
			6			3Q22 FORM 10-Q REPORT

~~CONSOLIDATED CONDENSED STATEMENTS OF CONDITION~~

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

CONSOLIDATED BALANCE SHEETS



	(Unaudited)		December 31,
	September 30,
(Dollars in millions, except per share amounts)	2022		2021
Assets
Cash and due from banks	$	1,193	$	1,147
Interest-bearing deposits with banks	3,241		14,907
Federal funds sold and securities purchased under agreements to resell	690		641
Trading securities	1,421		1,601
Securities available for sale at fair value	8,718		8,707
Securities held to maturity (fair value of $1,222 and $705, respectively)	1,385		712
Loans held for sale (including $89 and $258 at fair value, respectively)	680		1,172
Loans and leases	57,354		54,859
Allowance for loan and lease losses	(664)		(670)
Net loans and leases	56,690		54,189
Premises and equipment	622		665
Goodwill	1,511		1,511
Other intangible assets	246		298
Other assets	3,902		3,542
Total assets	$	80,299	$	89,092

Liabilities
Noninterest-bearing deposits	$	25,813	$	27,883
Interest-bearing deposits	40,202		47,012
Total deposits	66,015		74,895
Trading liabilities	383		426
Short-term borrowings	1,416		2,124
Term borrowings	1,597		1,590
Other liabilities	2,605		1,563
Total liabilities	72,016		80,598

Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 31,686 and 26,750 shares, respectively	1,014		520
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 536,736,705 and 533,576,766 shares, respectively	335		333
Capital surplus	4,812		4,743
Retained earnings	3,254		2,891
Accumulated other comprehensive loss, net	(1,427)		(288)
FHN shareholders' equity	7,988		8,199
Noncontrolling interest	295		295
Total equity	8,283		8,494
Total liabilities and equity	$	80,299	$	89,092

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


~~(a)~~			~~September 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.~~7			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			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.

CONSOLIDATED STATEMENTS OF INCOME




	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions, except per share data; shares in thousands) (Unaudited)	2022		2021		2022		2021
Interest income
Interest and fees on loans and leases	$	617	$	482	$	1,553	$	1,485
Interest and fees on loans held for sale	9		8		30		22
Interest on investment securities	46		31		123		88
Interest on trading securities	15		6		39		20
Interest on other earning assets	46		6		82		11
Total interest income	733		533		1,827		1,626
Interest expense
Interest on deposits	43		20		72		67
Interest on trading liabilities	3		1		9		4
Interest on short-term borrowings	7		2		10		4
Interest on term borrowings	18		18		53		55
Total interest expense	71		41		144		130
Net interest income	662		492		1,683		1,496
Provision for credit losses	60		(85)		50		(245)
Net interest income after provision for credit losses	602		577		1,633		1,741
Noninterest income
Fixed income	46		96		170		324
Deposit transactions and cash management	43		44		129		130
Brokerage, management fees and commissions	23		24		71		65
Mortgage banking and title income	9		34		65		126
Card and digital banking fees	21		21		64		59
Other service charges and fees	13		12		41		32
Trust services and investment management	11		13		36		39
Securities gains (losses), net	12		1		18		12
Deferred compensation income	(3)		3		(24)		12
Loss on debt extinguishment	—		(23)		—		(23)
Other income	38		22		72		53
Total noninterest income	213		247		642		829
Noninterest expense
Personnel expense	275		296		820		920
Net occupancy expense	32		33		96		103
Computer software	28		30		85		87
Operations services	22		24		65		59
Legal and professional fees	10		21		50		52
Contract employment and outsourcing	12		21		43		47
Amortization of intangible assets	13		14		39		42
Advertising and public relations	12		14		34		23
Equipment expense	11		12		34		35
Communications and delivery	10		9		28		28
Other expense	44		52		156		171
Total noninterest expense	469		526		1,450		1,567
Income before income taxes	346		298		825		1,003
Income tax expense	78		63		183		222
Net income	$	268	$	235	$	642	$	781
Net income attributable to noncontrolling interest	3		3		8		9
Net income attributable to controlling interest	$	265	$	232	$	634	$	772
Preferred stock dividends	8		8		24		29
Net income available to common shareholders	$	257	$	224	$	610	$	743


~~(c)~~			~~September 30, 2017 and December 31, 2016 include $7.1 million and $8.1 million, respectively, of foreclosed residential real estate.~~8			3Q22 FORM 10-Q REPORT

C~~ONSOLIDATED CONDENSED 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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

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


Basic earnings per common share	$	0.48	$	0.41	$	1.14	$	1.35
Diluted earnings per common share	$	0.45	$	0.41	$	1.08	$	1.34
Weighted average common shares	535,986		545,818		534,613		549,434
Diluted average common shares	570,153		549,819		563,538		554,199

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


			9			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

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



	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions) (Unaudited)	2022		2021		2022		2021
Net income	$	268	$	235	$	642	$	781
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale	(368)		(38)		(1,003)		(103)
Net unrealized gains (losses) on cash flow hedges	(99)		(1)		(142)		(5)
Net unrealized gains (losses) on pension and other postretirement plans	3		1		6		7
Other comprehensive income (loss)	(464)		(38)		(1,139)		(101)
Comprehensive income (loss)	(196)		197		(497)		680
Comprehensive income attributable to noncontrolling interest	3		3		8		9
Comprehensive income (loss) attributable to controlling interest	$	(199)	$	194	$	(505)	$	671
Income tax expense (benefit) of items included in other comprehensive income:
Net unrealized gains (losses) on securities available for sale	$	(119)	$	(12)	$	(324)	$	(33)
Net unrealized gains (losses) on cash flow hedges	(32)		—		(46)		(2)
Net unrealized gains (losses) on pension and other postretirement plans	1		1		2		2

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

~~CONSOLIDATED CONDENSED STATEMENTS OF EQUITY~~


			10			3Q22 FORM 10-Q REPORT

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY




Nine Months Ended September 30, 2022
	Preferred Stock			Common Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total
Balance, December 31, 2021	26,750	$	520	533,577	$	333	$	4,743	$	2,891	$	(288)	$	295	$	8,494


Net income	—	—		—	—		—		195		—		3		198
Other comprehensive income (loss)	—	—		—	—		—		—		(423)		—		(423)
Comprehensive income (loss)	—	—		—	—		—		195		(423)		3		(225)
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(82)		—		—		(82)
Preferred stock issuance (4,936 shares issued at $100,000 per share)	4,936	494		—	—		—		—		—		—		494
Common stock repurchased	—	—		(120)	—		(2)		—		—		—		(2)
Common stock issued for:
Stock options exercised and restricted stock awards	—	—		1,130	1		14		—		—		—		15
Stock-based compensation expense	—	—		—	—		14		—		—		—		14
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, March 31, 2022	31,686	1,014		534,587	334		4,769		2,996		(711)		295		8,697

Net income	—	—		—	—		—		174		—		3		177
Other comprehensive income (loss)	—	—		—	—		—		—		(252)		—		(252)
Comprehensive income (loss)	—	—		—	—		—		174		(252)		3		(75)
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(83)		—		—		(83)


Common stock repurchased	—	—		(334)	(1)		(7)		—		—		—		(8)
Common stock issued for:
Stock options exercised and restricted stock awards	—	—		2,080	2		11		—		—		—		13
Stock-based compensation expense	—	—		—	—		18		—		—		—		18
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, June 30, 2022	31,686	1,014		536,333	335		4,791		3,079		(963)		295		8,551
Net income	—	—		—	—		—		265		—		3		268
Other comprehensive income (loss)	—	—		—	—		—		—		(464)		—		(464)
Comprehensive income (loss)	—	—		—	—		—		265		(464)		3		(196)
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(82)		—		—		(82)

Common stock repurchased	—	—		(103)	—		(3)		—		—		—		(3)
Common stock issued for:
Stock options exercised and restricted stock awards	—	—		507	—		3		—		—		—		3

Stock-based compensation expense	—	—		—	—		21		—		—		—		21
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Balance, September 30, 2022	31,686	$	1,014	536,737	$	335	$	4,812	$	3,254	$	(1,427)	$	295	$	8,283

(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.

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.~~11			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~2016 includes $93.5 million repurchased under share repurchase programs.~~

CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF ~~CASH FLOWS~~CHANGES IN EQUITY (continued)


Nine Months Ended September 30, 2021
	Preferred Stock			Common Stock
(Dollars in millions, except per share data; shares in thousands) (unaudited)	Shares	Amount		Shares	Amount		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss) (a)		Noncontrolling Interest		Total
Balance, December 31, 2020	26,250	$	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 exercised and restricted stock awards	—	—		1,208	—		12		—		—		—		12
Stock-based compensation expense	—	—		—	—		10		—		—		—		10
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)

Balance, March 31, 2021	26,250	470		552,375	345		5,036		2,402		(241)		295		8,307

Net income	—	—		—	—		—		308		—		3		311
Other comprehensive income (loss)	—	—		—	—		—		—		38		—		38
Comprehensive income (loss)	—	—		—	—		—		308		38		3		349
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(85)		—		—		(85)
Preferred stock issuance (1,500 shares issued at $100,000 per share net of offering costs)	1,500	145		—	—		—		—		—		—		145
Call of preferred stock	(1,000)	(95)							(5)						(100)
Common stock repurchased (b)	—	—		(3,435)	(3)		(61)		—		—		—		(64)
Common stock issued for:
Stock options exercised and restricted stock awards	—	—		1,925	2		11		—		—		—		13

Stock-based compensation expense	—	—		—	—		11		—		—		—		11
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Balance, June 30, 2021	26,750	520		550,865	344		4,997		2,612		(203)		295		8,565
Net income	—	—		—	—		—		232		—		3		235
Other comprehensive income (loss)	—	—		—	—		—		—		(38)		—		(38)
Comprehensive income (loss)	—	—		—	—		—		232		(38)		3		197
Cash dividends declared:
Preferred stock	—	—		—	—		—		(8)		—		—		(8)
Common stock ($0.15 per share)	—	—		—	—		—		(83)		—		—		(83)
Common stock repurchased (b)	—	—		(9,235)	(5)		(141)		—		—		—		(146)
Common stock issued for:
Stock options exercised and restricted stock awards	—	—		230	—		—		—		—		—		—

Stock-based compensation expense	—	—		—	—		10		—		—		—		10
Dividends declared - noncontrolling interest of subsidiary preferred stock	—	—		—	—		—		—		—		(3)		(3)
Balance, September 30, 2021	26,750	$	520	541,860	$	339	$	4,866	$	2,753	$	(241)	$	295	$	8,532

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

~~Certain previously reported amounts~~(a)Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of other comprehensive income (loss) have been ~~reclassified~~attributed solely to ~~agree with current presentation.~~FHN as the controlling interest holder.

(b)Includes $59 million, $57 million and $141 million repurchased under share repurchase programs for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively.

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


~~(a)~~			~~2016 includes $537.4 million UPB of loans acquired from GE Capital.~~12			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~2016 includes $93.5 million repurchased under share repurchase programs.~~

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine months ended September 30,
(Dollars in millions) (Unaudited)	2022		2021
Operating Activities
Net income	$	642	$	781
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	50		(245)
Deferred income tax expense (benefit)	167		(28)
Depreciation and amortization of premises and equipment	45		46
Amortization of intangible assets	39		42
Net other amortization and accretion	(3)		(50)
Net (increase) decrease in trading securities	1,728		1,347
Net (increase) decrease in derivatives	822		309




Stock-based compensation expense	53		31
Securities (gains) losses, net	(18)		(12)


(Gain) loss on BOLI	(4)		(5)

Net (gains) losses on sale/disposal of fixed assets	(1)		32
Gain on sale of mortgage servicing rights	(12)		—
Gain on sale of title services business	(21)		—
Loans held for sale:
Purchases and originations	(3,184)		(4,682)
Gross proceeds from settlements and sales	2,050		3,288

(Gain) loss due to fair value adjustments and other	78		(142)










Other operating activities, net	(145)		(144)
Total adjustments	1,644		(213)
Net cash provided by (used in) operating activities	2,286		568
Investing Activities

Proceeds from sales of securities available for sale	—		68
Proceeds from maturities of securities available for sale	1,080		1,680
Purchases of securities available for sale	(2,457)		(2,343)
Purchases of securities held to maturity	(712)		(304)
Proceeds from prepayments of securities held to maturity	40		10
Proceeds from sales of premises and equipment	17		22
Purchases of premises and equipment	(22)		(46)



Proceeds from BOLI	9		12

Net (increase) decrease in loans and leases	(2,471)		2,891

Net (increase) decrease in interest-bearing deposits with banks	11,666		(6,478)


Other investing activities, net	5		15
Net cash provided by (used in) investing activities	7,155		(4,473)
Financing Activities
Common stock:
Stock options exercised	30		25
Cash dividends paid	(243)		(252)
Repurchase of shares	(12)		(272)

Preferred stock:
Preferred stock issuance	494		145

Cash dividends paid - preferred stock - noncontrolling interest	(9)		(9)
Cash dividends paid - preferred stock	(24)		(24)




Net increase (decrease) in deposits	(8,880)		4,287
Net increase (decrease) in short-term borrowings	(707)		27


Increases (decreases) in term borrowings	5		(112)
Net cash provided by (used in) financing activities	(9,346)		3,815
Net increase (decrease) in cash and cash equivalents	95		(90)
Cash and cash equivalents at beginning of period	1,788		1,648
Cash and cash equivalents at end of period	$	1,883	$	1,558


			13			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents


Supplemental Disclosures
Total interest paid	$	127	$	128
Total taxes paid	11		254
Total taxes refunded	4		28
Transfer from loans to OREO	3		3
Transfer from loans HFS to trading securities	1,548		1,490
Transfer from loans to loans HFS	—		31

See accompanying notes to consolidated financial statements.


			14			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 1—BASIS OF PRESENTATION & ACCOUNTING POLICIES

Notes to the Consolidated ~~Condensed~~ Financial Statements (Unaudited)

Note ~~1 – Financial Information~~

1—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 ~~conformity~~accordance with ~~accounting principles generally accepted in~~GAAP for interim financial information and with the ~~United States~~instructions to Form 10-Q and Article 10 of ~~America~~Regulation 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 the~~notes 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 of~~presentation. These interim financial ~~position~~statements 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 disclosed~~notes in ~~this Quarterly~~FHN's Annual Report on Form ~~10-Q. The operating~~10-K, as amended, for the year ended December 31, 2021. Operating results for the interim ~~2017~~ period are not necessarily indicative of the results that may be expected ~~going forward. For further information, refer~~for 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 consolidated financial statements~~current period presentation. See the Glossary of Acronyms and Terms included in ~~Exhibit 13~~this Report for terms used herein.

Pending Merger

As previously disclosed, on February 27, 2022, FHN entered into an Agreement and Plan of Merger (the “TD Merger Agreement”) with The Toronto-Dominion Bank, a Canadian chartered bank (“TD”), TD Bank US Holding Company, a Delaware corporation and indirect, wholly owned subsidiary of TD (“TD-US”), and Falcon Holdings Acquisition Co., a Delaware corporation and wholly owned subsidiary of TD-US (“Merger Sub”).

Pursuant to ~~FHN’s Annual Report~~the TD Merger Agreement, FHN and Merger Sub will merge (the “First Holding Company Merger”), with FHN continuing as the surviving entity in the merger. Following the First Holding Company Merger, at the election of TD, FHN and TD-US will merge (the “Second Holding Company Merger” and, together with the First Holding Company Merger, the “Holding Company Mergers”), with TD-US continuing as the surviving entity in the merger.

Upon the terms and subject to the conditions set forth in the TD Merger Agreement, each share of FHN common stock, par value $0.625 per share, (“Company Common Stock”), issued and outstanding immediately prior to the effective time of the First Holding Company Merger (the “First Effective Time”) will be converted into the right to receive $25.00 (USD) per share in cash, without interest. If the transaction does not close on ~~Form 10-K~~or before November 27, 2022, shareholders will receive an additional $0.65 per

share of Company Common Stock on an annualized basis (or approximately 5.4 cents per month) for the period from November 28, 2022 through the day immediately prior to the closing.

Each outstanding share of FHN’s preferred stock, series B, C, D, E and F, will remain issued and outstanding in connection with the First Holding Company Merger. If TD elects to effect the Second Holding Company Merger, at the effective time of the Second Holding Company Merger, each outstanding share of FHN’s preferred stock will be converted into a share of a newly created, corresponding series of preferred stock of TD-US having terms as described in the Merger Agreement.

Following the completion of the First Holding Company Merger, at such time as determined by TD, First Horizon Bank and TD Bank, N.A., a national banking association (“TDBNA”) will merge, with TDBNA surviving as a subsidiary of TD-US (the “Bank Merger” and together with the Holding Company Mergers, the “Pending TD Merger”).

The Pending TD Merger is expected to be completed in the first quarter of TD's 2023 fiscal year, and is subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities. FHN's shareholders approved the merger on May 31, 2022. Merger and integration expenses related to the Pending TD Merger are recorded in FHN’s Corporate segment. Expenses recognized during the three and nine months ended September 30, 2022 were approximately $21 million and $55 million, respectively.

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 reporting. The provisions of ASU 2020-04 primarily affect 1) contract modifications (e.g., loans, leases, debt, and derivatives) made in anticipation that a reference rate (e.g., LIBOR) will be discontinued and 2) the application of hedge accounting for existing relationships affected by those modifications. The provisions of ASU 2020-04 are effective upon release and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, ~~2016.~~2022, except for hedging relationships existing as of

~~Summary~~


			15			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 1—BASIS OF PRESENTATION & ACCOUNTING POLICIES

December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of ~~Accounting Changes.~~ ~~Effective January 1, 2017,~~ the hedging relationship.

FHN ~~adopted~~has identified contracts affected by reference rate reform and developed modification plans for those contracts. FHN has elected to utilize the ~~provisions~~optional expedients and exceptions provided by ASU 2020-04 for certain contract modifications that have already been implemented. For cash flow hedges that reference 1-Month USD LIBOR, FHN has applied expedients related to 1) the assumption of Accounting Standards Update (“ASU”) 2016-09, “Improvements 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 statementprobability of cash flows ~~shifted~~when reference rates are changed on hedged items 2) avoiding de-designation when critical terms (i.e., reference rates) change and 3) the allowed assumption of shared risk exposure for hedged items. For its 2022 cash flow hedges that reference 1-Month Term SOFR, FHN has applied expedients related to ~~an operating activity from~~1) the ~~prior classification as a financing activity.~~

~~ASU 2016-09 also provides an~~allowed assumption of shared risk exposure for hedged items and 2) multiple allowed assumptions of conformity between hedged items and the hedging instrument when assessing effectiveness. FHN anticipates that it will continue to utilize the expedients and exceptions for future modifications in situations where they mitigate potential accounting ~~policy election to recognize forfeitures of awards as they occur when estimating stock-based compensation expense rather than~~outcomes that do not faithfully represent management’s intent or risk management activities, consistent with 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 classificationpurpose of the ~~award. Under previous guidance, withholding of equity awards in excess~~standard.

The FASB has proposed an extension of the ~~minimum statutory requirement resulted~~transition window for ASU 2020-04 until December 31, 2024, consistent with key USD LIBOR tenors continuing to be published through June 30, 2023.

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 ~~liability classification~~October 2020 by derivative clearinghouses for the ~~entire award. The related cash remittance~~use of Secure 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 derivative contracts affected by the ~~employer for employee taxes is treated as a financing activity~~change in ~~the statement~~discounting convention regardless of ~~cash flows. Transition~~whether 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 adopted~~retroactively apply the provisions of ASU ~~2016-16, “Intra-Entity Transfers~~2021-01 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.~~FHN's reported financial condition or results of operations.

Accounting Changes Issued ~~but~~But Not Currently Effective

ASU 2022-01

In ~~May 2014,~~March 2022, the FASB issued ASU ~~2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 does not change revenue recognition for~~2022-01, "Fair Value Hedging - Portfolio Layer Method", which will expand FHN's ability to hedge the benchmark interest rate risk of portfolios of financial ~~assets. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers~~interests (or beneficial interests) 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 and

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

provides further guidance on certain issues. These ASUs are effective in annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Transition to the new requirements may be made by retroactively revising prior financial statements (with certain practical expedients permitted) or by a cumulative effect through retained earnings. If the latter option is selected, additional disclosures are required for comparability. FHN is evaluating their effects on its revenue recognition practices. Currently, 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 thehedge. 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~~2022-01 also permit FHN to ~~measure any noncontrolling interest it receives (or retains) at fair value. ASU 2017-05 has~~apply the same ~~effective date~~portfolio hedging method to both prepayable and ~~transition provisions~~non-prepayable financial assets, namely by expanding the use of the "portfolio layer" method to non-prepayable financial assets. ASU 2022-01 also permits multiple hedged layers to be designated as a single closed portfolio to achieve hedge accounting. Additionally, the ASU ~~2014-09 and the two standards~~requires that basis adjustments must be ~~adopted simultaneously although~~maintained on the ~~transition methods may be different. FHN is evaluating the effects~~closed portfolio of assets as a whole, and not allocated to individual assets for active portfolio layer method hedges.

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 2016-012022-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Transition will be through a cumulative effect adjustment to retained earnings for equity investments with readily determinable fair values. Equity investments without readily determinable fair values, for which the accounting election is made, will have any initial fair value marks recorded through earnings prospectively after adoption.

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

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

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

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

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

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

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

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

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

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

~~ASU 2016-13 is effective for fiscal years beginning after December 15, 2019,~~2022, including interim periods within those fiscal years. Early adoption is ~~permitted in fiscal years beginning after December 15, 2018.~~permitted. FHN ~~continues to evaluate~~is evaluating 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 required2022-01 on its future hedging strategies.

ASU 2022-02

Also in ~~the implementation of the new standard.~~

~~In August 2016,~~March 2022, the FASB issued ASU ~~2016-15, “Classification~~2022-02, “Troubled Debt Restructurings and Vintage Disclosures” that eliminates current TDR recognition and measurement guidance and instead requires the Company to evaluate whether the modification represents a new loan or a continuation of ~~Certain Cash Receipts~~an existing loan (which is consistent with the accounting for other loan modifications). The provisions of ASU 2022-02 also enhance existing disclosure requirements and ~~Cash Payments,” which clarifies multiple cash flow presentation issues including providing guidance as~~introduces new disclosures related to ~~classification on the cash flow statement for~~ certain ~~cash receipts~~modifications made to borrowers experiencing financial difficulty. The provisions of this ASU also require FHN to disclose current period gross write-offs of loans and ~~cash payments where diversity in practice exists.~~ leases by year of origination.

ASU ~~2016-15~~2022-02 is effective for fiscal years beginning after December 15, ~~2017,~~2022, including interim periods within those fiscal years. ~~The~~Early adoption is permitted. For the transition method related to the recognition and measurement of TDRs, FHN has the option to apply a modified retrospective transition, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Otherwise, provisions ofin this ASU ~~2016-15~~ will be applied ~~retroactively and will result in proceeds from bank-owned life insurance (“BOLI”) being classified as an investing activity rather than their prior classification as an operating activity.~~

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

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

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

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

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

ASU 2017-12 also makes revisions to the current disclosure requirements for hedging activities to reflect the presentation of hedging results consistent with the changes to income statement classification and to improve the disclosure 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.

prospectively. FHN is evaluating the ~~effects~~impact of ~~adopting~~ ASU ~~2017-12~~2022-02, and is not currently able to reasonably estimate the impact the adoption will have on its ~~current and potential future hedging relationships. Currently, FHN anticipates early adoption in the first quarter~~consolidated financial position, results of ~~2018. Upon adoption of ASU 2017-12, FHN will prospectively record components of hedging results for its fair value and~~operations, or 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.flows.

~~Note 2 – Acquisitions and Divestitures~~


			16			3Q22 FORM 10-Q REPORT

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

On April 3, 2017, FTN Financial acquired substantially all of the assets and assumed substantially all of the liabilities of Coastal Securities, Inc. (“Coastal”), a national leader in the trading, securiti~~zation, 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 acquired assets and liabilities and consideration paid, as well as adjustments to record the assets and liabilities at their estimated fair values as of April 3, 2017:~~

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

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

In relation to the acquisition, FHN has recorded $45.0 million in goodwill, representing the excess of acquisition consideration over the estimated fair value of net assets acquired (refer to Note 6 - Intangible Assets for additional information), and all of which is expected to be deductible for tax purposes. The goodwill is the result of adding an experienced workforce, establishing an additional major product sector for FTN Financial, expected synergies, and other factors. FHN's operating results for 2017


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 2—INVESTMENT SECURITIES

Note ~~2 – Acquisitions and Divestitures (Continued)~~

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

~~For the three and nine months ended September 30, 2017, FHN recognized $8.2 million and~~ ~~$14.6 million~~, respectively, of acquisition and integration-related expenses primarily associated with the CBF and Coastal acquisitions. These expenses were primarily included in Professional fees, Legal fees, Employee compensation, incentives and benefits, and All other expense on the Consolidated Condensed Statements of Income.

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.

~~Note 3 –~~ 2—Investment Securities

The following tables summarize FHN’s investment securities onas of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:


INVESTMENT SECURITIES AT SEPTEMBER 30, 2022
	September 30, 2022
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:

Government agency issued MBS	$	5,457	$	—	$	(767)	$	4,690
Government agency issued CMO	2,775		—		(360)		2,415
Other U.S. government agencies	1,212		—		(156)		1,056

States and municipalities	648		—		(91)		557
Total securities available for sale (a)	$	10,092	$	—	$	(1,374)	$	8,718

Securities held to maturity:
Government agency issued MBS	$	908	$	—	$	(116)	$	792
Government agency issued CMO	477		—		(47)		430
Total securities held to maturity	$	1,385	$	—	$	(163)	$	1,222

(a)Includes $6.4 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.


INVESTMENT SECURITIES AT YE 2021
	December 31, 2021
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:

Government agency issued MBS	$	5,062	$	42	$	(49)	$	5,055
Government agency issued CMO	2,296		8		(47)		2,257
Other U.S. government agencies	861		4		(15)		850

States and municipalities	535		11		(1)		545
Total securities available for sale (a)	$	8,754	$	65	$	(112)	$	8,707

Securities held to maturity:
Government agency issued MBS	$	509	$	—	$	(5)	$	504
Government agency issued CMO	203		—		(2)		201
Total securities held to maturity	$	712	$	—	$	(7)	$	705

(a)Includes $6.5 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)~~			~~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.~~17			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~SBA-interest only strips are recorded at elected fair value. See Note 16 - Fair Value for additional information.~~

NOTE 2—INVESTMENT SECURITIES
~~(c)~~	~~Includes $3.3 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.~~

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-maturity~~debt securities ~~portfolios on~~portfolio as of September 30, ~~2017 are~~2022 is provided below:


DEBT SECURITIES PORTFOLIO MATURITIES
	Held to Maturity				Available for Sale
(Dollars in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	45	$	45
After 1 year through 5 years	—		—		117		110
After 5 years through 10 years	—		—		397		351
After 10 years	—		—		1,301		1,107
Subtotal	—		—		1,860		1,613
Government agency issued MBS and CMO (a)	1,385		1,222		8,232		7,105
Total	$	1,385	$	1,222	$	10,092	$	8,718

(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.

Held-to-Maturity Available-for-Sale
(Dollars in thousands)
Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value
Within 1 year $ —
$ —
$ —
$ —
After 1 year; within 5 years —
—
100
120
After 5 years; within 10 years 10,000
9,985
—
1,464
After 10 years —
—
—
1,639
Subtotal 10,000
9,985
100
3,223
Government agency issued MBS and CMO (a) —
—
3,783,144
3,773,500
Equity and other —
—
186,413
186,415
Total $ 10,000
$ 9,985
$ 3,969,657
$ 3,963,138


~~(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~~Gross gains and ~~gross~~ losses ~~from investment~~on sales of AFS securities for the three and nine months ended September ~~30:~~

30, 2022 and 2021 were insignificant. Cash proceeds from sales of AFS securities were insignificant for the three and nine months ended September 30, 2022. Cash proceeds from sales of AFS securities for the three and nine months ended September 30, 2021 were $35 million and $68 million.

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, ~~2017~~2022 and December 31, ~~2016:~~2021:

AFS INVESTMENT SECURITIES WITH UNREALIZED LOSSES


	As of September 30, 2022
	Less than 12 months				12 months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Government agency issued MBS	$	3,168	$	(429)	$	1,517	$	(338)	$	4,685	$	(767)
Government agency issued CMO	1,398		(155)		992		(205)		2,390		(360)
Other U.S. government agencies	669		(71)		386		(85)		1,055		(156)

States and municipalities	507		(74)		48		(17)		555		(91)
Total	$	5,742	$	(729)	$	2,943	$	(645)	$	8,685	$	(1,374)


	As of December 31, 2021
	Less than 12 months				12 months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Government agency issued MBS	$	2,973	$	(41)	$	184	$	(8)	$	3,157	$	(49)
Government agency issued CMO	1,436		(37)		248		(10)		1,684		(47)
Other U.S. government agencies	459		(11)		90		(4)		549		(15)

States and municipalities	68		(1)		—		—		68		(1)
Total	$	4,936	$	(90)	$	522	$	(22)	$	5,458	$	(112)


			18			3Q22 FORM 10-Q REPORT

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)~~


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 2—INVESTMENT SECURITIES

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 investment~~evaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for ~~OTTI~~recognition of credit losses. No AFS debt securities were determined to have credit losses. Total AIR not included in the fair value or amortized cost basis of AFS debt securities was $27 million and ~~does not consider them other-than-temporarily impaired. For~~$23 million as of September 30, 2022 and December 31, 2021. 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 them and it is ~~more-likely-than-not~~more likely than not that FHN will not be required to sell them prior to recovery. ~~The decline in~~Therefore, no write downs of these investments to fair value occurred during the reporting period.

For HTM securities, an allowance for credit losses is ~~primarily attributable~~required to ~~changes in interest rates and not~~absorb estimated lifetime credit losses. ~~For equity~~Total AIR not included in the fair value or amortized cost basis of HTM debt securities ~~FHN has both the ability~~was $3 million and ~~intent to hold these securities for the time necessary to recover the amortized cost.~~

~~Note 4 – Loans~~

~~The following table provides the balance of loans, net of unearned income, by portfolio segment~~$1 million as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021. FHN has assessed the risk of credit loss and has determined that zero allowance for credit losses for HTM securities was necessary as of September 30, 2022 and December 31, 2021. The evaluation of credit risk includes consideration of third-party and government guarantees (both explicit and implicit), senior or subordinated status, credit ratings of the issuer, the effects of interest rate changes since purchase and observable market information such as issuer-specific credit spreads.

~~CONTINGENCIES~~

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 in~~generally 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 sometimes~~or 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 are~~FHN 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 ~~former~~pre-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,~~2022, the aggregate amount of liabilities established for all such loss contingency matters was ~~$8.8~~$2 million. These liabilities are separate from those discussed under the heading ~~“Repurchase~~Mortgage Loan Repurchase and Foreclosure ~~Liability”~~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,~~2022, 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 zero to ~~approximately $52~~less 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~~

Exposures from pre-2009 Mortgage Business

FHN is contending with indemnification claims related to "other whole loans sold," which were mortgage loans originated by FHN before 2009 and sold outside of a securitization organized by FHN. These claims generally assert that FHN-originated loans contributed to losses in connection with mortgage loans securitized by the buyer of the loans. The claims generally do not include specific deficiencies for ~~matters included in~~specific loans sold by FHN. Instead, the claims generally assert that FHN is liable for a share of the claimant's loss estimated ~~reasonably possible loss (“RPL”) range mentioned above and for matters not included in that range.~~by assessing the totality of the


			37			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 10—CONTINGENCIES & OTHER DISCLOSURES

other whole loans sold by FHN to claimant in relation to the totality of ~~Headers~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

~~Material Matters~~

~~FHN, along with multiple co-defendants, is defending lawsuits brought by investors which claim that~~ 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 alarger number of separate securitizations. Plaintiff demands damages 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 securitizations~~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 ~~as to which the claimant specifies no dollar amount; the potential remedies that~~ might ~~be available~~eliminate or ~~awarded; the availability of significantly dispositive defenses such as statutes of limitations~~reduce claims against FHN or repose; the outcome of potentially dispositive early-stage motions such as motions to dismiss; the incomplete status of the discovery process; the lack of a precise statement of damages; and lack of precedent claims. The alleged purchase prices of the certificates subject to pendingtheir 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 claims~~related 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 notice~~Nationstar 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 ~~former~~pre-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 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.

~~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~~

~~Table of Headers~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

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

~~Table of Headers~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

~~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~~




~~Agencies~~	~~the two GSEs and Ginnie Mae~~	~~HELOC~~	~~home equity line of credit~~
~~certificates~~	~~securities sold to investors representing interests in mortgage loan securitizations~~	~~HUD~~	~~Dept. of Housing and Urban Development~~

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

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

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

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

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

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

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

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

Repurchase and Foreclosure Liability

~~The~~FHN’s repurchase and foreclosure liability, primarily related to its pre-2009 mortgage businesses, is comprised of ~~reserves~~accruals 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 as~~and 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~~$16 million and ~~$66.0~~$17 million as of September 30, ~~2017~~2022 and December 31, ~~2016,~~ 2021, respectively ~~including a smaller amount related to equity-lending junior lien loan sales.~~. Accrued liabilities for FHN’s estimate of these obligations are reflected in ~~Other~~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~~

~~Table of Headers~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

~~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 ~~the~~each balance sheet ~~dates~~date and could be subject to future changes. Changes to any one of these factors could significantly impact the estimate of FHN’s liability.

Other ~~FHN Mortgage Exposures~~Disclosures

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.

~~Table of Headers~~

~~Note 10 – Contingencies and Other Disclosures (Continued)~~

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.


			38			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 11—RETIREMENT PLANS

Note ~~11 – Pension, Savings, and Other Employee Benefits~~11—Retirement 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~~made a contribution of $6 million to the qualified pension plan in third quarter 2016. The contribution had 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, 2017.2021. Management does not currently anticipate that FHN will make a contribution to the qualified pension plan ~~for the remainde~~r ~~of 2017.~~in 2022.

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.~~2021. FHN anticipates making benefit payments under the non-qualified plans of ~~$5.0~~$5 million in ~~2017.~~2022.

~~Savings plan.~~ ~~FHN provides all qualifying full-time employees with~~Service cost is included in personnel expense in the ~~opportunity to participate~~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 - Retirement Plans and 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,~~2021 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.

~~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.Form 10-K, as amended.

The components of net periodic benefit cost for the three ~~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 $ 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

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

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


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Amounts are comprised entirely of interest rate derivative contracts.~~NOTE 15—MASTER NETTING & SIMILAR AGREEMENTS

Note ~~15 –~~ 15—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 ~~Securities~~securities 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 ~~Securities~~securities purchased under agreements to resell ~~as presented on the Consolidated Condensed Statements of Condition~~ and collateral pledged by counterparties as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

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


SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
							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:
September 30, 2022	$	492	$	—	$	492	$	(11)	$	(479)	$	2
December 31, 2021	488		—		488		(10)		(476)		2

The following table provides details of ~~Securities~~securities sold under agreements to repurchase ~~as presented on the Consolidated Condensed Statements of Condition~~ and collateral pledged by FHN as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

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)~~


SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
							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:
September 30, 2022	$	658	$	—	$	658	$	(11)	$	(647)	$	—
December 31, 2021	1,247		—		1,247		(10)		(1,237)		—

Due to the short duration of ~~Securities~~securities sold under agreements to repurchase and the nature of collateral involved, the risks associated with these transactions are considered minimal.


			55			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 15—MASTER NETTING & SIMILAR AGREEMENTS

The following tables provide details, by collateral type, of the remaining contractual maturity of ~~Securities~~securities sold under agreements to repurchase as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:


MATURITIES OF SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
	September 30, 2022
(Dollars in millions)	Overnight and Continuous		Up to 30 Days		Total
Securities sold under agreements to repurchase:
U.S. treasuries	$	11	$	—	$	11
Government agency issued MBS	558		—		558
Government agency issued CMO	89		—		89


Total securities sold under agreements to repurchase	$	658	$	—	$	658

	December 31, 2021
(Dollars in millions)	Overnight and Continuous		Up to 30 Days		Total
Securities sold under agreements to repurchase:
U.S. treasuries	$	33	$	—	$	33
Government agency issued MBS	1,068		—		1,068

Other U.S. government agencies	31		—		31
Government guaranteed loans (SBA and USDA)	115		—		115
Total securities sold under agreements to repurchase	$	1,247	$	—	$	1,247


			56			3Q22 FORM 10-Q REPORT

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

Note ~~16 –~~ 16—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—1—Valuation is based upon quoted prices for identical instruments traded in active markets.

•Level 2—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—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.~~

~~Table of Contents~~

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

Recurring Fair Value Measurements

The following ~~table presents~~tables present the ~~balance~~balances of assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2017:~~2022 and December 31, 2021:


			57			3Q22 FORM 10-Q REPORT

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES


BALANCES OF ASSETS & LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
	September 30, 2022
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Trading securities:
U.S. treasuries	$	—	$	53	$	—	$	53
Government agency issued MBS	—		60		—		60
Government agency issued CMO	—		236		—		236
Other U.S. government agencies	—		147		—		147
States and municipalities	—		31		—		31
Corporate and other debt	—		871		—		871
Interest-only strips (elected fair value)	—		—		23		23
Total trading securities	—		1,398		23		1,421

Loans held for sale (elected fair value)	—		69		20		89

Securities available for sale:

Government agency issued MBS	—		4,690		—		4,690
Government agency issued CMO	—		2,415		—		2,415
Other U.S. government agencies	—		1,056		—		1,056
States and municipalities	—		557		—		557


Total securities available for sale	—		8,718		—		8,718
Other assets:
Deferred compensation mutual funds	106		—		—		106
Equity, mutual funds, and other	22		—		—		22
Derivatives, forwards and futures	49		—		—		49
Derivatives, interest rate contracts	—		267		—		267
Derivatives, other	—		2		—		2
Total other assets	177		269		—		446
Total assets	$	177	$	10,454	$	43	$	10,674
Trading liabilities:
U.S. treasuries	$	—	$	326	$	—	$	326




Corporate and other debt	—		57		—		57

Total trading liabilities	—		383		—		383
Other liabilities:
Derivatives, forwards and futures	39		—		—		39
Derivatives, interest rate contracts	—		988		—		988
Derivatives, other	—		2		20		22
Total other liabilities	39		990		20		1,049
Total liabilities	$	39	$	1,373	$	20	$	1,432


			58			3Q22 FORM 10-Q REPORT

~~Table of Contents~~

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

~~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, 2021
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Trading securities:
U.S. treasuries	$	—	$	85	$	—	$	85
Government agency issued MBS	—		464		—		464
Government agency issued CMO	—		62		—		62
Other U.S. government agencies	—		276		—		276
States and municipalities	—		34		—		34
Corporate and other debt	—		642		—		642
Interest-only strips (elected fair value)	—		—		38		38
Total trading securities	—		1,563		38		1,601

Loans held for sale (elected fair value)	—		230		28		258

Securities available for sale:

Government agency issued MBS	—		5,055		—		5,055
Government agency issued CMO	—		2,257		—		2,257
Other U.S. government agencies	—		850		—		850
States and municipalities	—		545		—		545

Total securities available for sale	—		8,707		—		8,707
Other assets:
Deferred compensation mutual funds	125		—		—		125
Equity, mutual funds, and other	25		—		—		25
Derivatives, forwards and futures	12		—		—		12
Derivatives, interest rate contracts	—		311		—		311
Derivatives, other	—		1		—		1
Total other assets	162		312		—		474
Total assets	$	162	$	10,812	$	66	$	11,040
Trading liabilities:
U.S. treasuries	$	—	$	334	$	—	$	334

Government agency issued MBS	—		1		—		1
Corporate and other debt	—		91		—		91
Total trading liabilities	—		426		—		426
Other liabilities:
Derivatives, forwards and futures	11		—		—		11
Derivatives, interest rate contracts	—		93		—		93
Derivatives, other	—		1		23		24
Total other liabilities	11		94		23		128
Total liabilities	$	11	$	520	$	23	$	554


			59			3Q22 FORM 10-Q REPORT

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

~~Table of Contents~~

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

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, ~~2017~~2022 and ~~2016,~~2021 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)


CHANGES IN LEVEL 3 ASSETS & LIABILITIES MEASURED AT FAIR VALUE
	Three Months Ended September 30, 2022
(Dollars in millions)	Interest-only strips			Loans held for sale			Net derivative liabilities
Balance on July 1, 2022	$	26		$	34		$	(28)


Total net gains (losses) included in net income	(2)			—			(1)

Sales	(23)			(14)			—
Settlements	—			—			9
Repayments	—			(1)			—
Net transfers into (out of) Level 3	22		(b)	1			—
Balance on September 30, 2022	$	23		$	20		$	(20)
Net unrealized gains (losses) included in net income	$	(1)	(c)	$	—	(a)	$	(1)	(d)


	Three Months Ended September 30, 2021
(Dollars in millions)	Interest-only strips-AFS			Loans held for sale			Net derivative liabilities
Balance on July 1, 2021	$	30		$	25		$	(18)

Total net gains (losses) included in net income	1			—			—
Purchases	—			3			—
Sales	(35)			(8)			—
Settlements	—			—			2
Net transfers into (out of) Level 3	20		(b)	4			—
Balance on September 30, 2021	$	16		$	24		$	(16)
Net unrealized gains (losses) included in net income	$	—	(c)	$	—	(a)	$	—	(d)

(a)Primarily included in mortgage banking and title income on the Consolidated Statements of Income.

(b)Transfers into interest-only strips 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.

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)~~			~~Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income.~~60			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).~~

NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES
~~(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.~~

~~Table of Contents~~

~~Note 16 – Fair Value of Assets & 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~~2022 and ~~2016,~~2021, 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)


CHANGES IN LEVEL 3 ASSETS & LIABILITIES MEASURED AT FAIR VALUE
	Nine Months Ended September 30, 2022
(Dollars in millions)	Interest-only strips			Loans held for sale			Net derivative liabilities
Balance on January 1, 2022	$	38		$	28		$	(23)


Total net gains (losses) included in net income	(5)			—			(13)
Purchases	—			1			—
Sales	(61)			(14)			—
Settlements	—			(1)			16
Repayments	—			(1)			—
Net transfers into (out of) Level 3	51		(b)	7			—
Balance on September 30, 2022	$	23		$	20		$	(20)
Net unrealized gains (losses) included in net income	$	(2)	(c)	$	—	(a)	$	(13)	(d)


	Nine Months Ended September 30, 2021
(Dollars in millions)	Interest-only strips-AFS			Loans held for sale			Loans held for investment			Net derivative liabilities
Balance on January 1, 2021	$	32		$	12		$	16		$	(14)

Total net gains (losses) included in net income	5			2			—			(9)
Purchases	—			8			—			—
Sales	(68)			(18)			—			—
Settlements	—			(2)			(2)			7
Net transfers into (out of) Level 3	47		(b)	22		(e)	(14)		(e)	—
Balance on September 30, 2021	$	16		$	24		$	—		$	(16)
Net unrealized gains (losses) included in net income	$	—	(c)	$	2	(a)	$	—		$	(9)	(d)

(a)Primarily included in mortgage banking and title income on the Consolidated Statements of Income.

(b)Transfers into interest-only strips 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.

(e)The loans held for investment at fair value option portfolio was transferred to the loans held for sale portfolio on April 1, 2021.

There were no net unrealized gains (losses) for Level 3 assets and liabilities included in other comprehensive income as of September 30, 2022 and 2021.

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.~~61			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Transfers into interest-only strips - AFS level 3 measured on a recurring basis reflect movements from loans held-for-sale (Level 2 nonrecurring).~~NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

~~(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.~~

~~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 sheet~~Consolidated Balance Sheets at September 30, ~~2017,~~2022, and December 31, ~~2016,~~2021, 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


LEVEL OF VALUATION ASSUMPTIONS FOR ASSETS MEASURED AT FAIR VALUE ON A NON-RECURRING BASIS
	Carrying value at September 30, 2022
(Dollars in millions)	Level 1		Level 2		Level 3		Total

Loans held for sale—SBAs and USDA	$	—	$	556	$	—	$	556

Loans and leases (a)	—		—		122		122
OREO (b)	—		—		3		3
Other assets (c)	—		—		40		40


	Carrying value at December 31, 2021
(Dollars in millions)	Level 1		Level 2		Level 3		Total

Loans held for sale—SBAs and USDA	$	—	$	852	$	1	$	853
Loans held for sale—first mortgages	—		—		1		1
Loans and leases (a)	—		—		84		84
OREO (b)	—		—		3		3
Other assets (c)	—		—		30		30

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 sheet~~Consolidated 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, ~~2017~~2022 and ~~2016:~~2021:


FAIR VALUE ADJUSTMENTS ON ASSETS MEASURED ON A NONRECURRING BASIS
	Net gains (losses) Three Months Ended September 30,				Net gains (losses) Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021

Loans held for sale—SBAs and USDA	$	(2)	$	(2)	$	(4)	$	(3)

Loans and leases (a)	(6)		(9)		(7)		(12)
OREO (b)	—		—		—		(1)
Other assets (c)	(3)		(2)		(5)		(2)
	$	(11)	$	(13)	$	(16)	$	(18)

(a)Write-downs on these loans are recognized as part of provision for credit losses.

(c)Represents tax credit investments accounted for under the equity method.

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)~~			~~Write-downs on these loans are recognized as part of provision for loan losses.~~62			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Represents losses of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related to government insured mortgages.~~

NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES
~~(c)~~			~~Represents tax credit investments accounted for under the equity method.~~

~~Table of Contents~~

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

~~In third quarter 2017, FHN’s Corporate segment~~For the three and nine months ended September 30, 2022, FHN recognized ~~$2.0~~less than $1 million of fixed asset and leased asset impairments ~~on long-lived technology~~and less than $1 million of fixed asset recoveries for both periods. These amounts were primarily recognized in the Corporate segment.

For the three and nine months ended September 30, 2021, FHN recognized less than $1 million of fixed asset recoveries and $33 million of fixed asset impairments, respectively, and less than $1 million of leased asset recoveries and $3 million of leased asset impairments, respectively, primarily related to continuing acquisition integration efforts associated with reduction of leased office space and banking center optimization. These amounts were primarily recognized in the Corporate segment.

Lease asset impairments recognized represent the reduction in value of the right-of-use assets associated with ~~an expansion of processing capacity~~leases that ~~will be required upon completion~~are being exited in advance of the ~~merger with CBF. The fair values of the assets impaired were determined~~contractual lease expiration.

Impairments are measured using a discounted cash flow ~~approach~~methodology, which ~~reflected short estimated remaining lives and~~is considered ~~estimated salvage values. The measurement methodologies are considered~~a Level 3 ~~valuations. In first quarter 2016, FHN’s Regional Banking segment recognized $3.7 million~~valuation.

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 of~~land 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.

Level 3 Measurements

The following tables provide information regarding the unobservable inputs utilized in determining the fair value of ~~level~~Level 3 recurring and non-recurring measurements as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

(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)~~			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.63			3Q22 FORM 10-Q REPORT

~~Table of Contents~~

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


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~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.~~NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

UNOBSERVABLE INPUTS USED IN LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in millions)

Values Utilized

Level 3 Class

Fair Value at September 30, 2022

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

Trading securities - SBA interest-only strips

Discounted cash flow

Constant prepayment rate

12% - 13%

12%

Bond equivalent yield

15% - 17%

15%

Loans held for sale - residential real estate

Discounted cash flow

Prepayment speeds - First mortgage

2% - 9%

Foreclosure losses

63% - 77%

65%

Loss severity trends - First mortgage

0% - 10%

of UPB

Derivative liabilities, other

Discounted cash flow

Visa covered litigation resolution amount

$5.4 billion - $6.2 billion

$5.9 billion

Probability of resolution scenarios

10% - 30%

24%

Time until resolution

3 - 33 months

22 months

Loans and leases (a)

122

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)

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10%

of appraisal

Other assets (c)

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

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.


~~(c)~~			~~Represents tax credit investments accounted for under the equity method.~~64			3Q22 FORM 10-Q REPORT

(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)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			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.

NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES
~~(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.~~

(Dollars in millions)

Values Utilized

Level 3 Class

Fair Value at December 31, 2021

Valuation Techniques

Unobservable Input

Range

Weighted Average (d)

Trading securities - SBA interest-only strips

Discounted cash flow

Constant prepayment rate

11% - 12%

11%

Bond equivalent yield

11% - 14%

11%

Loans held for sale - residential real estate

Discounted cash flow

Prepayment speeds - First mortgage

4% - 12%

Foreclosure losses

54% - 66%

65%

Loss severity trends - First mortgage

1% - 14%

of UPB

Loans held for sale - unguaranteed interest in SBA loans

Discounted cash flow

Constant prepayment rate

8% - 12%

10%

Bond equivalent yield

11%

Derivative liabilities, other

Discounted cash flow

Visa covered litigation resolution amount

$5.8 billion - $6.2 billion

$6.0 billion

Probability of resolution scenarios

15% - 35%

24%

Time until resolution

12 - 36 months

25 months

Loans and leases (a)

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)

Appraisals from comparable properties

Adjustment for value changes since appraisal

0% - 10%

of appraisal

Other assets (c)

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

NM - Not meaningful

(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.

Trading Securities ~~AFS~~. - SBA interest-only strips

Increases (decreases) in estimated prepayment rates and bond equivalent yields negatively (positively) affect the value of SBA ~~interest only~~interest-only strips. Management additionally considers whether the loans underlying related ~~SBA-interest only~~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. SBA interest-only strips were transferred from AFS to trading securities on October 1, 2021.

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


			65			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

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-sale~~held 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

~~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.~~liabilities

In conjunction with ~~the~~pre-2020 sales of ~~portions of its~~ Visa Class B shares, FHN and the ~~purchaser~~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. 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 income~~leases and Other Real Estate ~~Owned.~~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.~~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 ~~almost~~substantially all types of mortgage loans originated for sale purposes ~~under~~except 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-sale~~held for sale at fair value at the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent values from exceeding the initial fair value, determined at the time of repurchase, but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declines in value.

FHN also had a portion of mortgage loans held for investment for which the fair value option was elected upon origination and which were accounted for at fair value. This portion of mortgage loans held for investment at fair value option was transferred to the loans held for sale portfolio on April 1, 2021.


			66			3Q22 FORM 10-Q REPORT

~~Table of Contents~~

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

The following tables reflect the differences between the fair value carrying amount of residential real estate loans ~~held-for-sale~~held 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.


DIFFERENCES BETWEEN FAIR VALUE CARRYING AMOUNTS AND CONTRACTUAL AMOUNTS OF RESIDENTIAL REAL ESTATE LOANS REPORTED AT FAIR VALUE
	September 30, 2022
(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	$	89	$	96	$	(7)
Nonaccrual loans	4		8		(4)






	December 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	$	258	$	264	$	(6)
Nonaccrual loans	4		7		(3)

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:


CHANGES IN FAIR VALUE RECOGNIZED IN NET INCOME
	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Changes in fair value included in net income:
Mortgage banking and title noninterest income
Loans held for sale	$	(4)	$	(3)	$	(10)	$	(8)

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

For the three and nine months ended September 30, ~~2017,~~2022 and ~~2016,~~2021, the ~~amounts~~amount for residential real estate loans ~~held-for-sale include~~held 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 are 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-sale~~held for sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated ~~Condensed~~ Statements of Income as interest on loans ~~held-for-sale.~~

~~FHN has elected to account~~held 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.sale.

Determination of Fair Value

~~In accordance with ASC 820-10-35, fair~~Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the

~~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 Condition~~Balance 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.~~assets

Federal funds sold, securities purchased under agreements to resell, and ~~interest bearing~~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.~~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


			67			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

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 - SBA interest-only strips

~~Securities available-for-sale.~~ Securities available-for-sale includes the investment portfolio accounted for as available-for-sale under ASC 320-10-25, federal bank stock holdings, and short-term investments in mutual funds. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates, and credit spreads. When available, broker quotes are used to support these valuations.

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~~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~~interest-only strip terms. These securities bear the risk of loan prepayment or default that may result in ~~the Company~~FHN 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. SBA interest-only strips were transferred from AFS to trading on October 1, 2021.

Securities ~~held-to-maturity.~~ ~~Securities held-to-maturity reflects~~available for sale and held to maturity

Valuations of debt ~~securities for which management has the positive intent and ability to hold to maturity. To the extent possible, valuations of held-to-maturity~~ securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include ~~LIBOR and U.S. treasury curves~~benchmark yields, consensus prepayment speeds, and credit spreads. ~~Debt~~Trades from similar securities ~~with limited trading activity~~and broker quotes are ~~valued~~used to support these valuations.

Loans held for sale

FHN determines the fair value of loans held for sale 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-sale~~models. Fair values are ~~valued~~determined 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-sale~~held 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~~

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 Company~~FHN values SBA-unguaranteed interests in loans ~~held-for-sale~~held for sale based on individual loan

~~Table of Contents~~

~~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-sale~~held for sale is approximated by their carrying values based on current transaction values.

~~Loans, net of unearned income.~~ ~~Loans, net of unearned income are recognized~~Mortgage 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 rate~~mortgage loans ~~is estimated through comparison to recent market activity in loans of similar product types, with adjustments made~~held 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 by~~a 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 of~~time 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 accordance~~similar 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 considered~~estimated 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.


			68			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

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. Typical 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 ~~customer~~client 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.

~~OREO.~~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

~~Table of Contents~~

~~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~~Other 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 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 ~~assets~~mutual 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.~~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.~~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.Loan commitments

~~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.~~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, ~~2017~~2022 and December 31, ~~2016,~~2021, 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,


			69			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

particularly consumer loans and TRUPS loans within the ~~non-strategic~~Corporate 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.

~~Table of Contents~~

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

The following ~~table summarizes~~tables summarize the book value and estimated fair value of financial instruments recorded in the Consolidated ~~Condensed Statements of Condition~~Balance Sheets as of September 30, ~~2017:~~2022 and December 31, 2021:

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)~~			~~Classes are detailed in the recurring and nonrecurring measurement tables.~~70			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.~~NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

~~Table of Contents~~


BOOK VALUE AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
	September 30, 2022
	Book Value		Fair Value
(Dollars in millions)			Level 1		Level 2		Level 3		Total
Assets:
Loans and leases, net of allowance for loan and lease losses
Commercial:
Commercial, financial and industrial	$	31,325	$	—	$	—	$	31,084	$	31,084
Commercial real estate	12,873		—		—		12,735		12,735
Consumer:
Consumer real estate	11,671		—		—		11,550		11,550

Credit card and other	821		—		—		825		825
Total loans and leases, net of allowance for loan and lease losses	56,690		—		—		56,194		56,194
Short-term financial assets:
Interest-bearing deposits with banks	3,241		3,241		—		—		3,241
Federal funds sold	198		—		198		—		198
Securities purchased under agreements to resell	492		—		492		—		492
Total short-term financial assets	3,931		3,241		690		—		3,931
Trading securities (a)	1,421		—		1,398		23		1,421
Loans held for sale:
Mortgage loans (elected fair value) (a)	89		—		69		20		89
USDA & SBA loans - LOCOM	557		—		559		—		559

Mortgage loans - LOCOM	34		—		—		34		34
Total loans held for sale	680		—		628		54		682
Securities available for sale (a)	8,718		—		8,718		—		8,718
Securities held to maturity	1,385		—		1,222		—		1,222
Derivative assets (a)	318		49		269		—		318
Other assets:
Tax credit investments	530		—		—		530		530
Deferred compensation mutual funds	106		106		—		—		106
Equity, mutual funds, and other (b)	251		22		—		229		251
Total other assets	887		128		—		759		887
Total assets	$	74,030	$	3,418	$	12,925	$	57,030	$	73,373
Liabilities:
Defined maturity deposits	$	2,671	$	—	$	2,668	$	—	$	2,668
Trading liabilities (a)	383		—		383		—		383
Short-term financial liabilities:
Federal funds purchased	496		—		496		—		496
Securities sold under agreements to repurchase	657		—		657		—		657
Other short-term borrowings	263		—		263		—		263
Total short-term financial liabilities	1,416		—		1,416		—		1,416
Term borrowings:
Real estate investment trust-preferred	46		—		—		47		47
Term borrowings—new market tax credit investment	66		—		—		59		59
Secured borrowings	4		—		—		4		4
Junior subordinated debentures	148		—		—		150		150
Other long term borrowings	1,333		—		1,331		—		1,331
Total term borrowings	1,597		—		1,331		260		1,591
Derivative liabilities (a)	1,049		39		990		20		1,049
Total liabilities	$	7,116	$	39	$	6,788	$	280	$	7,107

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

~~The following table summarizes the book value and estimated fair value of financial instruments recorded~~(a)Classes are detailed in the ~~Consolidated Statements~~recurring and nonrecurring measurement tables.

(b)Level 1 primarily consists of ~~Condition as~~mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of ~~December 31, 2016:~~$26 million and FRB stock of $203 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)~~			~~Classes are detailed in the recurring and nonrecurring measurement tables.~~71			3Q22 FORM 10-Q REPORT


~~(b)~~PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			~~Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.~~NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES


	December 31, 2021
	Book Value		Fair Value
(Dollars in millions)			Level 1		Level 2		Level 3		Total
Assets:
Loans and leases and allowance for loan and lease losses
Commercial:
Commercial, financial and industrial	$	30,734	$	—	$	—	$	31,020	$	31,020
Commercial real estate	11,955		—		—		11,986		11,986
Consumer:
Consumer real estate	10,609		—		—		11,111		11,111
Credit card and other	891		—		—		906		906
Total loans and leases, net of allowance for loan and lease losses	54,189		—		—		55,023		55,023
Short-term financial assets:
Interest-bearing deposits with banks	14,907		14,907		—		—		14,907
Federal funds sold	153		—		153		—		153
Securities purchased under agreements to resell	488		—		488		—		488
Total short-term financial assets	15,548		14,907		641		—		15,548
Trading securities (a)	1,601		—		1,563		38		1,601
Loans held for sale:
Mortgage loans (elected fair value) (a)	258		—		230		28		258
USDA & SBA loans - LOCOM	853		—		855		1		856
Other loans - LOCOM	24		—		24		—		24
Mortgage loans - LOCOM	37		—		—		37		37
Total loans held for sale	1,172		—		1,109		66		1,175
Securities available for sale (a)	8,707		—		8,707		—		8,707
Securities held to maturity	712		—		705		—		705
Derivative assets (a)	324		12		312		—		324
Other assets:
Tax credit investments	456		—		—		450		450
Deferred compensation mutual funds	125		125		—		—		125
Equity, mutual funds, and other (b)	257		25		—		232		257
Total other assets	838		150		—		682		832
Total assets	$	83,091	$	15,069	$	13,037	$	55,809	$	83,915
Liabilities:
Defined maturity deposits	$	3,500	$	—	$	3,524	$	—	$	3,524
Trading liabilities (a)	426		—		426		—		426
Short-term financial liabilities:
Federal funds purchased	775		—		775		—		775
Securities sold under agreements to repurchase	1,247		—		1,247		—		1,247
Other short-term borrowings	102		—		102		—		102
Total short-term financial liabilities	2,124		—		2,124		—		2,124
Term borrowings:
Real estate investment trust-preferred	46		—		—		47		47
Term borrowings—new market tax credit investment	59		—		—		58		58
Secured borrowings	6		—		—		6		6
Junior subordinated debentures	148		—		—		150		150
Other long term borrowings	1,331		—		1,452		—		1,452
Total term borrowings	1,590		—		1,452		261		1,713
Derivative liabilities (a)	128		11		94		23		128
Total liabilities	$	7,768	$	11	$	7,620	$	284	$	7,915

(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 $29 million and FRB stock of $203 million.


			72			3Q22 FORM 10-Q REPORT

~~Table of Contents~~

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


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 16—FAIR VALUE OF ASSETS & LIABILITIES

The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other commitments as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:


UNFUNDED COMMITMENTS
	Contractual Amount				Fair Value
(Dollars in millions)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Unfunded Commitments:
Loan commitments	$	26,747	$	24,229	$	1	$	1
Standby and other commitments	716		810		7		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


~~Item 2.~~			~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~73			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

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

TABLE OF ITEM 2 TOPICS

~~FIRST HORIZON NATIONAL CORPORATION~~


			74			3Q22 FORM 10-Q REPORT

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

~~CONDITION AND RESULTS OF OPERATIONS~~


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

~~GENERAL INFORMATION~~Introduction

First Horizon ~~National~~ Corporation ~~(“FHN”~~(NYSE common stock trading symbol “FHN”) ~~began as~~is a ~~community bank chartered~~financial holding company headquartered in ~~1864~~Memphis, Tennessee. FHN’s principal subsidiary, and ~~as of~~only banking subsidiary, is First Horizon Bank. Through the Bank and other subsidiaries, FHN offers regional banking, mortgage lending, specialized commercial lending, commercial leasing and equipment financing, brokerage, wealth management, capital markets, and other financial services to commercial, consumer, and governmental clients throughout the U.S.

At September 30, ~~2017, was one of~~2022, FHN had over 500 business locations in 22 states, including over 400 banking centers in 12 states, and employed more than 7,500 associates.

This MD&A should be read in conjunction with the ~~40 largest publicly traded banking organizations~~accompanying unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements 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 bank headquartered in the state of Tennessee. FTN Financial (“FTNF”) is an industry leader in fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad.

~~FHN is composed of the following operating segments:~~

Regional banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial customers 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 in the U.S. and abroad,~~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 Divestitures~~other information contained in this ~~report~~document and ~~in Exhibit 13 to FHN’s~~FHN's 2021 Annual Report on Form 10-K, ~~for~~as amended.

Executive Overview

Merger Agreement with Toronto-Dominion Bank

On February 27, 2022, FHN entered into an Agreement and Plan of Merger (the “TD Merger Agreement”) with The Toronto-Dominion Bank, a Canadian chartered bank (“TD”), TD Bank US Holding Company, a Delaware corporation and indirect, wholly owned subsidiary of TD (“TD-US”), and Falcon Holdings Acquisition Co., a Delaware corporation and wholly owned subsidiary of TD-US (“Merger Sub”).

Pursuant to the ~~year ended December 31, 2016 for additional information.~~

~~For~~TD Merger Agreement, FHN and Merger Sub will merge (the “First Holding Company Merger”), with FHN continuing as the ~~purpose~~surviving entity in the merger. Following the First Holding Company Merger, at the election of ~~this management’s discussion~~TD, FHN and ~~analysis (“MD&A”), earning assets have been expressed as averages, unless otherwise noted,~~TD-US will merge (the “Second Holding Company Merger” and, ~~loans have been disclosed net of unearned income. The following financial discussion should be read~~together with the ~~accompanying audited Consolidated Condensed Financial Statements and Notes in this report. Additional information including~~First Holding Company Merger, the ~~2016 financial statements, notes, and MD&A is provided in Exhibit 13 to FHN’s Annual Report on Form 10-K for~~“Holding Company Mergers”), with TD-US continuing as the ~~year ended December 31, 2016.~~

~~Non-GAAP Measures~~

~~Certain measures are included~~surviving entity in the ~~narrative~~merger.

Upon the terms and tables in this MD&A that are “non-GAAP”, meaning (under U.S. financial reporting rules) they are not presented in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the capital position or financial results of FHN. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

~~Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for comparability to other financial institutions~~ subject to the ~~same regulations as~~conditions set forth in the TD Merger Agreement, each share of 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 conformscommon stock, par value $0.625 per share, (“Company Common Stock”), issued and outstanding immediately prior to regulatory standards. Regulatory measures used in this MD&A include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the ~~sum of core capital (including common equity and instruments that cannot be redeemed at the option~~effective time of the ~~holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets (“RWA”~~First Holding Company Merger (the “First Effective Time”)~~, which is a measure~~ will be converted into the right to receive $25.00 (USD) per share in cash, without interest. If the transaction does not close on or before November 27, 2022, shareholders will receive an additional $0.65 per share 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~~Company Common Stock on ~~average tangible common equity (“ROTCE”). Refer to table 25 for a reconciliation of 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,” and other expressions that indicate future events and trends identify forward-looking statements.

Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies, many of which are beyond FHN’s control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change. Examples of uncertainties and contingencies include, among other important factors: global, general and local economic and business 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, on a classan annualized basis or as master servicer of securitized loans; potential claims relating to participation in government programs, especially lending or other financial services programs; expectations of and actual timing and amount of interest rate movements, including the slope and shape of the yield curve, which can have a significant impact on a financial services institution; market and monetary fluctuations, including fluctuations in mortgage markets; inflation or deflation; customer, investor, competitor, regulatory, and legislative responses to any or all of these conditions; the financial condition of borrowers and other counterparties; competition within and outside the financial services industry; geopolitical developments including possible terrorist activity; natural disasters; effectiveness and cost-efficiency of FHN’s hedging practices; technological changes; fraud, theft, or other incursions through conventional, electronic, or other means affecting FHN directly or affecting its customers, business counterparties or competitors; demand for FHN’s product offerings; new products and services in the industries in which FHN operates; the increasing use of new technologies to interact with customers and others; and critical accounting estimates. Other factors are those inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other real estate prices, fluctuation of collateral values, and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission (“SEC”), the Financial Accounting Standards Board (“FASB”), the Office 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.

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(or approximately 5.4 cents per month) for the period ~~ended September 30, 2017,~~from November 27, 2022 through the day immediately prior to the closing. Each outstanding share of FHN’s preferred stock, series B, C, D, E and F, will remain issued outstanding in ~~documents incorporated~~connection with the First Holding Company Merger. If TD elects to effect the Second Holding Company Merger, at the effective time of the Second Holding Company Merger, each outstanding share of FHN’s preferred stock will be converted into ~~this Quarterly Report.~~a share of a newly created, corresponding series of TD-US having terms as described in the Merger Agreement.

~~FINANCIAL SUMMARY~~

In connection with the TD Merger Agreement, TD purchased from FHN shares of non-voting Perpetual Convertible Preferred Stock, Series G, a new series of preferred stock of FHN (the “Series G Convertible Preferred Stock”) in a private placement transaction having an aggregate liquidation preference and purchase price of approximately $494 million, pursuant to a securities purchase agreement between FHN and TD entered into concurrently with the execution and delivery of the TD Merger Agreement. The Series G Convertible Preferred Stock is convertible into up to 4.9% of the outstanding shares of Company Common Stock in certain circumstances, including the closing of the Pending TD Merger or the termination of the TD Merger Agreement.


			75			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

Financial Performance Summary

Third Quarter 2022 Highlights

FHN reported third quarter ~~2017, FHN reported~~2022 net income available to common shareholders of ~~$67.3~~$257 million, or ~~$.28~~$0.45 per diluted share, compared to ~~net income of $63.2~~$166 million, or ~~$.27~~$0.29 per diluted share, in second quarter 2022 and $224 million, or $0.41 per diluted share, in third quarter ~~2016.~~ 2021.

Net interest income of $662 million increased $120 million from second quarter 2022 reflecting the benefit of higher rates, loan growth, and higher investment portfolio income, partially offset by higher funding costs. Compared to third quarter 2021, net interest income increased $170 million, driven by higher earning asset yields and higher average investment portfolio balances.

Provision for credit losses was $60 million in third quarter 2022 compared to $30 million in second quarter 2022 largely reflecting the impact of loan growth, deterioration in the macroeconomic forecast and a preliminary estimate for potential losses related to Hurricane Ian. The provision for credit losses increased $145 million compared to a benefit of $85 million in third quarter 2021, as the benefit in the prior year reflected an improved macroeconomic outlook and positive credit grade migration.

Noninterest income of $213 million increased $12 million compared to second quarter 2022 largely driven by a gain of $21 million on the sale of FHN's title services business. Results also reflect higher deferred compensation income and securities gains offset by decreases in mortgage banking and title income and fixed income. Noninterest income decreased $34 million compared to third quarter 2021 primarily reflecting lower fixed income and mortgage banking and title income. Results also reflect the impact of a $23 million loss on the retirement of legacy IBKC trust preferred securities in third quarter 2021 and higher securities gains in third quarter 2022

Noninterest expense of $469 million decreased $19 million from second quarter 2022, largely reflecting the impact of $12 million in derivative valuation adjustments on prior Visa Class-B share sales in second quarter 2022. Compared with third quarter 2021, noninterest expense decreased $57 million largely reflecting decreases in personnel expense, legal and professional fees and contract employment and outsourcing. Merger and integration expenses related to the IBKC and Pending TD Mergers totaled $24 million for the third quarter of 2022 compared to $38 million in second quarter 2022 and $46 million in third quarter 2021.

Year-to-Date and Period End Highlights

For the nine months ended September 30, ~~2017, FHN reported~~2022, net income available to common shareholders ~~of $212.2~~was $610 million, or ~~$.90~~$1.08 per diluted share, compared to ~~net income available to common shareholders of $167.6~~$743 million, or ~~$.71~~$1.34 per diluted share, for the nine months ended September 30, ~~2016. Results improved~~2021. The decrease was the result of a $295 million increase in the provision for ~~both periods primarily driven~~credit losses and a $187 million decrease in noninterest income, offset by ana $187 million increase in net interest income ~~("NII")~~ and a $117 million decrease in noninterest expense.

Period-end loans and leases of $57.4 billion increased $2.5 billion from December 31, 2021 despite a decrease of $909 million in PPP loans. Average loans and leases of $56.5 billion in third quarter 2022 increased $1.0 billion from $55.5 billion in third quarter 2021 driven by consumer loan growth of $730 million and commercial loan growth of $305 million.

Period-end deposits of $66.0 billion decreased $8.9 billion, or 12%, from December 31, 2021 driven by a $6.8 billion decrease in interest-bearing deposits and a $2.1 billion decrease in noninterest-bearing deposits. Average deposits decreased $5.6 billion from third quarter 2021 from higher deposit balances in the prior year associated with elevated liquidity related to the COVID-19 pandemic.

Tier 1 risk-based capital and total risk-based capital ratios at September 30, 2022 were 11.71% and 13.10%, an improvement from 11.04% and 12.34% at December 31, 2021, respectively. The CET1 ratio was 9.94% at September 30, 2022 compared to 9.92% at December 31, 2021.

The following portions of this MD&A focus in more detail on the results of operations for the three and nine months ended September 30, 2022, the three months ended June 30, 2022, and the three and nine months ended September 30, 2021 and on information about FHN's financial condition, loan and lease portfolio, liquidity, funding sources, capital and other matters.


			76			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

Table I.2.1

KEY PERFORMANCE INDICATORS


	As of or for the three months ended									As of or for the nine months ended
(Dollars in millions, except per share data)	September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Pre-provision net revenue (a)	$	406		$	255		$	213		$	875		$	758
Diluted earnings per common share	$	0.45		$	0.29		$	0.41		$	1.08		$	1.34
Return on average assets (b)	1.29		%	0.82		%	1.05		%	1.00		%	1.20		%
Return on average common equity (c)	13.85		%	9.12		%	11.43		%	10.97		%	12.96		%
Return on average tangible common equity (a) (d)	18.23		%	12.07		%	14.95		%	14.44		%	17.06		%
Net interest margin (e)	3.49		%	2.74		%	2.41		%	2.85		%	2.50		%
Noninterest income to total revenue (f)	23.27		%	27.06		%	33.34		%	27.07		%	35.33		%
Efficiency ratio (g)	54.29		%	65.76		%	71.27		%	62.83		%	67.75		%
Allowance for loan and lease losses to total loans and leases	1.16		%	1.10		%	1.32		%	1.16		%	1.32		%
Net charge-offs (recoveries) to average loans and leases (annualized)	0.08		%	0.09		%	0.02		%	0.08		%	—		%
Total period-end equity to period-end assets	10.32		%	10.04		%	9.64		%	10.32		%	9.64		%
Tangible common equity to tangible assets (a)	6.64		%	6.55		%	6.80		%	6.64		%	6.80		%
Cash dividends declared per common share	$	0.15		$	0.15		$	0.15		$	0.45		$	0.45
Book value per common share	$	12.99		$	13.50		$	14.24		$	12.99		$	14.24
Tangible book value per common share (a)	$	9.72		$	10.18		$	10.88		$	9.72		$	10.88
Common equity Tier 1	9.94		%	9.81		%	10.09		%	9.94		%	10.09		%
Market capitalization	$	12,291		$	11,724		$	8,827		$	12,291		$	8,827

(a) Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table I.2.26.

(b) Calculated using annualized net income divided by average assets.

(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 21% 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 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.

The following tables present the major components of net interest income and net interest margin:


			77			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

Table I.2.2

QUARTER-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES


	Three Months Ended
(Dollars in millions)	September 30, 2022						June 30, 2022						September 30, 2021
	Average Balance		Interest Income/Expense		Yield/Rate		Average Balance		Interest Income/Expense		Yield/Rate		Average Balance		Interest Income/Expense		Yield/Rate
Assets:
Loans and leases:
Commercial loans and leases	$	44,046	$	496	4.47	%	$	43,589	$	382	3.52	%	$	43,741	$	372	3.37	%
Consumer loans	12,497		124		3.94		11,987		112		3.74		11,767		112		3.81
Total loans and leases	56,543		620		4.35		55,576		494		3.57		55,508		484		3.47
Loans held for sale	761		9		4.91		1,027		10		3.89		992		8		3.25






Investment securities	10,315		55		2.14		9,781		46		1.87		8,494		31		1.48
Trading securities	1,342		15		4.54		1,509		13		3.43		1,171		6		2.07

Federal funds sold	259		1		2.28		228		1		1.11		13		—		0.18
Securities purchased under agreements to resell (a)	402		2		1.89		629		1		0.49		574		—		(0.04)
Interest-bearing deposits with banks	6,341		35		2.15		10,989		21		0.79		15,023		6		0.16

Total earning assets / Total interest income	$	75,963	$	737	3.86	%	$	79,739	$	586	2.95	%	$	81,775	$	535	2.61	%

Cash and due from banks	1,246						1,281						1,263
Goodwill and other intangible assets, net	1,767						1,789						1,829

Allowance for loan and lease losses	(639)						(621)						(793)
Other assets	4,214						4,138						4,327
Total assets	$	82,551					$	86,326					$	88,401

Liabilities and Shareholders' Equity:

Interest-bearing deposits:
Savings	$	23,569	$	19	0.31	%	$	24,841	$	5	0.08	%	$	27,793	$	9	0.12	%
Other interest-bearing deposits	15,103		21		0.56		16,273		9		0.22		15,333		5		0.12
Time deposits	2,759		3		0.50		3,040		4		0.50		4,122		6		0.62
Total interest-bearing deposits	41,431		43		0.41		44,154		18		0.16		47,248		20		0.17
Federal funds purchased	596		3		2.28		733		1		0.80		906		—		0.14
Securities sold under agreements to repurchase	877		2		0.82		770		1		0.32		1,422		1		0.32
Trading liabilities	372		3		3.03		585		4		2.52		527		1		1.11
Other short-term borrowings	238		2		2.22		207		—		0.81		124		1		0.09
Term borrowings	1,598		18		4.57		1,597		17		4.38		1,665		18		4.39
Total interest-bearing liabilities / Total interest expense	$	45,112	$	71	0.63	%	$	48,046	$	41	0.34	%	$	51,892	$	41	0.31	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits	26,701						27,791						26,485
Other liabilities	2,069						1,875						1,447
Total liabilities	73,882						77,712						79,824

Shareholders' equity	8,374						8,319						8,282
Noncontrolling interest	295						295						295
Total shareholders' equity	8,669						8,614						8,577
Total liabilities and shareholders' equity	$	82,551					$	86,326					$	88,401

Net earnings assets / Net interest income (TE) / Net interest spread	$	30,851	$	666	3.23	%	$	31,693	$	545	2.61	%	$	29,883	$	494	2.30	%
Taxable equivalent adjustment			(4)		0.26				(3)		0.13				(2)		0.11
Net interest income / Net interest margin (b)			$	662	3.49	%			$	542	2.74	%			$	492	2.41	%

(a) Negative yield is driven by negative market rates on reverse repurchase agreements.

(b) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.


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Third Quarter 2022 versus Second Quarter 2022

Net interest income of $662 million in third quarter 2022 increased $120 million from second quarter 2022 driven by higher interest rates, greater average loan balances, and additional investment portfolio income, partially offset by higher funding costs.

The net interest margin of 3.49% in third quarter 2022 improved 75 basis points from second quarter 2022 primarily due to the benefit of higher interest rates as well as loan and securities portfolio growth and lower excess cash balances, partially offset by an increase in funding costs.

Average earning assets of $76.0 billion in third quarter 2022 decreased $3.8 billion from second quarter 2022 largely due to a $4.6 billion decrease in interest-bearing cash, offset by a $1.0 billion increase in loans and leases, driven by a $457 million increase in commercial loans and a $510 million increase in consumer loans.

Third Quarter 2022 versus Third Quarter 2021

Net interest income increased $170 million from third quarter 2021 driven by both higher earning asset yields and higher investment portfolio balances.

Third quarter 2022 net interest margin increased 108 basis points from 2.41% in third quarter 2021, driven by the impact of higher yields on earning assets, partially offset by higher funding costs.

Average earning assets decreased $5.8 billion from third quarter 2021 largely driven by a $8.7 billion decrease in average interest-bearing deposits with banks, offset by a $1.0 billion increase in loans and leases and a $1.8 billion increase in investment securities.


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Table I.2.3

YEAR-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES


	Nine Months Ended
	September 30, 2022						September 30, 2021
(Dollars in millions)	Average Balance		Interest Income/Expense		Yield/Rate		Average Balance		Interest Income/Expense		Yield/Rate
Assets:
Loans and leases:
Commercial loans and leases	$	43,366	$	1,217	3.75	%	$	44,771	$	1,135	3.38	%
Consumer loans	12,043		344		3.80		12,072		357		3.98
Total loans and leases	55,409		1,561		3.76		56,843		1,492		3.51
Loans held for sale	980		30		4.01		856		22		3.41






Investment securities	9,923		139		1.87		8,406		88		1.43
Trading securities	1,481		39		3.52		1,303		20		2.02

Federal funds sold	190		1		1.52		32		—		0.13
Securities purchased under agreements to resell (a)	567		2		0.61		580		—		(0.08)
Interest-bearing deposits with banks	10,713		63		0.79		12,468		11		0.12

Total earning assets / Total interest income	$	79,263	$	1,835	3.09	%	$	80,488	$	1,633	2.72	%

Cash and due from banks	1,251						1,260
Goodwill and other intangible assets, net	1,786						1,843
Premises and equipment, net	643						724
Allowance for loan and lease losses	(639)						(875)
Other assets	3,495						3,691
Total assets	$	85,799					$	87,131

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings	$	24,903	$	27	0.14	%	$	27,468	$	31	0.15	%
Other interest-bearing deposits	15,972		34		0.28		15,617		17		0.14
Time deposits	3,046		11		0.51		4,479		19		0.58
Total interest-bearing deposits	43,921		72		0.22		47,564		67		0.19
Federal funds purchased	737		5		0.96		969		1		0.11
Securities sold under agreements to repurchase	882		3		0.40		1,229		2		0.33
Trading liabilities	523		9		2.32		535		4		1.01
Other short-term borrowings	185		2		1.29		130		1		0.08
Term borrowings	1,595		53		4.41		1,669		55		4.39
Total interest-bearing liabilities / Total interest expense	$	47,843	$	144	0.40	%	$	52,096	$	130	0.33	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits	27,468						25,070
Other liabilities	1,854						1,503
Total liabilities	77,165						78,669

Shareholders' equity	8,339						8,167
Noncontrolling interest	295						295
Total shareholders' equity	8,634						8,462
Total liabilities and shareholders' equity	$	85,799					$	87,131

Net earnings assets / Net interest income (TE) / Net interest spread	$	31,420	$	1,691	2.69	%	$	28,392	$	1,503	2.39	%
Taxable equivalent adjustment			(8)		0.16				(7)		0.11
Net interest income / Net interest margin (b)			$	1,683	2.85	%			$	1,496	2.50	%

(a) Yield is driven by negative market rates on reverse repurchase agreements.

(b) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.


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For the nine months ended September 30, 2022, net interest income of $1.7 billion increased $187 million from the same period one year ago largely driven by higher earning asset yields.

Total average earning assets decreased $1.2 billion in the first nine months of 2022 largely from decreases in average loans and leases and interest-bearing cash partially offset by growth in investment securities.

The year-to-date net interest margin of 2.85% increased 35 basis points compared to the same period of 2021 as the increase in earning asset yields was partially offset by an increase in the cost of interest-bearing liabilities.

Provision for Credit Losses

The provision for credit losses includes the provision for loan and lease losses and the provision for unfunded lending commitments. The provision for credit losses is the expense necessary to maintain the ALLL and the accrual for unfunded lending commitments at levels appropriate to absorb management’s estimate of credit losses expected over the life of the loan and lease portfolio and the portfolio of unfunded loan commitments.

For the third quarter 2022, provision for credit losses was $60 million compared to $30 million in second quarter 2022, largely reflecting the impact of loan growth, deterioration in the macroeconomic forecast, and a

preliminary estimate for potential losses related to Hurricane Ian. The third quarter 2022 provision increased $145 million from third quarter 2021 and increased $295 million on a year-to-date basis. The increase in provision during 2022 was reflective of non-PPP loan growth, deterioration in the macroeconomic forecast and a preliminary estimate of potential losses related to Hurricane Ian. The provision benefit in 2021 reflected an improved macroeconomic outlook and positive credit grade migration.

For additional information about general asset quality trends, refer to the Asset Quality section in this MD&A.

Noninterest Income

The following table presents the significant components of noninterest income ~~taxes, somewhat~~for each of the periods presented:

Table I.2.4

NONINTEREST INCOME


	Three Months Ended						3Q22 vs. 2Q22				3Q22 vs. 3Q21
(Dollars in millions)	September 30, 2022		June 30, 2022		September 30, 2021		$ Change		% Change		$ Change		% Change
Noninterest income:
Fixed income	$	46	$	51	$	96	$	(5)	(10)	%	$	(50)	(52)	%
Deposit transactions and cash management	43		42		44		1		2		(1)		(2)
Brokerage, management fees and commissions	23		24		24		(1)		(4)		(1)		(4)
Card and digital banking fees	21		23		21		(2)		(9)		—		—
Other service charges and fees	13		15		12		(2)		(13)		1		8
Trust services and investment management	11		12		13		(1)		(8)		(2)		(15)
Securities gains (losses), net	12		—		1		12		100		11		NM
Mortgage banking and title income	9		34		34		(25)		(74)		(25)		(74)
Deferred compensation income	(3)		(17)		3		14		82		(6)		(200)
Loss on debt extinguishment	—		—		(23)		—		—		23		100
Other income	38		17		22		21		124		16		73
Total noninterest income	$	213	$	201	$	247	$	12	6	%	$	(34)	(14)	%

NM – Not meaningful


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Third Quarter 2022 versus Second Quarter 2022

Noninterest income of $213 million increased $12 million, or 6%, from second quarter 2022. During third quarter 2022, FHN sold its title services business for a gain of $21 million. Noninterest income results were also impacted by higher deferred compensation income and securities gains offset by decreases in mortgage banking and title income and fixed income.

Fixed income of $46 million decreased $5 million reflecting the impact of higher long-term rates, macroeconomic uncertainty and market volatility. Fixed income average daily revenue of $0.5 million compared with $0.6 million in second quarter 2022.

Mortgage banking and title income of $9 million decreased $25 million largely driven by declines in mortgage sales volume and margin compression as well as the divestiture of the title services business.

The increase in securities gains was largely attributable to a $10 million gain on an equity securities investment.

Deferred compensation income increased $14 million reflecting fluctuations in equity market valuations.

Third Quarter 2022 versus Third Quarter 2021

Noninterest income of $213 million for third quarter 2022 decreased $34 million, or 14%, compared to third quarter 2021, primarily reflecting lower fixed income and mortgage banking and title income. Results also reflect the impact of a $23 million loss on the retirement of legacy IBKC trust preferred securities in third quarter 2021 and higher securities gains in third quarter 2022.

Fixed income of $46 million decreased $50 million from third quarter 2021. Fixed income product revenue decreased $51 million, reflecting less favorable market conditions, while revenue from other products increased $1 million, largely driven by higher loans sales partially offset by lower derivative fees.

Mortgage banking and title income decreased $25 million largely driven by declines in mortgage sales volume and margin compression as well as the divestiture of the title services business.

Deferred compensation income decreased $6 million reflecting fluctuations in equity market valuations relative to the prior year.

Table I.2.5

NONINTEREST INCOME


	Nine Months Ended
(Dollars in millions)	September 30, 2022		September 30, 2021		$ Change		% Change
Noninterest income:
Fixed income	$	170	$	324	$	(154)	(48)	%
Deposit transactions and cash management	129		130		(1)		(1)
Brokerage, management fees and commissions	71		65		6		9
Mortgage banking and title income	65		126		(61)		(48)
Card and digital banking fees	64		59		5		8
Other service charges and fees	41		32		9		28
Trust services and investment management	36		39		(3)		(8)
Securities gains (losses), net	18		12		6		50
Deferred compensation income	(24)		12		(36)		NM
Loss on debt extinguishment	—		(23)		23		100
Other income	72		53		19		36
Total noninterest income	$	642	$	829	$	(187)	(23)	%

NM – Not meaningful

For the nine months ended September 30, 2022, noninterest income ~~relative~~of $642 million decreased $187 million, or 23%, compared to ~~2016. Total expenses including~~the same period in 2021, primarily due to lower fixed income, mortgage banking and title income and deferred compensation income.

Fixed income product revenue of $133 million decreased $158 million largely driven by less favorable market conditions. Revenue from other products of $38 million

increased $5 million primarily driven by higher fees from loan ~~loss provision were flat for~~sales.

Mortgage banking and title income of $65 million decreased $61 million driven by lower origination volume given the ~~quarterly period, but declined~~impact of higher long-term rates as well as a continued mix shift toward portfolio loans, partially offset by a $12 million gain on sale of mortgage servicing rights.


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Deferred compensation income decreased $36 million for the year-to-date period ~~which also contributed~~of 2022 largely driven by equity market valuations relative to the ~~improvement~~prior year.

Noninterest Expense

The following tables present the significant components of noninterest expense for each of the periods presented:

Table I.2.6

NONINTEREST EXPENSE


	Three Months Ended						3Q22 vs. 2Q22				3Q22 vs. 3Q21
(Dollars in millions)	September 30, 2022		June 30, 2022		September 30, 2021		$ Change		% Change		$ Change		% Change
Noninterest expense:
Personnel expense	$	275	$	265	$	296	$	10	4	%	$	(21)	(7)	%
Net occupancy expense	32		33		33		(1)		(3)		(1)		(3)
Computer software	28		29		30		(1)		(3)		(2)		(7)
Operations services	22		23		24		(1)		(4)		(2)		(8)

Amortization of intangible assets	13		13		14		—		—		(1)		(7)
Contract employment and outsourcing	12		12		21		—		—		(9)		(43)
Advertising and public relations	12		10		14		2		20		(2)		(14)
Equipment expense	11		11		12		—		—		(1)		(8)
Legal and professional fees	10		17		21		(7)		(41)		(11)		(52)
Communications and delivery	10		9		9		1		11		1		11
Other expense	44		66		52		(22)		(33)		(8)		(15)
Total noninterest expense	$	469	$	488	$	526	$	(19)	(4)	%	$	(57)	(11)	%

Third Quarter 2022 versus Second Quarter 2022

Noninterest expense of $469 million decreased $19 million, or 4%, compared with second quarter 2022. Other noninterest expense decreased $22 million, primarily from $12 million in derivative valuation adjustments on prior Visa Class-B share sales in second quarter 2022, as well as a decline in other losses. Results also reflect a $7 million decrease in legal and professional fees largely attributable to lower merger and integration related costs. Personnel expense increased $10 million largely reflecting higher deferred compensation expense.

Third Quarter 2022 versus Third Quarter 2021

Noninterest expense of $469 million decreased $57 million, or 11%, from third quarter 2021. Personnel

expense decreased $21 million largely attributable to lower incentive-based compensation and deferred compensation costs. Legal and professional fees decreased $11 million and contract employment and outsourcing expense decreased $9 million from third quarter 2021 largely attributable to lower merger and integration related costs.


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Table I.2.7

NONINTEREST EXPENSE


	Nine Months Ended
(Dollars in millions)	September 30, 2022		September 30, 2021		$ Change		% Change
Noninterest expense:
Personnel expense	$	820	$	920	$	(100)	(11)	%
Net occupancy expense	96		103		(7)		(7)
Computer software	85		87		(2)		(2)
Operations services	65		59		6		10
Legal and professional fees	50		52		(2)		(4)
Contract employment and outsourcing	43		47		(4)		(9)
Amortization of intangible assets	39		42		(3)		(7)
Equipment expense	34		35		(1)		(3)
Advertising and public relations	34		23		11		48
Communications and delivery	28		28		—		—

Other expense	156		171		(15)		(9)
Total noninterest expense	$	1,450	$	1,567	$	(117)	(7)	%

For the nine months ended September 30, 2022, noninterest expense decreased $117 million, or 7%, largely attributable to a $100 million decrease in personnel expense reflecting lower revenue-based incentives and commissions and deferred compensation expense. Occupancy expense decreased $7 million largely reflecting lower merger and integration expenses as well as the benefit of IBKC merger cost savings.

Year-to-date results also reflect increases in advertising and public relations and operations services.

Total merger and integration expense was $99 million for the first nine months of 2022 compared to $148 million for the same period of 2021.

Income Taxes

FHN recorded income tax expense of $78 million in third quarter 2022 compared to $48 million in second quarter 2022 and $63 million in third quarter 2021. For the nine months ended September 30, 2022 and 2021, FHN recorded income tax expense of $183 million and $222 million, respectively.

The effective tax rate was approximately 22.6%, 21.3%, and 21.1% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. The effective tax rate was approximately 22.2% and 22.1% for the nine months ended September 30, ~~2017.~~2022 and 2021, respectively.

FHN’s effective 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 tax credit investments. The ~~decline in provision for income taxes for both~~effective rate is unfavorably affected by the ~~three~~non-deductibility of portions of: FDIC premium, executive compensation and ~~nine months ended September 30, 2017 was due to favorable~~merger expenses. FHN’s effective tax rate ~~adjustments primarily associated with the reversal of a capital loss~~also may be affected by items that may occur in any given period but are not consistent from period to period, such as changes in unrecognized tax benefits. The rate also may be affected by items resulting from business combinations.

A deferred tax asset or deferred tax liability is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax consequence is calculated by applying current enacted statutory tax rates to these temporary differences in future years. As of September 30, 2022, FHN’s gross DTA and gross DTL were $675 million and $421 million, respectively, resulting in a net DTA of $254 million at September 30, 2022, compared with a net DTA of $52 million at December 31, 2021.

As of September 30, 2022, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $61 million and $5 million, respectively, which will expire at various dates.

Based on current analysis, FHN believes that its ability to realize the DTA is more likely than not. FHN monitors its DTA and the need for a valuation allowance on a quarterly basis. A significant adverse change in ~~2017.~~FHN’s taxable earnings outlook could result in the need for a valuation allowance.

~~Total revenue was $322.2 million~~


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Business Segment Results

FHN's reportable segments include Regional Banking, Specialty Banking and ~~$957.3 million, respectively,~~Corporate. See Note 12 - Business Segment Information for the three and nine months ended September 30, 2017 compared to $333.7 million and $961.9 million for the three and nine months ended September 30, 2016. NII increased 13 percent for both periods, largely driven by the impact of higher short-term market rates and net loan growth. Noninterest income declined 24 percent and 17 percent, respectively, for the three and nine months ended September 30, 2017 due to lower fixed income revenue and a loss from the repurchase of equity securities previously included in a financing transaction.

Noninterest expense increased 1 percent to $236.9 million for the three months ended September 30, 2017 and decreased 2 percent to $677.0 million for the nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. Expenses increased in third quarter 2017 largely driven by higher acquisition- and integration-related expenses primarily associated with the CBF and Coastal acquisitions and an increase in net loss accrualsadditional disclosures 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.FHN's segments.

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

The Regional Banking segment generated pre-tax income of $280 million for third quarter 2022, an increase of $51 million compared to second quarter 2022, driven by a $49 million increase in revenue and a $9 million decrease in provision for credit losses partially offset by a $7 million increase in noninterest expense. Net interest income of $517 million increased $52 million reflecting the benefit of higher interest rates and average loan balances, partially offset by higher funding costs.

Pre-tax income ~~within the regional banking segment increased 12 percent to $114.7 million in~~for third quarter ~~2017 from $102.0~~2022 decreased $37 million incompared to $317 million for third quarter ~~2016.~~2021. The ~~increase~~provision for credit losses increased $95 million largely reflecting the impact of non-PPP loan growth, deterioration in ~~pre-tax~~the macroeconomic forecast and a preliminary estimate of potential losses related to Hurricane Ian. Net interest income ~~was primarily~~increased $73 million from third quarter 2021 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~~earning asset yields. Noninterest expense increased $12 million compared to ~~$237.6~~third quarter 2021.

Pre-tax income of $772 million for the nine months ended September 30, ~~2016.~~2022 decreased $202 million compared to the same period of 2021, largely from a $233 million increase in provision for credit losses. The increase in ~~pre-tax income for~~provision during 2022 was the ~~nine months ended September 30, 2017 was driven by an~~result of loan growth, deterioration in the macroeconomic forecast and a preliminary estimate of potential losses related to Hurricane Ian. Results also reflect a $105 million increase in revenue, ~~coupled with~~largely from higher net interest income, and a $74 million increase in noninterest expense, largely tied to higher personnel expense and fraud losses.

Specialty Banking

Pre-tax income in the Specialty Banking segment of $81 million for third quarter 2022 decreased $58 million compared to second quarter 2022, driven by a $36 million increase in provision for credit losses and a $35 million decline in revenue, offset by a $12 million decline in noninterest expense. Fixed income of $46 million decreased $5 million, reflecting the impact of higher long-term rates, macroeconomic uncertainty and market volatility. Mortgage banking and title income of $9 million decreased $25 million largely driven by 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 loansmortgage sales volume and ~~noninterest-bearing deposits,~~margin compression as well as the divestiture of the title services business. The decline in noninterest expense was largely reflective of lower ~~deposit costs relative~~personnel expense of $12 million tied to ~~third quarter 2016. Noninterest income was $64.4 million and $65.1 million~~a decrease 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. Noninterestincentive-based compensation.

Pre-tax income in ~~third quarter 2016 was favorably impacted by a $1.8~~the Specialty Banking segment decreased $109 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.~~2021

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

largely driven by ~~the C&I portfolio,~~lower revenue and higher provision for credit losses, partially offset by ~~reserve decreases~~lower noninterest expense. The decline in both the consumer 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. The increase in expense~~revenue was primarily ~~driven by an $8.7 million net increase in loss accruals related~~attributable to ~~legal matters as a result~~lower fixed income and mortgage banking and title income.

Pre-tax income 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~~$344 million for the nine months ended September 30, ~~2017,~~2022 decreased $218 million from ~~$726.8~~the same period of 2021 largely reflecting a $211 million decrease in noninterest income tied to lower fixed income and mortgage banking and title fees.

Corporate

Pre-tax loss for the Corporate segment was $15 million for third quarter 2022 compared to $144 million for second quarter 2022, largely reflecting a $71 million increase in net interest income and a $47 million increase in noninterest income. Merger and integration expenses were $24 million compared to $38 million in the prior quarter.

Pre-tax income in the Corporate segment increased $194 million compared to third quarter 2021. Net interest income increased $112 million from the impact of funds transfer pricing. Noninterest income increased $47 million compared to third quarter 2021, largely the result of the gain on the sale of the title services business, a loss on the retirement of legacy IBKC trust preferred securities in third quarter 2021 and higher securities gains in the current quarter. Noninterest expense decreased $35 million from the third quarter 2021, largely reflecting lower merger and integration expenses. Merger and integration expenses were $24 million compared to $46 million in third quarter 2021.

Pre-tax loss of $291 million for the nine months ended September 30, ~~2016, driven by an increase in NII. The increase in NII for~~2022 improved $242 million compared to the ~~year-to-date~~same period ~~was also driven by~~of 2021. Net interest expense decreased $138 million reflecting the ~~favorable~~ impact of ~~higher interest rates on loans, higher average balances~~funds transfer pricing. Noninterest income of ~~commercial loans and noninterest-bearing deposits, and lower deposit costs relative~~$40 million increased $11 million compared to ~~2016. For~~ the ~~nine months ended September 30, 2017 and 2016, noninterest~~prior year. 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~~results reflect 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~~impact of a ~~$4.4~~$23 million ~~held-to-maturity municipal bond~~loss on retirement of legacy IBKC trust preferred securities in ~~second~~third quarter ~~2017. Gains~~2021, the $21 million gain on ~~the~~ sale of ~~fixed assets decreased $2.0~~the title services business in third quarter 2022, and higher securities gains. These increases were partially offset by lower deferred compensation income of $36 million.

Noninterest expense of $190 million for the nine months ended September 30, ~~2017 and fees from derivative transactions~~2022 decreased ~~$.9~~$99 million ~~both reducing noninterest income in 2017~~ compared to 2016. Additionally, declines in fees from deposit transactions and cash management and bankcard income also negatively impacted noninterest income for the nine months ended September 30, 2017 relative to the prior year. The decrease in fees 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.

Provision expense was $11.9 million 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 to 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 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 result of the Coastal acquisition. Fixed income product revenue decreased 24 percent to $45.0 million in third 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 flattening 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, primarily 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.

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 net interest expense was the result of a higher yielding securities portfolio in 2017. Noninterest 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.

~~Noninterest expense was $23.9 million in third quarter 2017 up from $14.9 million in third quarter 2016. The increase in expense 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 m~~illion 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. Losses remain historically low as the non-strategic segment had net recoveries of $3.3 m~~illion 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 loan losses within 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. Tota~~l 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 loans 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 banking 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 billion 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 loans 4.13 % 3.63 % 4.01 % 3.60 %
Consumer loans 4.23
4.08
4.19
4.08
Total loans, net of unearned income 4.16
3.76
4.06
3.74
Loans held-for-sale 4.53
4.36
4.47
4.23
Investment securities:
U.S. treasuries 1.26
0.97
1.08
0.98
U.S. government agencies 2.54
2.34
2.57
2.40
States and municipalities —
9.01
9.43
7.55
Corporate bonds 5.25
5.25
5.25
5.25
Other 3.67
2.44
3.32
2.50
Total investment securities 2.60
2.36
2.61
2.42
Trading securities 3.06
2.46
3.00
2.65
Other earning assets:
Federal funds sold 1.75
0.99
1.58
1.12
Securities purchased under agreements to resell 0.88
0.08
0.64
0.11
Interest bearing cash 1.24
0.49
0.92
0.49
Total other earning assets 1.03
0.25
0.82
0.29
Interest income / total earning assets 3.76 % 3.30 % 3.57 % 3.27 %
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings 0.50 % 0.23 % 0.46 % 0.22 %
Other interest-bearing deposits 0.46
0.19
0.37
0.18
Time deposits 0.97
0.86
0.94
0.83
Total interest-bearing deposits 0.51
0.26
0.46
0.25
Federal funds purchased 1.24
0.52
0.98
0.51
Securities sold under agreements to repurchase 1.06
0.09
0.70
0.09
Fixed income trading liabilities 2.19
1.76
2.26
1.91
Other short-term borrowings 1.22
0.61
1.24
0.70
Term borrowings 3.51
2.67
3.24
2.52
Interest expense / total interest-bearing liabilities 0.80
0.47
0.71
0.48
Net interest spread 2.96 % 2.83 % 2.86 % 2.79 %
Effect of interest-free sources used to fund earning assets 0.23
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~~

The provision for loan losses is the charge to or credit to earnings that management determines to be necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of probable incurred losses in the loan portfolio. There was no provision for loan 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 million from year-end to $194.9 million as of September 30, 2017. For additional information about the provision for loan losses refer to the Regional Banking and Non-Strategic sections of the Business Line Review section in this MD&A. 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 percent 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 2017 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.

~~Fixed Income 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 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.~~ ~~The following table summarizes FHN’s fixed income noninterest income for~~2021 largely reflecting lower deferred compensation expense in the ~~three and nine months ended September 30, 2017 and 2016.~~current year, as well as the impact of impairments on long-lived assets related to acquisition integration efforts in 2021.

~~Table 2—Fixed Income Noninterest Income~~

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 )%

~~Deposit Transactions and Cash Management~~

Fees from deposit transactions and cash management activities increased to $28.0 million in third quarter 2017 from $27.2 million in third quarter 2016 largely driven by higher fee income associated with cash management activities. For the nine months ended September 30, 2017 and 2016 fees from deposit transactions 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.

~~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.

~~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.

~~Table 3—Other Income~~

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 )%

~~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.~~85			3Q22 FORM 10-Q REPORT

~~(b) 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.~~

~~NONINTEREST EXPENSE~~

Total noninterest expense increased to $236.9 million in third quarter 2017 from $233.6 million in third quarter 2016. The increase in noninterest 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 recognized an increase in personnel 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 within the regional 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 relative 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 services expense was $10.8 million and $10.5 million for the three months ended September 30, 2017 and 2016, 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 )%


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

Analysis of Financial Condition

~~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 end~~ed September 30, 2016. FHN’s effective tax rate is favorably affected by recurring items such as bank-owned life insurance, tax-exempt income, and credits and other tax benefits from affordable housing investments. The company’s effective tax rate also may be affected by items that may occur in any given peri~~od 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.

~~A deferred tax asset (“DTA”) or deferred tax liability (“DTL”) is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing~~Total period-end 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, FHN’s gross DTA (net of a valuation allowance) and gross DTL were $282.3 million and $91.6 million, respectively, resulting in a net DTA of $190.7 million a~~t September 30, 2017, compared with a net DTA of $157.2 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. As of September 30, 2017, FHN had gross deferred tax asset balances related to federal and state income tax carryforwards of $57.3 million and $14.1 million, respectively, which will expire at various 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~~were $80.3 billion as of September 30, ~~2017 and 2016, respectively. Based on current analysis, FHN believes that its ability~~2022 compared to realize the remaining DTA is more likely than not. 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~~$89.1 billion o~~n September 30, 2017, up 4 percent from $28.6 billion on~~at 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 increase2021. The decrease in total assets onduring 2022 was driven by a ~~period-end and average basis, but were somewhat~~$11.7 billion decrease in interest-bearing deposits with banks from lower customer deposits, 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~~$2.5 billion increase in ~~Fixed income trading inventory on September 30, 2017 also contributed to the~~loans and leases and a $684 million increase in ~~total assets on a period-end basis.~~investment securities.

~~Total period-end liabilities were $26.7 billion on September 30, 2017, a 3 percent increase from $25.9 billion on Decembe~~r 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 and leases, loans held for sale, investment securities, and other earning assets, such as trading securities and 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.~~deposits with banks. A ~~more~~ detailed discussion of the major ~~line items follows.~~components of earning assets is provided in the following sections.

Total deposits of $66.0 billion as of September 30, 2022 decreased $8.9 billion from December 31, 2021 reflecting a continued downward trend from mid-2021 highs driven by excess liquidity associated with the COVID-19 pandemic. Interest-bearing deposits decreased $6.8 billion and noninterest-bearing deposits decreased $2.1 billion.

See Tables I.2.2 and I.2.3 - Average Balances, Net Interest Income and Yields/Rates in this Report for information on average deposits including average rates paid. The following table summarizes the major components of deposits as of September 30, 2022 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.~~2021.

~~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~~I.2.16

DEPOSITS


	September 30, 2022				December 31, 2021
(Dollars in millions)	Amount		Percent of total		Amount		Percent of total		Change		Percent
Savings	$	22,800	35	%	$	26,457	35	%	$	(3,657)	(14)	%
Time deposits	2,671		4		3,500		5		(829)		(24)
Other interest-bearing deposits	14,731		22		17,055		23		(2,324)		(14)

Total interest-bearing deposits	40,202		61		47,012		63		(6,810)		(14)
Noninterest-bearing deposits	25,813		39		27,883		37		(2,070)		(7)
Total deposits	$	66,015	100	%	$	74,895	100	%	$	(8,880)	(12)	%

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~~include federal funds purchased, ~~(“FFP”),~~ securities sold under agreements to repurchase, trading liabilities, and other short-term ~~borrowings) averaged $2.3~~borrowings. Total short-term borrowings were $1.8 billion ~~in third quarter 2017, up 22 percent from $1.9~~and $2.6 billion ~~in fourth quarter 2016. The increase in short-term borrowings between third quarter 2017~~as of September 30, 2022 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~~December 31, 2021, respectively.

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~~

Trading liabilities fluctuate based on various factors, including levels of trading securities ~~sold under agreements to repurchase increased in third quarter 2017, primarily due to the Coastal acquisition.~~ ~~Average FFP~~and hedging strategies. Federal funds purchased fluctuates depending on the amount of excess funding of FHN’s correspondent bank ~~customers and average trading liabilities fluctuates~~customers. Balances of securities sold under agreements to repurchase fluctuate based on ~~expectations of customer demand. Period-end short-term borrowings increased~~cost attractiveness relative 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~~borrowing levels and the ability to ~~support loan growth.~~pledge securities toward such transactions.

~~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~~Total term borrowings were ~~$1.1~~$1.6 billion ~~and $1.0 billion on~~as of September 30, ~~2017~~2022 and December 31, ~~2016, respectively. Average term borrowings~~2021.

~~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~~


			96			3Q22 FORM 10-Q REPORT

~~Period-end other liabilities were $.6 billion on September 30, 2017 and December 31, 2016.~~


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

~~CAPITAL~~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~~well-capitalized standards, and to assure ready ~~access~~access to the c~~apital~~capital markets. ~~Period-end~~Total equity ~~increased to $ 2.9~~was $8.3 billion onat September 30, ~~2017 from $2.7~~2022 and $8.5 billion onat December 31, ~~2016 primarily due to~~2021. Significant changes included net income ~~recognized since fourth quarter 2016, partially~~of $642 million and the issuance of $494 million in Series G preferred stock, which were offset by $271

million in 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 byand a decrease ~~attributable to average accumulated other comprehensive income. The decline attributable to average accumulated other comprehensive income was largely the result~~in AOCI of ~~unrealized losses recognized on the AFS securities portfolio, as well as an increase of net actuarial losses for pension and post retirement plans.~~$1.1 billion.

The following tables provide a reconciliation of ~~Shareholders’~~shareholders’ equity from the Consolidated ~~Condensed Statements of Condition~~Balance Sheets to Common Equity Tier 1, Tier 1 and Total Regulatory Capital as well as certain selected capital ratios:

Table ~~8—Regulatory Capital and Ratios~~I.2.17

REGULATORY CAPITAL DATA


(Dollars in millions)	September 30, 2022		December 31, 2021
Shareholders’ equity	$	7,988	$	8,199
Modified CECL transitional amount (a)	85		114
FHN non-cumulative perpetual preferred stock	(1,014)		(520)
Common equity tier 1 before regulatory adjustments	$	7,059	$	7,793
Regulatory adjustments:
Disallowed goodwill and other intangibles	(1,669)		(1,711)
Net unrealized (gains) losses on securities available for sale	1,039		36
Net unrealized (gains) losses on pension and other postretirement plans	249		255
Net unrealized (gains) losses on cash flow hedges	139		(3)
Disallowed deferred tax assets	—		(2)
Other deductions from common equity tier 1	(1)		(1)
Common equity tier 1	$	6,816	$	6,367
FHN non-cumulative perpetual preferred stock (b)	920		426
Qualifying noncontrolling interest— First Horizon Bank preferred stock	295		295

Tier 1 capital	$	8,031	$	7,088
Tier 2 capital	956		830
Total regulatory capital	$	8,987	$	7,918
Risk-Weighted Assets
First Horizon Corporation	$	68,580	$	64,183
First Horizon Bank	68,065		63,601
Average Assets for Leverage
First Horizon Corporation	82,059		87,683
First Horizon Bank	81,368		86,953


			97			3Q22 FORM 10-Q REPORT

(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


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

Table I.2.18

REGULATORY RATIOS & AMOUNTS


	September 30, 2022				December 31, 2021
	Ratio		Amount		Ratio		Amount
Common Equity Tier 1
First Horizon Corporation	9.94	%	$	6,816	9.92	%	$	6,367
First Horizon Bank	10.55		7,182		10.75		6,838
Tier 1
First Horizon Corporation	11.71		8,031		11.04		7,088
First Horizon Bank	10.98		7,477		11.22		7,133
Total
First Horizon Corporation	13.10		8,987		12.34		7,918
First Horizon Bank	12.18		8,289		12.41		7,893
Tier 1 Leverage
First Horizon Corporation	9.79		8,031		8.08		7,088
First Horizon Bank	9.19		7,477		8.20		7,133
Other Capital Ratios
Total period-end equity to period-end assets	10.32				9.53
Tangible common equity to tangible assets (c)	6.64				6.73
Adjusted tangible common equity to risk-weighted assets (c)	9.12				9.20

(a)The modified CECL transitional amount includes 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 December 31, 2021. For September 30, 2022, 25% of the full amount at December 31, 2021 is phased out and not included in Common Equity Tier 1 capital.

(b)The $94 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, which was re-set to July 1, 2020 when the IBKC merger closed.

(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 I.2.26.

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,~~6.50%, 8.00%, 10.00%, and ~~5 percent, respectively~~. 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 September 30, ~~2017,~~2022, each of FHN and ~~FTBNA~~First Horizon Bank had ~~sufficient~~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 ~~well-capitalized institution.~~ three-year transition period.

For FHN, the Tier 1 and Total risk-based regulatory capital ratios ~~remained consistent~~increased in ~~the~~ third quarter ~~of 2017~~2022 relative to ~~fourth quarter 2016 as~~year-end 2021 primarily from the ~~capital generated from~~impact of net income less dividends ~~offset~~during the ~~impact~~first nine months of ~~increased disallowed intangible assets related to~~2022. FHN's Tier 1 Capital and Tier 1 Leverage ratios as of September 30, 2022 further benefited from the ~~Coastal acquisition, the continued phased-in implementation~~issuance of ~~the Basel III regulations,~~its Series G preferred stock in February 2022. FHN and First Horizon Bank's risk-based regulatory capital ratios were negatively impacted in 2022 from 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,from December 31, 2021.

During 2022, capital ratios are expected to remain above well-capitalized ~~standards.~~standards plus the required capital conservation buffer.

~~Common Stock Purchase Programs~~Finance and Insurance

~~Pursuant to board authority, FHN may repurchase shares of its common stock from time to time~~The finance and ~~will evaluate the level of capital and take action designed to generate or use capital, as appropriate, for the interests~~insurance component represented 13% of the ~~shareholders, subject~~C&I portfolio as of September 30, 2022 and 11% as of December 31, 2021, and includes TRUPs (i.e., long-term

unsecured loans to ~~legal~~bank 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 dateinsurance-related businesses), loans to ~~January 31, 2017,~~bank holding companies, and ~~on April 26, 2016, FHN announced a $150 million increase and further extension~~asset-based lending to ~~January 31, 2018. The program currently authorizes total purchases of up to $350 million and expires on January 31, 2018.~~consumer finance companies. As of September 30, ~~2017, $160.3 million~~2022, asset-based lending to consumer finance companies represented approximately $1.9 billion of the finance and insurance component.

Paycheck Protection Program

In 2020, Congress created the Paycheck Protection Program (PPP) in ~~purchases had been~~response to the economic disruption associated with the COVID-19 pandemic. Under the PPP, qualifying businesses could 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.

The C&I portfolio as of September 30, 2022 includes 924 loans made under ~~this authority at~~the PPP with an ~~average price per share~~aggregate principal balance of ~~$12.86, $12.84 excluding commissions. Purchases may~~$129 million, which are fully government guaranteed with the SBA. Due to the government guarantee and forgiveness provisions, PPP loans are considered to have no credit risk and do not affect the amount of provision and ALLL recorded. As a result, no ALLL is recorded for PPP loans as of September 30, 2022, and FHN has assigned a risk weight of zero to PPP loans for regulatory capital purposes.

For these loans, there are remaining net lender fees of less than $1 million to be ~~made in the open market or through privately negotiated transactions~~paid to FHN as of September 30, 2022. During 2022, FHN continues to work with its clients that have applied for 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 closingreceived PPP loan forgiveness. Through September 30, 2022, over $5 billion of the ~~CBF Bank acquisition.~~

~~The following tables provide information related to securities repurchased~~original $6 billion in PPP loans originated by FHN ~~during third quarter 2017:~~and

~~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~~3Q22 FORM 10-Q REPORT

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

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

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

~~2017~~

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

~~July 1 to July 31~~

Table of Contents

—

~~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~~

IBERIABANK prior to acquisition have been forgiven by the SBA.

~~Compensation Plan Program.~~ ~~A consolidated compensation plan share purchase program was announced on August 6, 2004. This program consolidated into a single share purchase program all~~

Commercial Real Estate

The CRE portfolio totaled $13.0 billion as of September 30, 2022 and $12.1 billion as of December 31, 2021. The CRE portfolio reflects financings for both commercial construction and nonconstruction loans. The largest geographical concentrations of CRE loan balances as of September 30, 2022 were in Florida (26%), Texas (12%),

North Carolina (11%), Georgia (10%), Louisiana (9%), and Tennessee (9%). No other state represented more than 5% of the ~~previously authorized compensation plan share programs as well as the renewal~~portfolio. This portfolio contains loans, draws on lines, and letters of ~~the authorization~~credit to purchase shares for use in connection with two compensation plans for which the share purchase authority had expired. The total amount authorized under this consolidated compensation plan share purchase program, inclusive of a program amendment on April 24, 2006, is 29.6 million shares calculated before adjusting for stock dividends distributed through January 1, 2011. The authorization has been reduced for that portion which relates to compensation plans for which no options remain outstanding. The shares may be purchased over the option exercise period of the various compensation plans on or before December 31, 2023. On September 30, 2017, the maximum number of shares that may be purchased under the program was 25.5 million shares. Purchases may be made in the 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.

~~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 Portfolio Composition~~

FHN groups its loans into portfolio segments based on internal classifications reflecting the manner in which the ALLL is established and how credit risk is measured, monitored, and reported. From time to time, and if conditions are such that certain subsegments are uniquely affected by economic or market conditions or are experiencing greater deterioration than other components of the loan portfolio, management may determine the ALLL at a more granular level. Commercial loans are composed of commercial, financial, and industrial (“C&I”) and commercial real estate ~~(“CRE”~~developers for the construction and mini-permanent financing of income-producing real estate. Subcategories of the CRE portfolio consist of multi-family (27%), office (22%), retail (18%), industrial (15%), hospitality (11%), land/land development (2%), and other (5%).

Consumer ~~loans are~~Loan Portfolios

Consumer Real Estate

The consumer real estate portfolio totaled $11.9 billion and $10.8 billion as of September 30, 2022 and December 31, 2021, respectively, and is primarily composed of home equity lines and installment loans. The largest geographical concentrations of balances as of September 30, 2022 were in Florida (30%), Tennessee (23%), Louisiana (9%), Texas (9%), North Carolina (7%), and New York (5%). No other state represented more than 5% of the portfolio.

As of September 30, 2022, approximately 88% of the consumer real ~~estate; permanent mortgage;~~estate portfolio was in a first lien position. At origination, the weighted average FICO score of this portfolio was 756 and the refreshed FICO scores averaged 754 as of September 30, 2022, no significant change from FICO scores of 755 and 754, respectively, as of December 31, 2021. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

As of September 30, 2022 and December 31, 2021, FHN had held-for-investment consumer mortgage loans secured by real estate that were in the process of foreclosure totaling $32 million and $20 million, respectively.

HELOCs comprised $2.0 billion of the consumer real estate portfolio as of both September 30, 2022 and December 31, 2021, respectively. 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 frozen if a borrower becomes past due on payments. Once the draw period has 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, 2022, approximately 91% of FHN's HELOCs were in the draw period compared to 88% at December 31, 2021. It is expected that $499 million, or 28%, of HELOCs currently in the draw period will enter the repayment period during the next 60 months, 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, over time, performance of these loans usually begins to stabilize. HELOCs nearing the end of the draw period are closely monitored.

The following table presents HELOCs currently in the draw period, broken down by months remaining in the draw period.

Table I.2.10

HELOC DRAW TO REPAYMENT SCHEDULE


	September 30, 2022				December 31, 2021
(Dollars in millions)	Repayment Amount		Percent		Repayment Amount		Percent
Months remaining in draw period:
0-12	$	36	2	%	$	43	2	%
13-24	41		2		42		2
25-36	100		6		50		3
37-48	125		7		136		8
49-60	197		11		160		9
>60	1,313		72		1,324		76
Total	$	1,812	100	%	$	1,755	100	%


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Credit Card and Other

The credit card and ~~other.~~other portfolio, which is primarily within the Regional Banking segment, totaled $849 million as of September 30, 2022 and $910 million as of December 31, 2021. This portfolio primarily consists of

consumer-related credits, including home equity and other personal consumer loans, credit card receivables, and automobile loans. The $61 million decrease was driven by net repayments.

Allowance for Credit Losses

The ACL is maintained at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information regarding the ACL, see Note 4 of this Report and "Critical Accounting Policies and Estimates" and Note 5 in FHN's 2021 Form 10-K, as amended.

The ALLL decreased to $664 million as of September 30, 2022 from $670 million as of December 31, 2021. The ALLL balance as of September 30, 2022 reflects the impact of

loan growth, deterioration in the macroeconomic forecast and a preliminary estimate of potential losses related to Hurricane Ian. The ALLL to total loans and leases ratio decreased 6 basis points to 1.16%. The ACL to total loans and leases ratio decreased to 1.31% as of September 30, 2022 from 1.34% as of December 31, 2021.

Consolidated Net Charge-offs

Net charge-offs in third quarter 2022 were $12 million, or an annualized 8 basis points of total loans and leases, compared to net charge-offs of $3 million, or 2 basis points of total loans and leases, in third quarter 2021.

Net charge-offs in the commercial portfolio in third quarter 2022 were $12 million compared to $4 million in

third quarter 2021, primarily the result of lower gross recoveries compared to the prior year. Net charge-offs in the consumer portfolio were less than $1 million in third quarter 2022 compared to net recoveries of $1 million in third quarter 2021.

Table I.2.11

ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS


(Dollars in millions)		September 30, 2022		December 31, 2021		September 30, 2021
Allowance for loan and lease losses
	C&I	$	295	$	334	$	374
	CRE	148		154		162
	Consumer real estate	193		163		179
	Credit card and other	28		19		19
	Total allowance for loan and lease losses	$	664	$	670	$	734


Reserve for remaining unfunded commitments
	C&I	$	58	$	46	$	49
	CRE	19		12		10
	Consumer real estate	11		8		9
	Credit card and other	—		—		—
	Total reserve for remaining unfunded commitments	$	88	$	66	$	68

Allowance for credit losses
	C&I	$	353	$	380	$	423
	CRE	167		166		172
	Consumer real estate	204		171		188
	Credit card and other	28		19		19
	Total allowance for credit losses	$	752	$	736	$	802

Period-end loans and leases
	C&I	$	31,620	$	31,068	$	31,516
	CRE	13,021		12,109		12,194


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	Consumer real estate	11,864			10,772			10,787
	Credit card and other	849			910			938
	Total period-end loans and leases	$	57,354		$	54,859		$	55,435

ALLL / loans and leases %
	C&I	0.93		%	1.07		%	1.19		%
	CRE	1.14			1.27			1.33
	Consumer real estate	1.63			1.51			1.65
	Credit card and other	3.32			2.14			2.03
	Total ALLL / loans and leases %	1.16		%	1.22		%	1.32		%

ACL / loans and leases %
	C&I	1.11		%	1.22		%	1.34		%
	CRE	1.28			1.37			1.41
	Consumer real estate	1.72			1.59			1.74
	Credit card and other	3.32			2.09			2.04
	Total ACL / loans and leases %	1.31		%	1.34		%	1.45		%

Quarter-to-date net charge-offs (recoveries)
	C&I	$	11		$	1		$	4
	CRE	1			—			—
	Consumer real estate	(5)			(3)			(6)
	Credit card and other	5			3			5
	Total net charge-offs (recoveries)	$	12		$	1		$	3

Average loans and leases
	C&I	$	31,120		$	30,780		$	31,477
	CRE	12,926			12,221			12,264
	Consumer real estate	11,633			10,738			10,819
	Credit card and other	864			943			948
	Total average loans and leases	$	56,543		$	54,682		$	55,508

Charge-off % (annualized)
	C&I	0.14		%	0.01		%	0.06		%
	CRE	0.01			(0.01)			0.01
	Consumer real estate	(0.17)			(0.10)			(0.24)
	Credit card and other	2.46			1.26			1.86
	Total charge-off %	0.08		%	0.01		%	0.02		%

ALLL / annualized net charge-offs
	C&I	676		%	7,238		%	2,169		%
	CRE	6,931			NM			11,982
	Consumer real estate	NM			NM			NM
	Credit card and other	133			164			104
	Total ALLL / net charge-offs	1,428		%	17,374		%	6,855		%

NM - not meaningful


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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 a case-by-case basis) if FHN ~~has a concentration of~~continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans for which FHN continues to receive payments, including residential real estate loans ~~(24 percent~~where the borrower has been discharged of ~~total loans), the majority~~personal obligation through bankruptcy. NPAs consist of ~~which is~~nonperforming loans and OREO (excluding OREO from government insured mortgages).

Total NPAs (including NPLs HFS) increased to $301 million as of September 30, 2022 from $285 million as of December 31, 2021, largely driven by higher nonaccrual loans in the consumer real estate ~~portfolio (22 percent of total loans). Industry concentrations are discussed under the heading C&I below.~~

~~Consolidated key asset quality metrics for each of these portfolios can be found in Table 17 – Asset Quality by Portfolio. Credit underwriting guidelines are outlined in Exhibit 13~~portfolio. The nonperforming loans and leases ratio increased one basis point to FHN’s Annual Report on Form 10-K for the year ended December 31, 2016, in the Loan Portfolio Composition discussion in the Asset Quality Section beginning on page 26 and continuing to page 46. FHN’s credit underwriting guidelines and loan product offerings0.51% as of September 30, ~~2017,~~2022.

Certain nonperforming loans in both the commercial and consumer portfolios are ~~generally consistent with those reported~~deemed collateral-dependent and ~~disclosed in~~are charged down to an estimate of collateral value less costs to sell. Because the ~~Company’s Form 10-K for the year ended~~estimated loss has been recognized through a partial charge-off, typically an ALLL is not recorded.

Table I.2.12

NONACCRUAL/NONPERFORMING LOANS, FORECLOSED ASSETS, & OTHER DISCLOSURES


(Dollars in millions)










Nonperforming loans and leases		September 30, 2022			December 31, 2021
	C&I	$	116		$	125
	CRE	10			9
	Consumer real estate	163			138
	Credit card and other	3			3
	Total nonperforming loans and leases (a)	$	292		$	275

Nonperforming loans held for sale (a)		$	6		$	7
Foreclosed real estate and other assets (b)		3			3
	Total nonperforming assets (a) (b)	$	301		$	285

Nonperforming loans and leases to total loans and leases
	C&I	0.37		%	0.40		%
	CRE	0.08			0.08
	Consumer real estate	1.37			1.29
	Credit card and other	0.31			0.31
	Total NPL %	0.51		%	0.50		%

ALLL / NPLs
	C&I	253		%	268		%
	CRE	1,422			1,671
	Consumer real estate	119			118
	Credit card and other	1,070			699
	Total ALLL / NPLs	228		%	244		%

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

(b)Balances do not include government-insured foreclosed real estate. Foreclosed real estate from GNMA loans totaled $1 million as of both September 30, 2022 and December 31, ~~2016.~~2021.

~~COMMERCIAL LOAN PORTFOLIOS~~

~~C&I~~

The C&I portfolio was $12.8 billion on September 30, 2017, and is comprised of loans used for general business purposes and primarily composed of relationship customers in Tennessee and other selected markets. Typical products include working capital lines of credit, term loan financing of owner-occupied real estate and fixed assets, and trade credit enhancement through letters of credit.


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The following table provides nonperforming assets by business segment:

Table I.2.13

NONPERFORMING ASSETS BY SEGMENT



(Dollars in millions)
Nonperforming loans and leases (a) (b)		September 30, 2022			December 31, 2021
	Regional Banking	$	204		$	163
	Specialty Banking	56			78
	Corporate	32			34
	Consolidated	$	292		$	275
Foreclosed real estate (c)
	Regional Banking	$	—		$	2
	Specialty Banking	2			—
	Corporate	1			1
	Consolidated	$	3		$	3
Nonperforming Assets (a) (b) (c)
	Regional Banking	$	204		$	165
	Specialty Banking	58			78
	Corporate	33			35
	Consolidated	$	295		$	278
Nonperforming loans and leases to loans and leases
	Regional Banking	0.50		%	0.43		%
	Specialty Banking	0.34			0.48
	Corporate	6.19			5.39
	Consolidated	0.51		%	0.50		%
NPA % (d)
	Regional Banking	0.50		%	0.44		%
	Specialty Banking	0.36			0.48
	Corporate	6.48			5.51
	Consolidated	0.51		%	0.51		%

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

(b)Excludes loans classified as held for sale.

(c)Excludes foreclosed real estate and receivables related to government insured mortgages of $1 million as of both September 30, 2022 and December 31, 2021.

(d)Ratio is non-performing assets to total loans and leases plus foreclosed real estate.

Past Due Loans and Potential Problem Assets

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 addition to PPP loans, other customer support initiatives in response to the ~~composition of~~COVID-19 pandemic include incremental lending assistance for borrowers through delayed payment programs and fee waivers. Customer deferrals were not material at September 30, 2022 and December 31, 2021. To the ~~C&I portfolio by industry~~extent that loans were past due as of September 30, ~~2017,~~2022 or December 31, 2021 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.

Loans 90 days or more past due and still accruing were $24 million as of September 30, 2022 compared to $40 million as of December 31, 2021. Loans 30 to 89 days past due were $108 million as of both September 30, 2022 and December 31, ~~2016.~~ 2021. C&I loans past due 30 to 89 days increased $12 million while past due CRE loans decreased $8 million and past due consumer real estate loans decreased $6 million.


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Table I.2.14

ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES


(Dollars in millions)
Accruing loans and leases 30+ days past due		September 30, 2022			December 31, 2021
	C&I	$	66		$	58
	CRE	5			13
	Consumer real estate	48			70
	Credit card and other	12			7
	Total accruing loans and leases 30+ days past due	$	131		$	148

Accruing loans and leases 30+ days past due %
	C&I	0.21		%	0.19		%
	CRE	0.04			0.11
	Consumer real estate	0.40			0.65
	Credit card and other	1.43			0.76
	Total accruing loans and leases 30+ days past due %	0.23		%	0.27		%






Accruing loans and leases 90+ days past due (a) (b) (c):

	C&I	$	1		$	5



	Consumer real Estate	17			33
	Credit card and other	6			2

	Total accruing loans and leases 90+ days past due	$	24		$	40



Loans held for sale
30 to 89 days past due		$	4		$	7
30 to 89 days past due - guaranteed portion (d)		2			2
90+ days past due		14			24
90+ days past due - guaranteed portion (d)		6			12

(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 Federal

banking regulators for loans classified as substandard. Potential problem assets in the loan portfolio were $540 million on September 30, 2022 and $597 million on December 31, 2021. The current expectation of losses from potential problem assets has been included in management’s analysis for assessing the adequacy of the allowance for loan and lease losses.

Troubled Debt Restructurings and Loan Modifications

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

separately. In a situation where an economic concession has been granted to a borrower that is experiencing financial difficulty, FHN identifies and reports that loan as a TDR.

For ~~purposes~~loan modifications 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


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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 3 – Loans and Leases for further discussion regarding TDRs and loan modifications.

On September 30, 2022 and December 31, 2021, FHN had $204 million and $206 million portfolio loans classified as held-for-investment TDRs, respectively. For these TDRs, including specific reserves, FHN had an allowance for loan

and lease losses of $13 million, or 7% of TDR balances as of September 30, 2022, and $12 million, or 6% of TDR balances, as of December 31, 2021. Additionally, FHN had $31 million and $35 million of HFS loans classified as TDRs as of September 30, 2022 and December 31, 2021, respectively.

The following table provides a summary of TDRs for the periods ended September 30, 2022 and December 31, 2021:

Table I.2.15

TROUBLED DEBT RESTRUCTURINGS


(Dollars in millions)	September 30, 2022		December 31, 2021
Held for investment:
Commercial loans:
Current	$	15	$	53
Delinquent	—		—
Non-accrual	40		35
Total commercial loans	$	55	$	88
Consumer real estate:
Current	$	76	$	60
Delinquent	9		4
Non-accrual (a)	64		53
Total consumer real estate	$	149	$	117
Credit card and other:
Current	$	—	$	1
Delinquent	—		—
Non-accrual	—		—
Total credit card and other	—		1





Total held for investment	$	204	$	206

Held for sale:
Current	$	24	$	27
Delinquent	6		7
Non-accrual	1		1
Total held for sale	31		35
Total troubled debt restructurings	$	235	$	241

(a) Balances as of September 30, 2022 and December 31, 2021 include $11 million and $12 million, respectively, of discharged bankruptcies.

Investment Securities

FHN’s investment securities portfolio consists principally of debt securities available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency issued mortgage-backed securities and collateralized mortgage obligations. 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 conditions that could affect the profitability of the portfolio, the regulatory environment, and the level of interest rate risk to which FHN is exposed. These evaluations may result in steps taken to adjust the overall balance sheet positioning.

Investment securities were $10.1 billion and $9.4 billion on September 30, 2022 and December 31, 2021, respectively, representing approximately 13% and 11% of total assets, respectively. See Note 2 - Investment


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Securities for more information about the securities portfolio.

Deposits

See Tables I.2.2 and I.2.3 - Average Balances, Net Interest Income and Yields/Rates in this ~~disclosure, industries are determined~~Report for information on average deposits including average rates paid. The following table summarizes the major components of deposits as of September 30, 2022 and December 31, 2021.

Table I.2.16

DEPOSITS


	September 30, 2022				December 31, 2021
(Dollars in millions)	Amount		Percent of total		Amount		Percent of total		Change		Percent
Savings	$	22,800	35	%	$	26,457	35	%	$	(3,657)	(14)	%
Time deposits	2,671		4		3,500		5		(829)		(24)
Other interest-bearing deposits	14,731		22		17,055		23		(2,324)		(14)

Total interest-bearing deposits	40,202		61		47,012		63		(6,810)		(14)
Noninterest-bearing deposits	25,813		39		27,883		37		(2,070)		(7)
Total deposits	$	66,015	100	%	$	74,895	100	%	$	(8,880)	(12)	%

Short-Term Borrowings

Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, trading liabilities, and other short-term borrowings. Total short-term borrowings were $1.8 billion and $2.6 billion as of September 30, 2022 and December 31, 2021, respectively.

Short-term borrowings balances fluctuate largely based on the ~~North American Industry Classification System (“NAICS”) industry codes used by~~level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies.

Trading liabilities fluctuate based on various factors, including levels of trading securities and hedging strategies. Federal ~~statistical agencies in classifying business establishments for~~funds purchased fluctuates depending on the ~~collection, analysis,~~amount of excess funding of FHN’s correspondent bank customers. Balances of securities sold under agreements to repurchase fluctuate based on cost attractiveness relative to FHLB borrowing levels and ~~publication of statistical data related~~the ability to ~~the U.S. business economy.~~pledge securities toward such transactions.

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

Term Borrowings

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 %

Term borrowings include senior and subordinated borrowings with original maturities greater than one year. Total term borrowings were $1.6 billion as of September 30, 2022 and December 31, 2021.


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~~(b)~~PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents			~~Industries in this category each comprise less than 5 percent for 2017.~~

Capital

~~Industry Concentrations~~

~~Loan concentrations~~Management’s objectives are ~~considered~~ to ~~exist for a financial institution when there are loans~~provide capital sufficient to ~~numerous borrowers engaged~~cover the risks inherent in ~~similar activities that would cause them~~FHN’s businesses, to ~~be similarly impacted by economic or other conditions. 37 percent of~~ ~~FHN’s C&I portfolio (Finance~~maintain excess capital to well-capitalized standards, and ~~insurance plus Loans~~ to ~~mortgage companies) could be affected by items that uniquely impact~~assure ready access to the ~~financial services industry. Except “Finance and Insurance” and “Loans to Mortgage Companies”, as discussed below, on~~capital markets. Total equity was $8.3 billion at September 30, ~~2017,~~2022 and $8.5 billion at December 31, 2021. Significant changes included net income of $642 million and the issuance of $494 million in Series G preferred stock, which were offset by $271

million in common and preferred dividends and a decrease in AOCI of $1.1 billion.

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 well as certain selected capital ratios:

Table I.2.17

REGULATORY CAPITAL DATA


(Dollars in millions)	September 30, 2022		December 31, 2021
Shareholders’ equity	$	7,988	$	8,199
Modified CECL transitional amount (a)	85		114
FHN non-cumulative perpetual preferred stock	(1,014)		(520)
Common equity tier 1 before regulatory adjustments	$	7,059	$	7,793
Regulatory adjustments:
Disallowed goodwill and other intangibles	(1,669)		(1,711)
Net unrealized (gains) losses on securities available for sale	1,039		36
Net unrealized (gains) losses on pension and other postretirement plans	249		255
Net unrealized (gains) losses on cash flow hedges	139		(3)
Disallowed deferred tax assets	—		(2)
Other deductions from common equity tier 1	(1)		(1)
Common equity tier 1	$	6,816	$	6,367
FHN non-cumulative perpetual preferred stock (b)	920		426
Qualifying noncontrolling interest— First Horizon Bank preferred stock	295		295

Tier 1 capital	$	8,031	$	7,088
Tier 2 capital	956		830
Total regulatory capital	$	8,987	$	7,918
Risk-Weighted Assets
First Horizon Corporation	$	68,580	$	64,183
First Horizon Bank	68,065		63,601
Average Assets for Leverage
First Horizon Corporation	82,059		87,683
First Horizon Bank	81,368		86,953


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Table I.2.18

REGULATORY RATIOS & AMOUNTS


	September 30, 2022				December 31, 2021
	Ratio		Amount		Ratio		Amount
Common Equity Tier 1
First Horizon Corporation	9.94	%	$	6,816	9.92	%	$	6,367
First Horizon Bank	10.55		7,182		10.75		6,838
Tier 1
First Horizon Corporation	11.71		8,031		11.04		7,088
First Horizon Bank	10.98		7,477		11.22		7,133
Total
First Horizon Corporation	13.10		8,987		12.34		7,918
First Horizon Bank	12.18		8,289		12.41		7,893
Tier 1 Leverage
First Horizon Corporation	9.79		8,031		8.08		7,088
First Horizon Bank	9.19		7,477		8.20		7,133
Other Capital Ratios
Total period-end equity to period-end assets	10.32				9.53
Tangible common equity to tangible assets (c)	6.64				6.73
Adjusted tangible common equity to risk-weighted assets (c)	9.12				9.20

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 ~~did not have any other concentrations~~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 ~~C&I loans~~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 September 30, 2022, 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 ~~any single industry~~2020 to delay the effects of ~~10 percent or more~~CECL on regulatory capital for two years, followed by a three-year transition period.

For FHN, the Tier 1 and Total risk-based regulatory capital ratios increased in third quarter 2022 relative to year-end 2021 primarily from the impact of ~~total loans.~~net income less dividends during the first nine months of 2022. FHN's Tier 1 Capital and Tier 1 Leverage ratios as of September 30, 2022 further benefited from the issuance of its Series G preferred stock in February 2022. FHN and First Horizon Bank's risk-based regulatory capital ratios were negatively impacted in 2022 from an increase in risk-weighted assets from December 31, 2021.

During 2022, capital ratios are expected to remain above well-capitalized standards plus the required capital conservation buffer.

Finance and Insurance

The finance and insurance component ~~represents 22 percent~~represented 13% of the C&I portfolio as of September 30, 2022 and 11% as of December 31, 2021, and includes ~~TRUPS~~TRUPs (i.e., long-term

unsecured loans to bank and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of September 30, ~~2017,~~2022, asset-based lending to consumer finance companies ~~represents~~represented approximately ~~$1.2~~$1.9 billion of the finance and insurance component.

~~TRUPS lending was originally extended as a form of “bridge” financing~~Paycheck Protection Program

In 2020, Congress created the Paycheck Protection Program (PPP) in response to ~~participants in~~ the pooled trust preferred securitization program offered primarily to smaller banking (generally less than $15 billion in total assets) and insurance institutions through FHN’s fixed income business. Origination of TRUPS lending ceased in early 2008. Individual TRUPS are re-graded at least quarterly as part of FHN’s commercial loan review process. The terms of these loans generally include a scheduled 30 year balloon payoff and include an option to defer interest for up to 20 consecutive quarters. As of September 30, 2017, and December 31, 2016, one TRUP relationship was on interest deferral.

~~As of September 30, 2017, the unpaid principal balance (“UPB”) of trust preferred loans totaled $332.9 million ($206.6 million of bank TRUPS and $126.3 million of insurance TRUPS)~~economic disruption associated with the ~~UPB~~COVID-19 pandemic. Under the PPP, qualifying businesses could 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 ~~other bank-related loans totaling $345.8 million. Inclusive~~the funds and maintenance of ~~a valuation allowance on TRUPS of $25.5 million, total reserves (ALLL plus~~employment levels. To the ~~valuation allowance) for TRUPS and other bank-related loans were $26.8 million or 4 percent of outstanding UPB.~~extent forgiven, the borrower is relieved from payment while the lender is still paid from the program.

~~Loans to Mortgage Companies~~

The ~~balance of loans to mortgage companies was 15 percent of the~~ C&I portfolio as of September 30, ~~2017, 17 percent~~2022 includes 924 loans made under the PPP with an aggregate principal balance of $129 million, which are fully government guaranteed with the SBA. Due to the government guarantee and forgiveness provisions, PPP loans are considered to have no credit risk and do not affect the amount of provision and ALLL recorded. As a result, no ALLL is recorded for PPP loans as of September 30, 2022, and FHN has assigned a risk weight of zero to PPP loans for regulatory capital purposes.

For these loans, there are remaining net lender fees of less than $1 million to be paid to FHN as of September 30, 2022. During 2022, FHN continues to work with its clients that have applied for and received PPP loan forgiveness. Through September 30, 2022, over $5 billion of the ~~C&I~~original $6 billion in PPP loans originated by FHN and


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IBERIABANK prior to acquisition have been forgiven by the SBA.

Commercial Real Estate

The CRE portfolio totaled $13.0 billion as of September 30, 2022 and $12.1 billion as of December 31, 2016, and 20 percent of the C&I portfolio as of September 30, 2016, and includes balances related to both home purchase and refinance activity. This portfolio class, which generally fluctuates with mortgage rates and seasonal factors, includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Generally, lending to mortgage lenders increases when there is a decline in mortgage rates and decreases when rates rise.

~~C&I Asset Quality Trends~~

Overall, the 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&I loans as of September 30, 2017. The 30+ delinquency ratio increased 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.

~~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 7.83 x              NM 7.97 x

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

Nonperforming loans 15,828
3,097
18,925

Troubled debt restructurings 16,336
—
16,336

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

Allowance / loans % 0.78
0.32
0.77

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

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

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

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

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

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

Nonperforming loans 28,619
4,117
32,736

Troubled debt restructurings 34,334
—
34,334

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

Allowance / loans % 0.75
0.33
0.74

~~NM—Not meaningful~~

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


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

~~Commercial Real Estate~~

2021. The CRE portfolio ~~was $2.3 billion on September 30, 2017. The CRE portfolio includes both~~reflects financings for both commercial construction and nonconstruction loans. The largest geographical concentrations of CRE loan balances as of September 30, 2022 were in Florida (26%), Texas (12%),

North Carolina (11%), Georgia (10%), Louisiana (9%), and Tennessee (9%). No other state represented more than 5% of the portfolio. This ~~portfolio is segregated between the income-producing CRE class which~~portfolio contains loans, draws on lines, and letters of credit to commercial real estate developers for the construction and ~~mini-permanent~~mini-permanent financing of income-producing real ~~estate, and the residential CRE class.~~estate. Subcategories of ~~income~~the CRE portfolio consist of multi-family ~~(31 percent)~~(27%), office (22%), retail ~~(22 percent)~~(18%), ~~office (18 percent)~~industrial (15%), hospitality ~~(12 percent), industrial (12 percent)~~(11%), land/land development ~~(1 percent)~~(2%), and other ~~(4 percent)~~(5%).

Consumer Loan Portfolios

Consumer Real Estate

The ~~residential CRE class includes loans to residential builders~~consumer real estate portfolio totaled $11.9 billion 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~~$10.8 billion as of September 30, ~~2017, with nonperforming loans down $1.1 million from~~2022 and 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)~~	~~30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.~~

~~CONSUMER LOAN PORTFOLIOS~~

~~Consumer Real Estate~~

~~The consumer real estate portfolio was $4.4 billion on September 30, 2017,~~2021, respectively, and is ~~primarily~~primarily composed of home equity lines and installment ~~loans including restricted balances (loans consolidated under ASC 810).~~loans. The largest geographical ~~concentrations~~concentrations of balances as of September 30, ~~2017, are~~2022 were in Florida (30%), Tennessee ~~(72 percent)~~(23%), ~~California (4 percent)~~Louisiana (9%), Texas (9%), North Carolina (7%), and ~~North Carolina (4 percent) with no~~New York (5%). No other state ~~representing~~represented more than ~~3 percent~~5% of the portfolio.

As of September 30, ~~2017,~~2022, approximately ~~74 percent~~88% of the consumer real estate portfolio was in a first lien position. At origination, the weighted average FICO score of this portfolio was ~~751~~756 and the refreshed FICO scores averaged ~~749~~754 as of September 30, ~~2017, as compared to 750~~2022, no significant change from FICO scores of 755 and ~~747,~~754, respectively, as of December 31, ~~2016.~~2021. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

~~Home equity lines~~As of ~~credit (“HELOCs”) comprise $1.5~~September 30, 2022 and December 31, 2021, FHN had held-for-investment consumer mortgage loans secured by real estate that were in the process of foreclosure totaling $32 million and $20 million, respectively.

HELOCs comprised $2.0 billion of the consumer real estate portfolio as of both September 30, ~~2017.~~2022 and December 31, 2021, respectively. 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 percent~~2022, approximately 91% of FHN's HELOCs ~~are~~were in the draw period compared to ~~approximately 62 percent as of~~88% at December 31, ~~2016. Based on when draw periods are scheduled to end per the line agreement, it~~2021. It is expected that ~~$362.6~~$499 million, or ~~42 percent~~28%, of HELOCs currently in the draw period will enter the repayment period during the next 60 ~~months. Delinquencies and charge-off rates~~months, 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 portfolio are being monitored closely for those~~HELOCs nearing the end of the draw ~~period and borrowers~~period 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.~~ closely monitored.

The following table ~~shows the~~presents HELOCs currently in the draw period, ~~and expected timing of conversion to~~broken down by months remaining in the ~~repayment~~draw period.

Table ~~13—HELOC Draw To Repayment Schedule~~I.2.10

HELOC DRAW TO REPAYMENT SCHEDULE


	September 30, 2022				December 31, 2021
(Dollars in millions)	Repayment Amount		Percent		Repayment Amount		Percent
Months remaining in draw period:
0-12	$	36	2	%	$	43	2	%
13-24	41		2		42		2
25-36	100		6		50		3
37-48	125		7		136		8
49-60	197		11		160		9
>60	1,313		72		1,324		76
Total	$	1,812	100	%	$	1,755	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 %

C~~onsumer 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 11.04 x              NM              NM

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

Nonperforming loans 22,707
54,138
76,845

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

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

Allowance / loans % 0.46
3.66
0.94

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

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

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

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

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

Nonperforming loans 18,865
63,947
82,812

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

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

Allowance / loans % 0.52
3.56
1.11

~~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.~~89			3Q22 FORM 10-Q REPORT

~~Permanent Mortgage~~

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

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

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

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

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

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

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

~~NM—Not meaningful~~

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


~~(a)~~PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
~~An allowance has not been established for these loans as the valuation adjustment taken upon exercise~~ Table of ~~clean-up calls included expected losses.~~Contents


~~(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 isis primarily within the ~~regional banking~~Regional Banking segment, ~~was $.4 billion as of September 30, 2017, and primarily includes credit card receivables, other consumer-related credits, and automobile loans. The allowance decreased to $10.3~~totaled $849 million as of September 30, ~~2017, from $12.2~~2022 and $910 million as of December 31, ~~2016. Loans 30 days or more delinquent~~2021. This portfolio primarily consists of

consumer-related credits, including home equity and ~~accruing as a percentage of~~other personal consumer loans, ~~decreased 28 basis points 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 receivables, and ~~other portfolio, compared to $2.7~~automobile loans. The $61 million ~~in third quarter 2016. The following table shows credit card and other asset quality trends~~decrease was driven by ~~segment.~~net repayments.

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

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

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

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

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

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

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

Nonperforming loans —
126
126

Troubled debt restructurings 500
44
544

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

Allowance / loans % 2.99
0.69
2.95

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

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

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

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

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

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

Nonperforming loans —
142
142

Troubled debt restructurings 274
32
306

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

Allowance / loans % 3.42
2.26
3.39

~~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 7.97 x
             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
17.56 x
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 1.04 x 1.04 x

~~NM – Not meaningful~~

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


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

Allowance for ~~Loan~~Credit Losses

~~Management’s policy~~

The ACL is ~~to maintain the ALLL~~maintained at a level sufficient to provide appropriate reserves to absorb estimated ~~probable incurred~~future credit losses in accordance with GAAP. For additional information regarding the ~~loan portfolio.~~ ACL, see Note 4 of this Report and "Critical Accounting Policies and Estimates" and Note 5 in FHN's 2021 Form 10-K, as amended.

The ~~total allowance for loan losses~~ALLL decreased to ~~$194.9~~$664 million ~~on September 30, 2017, from $202.1 million on December 31, 2016. The ALLL~~ as of September 30, ~~2017,~~2022 from $670 million as of December 31, 2021. The ALLL balance as of September 30, 2022 reflects ~~strong asset quality with~~ the ~~consumer real estate portfolio continuing~~impact of

loan growth, deterioration in the macroeconomic forecast and a preliminary estimate of potential losses related to ~~stabilize, historically low levels of net charge-offs, and declining non-strategic balances.~~Hurricane Ian. The ~~ratio of allowance for loan losses~~ALLL to total loans ~~net of unearned income,~~and leases ratio decreased 6 basis points to 1.16%. The ACL to total loans and leases ratio decreased to ~~.97 percent on~~1.31% as of September 30, ~~2017,~~2022 from ~~1.03 percent on~~1.34% as of December 31, ~~2016.~~2021.

The provision for loan losses is the charge to or release of earnings necessary to maintain the ALLL at a sufficient level reflecting management’s estimate of probable incurred losses in the loan portfolio. There was no provision expense recorded

Consolidated Net Charge-offs

Net charge-offs in third quarter ~~2017~~2022 were $12 million, or an annualized 8 basis points of total loans and leases, compared to ~~a provision expense~~net charge-offs of ~~$4.0~~$3 million, or 2 basis points of total loans and leases, in third quarter 2021.

Net charge-offs in the commercial portfolio in third quarter 2022 were $12 million compared to $4 million in

third quarter 2021, primarily the result of lower gross recoveries compared to the prior year. Net charge-offs in the consumer portfolio were less than $1 million in third quarter ~~2016.~~

FHN expects asset quality trends to remain relatively stable for the near term if the slow growth of the economy continues. The C&I portfolio is expected to continue to show stable trends but short-term variability (both positive and negative) is possible primarily due to the size of the credits within this portfolio. 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 should continue to steadily wind down. Asset quality metrics within non-strategic may become skewed as the portfolio continues to shrink. Continued stabilization in performance of the consumer real estate portfolio assumes an ongoing economic recovery as consumer delinquency and loss rates are correlated with life events that affect borrowers' finances, unemployment trends, and strength of the housing market.

~~Consolidated Net Charge-offs~~

~~Overall, net charge-offs continue to be at historical lows. Third quarter 2017 experienced net charge-offs of $2.4 million~~2022 compared to ~~$2.3 million~~net recoveries of ~~net charge-offs in third quarter 2016.~~

~~The commercial portfolio experienced $2.8 million of net charge-offs in third quarter 2017 compared to $.7~~$1 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.2021.

Table I.2.11

ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS


(Dollars in millions)		September 30, 2022		December 31, 2021		September 30, 2021
Allowance for loan and lease losses
	C&I	$	295	$	334	$	374
	CRE	148		154		162
	Consumer real estate	193		163		179
	Credit card and other	28		19		19
	Total allowance for loan and lease losses	$	664	$	670	$	734


Reserve for remaining unfunded commitments
	C&I	$	58	$	46	$	49
	CRE	19		12		10
	Consumer real estate	11		8		9
	Credit card and other	—		—		—
	Total reserve for remaining unfunded commitments	$	88	$	66	$	68

Allowance for credit losses
	C&I	$	353	$	380	$	423
	CRE	167		166		172
	Consumer real estate	204		171		188
	Credit card and other	28		19		19
	Total allowance for credit losses	$	752	$	736	$	802

Period-end loans and leases
	C&I	$	31,620	$	31,068	$	31,516
	CRE	13,021		12,109		12,194


			90			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents


	Consumer real estate	11,864			10,772			10,787
	Credit card and other	849			910			938
	Total period-end loans and leases	$	57,354		$	54,859		$	55,435

ALLL / loans and leases %
	C&I	0.93		%	1.07		%	1.19		%
	CRE	1.14			1.27			1.33
	Consumer real estate	1.63			1.51			1.65
	Credit card and other	3.32			2.14			2.03
	Total ALLL / loans and leases %	1.16		%	1.22		%	1.32		%

ACL / loans and leases %
	C&I	1.11		%	1.22		%	1.34		%
	CRE	1.28			1.37			1.41
	Consumer real estate	1.72			1.59			1.74
	Credit card and other	3.32			2.09			2.04
	Total ACL / loans and leases %	1.31		%	1.34		%	1.45		%

Quarter-to-date net charge-offs (recoveries)
	C&I	$	11		$	1		$	4
	CRE	1			—			—
	Consumer real estate	(5)			(3)			(6)
	Credit card and other	5			3			5
	Total net charge-offs (recoveries)	$	12		$	1		$	3

Average loans and leases
	C&I	$	31,120		$	30,780		$	31,477
	CRE	12,926			12,221			12,264
	Consumer real estate	11,633			10,738			10,819
	Credit card and other	864			943			948
	Total average loans and leases	$	56,543		$	54,682		$	55,508

Charge-off % (annualized)
	C&I	0.14		%	0.01		%	0.06		%
	CRE	0.01			(0.01)			0.01
	Consumer real estate	(0.17)			(0.10)			(0.24)
	Credit card and other	2.46			1.26			1.86
	Total charge-off %	0.08		%	0.01		%	0.02		%

ALLL / annualized net charge-offs
	C&I	676		%	7,238		%	2,169		%
	CRE	6,931			NM			11,982
	Consumer real estate	NM			NM			NM
	Credit card and other	133			164			104
	Total ALLL / net charge-offs	1,428		%	17,374		%	6,855		%

NM - not meaningful


			91			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

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 ~~basis~~basis) if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccruals are loans infor which 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 assets~~NPAs (including NPLs HFS) ~~decreased~~increased to ~~$140.2~~$301 million on September 30, 2017, from $164.6 million on December 31, 2016. The nonperforming assets ratio (nonperforming assets excluding NPLs HFS to total period-end loans plus OREO and other assets) decreased to .66 percent as of September 30, ~~2017, compared to .80 percent~~2022 from $285 million as of 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~~2021, largely driven by ~~decreases within~~higher nonaccrual loans in the ~~C&I and~~ consumer real estate ~~portfolios. This decrease in the C&I portfolio was largely driven by payoffs.~~

portfolio. The nonperforming loans and leases ratio ~~of the ALLL~~increased one basis point to ~~NPLs in the loan portfolio was 1.56 times~~0.51% as of September 30, ~~2017, compared to 1.39 times as of December 31, 2016.~~ 2022.

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 are~~an ALLL is not recorded.

Table ~~18 provides an activity rollforward of OREO balances for September 30, 2017~~I.2.12

NONACCRUAL/NONPERFORMING LOANS, FORECLOSED ASSETS, & OTHER DISCLOSURES


(Dollars in millions)










Nonperforming loans and leases		September 30, 2022			December 31, 2021
	C&I	$	116		$	125
	CRE	10			9
	Consumer real estate	163			138
	Credit card and other	3			3
	Total nonperforming loans and leases (a)	$	292		$	275

Nonperforming loans held for sale (a)		$	6		$	7
Foreclosed real estate and other assets (b)		3			3
	Total nonperforming assets (a) (b)	$	301		$	285

Nonperforming loans and leases to total loans and leases
	C&I	0.37		%	0.40		%
	CRE	0.08			0.08
	Consumer real estate	1.37			1.29
	Credit card and other	0.31			0.31
	Total NPL %	0.51		%	0.50		%

ALLL / NPLs
	C&I	253		%	268		%
	CRE	1,422			1,671
	Consumer real estate	119			118
	Credit card and other	1,070			699
	Total ALLL / NPLs	228		%	244		%

(a)Excludes loans and ~~2016. The balance of OREO, exclusive of inventory~~leases that are 90 or more days past due and still accruing interest.

(b)Balances do not include government-insured foreclosed real estate. Foreclosed real estate from ~~government insured mortgages, decreased to $7.9~~GNMA loans totaled $1 million as of both September 30, ~~2017, from $13.7 million as of September 30, 2016, as FHN has executed sales of existing OREO~~2022 and ~~continued efforts to avoid foreclosures by~~December 31, 2021.

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

~~Table 18—Rollforward of OREO~~

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


~~(a)~~			~~Excludes OREO and receivables related to government insured mortgages of $6.5 million and $6.4 million as of September 30, 2017 and 2016, respectively.~~92			3Q22 FORM 10-Q REPORT


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

The following table provides ~~consolidated asset quality information~~nonperforming assets by business segment:

Table I.2.13

NONPERFORMING ASSETS BY SEGMENT



(Dollars in millions)
Nonperforming loans and leases (a) (b)		September 30, 2022			December 31, 2021
	Regional Banking	$	204		$	163
	Specialty Banking	56			78
	Corporate	32			34
	Consolidated	$	292		$	275
Foreclosed real estate (c)
	Regional Banking	$	—		$	2
	Specialty Banking	2			—
	Corporate	1			1
	Consolidated	$	3		$	3
Nonperforming Assets (a) (b) (c)
	Regional Banking	$	204		$	165
	Specialty Banking	58			78
	Corporate	33			35
	Consolidated	$	295		$	278
Nonperforming loans and leases to loans and leases
	Regional Banking	0.50		%	0.43		%
	Specialty Banking	0.34			0.48
	Corporate	6.19			5.39
	Consolidated	0.51		%	0.50		%
NPA % (d)
	Regional Banking	0.50		%	0.44		%
	Specialty Banking	0.36			0.48
	Corporate	6.48			5.51
	Consolidated	0.51		%	0.51		%

(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~~sale.

(c)Excludes foreclosed real estate and receivables related to government insured mortgages of $1 million as of both September 30, ~~2017 and 2016, and as of September 30, 2017,~~2022 and December 31, ~~2016:~~2021.

~~Table 19—Asset Quality Information~~(d)Ratio is non-performing assets to total loans and leases plus foreclosed real estate.

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) 20.55 x 22.51 x
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)~~	~~Ratio is total allowance divided by annualized net charge-offs.~~


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


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


~~(d)~~	~~Excludes OREO from government-insured mortgages.~~

As of September 30 As of December 31
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 1.56 x 1.39 x
NPA % (f) 0.66 % 0.80 %
NPL % 0.62 % 0.74 %


~~(a)~~	~~Includes past due loans.~~


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


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


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


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


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

Past Due Loans and Potential Problem Assets

Past due loans are loans ~~contractually~~contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. ~~Loans~~

In 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. Customer deferrals were not material at September 30, 2022 and December 31, 2021. To the extent that loans were past due as of September 30, 2022 or December 31, 2021 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 ~~portfolio that are~~table and discussion below.

Loans 90 days or more past due and still accruing were ~~$31.0~~$24 million onas of September 30, ~~2017,~~2022 compared to ~~$23.4~~$40 million onas of December 31, ~~2016. The increase was due in large part to one relationship, which is a purchased credit-impaired loan.~~2021. Loans 30 to 89 days past due ~~increased to $45.2~~were $108 million onas of both September 30, ~~2017, from $42.6 million on~~2022 and December 31, ~~2016.~~2021. C&I loans past due 30 to 89 days increased $12 million while past due CRE loans decreased $8 million and past due consumer real estate loans decreased $6 million.


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Table I.2.14

ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES


(Dollars in millions)
Accruing loans and leases 30+ days past due		September 30, 2022			December 31, 2021
	C&I	$	66		$	58
	CRE	5			13
	Consumer real estate	48			70
	Credit card and other	12			7
	Total accruing loans and leases 30+ days past due	$	131		$	148

Accruing loans and leases 30+ days past due %
	C&I	0.21		%	0.19		%
	CRE	0.04			0.11
	Consumer real estate	0.40			0.65
	Credit card and other	1.43			0.76
	Total accruing loans and leases 30+ days past due %	0.23		%	0.27		%






Accruing loans and leases 90+ days past due (a) (b) (c):

	C&I	$	1		$	5



	Consumer real Estate	17			33
	Credit card and other	6			2

	Total accruing loans and leases 90+ days past due	$	24		$	40



Loans held for sale
30 to 89 days past due		$	4		$	7
30 to 89 days past due - guaranteed portion (d)		2			2
90+ days past due		14			24
90+ days past due - guaranteed portion (d)		6			12

(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.

banking regulators for loans classified as substandard. Potential problem assets in the loan portfolio were ~~$280.4~~$540 million on September 30, ~~2017, $290.4~~2022 and $597 million on December 31, ~~2016, and $255.4 million on September 30, 2016. The decline from year-end in potential problem assets was due to a net decrease in classified commercial loans driven by the payoff of a few credits.~~2021. The current expectation of losses from potential problem assets has been included in management’s analysis for assessing the ~~adequacy~~adequacy of the allowance for loan and lease losses.

Troubled Debt ~~Restructuring~~Restructurings and Loan Modifications

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 met the TDR relief provisions outlined in either the CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has excluded these


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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 43 – Loans and Leases for further discussion regarding TDRs and loan modifications.

On September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, FHN had ~~$241.6~~$204 million and ~~$285.2~~$206 million portfolio loans classified as held-for-investment TDRs, respectively. For these TDRs, ~~in the loan portfolio,~~including specific reserves, FHN had an allowance for loan ~~loss reserves~~

and lease losses of ~~$38.6 million and $44.9~~$13 million, or ~~16 percent~~7% of TDR balances as of September 30, ~~2017~~2022, and $12 million, or 6% of TDR balances, as of December 31, ~~2016.~~2021. Additionally, FHN had ~~$63.2~~$31 million and ~~$69.3~~$35 million of HFS loans classified as TDRs as of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, 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, ~~2017~~2022 and December 31, ~~2016:~~2021:

Table ~~20—Troubled Debt Restructurings~~I.2.15

TROUBLED DEBT RESTRUCTURINGS


(Dollars in millions)	September 30, 2022		December 31, 2021
Held for investment:
Commercial loans:
Current	$	15	$	53
Delinquent	—		—
Non-accrual	40		35
Total commercial loans	$	55	$	88
Consumer real estate:
Current	$	76	$	60
Delinquent	9		4
Non-accrual (a)	64		53
Total consumer real estate	$	149	$	117
Credit card and other:
Current	$	—	$	1
Delinquent	—		—
Non-accrual	—		—
Total credit card and other	—		1





Total held for investment	$	204	$	206

Held for sale:
Current	$	24	$	27
Delinquent	6		7
Non-accrual	1		1
Total held for sale	31		35
Total troubled debt restructurings	$	235	$	241

(a) Balances as of September 30, 2022 and December 31, 2021 include $11 million and $12 million, respectively, of discharged bankruptcies.

Investment Securities

(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


~~(a)~~			~~Balances as of September 30, 2017 and December 31, 2016, include $5.5 million and $5.3 million, respectively, of discharged bankruptcies.~~95			3Q22 FORM 10-Q REPORT


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Table of Contents			~~Balances~~

Securities for more information about the securities portfolio.

Deposits

Table I.2.16

DEPOSITS


	September 30, 2022				December 31, 2021
(Dollars in millions)	Amount		Percent of total		Amount		Percent of total		Change		Percent
Savings	$	22,800	35	%	$	26,457	35	%	$	(3,657)	(14)	%
Time deposits	2,671		4		3,500		5		(829)		(24)
Other interest-bearing deposits	14,731		22		17,055		23		(2,324)		(14)

Total interest-bearing deposits	40,202		61		47,012		63		(6,810)		(14)
Noninterest-bearing deposits	25,813		39		27,883		37		(2,070)		(7)
Total deposits	$	66,015	100	%	$	74,895	100	%	$	(8,880)	(12)	%

Short-Term Borrowings

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.

Trading liabilities fluctuate based on various factors, including levels of trading securities and hedging 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 repurchase 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. Total term borrowings were $1.6 billion as of September 30, 2022 and December 31, 2021.


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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. Total equity was $8.3 billion at September 30, 2022 and $8.5 billion at December 31, 2021. Significant changes included net income of $642 million and the issuance of $494 million in Series G preferred stock, which were offset by $271

million in common and preferred dividends and a decrease in AOCI of $1.1 billion.

Table I.2.17

REGULATORY CAPITAL DATA


(Dollars in millions)	September 30, 2022		December 31, 2021
Shareholders’ equity	$	7,988	$	8,199
Modified CECL transitional amount (a)	85		114
FHN non-cumulative perpetual preferred stock	(1,014)		(520)
Common equity tier 1 before regulatory adjustments	$	7,059	$	7,793
Regulatory adjustments:
Disallowed goodwill and other intangibles	(1,669)		(1,711)
Net unrealized (gains) losses on securities available for sale	1,039		36
Net unrealized (gains) losses on pension and other postretirement plans	249		255
Net unrealized (gains) losses on cash flow hedges	139		(3)
Disallowed deferred tax assets	—		(2)
Other deductions from common equity tier 1	(1)		(1)
Common equity tier 1	$	6,816	$	6,367
FHN non-cumulative perpetual preferred stock (b)	920		426
Qualifying noncontrolling interest— First Horizon Bank preferred stock	295		295

Tier 1 capital	$	8,031	$	7,088
Tier 2 capital	956		830
Total regulatory capital	$	8,987	$	7,918
Risk-Weighted Assets
First Horizon Corporation	$	68,580	$	64,183
First Horizon Bank	68,065		63,601
Average Assets for Leverage
First Horizon Corporation	82,059		87,683
First Horizon Bank	81,368		86,953


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Table I.2.18

REGULATORY RATIOS & AMOUNTS


	September 30, 2022				December 31, 2021
	Ratio		Amount		Ratio		Amount
Common Equity Tier 1
First Horizon Corporation	9.94	%	$	6,816	9.92	%	$	6,367
First Horizon Bank	10.55		7,182		10.75		6,838
Tier 1
First Horizon Corporation	11.71		8,031		11.04		7,088
First Horizon Bank	10.98		7,477		11.22		7,133
Total
First Horizon Corporation	13.10		8,987		12.34		7,918
First Horizon Bank	12.18		8,289		12.41		7,893
Tier 1 Leverage
First Horizon Corporation	9.79		8,031		8.08		7,088
First Horizon Bank	9.19		7,477		8.20		7,133
Other Capital Ratios
Total period-end equity to period-end assets	10.32				9.53
Tangible common equity to tangible assets (c)	6.64				6.73
Adjusted tangible common equity to risk-weighted assets (c)	9.12				9.20

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 September 30, 2022, each of FHN and First Horizon Bank had sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer

For FHN, the Tier 1 and Total risk-based regulatory capital ratios increased in third quarter 2022 relative to year-end 2021 primarily from the impact of net income less dividends during the first nine months of 2022. FHN's Tier 1 Capital and Tier 1 Leverage ratios as of September 30, 2022 further benefited from the issuance of its Series G preferred stock in February 2022. FHN and First Horizon Bank's risk-based regulatory capital ratios were negatively impacted in 2022 from an increase in risk-weighted assets from December 31, 2021.

During 2022, capital ratios are expected to remain above well-capitalized standards plus the required capital conservation buffer.

Common Stock Purchase Programs

General Purchase Program

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 was to expire on January 31, 2023, replacing the 2018 program, which was terminated. On


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October 26, 2021, FHN announced that the 2021 program had been increased by $500 million and extended to October 31, 2023. Like the 2018 program, the 2021 program is not tied to any compensation plan. 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 September 30, 2022, $401 million in purchases had been made life-to-date under the 2021 program at an average price per share of $16.60, or $16.58 excluding commissions. At current price levels, which have been impacted by the Pending TD Merger since it was announced, management does not currently anticipate purchasing additional shares under this authority.

Table I.2.19

COMMON STOCK PURCHASES—GENERAL PROGRAM


(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
2022
July 1 to July 31	—	N/A	—	$	598,646
August 1 to August 31	—	N/A	—	598,646
September 1 to September 30 ~~2017 and December 31, 2016, include $14.9 million and $15.3 million, respectively,~~	—	N/A	—	598,646
Total	—	N/A	—

(a) Represents total costs including commissions paid.

Compensation Plans Purchase Program

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

The total amount authorized under this consolidated compensation plan share purchase program 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 stock option awards remain outstanding. The shares may be purchased over the option exercise periods 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 conditions and regulatory restrictions. As of September 30, 2022, the maximum number of shares that may be purchased under the program was 22.5 million shares. Management currently does not anticipate purchasing a material number of shares under this authority during 2022.

Table I.2.20

COMMON STOCK PURCHASES—COMPENSATION PLANS PROGRAM


(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
2022
July 1 to July 31	31	$	21.98	31	22,598
August 1 to August 31	71	22.07		71	22,527
September 1 to September 30	1	22.89		1	22,526
Total	103	$	22.05	103


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Table of ~~discharged bankruptcies.~~Contents

~~RISK MANAGEMENT~~Risk Management

~~Except as discussed below, there~~

There have been no significant changes to FHN’s risk management practices as described under “Risk Management” ~~beginning on page 47~~included in Item 7 of ~~Exhibit 13 to~~ FHN’s 2021 Annual Report on Form 10-K, ~~for the year ended December 31, 2016.~~as amended.

~~MARKET RISK MANAGEMENT~~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 percent~~99% confidence level ~~and~~with 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~~the trading securities portfolio.

A summary of FHN’s VaR and SVaR measures for 1-day and 10-day time horizons is ~~as follows:~~presented in the following table:

Table ~~21—~~I.2.21

VaR ~~and~~& SVaR ~~Measures~~MEASURES


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022						As of September 30, 2022
(Dollars in millions)	Mean		High		Low		Mean		High		Low
1-day
VaR	$	2	$	3	$	2	$	2	$	3	$	2	$	3
SVaR	5		6		4		5		7		4		5
10-day
VaR	9		10		8		7		11		3		10
SVaR	24		27		18		24		34		18		25

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021						As of September 30, 2021
(Dollars in millions)	Mean		High		Low		Mean		High		Low
1-day
VaR	$	1	$	1	$	1	$	2	$	4	$	1	$	1
SVaR	5		6		4		4		6		2		5
10-day
VaR	3		5		2		6		21		1		4
SVaR	19		24		14		17		24		11		21


	Year Ended December 31, 2021						As of December 31, 2021
(Dollars in millions)	Mean		High		Low
1-day
VaR	$	1	$	4	$	1	$	2
SVaR	4		7		2		5
10-day
VaR	5		21		1		5
SVaR	18		27		11		22


			100			3Q22 FORM 10-Q REPORT

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


PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
Table of Contents

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

Table ~~22—Schedule of Risks Included in~~I.2.22

SCHEDULE OF RISKS INCLUDED IN VaR


	As of September 30, 2022				As of September 30, 2021				As of December 31, 2021
(Dollars in millions)	1-day		10-day		1-day		10-day		1-day		10-day
Interest rate risk	$	1	$	3	$	1	$	3	$	1	$	1
Credit spread risk	1		1		—		1		1		1

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 division~~FHN 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 Income~~FHNF traders actively manage the trading securities

inventory continuously throughout each trading day. Accordingly, ~~FHN’s~~FHNF’s trading securities inventory is highly dynamic, rather than static. As a result, it would be rare for ~~Fixed Income~~FHNF to incur a negative revenue day in its fixed income activities ofat the ~~level~~levels indicated by its VaR ~~measurements.~~

measures.

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

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

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

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

Curve flattening - assumes an instantaneous flattening of the interest rate yield curve through an increase in short-term rates and a decrease in long-term rates. The 2-year point on the Treasury yield curve is assumed to

increase 15 basis points and the 10-year point on the Treasury yield curve is assumed to decrease 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

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

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

Model Validation

Trading risk management personnel within ~~Fixed Income~~FHN 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~~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.~~Management

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


TN					62-0803242
(State or other jurisdiction incorporation of organization)					(IRS Employer Identification No.)

TN165 Madison Avenue					~~62-0803242~~
~~(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)



Class						Outstanding on ~~September 30, 2017~~October 31, 2022
Common Stock, $.625 par value						~~234,230,515~~536,803,802



Glossary of Acronyms and Terms			1
Forward-Looking Statements			3
Non-GAAP Information			5

Part I. Financial Information			16
Item 1. Financial Statements			16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			7874
Item 3. Quantitative and Qualitative Disclosures about Market Risk			~~126~~111
Item 4. Controls and Procedures			~~126~~111

Part II. Other Information			~~127~~112
Item 1. Legal Proceedings			~~127~~112
Item 1A. Risk Factors			~~127~~112
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			~~127~~112
Item 3. Defaults Upon Senior Securities			~~127~~112
Item 4. Mine Safety Disclosures			~~127~~112
Item 5. Other Information			~~127~~112
Item 6. Exhibits			~~128~~113
~~Exhibit 10.1~~
~~Exhibit 10.2~~
~~Exhibit 31(a)~~
~~Exhibit 31(b)~~
~~Exhibit 32(a)~~
~~Exhibit 32(b)~~
~~Signatures~~			~~129~~


Consolidated ~~Condensed~~Balance Sheets (unaudited)		7

Consolidated Statements of Income (unaudited)		38

~~The~~ Consolidated ~~Condensed~~ Statements of Comprehensive Income (unaudited)		510

~~The~~ Consolidated ~~Condensed~~ Statements of Changes in Equity (unaudited)		611

~~The~~ Consolidated ~~Condensed~~ Statements of Cash Flows (unaudited)		713

~~The~~ Notes to the Consolidated ~~Condensed~~ Financial Statements (unaudited)		915
Note 1 ~~Financial Information~~Basis of Presentation and Accounting Policies		915

Note 2 Investment Securities		17
Note ~~2 Acquisitions~~3 Loans and ~~Divestitures~~Leases		1420
Note ~~3 Investment Securities~~4 Allowance for Credit Losses		1628
Note ~~4 Loans~~5 Mortgage Banking Activity		1931
Note ~~5 Allowance for Loan Losses~~6 Goodwill and Other Intangible Assets		3032

Note 7 Preferred Stock		33
~~Note 6 Intangible Assets~~		32
~~Note 7 Other Income and Other Expense~~	33
Note 8 Components of Other Comprehensive ~~Income/(loss)~~Income (Loss)	34
Note 9 Earnings Per Share		36
Note 10 Contingencies and Other Disclosures		37
Note 11 ~~Pension, Savings, and Other Employee Benefits~~Retirement Plans		4439
Note 12 Business Segment Information		4640
Note 13 Variable Interest Entities		4845
Note 14 Derivatives		5348
Note 15 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions		6055
Note 16 Fair Value of Assets &and Liabilities		6257



	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



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



~~The Consolidated Condensed Statements of Condition (unaudited)~~Signatures			115


ACL			Allowance for credit losses
AFS			Available for sale
AIR			Accrued interest receivable
ALCO			Asset/Liability Committee
ALLL			Allowance for loan and lease losses
ALM			Asset/liability management
AMERIBOR			American Interbank Offered Rate
AOCI			Accumulated other comprehensive income
ARRC			Alternative Reference Rates Committee
ASC			FASB Accounting Standards Codification
Associate			Person employed by FHN
ASU			Accounting Standards Update
Bank			First Horizon Bank
BOLI			Bank-owned life insurance
BSBY			Bloomberg short-term bank yield index
C&I			Commercial, financial, and industrial loan portfolio
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
CBF			Capital Bank Financial
CECL			Current expected credit loss
CEO			Chief Executive Officer
CMO			Collateralized mortgage obligations
Company			First Horizon Corporation
Corporation			First Horizon Corporation
CRE			Commercial Real Estate loan portfolio
CRMC			Credit Risk Management Committee
DTA			Deferred tax asset
DTL			Deferred tax liability
EPS			Earnings per share
Fannie Mae			Federal National Mortgage Association
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Federal Reserve Board
FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank
FHN			First Horizon Corporation
FHNF			FHN Financial; FHN's fixed income division
FICO			Fair Isaac Corporation
First Horizon			First Horizon Corporation


FRB			Federal Reserve Bank or the Federal Reserve Board
Freddie Mac			Federal Home Loan Mortgage Corporation
FTE			Fully taxable equivalent
FTRESC			FT Real Estate Securities Company, Inc.
GAAP			Generally accepted accounting principles (U.S.)
GNMA			Government National Mortgage Association or Ginnie Mae
GSE			Government sponsored enterprises, in this report references Fannie Mae and Freddie Mac
HELOC			Home equity line of credit
HFS			Held for Sale
HTM			Held to maturity
IBKC			IBERIABANK Corporation
IBKC merger			FHN's merger of equals with IBKC that closed July 2020
ISDA			International Swap and Derivatives Association
IRS			Internal Revenue Service
LGD			Loss given default
LIBOR			London Inter-Bank Offered Rate
LIHTC			Low Income Housing Tax Credit
LLC			Limited Liability Company
LMC			Loans to mortgage companies
LOCOM			Lower of cost or market
LRRD			Loan Rehab and Recovery Department
LTV			Loan-to-value
MBS			Mortgage-backed securities
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAICS			North American Industry Classification System
NII			Net interest income
NM			Not meaningful
NMTC			New Market Tax Credit
NPA			Nonperforming asset
Non-PCD			Non-Purchased Credit Deteriorated Financial Assets
NPL			Nonperforming loan
OREO			Other Real Estate Owned
PCAOB			Public Company Accounting Oversight Board


PCD			Purchased credit deteriorated financial assets
PCI			Purchased credit impaired
PD			Probability of default
PM			Portfolio managers
PPP			Paycheck Protection Program
PSU			Performance Stock Unit
RE			Real estate
RM			Relationship managers
ROA			Return on assets
RPL			Reasonably Possible Loss
SBA			Small Business Administration
SEC			Securities and Exchange Commission
SOFR			Secure Overnight Funding Rate
SVaR			Stressed Value-at-Risk
TD			The Toronto-Dominion Bank
TDBNA			TD Bank, N.A.
TD-US			TD Bank US Holding Company
TD Merger Agreement			Merger agreement between FHN, TD, TD-US, and a TD-US subsidiary
Pending TD Merger			The merger transactions contemplated by the TD Merger Agreement
TDR			Troubled Debt Restructuring
TRUP			Trust preferred loan
UPB			Unpaid principal balance
USDA			United States Department of Agriculture
VaR			Value-at-Risk
VIE			Variable Interest Entities
we / us / our			First Horizon Corporation


FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION
Table of Contents



	First Horizon National Corporation
	(Unaudited)			December 31
	September 30			December 31
(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



	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



	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		)


GLOSSARY OF ACRONYMS & TERMS
Table of Contents


GLOSSARY OF ACRONYMS & TERMS
Table of Contents



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



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

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



	Held-to-Maturity				Available-for-Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	—	$	—
After 1 year; within 5 years	—		—		100		120
After 5 years; within 10 years	10,000		9,985		—		1,464
After 10 years	—		—		—		1,639
Subtotal	10,000		9,985		100		3,223
Government agency issued MBS and CMO (a)	—		—		3,783,144		3,773,500
Equity and other	—		—		186,413		186,415
Total	$	10,000	$	9,985	$	3,969,657	$	3,963,138



	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		)



	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	)


~~(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.19			3Q22 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents			NOTE 3—LOANS & LEASES


LOANS AND LEASES BY PORTFOLIO SEGMENT
(Dollars in millions)	September 30, 2022		December 31, 2021
Commercial:
Commercial and industrial (a) (b)	$	28,910	$	26,550
Loans to mortgage companies	2,710		4,518
Total commercial, financial, and industrial	31,620		31,068
Commercial real estate	13,021		12,109
Consumer:
HELOC	1,977		1,964
Real estate installment loans	9,887		8,808
Total consumer real estate	11,864		10,772
Credit card and other	849		910
Loans and leases	$	57,354	$	54,859
Allowance for loan and lease losses	(664)		(670)
Net loans and leases	$	56,690	$	54,189


~~(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.~~


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



	Three Months Ended September 30								Nine months ended September 30
	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


C&I PORTFOLIO
	September 30, 2022

(Dollars in millions)	2022		2021		2020		2019		2018		Prior to 2018		LMC (a)		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (b)	$	4,518	$	4,415	$	2,051	$	2,357	$	1,300	$	3,947	$	2,710	$	9,006	$	399	$	30,703












Special Mention (PD grade 13)	29		24		11		73		9		68		—		96		3		313
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	36		32		71		34		78		130		—		126		97		604







Total C&I loans	$	4,583	$	4,471	$	2,133	$	2,464	$	1,387	$	4,145	$	2,710	$	9,228	$	499	$	31,620


CRE PORTFOLIO
	September 30, 2022

(Dollars in millions)	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving Loans Converted to Term Loans		Total

Credit Quality Indicator:
Pass (PD grades 1 through 12)	$	2,099	$	3,260	$	1,547	$	1,969	$	881	$	2,687	$	251	$	20	$	12,714
Special Mention (PD grade 13)	1		1		2		45		98		9		—		—		156
Substandard, Doubtful, or Loss (PD grades 14,15, and 16)	—		3		12		62		26		36		12		—		151







Total CRE loans	$	2,100	$	3,264	$	1,561	$	2,076	$	1,005	$	2,732	$	263	$	20	$	13,021



	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


CONSUMER REAL ESTATE PORTFOLIO
	September 30, 2022

(Dollars in millions)	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving Loans Converted to Term Loans (a)		Total
FICO score 740 or greater	$	1,743	$	1,873	$	833	$	541	$	284	$	1,354	$	1,208	$	68	$	7,904
FICO score 720-739	235		254		118		100		35		247		174		19		1,182
FICO score 700-719	209		210		94		58		38		234		140		23		1,006
FICO score 660-699	175		138		91		57		63		296		195		25		1,040
FICO score 620-659	15		25		26		42		20		110		50		10		298
FICO score less than 620	15		18		31		12		24		269		49		16		434
Total	$	2,392	$	2,518	$	1,193	$	810	$	464	$	2,510	$	1,816	$	161	$	11,864


~~(a)~~			~~For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loans have seasoned.~~22			3Q22 FORM 10-Q REPORT


CREDIT CARD & OTHER PORTFOLIO
	September 30, 2022

(Dollars in millions)	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving Loans Converted to Term Loans (a)		Total
FICO score 740 or greater	$	25	$	17	$	12	$	10	$	4	$	25	$	290	$	7	$	390
FICO score 720-739	3		2		2		1		1		5		33		1		48
FICO score 700-719	2		4		1		1		—		4		37		—		49
FICO score 660-699	2		2		2		1		2		7		35		1		52
FICO score 620-659	1		2		1		—		1		3		21		—		29
FICO score less than 620	7		7		6		10		7		68		175		1		281
Total	$	40	$	34	$	24	$	23	$	15	$	112	$	591	$	10	$	849


ACCRUING & NON-ACCRUING LOANS AND LEASES
	September 30, 2022
	Accruing								Non-Accruing
(Dollars in millions)	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 and Leases
Commercial, financial, and industrial:
C&I (a)	$	28,728	$	65	$	1	$	28,794	$	49	$	21	$	46	$	116	$	28,910

Loans to mortgage companies	2,710		—		—		2,710		—		—		—		—		2,710

Total commercial, financial, and industrial	31,438		65		1		31,504		49		21		46		116		31,620
Commercial real estate:
CRE (b)	13,006		5		—		13,011		7		—		3		10		13,021



Consumer real estate:
HELOC (c)	1,917		10		5		1,932		35		2		8		45		1,977
Real estate installment loans (d)	9,736		21		12		9,769		58		7		53		118		9,887
Total consumer real estate	11,653		31		17		11,701		93		9		61		163		11,864
Credit card and other:
Credit card	256		5		6		267		—		—		—		—		267
Other	577		2		—		579		1		1		1		3		582
Total credit card and other	833		7		6		846		1		1		1		3		849
Total loans and leases	$	56,930	$	108	$	24	$	57,062	$	150	$	31	$	111	$	292	$	57,354



	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