loan portfolios; and, levels of trading inventory balances. With interest-bearing cash and trading inventory levels, higher balances typically compress margin.
PROVISION FOR LOAN LOSSES
unfunded lending commitments. The provision for loancredit losses is the charge to or credit to earnings that management determines to beexpense necessary to maintain the ALLL and the accrual for unfunded lending commitments at a sufficient level reflectinglevels appropriate to absorb management’s estimate of probable incurredcredit losses expected over the life of the loan and lease portfolio and the portfolio of unfunded loan commitments.
The provision for credit losses benefit of $45 million compared to expense of $1 million in fourth quarter
2020, largely reflecting continued improvement in the loan portfolio. There was nooverall macroeconomic outlook and a reduction in consumer loans. The provision for loancredit losses recognized for the three months ended September 30, 2017 compared to a provision expense of $4.0 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017 and 2016, the provision for loan losses was a credit of $3.0 million and an expense of $11.0 million, respectively. For the three and nine months ended September 30 2017, FHN’s asset quality metrics remained strong. In both third quarter 2017 and 2016, net charge-offs as a percentage of loans was .05 percent. Net charge-offs as a percentage of loans declined to .03 percent for the nine months ended September 30, 2017 from .15 percent for the nine months ended September 30, 2016. The ALLL decreased $7.2$199 million from year-end to $194.9 million as of September 30, 2017. For additional information aboutfirst quarter 2020 primarily from an improvement in the provision for loan losses refer to the Regional Banking and Non-Strategic sections of the Business Line Review section in this MD&A. overall macroeconomic outlook.
For additional information about general asset quality trends, refer to the Asset Quality section in this MD&A.
NONINTEREST INCOME

Noninterest income (including securities gains/(losses)) was $112.4 million in third quarter 2017 and represented 35 percentIncome

The following table presents the significant components of total revenue compared to $148.5 million in third quarter 2016 and 45 percent. For the nine months ended September 30, 2017 and 2016 noninterest income was $357.0 million and $428.4 million, respectively, representing 37 percent and 45 percent of total revenue. The decrease in noninterest income for both 2017each of the periods was largely driven by lower fixed income product revenue and a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction.presented:
Fixed Income
Table 3 - Noninterest Income
Fixed income noninterest income was $55.8 million and $161.5 million for the three and nine months ended September 30, 2017, down 22 percent and 25 percent, respectively, from $71.7 million and $216.6 million for the three and nine months ended September 30, 2016. The decline in both periods reflects lower activity due
Three Months Ended1Q21 vs. 1Q201Q21 vs. 4Q20
(Dollars in millions)March 31, 2021December 31, 2020March 31, 2020$ Change% Change$ Change% Change
Noninterest income:
Fixed income$126 $104 $96 $30 31 %$22 21 %
Mortgage banking and title income53 57 2 51 NM(4)(7)%
Deposit transactions and cash management42 45 30 12 40 %(3)(7)%
Brokerage, management fees and commissions20 19 16 4 25 %1 5 %
Trust services and investment management12 12 7 5 71 %— — %
Bankcard income11 12 7 4 57 %(1)(8)%
Other income34 39 16 18 NM(5)(13)%
Total noninterest income$298 $288 $174 $124 71 %$10 3 %
Certain previously reported amounts have been reclassified to challenging market conditions (interest rate increases, a flattening yield curve, and low levels of market volatility). Revenue from other products decreased 16 percent to $10.7 million in third quarter 2017 from $12.7 million in third quarter 2016, largely driven by lower fees from derivative and loan sales. For the nine months ended September 30, 2017, revenue from other products decreased to $28.2 million from $30.8 million for the nine months ended September 30, 2016. The decline in other product revenue for the year-to-date period of 2017 was largely due to lower fees from portfolio advisory services and derivative sales relative to the same period of 2016. Theagree with current presentation.
NM – Not meaningful

The following table summarizes FHN’s fixed income noninterest income for each of the three and nine months ended September 30, 2017 and 2016.
periods presented:
Table 2—4—Fixed Income Noninterest Income
 
Three Months Ended1Q21 vs. 1Q201Q21 vs. 4Q20
(Dollars in millions)March 31, 2021December 31, 2020March 31, 2020$ Change% Change$ Change% Change
Noninterest income:
Fixed income$115 $94 $78 $37 47 %$21 22 %
Other product revenue11 10 18 (7)(39 %)1 10 %
Total noninterest income$126 $104 $96 $30 31 %$22 21 %



  Three Months Ended
September 30		 Percent Change Nine Months Ended
September 30		 
Percent
Change
(Dollars in thousands)
 2017 2016  2017 2016 
Noninterest income:            
Fixed income $45,020
 $59,003
 (24)% $133,302
 $185,865
 (28)%
Other product revenue 10,738
 12,745
 (16)% 28,244
 30,773
 (8)%
Total fixed income noninterest income $55,758
 $71,748
 (22)% $161,546
 $216,638
 (25)%


FIRST HORIZON CORPORATION741Q21 FORM 10-Q REPORT

Deposit Transactions
First Quarter 2021 versus Fourth Quarter 2020
Compared to fourth quarter 2020, noninterest income increased $10 million, or 3%, primarily reflecting strong fixed income. Fixed income increased $22 million, or 21%, driven by continued elevated liquidity and Cash Management
Fees fromweak loan demand among fixed income customers, as well as interest rate volatility.This increase was partially offset by decreases in mortgage banking and title income, deposit transactionstransaction and cash management activitiesfees, deferred compensation and derivative sales.
First Quarter 2021 versus First Quarter 2020
Noninterest income of $298 million for first quarter 2021, increased $124 million, or 71%, compared to $28.0
first quarter 2020, primarily driven by the impact of the IBKC merger as well as strong fixed income revenue during the quarter. Fixed income increased $30 million, in thirdor 31%, from first quarter 2017 from $27.22020. Fixed income product revenue of $115 million in third quarter 2016increased 47%, largely driven by higher fee income associated with cash management activities. For the nine months ended September 30, 2017favorable market conditions including market volatility and 2016increased depository liquidity. Revenue from other products of $11 million decreased 39%, primarily driven by lower fees from deposit transactionsderivative and cash management activities were $80.4 million and $81.0 million respectively. The decrease for the nine months ended September 30, 2017 was primarily the result of lower NSF/overdraft fees in 2017 driven by changes in consumer behavior and a modification of billing practices, but was partially mitigated by an increase in fee income associated with cash management activities.loan sales.
Brokerage, Management Fees and Commissions


Noninterest income from brokerage, management fees and commissions increased 10 percent to $11.9 million in third quarter 2017 from $10.8 million in third quarter 2016. For the nine months ended September 30, 2017 noninterest income from brokerage, management fees and commissions increased 12 percent to $35.9 million from $31.9 million for the nine months ended September 30, 2016. The increase in both periods was due in large part to increases in recurring revenue driven primarily by growth in FHN's advisory business and favorable market conditions.Expense
Bankcard Income
Bankcard income was $6.2 million and $17.2 million for the three and nine months ended September 30, 2017 compared to $6.3 million and $18.1 million for the three and nine months ended September 30, 2016. The decline in bankcard income for the nine months ended September 30, 2017 relative to the prior year was primarily the result of volume incentives received in 2016 driven by a significant new relationship.

Securities Gains/(Losses)
Net securities gains for the three months ended September 30, 2017 and 2016 were not material. Net securities gains for the nine months ended September 30, 2017 were $.5 million and were primarily the result of the call of a $4.4 million held-to-maturity municipal bond within the regional banking segment in second quarter 2017. For the nine months ended September 30, 2016, FHN recognized net securities gains of $1.5 million, which was primarily the result of a $1.7 million gain on an exchange of approximately $294 million of AFS debt securities.
Other Noninterest Income
Other income includes revenues from ATM and interchange fees, other service charges, mortgage banking (primarily within the non-strategic and regional banking segments), electronic banking fees, letter of credit fees, revenue related to deferred compensation plans (which are mirrored by changes in noninterest expense), insurance commissions, gains/(losses) on the extinguishment of debt, and various other fees.
Revenue from all other income and commissions decreased to $43 thousand in third quarter 2017 from $21.8 million in third quarter 2016. For the nine months ended September 30, 2017 revenue from all other income and commissions was $29.1 million, down 39 percent from $47.4 million for the nine months ended September 30, 2016. The decrease in all other income and commissions in both periods was primarily due to a $14.3 million loss from the repurchase of equity securities previously included in a financing transaction. Additionally, a decrease in mortgage banking income associated with a $4.4 million gain recognized in third quarter 2016 primarily related to recoveries associated with prior legacy mortgage servicing sales and a $1.8 million gain on the sales of property recognized in third quarter 2016 also contributed to the decline in other noninterest income for the three and nine months ended September 30, 2017 relative to the comparative periods of 2016. The following table provides detail regarding FHN’s other income.presents the significant components of noninterest expense for each of the periods presented:




Table 3—Other Income5 - Noninterest Expense
Three Months Ended1Q21 vs. 1Q201Q21 vs. 4Q20
(Dollars in millions)March 31, 2021December 31, 2020March 31, 2020$ Change% Change$ Change% Change
Noninterest expense:
Personnel expense$318 $319 $183 $135 74 %$(1)NM
Net occupancy expense37 36 20 17 85 %1 3 %
Computer software28 27 16 12 75 %1 4 %
Legal and professional fees14 19 9 5 56 %(5)(26)%
Operations services16 17 12 4 33 %(1)(6)%
Equipment expense11 13 9 2 22 %(2)(15)%
Amortization of intangible assets14 15 5 9 NM(1)(7)%
Other expense106 62 48 58 NM4471 %
Total noninterest expense$544 $508 $302 $242 80 %$36 7 %
  Three Months Ended
September 30		 
Percent
Change
 Nine Months Ended
September 30		 Percent Change
(Dollars in thousands) 2017 2016  2017 2016 
Other income:            
ATM interchange fees $3,137
 $3,081
 2 % $8,998
 $8,918
 1 %
Other service charges 2,954
 3,004
 (2)% 9,047
 8,713
 4 %
Mortgage banking 1,354
 5,524
 (75)% 3,883
 7,395
 (47)%
Electronic banking fees 1,282
 1,398
 (8)% 3,911
 4,176
 (6)%
Letter of credit fees 1,211
 981
 23 % 3,369
 3,157
 7 %
Deferred compensation (a) 1,128
 1,038
 9 % 4,446
 2,162
 NM
Insurance commissions 567
 1,262
 (55)% 2,042
 2,301
 (11)%
Gain/(loss) on extinguishment of debt (b) (14,329) —
 NM
 (14,329) —
 NM
Other 2,739
 5,518
 (50)% 7,684
 10,594
 (27)%
Total $43

$21,806
 NM
 $29,051
 $47,416
 (39)%

Certain previously reported amounts have been reclassified to agree with current presentation.
NM – Not meaningful
(a)Deferred compensation market value adjustments are mirrored by changes in deferred compensation expense which is included in employee compensation, incentives, and benefits expense.
(b) Loss on extinguishment of debt for the three

First Quarter 2021 versus Fourth Quarter 2020
Compared to fourth quarter 2020, noninterest expense increased $36 million, or 7%, driven by a $36 million increase in merger and nine months ended September 30, 2017 relatesacquisition related expense largely tied to the repurchase of equity securities previouslyIBKC merger integration costs. First quarter 2021 also included $10 million in a financing transaction.derivative valuation adjustments related to prior Visa Class-B share sales.
First Quarter 2021 versus First Quarter 2020
NONINTEREST EXPENSE
Total noninterest expense of $544 million increased $242 million, or 80%, from first quarter 2020 primarily attributable to the impact of the IBKC merger and Truist branch acquisition. In addition to $236.9 million in third quarter 2017 from $233.6 million in third quarter 2016. Thethe impact of
the merger and branch acquisition, the increase in noninterest personnel expense in third quarter 2017 was primarily driven by higher acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions and a net increase in loss accruals related to legal matters compared to third quarter 2016. Lower personnel-related expenses and legal fees relative to third quarter 2016 favorably impacted expense in third quarter 2017, offsetting a portion of the net increase in expenses. For the nine months ended September 30, 2017, total noninterest expense decreased 2 percent, or $10.3 million, to $677.0 million from $687.3 million. The decrease in noninterest expense for the year-to-date period was primarily the result of a reduction of loss accruals related to legal matters, lower personnel expenses, and lower 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 September 30, 2017, compared to the nine months ended September 30, 2016, offset a portion of the expense decline.
Employee Compensation, Incentives, and Benefits
Employee compensation, incentives, and benefits (personnel expense), the largest component of noninterest expense, decreased 5 percent and 3 percent for the three and nine months ended September 30, 2017 to $137.8 million and $411.8 million, respectively, from $145.1 million and $425.6 million for the three and nine months ended September 30, 2016. The decrease in personnel expense for both the quarterly and year-to-date periods was primarily driven by a decrease in variable compensation associated with lower fixed income product sales revenue within FHN’s fixed income operating segment relative to the comparative periods of 2016. For the quarterly period FHN recognized $1.5 million of personnel expense related to acquisition- and integration-related expenses, offsetting a portion of the decline in personnel expense. For the nine months ended September 30, 2017, FHN recognizedreflects an increase in personnel expenses associated with strategic hiresrevenue-based compensation due to increases in expansion marketsfixed income and specialty areas, as well as higher incentive expense associated with loan/deposit growth and retention initiatives within the regionalmortgage banking segment in 2017. Additionally, FHN recognized $2.9 million of personnel expense related to acquisition- and integration-related expenses during the nine months ended September 30, 2017 and an increase in deferred compensation expense relativedriven by equity market valuations. Other expense in first quarter 2021 included $33 million in asset impairments related to 2016, which somewhat offset the decline in personnel expenses for the year-to-date period. Personnel expense for the nine months ended September 30, 2017 was favorably impacted by $2.2 million of deferred compensation BOLI gains recognized in second quarter 2017.



Operations Services
Operations servicesIBKC merger integration efforts. Total merger and acquisition expense was $10.8$70 million in first quarter 2021 compared to $6 million in first quarter 2020.
Income Taxes
FHN recorded income tax expense of $71 million in first quarter 2021, compared to $56 million in fourth quarter 2020 and $5 million in first quarter 2020. The effective tax rate was approximately 23.2%, 18.7%,
FIRST HORIZON CORPORATION751Q21 FORM 10-Q REPORT

and $10.5 million for22.4% for the three months ended September 30, 2017March 31, 2020, December 31, 2020 and 2016,March 31, 2020, respectively. For the nine months ended September 30, 2017 operation services expense increased 7 percent to $33.2 million from $30.9 million for the nine months ended September 30, 2016, primarily related to an increase in third party fees associated with
FHN’s online digital banking platform.
Professional Fees
Professional fees were $6.6 million in third quarter 2017 compared to $4.9 million in third quarter 2016. For the nine months ended September 30, 2017, professional fees increased to $21.0 million from $14.3 million for the nine months ended September 30, 2016. The increase in professional fees for both periods was primarily driven by acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions.
FDIC Premium Expense
FDIC premium expense was $6.1 million in third quarter 2017, compared to $5.7 million in third quarter 2016. For the nine months ended September 30, 2017 FDIC premium expense was $17.7 million, up from $15.5 million for the nine months ended September 30, 2016. The increase in FDIC premium expense for both periods was due in large part to balance sheet growth.
Legal Fees
Legal fees decreased $2.7 million and $4.7 million during the three and nine months ended September 30, 2017 to $2.1 million and $10.8 million, respectively, from $4.8 million and $15.5 million for the three and nine months ended September 30, 2016. Legal fees fluctuate primarily based on the status, timing, type, and composition of cases or other projects.
Repurchase and Foreclosure Provision
For the three months ended September 30, 2017 and 2016, the mortgage repurchase and foreclosure provision was not material. For the nine months ended September 30, 2017 FHN recognized a $22.6 million reversal of mortgage repurchase and foreclosure provision primarily as a result of the settlement of certain repurchase claims in second quarter 2017, which favorably impacted expenses in 2017. Similarly, during the nine months ended September 30, 2016, FHN recognized a $31.6 million reversal of mortgage repurchase and foreclosure provision as a result of the settlement of certain repurchase claims, which also resulted in a favorable impact on expenses in 2016.
Other Noninterest Expense
Other expense includes losses from litigation and regulatory matters, travel and entertainment expenses, other insurance and tax expense, customer relations expenses, costs associated with employee training and dues, supplies, tax credit investments expenses, miscellaneous loan costs, expenses associated with OREO, and various other expenses.
All other expenses increased to $27.7 million in third quarter 2017 from $19.9 million in third quarter 2016, primarily driven by a $7.9 million net increase in loss accruals related to legal matters. Additionally, all other expenses in third quarter 2017 included $2.2 million of acquisition- and integration-related expenses. For the nine months ended September 30, 2017 all other expenses were $70.9 million compared to $88.9 million for the nine months ended September 30, 2016. The decline in all other expenses for the year-to-date period was primarily driven by a decline in loss accruals related to legal matters. In the nine months ended September 30, 2017, FHN experienced a $4.6 million net decrease in fixed asset impairments and lease abandonment charges and a $2.4 million decrease in negative valuation adjustments associated with derivatives related to prior sales of Visa Class B shares, which also contributed to the expense decline during 2017. Additionally, other insurance and taxes decreased to $7.2 million for the nine months ended September 30, 2017 from $9.0 million for the comparable period of 2016 largely driven by favorable adjustments to franchise taxes related to community reinvestment efforts. For the nine months ended September 30, 2017 FHN recognized a $3.2 million charitable contribution to the First Tennessee Foundation, $2.2 million of acquisition- and integration-related expenses previously mentioned, and a $2.0 million vendor payment adjustment, all of which negatively impacted expense for the year-to-date period of 2017 relative to 2016.




Table 4—Other Expense
  Three Months Ended
September 30		 
Percent
Change
 Nine Months Ended
September 30		 Percent Change
(Dollars in thousands)
 2017 2016  2017 2016 
Other expense:     

      
Litigation and regulatory matters $8,162
 $260
 NM
 $8,403
 $25,785
 (67)%
Travel and entertainment 2,798
 2,478
 13 % 8,308
 7,035
 18 %
Other insurance and taxes 2,396
 2,625
 (9)% 7,229
 8,952
 (19)%
Customer relations 1,361
 1,442
 (6)% 4,240
 4,804
 (12)%
Employee training and dues 1,198
 1,360
 (12)% 4,194
 4,088
 3 %
Supplies 928
 1,158
 (20)% 2,884
 3,114
 (7)%
Tax credit investments 762
 788
 (3)% 2,646
 2,325
 14 %
Miscellaneous loan costs 757
 676
 12 % 2,078
 1,958
 6 %
OREO 303
 815
 (63)% 953
 125
 NM
Other 9,033
 8,326
 8 % 29,954
 30,669
 (2)%
Total $27,698

$19,928
 39 % $70,889

$88,855
 (20)%

NM – Not meaningful
INCOME TAXES
FHN recorded an income tax provision of $13.6 million in third quarter 2017, compared to $28.5 million in third quarter 2016. For the nine months ended September 30, 2017 and 2016, FHN recorded an income tax provision of $57.9 million and $82.8 million, respectively. The effective tax rate for thethree and nine months ended September 30, 2017 were approximately 16 percent and 20 percent compared to 30 percent and 31 percent for the three and nine months ended September 30, 2016. FHN’s effectiveeffective tax rate is favorably affected by recurring items such as bank-owned life insurance, tax-exempt income, and tax credits and other tax benefits from affordable housingtax credit investments. The company’seffective rate is unfavorably affected by the non-deductibility of a portion of FHN's FDIC premium, executive compensation and merger expenses. FHN’s effective tax rate also may be affected by items that may occur in any given periodperiod but are not consistent from period to period, such as changes in the deferred tax asset valuation allowance and changes in unrecognized tax benefits. The decrease in the effective tax rate for the three and nine months ended September 30, 2017 relative to the prior year was primarily related to the reversal of the valuation allowance for the deferred tax asset related to its 2012 federal capital loss carryforward based on capital gain transactions initiated in second quarter 2017. See Note 15 – Income Taxes in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2016, for additional information related to FHN's valuation allowance related to its capital loss carryforward.also may be affected by items resulting from business combinations.
A deferred tax asset (“DTA”) or deferred tax liability (“DTL”) is recognized for the tax consequences of temporary differences between the financial statement carrying amountsamounts and the tax bases of existing assets and
liabilities. The tax consequence is calculated by applying enacted statutory tax rates, applicable to future years, to these temporary differences. As of September 30, 2017,March 31, 2021, FHN’s gross DTA (net of a valuation allowance) and gross DTL were $282.3$472 million and $91.6$448 million, respectively, resulting in a net DTA of $190.7$24 million at September 30, 2017,at March 31, 2021, compared with a net DTA of $157.2less than $1 million at September 30, 2016. The increase in the DTA since the third quarter of 2016 is primarily the result of the reversal of a capital loss deferred tax asset valuation allowance. December 31, 2020.
As of September 30, 2017,March 31, 2021, FHN had gross deferred tax asset balances related to federal and state income tax carryforwards of $57.3$39 million and $14.1$9 million, respectively, which will expire at various dates.dates.
As of September 30, 2017 FHN did not have a valuation allowance against its federal capital loss carryforwards. As of September 30, 2016, FHN's valuation allowance against its federal capital loss carryforwards was $40.3 million. FHN’s gross DTA after valuation allowance was $ 282.3 million and $289.2 million as of September 30, 2017 and 2016, respectively. Based on current analysis, FHN believes that its abilityit will be able to realize the remainingvalue of its DTA and that no valuation allowance is more likely than not.needed. FHN monitors its DTA and the need for a valuation allowance on a quarterly basis. A significant adverse change in FHN’s taxable earnings outlook could result in the need for further valuation allowances. In the event FHN determines that the deferred tax assets are realizable in the future in excess of their net recorded amount, FHN makes an adjustment to the valuation allowance, which reduces the effective tax rate and provision for income taxes.
Tax reform, including the reduction of the corporate tax rate, is expected to be on the legislative agenda this year. A rate reduction, if enacted, will have a net beneficial effect to FHN over the long-term; however, certain deductions may be eliminated or reduced as a part of tax reform which could reduce the beneficial effect of the rate reduction. Additionally, a rate


reduction would result in the impairment of a portion of the deferred tax asset in the quarter that it is signed into law by the President. The actual impacts are subject to significant uncertainties including whether, and to what extent, rate reductions or broader tax reform can actually be executed and, if executed, the timing.
STATEMENT OF CONDITION REVIEW
Total period-end assets were $29.6 billion on September 30, 2017, up 4 percent from $28.6 billion on December 31, 2016. Average assets increased to $28.9 billion in third quarter 2017 from $28.6 billion in fourth quarter 2016. A net increase in the loan portfolios and higher balances of loans held-for-sale significantly contributed to the increase in total assets on a period-end and average basis, but were somewhat offset by a decline in the levels of interest bearing cash on hand during the quarter and at September 30, 2017 relative to December 31, 2016. Additionally, an increase in Fixed income trading inventory on September 30, 2017 also contributed to the increase in total assets on a period-end basis.
Total period-end liabilities were $26.7 billion on September 30, 2017, a 3 percent increase from $25.9 billion on December 31, 2016. Average liabilities increased to $26.0 billion in third quarter 2017, from $25.9 billion in fourth quarter 2016. The net increase in period-end and average liabilities relative to fourth quarter 2016 was primarily due to increases in short-term borrowings. Deposits decreased relative to fourth quarter 2016 on both a period-end and average basis.
EARNING ASSETS
Earning assets consist of loans, investment securities, other earning assets such as trading securities, interest-bearing cash, and loans HFS. Average earning assets increased 1 percent to $26.6 billion in third quarter 2017 from $26.4 billion in fourth quarter 2016. A more detailed discussion of the major line items follows.
Loans
Period-end loans increased 3 percent to $20.2 billion as of September 30, 2017 from $19.6 billion on December 31, 2016 and September 30, 2016. Average loans for third quarter 2017 were $19.8 billion compared to $19.4 billion for fourth quarter 2016 and $18.7 billion for third quarter 2016. The increase in period-end and average loan balances from fourth and third quarters 2016 was primarily due to organic growth in several of the commercial loan portfolios within the regional banking segment, somewhat offset by lower balances of loans to mortgage companies and the continued run-off of consumer loan portfolios within the non-strategic segment. The increase in average loan balances from third quarter 2016 was also impacted by the purchase of franchise finance loans in third quarter 2016.
Table 5—Average Loans
  
Quarter Ended
September 30, 2017
 
Quarter Ended
December 31, 2016
  
(Dollars in thousands) Amount Percent of total Amount Percent of total Growth Rate
Commercial:          
Commercial, financial, and industrial $12,474,188
 63% $11,987,561
 62% 4 %
Commercial real estate 2,211,831
 11
 2,089,314
 11
 6 %
Total commercial 14,686,019
 74
 14,076,875
 73
 4 %
Consumer:          
Consumer real estate (a) 4,398,550
 22
 4,545,647
 23
 (3)%
Permanent mortgage 405,287
 2
 429,914
 2
 (6)%
Credit card, OTC and other 354,807
 2
 361,311
 2
 (2)%
Total consumer 5,158,644
 26
 5,336,872
 27
 (3)%
Total loans, net of unearned income $19,844,663
 100% $19,413,747
 100% 2 %
(a) Balance as of September 30, 2017 and December 31, 2016, includes $27.3 million and $37.2 million of restricted and secured real estate loans, respectively.
C&I loans are the largest component of the commercial portfolio comprising 85 percent of average commercial loans in both third quarter 2017 and fourth quarter 2016. C&I loans increased 4 percent, or $.5 billion, from fourth quarter 2016 due to net loan growth within several of the regional bank’s portfolios including commercial, asset-based lending ("ABL"), and franchise


finance, somewhat offset by lower balances of loans to mortgage companies. Commercial real estate loans increased 6 percent to $2.2 billion in third quarter 2017 because of growth in expansion markets and increased funding under existing commitments.
Average consumer loans declined 3 percent, or $.2 billion, from fourth quarter 2016 to $5.2 billion in third quarter 2017. The consumer real estate portfolio (home equity lines and installment loans) declined $147.1 million, to $4.4 billion, as the continued wind-down of portfolios within the non-strategic segment outpaced a $148.6 million increase in real estate installment loans from new originations within the regional banking segment. The permanent mortgage portfolio declined $24.6 million to $405.3 million in third quarter 2017 driven by run-off of legacy assets within the non-strategic segment offset by some growth in mortgage loans within regional banking, primarily related to FHN’s CRA initiatives. Credit Card and Other decreased $6.5 million to $354.8 million in third quarter 2017.
Investment Securities
FHN’s investment portfolio consists principally of debt securities including government agency issued mortgage-backed securities (“MBS”) and government agency issued collateralized mortgage obligations (“CMO”), substantially all of which are classified as available-for-sale (“AFS”). FHN utilizes the securities portfolio as a source of income, liquidity and collateral for repurchase agreements, for public funds, and as a tool for managing risk of interest rate movements. Investment securities were $4.0 billion on September 30, 2017 and December 31, 2016 and averaged $4.0 billion in third quarter 2017 and fourth quarter 2016, representing 15 percent of average earning assets in both periods.
Loans Held-for-Sale
Loans HFS consists of small business, the mortgage warehouse (primarily repurchased government-guaranteed loans), USDA, student, and home equity loans. On September 30, 2017 loans HFS were $339.8 million compared to $111.2 million on December 31, 2016. The average balance of loans HFS increased to $540.1 million in third quarter 2017 from $127.5 million in fourth quarter 2016. The increase in period-end and average loans HFS was driven by the Coastal acquisition, which resulted in an increase in small business loans and the addition of USDA loans.
Other Earning Assets
Other earning assets include trading securities, securities purchased under agreements to resell, federal funds sold (“FFS”), and interest-bearing deposits with the Fed and other financial institutions. Other earning assets averaged $2.2 billion in third quarter 2017, down from $2.8 billion in fourth quarter 2016. The decrease in other earning assets was primarily driven by lower levels of interest bearing cash as a result of loan growth and the Coastal acquisition. Additionally, fixed income trading securities and securities purchased under agreements to resell ("asset repos") decreased from fourth quarter 2016. Fixed income's trading inventory fluctuates daily based on customer demand. Asset repos are used in fixed income trading activity and generally fluctuate with the level of fixed income trading liabilities (short-positions) as securities collateral from asset repo transactions are used to fulfill trades. Other earning assets were $2.8 billion on September 30, 2017, a 7 percent increase from $2.6 billion on December 31, 2016. The increase in other earning assets on a period-end basis were driven by an increase in fixed income trading securities, offset by a decline in interest-bearing cash.
Non-earning assets
Period-end non-earning assets increased $55.0 million to $2.3 billion on September 30, 2017. The increase in non-earning assets was primarily due to increases in Fixed income receivables, goodwill and intangible assets associated with the Coastal acquisition, as well as the addition of LIHTC investments in third quarter 2017, but was somewhat offset by a decline in derivative assets and lower cash balances.
Deposits
Average deposits were $22.1 billion during third quarter 2017, down 1 percent from $22.3 billion during fourth quarter 2016 and up 5 percent from $21.1 billion in third quarter 2016. The decrease in average deposits from fourth quarter 2016 was primarily driven by FHN's decision to decrease market-indexed deposit balances and use alternate sources of wholesale funding to support loan growth; however, this decline was somewhat offset by increases in consumer interest (largely priority and other consumer savings), non-interest bearing deposits and commercial customer deposits. The increase in average deposits from third quarter 2016 was largely due to increases in consumer interest, non-interest bearing deposits and commercial customer deposits, somewhat offset by a decrease in market-indexed deposits. Period-end deposits were $22.1 billion on September 30, 2017, down 3 percent from $22.7 billion on December 31, 2016, and up 2 percent from $21.6 billion on September 30, 2016.


FHN experienced deposit growth within consumer interest, commercial interest and non-interest bearing deposits from September 30, 2016 and December 31, 2016 to September 30, 2017. Market-indexed deposits decreased from September 30, 2016 and December 31, 2016 to September 30, 2017; however the decrease from year-end was much more significant, more than offsetting other deposit growth and resulting in the net decrease in total deposits from December 31, 2016 on a period-end basis.
Table 6—Average Deposits
  Quarter Ended
September 30, 2017		 Quarter Ended
December 31, 2016		  
(Dollars in thousands) Amount Percent of total Amount Percent of total Growth Rate
Interest-bearing deposits:          
Consumer interest $9,244,021
 42% $8,641,507
 39% 7 %
Commercial interest 2,876,398
 13
 2,819,980
 13
 2 %
Market-indexed (a) 3,523,450
 16
 4,787,912
 21
 (26)%
Total interest-bearing deposits 15,643,869
 71
 16,249,399
 73
 (4)%
Noninterest-bearing deposits 6,411,160
 29
 6,039,025
 27
 6 %
Total deposits $22,055,029
 100% $22,288,424
 100% (1)%
(a) Market-indexed deposits are tied to an index not administered by FHN and are comprised of insured network deposits, correspondent banking deposits, and trust/sweep deposits.
Short-Term Borrowings
Short-term borrowings (federal funds purchased (“FFP”), securities sold under agreements to repurchase, trading liabilities, and other short-term borrowings) averaged $2.3 billion in third quarter 2017, up 22 percent from $1.9 billion in fourth quarter 2016. The increase in short-term borrowings between third quarter 2017 and fourth quarter 2016 was primarily due to increases in other short-term borrowings and securities sold under agreements to repurchase, partially offset by lower levels of FFP and trading liabilities. Other short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Average securities sold under agreements to repurchase increased in third quarter 2017, primarily due to the Coastal acquisition. Average FFP fluctuates depending on the amount of excess funding of FHN’s correspondent bank customers and average trading liabilities fluctuates based on expectations of customer demand. Period-end short-term borrowings increased to $3.0 billion on September 30, 2017 from $1.5 billion on December 31, 2016. The increase in short-term borrowings on a period-end basis was driven by an increase in other short-term borrowings (primarily FHLB advances) which management uses as an additional source of wholesale funding to support loan growth.
Table 7—Average Short-Term Borrowings
  Quarter Ended
September 30, 2017		 Quarter Ended
December 31, 2016		  
(Dollars in thousands) Amount Percent of total Amount Percent of total Growth Rate
Short-term borrowings:          
Federal funds purchased $376,150
 16% $528,266
 28% (29)%
Securities sold under agreements to repurchase 680,366
 30
 378,837
 20
 80 %
Trading liabilities 597,269
 26
 745,011
 39
 (20)%
Other short-term borrowings 655,599
 28
 243,527
 13
 NM
Total short-term borrowings $2,309,384
 100% $1,895,641
 100% 22 %
NM - Not meaningful          
Term Borrowings
Term borrowings include senior and subordinated borrowings with original maturities greater than one year. Term borrowings were $1.1 billion and $1.0 billion on September 30, 2017 and December 31, 2016, respectively. Average term borrowings


increased $48.5 million from fourth quarter 2016 to $1.1 billion in third quarter 2017 primarily driven by a temporary increase in secured borrowings associated with a financing transaction.
Other Liabilities
Period-end other liabilities were $.6 billion on September 30, 2017 and December 31, 2016.
CAPITAL
Management’s objectives are to provide capital sufficient to cover the risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards, and to assure ready access to the capital markets. Period-end equity increased to $ 2.9 billion on September 30, 2017 from $2.7 billion on December 31, 2016 primarily due to net income recognized since fourth quarter 2016, partially offset by common and preferred dividends paid. Average equity increased $119.9 million to $2.9 billion in third quarter 2017 from fourth quarter 2016, as the impact of net income less dividends paid on equity recognized in the nine months ended September 30, 2017 on an average basis was somewhat offset by a decrease attributable to average accumulated other comprehensive income. The decline attributable to average accumulated other comprehensive income was largely the result of unrealized losses recognized on the AFS securities portfolio, as well as an increase of net actuarial losses for pension and post retirement plans.
The following tables provide a reconciliation of Shareholders’ equity from the Consolidated Condensed Statements of Condition to Common Equity Tier 1, Tier 1 and Total Regulatory Capital as well as certain selected capital ratios:
Table 8—Regulatory Capital and Ratios
(Dollars in thousands)
 September 30, 2017 December 31, 2016
Shareholders’ equity $2,588,120
 $2,409,653
FHN non-cumulative perpetual preferred (95,624) (95,624)
Common equity $2,492,496
 $2,314,029
Regulatory adjustments:    
Disallowed goodwill and other intangibles (229,555) (165,292)
Net unrealized (gains)/losses on securities available-for-sale 5,940
 17,232
Net unrealized (gains)/losses on pension and other postretirement plans 224,686
 229,157
Net unrealized (gains)/losses on cash flow hedges 1,758
 1,265
Disallowed deferred tax assets (17,637) (18,027)
Other deductions from common equity tier 1 (478) (377)
Common equity tier 1 $2,477,210
 $2,377,987
FHN non-cumulative perpetual preferred 95,624
 95,624
Qualifying noncontrolling interest—FTBNA preferred stock 250,409
 256,811
Other deductions from tier 1 (58,463) (58,551)
Tier 1 capital $2,764,780
 $2,671,871
Tier 2 capital 240,418
 254,139
Total regulatory capital $3,005,198
 $2,926,010
Risk-Weighted Assets    
First Horizon National Corporation $24,678,030
 $23,914,158
First Tennessee Bank National Association 24,186,100
 23,447,251
Average Assets for Leverage    
First Horizon National Corporation 28,793,816
 28,581,251
First Tennessee Bank National Association 27,962,251
 27,710,158


  September 30, 2017 December 31, 2016
  Ratio Amount Ratio Amount
Common Equity Tier 1        
First Horizon National Corporation 10.04% $2,477,210
 9.94% $2,377,987
First Tennessee Bank National Association 9.53
 2,304,244
 9.80
 2,298,080
Tier 1        
First Horizon National Corporation 11.20
 2,764,780
 11.17
 2,671,871
First Tennessee Bank National Association 10.47
 2,532,669
 10.83
 2,538,382
Total        
First Horizon National Corporation 12.18
 3,005,198
 12.24
 2,926,010
First Tennessee Bank National Association 11.32
 2,738,372
 11.78
 2,762,271
Tier 1 Leverage        
First Horizon National Corporation 9.60
 2,764,780
 9.35
 2,671,871
First Tennessee Bank National Association 9.06
 2,532,669
 9.16
 2,538,382


Banking regulators define minimum capital ratios for bank holding companies and their bank subsidiaries. Based on the capital rules and definitions prescribed by the banking regulators, should any depository institution’s capital ratios decline below predetermined levels, it would become subject to a series of increasingly restrictive regulatory actions. The system categorizes a depository institution’s capital position into one of five categories ranging from well-capitalized to critically under-capitalized. For an institution the size of FHN to qualify as well-capitalized, Common Equity Tier 1, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least 6.5 percent, 8 percent, 10 percent, and 5 percent, respectively. As of September 30, 2017, each of FHN and FTBNA had sufficient capital to qualify as a well-capitalized institution. For FHN, regulatory capital ratios remained consistent in the third quarter of 2017 relative to fourth quarter 2016 as the capital generated from net income less dividends offset the impact of increased disallowed intangible assets related to the Coastal acquisition, the continued phased-in implementation of the Basel III regulations, and an increase in risk-weighted assets primarily as a result of increased period end loans. Over the same period, the regulatory capital ratios for FTBNA declined 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, 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. On January 22, 2014, FHN announced a $100 million share purchase authority with an expiration date of January 31, 2016. On July 21, 2015, FHN announced a $100 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. 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 under the program. In third quarter 2016 FHN repurchased $7.1 million of common shares under the program. FHN does not anticipate repurchasing any shares under this authorization through the closing of the CBF Bank acquisition.


The following tables provide information related to securities repurchased by FHN during third quarter 2017:
Table 9a—Issuer Purchases of Common Stock
General Repurchase 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 programsBusiness Segment Results
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—
N/A—Not applicable
Compensation Plan Program. A consolidated compensation plan share purchase program was announced on August 6, 2004.
During fourth quarter 2020, FHN reorganized its internal management structure and, accordingly, its segment reporting structure. Historically, FHN's primary business segments were Regional Banking, Fixed Income, Corporate, and Non-strategic. On July 1, 2020, FHN and IBKC closed their merger of equals transaction. This program consolidated intotransaction prompted organizational changes to better integrate and execute the combined Company's strategic priorities across all lines of businesses. As a single share purchase program allresult, FHN revised its reportable segments to include Regional Banking, Specialty Banking and Corporate. Segment results for the first quarter of 2020 have been recast to adjust for the realignment of the previously authorizedsegment reporting structure. See Note 13 - Business Segment Information for additional disclosures related to FHN's operating segments.
Regional Banking
The Regional Banking segment generated pre-tax income of $286 million for first quarter 2021 compared to $231 million for fourth quarter 2020 and pre-tax loss of $4 million for first quarter 2020. The increase in first quarter 2021 compared to fourth quarter 2020 was primarily driven by a decrease in noninterest expense and lower provision for credit losses reflecting continued improvement in the overall macroeconomic outlook and a reduction in consumer loans. The increase for the first quarter 2021 compared to first quarter 2020 reflected an increase in revenue offset by an increase in noninterest expense resulting from the IBKC merger and a
decrease in the provision for credit losses resulting from improvement in the macroeconomic outlook.
Specialty Banking

The Specialty Banking segment generated pre-tax income of $197 million for first quarter 2021 compared to $194 million for fourth quarter 2020 and $48 million for first quarter 2020. First quarter 2021 results compared to fourth quarter 2020 included an increase in noninterest income and lower provision for credit losses partially offset by lower net interest income and higher noninterest expense. The increase for the first quarter 2021 compared to first quarter 2020 was driven by an increase in revenue offset by an increase in noninterest expense resulting from the IBKC merger and a decrease in the provision for credit losses resulting from improvement in the macroeconomic outlook.

Corporate

The Corporate segment generated pre-tax loss of $176 million for first quarter 2021 compared to $124 million for fourth quarter 2020 and $23 million for first quarter 2020. The increase in pre-tax loss for first quarter 2021 compared to first quarter 2020 reflected an increase in noninterest expense primarily from a $64 million increase in merger and integration-related costs and the impact of the IBKC merger and a decrease in net interest income resulting from the impact of funds transfer pricing, partially offset by an increase in noninterest income primarily resulting from an increase in deferred compensation plan share programsincome
FIRST HORIZON CORPORATION761Q21 FORM 10-Q REPORT

driven by equity market valuations relative to the prior year.

Financial Condition
Total period-end assets were $87.5 billion at March 31, 2021 compared to $84.2 billion at December 31, 2020. Asset growth during first quarter 2021 was driven by an increase in cash from deposit growth and by loan growth, primarily C&I loans from PPP loan originations.
Earning assets consist of loans and leases, loans held for sale, investment securities, and other earning assets, such as trading securities and interest-bearing deposits with banks. A detailed discussion of the major components of earning assets is provided in the following sections.
Loans and Leases
Period-end loans and leases increased $368 million, or 1% to $58.6 billion as of March 31, 2021 from $58.2 billion on December 31, 2020, driven by a $1.0 billion increase in commercial loans primarily tied to PPP loans, offset by a $674 million decrease in consumer loans. Average loans and leases decreased to $58.2 billion in first quarter 2021 compared to $59.8 billion in fourth quarter 2020 and increased from $30.5 billion in first quarter 2020 primarily from acquired loans during third quarter 2020.
The following table provides detail regarding FHN's loans and leases as of March 31, 2021 and December 31, 2020.
Table 6—Loans and Leases
As of March 31, 2021As of December 31, 2020
(Dollars in millions)AmountPercent of totalAmountPercent of totalGrowth Rate
Commercial:
Commercial, financial, and industrial (a)$33,951 58 %$33,104 57 %3 %
Commercial real estate12,470 21 12,275 21 2 
Total commercial46,421 79 45,379 78 2 
Consumer:
Consumer real estate11,053 19 11,725 20 (6)
Credit card and other1,126 2 1,128 2 — 
Total consumer12,179 21 12,853 22 (5)
Total loans and leases$58,600 100 %$58,232 100 %1 %
(a)Includes equipment financing loans and leases.


C&I loans are the largest component of the loan portfolio, comprising 58% of total loans at the end of the first quarter 2021 and 57% at year-end 2020. C&I loans increased 3% from December 31, 2020, largely driven by PPP lending and higher balances within Specialty Banking, primarily from mortgage warehouse lending and growth in both the accommodation and food services and healthcare industries. Commercial real estate loans increased 2% to $12.5 billion in first quarter 2021 driven by growth in Regional Banking and Corporate CRE loans.
Total consumer loans decreased 5% from 2020 to $12.2 billion as of March 31, 2021, largely driven by paydowns in real estate installment loans and home
equity lines of credit within the Regional Banking segment.
Loans Held for Sale
In 2020, FHN obtained IBKC's mortgage banking operations, which includes origination and servicing of residential first lien mortgage loans, primarily fixed rate single-family residential mortgage loans originated by IBKC and committed to be sold in the secondary market. The legacy FHN loans HFS portfolio consists of small business, other consumer loans, the mortgage warehouse, USDA, student, and home equity loans.
On March 31, 2021 and December 31, 2020, loans HFS were $811 million and $1.0 billion, respectively. The decrease in loans HFS was primarily driven by a
FIRST HORIZON CORPORATION771Q21 FORM 10-Q REPORT

seasonal slowdown in mortgage volume, as well as the renewala reduction in refinance activity impacted by a recent rise in mortgage interest rates. Held-for-sale consumer mortgage loans secured by residential real estate in process 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 29.6foreclosure totaled $2 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 beforeat both March 31, 2021 and 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 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. 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—Issuer Purchase of Common Stock
Compensation Plan-Related Repurchase 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






ASSET QUALITY

Loan and Lease 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 and leases are composed of commercial, financial,C&I loans and industrial (“C&I”)leases and commercial real estate (“CRE”).CRE loans. Consumer loans are composed of consumer real estate; permanent mortgage;estate loans and credit card and other.other loans. 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 percent (19% of total loans). IndustryIndustry concentrations are discussed under the heading C&I below.
Consolidated key asset quality metrics for each of these portfolios can be found in Table 17 – Asset Quality by Portfolio. CreditCredit underwriting guidelines are outlined in Exhibit 13 toItem 7 of FHN’s Annual Report on Form 10-K for the year ended December 31, 2016,2020 in the Loan Portfolio Composition discussion in the Asset Quality Section beginning on page 26 and continuing to page 46. FHN’s.
FHN’s credit underwriting guidelines and loan product offerings as of September 30, 2017,March 31, 2021 are generally consistent with those reported and disclosed in the Company’sFHN’s Form 10-K for the year ended December 31, 2016.2020.
COMMERCIAL LOAN PORTFOLIOSCommercial Loan and Lease Portfolios
C&I
The C&I portfolio was $12.8totaled $34.0 billion as of March 31, 2021 and $33.1 billion on September 30, 2017,as of December 31, 2020 and is comprised of loans and leases used for general business purposes and primarily composed of relationship customerspurposes. Products offered in Tennessee and other selected markets. Typical productsthe C&I portfolio include working capital lines of credit, term loan financing of owner-occupied real estate and fixed assets, direct financing and sales-type leases, working capital lines of credit, and trade credit enhancement through letters of credit.credit. The largest geographical concentrations of balances in the C&I portfolio as of March 31, 2021 were in Tennessee (21%), Florida (12%), Texas (9%), Louisiana (8%), North Carolina (8%), California (7%), and Georgia (5%). No other state represented more than 5% of the portfolio.
The following table provides the compositioncomposition of the C&I portfolio by industry as of September 30, 2017,March 31, 2021, and December 31, 2016.2020. For purposes of this disclosure, industries are determined based on the North American Industry Classification System (“NAICS”)(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—7 — C&I Loan Portfolio by Industry
 
 March 31, 2021December 31, 2020
(Dollars in millions) 
AmountPercentAmountPercent
Industry: 
Loans to mortgage companies$5,530 16 %$5,404 16 %
Finance and insurance3,113 9 3,130 10 
Health care and social assistance2,832 8 2,689 8 
Accommodation and food service2,480 7 2,303 7 
Real estate rental and leasing (a)2,377 7 2,365 7 
Wholesale trade2,133 6 2,079 6 
Manufacturing1,968 6 1,907 6 
Energy1,637 5 1,686 5 
Retail trade1,566 5 1,531 5 
Professional, scientific, and technical1,567 5 1,457 4 
Other (construction, transportation, etc.) (b)8,748 26 8,553 26 
Total C&I loan portfolio$33,951 100 %$33,104 100 %
  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%
(a)Leasing, rental of real estate, equipment, and goods.
(b)Industries in this category each comprise less than 5% for 2021.


(a)FIRST HORIZON CORPORATIONLeasing, rental of real estate, equipment, and goods.781Q21 FORM 10-Q REPORT
(b)Industries in this category each comprise less than 5 percent for 2017.



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. 37 percent of FHN’s C&I portfolio (Finance and insurance plus Loans to mortgage companies)companies and borrowers in the finance and insurance industry were 25% of FHN’s C&I loan portfolio as of March 31, 2021, and as a result could be affected by items that uniquely impact the financial services industry. Except “Finance and Insurance” and “Loans to Mortgage Companies”, as discussed below, onSeptember 30, 2017,industry. As of March 31, 2021, FHN did not have any other concentrations of C&I loans in any single industry of 10 percent10% or more of total loans.
Loans to Mortgage Companies
Loans to mortgage companies were 16% of the C&I portfolio as of March 31, 2021 and December 31, 2020. This portfolio generally fluctuates with mortgage rates and seasonal factors and 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, new loan originations 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 2021, 33% of the loan originations were home purchases and 67% were refinance transactions.
Finance and Insurance
The finance and insurance component represents 22 percentrepresents 9% of the C&I portfolio as of March 31, 2021 compared to 10% as of December 31, 2020, and includes TRUPSTRUPs (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, 2021, asset-based lending to consumerconsumer finance companies represents approximately $1.2 billion of the finance and insurance component.
TRUPSTRUPs 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 TRUPSTRUPs lending ceased in early 2008. Individual TRUPSTRUPs 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 DecemberMarch 31, 2016, one TRUP relationship was on interest deferral.
As of September 30, 2017,2021, the unpaid principal balance (“UPB”)(UPB) of trust preferred loans totaled $332.9 million ($206.6 milliontotaled $228 million. Including an amortizing discount of bank TRUPS and $126.3 million of insurance TRUPS) with the UPB of other bank-related loans totaling $345.8 million. Inclusive of a valuation allowance on TRUPS of $25.5 million,$18 million, total reserves (ALLL plus the valuation allowance)
amortizing discount) for TRUPSTRUPs and other bank-related loans were $26.8$28 million, or 4 percent12% of outstandingoutstanding UPB.As of March 31, 2021, TRUPs loans included $7 million of loans on nonaccrual, which represented a single loan relationship.
LoansPaycheck Protection Program
In 2020, Congress created the Paycheck Protection Program (PPP). Under the PPP, qualifying businesses may receive loans from private lenders, such as FHN, that are fully guaranteed by the Small Business Administration. These loans potentially are partly or fully forgivable, depending upon the borrower’s use of the funds and maintenance of employment levels. To the extent forgiven, the borrower is relieved from payment while the lender is still paid from the program. Congress made revisions to Mortgage Companiesthe PPP during first quarter 2021, and may make further revisions in the future.
The
At March 31, 2021, FHN had 44,717 of PPP loans with an aggregate principal balance of $5.1 billion. For these loans, to mortgage companies was 15 percentFHN anticipates being paid net lender fees 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 priorapproximately $81 million in relation to the borrower’s salePPP loans held at March 31, 2021.
Because PPP loans carry a full SBA guarantee, they do not have any credit risk and will not affect the amount of those mortgage loans to third party investors. Generally, lending to mortgage lenders increases when thereprovision and ALLL recorded. As a result, no ALLL is a decline in mortgage rates and decreases when rates rise.
C&I Asset Quality Trends
Overall, the C&I portfolio trends remain strong in 2017, continuing in line with recent historical performance. The C&I ALLL increased $8.8 million from December 31, 2016, to $98.2 million as of September 30, 2017. The allowance as a percentage of period-end loans increased to .77 percent as of September 30, 2017, from .74 percent as of December 31, 2016. Nonperforming C&I loans decreased $13.8 million from December 31, 2016, to $18.9 million on September 30, 2017. The nonperforming loan (“NPL”) ratio decreased 12 basis points from December 31, 2016, to .15 percent of C&Irecorded for PPP loans as of September 30, 2017. The 30+ delinquency ratio increasedMarch 31, 2021, and FHN has assigned a risk weight of zero to .27 percent as of September 30, 2017, from .08 percent as of December 31, 2016, driven by two larger relationships, one of which is a purchased credit-impaired loan. Third quarter 2017 experienced net charge-offs of $3.1 million compared to $1.6 million of net recoveries in fourth quarter 2016 and $1.3 million of net charge-offs in third quarter 2016. The following table shows C&I asset quality trends by segment.PPP loans for regulatory capital purposes.



Table 11—C&I 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 $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 7.83x              NM 7.97x 
        
  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 16.76x              NM 17.23x 
        
  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.


Commercial Real Estate
The CRE portfolio was $2.3totaled $12.5 billion and $12.3 billion on September 30, 2017.as of March 31, 2021 and December 31, 2020, respectively. The CRE portfolio includes bothreflects financings for both commercial construction and nonconstruction loans. This portfolio is segregated betweenThe largest geographical concentrations of CRE loan balances as of March 31, 2021 were in Florida (28%), Louisiana (11%), Texas (11%), North Carolina (11%), Tennessee (9%), and Georgia (9%). No other state represented more than 5% of the income-producing CRE class whichportfolio. This portfolio 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, andestate. Subcategories of the residential CRE class. Subcategories of income CREportfolio consist of multi-family (31 percent)(27%), office (22%), retail (22 percent)(18%), office (18 percent)industrial (11%), hospitality (12 percent), industrial (12 percent)(11%), land/land development (1 percent)(2%), and other (4 percent)(9%).
The residential CRE class includes loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town homes. Active residential CRE lending has been minimal 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 the most recent down cycle.
CRE Asset Quality Trends
The CRE portfolio had continued stable performance as of September 30, 2017, with nonperforming loans down $1.1 million from December 31, 2016, net recoveries in third quarter 2017, and minimal past due activity. The allowance decreased $4.2 million from December 31, 2016, to $29.7 million as of September 30, 2017. Allowance as a percentage of loans decreased 27 basis points from December 31, 2016, to 1.32 percent as of September 30, 2017. Nonperforming loans as a percentage of total CRE loans improved 6 basis points from year-end to .07 percent as of September 30, 2017. Accruing delinquencies as a percentage of period-end loans increased to .02 percent as of September 30, 2017 from .01 percent as of year-end 2016. FHN recognized net recoveries of $.3 million in third quarter 2017 compared to $.6 million in third quarter 2016. The following table shows commercial real estate asset quality trends by segment.



Table 12—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.
NM—Not meaningful
Loans are expressed net of unearned income.
(a)FIRST HORIZON CORPORATION30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.791Q21 FORM 10-Q REPORT




CONSUMER LOAN PORTFOLIOS
Consumer Loan Portfolios
Consumer Real Estate
The consumer real estate portfolio was $4.4totaled $11.1 billion and $11.7 billion on September 30, 2017,as of March 31, 2021 and December 31, 2020, respectively , and is primarily composed of home equity lines and installment loans including restricted balances (loans consolidated under ASC 810).loans. The largest geographical concentrationsconcentrations of balances as of September 30, 2017, areMarch 31, 2021, were in Florida (32%), Tennessee (72 percent)(25%), California (4 percent)Louisiana (10%), North Carolina (8%), and North Carolina (4 percent) with noTexas (5%). No other state representingrepresented more than 3 percent5% of the portfolio.
As of September 30, 2017,March 31, 2021, approximately 74 percent85% of the consumer real estate portfolio was in a first lien position. At origination, the weighted average FICO score of this portfolio was 751753 and the refreshed FICO scores averaged 749765 as of September 30, 2017, as compared to 750March 31, 2021, no significant change from FICO scores of 753 and 747,763, respectively, as of December 31, 2016.2020. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.
Home equity linesAs of credit (“HELOCs”) comprise $1.5 billionMarch 31, 2021 and December 31, 2020, FHN had held-for-investment consumer mortgage loans secured by real estate that were in the process of foreclosure totaling $34 million and $36 million, respectively.
HELOCs comprised $2.3 billion of the consumer real estate portfolio as of September 30, 2017.March 31, 2021. 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,ended, 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, approximately 60 percentboth March 31, 2021 and December 31, 2020, approximately 86% of FHN's HELOCs arewere in the draw period compared to approximately 62 percent as of December 31, 2016. Based on when draw periods are scheduled to end per the line agreement, itperiod. It is expected that $362.6$438 million, or 42 percent22% of HELOCs currently in the draw period, will enter the repayment period during the next 60 months. Delinquencies and charge-off ratesmonths, based on current terms. Generally, delinquencies 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,requirement. However, over time, performance of these loans usually begins to stabilize. The home equity lines of the consumer real estate portfolioHELOCs 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. period.
The following table shows thepresents HELOCs currently in the draw period and expected timing of conversion to the repayment period.

Table 13—8—HELOC Draw To Repayment Schedule
 
 March 31, 2021December 31, 2020
(Dollars in millions)Repayment
Amount		PercentRepayment
Amount		Percent
Months remaining in draw period:
0-12$65 3 %$73 4 %
13-2458 3 66 3 
25-3654 3 62 3 
37-4878 4 67 3 
49-60183 9 187 8 
>601,551 78 1,662 79 
Total$1,989 100 %$2,117 100 %
  September 30, 2017 December 31, 2016
(Dollars in thousands) 
Repayment
Amount
 Percent 
Repayment
Amount
 Percent
Months remaining in draw period:        
0-12 $112,207
 13% $212,665
 20%
13-24 69,367
 8
 127,662
 12
25-36 56,098
 6
 73,331
 7
37-48 57,254
 7
 68,768
 6
49-60 67,625
 8
 68,792
 7
>60 510,670
 58
 514,126
 48
Total $873,221
 100% $1,065,344
 100%


Consumer Real Estate Asset Quality Trends
Overall, performance of the consumer real estate portfolio remained strong in third 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 to .61 percent as of September 30, 2017. 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 and may become more skewed as the portfolio shrinks and some of the stronger borrowers payoff or refinance elsewhere. The ALLL decreased $9.4 million from December 31, 2016, to $40.9 million as of September 30, 2017, with the majority of the decline attributable to the non-strategic segment. The allowance as a percentage of loans declined 17 basis points to .94 percent as of September 30, 2017, compared to year-end. The balance of nonperforming loans declined $6.0 million to $76.8 million on September 30, 2017. Loans delinquent 30 or more days and still accruing declined from $42.1 million as of December 31, 2016, to $32.4 million as of September 30, 2017. The portfolio realized net recoveries of $2.6 million in third quarter 2017 compared to net recoveries of $2.2 million in fourth quarter 2016 and net recoveries of $1.2 million in third quarter 2016. The following table shows consumer real estate asset quality trends by segment.


Table 14—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 11.04x              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 57.14x              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
 
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.



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 29.16x 31.11x
         
  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 for these loans as the valuation adjustment taken upon exercise of clean-up calls included expected losses.
(b)30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.



Credit Card and Other
The credit card and other portfolio, which is primarily within the regional bankingRegional Banking segment, was $.4 billiontotaled $1.1 billion as of September 30, 2017,March 31, 2021 and primarily includes creditconsumer-related credits, including home equity and other personal consumer loans, credit card receivables, other consumer-related credits, and automobile loans. The allowance decreased to $10.3 million asThere was no
significant change in the balance of September 30, 2017, from $12.2 million as of December 31, 2016. Loans 30 days or more delinquent and accruing as a percentage of loans decreased 28 basis pointsthis portfolio from December 31, 2016, to .89 percent as of September 30, 2017. In third quarter 2017, FHN recognized $2.5 million of net charge-offs in the credit card and other portfolio, compared to $2.7 million in third quarter 2016. The following table shows credit card and other asset quality trends by segment.2020.
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 1.04x 0.60x 1.04x 
        
  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 1.13x              NM 1.17x 
        
  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
 
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.


The following table provides additional asset quality data by loan portfolio:
Table 17—Asset Quality by Portfolio
  September 30 December 31 
  2017 2016 
Key Portfolio Details     
C&I     
Period-end loans ($ millions) $12,792
 $12,148
 
30+ Delinq. % (a) 0.27% 0.08% 
NPL % 0.15
 0.27
 
Charge-offs % (qtr. annualized) 0.10
              NM
 
Allowance / loans % 0.77% 0.74% 
Allowance / net charge-offs 7.97x 
             NM

 
Commercial Real Estate     
Period-end loans ($ millions) $2,251
 $2,136
 
30+ Delinq. % (a) 0.02% 0.01% 
NPL % 0.07
 0.13
 
Charge-offs % (qtr. annualized)            NM
 0.09
 
Allowance / loans % 1.32% 1.59% 
Allowance / net charge-offs            NM
 17.56x 
Consumer Real Estate     
Period-end loans ($ millions) $4,370
 $4,524
 
30+ Delinq. % (a) 0.74% 0.93% 
NPL % 1.76
 1.83
 
Charge-offs % (qtr. annualized)            NM
              NM
 
Allowance / loans % 0.94% 1.11% 
Allowance / net charge-offs            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
 
30+ Delinq. % (a) 0.89% 1.17% 
NPL % 0.04
 0.04
 
Charge-offs % (qtr. annualized) 2.80
 3.25
 
Allowance / loans % 2.95% 3.39% 
Allowance / net charge-offs 1.04x 1.04x 
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.


Allowance for Loan and Lease Losses
Management’s policy is to maintain the ALLL at a level sufficient to absorb estimated probable incurredrecognize current expected credit losses inon the amortized cost basis of the loan and lease portfolio. The total allowance for loan and lease
FIRST HORIZON CORPORATION801Q21 FORM 10-Q REPORT

losses decreased to $194.9$914 million on September 30, 2017,March 31, 2021 from $202.1$963 million on December 31, 2016.2020. The ALLL as of September 30, 2017,March 31, 2021 reflects strong asset quality with the consumer real estate portfolio continuing to stabilize, historically low levels of net charge-offs, and declining non-strategic balances. Theimprovement in the economic forecast from year-end 2020. As a result, the ratio of allowance for loan lossesALLL to total loans net of unearned income,and leases decreased to .97 percent on September 30, 2017,9 basis points from 1.03 percent on December 31, 2016.2020 to 1.56% on March 31, 2021.
The provision for loan and lease losses is the charge to or release of earnings necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of probable incurredcurrent expected losses inon the amortized cost basis of the loan and lease portfolio. ThereProvision credit was no provision expense recorded$41 million in thirdfirst quarter 20172021 compared to a provision expense of $4.0$145 million in thirdfirst quarter 2016.2020. The decrease is primarily attributable to an improving economic forecast, as first quarter 2020 was negatively impacted by the economic uncertainty around the COVID-19 pandemic.
FHN expects assetAsset quality trends may continue to remain relatively stable forbe impacted by the near term ifeconomic uncertainty attributable to the slow growth of the economy continues.COVID-19 pandemic. The C&I portfolio is expectedreflects 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 duemortgage companies which carry minimal credit risk. The C&I portfolio as of March 31, 2021 includes $5.1 billion of loans made under the Paycheck Protection Program of the SBA. PPP loans are fully government guaranteed with the SBA. Due to the size of the credits within this portfolio. government guarantee and forgiveness provisions, PPP loans are considered to have no credit risk.
The CRE portfolio metrics should be relatively consistent as FHN expects stable property values over the near term; 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). The remaining non-strategic consumer real estate and permanent mortgage portfolios shouldmay continue to steadily wind down. Asset quality metrics within non-strategicbe impacted by the COVID-19 pandemic due to travel and occupancy restrictions set by state and local governments affecting the hospitality and retail industries. The consumer portfolio may become skewed asalso continue to be impacted by the portfolioCOVID-19 pandemic if consumer unemployment continues to shrink. Continued stabilization in performanceremain elevated and clients are unable to continue making loan payments. The consumer portfolio, however, is high quality with no subprime and minimal exposure to other traditional categories 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.high risk lending.
Consolidated Net Charge-offs
Overall, netNet charge-offs continue to be at historical lows. Thirdin first quarter 2017 experienced 2021 were $8 million, an annualized charge-off percentage of 0.06% of total loans and leases, consistent with net charge-offs of $2.4$8 million in first quarter 2020.
Net charge-offs in first quarter 2021 in the commercial portfolio were $11 million compared to $2.3$6 million ofin first quarter 2020. Net charge-offs were impacted by higher energy charge-offs in the current quarter, as well as a larger commercial portfolio from acquired loans in third quarter 2020.
Net recoveries in the consumer portfolio were $3 million in first quarter 2021, driven by consumer real estate recoveries in the Corporate segment, compared to $2 million in net charge-offs in thirdfirst quarter 2016.2020.
Table 9—Analysis of Allowance for Loan and Lease Losses and Charge-offs
(Dollars in millions)
Allowance for loan and lease losses (a)March 31, 2021December 31, 2020March 31, 2020
C&I$442 $453 $255 
CRE232 242 48 
Consumer real estate222 242 122 
Credit card and other18 26 19 
Total allowance for loan and lease losses$914 $963 $444 
Period-end loans and leases
C&I$33,951 $33,104 $22,124 
CRE12,470 12,275 4,640 
Consumer real estate11,053 11,725 6,119 
Credit card and other1,126 1,128 495 
Total period-end loans and leases$58,600 $58,232 $33,378 
ALLL / loans and leases % (a)
C&I1.30 %1.37 %1.15 %
CRE1.86 %1.97 %1.03 %
FIRST HORIZON CORPORATION811Q21 FORM 10-Q REPORT

Consumer real estate2.00 %2.07 %2.00 %
Credit card and other1.63 %2.34 %3.91 %
Total ALLL / loans and leases %1.56 %1.65 %1.33 %
Quarter-to-date net charge-offs (recoveries)
C&I$10 $31 $6 
CRE1 (1)— 
Consumer real estate(5)(3)(1)
Credit card and other2 2 3 
Total net charge-offs$8 $29 $8 
Average loans and leases (b)
C&I$33,279 $34,196 $19,470 
CRE12,424 12,400 4,422 
Consumer real estate11,400 12,030 6,134 
Credit card and other1,119 1,194 498 
Total average loans and leases$58,222 $59,820 $30,524 
Charge-off %
C&I0.12 %0.36 %0.12 %
CRE0.06 %NM— %
Consumer real estateNMNMNM
Credit card and other0.65 %0.68 %2.23 %
Total charge-off %0.06 %0.19 %0.10 %
ALLL / annualized net charge-offs
C&I11.47 x3.67 x10.89 x
CRE33.31 xNMNM
Consumer real estateNMNMNM
Credit card and other2.53 x3.23 x1.74 x
Total ALLL / net charge-offs28.14 x8.41 x13.80 x
ALLL / NPLs
C&I3.07 x3.15 x2.65 x
CRE3.45 x4.15 x21.75 x
Consumer real estate1.23 x1.33 x1.34 x
Credit card and other7.49 x13.13 x53.69 x
Total ALLL / NPLs2.32 x2.49 x2.34 x
NM - not meaningful
(a)The commercial portfolio experienced $2.8 millionincrease in the ALLL from first quarter 2020 was primarily attributable to the allowance recorded on acquired non-PCD loans and the decline in the economic forecast attributable to the COVID-19 pandemic, while the decrease from fourth quarter 2020 was from an improvement in the overall economic forecast.
(b)The increase in period-end and average loans and leases from 1st quarter 2020 is primarily the result of net charge-offs$26.3 billion in acquired loans and leases in third quarter 2017 compared to $.7 million in third quarter 2016. In addition, the consumer real estate portfolio experienced net recoveries of $2.6 million in third quarter 2017 compared to $1.2 million in net recoveries during third quarter 2016. Permanent mortgage and credit card and other remained relatively flat compared to a year ago.2020.
FIRST HORIZON CORPORATION821Q21 FORM 10-Q REPORT

Nonperforming Assets
Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, if impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or on(on a case-by-case basisbasis), if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans in whichthat FHN continues to receive payments, including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy,bankruptcy. NPAs consist of nonperforming loans 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(excluding OREO from government insured mortgages, represent nonperforming assets (“NPAs”)mortgages).
Total nonperforming assetsNPAs (including NPLs HFS) decreasedincreased to $140.2$410 million on September 30, 2017,as of March 31, 2021 from $164.6$406 million on as of
December 31, 2016. The2020. Despite the marginal increase, the nonperforming assets ratio (nonperforming assets excluding NPLs HFS to total period-end loansloans plus OREO and other assets) decreased to .66 percentOREO) was 0.69% as of September 30, 2017, compared to .80 percent as ofboth March 31, 2021 and December 31, 2016. Portfolio nonperforming loans declined $20.7 million from December 31, 2016, to $125.0 million on September 30, 2017. The decline 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.
2020. The ratio of the ALLL to NPLs in the loan portfolio was 1.562.3 times as of September 30, 2017,March 31, 2021 compared to 1.392.5 times as of December 31, 2016. 2020.
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 the estimated loss content has been recognized through a partial charge-off, typically reserves arean ALLL is not recorded.
Table 18 provides an activity rollforward of OREO balances for September 30, 2017 and 2016. The balance of OREO, exclusive of inventory from government insured mortgages, decreased to $7.9 million as of September 30, 2017, from $13.7 million as of September 30, 2016, as FHN has executed sales of existing OREO and continued efforts to avoid foreclosures10—Nonperforming Assets by Loan Portfolio

(Dollars in millions)March 31, 2021December 31, 2020
Nonperforming loans and leases
C&I$144 $144 
CRE67 58 
Consumer real estate180 182 
Credit card and other3 2 
Total nonperforming loans and leases (a)$394 $386 
Nonperforming loans held for sale (a)$5 $5 
Foreclosed real estate and other assets (b)11 15 
Total nonperforming assets (a) (c)$410 $406 
Nonperforming loans and leases to total loans and leases
C&I0.42 %0.43 %
CRE0.54 %0.48 %
Consumer real estate1.63 %1.56 %
Credit card and other0.22 %0.18 %
Total NPL %0.67 %0.66 %

restructuring(a)Excludes loans and working with borrowers. Additionally, property values have stabilized which also affects the balance of OREO.leases that are 90 or more days past due and still accruing interest.
(b)Foreclosed real estate from GNMA loans totaled $2 million at both March 31, 2021 and December 31, 2020.
Table 18—Rollforward of OREO(c)Balances do not include government-insured foreclosed real estate.

  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)FIRST HORIZON CORPORATIONExcludes OREO and receivables related to government insured mortgages of $6.5 million and $6.4 million as of September 30, 2017 and 2016, respectively.831Q21 FORM 10-Q REPORT



The following table provides consolidated asset quality informationnonperforming assets by business segment:

Table 11—Nonperforming Assets by Segment
(Dollars in millions)March 31, 2021December 31, 2020
Nonperforming loans and leases (a) (b)
Regional Banking$226 $216 
Specialty Banking111 117 
Corporate57 53 
Consolidated$394 $386 
Foreclosed real estate (c)
Regional Banking$10 $12 
Specialty Banking— 1 
Corporate1 2 
Consolidated$11 $15 
Nonperforming Assets (a) (b) (c)
Regional Banking$236 $228 
Specialty Banking111 118 
Corporate58 55 
Consolidated$405 $401 
Nonperforming loans and leases to loans and leases
Regional Banking0.56 %0.54 %
Specialty Banking0.64 0.68 
Corporate6.20 5.70 
Consolidated0.67 %0.66 %
NPA % (d)
Regional Banking0.58 %0.57 %
Specialty Banking0.64 0.68 
Corporate6.28 5.87 
Consolidated0.69 %0.69 %
(a)Excludes loans and leases that are 90 or more days past due and still accruing interest.
(b)Excludes loans classified as held for the three months ended September 30, 2017sale.
(c)Excludes foreclosed real estate and 2016,receivables related to government insured mortgages of $4 million and as of September 30, 2017,$5 million at March 31, 2021, and December 31, 2016:2020, respectively.
Table 19—Asset Quality Information(d)Ratio is non-performing assets to total loans and leases plus foreclosed real estate.


Lending Assistance for Borrowers
In addition to PPP loans, other customer support initiatives in response to the COVID-19 pandemic 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 March 31, 2021.
  Three Months Ended
September 30		 
(Dollars in thousands) 2017 2016 
Allowance for loan losses:     
Beginning balance on July 1 $197,257
 $199,807
 
Provision/(provision credit) for loan losses —
 4,000
 
Charge-offs (10,670) (10,362) 
Recoveries 8,280
 8,112
 
Ending balance on September 30 $194,867
 $201,557
 
Reserve for remaining unfunded commitments 4,372
 4,802
 
Total allowance for loan losses and reserve for unfunded commitments $199,239
 $206,359
 
Key ratios     
Allowance / net charge-offs (a) 20.55x 22.51x 
Net charge-offs % (b) 0.05% 0.05% 
      
  As of September 30 As of December 31 
Nonperforming Assets by Segment 
 2017 2016 
Regional Banking: 
     
Nonperforming loans (c) $40,610
 $50,653
 
OREO (d) 2,848
 5,081
 
Total Regional Banking 43,458
 55,734
 
Non-Strategic:     
Nonperforming loans (c) 82,203
 93,808
 
Nonperforming loans held-for-sale net of fair value adjustment (c) 7,314
 7,741
 
OREO (d) 5,029
 6,154
 
Total Non-Strategic 94,546
 107,703
 
Corporate:     
Nonperforming loans (c) 2,173
 1,186
 
Total Corporate 2,173
 1,186
 
Total nonperforming assets (c) (d)
 $140,177
 $164,623
 
(a)FIRST HORIZON CORPORATIONRatio is total allowance divided by annualized net charge-offs.841Q21 FORM 10-Q REPORT

Table 12 - Customer Deferrals
(b)(Dollars in millions)Ratio is annualized net charge-offs divided by quarterly average loans, netAs of unearned income.March 31, 2021
Commercial:
(c)C&IExcludes loans that are 90 or more days past due and still accruing interest.$51
(d)CREExcludes OREO from government-insured mortgages.178


  As of September 30 As of December 31 
  2017 2016 
Loans and commitments:     
Total period-end loans, net of unearned income $20,166,091
 $19,589,520
 
Potential problem assets (a) 280,358
 290,354
 
Loans 30 to 89 days past due 45,248
 42,570
 
Loans 90 days past due (b) (c) 30,950
 23,385
 
Loans held-for-sale 30 to 89 days past due (d) 34,325
 6,462
 
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
 
Remaining unfunded commitments $8,868,115
 $8,744,649
 
Key ratios     
Allowance / loans % 0.97% 1.03% 
Allowance / NPL 1.56x 1.39x 
NPA % (f) 0.66% 0.80% 
NPL % 0.62% 0.74% 
Total Commercial$229
Consumer:
(a)HELOCIncludes past due loans.
$12
(b)R/E installment loansExcludes loans classified as held-for-sale.
138
(c)Credit card and otherAmounts are not included in nonperforming/nonaccrual loans.
6
(d)Total Consumer2017 includes loans related to the Coastal acquisition.
156
(e)TotalGuaranteed loans include FHA, VA, SBA, USDA, and GNMA loans repurchased through the GNMA buyout program.
$385
(f)Ratio is non-performing assets related to the loan portfolio to total loans plus OREO and other assets.
Commercial deferrals were comprised primarily of general commercial (59% or $135 million) and professional commercial real estate (38% or $86 million).

To the extent that loans were past due at March 31, 2021 or December 31, 2020 and had been granted a deferral, they were excluded from loans past due 30 to 89 days and loans past due 90 days or more in the table and discussion below.
Past Due Loans and Potential Problem Assets
Past due loans are loans contractuallycontractually 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$13 million on September 30, 2017,March 31, 2021, compared to $23.4$17 million on December 31, 2016.2020. The increasedecrease was due in large part to one relationship, which is a purchased credit-impaired loan.primarily driven by consumer real estate loans. Loans 30 to 89 days past due increased to $45.2were $81 million on September 30, 2017, from $42.6March 31, 2021, compared to $100 million on December 31, 2016.2020. The decrease included a $14 million decrease in consumer real estate loans, a $12 million decrease in CRE loans, and a $4 million decrease in credit card and other consumer loans, partially offset by an increase in C&I loans past due 30 to 89 days.
FIRST HORIZON CORPORATION851Q21 FORM 10-Q REPORT

Table 13—Accruing Delinquencies
(Dollars in millions)March 31, 2021December 31, 2020
Accruing loans and leases 30+ days past due
C&I$26 $15 
CRE11 23 
Consumer real estate52 69 
Credit card and other5 10 
Total 30+ Delinquency$94 $117 
Accruing loans and leases 30+ days past due %
C&I0.08 %0.05 %
CRE0.09 %0.19 %
Consumer real estate0.47 %0.58 %
Credit card and other0.45 %0.87 %
Total 30+ Delinquency %0.16 %0.20 %
Accruing loans and leases 90+ days past due (a) (b) (c):
C&I$— $— 
CRE— — 
Consumer real Estate13 16 
Credit card and other— 1 
Total accruing loans and leases 90+ days past due$13 $17 
Loans held for sale
30 to 89 days past due (b)7 6 
30 to 89 days past due - guaranteed portion (b) (d)6 5 
90+ days past due (b)13 12 
90+ days past due - guaranteed portion (b) (d)11 10 
(a)Excludes loans classified as held for sale.
(b)Amounts are not included in nonperforming/nonaccrual loans.
(c)Amounts are also included in accruing loans and leases 30+ days past due.
(d)Guaranteed loans include FHA, VA, and GNMA loans repurchased through the GNMA buyout program.


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 OCCFederal banking regulators for loans classified as substandard. Potential problem assets in the loan portfolioportfolio were $280.4$738 million on September 30, 2017, $290.4March 31, 2021 and $718 million on December 31, 2016, and $255.4 million on September 30, 2016.2020. The decline from year-endincrease in potential problem assets was due tofrom a net decreaseincrease in classified commercial loans driven bywithin the payoffC&I portfolio from a limited number of a few credits.
customer migrations to substandard loans in the current quarter. The current expectation of losses from potential problem assets has been included in management’s analysis for assessing the adequacyadequacy of the allowance for loan and lease losses.
Troubled Debt RestructuringRestructurings 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
FIRST HORIZON CORPORATION861Q21 FORM 10-Q REPORT

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”).TDR.
For loan modifications that were made during 2021 and 2020 that met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these modifications from consideration as a TDR, and has excluded loans with these qualifying modifications from designation as a TDR in the
information and discussion that follows. See Note 4 – Loans and Leases for further discussion regarding TDRs and loan modifications.
On September 30, 2017March 31, 2021 and December 31, 2016,2020, FHN had $241.6$288 million and $285.2$307 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $38.6$11 million and $44.9$12 million, or 16 percent4% of TDR balances as of September 30, 2017both March 31, 2021 and December 31, 2016.2020, respectively. Additionally, FHN had $63.2$41 million and $69.3$42 million of HFS loans classified as TDRs as of September 30, 2017March 31, 2021 and December 31, 2016,2020, 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.
The following table provides a summary of TDRs for the periods ended September 30, 2017March 31, 2021 and December 31, 2016:2020:
Table 20—14—Troubled Debt Restructurings
(Dollars in millions)As of
March 31, 2021		As of
December 31, 2020
Held-to-maturity:
Consumer real estate:
Current$71 $77 
Delinquent2 2 
Non-accrual (a)57 61 
Total consumer real estate130 140 
Credit card and other:
Current1 1 
Delinquent— — 
Non-accrual— — 
Total credit card and other1 1 
Commercial loans:
Current74 82 
Delinquent— — 
Non-accrual83 84 
Total commercial loans157 166 
Total held-to-maturity$288 $307 
Held-for-sale:
Current$35 $36 
Delinquent5 5 
Non-accrual1 1 
Total held-for-sale41 42 
Total troubled debt restructurings$329 $349 
 
(a)Balances as of March 31, 2021 and December 31, 2020, include $13 million and $11 million, respectively, of discharged bankruptcies.
(Dollars in thousands) 
As of
September 30, 2017
 
As of
December 31, 2016
Held-to-maturity:    
Permanent mortgage:    
Current $65,215
 $73,500
Delinquent 1,657
 2,751
Non-accrual (a) 17,209
 17,675
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
Credit card and other:    
Current 512
 288
Delinquent 32
 18
Non-accrual —
 —
Total credit card and other 544
 306
Commercial loans:    
Current 16,412
 21,887
Delinquent 88
 —
Non-accrual 4,616
 15,571
Total commercial loans 21,116
 37,458
Total held-to-maturity $241,599
 $285,150
Held-for-sale:    
Current $43,864
 $46,625
Delinquent 13,956
 16,436
Non-accrual 5,347
 6,283
Total held-for-sale 63,167
 69,344
Total troubled debt restructurings $304,766
 $354,494
Investment Securities
FHN’s investment portfolio consists principally of debt securities, including government agency issued mortgage-backed securities and government agency issued collateralized mortgage obligations, all of
which are classified as AFS. The securities portfolio provides a source of income and liquidity and is an important tool used to balance the interest rate risk of the loan and deposit portfolios. The securities portfolio is periodically evaluated in light of established ALM objectives, changing market
(a)FIRST HORIZON CORPORATIONBalances as of September 30, 2017 and December 31, 2016, include $5.5 million and $5.3 million, respectively, of discharged bankruptcies.871Q21 FORM 10-Q REPORT

conditions that could affect the profitability of the portfolio, the regulatory environment, and the level of interest rate risk to which FHN is exposed.
Investment securities were $8.4 billion on March 31, 2021, up from $8.0 billion on December 31, 2020 and represented approximately 10% of total assets for both periods. See Note 3 - Investment Securities for more information about the securities portfolio, including gross unrealized gains and losses by type
of security, contractual maturities, and securities pledged.
Deposits
Total deposits as of March 31, 2021 increased 5% to $73.2 billion from $70.0 billion on December 31, 2020 driven by an increase in non-interest bearing deposits largely reflecting the impact of government stimulus checks and PPP loan funding.
The following table summarizes the major components of deposits as of March 31, 2021 and December 31, 2020.
Table 15— Deposits
 March 31, 2021December 31, 2020 
(Dollars in millions)AmountPercent of totalAmountPercent of totalChangePercent
Savings$27,023 37 %$27,324 39 %$(301)(1)%
Time deposits4,653 6 5,070 7 (417)(8)
Other interest-bearing deposits16,444 23 15,415 22 1,029 7 
Interest-bearing deposits48,120 66 47,809 68 311 1 
Noninterest-bearing deposits25,046 34 22,173 32 2,873 13 
Total deposits$73,166 100 %$69,982 100 %$3,184 5 %


Short-Term Borrowings
Total short-term borrowings were $2.2 billion as of March 31, 2021 and December 31, 2020.
Short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Federal funds purchased fluctuates depending on the amount of excess funding of FHN’s correspondent bank customers. Balances of securities sold under agreements to
resell fluctuate based on cost attractiveness relative to FHLB borrowing levels and the ability to pledge securities toward such transactions.
Term Borrowings
Term borrowings include senior and subordinated borrowings with original maturities greater than one year. Term borrowings were $1.7 billion as of March 31, 2021 and December 31, 2020.
(b)Capital
Balances as of September 30, 2017 and December 31, 2016, include $14.9 million and $15.3 million, respectively, of discharged bankruptcies.
RISK MANAGEMENT
Management’s objectives are to provide capital sufficient to cover the risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards, and to assure ready access to the capital markets. Total equity was $8.3 billion at both March 31, 2021 and December 31, 2020.
Except
Significant changes included net income of $236 million which was offset by a decrease in AOCI of $101 million, $92 million in common and preferred dividends, and $62 million in common share repurchases.
FIRST HORIZON CORPORATION881Q21 FORM 10-Q REPORT

The following tables provide a reconciliation of shareholders’ equity from the Consolidated Balance Sheets to Common Equity Tier 1, Tier 1 and Total Regulatory Capital as discussedwell as certain selected capital ratios:
Table 16—Regulatory Capital and Ratios
(Dollars in millions)March 31, 2021December 31, 2020
Shareholders’ equity$8,012 $8,012 
Modified CECL transitional amount (a)178 191 
FHN non-cumulative perpetual preferred(470)(470)
Common equity tier 1 before regulatory adjustments$7,720 $7,733 
Regulatory adjustments:
Disallowed goodwill and other intangibles(1,745)(1,757)
Net unrealized (gains) losses on securities available for sale(5)(108)
Net unrealized (gains) losses on pension and other postretirement plans256 260 
Net unrealized (gains) losses on cash flow hedges(10)(12)
Disallowed deferred tax assets(1)(5)
Other deductions from common equity tier 1(1)(1)
Common equity tier 1$6,214 $6,110 
FHN non-cumulative perpetual preferred (b)377 377 
Qualifying noncontrolling interest— First Horizon Bank preferred stock295 295 
Tier 1 capital$6,886 $6,782 
Tier 2 capital1,120 1,153 
Total regulatory capital$8,006 $7,935 
Risk-Weighted Assets
First Horizon Corporation$62,339 $63,140 
First Horizon Bank61,610 62,508 
Average Assets for Leverage
First Horizon Corporation83,959 82,347 
First Horizon Bank83,242 81,709 

 March 31, 2021December 31, 2020
 RatioAmountRatioAmount
Common Equity Tier 1
First Horizon Corporation9.97 %$6,214 9.68 %$6,110 
First Horizon Bank10.72 6,606 10.46 6,537 
Tier 1
First Horizon Corporation11.05 6,886 10.74 6,782 
First Horizon Bank11.20 6,901 10.93 6,832 
Total
First Horizon Corporation12.84 8,006 12.57 7,935 
First Horizon Bank12.75 7,855 12.52 7,827 
Tier 1 Leverage
First Horizon Corporation8.20 6,886 8.24 6,782 
First Horizon Bank8.29 6,901 8.36 6,832 
Other Capital Ratios
Total period-end equity to period-end assets9.49 9.86 
Tangible common equity to tangible assets (c)6.64 6.89 
Adjusted tangible common equity to risk weighted assets (c)9.12 8.82 
(a)The modified CECL transitional amount is calculated as defined in the final rule issued by the banking regulators on August 26, 2020 and includes the full amount of the impact to retained earnings from the initial adoption of CECL plus 25% of the change in the adjusted allowance for credit losses since FHN’s initial adoption of CECL through March 31, 2021 and December 31, 2020.
(b)The $93 million carrying value of the Series D preferred stock does not qualify as Tier 1 capital because the earliest redemption date is less than five years from the issuance date.
(c)Tangible common equity to tangible assets and Adjusted tangible common equity to risk-weighted assets are non-GAAP measures and are reconciled to total equity to total assets (GAAP) in the Non-GAAP to GAAP Reconciliation - Table 20.
FIRST HORIZON CORPORATION891Q21 FORM 10-Q REPORT

Banking regulators define minimum capital ratios for bank holding companies and their bank subsidiaries. Based on the capital rules and definitions prescribed by the banking regulators, should any depository institution’s capital ratios decline below therepredetermined levels, it would become subject to a series of increasingly restrictive regulatory actions.
The system categorizes a depository institution’s capital position into one of five categories ranging from well-capitalized to critically under-capitalized. For an institution the size of FHN to qualify as well-capitalized, Common Equity Tier 1, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least 6.50%, 8.00%, 10.00%, and 5.00%, respectively. Furthermore, a capital conservation buffer of 50 basis points above these levels 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 March 31, 2021, each of FHN and First Horizon Bank had sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer requirement. Capital ratios for both FHN and First Horizon Bank are calculated under the final rule issued by the banking regulators in 2020 to delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period.
For both FHN and First Horizon Bank, the risk-based regulatory capital ratios increased in first quarter 2021 relative to fourth quarter 2020 primarily from the impact of net income less dividends and share repurchases during the first three months of 2021 and a decrease in risk weighted assets, primarily from loan activity. During 2021, capital ratios are expected
to remain above well-capitalized standards plus the required capital conservation buffer.
Common Stock Purchase Programs
General Authority
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. FHN’s Board has not authorized a preferred stock purchase program.
On January 27, 2021, FHN announced that its Board of Directors approved a new $500 million common share purchase program that will expire on January 31, 2023. The new program is not tied to any compensation plan, and replaced the previous general share repurchase program, which was terminated by the Board. Purchases may be made in the open market or through privately negotiated transactions, including under Rule 10b5-1 plans as well as accelerated share repurchase and other structured transactions. The timing and exact amount of common share repurchases will be subject to various factors, including FHN's capital position, financial performance, capital impacts of strategic initiatives, market conditions and regulatory considerations.
As of March 31, 2021, $59 million in purchases had been made under this authority at an average price per share of $16.12, or $16.10 excluding commissions.
Table 17a—Issuer Purchases of Common Stock - General Authority
(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
2021
January 1 to January 31— N/A— $500,000 
February 1 to February 282,128 15.59 2,128 466,828 
March 1 to March 311,515 16.88 1,515 441,258 
Total3,643 $16.12 3,643 
N/A - not applicable
(a) Represents total costs including commissions paid.


Compensation 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
FIRST HORIZON CORPORATION901Q21 FORM 10-Q REPORT

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 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. Purchases may be made in the open market or through privately negotiated transactions and are subject to various factors including FHN's capital position, financial performance, capital impacts of strategic initiatives, market market conditions and regulatory restrictions. As of March 31, 2021, the maximum number of shares that may be purchased under the program was 23.8 million shares. Management currently does not anticipate purchasing a material number of shares under this authority during 2021.

Table 17b—Issuer Purchase of Common Stock - Compensation 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
2021
January 1 to January 31170 $13.54 170 23,861 
February 1 to February 288 13.97 8 23,854 
March 1 to March 3144 16.69 44 23,810 
Total221 $14.18 221 

Risk Management
There have been no significant changes to FHN’s risk management practices as described under “Risk Management” beginning on page 47included in Item 7 of Exhibit 13 to FHN’s 2020 Annual Report on Form 10-K for the year ended December 31, 2016.10-K.
MARKET RISK MANAGEMENT
Except as discussed below, there have been no significant changes to FHN’s market risk management practices as described under “Market Risk Management” beginning on page 48 of Exhibit 13 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016.


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 percent99% 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 CORPORATION911Q21 FORM 10-Q REPORT

A summary of FHN’s VaR and SVaR measures for 1-day and 10-day time horizons is as follows:
Table 21—18—VaR and SVaR Measures

 Three Months Ended
March 31, 2021		As of
March 31, 2021
(Dollars in millions)MeanHighLow 
1-day
VaR$3 $4 $1 $1 
SVaR3 4 2 3 
10-day
VaR12 21 1 4 
SVaR15 21 11 13 
 Three Months Ended
March 31, 2020		As of
March 31, 2020
(Dollars in millions)MeanHighLow 
1-day
VaR$2 $7 $1 $5 
SVaR9 18 5 5 
10-day
VaR7 25 2 19 
SVaR27 43 16 19 
 Year Ended
December 31, 2020		As of
December 31, 2020
(Dollars in millions)MeanHighLow 
1-day
VaR$3 $7 $1 $2 
SVaR5 18 1 2 
10-day
VaR13 25 2 10 
SVaR18 43 6 10 

  Three Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2017		 As of
September 30, 2017
(Dollars in thousands) Mean High Low Mean High Low  
1-day              
VaR $1,620
 $3,310
 $521
 $1,450
 $3,310
 $521
 $3,174
SVaR 4,575
 7,781
 2,150
 4,023
 7,781
 1,775
 6,805
10-day              
VaR 4,112
 8,039
 870
 3,538
 8,039
 870
 6,302
SVaR 15,021
 22,511
 7,833
 13,390
 24,550
 4,916
 18,602
               
  Three Months Ended
September 30, 2016		 Nine Months Ended
September 30, 2016		 As of
September 30, 2016
(Dollars in thousands) Mean High Low Mean High Low  
1-day              
VaR $814
 $1,040
 $606
 $769
 $1,411
 $393
 $880
SVaR 3,823
 5,641
 2,253
 3,607
 5,789
 1,748
 4,017
10-day              
VaR 1,917
 3,167
 1,170
 1,848
 4,058
 751
 2,998
SVaR 12,439
 18,221
 7,105
 11,703
 18,221
 3,263
 12,055
               
    Year Ended
December 31, 2016		 As of
December 31, 2016
(Dollars in thousands)       Mean High Low  
1-day              
VaR       $821
 $1,745
 $393
 $932
SVaR       3,643
 5,789
 1,748
 2,830
10-day              
VaR       2,088
 5,852
 751
 2,136
SVaR       11,671
 18,483
 3,263
 6,443

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—19—Schedule of Risks Included in VaR
 As of March 31, 2021As of March 31, 2020As of December 31, 2020
(Dollars in millions)1-day10-day1-day10-day1-day10-day
Interest rate risk$1 $2 $1 $3 $1 $2 
Credit spread risk— 1 2 12 2 6 

  As of September 30, 2017 As of September 30, 2016 As of December 31, 2016
(Dollars in thousands) 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
Credit spread risk 370
 701
 785
 2,710
 537
 1,391
The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static. Because FHN’s Fixed Income divisionFHN Financial procures fixed income securities for purposes of distribution to customers,clients, its trading securities inventory turns over multiple times daily, on average.regularly. Additionally, Fixed IncomeFHNF 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 IncomeFHNF to incur a negative 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
FIRST HORIZON CORPORATION921Q21 FORM 10-Q REPORT

information regarding FHN's capital adequacy refer to the "Capital"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 IncomeFHN Financial 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 have been no significant changes to FHN's interest rate risk management practices as described under "Interest Rate Risk Management" beginning on page 50 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, 2016.

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.Report.


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 exposureMarch 31, 2021, NII exposures over the next 12 months assuming a rate shockshocks of plus 25 basis points, 50 basis points, 100 basis points, and 200 basis points isare estimated to have a favorable variancevariances of 1.0 percent, 2.1 percent, 4.1 percent,2.5%, 4.7%, 9.3%, and 7.7 percent,16.0%, 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.of 0.7%. 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 shockof 0.9%. Rate shocks of minus 25 basis points and minus 50 basis points resultsresult in an unfavorable variance in net interest incomeNII variances of 1.5 percent1.7% and 4.4 percent, respectively,2.0%, assuming the absence of base net interest income.negative rates. 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’s net interest income has been, and likely will continue to be, impacted by the disruption from the COVID-19 pandemic and the low rate environment.
FIRST HORIZON CORPORATION931Q21 FORM 10-Q REPORT

The increase in the unemployment rate, client loan deferral requests, the impact of government assistance programs, and other developments have influenced net interest income results. FHN reports its interest rate risk profile to the Board quarterly.
CAPITAL MANAGEMENT AND ADEQUACY
There have been no significant changes to FHN's capital management practices as described under "Capital Managementis monitoring current economic trends and Adequacy" on page 51 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, 2016.
OPERATIONAL RISK MANAGEMENT
Except as discussed below, there have been no significant changes to FHN's operational risk management practices as described under "Operational Risk Management" on page 52 of Exhibit 13 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.
COMPLIANCE RISK MANAGEMENT
There have been no significant changes to FHN's compliance risk management practices as described under "Compliance Risk Management" on page 52 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, 2016.
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 52 of Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended December 31, 2016.

potential exposures closely.
LIQUIDITY RISK MANAGEMENT
Among other things, ALCO also focuses onis responsible for 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. ThePolicy of which 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 FundsFunds markets, incremental borrowing capacitycapacity at the FHLBFHLB ($1.413.9 billionwas was available at September 30, 2017)as of March 31, 2021), 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, excludingexcluding loans HFS and restricted real estate loans, to core deposits was 104 percent on September 30, 2017 compared to 105 percent on86% for March 31, 2021 and 97% for December 31, 2016.


2020.
FHN may also may use unsecured short-term borrowings as a source of liquidity. Currently, the largest concentration of unsecured borrowings is federalFederal funds purchased from correspondent bank correspondent customers. These fundsclients 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 isconsists of securities sold under agreements to repurchase transactions accounted for as secured borrowings with Regional Banking’s business customersclients or Fixed Income’s broker dealer counterparties.
Both FHN and FTBNA 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 issued $400 million of fixed rate senior notes due in December 2019. In October 2015, FHN issued $500 million of fixed rate senior notes due in December 2020.
Both FHN and FTBNAFirst Horizon Bank have the ability to generate liquidity by issuing senior or subordinated unsecured debt, 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, FTBNAMarch 31, 2021, FHN had outstanding $1.3 billion in senior and subordinated unsecured debt and $470 million in non-cumulative perpetual preferred stock. As of March 31, 2021, First Horizon Bank and subsidiaries had outstanding preferred shares of $295.4$295 million, which are reflected as noncontrolling interest on the Consolidated Condensed Statements of Condition.Balance Sheets.
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 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 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 to declare preferred or common dividends without prior regulatory approval in an aggregate amount equal to FTBNA’s retained net income for the two most recent completed years plus the current year to date. For any period, FTBNA’s ‘retained net income’ generally is equal to FTBNA’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. Applying the dividend restrictions imposed under applicable federal and state rules FTBNA’sas outlined above, the Bank’s total amount available for dividends was negative $64.7$969 million as of September 30, 2017 compared to negative $132.5 million as of December 31, 2016. Consequently, FTBNA could not pay common dividends to its sole common stockholder, FHN, or to its preferred shareholders without prior regulatory approval. FTBNA applied forApril 1, 2021. First Horizon Bank declared and received approval from the OCC to declare and paypaid 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, andparent company in the amount of $250$183 million in 2016. FTBNAfirst quarter 2021 and $65 million in first quarter 2020. First Horizon Bank declared preferred dividends in the first quarter of 2021 which were payable in April 2021 and declared and paid preferred dividends in each quarter to date of 2017 and each quarter of 2016, with OCC approval as necessary. Additionally, FTBNA declared preferred dividends in fourth quarter 2017, with OCC approval.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. Additionally, the Federal Reserve and the OCCbanking 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$0.15 per common share on October 2, 2017, April 1, 2021. FHN paid cash dividends of $1,550 per Series A preferred share and $1,625 per Series E preferred share on April 12, 2021 and $165 per Series C preferred share and $305 per Series D preferred share on May 3, 2021. In addition, in October 2017April 2021, the Board approved a $.09cash dividends per common share cash dividend payable on January 2, 2018, to shareholders of record on November 3, 2017. FHN paid a cash dividend of $1,550.00 per preferred share on October 10, 2017, and in October 2017 the Board approved a $1,550.00 per preferred share cash dividend payable on January 10, 2018, to shareholders of record on December 22, 2017.

CASH FLOWS
The Consolidated Condensed Statements of Cash Flows provide information on cash flows from operating, investing, and financing activities for the nine months ended September 30, 2017 and 2016. The level of cash and cash equivalents increased $50.0 million during 2017 compared to an increase of $126.5 million in 2016, as cash provided by financing activities more than offset cash used by operating and investing activities during both periods.
Net cash provided by financing activities was $621.8 million in 2017, largely driven by an increase in short-term borrowings (primarily FHLB borrowings) used to fund loan growth, somewhat offset by a decline in market-indexed deposits. Net cash used by investing activities was $266.4 million in 2017, as 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 andfollowing amounts:


FIRST HORIZON CORPORATION941Q21 FORM 10-Q REPORT

cash outflows of $85.0 million related to operating assets and liabilities, but were somewhat offset by favorably driven cash-related net income items.
Dividend/ShareRecord DatePayment Date
Common Stock$0.15 06/11/202107/01/2021
Preferred Stock
Series A$1,550.00 06/25/202107/12/2021
Series B$331.25 07/16/202108/02/2021
Series C$165.00 07/16/202108/02/2021
Series E$1,625.00 06/25/202107/12/2021
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 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 in 2016. Operating cash decreased in 2016 primarily driven by net cash outflows of net fixed income trading activities of $287.5 million, a $165 million cash contribution to the qualified pension plan and net changes in operating assets and liabilities of $94.7 million.
REPURCHASE OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS, AND OTHER CONTRACTUAL OBLIGATIONS
Obligations from Legacy Mortgage Businesses
[Certain mortgage-related terms used in this section are defined in “Mortgage-Related Glossary” below.]
Repurchase Obligations and Off-Balance Sheet Arrangements
Overview
Prior to September 2008, FHN originated loans through its legacy mortgagepre-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: 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 FH 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 FH proprietary securitizations. FHN also originated mortgage loans eligible for FHA insurance or VA guaranty. In addition, FHN originated and sold HELOCs and second 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 sold or securitized having an LTV ratio at origination of greater than 80 percent.
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 sale FHN has sold substantially all remaining servicing assets and obligationsdiscussed 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 or to pay the purchaser to “make them whole” for economic losses incurred. These claims have been driven primarily by loan delinquencies. In repurchase or make-whole claims a loan purchaser typically asserts that specified loans violated representations and warranties FHN made when the loans were sold. A significant majority of claims received overall have come from GSEs, and the remainder are from purchasers of other whole loan sales. FHN has not received 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, 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 –11 - Contingencies and Other Disclosures, FHN's principal remaining exposures for a discussion of certain actions pending against FHN in relationthose activities relate to FH proprietary securitizations.
Servicing Obligations
FHN’s national servicing business was sold as part of the platform sale in 2008. A significant amount of MSR was sold at(i) indemnification claims by underwriters, loan purchasers, and other parties which assert 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 a three-year subservicing arrangement (the “2008 subservicing agreement”) with the platform buyer (the “2008 subservicer”). The 2008 subservicing agreement expired in 2011 when FHN entered into a replacement agreement with a new subservicer (the “2011 subservicer”). In fourth quarter 2013, FHN contractedFHN-originated loans caused or contributed to sell 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 bylosses which FHN is not significantlegally obliged to indemnify, 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(ii) indemnification or other tasks related to each loan. Each subservicer undertook to perform those obligations on 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—Contingencies and Other Disclosures—FHN has received a notice of indemnification claims from its 2011 subservicer, Nationstar Mortgage LLC, currently doing business as “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 proprietary securitizations was $3.2 billion, comprised of $2.3 billion of Alt-A loans and $0.9 billion of Jumbo loans.
Mortgage-Related Glossary
Agenciesthe two GSEs and Ginnie MaeHELOChome equity line of credit
certificatessecurities sold to investors representing interests in mortgage loan securitizationsHUDDept. of Housing and Urban Development
DOJU.S. Department of JusticeLTVloan-to-value, a ratio of the loan amount divided by the home value
DRAdefinitive resolution agreement with a GSEMIprivate mortgage insurance, insuring against borrower payment default
Fannie Mae, Fannie, FNMAFederal National Mortgage AssociationMSRmortgage servicing rights
FH proprietary securitizationsecuritization of mortgages sponsored by FHN under its First Horizon brandnonconforming loansloans that did not conform to Agency program requirements
FHAFederal Housing Administrationother whole loans soldmortgage loans sold to private, non-Agency purchasers
Freddie Mac, Freddie, FHLMCFederal Home Loan Mortgage Corporation2008 platform sale, platform sale, 2008 saleFHN’s sale of its national mortgage origination and servicing platforms in 2008
Ginnie Mae, Ginnie, GNMAGovernment National Mortgage Associationpipeline or active pipelinepipeline of mortgage repurchase, make-whole, & certain related claims against FHN
GSEsFannie Mae and Freddie MacVAVeterans 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 percent 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 breachesFHN's servicing of representations and warranties related to origination.pre-2009 mortgage loans.
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 thepotential 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, andconsiders 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 lossescontent 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
TheFHN’s repurchase and foreclosure liability, primarily related to its pre-2009 mortgage business, is comprised of reservesaccruals 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 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 from other whole loans sold.was $16 million as of March 31, 2021 and December 31, 2020.
Certain government entities have subpoenaed information from
Off-Balance Sheet Arrangements

In the normal course of business, 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 purportis a party 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 concerning: a number of FH proprietary securitizations and/activities that contain credit, market and operational risk that are not reflected in whole or underlyingin part in the consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments. FHN provides customers with off-balance sheet credit support through loan originations;commitments, lines of credit, and originationsstandby letters 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 somecredit. Many of the loans under review. Unlesscommitments are expected to expire unused or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements. Based on its available liquidity and until a review (if relatedavailable borrowing capacity, FHN anticipates it will continue to specific loans) becomes an identifiable repurchase claim, the associated loans are not considered part of the active pipeline.have sufficient funds to meet its current commitments.
MARKET UNCERTAINTIES AND PROSPECTIVE TRENDS
FIRST HORIZON CORPORATION951Q21 FORM 10-Q REPORT

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, and the availability and administration of stimulus relief for the economy. Additional impacts include how the pandemic affects FHN’s clients, as well as political uncertainty, potential changes in federal policies. In addition, legacy matterspolicies and the potential impact to our clients, and FHN’s strategic initiatives. The global COVID-19 pandemic has led to periods of significant volatility in the non-strategic segment are likely to continue to impact FHN’s quarterly results in ways which are both difficult to predictfinancial commodities (including oil 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,gas) and other traditional means.markets, and has adversely affected FHN’s and its clients' ability to conduct normal business, and could harm FHN’s business and future results of operations.
Performance by FHN, andIn March 2020, the entire U.S. financial services industry, is affected considerably by the overall health of the U.S. economy. The most recent recession ended in 2009. Growth during the economic expansion since 2009 largely has been muted, compared to earlier recoveries, 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 loan and other financial activity growth by our customers.
The Federal Reserve has raisedlowered short-term interest rates by 25 basis points three timestwice 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, was 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 the severity of 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 is 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 adversely impactmarket negatively impacted 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 ratesAmortization of net processing fees related to rise slower than short-term rates, thengovernment relief programs, including the yield curve would flatten, which would adversely impact FHN’sPaycheck Protection Program, has offset a portion of the net interest margin.margin decline.
COVID-19 Pandemic
Government and societal reaction to the COVID-19 pandemic caused extraordinary disruption to the U.S. economy, as well as to the local economies within FHN's footprint, during the final three quarters of 2020 and continuing into the first quarter of 2021. Business activity, especially lending, declined throughout 2020 and into first quarter this year. In certain business lines, FHN reduced or stopped new lending because of the pandemic.
In the fourth quarter of 2020, two extremely effective vaccines were approved in the U.S. Administration of those vaccines began late in 2020, nationwide but on a narrowly targeted basis. In the first quarter of 2021, vaccine production and distribution increased, and a third vaccine was approved in the U.S. Public vaccination in the U.S. has accelerated during the first four months of 2021. In many of FHN's markets, COVID-19 restrictions at least partially were eased by the end of March or during April, and FHN believes further easing is likely in the rest of 2021. COVID-19 restrictions still had a substantial impact on FHN and its clients in the first quarter of 2021, but FHN expects those impacts to diminish over the rest of this year as the vaccinated percentage of the U.S. population continues to climb. Within the U.S. economy, broadly speaking, manufacturing has largely recovered while services continue to lag significantly, especially in hospitality and leisure.
Risk of resurgence remains as new virus variants continue to be identified around the world. As a result, FHN continues to closely monitor the pandemic and its effects on clients, especially credit quality, on FHN's communities, and on the financial markets. FHN continues to reach out to clients to discuss challenges and solutions, to provide line draws and new extensions to existing clients, to provide support for small businesses through the Paycheck Protection Program and other stimulus programs, and to provide lending and deposit assistance through deferrals and waived fees.

LIBOR Reform
In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London Inter-Bank Offered Rate (LIBOR), announced that it intends to halt persuading or compelling banks to submit rates for the calculation of LIBOR after 2021.
In March 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”), the governmental regulator of the administrator of LIBOR, announced that U.S. Dollar LIBOR will no longer be representative as of:
•One week and two month USD LIBOR after December 31, 2021; and
•All other USD LIBOR tenors (e.g., overnight, 1-month, 3-month, 6-month and 12-month tenors) after June 30, 2023.

FIRST HORIZON CORPORATION961Q21 FORM 10-Q REPORT

The administrator of LIBOR thereafter announced that USD LIBOR will cease to be published immediately after the dates set out above.
Previous to these announcements, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued SR 20-27 to encourage banks to transition away from U.S. dollar LIBOR as soon as practicable and noted that entering into new contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks. As a result, market participants will be required to transition away from LIBOR beginning in 2021. FHN is not currently able to predict the impact that the transition from LIBOR will have on FHN; 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 cannot predicthas initiated efforts to 1) develop an inventory of affected loans, securities, and derivatives, 2) evaluate and assess modifications as needed to address loans outstanding at the timing, resolutiontime of LIBOR discontinuance, 3) obtain an understanding of the potential effects for applicable securities and effectsderivatives, 4) assess revisions to systems, processes, and pricing needed to implement alternative reference rates, and 5) update fallback language for all new loans that reference LIBOR.

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. The scope of ASU 2020-04 was expanded with the January 2021 issuance of ASU 2021-01, "Scope". Refer to the Accounting Changes Issued but Not Currently Effective section of Note 1 - Basis of Presentation and Accounting Policies for additional information. Additionally, the IRS has released guidance that is intended to facilitate the transition of existing contracts from LIBOR to new legislation. The potential legislative actions which currently seemreference rates without triggering modification accounting or taxable exchange treatment for those contracts. This guidance specifies what must be met in order to qualify for the most likely to be impactful to FHN include corporate tax reform, general regulatory reform, and financial regulatory reform, all of which can affect the overall economybeneficial transition approach and FHN customers.is considering this guidance in its transition plans.
Lastly, while
Limited Data Security Incident

In mid-April, FHN became aware of a data security incident affecting a limited number of customer accounts. Based on its ongoing investigation, FHN determined that an unauthorized party had obtained login credentials from an unknown source and attempted access to client accounts. Using the credentials and exploiting a vulnerability in third-party security software, the unauthorized party gained unauthorized access to under 200 on-line client bank accounts, had access to personal information in those accounts, and fraudulently obtained an aggregate of less than $1 million from some of those accounts. FHN has remediated the software vulnerability, reset the passwords for the identified accounts, is working with the affected clients to close existing accounts and open new ones, has reimbursed clients for the stolen funds, and has notified the appropriate regulators and enforcement authorities. Based on its ongoing assessment of the incident to date, FHN does not believe that this event will have a material adverse effect on its business, results of operations, or financial condition.

Critical Accounting Policies and Estimates
FHN has made significant progress in resolving matters from the legacy mortgage business, several matters 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 occasionally and unexpectedly impact FHN’s overall quarterly results negatively or positively with reserve accruals or releases. Also, although new legacy 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 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 servicing business and subservicing arrangements. Further details regarding these legacy matters are provided in “Obligations from Legacy Mortgage Businesses – Overview – Servicing Obligations” under “Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations.”


CRITICAL ACCOUNTING POLICIES
There have been no significant changes to FHN’sin its critical accounting policies as describedand estimates from those disclosed in “Critical Accounting Policies” beginning on page 64 of Exhibit 13 to FHN’sits 2020 Annual Report on Form 10-K for the year ended December 31, 2016.10-K.
ACCOUNTING CHANGES ISSUED BUT NOT CURRENTLY EFFECTIVEAccounting Changes With Extended Transition Periods
Refer to Note 1 – Financial Information forBasis of Presentation and Accounting Policies for a detail of accounting standards that have been issued but are not currently effective,changes with extended transition periods, which section is incorporated into MD&A by this reference.
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 CORPORATION971Q21 FORM 10-Q REPORT

Non-GAAP Information
Table 25—20—Non-GAAP to GAAP Reconciliation
 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
Three Months Ended
(Dollars in millions; shares in thousands)March 31, 2021December 31, 2020March 31, 2020
Pre-provision Net Revenue (Non-GAAP)
Net interest income (GAAP)$508 $522 $303 
Plus: Noninterest income (GAAP)298 288 175 
Total revenues (GAAP)806 810 478 
Less: Noninterest expense (GAAP)544 508 302 
Pre-provision net revenue (Non-GAAP)$262 $302 $176 
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)$8,349 $8,209 $5,002 
Less: Average noncontrolling interest (a)295 295 295 
Less: Average preferred stock (a)470 470 96 
(A) Total average common equity$7,584 $7,444 $4,611 
Less: Average intangible assets (GAAP) (b)1,857 1,871 1,560 
(B) Average Tangible Common Equity (Non-GAAP)$5,727 $5,573 $3,051 
Net Income Available to Common Shareholders
(C) Net income available to common shareholders (annualized) (GAAP)$911 $933 $49 
Tangible Common Equity (Non-GAAP)
(D) Total equity (GAAP)$8,307 $8,307 $5,056 
Less: Noncontrolling interest (a)295 295 295 
Less: Preferred stock (a)470 470 96 
(E) Total common equity$7,542 $7,542 $4,665 
Less: Intangible assets (GAAP) (b)1,850 1,865 1,558 
(F) Tangible common equity (Non-GAAP)5,692 5,677 3,107 
Less: Unrealized gains (losses) on AFS securities, net of tax5 108 119 
(G) Adjusted tangible common equity (Non-GAAP)$5,687 $5,569 $2,988 
Tangible Assets (Non-GAAP)
(H) Total assets (GAAP)$87,513 $84,209 $47,197 
Less: Intangible assets (GAAP) (b)1,850 1,865 1,558 
(I) Tangible assets (Non-GAAP)$85,663 $82,344 $45,639 
Risk-Weighted Assets
(J) Risk-weighted assets (c)$62,339 $63,140 $40,055 
Period-end Shares Outstanding
(K) Period-end shares outstanding552,374 555,031 311,863 
Ratios
(C)/(A) Return on average common equity (GAAP)12.01 %12.53 %1.05 %
(C)/(B) Return on average tangible common equity (Non-GAAP)15.90 16.73 1.59 
(D)/(H) Total period-end equity to period-end assets (GAAP)9.49 9.86 10.71 
(F)/(I) Tangible common equity to tangible assets (Non-GAAP)6.64 6.89 6.81 
(G)/(J) Adjusted tangible common equity to risk weighted assets (Non-GAAP)9.12 8.82 7.46 
(E)/(K) Book value per common share (GAAP)$13.65 $13.59 $14.96 
(F)/(K) Tangible book value per common share (Non-GAAP)$10.29 $10.23 $9.96 
(a)Included in Total equity on the Consolidated Condensed Statements of Condition.Balance Sheets.
(b)Includes Goodwill and other intangible assets, net of amortization.
(c)Ratio is annualized net income available Defined by and calculated in conformity with bank regulations applicable to common shareholders to average common equity.FHN.
(d)Ratio is annualized net income available to common shareholders to average tangible common equity.



FIRST HORIZON CORPORATION981Q21 FORM 10-Q REPORT

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 11491 of this report and the subsections entitled “Market Risk Management” beginning on page 11491 and “Interest Rate Risk Management” beginning on page 11693 of this report, and
(b)
Note 1415 to the Consolidated Condensed Financial Statements appearing on pages 53-5942-48 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 13Item 7 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016,2020, including in particular the section entitled “Risk Management” beginning on page 4787 of that Report and the subsections entitled “Market Risk Management” beginning on page 4888 and “Interest Rate Risk Management” appearingbeginning on pages 50-51page 90 of that Report;Report; and Note 22 to the Consolidated Financial Statements appearing on pages 153-158202-209 of Exhibit 13Item 8 to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


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. Other than as explained below, there have not been any changes in our internal control over financial reporting during the first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On July 1, 2020, FHN and IBERIABANK Corporation ("IBKC") closed their merger-of-equals transaction. As permitted by Securities and Exchange Commission rules, we elected to exclude IBKC from our assessment of internal control over financial reporting as of December 31, 2020. Our integration of IBKC’s systems and processes with our own could cause changes to our internal controls over financial reporting in future periods.







Item 4.FIRST HORIZON CORPORATIONControls and Procedures991Q21 FORM 10-Q REPORT

(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.



PartPART II.
OTHER INFORMATION

Item 1
Item 1.    Legal Proceedings

The “Contingencies” section of Note 1011 to the Consolidated Condensed Financial Statements beginning on page 3732 of this Report is incorporated into this Item by reference.

Item 1A.    Risk Factors

Changes from previous risk factor disclosures:

The following updates and restates the third highlighted topic under "Operational Risks" within Item 1A of FHN's annual report on Form 10-K for the year ended December 31, 2020, which appeared on page 30 of that report.

An information technology security (cybersecurity) breach or other incident can cause significant damage, and can be difficult to detect even after it occurs. Among other things, that damage can occur due to outright theft, loss or extortion of our funds or our clients’ funds, fraud or identity theft perpetrated on clients, loss of confidential or proprietary information, business disruption, or adverse publicity associated with a breach or incident and its potential effects. Perpetrators potentially can be associates, clients, and certain vendors, all of whom legitimately have access to some portion of our systems, as well as outsiders with no legitimate access. For example, in April 2021 we experienced a data security incident affecting a small number of client accounts. An unauthorized party gained access to certain client login credentials from an unknown source. Using those credentials and exploiting a vulnerability in third-party security software, the unauthorized party was able to fraudulently obtain funds from client accounts. Although our monetary loss from that incident was minimal, the incident illustrates that we are at risk for vulnerabilities not fully within our control, in this case related to third-party software and client credentials.

Because of the potential for very serious consequences associated with these risks, our electronic systems and their upgrades need to address internal and external security concerns to a high degree, and our systems must comply with applicable banking and other regulations pertaining to bank safety and client protection. Although many of our defenses are systemic and highly technical, others are much older and more basic. For example, periodically we train all our associates to recognize red flags associated with fraud, theft, and other electronic crimes, and we educate our clients as well through regular and episodic security-oriented communications. We expect our systems and regulatory requirements to continue to evolve as technology and criminal techniques also continue to evolve.


Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

(a) & (b)Not Applicable
(c)
The "Common Stock Purchase Programs” section including tables 17(a) and 17(b) and explanatory discussions included in Item 1A2 of Part I of this report under the heading “First Horizon Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operations,” beginning on page 90 of this report, is incorporated herein by reference.
Risk Factors


Items 3., 4., and 5.

Not applicable
FIRST HORIZON CORPORATION1001Q21 FORM 10-Q REPORT

Item 2Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.    Exhibits
(a) Exhibits
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 contract or compensatory plan or arrangement required to be identified as such; and the “Furnished” column denotes each exhibit that is “furnished” pursuant to 18 U.S.C. Section 1350 or otherwise, and is not “filed” as part of this Report or as a separate disclosure document.
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. 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 TABLE
Exh NoDescription of Exhibit to this ReportFiled HereMngt ExhFurn-ishedIncorporated by Reference to
FormExh No.Filing Date
4.10FHN 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.
10.1XX
10.2XX
10.3XX
10.4XX
10.5X8-K10.11/29/2021
10.6XProxy 2021App. A3/15/2021
31(a)X
31(b)X
32(a)XX
32(b)XX
XBRL Exhibits
101The following financial information from First Horizon Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets at March 31, 2021 and December 31, 2020; (ii) Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020; (iv) Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021 and 2020; (v) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020; (vi) Notes to Consolidated Financial Statements.X
101. INSXBRL Instance Document -- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101. SCHInline XBRL Taxonomy Extension SchemaX
101. CALInline XBRL Taxonomy Extension Calculation LinkbaseX
101. LABInline XBRL Taxonomy Extension Label LinkbaseX
FIRST HORIZON CORPORATION(a) & (b)101Not Applicable1Q21 FORM 10-Q REPORT

Exh NoDescription of Exhibit to this ReportFiled HereMngt ExhFurn-ishedIncorporated by Reference to
Form(c)Exh No.The "Common Stock Purchase Programs” section including tables 9(a) and 9(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 96 of this report, is incorporated herein by reference.Filing Date
101. PREInline XBRL Taxonomy Extension Presentation LinkbaseX
101. DEFInline XBRL Taxonomy Extension Definition LinkbaseX
104Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101)X
Items 3, 4, and 5
FIRST HORIZON CORPORATION1021Q21 FORM 10-Q REPORT


Not applicable

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 CORPORATION
(Registrant)                                 
Date: May 6, 2021By:/s/ William C. Losch III
Name:William C. Losch III
Title:Senior Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
FIRST HORIZON CORPORATION1031Q21 FORM 10-Q REPORT
Item 6.Exhibits

(a) Exhibits
Exhibits marked * represent management contracts or compensatory plans or arrangements required to be identified as such and filed as exhibits.
Exhibits marked ** are “furnished” pursuant to 18 U.S.C. Section 1350 and are 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 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.
ExhibitDescription
4FHN 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*
Rate Applicable to Participating Directors and Executive Officers under the Directors and Executives Deferred Compensation Plan
10.2*
Portions of FTN Financial Incentive Compensation Plan (as amended and restated October 2017) applicable to the annual bonus opportunity of the President-FTN Financial under the Management Incentive Plan. This Exhibit applies to that bonus opportunity pursuant to FHN's bylaws, the charter of the Board's Compensation Committee, and action by the Committee taken on July 18, 2006.
31(a)
Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of Sarbanes-Oxley Act of 2002)
31(b)
Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)
32(a)**
18 USC 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
32(b)**
18 USC 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
101***The following financial information from First Horizon National Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL: (i) Consolidated Condensed Statements of Condition at September 30, 2017 and December 31, 2016; (ii) Consolidated Condensed Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016; (iii) Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016; (iv) Consolidated Condensed Statements of Equity for the Nine Months Ended September 30, 2017 and 2016; (v) Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016; (vi) Notes to Consolidated Condensed Financial Statements.
101.INS***XBRL Instance Document
101.SCH***XBRL Taxonomy Extension Schema
101.CAL***XBRL Taxonomy Extension Calculation Linkbase
101.LAB***XBRL Taxonomy Extension Label Linkbase
101.PRE***XBRL Taxonomy Extension Presentation Linkbase
101.DEF***XBRL Taxonomy Extension Definition Linkbase


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, 2017By:/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