Loans | Loans The following table provides the balance of loans, net of unearned income, by portfolio segment as of March 31, 2019 and December 31, 2018 : March 31 December 31 (Dollars in thousands) 2019 2018 Commercial: Commercial, financial, and industrial $ 17,176,112 $ 16,514,328 Commercial real estate 3,946,943 4,030,870 Consumer: Consumer real estate (a) 6,151,503 6,249,516 Permanent mortgage 209,260 222,448 Credit card & other 506,230 518,370 Loans, net of unearned income $ 27,990,048 $ 27,535,532 Allowance for loan losses 184,911 180,424 Total net loans $ 27,805,137 $ 27,355,108 (a) Balances as of March 31, 2019 and December 31, 2018 , include $15.0 million and $16.2 million of restricted real estate loans, respectively. See Note 14—Variable Interest Entities for additional information. COMPONENTS OF THE LOAN PORTFOLIO The loan portfolio is disaggregated into segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally determined based on the initial measurement attribute (i.e., amortized cost or purchased credit-impaired), risk characteristics of the loan, and FHN’s method for monitoring and assessing credit risk. Commercial loan portfolio segments include commercial, financial and industrial (“C&I”) and commercial real estate ("CRE"). Commercial classes within C&I include general C&I, loans to mortgage companies, the trust preferred loans (“TRUPS”) (i.e. long-term unsecured loans to bank and insurance-related businesses) portfolio and purchased credit-impaired (“PCI”) loans. Loans to mortgage companies include commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to third party investors. Commercial classes within CRE include income CRE, residential CRE and PCI loans. Consumer loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio. Consumer classes include home equity lines of credit (“HELOCs”), real estate (“R/E”) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other. Concentrations FHN has a concentration of residential real estate loans ( 23 percent of total loans), the majority of which is in the consumer real estate segment ( 22 percent of total loans). Loans to finance and insurance companies total $2.6 billion ( 15 percent of the C&I portfolio, or 9 percent of the total loans). FHN had loans to mortgage companies totaling $2.3 billion ( 13 percent of the C&I segment, or 8 percent of total loans) as of March 31, 2019 . As a result, 28 percent of the C&I segment is sensitive to impacts on the financial services industry. Purchased Credit-Impaired Loans The following table presents a rollforward of the accretable yield for the three months ended March 31, 2019 and 2018 : Three Months Ended (Dollars in thousands) 2019 2018 Balance, beginning of period $ 13,375 $ 15,623 Accretion (1,673 ) (2,137 ) Adjustment for payoffs (462 ) (612 ) Adjustment for charge-offs (176 ) (551 ) Increase/(decrease) in accretable yield (a) 2,718 3,178 Other — (178 ) Balance, end of period $ 13,782 $ 15,323 (a) Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing and amounts of the cash flows. At March 31, 2019 , the ALLL related to PCI loans was $3.4 million compared to $4.0 million at December 31, 2018 . A loan loss provision credit related to PCI loans of $.4 million was recognized during the three months ended March 31, 2019 , compared to a loan loss provision expense of $.8 million during the three months ended March 31, 2018 . The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of March 31, 2019 and December 31, 2018 : March 31, 2019 December 31, 2018 (Dollars in thousands) Carrying value Unpaid balance Carrying value Unpaid balance Commercial, financial and industrial $ 34,619 $ 38,575 $ 38,873 $ 44,259 Commercial real estate 8,402 9,301 15,197 17,232 Consumer real estate 28,723 32,464 30,723 34,820 Credit card and other 1,127 1,377 1,627 1,879 Total $ 72,871 $ 81,717 $ 86,420 $ 98,190 Impaired Loans The following tables provide information at March 31, 2019 and December 31, 2018 , by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment in a loan, excluding any valuation allowance but including any direct write-down of the investment. For purposes of this disclosure, PCI loans and the TRUPS valuation allowance have been excluded. March 31, 2019 December 31, 2018 (Dollars in thousands) Recorded Unpaid Related Recorded Unpaid Related Impaired loans with no related allowance recorded: Commercial: General C&I $ 68,629 $ 71,101 $ — $ 42,902 $ 45,387 $ — Income CRE 1,522 1,522 — 1,589 1,589 — Total $ 70,151 $ 72,623 $ — $ 44,491 $ 46,976 $ — Consumer: HELOC (a) $ 6,548 $ 13,869 $ — $ 8,645 $ 16,648 $ — R/E installment loans (a) 5,910 6,693 — 4,314 4,796 — Permanent mortgage (a) 3,449 5,851 — 3,601 6,003 — Total $ 15,907 $ 26,413 $ — $ 16,560 $ 27,447 $ — Impaired loans with related allowance recorded: Commercial: General C&I $ 11,786 $ 11,786 $ 2,512 $ 2,802 $ 2,802 $ 149 TRUPS 2,838 3,700 925 2,888 3,700 925 Income CRE 357 357 — 377 377 — Total $ 14,981 $ 15,843 $ 3,437 $ 6,067 $ 6,879 $ 1,074 Consumer: HELOC $ 63,546 $ 66,801 $ 8,378 $ 66,482 $ 69,610 $ 11,241 R/E installment loans 43,949 44,898 6,464 38,993 39,851 6,743 Permanent mortgage 65,930 76,289 9,081 67,245 78,010 9,419 Credit card & other 684 684 446 695 695 337 Total $ 174,109 $ 188,672 $ 24,369 $ 173,415 $ 188,166 $ 27,740 Total commercial $ 85,132 $ 88,466 $ 3,437 $ 50,558 $ 53,855 $ 1,074 Total consumer $ 190,016 $ 215,085 $ 24,369 $ 189,975 $ 215,613 $ 27,740 Total impaired loans $ 275,148 $ 303,551 $ 27,806 $ 240,533 $ 269,468 $ 28,814 (a) All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance. Three Months Ended March 31 2019 2018 (Dollars in thousands) Average Interest Average Interest Impaired loans with no related allowance recorded: Commercial: General C&I $ 55,765 $ 180 $ 15,954 $ 175 Income CRE 1,556 13 791 12 Residential CRE — — 248 — Total $ 57,321 $ 193 $ 16,993 $ 187 Consumer: HELOC (a) $ 7,597 $ — $ 9,257 $ — R/E installment loans (a) 5,112 — 3,914 — Permanent mortgage (a) 3,525 — 5,217 — Total $ 16,234 $ — $ 18,388 $ — Impaired loans with related allowance recorded: Commercial: General C&I $ 7,294 $ — $ 22,891 $ — TRUPS 2,863 — 3,047 — Income CRE 367 4 806 — Residential CRE — — 398 — Total $ 10,524 $ 4 $ 27,142 $ — Consumer: HELOC $ 65,013 $ 522 $ 71,654 $ 577 R/E installment loans 41,471 270 42,110 267 Permanent mortgage 66,588 552 77,725 578 Credit card & other 690 5 648 3 Total $ 173,762 $ 1,349 $ 192,137 $ 1,425 Total commercial $ 67,845 $ 197 $ 44,135 $ 187 Total consumer $ 189,996 $ 1,349 $ 210,525 $ 1,425 Total impaired loans $ 257,841 $ 1,546 $ 254,660 $ 1,612 (a) All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance. Asset Quality Indicators FHN employs a dual grade commercial risk grading methodology to assign an estimate for the probability of default (“PD”) and the loss given default (“LGD”) for each commercial loan using factors specific to various industry, portfolio, or product segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 16 . This credit grading system is intended to identify and measure the credit quality of the loan portfolio by analyzing the migration of loans between grading categories. It is also integral to the estimation methodology utilized in determining the allowance for loan losses since an allowance is established for pools of commercial loans based on the credit grade assigned. Each PD grade corresponds to an estimated one-year default probability percentage; a PD 1 has the lowest expected default probability, and probabilities increase as grades progress down the scale. PD 1 through PD 12 are “pass” grades. PD grades 13 - 16 correspond to the regulatory-defined categories of special mention ( 13 ), substandard ( 14 ), doubtful ( 15 ), and loss ( 16 ). Pass loan grades are required to be reassessed annually or earlier whenever there has been a material change in the financial condition of the borrower or risk characteristics of the relationship. All commercial loans over $1 million and certain commercial loans over $500,000 that are graded 13 or worse are reassessed on a quarterly basis. Loan grading discipline is regularly reviewed internally by Credit Assurance Services to determine if the process continues to result in accurate loan grading across the portfolio. FHN may utilize availability of guarantors/sponsors to support lending decisions during the credit underwriting process and when determining the assignment of internal loan grades. LGD grades are assigned based on a scale of 1 - 12 and represent FHN’s expected recovery based on collateral type in the event a loan defaults. See Note 5 – Allowance for Loan Losses for further discussion on the credit grading system. The following tables provide the balances of commercial loan portfolio classes with associated allowance, disaggregated by PD grade as of March 31, 2019 and December 31, 2018 : March 31, 2019 (Dollars in thousands) General C&I Loans to Mortgage Companies TRUPS (a) Income CRE Residential CRE Total Percentage of Total Allowance for Loan Losses PD Grade: 1 $ 635,273 $ — $ — $ 11,997 $ — $ 647,270 3 % $ 100 2 849,658 — — 2,144 26 851,828 4 267 3 720,323 689,936 3,314 291,517 179 1,705,269 8 338 4 1,201,020 478,359 32,498 513,082 112 2,225,071 11 806 5 1,904,650 347,923 96,052 855,280 20,311 3,224,216 15 10,033 6 1,992,100 400,889 33,815 636,472 44,286 3,107,562 15 9,700 7 2,794,923 94,626 11,446 544,211 30,322 3,475,528 17 18,677 8 1,344,591 172,050 — 280,323 24,944 1,821,908 9 20,047 9 1,460,633 104,832 45,117 377,027 17,672 2,005,281 9 16,042 10 492,043 12,579 18,536 73,040 3,924 600,122 3 8,739 11 395,393 — — 63,318 2,112 460,823 2 10,353 12 289,203 146 — 48,454 5,586 343,389 2 6,172 13 223,362 — 5,786 51,615 238 281,001 1 9,652 14,15,16 204,958 — — 37,703 832 243,493 1 21,591 Collectively evaluated for impairment 14,508,130 2,301,340 246,564 3,786,183 150,544 20,992,761 100 132,517 Individually evaluated for impairment 80,415 — 2,838 1,879 — 85,132 — 3,437 Purchased credit-impaired loans 36,825 — — 6,043 2,294 45,162 — 2,141 Total commercial loans $ 14,625,370 $ 2,301,340 $ 249,402 $ 3,794,105 $ 152,838 $ 21,123,055 100 % $ 138,095 December 31, 2018 (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 $ 610,177 $ — $ — $ 12,586 $ — $ 622,763 3 % $ 100 2 835,776 — — 1,688 29 837,493 4 274 3 782,362 716,971 — 289,594 147 1,789,074 9 315 4 1,223,092 394,862 43,220 563,243 — 2,224,417 11 686 5 1,920,034 277,814 77,751 798,509 14,150 3,088,258 15 8,919 6 1,722,136 365,341 45,609 657,628 33,759 2,824,473 14 8,141 7 2,690,784 96,603 11,446 538,909 26,135 3,363,877 16 16,906 8 1,337,113 53,224 — 265,901 20,320 1,676,558 8 18,545 9 1,472,852 96,292 45,117 455,184 29,849 2,099,294 10 15,454 10 490,795 13,260 18,536 60,803 3,911 587,305 3 8,675 11 311,967 — — 66,986 788 379,741 2 7,973 12 244,867 9,379 — 82,574 5,717 342,537 2 6,972 13 285,987 — 5,786 55,408 251 347,432 2 10,094 14,15,16 224,853 — — 28,835 837 254,525 1 23,307 Collectively evaluated for impairment 14,152,795 2,023,746 247,465 3,877,848 135,893 20,437,747 100 126,361 Individually evaluated for impairment 45,704 — 2,888 1,966 — 50,558 — 1,074 Purchased credit-impaired loans 41,730 — — 12,730 2,433 56,893 — 2,823 Total commercial loans $ 14,240,229 $ 2,023,746 $ 250,353 $ 3,892,544 $ 138,326 $ 20,545,198 100 % $ 130,258 (a) Balances as of March 31, 2019 and December 31, 2018 , presented net of a $20.2 million valuation allowance. The consumer portfolio is comprised primarily of smaller-balance loans which are very similar in nature in that most are standard products and are backed by residential real estate. Because of the similarities of consumer loan-types, FHN is able to utilize the Fair Isaac Corporation (“FICO”) score, among other attributes, to assess the credit quality of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other consumer portfolio. The following table reflects the percentage of balances outstanding by average, refreshed FICO scores for the HELOC, real estate installment, and permanent mortgage classes of loans as of March 31, 2019 and December 31, 2018 : March 31, 2019 December 31, 2018 HELOC R/E Installment Loans Permanent Mortgage HELOC R/E Installment Loans Permanent Mortgage FICO score 740 or greater 61.0 % 72.2 % 52.0 % 61.4 % 71.3 % 51.8 % FICO score 720-739 8.8 8.3 8.3 8.5 8.8 7.6 FICO score 700-719 7.8 6.9 9.9 7.6 7.0 10.6 FICO score 660-699 10.9 7.2 14.8 10.9 7.6 14.7 FICO score 620-659 5.0 2.7 7.0 5.1 2.8 6.5 FICO score less than 620 (a) 6.5 2.7 8.0 6.5 2.5 8.8 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % (a) For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loans have seasoned. Nonaccrual and Past Due Loans The following table reflects accruing and non-accruing loans by class on March 31, 2019 : Accruing Non-Accruing (Dollars in thousands) Current 30-89 Days Past Due 90+ Days Past Due Total Accruing Current 30-89 Days Past Due 90+ Days Past Due Total Non- Accruing Total Loans Commercial (C&I): General C&I $ 14,508,455 $ 7,741 $ 191 $ 14,516,387 $ 61,711 $ 147 $ 10,300 $ 72,158 $ 14,588,545 Loans to mortgage companies 2,301,340 — — 2,301,340 — — — — 2,301,340 TRUPS (a) 246,564 — — 246,564 — — 2,838 2,838 249,402 Purchased credit-impaired loans 33,056 2,210 1,559 36,825 — — — — 36,825 Total commercial (C&I) 17,089,415 9,951 1,750 17,101,116 61,711 147 13,138 74,996 17,176,112 Commercial real estate: Income CRE 3,785,127 292 — 3,785,419 — 45 2,598 2,643 3,788,062 Residential CRE 150,300 238 — 150,538 — 6 — 6 150,544 Purchased credit-impaired loans 7,448 818 71 8,337 — — — — 8,337 Total commercial real estate 3,942,875 1,348 71 3,944,294 — 51 2,598 2,649 3,946,943 Consumer real estate: HELOC 1,380,487 9,735 7,321 1,397,543 48,772 4,223 8,370 61,365 1,458,908 R/E installment loans 4,623,499 10,037 7,982 4,641,518 15,151 2,685 3,395 21,231 4,662,749 Purchased credit-impaired loans 24,480 1,628 3,738 29,846 — — — — 29,846 Total consumer real estate 6,028,466 21,400 19,041 6,068,907 63,923 6,908 11,765 82,596 6,151,503 Permanent mortgage 184,237 1,494 2,579 188,310 11,874 95 8,981 20,950 209,260 Credit card & other: Credit card 193,754 992 969 195,715 — — — — 195,715 Other 305,267 3,067 473 308,807 155 67 211 433 309,240 Purchased credit-impaired loans 717 325 233 1,275 — — — — 1,275 Total credit card & other 499,738 4,384 1,675 505,797 155 67 211 433 506,230 Total loans, net of unearned income $ 27,744,731 $ 38,577 $ 25,116 $ 27,808,424 $ 137,663 $ 7,268 $ 36,693 $ 181,624 $ 27,990,048 (a) TRUPS is presented net of the valuation allowance of $20.2 million . The following table reflects accruing and non-accruing loans by class on December 31, 2018 : Accruing Non-Accruing (Dollars in thousands) Current 30-89 Days Past Due 90+ Days Past Due Total Accruing Current 30-89 Days Past Due 90+ Days Past Due Total Non- Accruing Total Loans Commercial (C&I): General C&I $ 14,153,275 $ 8,234 $ 102 $ 14,161,611 $ 26,325 $ 5,537 $ 5,026 $ 36,888 $ 14,198,499 Loans to mortgage companies 2,023,746 — — 2,023,746 — — — — 2,023,746 TRUPS (a) 247,465 — — 247,465 — — 2,888 2,888 250,353 Purchased credit-impaired loans 39,433 624 1,673 41,730 — — — — 41,730 Total commercial (C&I) 16,463,919 8,858 1,775 16,474,552 26,325 5,537 7,914 39,776 16,514,328 Commercial real estate: Income CRE 3,876,229 626 — 3,876,855 30 — 2,929 2,959 3,879,814 Residential CRE 135,861 — — 135,861 32 — — 32 135,893 Purchased credit-impaired loans 13,308 103 1,752 15,163 — — — — 15,163 Total commercial real estate 4,025,398 729 1,752 4,027,879 62 — 2,929 2,991 4,030,870 Consumer real estate: HELOC 1,443,651 11,653 10,129 1,465,433 49,009 3,314 8,781 61,104 1,526,537 R/E installment loans 4,652,658 10,470 6,497 4,669,625 15,146 1,924 4,474 21,544 4,691,169 Purchased credit-impaired loans 24,096 2,094 5,620 31,810 — — — — 31,810 Total consumer real estate 6,120,405 24,217 22,246 6,166,868 64,155 5,238 13,255 82,648 6,249,516 Permanent mortgage 193,591 2,585 4,562 200,738 11,227 996 9,487 21,710 222,448 Credit card & other: Credit card 188,009 2,133 1,203 191,345 — — — — 191,345 Other 320,551 3,570 526 324,647 110 60 454 624 325,271 Purchased credit-impaired loans 746 611 397 1,754 — — — — 1,754 Total credit card & other 509,306 6,314 2,126 517,746 110 60 454 624 518,370 Total loans, net of unearned income $ 27,312,619 $ 42,703 $ 32,461 $ 27,387,783 $ 101,879 $ 11,831 $ 34,039 $ 147,749 $ 27,535,532 Certain previously reported amounts have been reclassified to agree with current presentation. (a) TRUPS is presented net of the valuation allowance of $20.2 million . Troubled Debt Restructurings As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that FHN has granted a concession to the borrower. FHN may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future. Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions could include extension of the maturity date, reductions of the interest rate (which may make the rate lower than current market for a new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR. For all classes within the commercial portfolio segment, TDRs are typically modified through forbearance agreements (generally 6 to 12 months ). Forbearance agreements could include reduced interest rates, reduced payments, release of guarantor, or entering into short sale agreements. FHN’s proprietary modification programs for consumer loans are generally structured using parameters of U.S. government-sponsored programs such as the former Home Affordable Modification Program (“HAMP”). Within the HELOC and R/E installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1 percent for up to 5 years ) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years , the interest rate generally returns to the original interest rate prior to modification; for certain modifications, the modified interest rate increases 2 percent per year until the original interest rate prior to modification is achieved. Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2 percent for up to 5 years ) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years , the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans. Within the credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year . In the credit card workout program, customers are granted a rate reduction to 0 percent and term extensions for up to 5 years to pay off the remaining balance. Despite the absence of a loan modification, the discharge of personal liability through bankruptcy proceedings is considered a concession. As a result, FHN classifies all non-reaffirmed residential real estate loans discharged in Chapter 7 bankruptcy as nonaccruing TDRs. On March 31, 2019 and December 31, 2018 , FHN had $241.6 million and $228.2 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $24.4 million , or 10 percent as of March 31, 2019 , and $27.7 million , or 12 percent as of December 31, 2018 . Additionally, $55.4 million and $57.8 million of loans held-for-sale as of March 31, 2019 and December 31, 2018 , respectively, were classified as TDRs. The following tables reflect portfolio loans that were classified as TDRs during the three months ended March 31, 2019 and 2018 : March 31, 2019 March 31, 2018 (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 $ 13,895 $ 13,820 5 $ 1,504 $ 1,214 Total commercial (C&I) 2 13,895 13,820 5 1,504 1,214 Consumer real estate: HELOC 19 2,104 2,084 30 2,760 2,733 R/E installment loans 44 5,977 5,934 5 611 612 Total consumer real estate 63 8,081 8,018 35 3,371 3,345 Permanent mortgage 3 1,448 1,479 1 275 273 Credit card & other 15 74 71 41 210 197 Total troubled debt restructurings 83 $ 23,498 $ 23,388 82 $ 5,360 $ 5,029 The following tables present TDRs which re-defaulted during the three months ended March 31, 2019 and 2018 , and as to which the modification occurred 12 months or less prior to the re-default. For purposes of this disclosure, FHN generally defines payment default as 30 or more days past due. March 31, 2019 March 31, 2018 (Dollars in thousands) Number Recorded Investment Number Recorded Investment Consumer real estate: HELOC 1 33 2 69 Total consumer real estate 1 33 2 69 Permanent mortgage — — 1 112 Credit card & other 8 18 14 81 Total troubled debt restructurings 9 $ 51 17 $ 262 |