Investment Securities

3 Months Ended

Mar. 31, 2020

The following tables summarize FHN’s investment securities on March 31, 2020 and December 31, 2019:



	March 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	—		$	100
Government agency issued mortgage-backed securities (“MBS”)	2,303,720		98,797		—			2,402,517
Government agency issued collateralized mortgage obligations (“CMO”)	1,578,623		48,320		—			1,626,943
Other U.S. government agencies	366,453		7,268		(1,224		)	372,497
Corporates and other debt	40,000		621		—			40,621
States and municipalities	74,578		4,572		(25		)	79,125
	$	4,363,474	$	159,578	$	(1,249	)	4,521,803
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (a)								23,104
Total securities available-for-sale (b)								$	4,544,907
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	—	$	(176	)	$	9,824
Total securities held-to-maturity	$	10,000	$	—	$	(176	)	$	9,824


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


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



	December 31, 2019
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
U.S. treasuries	$	100	$	—	$	—		$	100
Government agency issued MBS	2,316,381		34,692		(2,556		)	2,348,517
Government agency issued CMO	1,667,773		9,916		(7,197		)	1,670,492
Other U.S. government agencies	303,463		3,750		(1,121		)	306,092
Corporates and other debt	40,054		486		—			40,540
States and municipalities	57,232		3,324		(30		)	60,526
	$	4,385,003	$	52,168	$	(10,904	)	4,426,267
AFS debt securities recorded at fair value through earnings:
SBA-interest only strips (a)								19,136
Total securities available-for-sale (b)								$	4,445,403
Securities held-to-maturity:
Corporates and other debt	$	10,000	$	1	$	—		$	10,001
Total securities held-to-maturity	$	10,000	$	1	$	—		$	10,001


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


(b)	Includes $3.8 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 March 31, 2020 are provided below:



	Held-to-Maturity				Available-for-Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	—	$	—	$	54,958	$	55,730
After 1 year; within 5 years	—		—		189,021		195,624
After 5 years; within 10 years	10,000		9,824		3,581		8,480
After 10 years	—		—		233,571		255,613
Subtotal	10,000		9,824		481,131		515,447
Government agency issued MBS and CMO (a)	—		—		3,882,343		4,029,460
Total	$	10,000	$	9,824	$	4,363,474	$	4,544,907


(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 months ended March 31, 2020 and 2019.



	Three Months Ended March 31
(Dollars in thousands)	2020		2019
Gross gains on sales of securities	$	—	$	—
Gross (losses) on sales of securities	—		—
Net gain/(loss) on sales of securities (a)	$	—	$	—


(a)	Cash proceeds for the three months ended March 31, 2020 and 2019 were not material.

The following tables provide information on investments within the available-for-sale portfolio that had unrealized losses as of March 31, 2020 and December 31, 2019:



	As of March 31, 2020
	Less than 12 months					12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Other U.S. government agencies	$	88,334	$	(1,224	)	$	—	$	—	$	88,334	$	(1,224	)
States and municipalities	1,466		(25		)	—		—		1,466		(25		)
Total temporarily impaired securities	$	89,800	$	(1,249	)	$	—	$	—	$	89,800	$	(1,249	)



	As of December 31, 2019
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Government agency issued MBS	$	174,983	$	(495	)	$	192,755	$	(2,061	)	$	367,738	$	(2,556	)
Government agency issued CMO	378,815		(1,970		)	361,124		(5,227		)	739,939		(7,197		)
Other U.S. government agencies	98,471		(1,121		)	—		—			98,471		(1,121		)
States and municipalities	3,551		(30		)	—		—			3,551		(30		)
Total temporarily impaired securities	$	655,820	$	(3,616	)	$	553,979	$	(7,288	)	$	1,209,799	$	(10,904	)

For periods subsequent to 2019, FHN has evaluated all AFS debt securities that were in unrealized loss positions in accordance with its accounting policy for recognition of credit losses. No AFS debt securities were determined to have credit losses because the primary cause of the decline in value was attributable to changes in interest rates. Total AIR not included in the fair value or amortized cost basis of AFS debt securities was $12.3 million as of March 31, 2020. Consistent with its review of the related securities, there were no credit-related write downs of AIR for AFS debt securities during the reporting period. Additionally, for AFS debt securities with unrealized losses, FHN does not intend to sell them and it is more-likely-than-not that FHN will not be required to sell them prior to recovery. Therefore, no write downs of these investments to fair value occurred during the reporting period.

For periods prior to 2020, FHN reviewed debt investment securities that were in unrealized loss positions in accordance with its accounting policy for OTTI and did not consider them other-than-temporarily impaired.

For debt securities with unrealized losses, FHN did not intend to sell them and it is more-likely-than-not that FHN would not be required to sell them prior to recovery. The decline in value was primarily attributable to changes in interest rates and not credit losses.

The carrying amount of equity investments without a readily determinable fair value was $25.9 million and $25.6 million at March 31, 2020 and December 31, 2019, respectively. The year-to-date 2020 and 2019 gross amounts of upward and downward valuation adjustments were not significant.

Unrealized losses of $5.7 million and unrealized gains of $3.4 million were recognized in the three months ended March 31, 2020 and 2019, respectively, for equity investments with readily determinable fair values.