Allowance for Loan Losses

The ALLL includes the following components: reserves for commercial loans evaluated based on pools of credit graded loans and reserves for pools of smaller-balance homogeneous consumer loans, both determined in accordance with ASC 450-20-50. The reserve factors applied to these pools are an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics and are subject to qualitative adjustments by management to reflect current events, trends, and conditions (including economic considerations and trends). The current economic conditions and trends, performance of the housing market, unemployment levels, labor participation rate, regulatory guidance, and both positive and negative portfolio segment-specific trends, are examples of additional factors considered by management in determining the ALLL. Additionally, management considers the inherent uncertainty of quantitative models that are driven by historical loss data. Management evaluates the periods of historical losses that are the basis for the loss rates used in the quantitative models and selects historical loss periods that are believed to be the most reflective of losses inherent in the loan portfolio as of the balance sheet date. Management also periodically reviews analysis of the loss emergence period which is the amount of time it takes for a loss to be confirmed (initial charge-off) after a loss event has occurred. FHN performs extensive studies as it relates to the historical loss periods used in the model and the loss emergence period and model assumptions are adjusted accordingly. The ALLL also includes reserves determined in accordance with ASC 310-10-35 for loans determined by management to be individually impaired and an allowance associated with PCI loans. See Note 1 – Summary of Significant Accounting Policies and Note 5 - Allowance for Loan Losses in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2017, for additional information about the policies and methodologies used in the aforementioned components of the ALLL.

The following table provides a rollforward of the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2018 and 2017:



(Dollars in thousands)	C&I			Commercial Real Estate			Consumer Real Estate			Permanent Mortgage			Credit Card and Other			Total
Balance as of July 1, 2018	$	96,834		$	33,832		$	31,769		$	14,078		$	8,949		$	185,462
Charge-offs	(1,391		)	(9		)	(2,801		)	(15		)	(5,266		)	(9,482		)
Recoveries	1,052			267			5,302			554			804			7,979
Provision/(provision credit) for loan losses	3,819			(175		)	(7,733		)	(1,137		)	7,226			2,000
Balance as of September 30, 2018	100,314			33,915			26,537			13,480			11,713			185,959
Balance as of January 1, 2018	$	98,211		$	28,427		$	37,371		$	15,565		$	9,981		$	189,555
Charge-offs	(6,753		)	(281		)	(6,193		)	(475		)	(14,271		)	(27,973		)
Recoveries	3,607			348			15,129			1,250			3,043			23,377
Provision/(provision credit) for loan losses	5,249			5,421			(19,770		)	(2,860		)	12,960			1,000
Balance as of September 30, 2018	100,314			33,915			26,537			13,480			11,713			185,959
Allowance - individually evaluated for impairment	6,028			—			18,076			9,996			293			34,393
Allowance - collectively evaluated for impairment	92,382			33,893			7,331			3,484			11,078			148,168
Allowance - purchased credit-impaired loans	1,904			22			1,130			—			342			3,398
Loans, net of unearned as of September 30, 2018:
Individually evaluated for impairment	53,549			2,503			119,729			74,833			552			251,166
Collectively evaluated for impairment	15,940,853			4,211,337			6,037,120			272,221			527,673			26,989,204
Purchased credit-impaired loans	49,743			23,196			34,334			—			2,571			109,844
Total loans, net of unearned income	$	16,044,145		$	4,237,036		$	6,191,183		$	347,054		$	530,796		$	27,350,214
Balance as of July 1, 2017	$	92,379		$	30,470		$	46,069		$	16,398		$	11,941		$	197,257
Charge-offs	(3,723		)	—			(3,601		)	(173		)	(3,173		)	(10,670		)
Recoveries	601			278			6,188			542			671			8,280
Provision/(provision credit) for loan losses	8,948			(1,065		)	(7,717		)	(1,048		)	882			—
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Balance as of January 1, 2017	$	89,398		$	33,852		$	50,357		$	16,289		$	12,172		$	202,068
Charge-offs	(6,188		)	(20		)	(11,401		)	(1,499		)	(9,805		)	(28,913		)
Recoveries	2,877			639			17,007			1,933			2,256			24,712
Provision/(provision credit) for loan losses	12,118			(4,788		)	(15,024		)	(1,004		)	5,698			(3,000		)
Balance as of September 30, 2017	98,205			29,683			40,939			15,719			10,321			194,867
Allowance - individually evaluated for impairment	6,895			126			23,936			12,601			246			43,804
Allowance - collectively evaluated for impairment	88,529			29,557			16,649			3,118			10,075			147,928
Allowance - purchased credit-impaired loans	2,781			—			354			—			—			3,135
Loans, net of unearned as of September 30, 2017:
Individually evaluated for impairment	32,028			2,320			135,858			84,081			544			254,831
Collectively evaluated for impairment	12,739,091			2,244,895			4,232,564			319,001			349,889			19,885,440
Purchased credit-impaired loans	20,725			3,800			1,295			—			—			25,820
Total loans, net of unearned income	$	12,791,844		$	2,251,015		$	4,369,717		$	403,082		$	350,433		$	20,166,091