Investment Securities

The following tables summarize FHN’s investment securities on June 30, 2018 and December 31, 2017:



	June 30, 2018
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	(2	)	$	98
Government agency issued mortgage-backed securities (“MBS”)	2,564,334		4,524		(74,558		)	2,494,300
Government agency issued collateralized mortgage obligations (“CMO”)	2,180,120		395		(72,935		)	2,107,580
Other U.S. government agencies	54,797		—		(395		)	54,402
Corporates and other debt	55,609		488		(259		)	55,838
States and municipalities	6,433		3		(30		)	6,406
	$	4,861,393	$	5,410	$	(148,179	)	4,718,624
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (a)								5,787
Total securities available-for-sale (b)								$	4,724,411
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	—	$	(214	)	$	9,786
Total securities held-to-maturity	$	10,000	$	—	$	(214	)	$	9,786


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


(b)	Includes $3.7 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes.



	December 31, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	(1	)	$	99
Government agency issued MBS	2,580,442		10,538		(13,604		)	2,577,376
Government agency issued CMO	2,302,439		1,691		(34,272		)	2,269,858
Corporates and other debt	55,799		23		(40		)	55,782
Equity and other (a)	265,863		7		—			265,870
	$	5,204,643	$	12,259	$	(47,917	)	5,168,985
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (b)								1,270
Total securities available-for-sale (c)								$	5,170,255
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	—	$	(99	)	$	9,901
Total securities held-to-maturity	$	10,000	$	—	$	(99	)	$	9,901


(a)	Includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $134.6 million. The remainder is money market, mutual funds, and cost method investments. Equity investments were reclassified to Other assets upon adoption of ASU 2016-01 on January 1, 2018.


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


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

The amortized cost and fair value by contractual maturity for the available-for-sale and held-to-maturity debt securities portfolios on June 30, 2018 are provided below:



	Held-to-Maturity				Available-for-Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	15,250	$	15,042
After 1 year; within 5 years	—		—		95,255		95,321
After 5 years; within 10 years	10,000		9,786		—		1,360
After 10 years	—		—		6,434		10,808
Subtotal	10,000		9,786		116,939		122,531
Government agency issued MBS and CMO (a)	—		—		4,744,454		4,601,880
Total	$	10,000	$	9,786	$	4,861,393	$	4,724,411


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

The table below provides information on gross gains and gross losses from debt investment securities for the three and six months ended June 30, 2018. Equity securities are included for periods prior to 2018.



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2018		2017		2018		2017
Gross gains on sales of securities	$	—	$	405	$	52	$	449
Gross (losses) on sales of securities	—		—		—		—
Net gain/(loss) on sales of securities (a) (b)	$	—	$	405	$	52	$	449


(a)	Cash proceeds from the sale of available-for-sale securities for the three and six months ended June 30, 2018 and 2017 were not material.


(b)	Three and six months ended June 30, 2017 includes a $.4 million gain associated with the call of a $4.4 million held-to-maturity municipal bond.

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of June 30, 2018 and December 31, 2017:



	As of June 30, 2018
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. treasuries	$	98	$	(2	)	$	—	$	—		$	98	$	(2	)
Government agency issued MBS	1,937,255		(57,182		)	317,784		(17,376		)	2,255,039		(74,558		)
Government agency issued CMO	1,278,976		(30,862		)	754,927		(42,073		)	2,033,903		(72,935		)
Other U.S. government agencies	54,402		(395		)	—		—			54,402		(395		)
Corporates and other debt	40,586		(259		)	—		—			40,586		(259		)
States and municipalities	4,724		(30		)	—		—			4,724		(30		)
Total temporarily impaired securities	$	3,316,041	$	(88,730	)	$	1,072,711	$	(59,449	)	$	4,388,752	$	(148,179	)



	As of December 31, 2017
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. treasuries	$	99	$	(1	)	$	—	$	—		$	99	$	(1	)
Government agency issued MBS	1,455,476		(4,738		)	331,900		(8,866		)	1,787,376		(13,604		)
Government agency issued CMO	1,043,987		(7,464		)	832,173		(26,808		)	1,876,160		(34,272		)
Corporates and other debt	15,294		(40		)	—		—			15,294		(40		)
Total temporarily impaired securities	$	2,514,856	$	(12,243	)	$	1,164,073	$	(35,674	)	$	3,678,929	$	(47,917	)

FHN has reviewed debt investment securities that were in unrealized loss positions in accordance with its accounting policy for OTTI and does not consider them other-than-temporarily impaired. For debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. The decline in value is primarily attributable to changes in interest rates and not credit losses.

The carrying amount of equity investments without a readily determinable fair value was $16.4 million and $16.3 million at June 30, 2018 and January 1, 2018, respectively. The year-to-date 2018 gross amounts of upward and downward valuation adjustments were not significant.

Unrealized gains of $.7 million and $1.1 million were recognized in the three and six months ended June 30, 2018, respectively, for equity investments with readily determinable fair values.