First Horizon Corporation

FHN

US3205171057

Banks

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Apr. 15	First Horizon Names Thomas Hung as Chief Credit Officer	MT
Apr. 15	First Horizon Corporation Announces Executive Changes	CI

FIRST HORIZON NATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION --------------------------- (form 10-Q)

May 08, 2020 at 04:49 pm EDT

TABLE OF ITEM 2 TOPICS
  General Information                                                       78

  Forward-Looking Statements                                                80

  Financial Summary                                                         81

  Statement of Condition Review                                             88

  Capital                                                                   91

  Asset Quality                                                             94

  Risk Management                                                          106

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

111



  Market Uncertainties and Prospective Trends

112



  Critical Accounting Policies                                             115

  Non-GAAP Information                                                     115





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

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General Information

First Horizon National Corporation ("FHN") began as a community bank chartered
in 1864. FHN's sole class of common stock, $.625 par value, is listed and trades
on the New York Stock Exchange LLC under the symbol FHN.
FHN is the parent company of First Horizon Bank. First Horizon Bank's principal
divisions and subsidiaries operate under the brands of First Horizon Bank, First
Horizon Advisors, and FHN Financial. FHN offers regional banking, wealth
management and capital market services through the First Horizon family of
companies. First Horizon Bank and First Horizon Advisors provide consumer and
commercial banking and wealth management services. FHN Financial, which operates
partly through a division of First Horizon Bank and partly through subsidiaries,
is an industry leader in fixed income sales, trading, and strategies for
institutional clients in the U.S. and abroad. First Horizon Bank has over 270
banking offices in seven southeastern U.S. states, and FHN Financial has 29
offices in 18 states across the U.S.
Segments
FHN is composed of the following operating segments:
•     Regional banking segment offers financial products and services, including

traditional lending and deposit taking, to consumer and commercial

customers primarily in the southeast U.S. and other selected markets.

Regional banking also provides investments, wealth management, financial

planning, trust services and asset management, mortgage banking, credit

card, and cash management. Additionally, the regional banking segment

includes correspondent banking which provides credit, depository, and other


      banking related services to other financial institutions nationally.

• Fixed income segment consists of fixed income securities sales, trading,

underwriting, and strategies for institutional clients in the U.S. and

abroad, as well as loan sales, portfolio advisory services, and derivative

sales.

• Corporate segment consists of unallocated corporate expenses, expense on

subordinated debt issuances, bank-owned life insurance, unallocated

interest income associated with excess equity, net impact of raising

incremental capital, revenue and expense associated with deferred

compensation plans, funds management, tax credit investment activities,


      derivative valuation adjustments related to prior sales of Visa Class B
      shares, gain/(loss) on extinguishment of debt, acquisition- and
      integration-related costs, expenses associated with

rebranding initiatives, and various charges related to restructuring, repositioning, and efficiency efforts. • Non-strategic segment consists of run-off consumer lending activities,

pre-2009 mortgage banking elements, 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.



Significant Pending Transactions
On November 4, 2019, FHN and IBERIABANK Corporation ("IBKC") announced that they
had entered into an agreement and plan of merger under which IBKC will merge
with FHN in a merger-of-equals transaction. IBKC, headquartered in Lafayette,
Louisiana, has 319 offices in 12 states, mostly in the southern and southeastern
U.S., and has reported $32.2 billion of total assets, $24.5 billion in loans,
and $25.5 billion in deposits, at March 31, 2020. IBKC's common stock is listed
on The NASDAQ Stock Market, LLC under the symbol IBKC. Under the merger
agreement, each share of IBKC common stock will be converted into 4.584 shares
of FHN common stock. After closing, FHN expects IBKC common shares will be
converted into approximately 44 percent of the then-outstanding shares of FHN
common stock. The merger agreement requires FHN to expand its board of directors
to seventeen persons; after closing, eight board positions will be held by
current IBKC directors, and nine will be held by current FHN directors. FHN
expects the transaction to close in second quarter, subject to regulatory
approvals and other customary closing conditions.
On November 8, 2019, FHN announced an agreement for First Horizon Bank to
purchase 30 branches from SunTrust Bank in conjunction with SunTrust Banks,
Inc.'s merger with BB&T Corporation, which created Truist Financial Corp. As
part of the agreement, FHN will assume approximately $2.4 billion of branch
deposits for a 3.40 percent deposit premium and purchase approximately $410
million of branch loans. The branches are in communities in North Carolina (20
branches), Virginia (8 branches), and Georgia (2 branches). FHN expects the
purchase to close in third quarter 2020, subject to customary closing
conditions.
In second quarter 2019, FHN sold a subsidiary acquired as part of the Capital
Bank Financial Corporation ("CBF") merger (in 2017), that did not fit within
FHN's risk profile. The sale resulted in the removal of approximately $25
million UPB of subprime consumer loans from Loans held-for-sale on FHN's
Consolidated Condensed Statements of Condition.
In relation to all acquisitions, FHN's operating results include the operating
results of the acquired assets and


                           FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q

REPORT 78

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assumed liabilities subsequent to the acquisition date. Refer to Note 2 -
Acquisitions and Divestitures in this report and in Item 7 to FHN's Annual
Report on Form 10-K for the year ended December 31, 2019 for additional
information.
For the purpose of this management's discussion and analysis ("MD&A"), earning
assets have been expressed as averages, unless otherwise noted, and loans have
been disclosed net of unearned income. The following financial discussion should
be read with the accompanying unaudited Consolidated Condensed Financial
Statements and Notes in this report. Additional information including the 2019
financial statements, notes, and MD&A is provided in Item 7 and 8 to FHN's
Annual Report on Form 10-K for the year ended December 31, 2019.
ADOPTION OF ACCOUNTING UPDATES
Effective January 1, 2020 FHN adopted ASU 2016-13, "Measurement of Credit Losses
on Financial Instruments," (CECL); which resulted in a $106.4 million increase
to the allowance for loan losses ("ALLL") and a $24.0 million increase to the
reserve for unfunded commitments, resulting in a $96.1 million decrease of
retained earnings (net of taxes). See Note 1- Financial Information for
additional information.
Non-GAAP Measures
Certain measures are included in the narrative and tables in this MD&A that are
"non-GAAP", meaning (under U.S. financial reporting rules) they are not
presented in accordance with generally accepted accounting principles ("GAAP")
in the U.S. and also are not codified in U.S. banking regulations currently
applicable to FHN.














Although other entities may use calculation methods that differ from those used
by FHN for non-GAAP measures, FHN's management believes such measures are
relevant to understanding the capital position or financial results of FHN.
Non-GAAP measures are reported to FHN's management and Board of Directors
through various internal reports.
Presentation of regulatory measures, even those which are not GAAP, provide a
meaningful base for comparability to other financial institutions subject to the
same regulations as FHN, as demonstrated by their use by banking regulators in
reviewing capital adequacy of financial institutions. Although not GAAP terms,
these regulatory measures are not considered "non-GAAP" under U.S. financial
reporting rules as long as their presentation conforms to regulatory standards.
Regulatory measures used in this MD&A include: common equity tier 1 capital,
generally defined as common equity less goodwill, other intangibles, and certain
other required regulatory deductions; tier 1 capital, generally defined as the
sum of core capital (including common equity and instruments that cannot be
redeemed at the option of the holder) adjusted for certain items under risk
based capital regulations; and risk-weighted assets ("RWA"), which is a measure
of total on- and off-balance sheet assets adjusted for credit and market risk,
used to determine regulatory capital ratios.
The non-GAAP measure presented in this filing is return on average tangible
common equity ("ROTCE"). Refer to table 23 for a reconciliation of the non-GAAP
to GAAP measure and presentation of the most comparable GAAP item.


                           FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q

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Forward-Looking Statements




This MD&A contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to FHN's beliefs, plans,
goals, expectations, and estimates. Forward-looking statements are 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: general economic and financial market conditions, including
expectations of and actual timing and amount of interest rate movements
including the slope of the yield curve, competition, customer and investor
responses to these conditions, ability to execute business plans, geopolitical
developments, recent and future legislative and regulatory developments, natural
disasters, the potential impacts on FHN's businesses of the coronavirus COVID-19
pandemic, including negative impacts from quarantines, market declines and
volatility, and changes in customer behavior related to COVID-19, potential
requirements for FHN to repurchase, or compensate for losses from, previously
sold or securitized mortgages or securities based on such mortgages; potential
claims alleging mortgage servicing failures, individually, on a class basis, or
as master servicer of securitized loans; potential claims relating to
participation in government programs, especially lending or other financial
services programs; expectations of and actual timing and amount of interest rate
movements, including the slope and shape of the yield curve, which can have a
significant impact on a financial services institution; market and monetary
fluctuations, including fluctuations in mortgage markets; inflation or
deflation; customer, investor, competitor, regulatory, and legislative responses
to any or all of these conditions; the financial condition of borrowers and
other counterparties; competition within and outside the financial services
industry;




geopolitical developments including possible terrorist activity; natural
disasters; effectiveness and cost-efficiency of FHN's hedging practices;
technological changes; fraud, theft, or other incursions through conventional,
electronic, or other means directly or indirectly affecting FHN or 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
Tennessee Department of Financial Institutions ("TDFI") and its Commissioner,
the Board of Governors of the Federal Reserve System ("Federal Reserve" or
"Fed"), the Federal Deposit Insurance Corporation ("FDIC"), the Financial
Industry Regulatory Authority ("FINRA"), the U.S. Department of the Treasury
("U.S. Treasury"), the Municipal Securities Rulemaking Board ("MSRB"), the
Consumer Financial Protection Bureau ("CFPB"), the Office of the Comptroller of
the Currency ("OCC"), the Financial Stability Oversight Council ("Council"), the
Public Company Accounting Oversight Board ("PCAOB"), and other regulators and
agencies; pending, threatened, or possible future regulatory, administrative,
and judicial outcomes, actions, and proceedings; current or future Executive
orders; changes in laws and regulations applicable to FHN; and FHN's success in
executing its business plans and strategies and managing the risks involved in
the foregoing, could cause actual results to differ, perhaps materially, from
those contemplated by the forward-looking statements.
FHN assumes no obligation to update or revise any forward-looking statements
that are made in this Quarterly Report of which this MD&A is a part or otherwise
from time to time. Actual results could differ and expectations could change,
possibly materially, because of one or more factors, including those presented
in this Forward-Looking Statements section, in other sections of this MD&A, in
other parts of and exhibits to this Quarterly Report on Form 10-Q for the period
ended March 31, 2020, and in documents incorporated into this Quarterly Report.


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

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Financial Summary




As previously mentioned, effective January 1, 2020, FHN adopted ASU 2016-13,
(CECL). Application of CECL methodology creates larger immediate impacts on
credit loss estimates in unanticipated rapid declines in economic projections
when compared to the prior incurred loss estimation methodology. The sudden,
steep decline in the economic forecast associated with the Coronavirus Disease
2019 ("COVID-19") pandemic late in first quarter 2020 resulted in a significant
increase in loan loss provision expense and the reserve for unfunded
commitments, negatively impacting FHN's operating results in first quarter 2020.
In first quarter 2020, FHN reported net income available to common shareholders
of $12.1 million, or $.04 per diluted share, compared to net income available to
common of $99.0 million, or $.31 per diluted share in first quarter 2019. The
decline in results in first quarter 2020 relative to the prior year was driven
by a significant increase in loan loss provision expense and an increase in the
reserve for unfunded commitments, somewhat offset by higher revenue.
Total revenue increased 10 percent to $477.6 million in first quarter 2020 from
$435.6 million in first quarter 2019. NII increased to $302.8 million in first
quarter 2020 from $294.5 million in first quarter 2019 primarily due to strong
loan and deposit growth, favorable deposit costs, and the maturity of $400
million of senior debt in fourth quarter 2019. Lower loan yields compared to
first quarter 2019 negatively impacted NII in first quarter 2020, offsetting a
portion of the overall increase in NII. Noninterest income increased 24 percent,
or $33.7 million, in first quarter 2020 driven by higher fixed income revenue,
somewhat offset by a decrease in deferred compensation income relative to first
quarter 2019.
Noninterest expense increased 5 percent to $311.9 million in first quarter 2020
from $296.1 million in first quarter 2019. The expense increase in first quarter
2020, was due in large part to an increase in credit expense on unfunded

commitments associated with economic uncertainty attributable to the COVID-19
pandemic, as well as higher personnel-related expenses, somewhat offset by lower
restructuring and rebranding related expenses.
Asset quality trends in first quarter 2020 were relatively consistent with
trends in first quarter 2019. The NPL ratio and 30+ delinquencies improved from
.65 percent and .23 percent, respectively in first quarter 2019 to .57 percent
and .19 percent, respectively in first quarter 2020. Net charge offs increased
from .07 percent in first quarter 2019 to .10 percent in first quarter 2020
primarily driven by two credits.
Return on average common equity ("ROCE") and ROTCE were 1.05 percent and 1.59
percent, respectively, in first quarter 2020 compared to 9.09 percent and 14.17
percent, respectively, in first quarter 2019. Return on average assets ("ROA")
declined to .15 percent in first quarter 2020 from 1.03 percent in first quarter
2019. Key financial ratios were negatively impacted in first quarter 2020 by the
large increase in loan loss provision expense. Common Equity Tier 1, Tier 1,
Total Capital, and Leverage ratios were 8.54 percent, 9.52 percent, 10.78
percent, and 9.00 percent, respectively, in first quarter 2020 down from 9.62
percent, 10.65 percent, 11.78 percent, and 9.02 percent, respectively, in first
quarter 2019 driven by an increase in risk-weighted assets due to higher loan
balances and an increase in fixed income market risk assets. Average assets
increased to $43.6 billion in first quarter 2020 from $40.9 billion in first
quarter 2019. Average loans and average deposits increased to $30.5 billion and
$32.9 billion, respectively, in first quarter 2020, up 12 percent and 1 percent
from first quarter 2019. Period-end Shareholders' equity increased to $5.1
billion in first quarter 2020 from $4.8 billion in first quarter 2019. Average
Shareholders' equity increased to $5.0 billion in first quarter 2020 from $4.8
billion in first quarter 2019.
Business Line Review


Regional Banking
Pre-tax income within the regional banking segment was $25.6 million in first
quarter 2020, down from $147.0 million in first quarter 2019. The decrease in
pre-tax income was primarily driven by an increase in loan loss provision
expense, and higher credit expense on unfunded commitments somewhat offset by
increase in revenue.
Total revenue increased 6 percent to $382.0 million in first quarter 2020 from
$359.1 million in first quarter 2019, driven by increases in NII and noninterest
income. The

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


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Provision expense increased to $145.4 million in first quarter 2020 from $13.4
million in first quarter 2019, primarily driven by the application of CECL
methodology and a sudden, steep decline in the economic forecast attributable to
the COVID-19 pandemic.
Noninterest expense was $211.0 million in first quarter 2020, up from $198.6
million in first quarter 2019. The increase in expense was primarily driven by a
$8.8 million increase in the credit expense on unfunded commitments largely
associated with the application of CECL methodology with a sudden, steep decline
in economic forecast attributable to the COVID-19 pandemic. An increase in FDIC
premium expense due to balance sheet growth and expected loss severity ratios as
well as $1.0 million of additional credit risk adjustments related to Regional
Banking interest rate derivatives and swap participations also contributed to
the overall increase in expenses in first quarter 2020 compared to the prior
year.
Fixed Income
Pre-tax income in the fixed income segment more than doubled to $25.6 million in
first quarter 2020 from $10.6 million in first quarter 2019. The increase in
pre-tax income in first quarter 2020 was driven by higher revenue, somewhat
offset by an increase in expenses.
Noninterest income increased 78 percent, or $41.9 million to $95.7 million in
first quarter 2020 from $53.8 million in first quarter 2019. Average daily
revenue ("ADR") increased to $1.3 million in first quarter 2019 from $729
thousand in first quarter 2019, due to elevated levels of commissionable
revenues, partially offset by elevated levels of trading losses driven by
extreme market volatility as compared to first quarter 2019. Other product
revenue was $17.4 million in first quarter 2020, up from $9.3 million in the
prior year, primarily driven by increases in fees from derivative sales. NII was
$10.9 million in first quarter 2020, up from $7.3 million in first quarter 2019,
primarily due to higher spreads on inventory positions in addition to higher
inventory balances compared to prior year.
Noninterest expense was $81.1 million in first quarter 2020 compared to $50.5
million in first quarter 2019, primarily driven by higher variable compensation
due to increased commissionable revenues.






Corporate
The pre-tax loss for the corporate segment was $32.5 million in first quarter
2020 compared to $36.3 million in first quarter 2019.
Net interest expense was $13.4 million and $7.9 million in first quarter 2020
and 2019, respectively. Net interest expense was negatively impacted by lower
average balances of excess cash at the Federal reserve ("Fed") and AFS
securities, somewhat offset by the maturity of $400 million of senior debt in
fourth quarter 2019. Noninterest income/(loss)(including securities gain/losses)
in first quarter 2020 was negative $3.7 million compared to $13.4 million in
first quarter 2019, primarily due to a $15.0 million decrease in deferred
compensation income driven by negative equity market valuations relative to the
prior year.
Noninterest expense decreased 63 percent or $26.3 million from $41.8 million in
first quarter 2019 to $15.5 million in first quarter 2020. The decrease in
expense for first quarter 2020 was primarily driven by decreases in deferred
compensation expense, restructuring costs associated with efficiency initiatives
and rebranding expenses relative to first quarter 2019. This expense decrease
was somewhat offset by an increase in pension expense.
Non-Strategic
The non-strategic segment had pre-tax income of $2.6 million in first quarter
2020 compared to $9.2 million in first quarter 2019. The decrease in results for
first quarter 2020 was driven by a smaller provision credit and a decline in NII
relative to first quarter 2019 somewhat offset by a decrease in expenses.
Total revenue was $6.0 million in first quarter 2020 down from $9.9 million in
first quarter 2019. NII decreased to $5.1 million in first quarter 2020 from
$9.1 million in first quarter 2019, primarily due to continued run-off of the
loan portfolios. Noninterest income was $.9 million in first quarter 2020 and
2019.
The provision for loan losses within the non-strategic segment was a provision
credit of $.4 million in first quarter 2020 compared to a provision credit of
$4.4 million in the prior year. The reduction in provision credit in first
quarter 2020 was due to additional consumer reserves associated with a sudden,
steep decline in economic forecast attributable to the COVID-19 pandemic.
Noninterest expense decreased 27 percent to $3.8 million in first quarter 2020
from $5.2 million in first quarter 2019.



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Income Statement Review




Total consolidated revenue was $477.6 million in first quarter 2020, up 10
percent from $435.6 million in first quarter 2019 driven by a 24 percent
increase in noninterest income and a 3 percent increase in NII. Provision
expense increased significantly from $9.0 million in first quarter 2019 to
$145.0 million in first quarter 2020 primarily driven by a sudden, steep decline
in the economic forecast attributable to the COVID-19 pandemic. Total
consolidated expenses increased 5 percent to $311.3 million in first quarter
2020 from $296.1 million in first quarter 2019, driven by an increase in expense
on unfunded commitments and higher personnel-related expenses, somewhat offset
by lower restructuring and rebranding related expenses.
Net Interest Income
Net interest income was $302.8 million in first quarter 2020, up from $294.5
million in first quarter 2019. The increase in NII was primarily attributable to
strong loan and deposit growth, favorable deposit costs, and the maturity of
$400 million of senior debt in fourth quarter 2019, somewhat offset by lower
loan yields compared to first quarter 2019. Average earning assets increased to
$38.8 billion in first quarter 2020 from $36.3 billion in first quarter 2019.


















The increase in average earning assets was primarily driven by increases in
loans, securities purchased under agreement to resell ("asset repos"), and fixed
income inventory, somewhat offset by decreases in interest-bearing cash.
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 was 3.16 percent in first quarter 2020 down
15 basis points from 3.31 percent in first quarter 2019. The net interest spread
was 2.89 percent in first quarter 2020, down 3 basis points from 2.92 percent in
first quarter 2019. The decrease in NIM in first quarter 2020 was primarily the
result of the negative impact of interest rates (including LIBOR and Prime)
relative to first quarter 2019. Additionally, higher balances of trading
securities negatively impacted NIM in first quarter 2020, but was somewhat
mitigated by loan and deposit growth, lower balances of cash held at the Fed,
and the maturity of $400 million of senior debt in fourth quarter 2019.



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Table 1-Net Interest Margin

                                                              Three Months Ended
                                                                   March 31
                                                               2020         2019
Assets:
Earning assets:
Loans, net of unearned income:
Commercial loans                                               4.33 %        5.08 %
Consumer loans                                                 4.33

4.59


Total loans, net of unearned income                            4.33          4.96
Loans held-for-sale                                            4.67          5.89
Investment securities:
U.S. government agencies                                       2.32          2.68
States and municipalities                                      3.35          4.33
Corporates and other debt                                      4.67          4.37
Other                                                         33.76         34.56
Total investment securities                                    2.51          2.79
Trading securities                                             2.91          3.80
Other earning assets:
Federal funds sold                                             1.05          2.63
Securities purchased under agreements to resell                1.13          2.21
Interest-bearing cash                                          1.13          2.41
Total other earning assets                                     1.13          2.38
Interest income / total earning assets                         3.94 %        4.49 %
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings                                                        0.87 %        1.36 %
Other interest-bearing deposits                                0.65

1.05


Time deposits                                                  1.67

1.91


Total interest-bearing deposits                                0.90

1.35


Federal funds purchased                                        1.19

2.50


Securities sold under agreements to repurchase                 1.36

2.06


Fixed income trading liabilities                               1.76          3.04
Other short-term borrowings                                    1.20          3.40
Term borrowings                                                4.01          4.89

Interest expense / total interest-bearing liabilities 1.05

1.57


Net interest spread                                            2.89 %        2.92 %
Effect of interest-free sources used to fund earning assets    0.27          0.39
Net interest margin (a)                                        3.16 %        3.31 %

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

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 84

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FHN's net interest margin is primarily impacted by its balance sheet mix
including the levels of fixed and floating rate loans, rate sensitive and
non-rate sensitive liabilities, cash levels, trading inventory levels as well as
loan fees and cash basis income. For 2020, NIM will also depend on potentially
modest loan growth, rate impact from the elevated spread of LIBOR to Fed Funds,
widening credit spreads, PPP fees, Fixed Income trading inventory and the extent
of assets moving to nonaccrual status.
PROVISION FOR LOAN LOSSES
The provision for loan losses is the charge to earnings that management
determines to be necessary to maintain the ALLL at a sufficient level reflecting
management's estimate of expected credit losses in the loan portfolio. Provision
expense was $145.0 million in first quarter 2020 calculated under the CECL
methodology adopted January 1, 2020, compared to $9.0 million in first quarter
2019 calculated under the "incurred loss" methodology. The increase in provision
expense was primarily the result of a sudden, steep decline in the economic
forecast attributable to the COVID-19 pandemic, and to a much less extent
associated with loan growth. 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 $174.8 million in
first quarter 2020 and represented 37 percent of total revenue compared to
$141.0 million in first quarter 2019 and 32 percent. The increase in noninterest
income in first quarter 2020 was primarily driven by higher fixed income
revenue, somewhat offset by a decrease in deferred compensation income relative
to first quarter 2019.
Fixed Income Noninterest Income
Fixed income noninterest income was $95.6 million in first quarter 2020, a 78
percent increase from $53.7 million in first quarter 2019. The increase in first
quarter 2020 was largely driven by elevated levels of commissionable revenues,
partially offset by elevated levels of trading losses driven by extreme market
volatility in March 2020. Revenue from other products increased 86 percent to
$17.3 million in first quarter 2020 from $9.3 million in first quarter 2019,
primarily driven by increases in derivative sales.

The following table summarizes FHN's fixed income noninterest income for the
three months ended March 31, 2020 and 2019.
Table 2-Fixed Income Noninterest Income

                                           Three Months Ended
                                                March 31
(Dollars in thousands)                      2020         2019       Percent Change
Noninterest income:
Fixed income                            $    78,354    $ 44,472            76 %
Other product revenue                        17,281       9,277            86 %
Total fixed income noninterest income   $    95,635    $ 53,749

78 %




Brokerage, Management Fees and Commissions
Noninterest income from brokerage, management fees and commissions increased 22
percent or $2.8 million from $12.6 million in first quarter 2019 to $15.4
million in first quarter 2020. The increase in first quarter 2020 was primarily
driven by higher advisory revenue and annuity income as a result of increased
transaction volume.
Deposit Transactions and Cash Management
Fees from deposit transactions and cash management activities were $30.3 million
in first quarter 2020, down 4 percent from $31.6 million in first quarter 2019.
The decrease in first quarter 2020 is largely due to lower debit


card transaction fees as a result of volume incentives received in 2019 and
lower NSF/overdraft fee income driven by changes in consumer behavior relative
to first quarter 2019, somewhat offset by an increase in fees from cash
management activities.
Other Noninterest Income
Other income includes revenues related to other service charges, ATM and
interchange fees, mortgage banking (primarily within the non-strategic and
regional banking segments), letters of credit fees, dividend income, electronic
banking fees, insurance commissions, gain/(loss)


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on the extinguishment of debt, deferred compensation plans (which are mirrored
by changes in noninterest expense) and various other fees.
Revenue from all other income and commissions decreased to $14.4 million in
first quarter 2020 from $24.6 million in first quarter 2019. The decrease in all
other income and commissions in first quarter 2020 was largely due to a $15.0
million decrease in deferred compensation income driven by negative equity
market valuations. 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. An increase in other service charges and higher fees from derivative
sales relative to first quarter 2019 offset a portion of the overall decline in
other noninterest income.
The following table provides detail regarding FHN's other income.

Table 3-Other Income

                                           Three Months Ended
                                                March 31           Percent
(Dollars in thousands)                     2020          2019       Change
Other income:
Other service charges                   $   5,219     $  3,869        35  %
ATM and interchange fees                    4,212        3,241        30  %
Mortgage banking                            2,431        1,886        29  %
Letter of credit fees                       1,462        1,368         7  %
Dividend income (a)                         1,130        2,313       (51 )%
Electronic banking fees                     1,030        1,271       (19 )%
Insurance commissions                         789          624        26  %
Gain/(loss) on extinguishment of debt           -           (1 )      NM
Deferred compensation (b)                  (9,507 )      5,474        NM
Other                                       7,598        4,586        66  %
Total                                   $  14,364     $ 24,631       (42 )%


Certain previously reported amounts have been reclassified to agree with current
presentation.
NM - Not meaningful
(a) Represents dividend income from Federal Reserve Bank ("FRB") and Federal Home

Loan Bank ("FHLB") holdings. Variability largely driven by dividend rate.

(b) Amounts are driven by market conditions and are mirrored by changes in

deferred compensation expense which is included in employee compensation

expense. First quarter 2020 decrease was driven by negative equity market


    valuations.


NONINTEREST EXPENSE
Total noninterest expense increased to $311.3 million in first quarter 2020 from
$296.1 million in first quarter 2019. The increase in noninterest expense in
first quarter 2020 was primarily driven by an increase in credit expense on
unfunded commitments associated with a sudden, steep decline in economic
forecast attributable to the COVID-19 pandemic.
To a lesser extent, higher personnel-related expense also contributed to the
increase in noninterest expense, somewhat offset by restructuring costs
associated with the identification of efficiency opportunities within the
organization, strategic initiatives and rebranding expenses recognized in first
quarter 2019.



Employee Compensation, Incentives, and Benefits
Employee compensation, incentives, and benefits (personnel expense), the largest
component of noninterest expense, increased 3 percent in first quarter 2020 to
$183.5 million from $177.9 million in first quarter 2019. The increase in
personnel expense in first quarter 2020 was primarily driven by higher variable
compensation due to increased commissionable revenues within Fixed Income.
These expense increases were somewhat offset by a $16.6 million decrease in
deferred compensation expense driven by negative equity market valuations in
first quarter 2020 and a $6.4 million decrease in restructuring costs associated
with the identification of efficiency opportunities within the organization.




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Professional Fees
Professional fees decreased 43 percent or $5.3 million from $12.3 million in
first quarter 2019 to $7.0 million in first quarter 2020. The decrease in
professional fees was primarily driven by lower restructuring costs associated
with the identification of efficiency opportunities within the organization.
Additionally, strategic investments recognized in first quarter 2019 to analyze
growth potential and product mix for new markets also contributed to the
year-over-year decline in professional fees.
FDIC premium expense
FDIC premium expense increased 58 percent from $4.3 million in first quarter
2019 to $6.7 million in first quarter 2020 driven by balance sheet growth and
expected loss severity ratios.
Contract employment and outsourcing
Expenses associated with contract employment and outsourcing increased 46
percent or $1.6 million to $4.9 million in first quarter 2020 compared to $3.4
million in first quarter 2019, primarily driven by merger and acquisition
related projects.



Other Noninterest Expense
Other expense includes expenses associated with unfunded commitments, travel and
entertainment, other insurance and tax expenses, expenses associated with the
non-service components of net periodic pension and post-retirement cost,
supplies, customer relation expenses, costs associated with employee training
and dues, miscellaneous loan costs, tax credit investments expenses, losses from
litigation and regulatory matters, expenses associated with OREO, and various
other expenses.
All other expenses increased 72 percent to $33.2 million in first quarter 2020
from $19.3 million in first quarter 2019. The increase was primarily driven by
an $8.8 million increase in credit expense on unfunded commitments largely
associated with the application of CECL methodology with a sudden, steep decline
in economic forecast attributable to the COVID-19 pandemic. Additionally, a $2.1
million increase in pension-related costs and $1.0 million of additional credit
risk adjustments on Regional Banking interest rate derivatives and swap
participations also contributed to the overall increase in all other expenses in
first quarter 2020 related to prior year.
The following table provides detail regarding FHN's other expense.
Table 4-Other Expense

                                                              Three Months Ended
                                                                   March 31           Percent
(Dollars in thousands)                                        2020          2019       Change
Other expense:
Credit expense on unfunded commitments (a)                 $   9,230     $    396        NM
Travel and entertainment                                       2,709        2,712         *
Other insurance and taxes                                      2,679        2,694        (1 )%
Non-service components of net periodic pension and
post-retirement cost                                           2,508          432        NM
Supplies                                                       2,411        1,804        34  %
Customer relations                                             2,004        1,599        25  %
Employee training and dues                                     1,341        1,457        (8 )%
Miscellaneous loan costs                                       1,094        1,027         7  %
Tax credit investments                                           346          675       (49 )%
Litigation and regulatory matters                                 13           13         *
OREO                                                            (184 )       (366 )      50  %
Other                                                          9,075        6,888        32  %
Total                                                      $  33,226     $ 19,331        72  %


Certain previously reported amounts have been reclassified to agree with current
presentation.
NM - Not meaningful
* Amount is less than one percent.
(a) First quarter 2020 increase largely associated with a sudden, steep decline

in economic forecast attributable to the COVID-19 pandemic.

INCOME TAXES

FHN recorded an income tax provision of $4.8 million in first quarter 2020, compared to $27.1 million in first

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q

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quarter 2019. The effective tax rate for the three months ended March 31, 2020
was approximately 22 percent compared to 21 percent for the three months ended
March 31, 2019.
The Company'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 effective rate is unfavorably
affected by the non-deductibility of a portion of the Company's FDIC premium and
executive compensation expenses. The Company's effective tax rate 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 the deferred tax asset valuation allowance
and changes in unrecognized tax benefits.
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 assets and liabilities. The tax
consequence is calculated by applying enacted statutory tax rates, applicable to
future years, to these temporary differences. As of March 31, 2020, FHN's gross
DTA (net of a valuation allowance) and gross DTL were $292.8 million and $207.6
million, respectively, resulting in a net DTA of $85.2 million at March 31,
2020, compared with a net DTA of $69.0 million at December 31, 2019.

As of March 31, 2020, FHN had deferred tax asset balances related to federal and
state income tax carryforwards of $37.5 million and $1.2 million, respectively,
which will expire at various dates.
FHN believes that it will be able to realize the value of its DTA and that no
valuation allowance is needed. FHN monitors its DTA and the need for a valuation
allowance on a quarterly basis.
RESTRUCTURING, REPOSITIONING, AND EFFICIENCY INITIATIVES
Beginning in 2019, FHN initiated a company-wide review of business practices
with the goal of optimizing its expense base to improve profitability and create
capacity to reinvest savings into technology and revenue production activities.
The net charges for restructuring, repositioning, and efficiency initiatives
were immaterial in first quarter 2020 compared to $12.2 million in first quarter
2019. These expenses are primarily associated with severance and other employee
costs and professional fees. Due to the broad nature of the actions being taken,
many components of expense are expected to benefit from the current efficiency
initiatives. See Note 17 - Restructuring, Repositioning, and Efficiency for
additional information.
Statement of Condition Review


Total period-end assets were $47.2 billion on March 31, 2020, up 9 percent from
$43.3 billion on December 31, 2019. The increase in period-end assets was
primarily driven by strong loan growth. Additionally, a net increase in other
earning assets (primarily trading securities), derivative assets and FHLB stock
also contributed to the increase in period-end assets. These increases were
somewhat offset by an increase in the allowance for loan losses due to the
Adoption of ASU 2016-13, "Measurement of Credit Losses on Financial
Instruments," or ("CECL") and all related ASUs on January 1, 2020 and additional
reserves recognized in first quarter 2020 due to a sudden, steep decline in the
economic forecast attributable to the COVID-19 pandemic. Average assets
increased 2 percent to $43.6 billion in first quarter 2020 from $42.9 billion in
fourth quarter 2019. The increase in average assets was driven by higher
balances of trading securities and securities purchased under agreements to
resell ("asset repos"), somewhat offset by lower average loan balances and an
increase in the ALLL due to the adoption of CECL.
Total period-end liabilities were $42.1 billion on March 31, 2020, a 10 percent
increase from $38.2 billion on December 31, 2019. The net increase in period-end
liabilities was primarily due to increases in deposits and

higher balances of short-term borrowings. In first quarter 2020, average
liabilities increased to $38.5 billion from $37.8 billion in fourth quarter
2019. The increase in
average liabilities was largely driven by higher balances of short-term
borrowings somewhat offset by a decrease in federal funds purchased ("FFP")
relative to fourth quarter 2019.
EARNING ASSETS
Earning assets consist of loans, investment securities, loans HFS, and other
earning assets such as trading securities and interest-bearing cash. Average
earning assets increased 1 percent and 7 percent to $38.8 billion in first
quarter 2020 from $38.2 billion and $36.3 billion, respectively, in fourth
quarter 2019 and first quarter 2019. A more detailed discussion of the major
line items follows.
Loans
Period-end loans increased 7 percent and 19 percent to $33.4 billion as of
March 31, 2020 from $31.1 billion on December 31, 2019 and $28.0 billion as of
March 31, 2019. The increase is period-end loan balances compared to December
31, 2019 was primarily due to an increase in


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loans to mortgage companies during the end of March and additional commercial
line draws. Average loans for first quarter 2020 were $30.5 billion compared to
$30.7 billion

in fourth quarter 2019 and $27.3 billion in first quarter 2019.
The following table summarizes FHN's average deposits for quarters-ended March
31, 2020 and December 31, 2019.
Table 5-Average Loans

                                        Quarter Ended                         Quarter Ended
                                        March 31, 2020                      December 31, 2019
(Dollars in thousands)            Amount       Percent of total        Amount        Percent of total     Growth Rate
Commercial:
Commercial, financial, and
industrial                    $ 19,469,572               64 %      $  19,739,937               64 %          (1 )%
Commercial real estate           4,421,913               14            4,263,597               14             4
Total commercial                23,891,485               78           24,003,534               78             *

Consumer:


Consumer real estate (a)
(b)                              6,134,390               20            6,194,134               20            (1 )
Credit card, OTC and other         498,290                2              508,651                2            (2 )
Total consumer                   6,632,680               22            6,702,785               22            (1 )
Total loans, net of
unearned income               $ 30,524,165              100 %      $  30,706,319              100 %          (1 )%

* Amount is less than one percent. (a) Balance as December 31, 2019 includes $7.1 million of restricted and secured

real estate loans.

(b) In first quarter 2020, the Permanent Mortgage portfolio was combined into

Consumer Real Estate portfolio, all prior periods were revised for
    comparability.



C&I loans are the largest component of the loan portfolio comprising 64 percent
of total loans in both first quarter 2020 and fourth quarter 2019. C&I loans
declined 1 percent, from fourth quarter 2019 largely driven by lower balances
within mortgage warehouse lending, partially mitigated by strong loan growth
within other commercial portfolios of Regional Banking. Growth in other
specialty lending areas, such as franchise finance, private client, asset based
lending, and healthcare also offset a portion of the overall decline in average
C&I loans in first quarter 2020 compared to fourth quarter 2019.Commercial real
estate loans experienced a net increase of 4 percent to $4.4 billion in first
quarter 2020.
Average consumer loans declined 1 percent from fourth quarter 2019 to $6.6
billion in first quarter 2020, largely driven by the continued wind-down of
portfolios within the Non-strategic segment and declines in home equity lines of
credit within the Regional Banking segment.
Investment Securities
FHN's investment portfolio consists principally of debt securities including
government agency issued mortgage-backed securities ("MBS") and government
agency issued collateralized mortgage obligations ("CMO"), substantially all of
which are classified as available-for-sale ("AFS"). FHN utilizes the securities
portfolio as a source of income, liquidity and collateral for repurchase
agreements, for public funds, and as a tool for managing risk of interest rate
movements. Period-end investment securities were $4.6 billion on March 31, 2020
compared to $4.5 billion on December 31, 2019.
Average investment securities were $4.5 billion in first quarter 2020 and $4.4
billion in fourth quarter 2019, representing 12 percent of average earning
assets in first quarter 2020 and fourth quarter 2019. The increase in period-end
and average investment securities was driven by FHN's reinvestment strategy in
2020. FHN manages the size and mix of the investment portfolio to assist in
asset

liability management, provide liquidity, and optimize risk adjusted returns.
Loans Held-for-Sale
Loans HFS consists of small business, other consumer loans, the mortgage
warehouse, USDA, student, and home equity loans. On March 31, 2020, loans HFS
were $595.6 million and $593.8 million, respectively. The average balance of
loans HFS increased to $590.5 million in first quarter 2020 from $581.8 million
in fourth quarter 2019. The increase in period-end and average loans HFS was
primarily driven by an increase in small business loans, somewhat offset by a
decrease in USDA loans.
Other Earning Assets
Other earning assets include trading securities, securities purchased under
agreements to resell ("asset repos"), federal funds sold ("FFS"), and
interest-bearing deposits with the Fed and other financial institutions. Other
earning assets averaged $3.2 billion in first quarter 2020, a 28 percent
increase from $2.5 billion in fourth quarter 2019. The increase in average other
earning assets was primarily driven by increases in fixed income trading
inventory and asset repos relative to fourth quarter 2019. 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
$3.1 billion on March 31, 2020, up from $2.5 billion on December 31, 2019,
primarily driven by increases in fixed income trading inventory and
interest-bearing cash.

The following table summarizes FHN's average other earning assets for quarters-ended March 31, 2020 and December 31, 2019. Table 6-Average Other Earning Assets


                                             Quarter Ended                        Quarter Ended
                                            March 31, 2020                      December 31, 2019
(Dollars in thousands)                Amount       Percent of total         Amount        Percent of total     Growth Rate
Other earning assets
Trading securities                 $ 1,831,492               57 %      $    1,263,633               50 %          45  %
Securities purchased under
agreements to resell                   816,794               25               645,979               26            26
Interest-bearing cash                  548,036               17               586,495               23            (7 )
Federal funds sold                      10,192                1                 9,700                1             5
Total other earning assets         $ 3,206,514              100 %      $    2,505,807              100 %          28  %





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Non-earning assets
Period-end non-earning assets were $5.5 billion and $4.7 billion on March 31,
2020 and December 31, 2019, respectively, driven largely by increases in
derivative assets, equity investments (primarily FHLB stock), and fixed income
receivables, partially offset by an increase in the ALLL and a decrease in cash
balances. Derivative assets and fixed income receivable balances were higher as
a result of extreme market volatility during first quarter 2020 and an increase
in required margin posting. The increase in the ALLL was due to the adoption of
ASU 2016-13 (CECL) on January 1, 2020 and additional reserves established during
first quarter 2020 associated with a sudden, steep decline in the economic
forecast attributable to the COVID-19 pandemic.
Deposits
Average deposits increased to $32.9 billion during first quarter 2020 from $32.8
billion in fourth quarter 2019 and $32.5 billion in first quarter 2019. The
increase in average deposits from fourth quarter 2019 was driven by a seasonal
influx of consumer deposits (both non-interest bearing and interest bearing),
coupled with an increase in market-indexed deposits, partially offset by lower
commercial interest deposits. The increase in first quarter 2020 relative to
first quarter 2019 was driven by increases in non-interest

bearing and consumer interest deposits as a result of FHN's strategic focus on
growing deposits during 2019, partially offset by decreases in commercial
interest and market-indexed deposits. FHN's mix of interest-bearing deposits and
noninterest-bearing deposits remained relatively consistent between periods.
Period-end deposits increased 6 percent to $34.4 billion on March 31, 2020, from
$32.4 billion on December 31, 2019 and $32.5 billion on March 31, 2019. The
increase in deposits from December 31, 2019 and March 31, 2019 was largely the
result of management's decision to increase market-indexed deposits (given the
favorable benefits of this funding source in lower interest-rate environments)
to fund loan growth, as well as significant deposit inflows in March 2020 as
brokerage customers exited equity markets to move in cash positions given the
market volatility associated with the COVID-19 pandemic.


The following table summarizes FHN's average deposits for quarters-ended March
31, 2020 and December 31, 2019.
Table 7-Average Deposits

                                            Quarter Ended                         Quarter Ended
                                            March 31, 2020                      December 31, 2019
(Dollars in thousands)                Amount       Percent of total        Amount        Percent of total     Growth Rate
Interest-bearing deposits:
Consumer                          $ 13,760,968               42 %      $  13,718,820               42 %             *
Commercial                           6,006,364               18            6,145,681               19              (2 )
Market-indexed (a)                   4,448,587               14            4,370,025               13               2
Total interest-bearing deposits     24,215,919               74           24,234,526               74               *
Noninterest-bearing deposits         8,666,087               26            8,542,521               26               1
Total deposits                    $ 32,882,006              100 %      $  32,777,047              100 %             *

* Amount is less than one percent. (a) Market-indexed deposits are tied to an index not administered by FHN and are

comprised of insured network deposits, correspondent banking deposits, and


    trust/sweep deposits.


Short-Term Borrowings
Short-term borrowings (federal funds purchased ("FFP"), securities sold under
agreements to repurchase, trading liabilities, and other short-term borrowings)
averaged $4.0 billion in first quarter 2020, up 20 percent from $3.3 billion in
fourth quarter 2019. As noted in the table below, the increase in short-term
borrowings between first quarter 2020 and fourth quarter 2019 was primarily
driven by increases in other short-term borrowings and trading liabilities,
partially offset by a decrease in FFP. Other short-term borrowings balances
fluctuate largely based on

the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Trading liabilities fluctuates based on expectations of customer demand. FFP fluctuates depending on the amount of excess funding of FHN's correspondent bank customers. Period-end short-term borrowings increased 44 percent to $5.8 billion on March 31, 2020 from $4.0 billion on December 31, 2019, primarily driven by an increase in other short-term borrowings, somewhat offset by a decreases in FFP. The increase in short-term borrowings was used to fund commercial loan growth including an uptick in loans to mortgage companies in the latter part of the quarter.

FIRST HORIZON NATIONAL CORP. 1Q20 FORM 10-Q REPORT 90

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Table 8-Average Short-Term Borrowings



                                             Quarter Ended                        Quarter Ended
                                            March 31, 2020                      December 31, 2019
(Dollars in thousands)                Amount       Percent of total         Amount        Percent of total     Growth Rate
Short-term borrowings:
Securities sold under agreements
to repurchase                      $   777,692               20 %      $      701,213               21 %           11  %
Trading liabilities                    750,520               19               585,889               18             28
Federal funds purchased                746,686               19             1,163,701               35            (36 )
Other short-term borrowings          1,686,690               42               844,558               26             NM
Total short-term borrowings        $ 3,961,588              100 %      $    3,295,361              100 %           20  %


NM - Not meaningful
Term Borrowings
Term borrowings include senior and subordinated borrowings with original
maturities greater than one year. Average term borrowings were $.8 billion in
first quarter 2020 and $.9 billion in fourth quarter 2019. Period-end term
borrowings were $.8 billion on March 31, 2020 and December 31, 2019. In April
2020, First Horizon Bank issued $450 million of subordinated notes.

Other Liabilities
Period-end other liabilities were $1.2 billion on March 31, 2020, up from $1.0
billion on December 31, 2019, primarily driven by increases in derivative
liabilities and fixed income payables.
Capital


Management's objectives are to provide capital sufficient to cover the risks
inherent in FHN's businesses, to maintain excess capital to well-capitalized
standards, and to assure ready access to the capital markets. Period-end equity
decreased $20.4 million from $5.1 billion on December 31, 2019 to $5.1 billion
on March 31, 2020. Average equity decreased $37.5 million to $5.0 billion in
first quarter 2020 from $5.0 billion in fourth quarter 2019. The decrease in
period-end and average equity was largely attributable to the adoption impact of
ASU 2016-13 (CECL) which

resulted in a net decrease to retained earnings of $96.1 million on January 1,
2020, coupled with common and preferred dividends paid, somewhat offset by net
income recognized since fourth quarter 2019. A decrease in accumulated other
comprehensive income ("AOCI"), largely the result of an increase in unrealized
gains associated with AFS debt securities partially mitigated the decrease in
period-end and average equity.



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The following tables provide a reconciliation of Shareholders' equity from the
Consolidated Condensed Statements of Condition to Common Equity Tier 1, Tier 1
and Total Regulatory Capital as well as certain selected capital ratios:
Table 9-Regulatory Capital and Ratios
(Dollars in thousands)                                     March 31, 2020      December 31, 2019
Shareholders' equity                                      $     4,760,149     $        4,780,577
Modified CECL transitional amount (a)                             132,811                      -
FHN non-cumulative perpetual preferred                            (95,624 )              (95,624 )
Common equity                                             $     4,797,336     $        4,684,953
Regulatory adjustments:
Disallowed goodwill and other intangibles                      (1,501,286 )           (1,505,971 )
Net unrealized (gains)/losses on securities
available-for-sale                                               (119,357 )              (31,079 )

Net unrealized (gains)/losses on pension and other postretirement plans

                                              271,809                273,914
Net unrealized (gains)/losses on cash flow hedges                 (16,288 )               (3,227 )
Disallowed deferred tax assets                                     (9,502 )               (8,610 )
Other deductions from common equity tier 1                           (949 )               (1,044 )
Common equity tier 1                                      $     3,421,763     $        3,408,936
FHN non-cumulative perpetual preferred                             95,624                 95,624
Qualifying noncontrolling interest-First Horizon Bank
preferred stock                                                   294,816                255,890
Tier 1 capital                                            $     3,812,203     $        3,760,450
Tier 2 capital                                                    507,181                394,435
Total regulatory capital                                  $     4,319,384     $        4,154,885
Risk-Weighted Assets
First Horizon National Corporation                        $    40,055,114     $       37,045,782
First Horizon Bank                                             39,670,943

36,626,993


Average Assets for Leverage
First Horizon National Corporation                             42,348,418             41,583,446
First Horizon Bank                                             41,632,972             40,867,365



                                         March 31, 2020         December 31, 2019
                                      Ratio       Amount       Ratio       Amount
Common Equity Tier 1
First Horizon National Corporation    8.54 %   $ 3,421,763     9.20 %   $ 3,408,936
First Horizon Bank                    8.70       3,450,974     9.38

3,433,867


Tier 1
First Horizon National Corporation    9.52       3,812,203    10.15       3,760,450
First Horizon Bank                    9.44       3,745,790    10.18

3,728,683

Total

First Horizon National Corporation 10.78 4,319,384 11.22 4,154,885 First Horizon Bank

                   10.37       4,113,057    10.77

3,944,613


Tier 1 Leverage
First Horizon National Corporation    9.00       3,812,203     9.04       3,760,450
First Horizon Bank                    9.00       3,745,790     9.12       3,728,683

(a) The modified CECL transitional amount is calculated as defined in the CECL

interim final rule issued by the banking regulators on March 27, 2020 and

includes the full amount of the impact to retained earnings from the initial

adoption of CECL plus 25 percent of the change in the adjusted allowance for

credit losses ("AACL") since FHN's initial adoption of CECL through March 31,


    2020.



Banking regulators define minimum capital ratios for bank holding companies and
their bank subsidiaries. Based on the capital rules and definitions prescribed
by the banking regulators, should any depository institution's capital ratios
decline below predetermined levels, it would become subject to a series of
increasingly restrictive regulatory actions. The system categorizes a depository
institution's

capital position into one of five categories ranging from well-capitalized to
critically under-capitalized. For an
institution the size of FHN to qualify as well-capitalized, Common Equity Tier
1, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least
6.5 percent, 8 percent, 10 percent, and 5 percent, respectively. Furthermore,
beginning January 1, 2019, a capital conservation buffer of 50 basis points
above these levels


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must be maintained on the Common Equity Tier 1, Tier 1 Capital and Total Capital
ratios to avoid restrictions on dividends, share repurchases and certain
discretionary bonuses.
As of March 31, 2020, each of FHN and First Horizon Bank had sufficient capital
to qualify as well-capitalized institutions. FHN also had sufficient capital to
meet the capital conservation buffer requirement while First Horizon Bank fell
slightly below based on its Total Capital Ratio. (See discussion on dividend
limitations for First Horizon Bank in the "Liquidity Risk Management" section of
this MD&A.) In April 2020, First Horizon Bank generated additional Tier 2
capital through the issuance of $450 million of subordinated notes. The first
quarter 2020 capital ratios for both FHN and First Horizon Bank are calculated
under the interim final rule issued by the banking regulators in late March 2020
to delay the effects of CECL on regulatory capital for two years, followed by a
three-year transition period. For both FHN and First Horizon Bank, the
risk-based regulatory capital ratios decreased in first quarter 2020 relative to
fourth quarter 2019 primarily due to increased risk-weighted assets due to
period-end commercial loan growth (primarily loans to mortgage companies) and
higher draw activity in March, coupled with an increase in market risk assets
driven by a spike in VaR due to extreme volatility in March. During 2020,
capital ratios are expected to remain above well-capitalized standards.


Common Stock Purchase Programs
Pursuant to board authority, FHN may repurchase shares of its common stock from
time to time and will evaluate the level of capital and take action designed to
generate or use capital, as appropriate, for the interests of the shareholders,
subject to legal and regulatory restrictions. Two common stock purchase programs
currently authorized are discussed below. FHN's board has not authorized a
preferred stock purchase program.
General Authority
On January 23, 2018, FHN announced a $250 million share purchase authority with
an expiration date of January 31, 2020. On January 29, 2019, FHN announced a
$250 million increase in that authority along with an extension of the
expiration date to January 31, 2021. Purchases may be made in the open market or
through privately negotiated transactions and are subject to market conditions,
accumulation of excess equity, prudent capital management, and legal and
regulatory restrictions. As of March 31, 2020, $229.3 million in purchases had
been made under this authority at an average price per share of $15.09, $15.07
excluding commissions. Management currently does not anticipate purchasing a
material number of shares under this authority during the first half of 2020 due
to the pending merger of equals with IBKC.
Table 10a-Issuer Purchases of Common Stock - General Authority
                                                                      Total number of        Maximum approximate
(Dollar values and volume     Total number                           shares purchased       dollar value that may
in thousands, except per       of shares        Average price       as part of publicly    yet be purchased under
share data)                    purchased      paid per share (a)    announced programs          the programs
2020
January 1 to January 31                 -                     NA                     -     $             270,654
February 1 to February 29               -                     NA                     -                   270,654
March 1 to March 31                     -                     NA                     -                   270,654
Total                                   -                    N/A                     -

(a) Represents total costs including commissions paid.



Compensation Authority
A consolidated compensation plan share purchase program was announced on
August 6, 2004. This program consolidated into a single share purchase program
all of the previously authorized compensation plan share programs as well as the
renewal of the authorization to purchase shares for 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. Purchases may be made in the


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

maximum number of shares that may be purchased under the program was 24.3 million shares. Management currently does not anticipate purchasing a material number of shares under this authority during 2020.

Table 10b-Issuer Purchase of Common Stock - Compensation Authority


                                                                      Total

number of Maximum number


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


Asset Quality



Loan Portfolio Composition
FHN groups its loans into portfolio segments based on internal classifications
reflecting the manner in which the ALLL is established and how credit risk is
measured, monitored, and reported. From time to time, and if conditions are such
that certain subsegments are uniquely affected by economic or market conditions
or are experiencing greater deterioration than other components of the loan
portfolio, management may determine the ALLL at a more granular level.
Commercial loans are composed of commercial, financial, and industrial ("C&I")
and commercial real estate ("CRE"). Consumer loans are composed of consumer real
estate; and credit card and other. In first quarter 2020, FHN consolidated its
permanent mortgage portfolio into consumer real estate. Loans previously
classified in permanent mortgage included primarily jumbo mortgages and
one-time-close ("OTC") completed construction loans in the non-strategic segment
that were originated through pre-2009 mortgage businesses. FHN has a
concentration of residential real estate loans (19 percent of total loans).
Industry concentrations are discussed under the heading C&I below.
Consolidated key asset quality metrics for each of these portfolios can be found
in Table 17 - Asset Quality by Portfolio. Credit underwriting guidelines are
outlined in Exhibit 13 to FHN's Annual Report on Form 10-K for the year ended
December 31, 2019, in the Loan Portfolio Composition discussion in the Asset
Quality Section

beginning on page 67 and continuing to page 87. FHN's credit underwriting
guidelines and loan product offerings as of March 31, 2020, are generally
consistent with those reported and disclosed in the Company's Form 10-K for the
year ended December 31, 2019.
COMMERCIAL LOAN PORTFOLIOS
C&I
The C&I portfolio was $22.1 billion on March 31, 2020, and is comprised of loans
used for general business purposes. Typical products include working capital
lines of credit, term loan financing of owner-occupied real estate and fixed
assets, and trade credit enhancement through letters of credit. The largest
geographical concentrations of balances as of March 31, 2020, are in Tennessee
(29 percent), North Carolina (10 percent), California (9 percent), Texas (6
percent), Florida (6 percent), Georgia (4 percent), South Carolina (3 percent),
and Virginia (3 percent), with no other state representing more than 3 percent
of the portfolio.
The following table provides the composition of the C&I portfolio by industry as
of March 31, 2020, and December 31, 2019. For purposes of this disclosure,
industries are determined based on the North American Industry Classification
System ("NAICS") industry codes used by Federal statistical agencies in
classifying business establishments for the collection, analysis, and
publication of statistical data related to the U.S. business economy.
Table 11-C&I Loan Portfolio by Industry



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

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

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




Industry Concentrations
Loan concentrations are considered to exist for a financial institution when
there are loans to numerous borrowers engaged in similar activities that would
cause them to be similarly impacted by economic or other conditions. 39 percent
of FHN's C&I portfolio (Finance and insurance plus Loans to mortgage companies)
could be affected by items that uniquely impact the financial services industry.
Except "Finance and Insurance" and "Loans to Mortgage Companies", as discussed
below, on March 31, 2020, FHN did not have any other concentrations of C&I loans
in any single industry of 10 percent or more of total loans.
Loans to Mortgage Companies
The balance of loans to mortgage companies was 26 percent of the C&I portfolio
as of March 31, 2020, 22 percent as of December 31, 2019 and 13 percent as of
March 31, 2019, and includes balances related to both home purchase and
refinance activity. This portfolio class, which generally fluctuates with
mortgage rates and seasonal factors, includes commercial lines of credit to
qualified mortgage companies primarily for the temporary warehousing of eligible
mortgage loans prior to the borrower's sale of those mortgage loans to third
party investors. Generally, lending to mortgage lenders increases when there is
a decline in mortgage rates and decreases when rates rise. In periods of
economic uncertainty, this trend may not occur even if interest rates are
declining. In first quarter 2020, 46 percent of the loans funded were home
purchases and 54 percent were refinance transactions.
Finance and Insurance
The finance and insurance component represents 13 percent of the C&I portfolio
as of March 31, 2020 compared to 14 percent as of December 31, 2019, and
includes TRUPS (i.e., long-term unsecured loans to bank


and insurance-related businesses), loans to bank holding companies, and
asset-based lending to consumer finance companies. As of March 31, 2020,
asset-based lending to consumer finance companies represents approximately $1.2
billion of the finance and insurance component.
TRUPS lending was originally extended as a form of "bridge" financing to
participants in the pooled trust preferred securitization program offered
primarily to smaller banking (generally less than $15 billion in total assets)
and insurance institutions through FHN's fixed income business. Origination of
TRUPS lending ceased in early 2008. Individual TRUPS are re-graded at least
quarterly as part of FHN's commercial loan review process. The terms of these
loans generally include a scheduled 30 year balloon payoff and include an option
to defer interest for up to 20 consecutive quarters. As of March 31, 2020, no
TRUP relationship was on interest deferral.
As of March 31, 2020, the unpaid principal balance ("UPB") of trust preferred
loans totaled $234.2 million ($173.6 million of bank TRUPS and $60.7 million of
insurance TRUPS) with the UPB of other bank-related loans totaling
$282.3 million. Inclusive of a valuation allowance on TRUPS of $18.9 million,
total reserves (ALLL plus the valuation allowance) for TRUPS and other
bank-related loans were $29.9 million or 6 percent of outstanding UPB.
C&I Asset Quality Trends
The C&I portfolio trends remained stable in first quarter 2020; however, the
impact of economic uncertainty attributable to the COVID-19 pandemic could
negatively impact future trends. The C&I ALLL increased $132.0 million from
December 31, 2019, to $254.5 million as of March 31, 2020, primarily due to the
sudden, steep decline


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in the economic forecast attributable to the COVID-19 pandemic and the adoption
of ASU 2016-13.
The allowance as a percentage of period-end loans increased 54 basis points to
1.15 percent as of March 31, 2020, compared to .61 percent as of year-end 2019.
Nonperforming C&I loans increased $21.8 million from December 31, 2019, to $96.1
million on March 31, 2020. The nonperforming loan ("NPL") ratio increased to .43
percent of C&I loans as of March 31, 2020, from .37 percent as of December 31,
2019. The increase in NPLs was primarily driven by one credit.

The 30+ delinquency ratio increased 3 basis points to .08 percent as of
March 31, 2020. First quarter 2020 experienced net charge-offs of $5.8 million
compared to $3.3 million and $2.3 million of net charge-offs in fourth quarter
2019 and first quarter 2019, respectively. First quarter 2020 net charge-offs
were primarily driven by one credit.
The following table shows C&I asset quality trends by segment.
Table 12-C&I Asset Quality Trends by Segment
                                                                        2020
                                                                 Three months ended
(Dollars in thousands)                            Regional Bank     Non-Strategic      Consolidated
Allowance for loan losses as of January 1        $     122,426     $           60     $    122,486
ASU Adoption 2016-13                                     9,086              9,696           18,782
Charge-offs                                             (6,751 )                -           (6,751 )
Recoveries                                                 931                  4              935
Provision/(provision credit) for loan losses           118,970                 94          119,064
Allowance for loan losses as of March 31         $     244,662     $        9,854     $    254,516
Net charge-offs % (qtr. annualized)                       0.12 %               NM             0.12 %
Allowance / net charge-offs                              10.45 x               NM            10.88 x

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

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

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


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.




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Commercial Real Estate
The CRE portfolio was $4.6 billion on March 31, 2020. The CRE portfolio includes
both financings for commercial construction and nonconstruction loans. The
largest geographical concentrations of balances as of March 31, 2020 are in
North Carolina (28 percent), Tennessee (20 percent), Florida (13 percent), South
Carolina (8 percent), Texas (8 percent), Georgia (6 percent), and Kentucky (3
percent), with no other state representing more than 3 percent of the portfolio.
This portfolio is segregated between the income-producing CRE class which
contains loans, draws on lines and letters of credit to commercial real estate
developers for the construction and mini-permanent financing of income-producing
real estate, and the residential CRE class. Subcategories of income CRE consist
of office (27 percent), multi-family (22 percent), retail (19 percent),
industrial (13 percent), hospitality (12 percent), land/land development (1
percent), and other (6 percent).
The residential CRE class includes loans to residential builders and developers
for the purpose of constructing single-family homes, condominiums, and town
homes, and on a limited basis, for developing residential subdivisions. After
the fulfillment of existing commitments over the near term, the residential CRE
class will be in a wind-down state with the expectation of full runoff in the
foreseeable future.


















CRE Asset Quality Trends
The CRE portfolio as of March 31, 2020 was not significantly affected by the
global COVID-19 pandemic, with nonperforming loans up $.4 million from
December 31, 2019. However, economic uncertainty attributable to COVID-19 could
impact future CRE portfolio trends. The allowance increased to $47.6 million as
of March 31, 2020, from $36.1 million as of December 31, 2019 primarily due to
COVID-19. Allowance as a percentage of loans increased 20 basis points from .83
percent as of December 31, 2019, to 1.03 percent as of March 31, 2020.
Nonperforming loans as a percentage of total CRE loans increased 1 basis point
from December 31, 2019, to .05 percent as of March 31, 2020.
Accruing delinquencies as a percentage of period-end loans decreased to .01
percent as of March 31, 2020, from .02 percent as of December 31, 2019. Net
charge-offs were not significant in first quarter 2020 and were $377 thousand in
first quarter 2019.
The following table shows commercial real estate asset quality trends by
segment.



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Table 13-Commercial Real Estate Asset Quality Trends by Segment



                                                                        2020
                                                                 Three months ended
(Dollars in thousands)                            Regional Bank      Non-Strategic     Consolidated
Allowance for loan losses as of January 1        $       33,729     $       2,383     $     36,112
ASU Adoption 2016-13                                     (5,191 )          (2,157 )         (7,348 )
Charge-offs                                                (581 )               -             (581 )
Recoveries                                                  573                 -              573
Provision/(provision credit) for loan losses             18,399               470           18,869

Allowance for loan losses as of March 31 $ 46,929 $

   696     $     47,625
Net charge-offs % (qtr. annualized)                           - %               -                - %
Allowance / net charge-offs                                  NM                NM               NM

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

                                                                        2019
                                                                 Three months ended
(Dollars in thousands)                            Regional Bank      Non-Strategic     Consolidated
Allowance for loan losses as of January 1        $       31,311     $           -     $     31,311
Charge-offs                                                (434 )               -             (434 )
Recoveries                                                   57                 -               57
Provision/(provision credit) for loan losses              3,448                 -            3,448

Allowance for loan losses as of March 31 $ 34,382 $

     -     $     34,382
Net charge-offs % (qtr. annualized)                        0.04 %              NM             0.04 %
Allowance / net charge-offs                               22.50 x              NM            22.50 x

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


NM-Not meaningful
Loans are expressed net of unearned income.
(a) 30+ Delinquency % includes all accounts delinquent more than one month and
    still accruing interest.






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CONSUMER LOAN PORTFOLIOS
Consumer Real Estate
The consumer real estate portfolio was $6.1 billion on March 31, 2020, and is
primarily composed of home equity lines and installment loans including
restricted balances (loans consolidated under ASC 810). The largest geographical
concentrations of balances as of March 31, 2020, are in Tennessee (55 percent),
North Carolina (15 percent), Florida (14 percent), and California (3 percent),
with no other state representing more than 3 percent of the portfolio. As of
March 31, 2020, approximately 85 percent of the consumer real estate portfolio
was in a first lien position. At origination, weighted average FICO score of
this portfolio was 755 and refreshed FICO scores averaged 754 on March 31, 2020.
Generally, performance of this portfolio is affected by life events that affect
borrowers' finances, the level of unemployment, and home prices.
Home equity lines of credit ("HELOCs") comprise $1.3 billion of the consumer
real estate portfolio as of March 31, 2020. FHN's HELOCs typically have a 5 or
10 year draw period followed by a 10 or 20 year repayment period, respectively.
During the draw period, a borrower is able to draw on the line and is only
required to make interest payments. The line is automatically frozen if a
borrower becomes 45 days or more past due on payments. Once the draw period has
concluded, the line is closed and the borrower is required to make both
principal and interest



payments monthly until the loan matures. The principal payment generally is
fully amortizing, but payment amounts will adjust when variable rates reset to
reflect changes in the prime rate.
As of March 31, 2020, approximately 78 percent of FHN's HELOCs are in the draw
period compared to approximately 76 percent as of December 31, 2019. Based on
when draw periods are scheduled to end per the line agreement, it is expected
that $306.7 million, or 32 percent of HELOCs currently in the draw period, will
enter the repayment period during the next 60 months. Delinquencies and
charge-off rates for HELOCs that have entered the repayment period are initially
higher than HELOCs still in the draw period because of the increased minimum
payment requirement; however, after some seasoning, performance of these loans
usually begins to stabilize. The home equity lines of the consumer real estate
portfolio are being monitored closely for those nearing the end of the draw
period and borrowers are initially being contacted at least 24 months before the
repayment period begins to remind the customer of the terms of their agreement
and to inform them of options.
The following table shows the HELOCs currently in the draw period and expected
timing of conversion to the repayment period.
Table 14-HELOC Draw To Repayment Schedule

                                       March 31, 2020           December 31, 2019
                                    Repayment                 Repayment
(Dollars in thousands)               Amount      Percent        Amount       Percent
Months remaining in draw period:
0-12                               $   46,788         5 %   $      47,455         5 %
13-24                                  59,132         6            58,843         6
25-36                                  64,613         7            65,833         7
37-48                                  60,114         6            67,692         7
49-60                                  76,089         8            75,246         7
>60                                   665,293        68           666,001        68
Total                              $  972,029       100 %   $     981,070       100 %


Consumer Real Estate Asset Quality Trends
Overall, performance of the consumer real estate portfolio remained stable in
first quarter 2020. Economic uncertainty attributable to COVID-19 could impact
future trends. The non-strategic segment is a run-off portfolio and while the
absolute dollars of delinquencies and nonaccruals as well as the 30+ accruing
delinquencies ratio improved from year-end, nonperforming loans ratios
deteriorated. That trend of increasing deterioration of ratios in the
non-strategic



segment is likely to continue and may become more skewed as the portfolio
shrinks and some of the stronger borrowers payoff or refinance elsewhere. NPLs
as a percentage of loans increased 10 basis point from year-end to 1.49 percent
as of March 31, 2020. The ALLL increased $94.6 million from December 31, 2019,
to $123.0 million as of March 31, 2020, primarily due to the adoption of ASU
2016-13. The allowance as a percentage of loans increased 155 basis points to
2.01 percent as of March 31, 2020, compared to year-end. The balance of
nonperforming loans increased $5.5 million to $91.2


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million as of March 31, 2020. Loans delinquent 30 or more days and still
accruing declined from $42.9 million as of December 31, 2019, to $40.1 million
as of March 31, 2020. The portfolio realized net recoveries of $1.2 million in
first quarter 2020 compared to net recoveries of $3.3 million in

fourth quarter 2019 and net recoveries of $1.2 million in first quarter 2019.
The following table shows consumer real estate asset quality trends by segment.
Table 15-Consumer Real Estate Asset Quality Trends by Segment

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

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

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

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


NM-Not meaningful
Loans are expressed net of unearned income.
(a) In first quarter 2020, the Permanent Mortgage portfolio was combined into

Consumer Real Estate portfolio, all prior periods were revised for

comparability.

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


    still accruing interest.






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



economic forecast attributable to the COVID-19 pandemic and the adoption of ASU
2016-13. Loans 30 days or more delinquent and accruing as a percentage of loans
increased 6 basis points from December 31, 2019, to .99 percent as of March 31,
2020. Net charge-offs were $2.6 million in first quarter 2020 compared to $3.1
million in first quarter 2019.
Table 16-Credit Card and Other Asset Quality Trends by Segment

                                                                         2020
                                                                  Three months ended
(Dollars in thousands)                            Regional Bank      Non-Strategic     Consolidated
Allowance for loan losses as of January 1        $       13,235     $          31     $      13,266
ASU Adoption 2016-13                                      1,607               361             1,968
Charge-offs                                              (3,408 )            (403 )          (3,811 )
Recoveries                                                  915               264             1,179
Provision/(provision credit) for loan losses              6,654                71             6,725

Allowance for loan losses as of March 31 $ 19,003 $

   324     $      19,327
Net charge-offs % (qtr. annualized)                        2.14 %            1.82 %            2.12 %
Allowance / net charge-offs                                1.89 x            0.58 x            1.83 x

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

                                                                         2019
                                                                  Three months ended
(Dollars in thousands)                            Regional Bank      Non-Strategic     Consolidated
Allowance for loan losses as of January 1        $       12,595     $         132     $      12,727
Charge-offs                                              (3,002 )          (1,186 )          (4,188 )
Recoveries                                                  745               342             1,087
Provision/(provision credit) for loan losses              2,179               857             3,036

Allowance for loan losses as of March 31 $ 12,517 $

   145     $      12,662
Net charge-offs % (qtr. annualized)                        2.10 %            4.35 %            2.44 %
Allowance / net charge-offs                                1.37 x            0.04 x            1.01 x

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


NM-Not meaningful
Loans are expressed net of unearned income.
(a) 30+ Delinquency % includes all accounts delinquent more than one month and
    still accruing interest.





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The following table provides additional asset quality data by loan portfolio: Table 17-Asset Quality by Portfolio



                                   March 31      December 31
                                     2020            2019
Key Portfolio Details
C&I
Period-end loans ($ millions)     $  22,124     $     20,051
30+ Delinq. % (a)                      0.08 %           0.05 %
NPL %                                  0.43             0.37
Charge-offs % (qtr. annualized)        0.12             0.07
Allowance / loans %                    1.15 %           0.61 %
Allowance / net charge-offs           10.88 x           9.25 x
Commercial Real Estate
Period-end loans ($ millions)     $   4,640     $      4,337
30+ Delinq. % (a)                      0.01 %           0.02 %
NPL %                                  0.05             0.04
Charge-offs % (qtr. annualized)           -     NM
Allowance / loans %                    1.03 %           0.83 %
Allowance / net charge-offs              NM               NM
Consumer Real Estate (b)
Period-end loans ($ millions)     $   6,119     $      6,177
30+ Delinq. % (a)                      0.66 %           0.70 %
NPL %                                  1.49             1.39
Charge-offs % (qtr. annualized)          NM               NM
Allowance / loans %                    2.01 %           0.46 %
Allowance / net charge-offs              NM               NM
Credit Card and Other
Period-end loans ($ millions)     $     495     $        496
30+ Delinq. % (a)                      0.99 %           0.93 %
NPL %                                  0.07             0.07
Charge-offs % (qtr. annualized)        2.12             2.29
Allowance / loans %                    3.91 %           2.68 %
Allowance / net charge-offs            1.83 x           1.14 x


NM - Not meaningful
Loans are expressed net of unearned income.
(a) 30+ Delinquency % includes all accounts delinquent more than one month and

still accruing interest.

(b) In first quarter 2020, the Permanent Mortgage portfolio was combined into

Consumer Real Estate portfolio, all prior periods were revised for
    comparability.





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Allowance for Loan Losses
Management's policy is to maintain the ALLL at a level sufficient to recognize
current expected credit losses on the amortized cost basis of the loan
portfolio. The total allowance for loan losses increased to $444.5 million on
March 31, 2020, from $200.3 million on December 31, 2019. The ALLL as of
March 31, 2020, reflects the adoption of ASU 2016-13 on January 1, 2020 and the
sudden, steep decline in the economic forecast attributable to the COVID-19
pandemic. The ratio of allowance for credit losses to total loans, net of
unearned income, increase 69 basis points to 1.33 percent on March 31, 2020,
compared to .64 percent on December 31, 2019.
The provision for loan losses is the charge to or release of earnings necessary
to maintain the ALLL at a sufficient level reflecting management's estimate of
current expected losses on the amortized cost basis of the loan portfolio.
Provision expense was $145.0 million in first quarter 2020, compared to $9.0
million provision expense in first quarter 2019. The increase is primarily
attributable to the declining economic forecast attributable to the COVID-19
pandemic.
FHN expects asset quality trends to be impacted by the economic uncertainty
attributable to the COVID-19 pandemic. The C&I portfolio reflects a broad mix of
categories with the heaviest concentration in loans to mortgage companies which
carry minimal credit risk. The CRE portfolio metrics could be impacted by the
COVID-19 pandemic due to travel and occupancy restrictions set by state and
local governments affecting CRE- Hospitality and CRE-Retail. The consumer
portfolio could be impacted by the COVID-19 pandemic if consumer unemployment
continues to rise and customers are unable to continue making loan payments. The
consumer portfolio however is high quality with no subprime and minimal exposure
to high risk lending. The remaining non-strategic consumer real estate should
continue to steadily wind down; however, it could be impacted if unemployment
continues to rise and borrowers have difficulty making loan payments. Asset
quality metrics within non-strategic have become skewed as the portfolio
continues to shrink.
Consolidated Net Charge-offs
In first quarter 2020, FHN experienced net charge-offs of $7.2 million compared
to $4.5 million of net charge-offs in first quarter 2019.
The commercial portfolio experienced $5.8 million of net charge-offs in first
quarter 2020 compared to $2.6 million in net charge-offs in first quarter 2019.
In addition, the consumer real estate portfolio experienced net recoveries of
$1.2 million in both first quarter 2020 and first quarter 2019. Credit card and
other consumer experienced net charge-offs of $2.6 million in first quarter 2020
compared to $3.1 million a year ago.

Nonperforming Assets
Nonperforming loans are loans placed on nonaccrual if it becomes evident that
full collection of principal and interest is at risk, impairment has been
recognized as a partial charge-off of principal balance due to insufficient
collateral value and past due status, or on a case-by-case basis if FHN
continues to receive payments but there are other borrower-specific issues.
Included in nonaccruals are loans in which FHN continues to receive payments
including residential real estate loans where the borrower has been discharged
of personal obligation through bankruptcy, and second liens, regardless of
delinquency status, behind first liens that are 90 or more days past due, are
bankruptcies, or are TDRs. These, along with OREO, excluding OREO from
government insured mortgages, represent nonperforming assets ("NPAs").
Total nonperforming assets (including NPLs HFS) increased to $207.3 million on
March 31, 2020, from $181.9 million on December 31, 2019. The nonperforming
assets ratio (nonperforming assets excluding NPLs HFS to total period-end loans
plus OREO and other assets) increased to .61 percent as of March 31, 2020, from
.57 percent as of December 31, 2019. Portfolio nonperforming loans increased to
$189.8 million as of March 31, 2020, from $162.2 million as of December 31,
2019. The increase in nonperforming loans was driven by the C&I portfolio.
The ratio of the ALLL to NPLs in the loan portfolio was 2.34 times as of
March 31, 2020, compared to 1.24 times as of December 31, 2019. Certain
nonperforming loans in both the commercial and consumer portfolios are deemed
collateral-dependent and are charged down to an estimate of collateral value
less costs to sell. Because loss content has been recognized through a partial
charge-off, typically reserves are not recorded.
Table 19 provides an activity rollforward of OREO balances for March 31, 2020
and 2019. The balance of OREO, exclusive of inventory from government insured
mortgages, decreased to $13.9 million as of March 31, 2020, from $20.7 million
as of March 31, 2019, driven by the sale of OREO. Moreover, property values have
stabilized which also affects the balance of OREO.


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Table 18-Rollforward of OREO
                                  Three Months Ended
                                       March 31
(Dollars in thousands)            2020          2019
Beginning balance              $  15,660     $ 22,387
Valuation adjustments                (27 )         35
New foreclosed property              928        1,607
Disposal                          (2,680 )     (3,353 )
Ending balance, March 31 (a)   $  13,881     $ 20,676

(a) Excludes OREO and receivables related to government insured mortgages of $7.8

million and $3.4 million as of March 31, 2020 and 2019, respectively.

The following table provides consolidated asset quality information for the three months ended March 31, 2020 and 2019, and as of March 31, 2020, and December 31, 2019: Table 19-Asset Quality Information


                                                                 Three Months Ended
                                                                      March 31
(Dollars in thousands)                                       2020                2019
Allowance for loan losses:
Beginning balance on January 1                         $      200,307     $

180,424


ASU Adoption 2016-13                                          106,394                     -
Provision/(provision credit) for loan losses                  145,000                 9,000
Charge-offs                                                   (13,453 )             (10,527 )
Recoveries                                                      6,242                 6,014
Ending balance on March 31                             $      444,490     $         184,911
Reserve for remaining unfunded commitments                     39,303

8,014


Total allowance for loan losses and reserve for
unfunded commitments                                   $      483,793     $

192,925


Key ratios
Allowance / net charge-offs (a)                                 15.33 x               10.10 x
Net charge-offs % (b)                                            0.10 %                0.07 %

                                                        As of March 31     As of December 31
Nonperforming Assets by Segment                              2020                2019
Regional Banking:
Nonperforming loans (c)                                $      142,916     $         113,187
OREO (e)                                                       10,278                12,347
Total Regional Banking                                        153,194               125,534
Non-Strategic:
Nonperforming loans (c)                                        45,595                47,651
Nonperforming loans held-for-sale net of fair value
adjustment (c)                                                  3,611                 4,047
OREO (e)                                                        3,603                 3,313
Total Non-Strategic                                            52,809                55,011
Corporate:
Nonperforming loans (c)                                         1,302                 1,327
Total Corporate                                                 1,302                 1,327
Total nonperforming assets (c) (d)                     $      207,305     $

181,872




NM - Not meaningful.
(a) Ratio is total allowance divided by annualized net charge-offs.


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




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(d) Excludes OREO from government-insured mortgages.




                                                        As of March 31      As of December 31
                                                             2020                  2019
Loans and commitments:
Total period-end loans, net of unearned income         $    33,378,303     $       31,061,111
Potential problem assets (a)                                   411,122                346,896
Loans 30 to 89 days past due                                    48,498                 36,052
Loans 90 days past due (b) (c)                                  14,144                 21,859
Loans held-for-sale 30 to 89 days past due (c)                   4,164                  3,732
Loans held-for-sale 30 to 89 days past
due-guaranteed portion (c) (d)                                   4,049                  3,424
Loans held-for-sale 90 days past due (c)                         5,397                  6,484
Loans held-for-sale 90 days past due-guaranteed
portion (c) (d)                                                  5,165                  6,417
Remaining unfunded commitments                         $    10,966,768     $       12,355,220
Key ratios
Allowance / loans %                                               1.33 %                 0.64 %
Allowance / NPL                                                   2.34 x                 1.24 x
NPA % (e)                                                         0.61 %                 0.57 %
NPL %                                                             0.57 %                 0.52 %

(a) Includes past due loans.

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

(d) Guaranteed loans include FHA, VA, SBA, USDA, and GNMA loans repurchased

through the GNMA buyout program.

(e) Ratio is non-performing assets related to the loan portfolio to total loans

plus OREO and other assets.





Past Due Loans and Potential Problem Assets
Past due loans are loans contractually past due as to interest or principal
payments, but which have not yet been put on nonaccrual status. Loans in the
portfolio that are 90 days or more past due and still accruing were $14.1
million on March 31, 2020, compared to $21.9 million on December 31, 2019. Loans
30 to 89 days past due were $48.5 million on March 31, 2020, compared to $36.1
million on December 31, 2019. The increase was primarily driven by the C&I
portfolio.
Potential problem assets represent those assets where information about possible
credit problems of borrowers has caused management to have serious doubts about
the borrower's ability to comply with present repayment terms and includes loans
past due 90 days or more and still accruing. This definition is believed to be
substantially consistent with the standards established by Federal banking
regulators for loans classified as substandard. Potential problem assets in the
loan portfolio were $411.1 million on March 31, 2020, $346.9 million on
December 31, 2019, and $270.4 million on March 31, 2019. The increase in
potential problem assets compared to December 31, 2019 was due to net increase
in classified commercial loans within the C&I portfolio. 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 losses.

Troubled Debt Restructuring and Loan Modifications
As part of FHN's ongoing risk management practices, FHN attempts to work with
borrowers when appropriate to extend or modify loan terms to better align with
their current ability to repay. Extensions and modifications to loans are made
in accordance with internal policies and guidelines which conform to regulatory
guidance. Each occurrence is unique to the borrower and is evaluated separately.
In a situation where an economic concession has been granted to a borrower that
is experiencing financial difficulty, FHN identifies and reports that loan as a
Troubled Debt Restructuring ("TDR"). See Note 4 - Loans for further discussion
regarding TDRs and loan modifications.
On March 31, 2020 and December 31, 2019, FHN had $194.7 million and $206.3
million portfolio loans classified as TDRs, respectively. For TDRs in the loan
portfolio, FHN had loan loss reserves of $13.9 million and $19.7 million, or 7
percent and 10 percent of TDR balances, as of March 31, 2020 and December 31,
2019, respectively. Additionally, FHN had $50.5 million and $51.1 million of HFS
loans classified as TDRs as of March 31, 2020 and December 31, 2019,
respectively.


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The following table provides a summary of TDRs for the periods ended March 31,
2020 and December 31, 2019:
Table 20-Troubled Debt Restructurings

                                           As of                As of
(Dollars in thousands)                March 31, 2020      December 31, 2019
Held-to-maturity:
Consumer real estate (a):
Current                                        98,965                105,525
Delinquent                                      4,871                  4,634
Non-accrual (b)                                48,557                 52,087
Total consumer real estate                    152,393                162,246
Credit card and other:
Current                                           654                    615
Delinquent                                         45                     38
Non-accrual                                         -                      -
Total credit card and other                       699                    653
Commercial loans:
Current                                        10,401                 10,558
Delinquent                                          -                      -
Non-accrual                                    31,191                 32,841
Total commercial loans                         41,592                 43,399
Total held-to-maturity               $        194,684    $           206,298
Held-for-sale:
Current                              $         38,914    $            39,014
Delinquent                                      7,555                  8,008
Non-accrual                                     4,042                  4,106
Total held-for-sale                            50,511                 51,128

Total troubled debt restructurings $ 245,195 $ 257,426

(a) In first quarter 2020, the Permanent Mortgage portfolio was combined into

Consumer Real Estate portfolio, all prior periods were revised for

comparability.

(b) Balances as of March 31, 2020 and December 31, 2019, include $12.1 million

and $12.6 million, respectively, of discharged bankruptcies.

Risk Management




There have been no significant changes to FHN's risk management practices as
described under "Risk Management" beginning on page 88 of Item 7 to FHN's Annual
Report on Form 10-K for the year ended December 31, 2019.
MARKET RISK MANAGEMENT
There have been no significant changes to FHN's market risk management practices
as described under "Market Risk Management" beginning on page 89 of Item 7 to
FHN's Annual Report on Form 10-K for the year ended December 31, 2019.


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



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

                               Three Months Ended                As of
                                 March 31, 2020              March 31, 2020
(Dollars in thousands)     Mean       High       Low
1-day
VaR                      $ 2,291    $ 6,783    $ 1,023    $             4,970
SVaR                       8,526     17,727      4,592                  4,970
10-day
VaR                        6,940     24,880      1,807                 18,568
SVaR                      26,510     43,221     15,887                 18,568

                               Three Months Ended                As of
                                 March 31, 2019              March 31, 2019
(Dollars in thousands)     Mean       High       Low
1-day
VaR                      $ 1,433    $ 1,907    $ 1,018    $             1,307
SVaR                       8,243      9,629      6,242                  8,144
10-day
VaR                        3,390      4,280      2,592                  3,046
SVaR                      21,757     28,086     16,032                 21,812

                                   Year Ended                    As of
                               December 31, 2019           December 31, 2019
(Dollars in thousands)     Mean       High       Low
1-day
VaR                      $ 1,068    $ 1,907    $   503    $             1,325
SVaR                       6,198      9,629      3,157                  4,579
10-day
VaR                        2,824      7,000      1,499                  2,233
SVaR                      17,367     28,086      8,803                 14,975


First quarter 2020 VaR and SVaR increased due to extreme volatility as a result
of economic uncertainty associated with the COVID-19 pandemic.
FHN's overall VaR measure includes both interest rate risk and credit spread
risk. Separate measures of these component risks are as follows:
Table 22-Schedule of Risks Included in VaR
                             As of March 31, 2020          As of March 31, 2019             As of December 31, 2019
(Dollars in thousands)        1-day         10-day         1-day         10-day               1-day               10-day
Interest rate risk        $     1,255     $   2,628     $      560     $   1,412     $       693                $  3,929
Credit spread risk              2,301        11,758            398           726             417                     828


First quarter 2020 VaR and SVaR increased due to extreme volatility as a result
of economic uncertainty associated with the COVID-19 pandemic.
The potential risk of loss reflected by FHN's VaR measures assumes the trading
securities inventory is static. Because FHN's Fixed Income division procures
fixed income securities for purposes of distribution to customers, its trading
securities inventory turns over regularly.

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

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revenue day in its fixed income activities of the level indicated by its VaR
measurements.
In addition to being used in FHN's daily market risk management process, the VaR
and SVaR measures are also used by FHN in computing its regulatory market risk
capital requirements in accordance with the Market Risk Capital rules. For
additional information regarding FHN's capital adequacy refer to the "Capital"
section of this MD&A.
FHN also performs stress tests on its trading securities portfolio to calculate
the potential loss under various assumed market scenarios. Key assumed stresses
used in those tests are:
Down 25 bps - assumes an instantaneous downward move in interest rates of 25
basis points at all points on the interest rate yield curve.
Up 25 bps - assumes an instantaneous upward move in interest rates of 25 basis
points at all points on the interest rate yield curve.
Curve flattening - assumes an instantaneous flattening of the interest rate
yield curve through an increase in short-term rates and a decrease in long-term
rates. The 2-year point on the Treasury yield curve is assumed to increase 15
basis points and the 10-year point on the Treasury yield curve is assumed to
decrease 15 basis points. Shifts in other points on the yield curve are
predicted based on their correlation to the 2-year and 10-year points.
Curve steepening - assumes an instantaneous steepening of the interest rate
yield curve through a decrease in short-term rates and an increase in long-term
rates. The 2-year point on the Treasury yield curve is assumed to decrease 15
basis points and the 10-year point on the Treasury yield curve is assumed to
increase 15 basis points. Shifts in other points on the yield curve are
predicted based on their correlation to the 2-year and 10-year points.
Credit spread widening - assumes an instantaneous increase in credit spreads
(the difference between yields on Treasury securities and non-Treasury
securities) of 25 basis points.
Model Validation
Trading risk management personnel within Fixed Income have primary
responsibility for model risk management with respect to the model used by FHN
to compute its VaR measures and perform stress testing on the trading inventory.
Among other procedures, these personnel monitor model results and perform
periodic backtesting as part of an ongoing process of validating the accuracy of
the model. These model risk management activities are subject to annual review
by FHN's Model Validation Group, an independent assurance group charged with
oversight responsibility for FHN's model risk management.

INTEREST RATE RISK MANAGEMENT
There have been no significant changes to FHN's interest rate risk management
practices as described under "Interest Rate Risk Management" beginning on page
90 of Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31,
2019.
Net Interest Income Simulation Analysis

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

Management uses a simulation model to measure interest rate risk and to
formulate strategies to improve balance sheet positioning, earnings, or both,
within FHN's interest rate risk, liquidity, and capital guidelines. Interest
rate exposure is measured by forecasting 12 months of NII under various interest
rate scenarios and comparing the percentage change in NII for each scenario to a
base case scenario where interest rates remain unchanged. Assumptions are made
regarding future balance sheet composition, interest rate movements, and loan
and deposit pricing.  In addition, assumptions are made about the magnitude of
asset prepayments and earlier than anticipated deposit withdrawals. The results
of these scenarios help FHN develop strategies for managing exposure to interest
rate risk. While management believes the assumptions used and scenarios selected
in its simulations are reasonable, simulation modeling provides only an
estimate, not a precise calculation, of exposure to any given change in interest
rates.
Based on a static balance sheet as of March 31, 2020, NII exposures over the
next 12 months assuming rate shocks of plus 25 basis points, 50 basis points,
100 basis points, and 200 basis points are estimated to have favorable variances
of 2.2 percent, 3.5 percent, 5.1 percent, and 6.5 percent, respectively compared
to base NII. A steepening yield curve scenario where long-term rates increase by
50 basis points and short-term rates are static, results in a favorable NII
variance of 1.7 percent. A flattening yield curve scenario where long-term rates
decrease by 50 basis points and short-term rates are static, results in an
unfavorable NII variance of 1.9 percent. Rate shocks of minus 25 basis points
and 50 basis points result in unfavorable NII variances of 4.1 percent and 8.7
percent. These hypothetical scenarios are used to create a risk measurement
framework, and do not necessarily represent management's current view of future
interest rates or market developments.
During March 2020, the Federal Reserve lowered the Fed Funds range to 0.00% -
0.25%. However, due to


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dislocation in the short end of the curve, LIBOR has remained elevated compared
to the Fed Funds rate. As most of FHN's assets are indexed to LIBOR while most
of FHN's floating liabilities are indexed to Fed Funds, this has a material
impact on the shock scenarios.
FHN's net interest income may be impacted by the disruption from the recent
COVID-19 crisis. The increase in the unemployment rate, customer loan deferral
requests, the impact of government assistance programs, and other developments
could influence net interest income results. FHN is monitoring the current
economic situation and potential exposures closely.
CAPITAL RISK MANAGEMENT AND ADEQUACY
There have been no significant changes to FHN's capital management practices as
described under "Capital Risk Management and Adequacy" on page 91 of Item 7 to
FHN's Annual Report on Form 10-K for the year ended December 31, 2019.
OPERATIONAL RISK MANAGEMENT
There have been no significant changes to FHN's operational risk management
practices as described under "Operational Risk Management" beginning on page 91
of Item 7 to FHN's Annual Report on Form 10-K for the year ended December 31,
2019.
COMPLIANCE RISK MANAGEMENT
There have been no significant changes to FHN's compliance risk management
practices as described under "Compliance Risk Management" on page 92 of Item 7
to FHN's Annual Report on Form 10-K for the year ended December 31, 2019.
CREDIT RISK MANAGEMENT
There have been no significant changes to FHN's credit risk management practices
as described under "Credit Risk Management" beginning on page 92 of Item 7 to
FHN's Annual Report on Form 10-K for the year ended December 31, 2019.

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

establishes liquidity limits that are deemed appropriate for FHN's risk profile.
In accordance with the Liquidity Policy, ALCO manages FHN's exposure to
liquidity risk through a dynamic, real time forecasting methodology. Base
liquidity forecasts are reviewed by ALCO and are updated as financial conditions
dictate. In addition to the baseline liquidity reports, robust stress testing of
assumptions and funds availability are periodically reviewed. FHN maintains a
contingency funding plan that may be executed, should unexpected difficulties
arise in accessing funding that affects FHN, the industry as a whole, or both.
Subject to market conditions and compliance with applicable regulatory
requirements from time to time, funds are available from a number of sources
including the available-for-sale securities portfolio, dealer and commercial
customer repurchase agreements, access to the overnight and term Federal Funds
markets, incremental borrowing capacity at the FHLB ($2.1 billion was available
at March 31, 2020), brokered deposits, loan sales, syndications, and access to
the Federal Reserve Bank.
Core deposits are a significant source of funding and have historically been a
stable source of liquidity for banks. Generally, core deposits represent funding
from a financial institution's customer base which provide inexpensive,
predictable pricing. The Federal Deposit Insurance Corporation insures these
deposits to the extent authorized by law. Generally, these limits are $250
thousand per account owner for interest bearing and non-interest bearing
accounts. The ratio of total loans, excluding loans HFS and restricted real
estate loans, to core deposits was 100 percent on March 31, 2020 compared to 98
percent on December 31, 2019.
FHN also may use unsecured short-term borrowings as a source of liquidity.
Currently, the largest concentration of unsecured borrowings is federal funds
purchased from correspondent bank customers. These funds are considered to be
substantially more stable than funds purchased in the national broker markets
for federal funds due to the long, historical, and reciprocal nature of banking
services provided by FHN to these correspondent banks. The remainder of FHN's
wholesale short-term borrowings is securities sold under agreements to
repurchase transactions accounted for as secured borrowings with Regional
Banking's business customers or Fixed Income's broker dealer counterparties.
Both FHN and First Horizon Bank may access the debt markets in order to provide
funding through the issuance of senior or subordinated unsecured debt subject to
market conditions and compliance with applicable regulatory requirements. In
April 2020, First Horizon Bank issued $450 million of subordinated notes. These
subordinated notes qualify as Tier 2 capital for First Horizon Bank as well as
FHN, up to certain regulatory limits for minority interest capital instruments.


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Both FHN and First Horizon Bank have the ability to generate liquidity by
issuing preferred equity, and (for FHN) by issuing common equity, subject to
market conditions and compliance with applicable regulatory requirements. In
January 2013, FHN issued $100 million of Non-Cumulative Perpetual Preferred
Stock, Series A. As of March 31, 2020, First Horizon Bank and subsidiaries had
outstanding preferred shares of $295.4 million, which are reflected as
noncontrolling interest on the Consolidated Condensed Statements of Condition.
Parent company liquidity is primarily provided by cash flows stemming from
dividends and interest payments collected from subsidiaries. These sources of
cash represent the primary sources of funds to pay cash dividends to
shareholders and principal and interest to debt holders of FHN. The amount paid
to the parent company through First Horizon Bank common dividends is managed as
part of FHN's overall cash management process, subject to applicable regulatory
restrictions. Certain regulatory restrictions exist regarding the ability of
First Horizon Bank to transfer funds to FHN in the form of cash, common
dividends, loans, or advances. At any given time, the pertinent portions of
those regulatory restrictions allow First Horizon Bank to declare preferred or
common dividends without prior regulatory approval in an aggregate amount equal
to First Horizon Bank's retained net income for the two most recent completed
years plus the current year to date. For any period, First Horizon Bank's
'retained net income' generally is equal to First Horizon Bank's regulatory net
income reduced by the preferred and common dividends declared by First Horizon
Bank. Applying the dividend restrictions imposed under applicable federal and
state rules as outlined above, the Bank's total amount available for dividends
was $294.7 million as of April 1, 2020. Additionally, a capital conservation
buffer of 50 basis points above well-capitalized levels (equal to an extra 2.5
percent above minimum levels) must be maintained on the Common Equity Tier 1,
Tier 1 Capital and Total Capital ratios to avoid restrictions on dividends.
Since the Total Capital ratio for First Horizon Bank fell slightly below the
required buffer as of March 31, 2020, these capital conservation buffer rules
limit the amount of dividends that the Bank can declare in second quarter 2020
to its sole common stockholder, FHN, or to its preferred shareholders without
prior regulatory approval at $70.9 million. First Horizon Bank declared and paid
common dividends to the parent company in the amount of $65 million in first
quarter 2020 and $345.0 million in 2019. First Horizon Bank declared and paid
preferred dividends in first quarter 2020 and each quarter of 2019.
Additionally, First Horizon Bank declared preferred dividends in second quarter
2020, payable in July 2020.
Payment of a dividend to shareholders of FHN is dependent on several factors
which are considered by the Board. These factors include FHN's current and

prospective capital, liquidity, and other needs, applicable regulatory
restrictions, and also availability of funds to FHN through a dividend from
First Horizon Bank. FHN is subject to the capital conservation buffer
requirements as described in the above paragraph for First Horizon Bank.
Additionally, banking regulators generally require insured banks and bank
holding companies to pay cash dividends only out of current operating earnings.
Consequently, the decision of whether FHN will pay future dividends and the
amount of dividends will be affected by current operating results. FHN paid a
cash dividend of $.15 per common share on April 1, 2020, and in April 2020 the
Board approved a $.15 per common share cash dividend payable on July 1, 2020, to
shareholders of record on June 12, 2020. FHN paid a cash dividend of $1,550.00
per preferred share on April 10, 2020, and in April 2020 the Board approved a
$1,550.00 per preferred share cash dividend payable on July 10, 2020, to
shareholders of record on June 25, 2020.
CASH FLOWS
The Consolidated Condensed Statements of Cash Flows provide information on cash
flows from operating, investing, and financing activities for the three months
ended March 31, 2020 and 2019. The level of cash and cash equivalents decreased
$136.8 million during first quarter 2020 and $192.5 million in first quarter
2019.
Net cash provided in financing activities was $3.7 billion in first quarter
2020, largely driven by an inflow of deposits and higher short-term borrowings
(primarily FHLB stock). Net cash used by investing activities was $2.5 billion
in first quarter 2020, driven by strong loan growth and an increase in
interest-bearing cash. Net cash used by operating activities was $1.4 billion in
first quarter 2020 primarily due to net cash outflows of $407.9 million related
to loans held-for-sale as purchases and originations outpaced proceeds from
sales and settlements, $285.4 million related to fixed income trading activities
and $323.8 million related to an increase in derivatives.
Net cash used in financing activities was $222.2 million in first quarter 2019,
largely driven by a decrease in deposits, share repurchases and cash dividends
paid during first quarter 2019, somewhat offset by an increase in other
short-term borrowings, primarily FFP. Net cash used by investing activities was
$92.7 million in first quarter 2019, largely driven by increases in loan
balances somewhat offset by a decrease in interest-bearing cash and a net
decrease in AFS debt securities, as maturities and sales outpaced purchases. Net
cash provided by operating activities was $122.5 million in first quarter 2019
primarily due to net cash inflows of $369.2 million related to fixed income
trading activities and favorably driven cash-related


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net income items, somewhat offset by outflows of $358.6 million related to loans
held-for-sale.
Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations


Obligations from Pre-2009 Mortgage Businesses
Prior to September 2008 FHN originated loans through its pre-2009 mortgage
business, primarily first lien home loans, with the intention of selling them.
Sales typically were effected either as non-recourse whole loan sales or through
non-recourse proprietary securitizations. Conventional conforming single-family
residential mortgage loans were sold predominately to two government-sponsored
entities, or "GSEs": Fannie Mae and Freddie Mac. Also, federally insured or
guaranteed whole loans were pooled, and payments to investors were guaranteed
through Ginnie Mae. Many mortgage loan originations, especially nonconforming
mortgage loans, were sold to investors, or certificate-holders, predominantly
through First Horizon proprietary securitizations but also, to a lesser extent,
through other whole loans sold to private non-Agency purchasers. FHN used only
one trustee for all of its First Horizon proprietary securitizations. In
addition to First Horizon proprietary securitization and other whole loan sales
activities, FHN also originated and sometimes sold or securitized second-lien,
line of credit, and government-insured mortgage loans.
From these pre-2009 activities, FHN has incurred substantial losses stemming
from obligations to repurchase loans, pay make-whole amounts, or otherwise
resolve claims that loans which FHN originated, or FHN's servicing of those
loans, were deficient in a manner for which FHN was liable. Many years ago, FHN
established a repurchase and foreclosure liability, or reserve, in connection
with those claims. FHN has settled many claims, and the reserve is reduced each
time a claim is settled. As discussed in Note 10 - Contingencies and Other
Disclosures, FHN's principal remaining exposures for those activities relate to
(i) indemnification claims by underwriters, loan purchasers, and other parties
which assert that FHN-originated loans caused or contributed to losses which FHN
is legally obliged to indemnify, and (ii) indemnification or other claims
related to FHN's servicing of pre-2009 mortgage loans.
Servicing Obligations
FHN's national servicing business was sold as part of the platform sale in 2008.
A significant amount of mortgage servicing rights ("MSR") was sold at that time,
and a significant amount was retained. The related servicing activities,
including foreclosure and loss mitigation practices, not sold in 2008 were
outsourced including a subservicing arrangement initiated in 2011 (the "2011
subservicer"). In fourth quarter 2013 and first quarter 2014, FHN sold and
transferred a substantial majority of its

remaining servicing obligations and servicing assets (including advances) to the
2011 subservicer. The servicing still retained by FHN is not significant and
continues to be subserviced.
As servicer, FHN had contractual obligations to the owners of the loans
(primarily GSEs) and securitization trustees to handle billing, custodial, and
other tasks related to each loan. Each subservicer undertook to perform those
obligations on FHN's behalf during the applicable subservicing period, although
FHN legally remained the servicer of record for those loans that were
subserviced.
As mentioned in Note 10 - Contingencies and Other Disclosures - FHN has received
a notice of indemnification claims from its 2011 subservicer, Nationstar
Mortgage LLC, currently doing business as "Mr. Cooper." The notice asserts
several categories of indemnity obligations by FHN to Nationstar in connection
with mortgage loans under the subservicing arrangement and under the purchase
transaction. This matter currently is not in formal litigation, but litigation
in the future is possible.
Repurchase Accrual Methodology
FHN's approach for determining the adequacy of the repurchase and foreclosure
reserve has evolved, sometimes substantially, based on changes in information
available. Repurchase/make-whole rates vary based on purchaser, vintage, and
claim type. For those loans repurchased or covered by a make-whole payment,
cumulative average loss severities range between 50 and 60 percent of the UPB.
Repurchase Accrual Approach
In determining potential loss content, claims are analyzed by purchaser,
vintage, and claim type. FHN considers various inputs including claim rate
estimates, historical average repurchase and loss severity rates, mortgage
insurance cancellations, and mortgage insurance curtailment requests. Inputs are
applied to claims in the active pipeline, as well as to historical average
inflows to estimate loss content related to potential future inflows. Management
also evaluates the nature of claims from purchasers and/or servicers of loans
sold to determine if qualitative adjustments are appropriate.
Repurchase and Foreclosure Liability
The repurchase and foreclosure liability is comprised of 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, and estimated loss content related to
certain known claims not currently


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

approaches for the respective periods with current reserve levels. Changes in
the estimated required liability levels are recorded as necessary through the
repurchase and foreclosure provision. The repurchase and foreclosure liability
decreased to $13.5 million on March 31, 2019 from $14.5 million on December 31,
2019.

Market Uncertainties and Prospective Trends




FHN's future results could be affected both positively and negatively by several
known trends. Key among those are changes in the U.S. and global economy and
outlook, government actions affecting interest rates, availability and the
administration of stimulus relief for the economy and FHN's customers related to
the recent global COVID-19 pandemic, political uncertainty, potential changes in
federal policies and the potential impact to our customers, and FHN's strategic
initiatives. In addition, pre-2009 mortgage business matters in the
Non-strategic segment could continue to impact FHN's quarterly results in ways
which are both difficult to predict and unrelated to current operations.
Performance by FHN, and the entire U.S. financial services industry, is affected
considerably by the overall health of the U.S. and global economy and outlook.
Furthermore, FHN may be directly or indirectly impacted by global events that
impact our customers and their businesses. The recent global COVID-19 pandemic
has led to periods of significant volatility in financial commodities (including
oil and gas) and other markets, has adversely affected FHN's ability to conduct
normal business, has adversely affected FHN customers, and is likely to harm
FHN's business and future results of operations.
In March 2020 the Federal Reserve lowered short-term interest rates twice and
started a "quantitative easing" program intended to lower longer-term interest
rates and foster access to credit. The effective yields of 10-year and 30-year
U.S. Treasury securities achieved record low rates and the U.S. Congress enacted
relief legislation which, among other things, is intended to provide emergency
credit to businesses at risk for failure from government and public actions
related to the COVID-19 pandemic, and to mitigate an economic recession. These
changes in interest rates and the volatility in the market are likely to
negatively impact FHN's net interest margin. In the near term, amortization of
net processing fees related to government relief programs, including the
Paycheck Protection Program ("PPP"), may offset a portion of the net interest
margin decline. In addition, credit spreads have widened. For new loans, wider
spreads should help mitigate net interest margin compression. However, FHN will
not be able to capture the widened spreads quickly for outstanding floating-rate
loans.

The economic effects of the COVID-19 pandemic have significantly altered
business in the U.S. and globally leading to partial or full business closures,
individuals being furloughed or laid off, significant increases in unemployment,
and workers being partially or wholly ordered to work from home. Disruption to
FHN's customers due to governmental and societal responses to COVID-19 are
likely to adversely affect FHN's loan and deposit fee income as well as create
downward loan migration and a corresponding increase in loan loss expense and
reserves. In addition, loan charge-offs likely will increase over time,
especially if economic disruption related to COVID-19 continues for more than a
few months. Furthermore, government programs under the Coronavirus Aid, Relief,
and Economic Security Act (the "CARES Act") and other guidance intended to
provide relief to customers through temporary modifications and deferrals, may
in some instances mask or postpone reporting of credit problems and potential
defaults. In these circumstances, current credit quality indicators may not be
reflective of the underlying health of FHN's portfolios.
Given the ongoing and dynamic nature of the circumstances, it is difficult to
predict the impact of the COVID-19 pandemic on the businesses of FHN for the
remainder of 2020 or afterward.
In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority,
which regulates the London InterBank Offered Rate ("LIBOR"), announced that it
intends to halt persuading or compelling banks to submit rates for the
calculation of LIBOR after 2021. As a result, LIBOR as currently operated may
not continue after 2021. FHN is not currently able to predict the impact that
the transition from LIBOR will have on the Company; however, because FHN has
instruments with floating rate terms based on LIBOR, FHN may experience
increases in interest, dividends, and other costs relative to these instruments
subsequent to 2021. Additionally, the transition from LIBOR could impact or
change FHN's hedge accounting practices. FHN has initiated efforts to 1) develop
an inventory of affected loans, securities, and derivatives, 2) evaluate and
draft modifications as needed to address loans outstanding at the time of LIBOR
retirement, 3) obtain an understanding of the potential


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effects for applicable securities and derivatives and 4) assess revisions to
product pricing structures based on alternative reference rates. In March 2020,
the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate
Reform on Financial Reporting," which provides several optional expedients and
exceptions to ease the potential burden in accounting for reference rate reform.
Refer to the Accounting Changes Issued but Not Currently Effective section of
Note 1 - Financial Information for additional information. Additionally, the IRS
has released a proposal that is intended to facilitate the transition of
existing contracts from LIBOR to new reference rates without triggering
modification accounting or taxable exchange treatment for those contracts. This
proposal contains specific guidance that must be met in order to qualify for the
beneficial transition approach and FHN is considering this guidance in its
transition plans.
FHN has prioritized expense discipline to include reducing or controlling
certain expenses including realization of expense efficiencies from its 2017
merger with CBF and investing in revenue-producing activities, customer-facing
technology, and critical infrastructure. FHN remains committed to organic growth
through customer retention, key hires, targeted incentives, and other
traditional means.
When FHN closes its proposed merger with IBKC, under applicable accounting
guidance FHN will be required to record IBKC's loans at estimated fair value as
of the closing date. In addition, FHN will be required to assess the current (at
that time) expected credit losses associated with IBKC loans. That credit loss
assessment will be separate from the fair value estimation, and will result in a
charge to FHN's income for certain loans for the period in which closing occurs.
FHN is not able make that assessment at this time, but believes that the
associated charge to income will be substantial to quarterly income.
Lastly, while FHN has resolved most matters from the pre-2009 mortgage business,
some remain unresolved. The timing or financial impact of resolution of these
matters cannot be predicted with accuracy. Accordingly, the non-strategic
segment may occasionally and unexpectedly impact FHN's overall quarterly results
negatively or positively with reserve accruals or releases. Also, although new
pre-2009 mortgage business matters of significance arise at a much slower pace
than in years past and some formerly common legal claims no longer can be made
due to the passage of time, potential for new pre-2009 mortgage business matters
remains.
Foreclosure Practices
FHN retains exposure for potential deficiencies in servicing related to its
pre-2009 mortgage servicing business and subservicing arrangements. Further
details regarding these matters are provided in

"Obligations from Pre-2009 Mortgage Businesses - Servicing Obligations" under
"Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual
Obligations."
FHN response to the COVID-19 pandemic
As previously mentioned, the COVID-19 pandemic has, and will continue, to
directly and indirectly impact FHN and our customers. FHN has adapted many
operations to help ensure the health and safety of employees and customers
during these uncertain times. Among other things, FHN has implemented remote
work policies, branch activities handled by appointment or via drive-through
only, as well as additional sick time and child care assistance for employees.
Additionally, FHN's foundation has donated $2.5 million to support community
relief efforts.
Loans
FHN is actively monitoring the COVID-19 pandemic and its impact on customers and
FHN's credit quality. In response, FHN is proactively reaching out to customers
to discuss challenges and solutions, is providing line draws and new extensions
to existing customers, is providing support for small businesses through the PPP
(discussed in more detail below) and other stimulus programs, as well as
providing lending and deposit assistance through deferrals and waived fees.
Additionally, in certain sectors, FHN has reduced or stopped new lending.
Paycheck Protection Program

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

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

• Businesses, including nonprofit organizations under Internal Revenue Code


       ("IRC") Section 501(c)(3), veterans' organizations under IRC Section
       501(c)(19), and tribal organizations, that




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



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

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

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

• Fixed interest rate of 1 percent per annum

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

• First payment deferred for six months

• Waiver of "credit elsewhere" SBA 7(a) requirement

• No collateral or personal guarantees required

• No borrower fees charged to obtain such loans





Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of
principal and accrued interest on PPP loans to the extent that the proceeds are
used to cover eligible payroll, interest, rent, and utility costs over the
eight-week period after the loan is made as long as the borrower retains its
employees and their compensation levels. However, no more than 25 percent of
loan forgiveness may be attributable to eligible rent, utilities and interest.
In addition, loans qualifying for forgiveness will not be included in the
borrower's taxable income.
Lenders making these PPP loans are paid a fee by the Small Business
Administration on the date the loans are made. Lender fees are based on the
following sliding scale.

• Loans $350,000 and under: 5.00%

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

• Loans greater than $2 million: 1.00%





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

• Loans $350,000 and under: 1.00%

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

• Loans greater than $2 million: 0.25%





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

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

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

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

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Lending Assistance for Borrowers
Other customer support initiatives include incremental lending assistance for
borrowers through delayed payment programs and fee waivers. The following table
provides the UPB of loans related to deferrals granted to FHN's customers that
have been processed through April 30, 2020.
(Dollars in thousands)         As of April 30, 2020
Commercial:
General C&I                   $           1,582,903
Loans to mortgage companies                       -
TRUPS                                             -
Income CRE                                1,061,452
Residential CRE                               1,715
Total Commercial              $           2,646,070
Consumer:
HELOC                         $              69,531
R/E installment loans                       494,205
Credit Card & Other                           3,279
Total Consumer                              567,015
Total                         $           3,213,085



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

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

Deposits

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

Critical Accounting Policies




Except for the changes to the following Allowance for Loan Losses section, there
have been no significant changes to FHN's critical accounting policies as
described in "Critical Accounting Policies" beginning on page 99 of Item 7 to
FHN's Annual Report on Form 10-K for the year ended December 31, 2019.
ALLOWANCE FOR LOAN LOSSES
Management's policy is to maintain the ALLL at a level sufficient to absorb
expected credit losses in the loan portfolio. Management performs periodic and
systematic detailed reviews of its loan portfolio to identify trends and to
assess the overall collectability of the loan portfolio. Management believes the
accounting estimate related to the ALLL is a "critical accounting estimate" as:
(1) changes in it can materially affect the provision for loan losses and net
income, (2) it requires management to predict borrowers' likelihood or capacity
to repay, including evaluation of inherently uncertain future economic
conditions, (3) prepayment activity must be projected to estimate of the life of
loans that often are shorter than contractual terms, (4) it requires estimation
of a reasonable and supportable forecast period for credit losses for loan
portfolio segments before reversion to historical loss levels over the remaining
life of a loan and (5) expected future recoveries of amounts previously charged
off must be estimated. Accordingly, this is a highly subjective process and
requires significant judgment since it is difficult to evaluate current and
future economic conditions in relation to an overall credit cycle and estimate
the timing and extent of loss events that are expected to occur prior to end of
a loan's estimated life. The ALLL is increased by the provision for loan losses
and recoveries and is decreased by charged-off loans. Principal loan amounts are
charged off against the ALLL in the period in which the loan or any portion of
the loan is deemed to be uncollectible. This critical accounting estimate
applies to the regional banking, non-strategic, and corporate segments. A
management committee comprised of representatives from Risk Management, Finance,
Credit, and Treasury performs a quarterly review of the assumptions used in
FHN's ALLL analytical models, makes qualitative assessments of the loan
portfolio, and determines if qualitative adjustments should be recommended to
the modeled results. On a quarterly basis, as a part of Enterprise Risk
reporting and discussion, management addresses credit reserve adequacy and
credit losses with the Executive and Risk Committee of FHN's Board of Directors.
FHN believes that the critical assumptions underlying the accounting estimates
made by management include: (1) the commercial loan portfolio has been properly
risk graded based on information about borrowers in specific industries and
specific issues with respect to single borrowers; (2) borrower specific
information made available to FHN is current and accurate; (3) the loan
portfolio has been segmented properly and individual loans have similar credit
risk characteristics and will behave similarly; (4) the lives for loan portfolio
pools have been estimated properly, including consideration of expected
prepayments; (5) the economic forecasts utilized in the modeling of expected
credit losses are reflective of future economic conditions; (6)
entity-specific historical loss information has been properly assessed for all
loan portfolio segments as the

initial basis for estimating expected credit losses; (7) the reasonable and
supportable periods for loan portfolio segments have been properly determined;
(8) the reversion methodologies and timeframes for migration from the reasonable
and supportable period to the use of historical loss rates are reasonable; (9)
expected recoveries of prior charge off amounts have been properly estimated;
and (10)  qualitative adjustments to modeled loss results reasonably reflect
expected future credit losses as of the date of the financial statements.
While management uses the best information available to establish the ALLL,
future adjustments to the ALLL and methodology may be necessary if economic or
other conditions differ substantially from the assumptions used in making the
estimates. Such adjustments to original estimates, as necessary, are made in the
period in which these factors and other relevant considerations indicate that
loss levels vary from previous estimates.
See Note 1 - Summary of Significant Accounting Policies and Note 5 - Allowance
for Loan Losses for detail regarding FHN's processes, models, and methodology
for determining the ALLL.
ACCOUNTING CHANGES ISSUED BUT NOT CURRENTLY EFFECTIVE
Refer to Note 1 - Financial Information for a detail of accounting standards
that have been issued but are not currently effective, which section is
incorporated into MD&A by this reference.
Non-GAAP Information

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

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

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Table 23-Non-GAAP to GAAP Reconciliation


                                                                Three Months Ended
                                                                     March 31
(Dollars in thousands)                                         2020            2019
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)                                $ 5,002,394     $ 4,809,235
Less: Average noncontrolling interest (a)                      295,431

295,431


Less: Average preferred stock (a)                               95,624

95,624


(A) Total average common equity                            $ 4,611,339     $ 4,418,180
Less: Average intangible assets (GAAP) (b)                   1,560,340

1,584,694


(B) Average Tangible Common Equity (Non-GAAP)              $ 3,050,999     $ 2,833,486
Net Income Available to Common Shareholders
(C) Net income available to common shareholders
(annualized) (GAAP)                                        $    48,545     $   401,642
Ratios
(C)/(A) Return on average common equity ("ROCE") (GAAP)
(c)                                                               1.05 %          9.09 %
(C)/(B) Return on average tangible common equity
("ROTCE") (Non-GAAP) (d)                                          1.59           14.17



(a)Included in Total equity on the Consolidated Condensed Statements of
Condition.
(b)Includes Goodwill and other intangible assets, net of amortization.
(c)Ratio is annualized net income available to common shareholders to average
common equity.
(d)Ratio is annualized net income available to common shareholders to average
tangible common equity.


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RBC Upgrades First Horizon to Outperform From Sector Perform, Raises Price Target to $18 From $16	Apr. 09	MT
Keefe, Bruyette & Woods Upgrades First Horizon to Outperform From Market Perform, Raises Price Target to $18 From $16	Apr. 05	MT
JPMorgan Adjusts Price Target on First Horizon to $17.50 From $16, Maintains Neutral Rating	Apr. 04	MT
First Horizon to Redeem Certain Preferred Stock, Corresponding Depositary Shares	Apr. 01	MT
Evercore ISI Adjusts Price Target on First Horizon to $17.50 From $17, Maintains Outperform Rating	Mar. 28	MT
TD CEO Masrani's 2023 pay was lower over US regulatory issues, First Horizon deal	Mar. 12	RE
Transcript : First Horizon Corporation Presents at 2024 RBC Capital Markets Financial Institutions Conference, Mar-06-2024 08:40 AM	Mar. 06
Transcript : First Horizon Corporation Presents at 45th Annual Raymond James Institutional Investors Conference 2024, Mar-04-2024 08:40 AM	Mar. 04
First Horizon Corporation Appoints Ashley Argo as Deputy Chief Risk Officer	Feb. 29	CI
Tranche Update on First Horizon Corporation's Equity Buyback Plan announced on January 27, 2021.	Feb. 23	CI
US mid-sized banks with over or close to $100 billion in assets	Jan. 31	RE
Sector Update: Financial Stocks Rise Late Afternoon	Jan. 24	MT
Sector Update: Financial Stocks Higher Wednesday Afternoon	Jan. 24	MT
UBS Upgrades First Horizon to Buy From Neutral, Adjusts Price Target to $16 From $15.50	Jan. 24	MT
First Horizon Authorizes $650 Million Share Buyback Plan, Maintains Quarterly Dividend	Jan. 24	MT
First Horizon Corporation announces an Equity Buyback for $650 million worth of its shares.	Jan. 23	CI
First Horizon Corporation Declares Quarterly Common Stock Dividend, Payable on April 1, 2024	Jan. 23	CI
First Horizon Corporation and First Horizon Bank Announce Board Changes	Jan. 23	CI
First Horizon National Corporation authorizes a Buyback Plan.	Jan. 22	CI
First Horizon's Q4 Adjusted Earnings, Revenue Fall; Shares Rise	Jan. 18	MT
Transcript : First Horizon Corporation, Q4 2023 Earnings Call, Jan 18, 2024	Jan. 18
First Horizon's Q4 Adjusted Earnings, Revenue Fall	Jan. 18	MT
First Horizon Corporation Reports Earnings Results for the Fourth Quarter and Full Year Ended December 31, 2023	Jan. 18	CI

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Company Profile

First Horizon Corporation is a bank holding company, which provides diversified financial services primarily through its principal subsidiary, First Horizon Bank (the Bank). The Company operates through three segments: Regional Banking, Specialty Banking, and Corporate. The principal lines of business in the regional banking segment include commercial banking, business banking, consumer banking, private client, and wealth management. This segment also provides investment, wealth management, financial planning, trust and asset management services for consumer clients. The principal lines of business in the specialty banking segment include fixed income/capital markets, professional commercial real estate, mortgage warehouse lending, asset-based (secured) lending, franchise finance, equipment finance, energy finance, healthcare finance, and tax credit finance. This segment also delivers treasury management solutions, loan syndications, and international banking.

Sector

Banks

Calendar

2024-04-17 - Q1 2024 Earnings Release

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Ratings for First Horizon Corporation

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Investor Rating

ESG Refinitiv

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Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

14.03 USD

Average target price

17.2 USD

Spread / Average Target

+22.59%

Consensus

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Quarterly earnings - Rate of surprise

Company calendar

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Other Banks

First Horizon Corporation

Equities

FHN

US3205171057

Banks

FIRST HORIZON NATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION --------------------------- (form 10-Q)

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