Management's estimate of expected credit losses in the loan and lease portfolios is recorded in the ALLL and the RULC, collectively the ACL. The ALLL and the RULC are reported on the Consolidated Balance Sheets in the allowance for loan and lease losses and in other liabilities, respectively. Provision for credit losses related to the loans and leases portfolio and the unfunded lending commitments are reported in the Consolidated Statements of Income as provision for credit losses.

The ACL is maintained at a level management believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan and lease portfolio and unfunded lending commitments. The determination of the ACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments considering a number of relevant underling factors, including key assumptions and evaluation of quantitative and qualitative information.

In accordance with its accounting policy elections, FHN does not recognize a separate allowance for

expected credit losses for AIR and records reversals of AIR as reductions of interest income. FHN reverses previously accrued but uncollected interest when an asset is placed on nonaccrual status. As of June 30, 2021 and December 31, 2020, FHN recognized approximately $1 million in allowance for expected credit losses on COVID-19 deferrals that do not qualify for the election which is not reflected in the table below. AIR and the related allowance for expected credit losses is included as a component of other assets.

The total amount of interest reversals from loans placed on nonaccrual status and the amount of income recognized on nonaccrual loans during the three and six months ended June 30, 2021 and 2020 were not material.

Expected credit losses for unfunded commitments are estimated for periods where the commitment is not unconditionally cancellable. The measurement of expected credit losses for unfunded commitments mirrors that of loans and leases with the additional estimate of future draw rates (timing and amount).

The following table provides a rollforward of the ALLL and RULC by portfolio type for the three and six months ended June 30, 2021 and 2020:


(Dollars in millions)	Commercial, Financial, and Industrial (a)		Commercial Real Estate		Consumer Real Estate		Credit Card and Other		Total
Allowance for loan and lease losses:
Balance as of April 1, 2021	$	442	$	232	$	222	$	18	$	914
Charge-offs	(2)		—		(1)		(3)		(6)
Recoveries	5		1		8		2		16

Provision for loan and lease losses	(60)		(23)		(26)		—		(109)
Balance as of June 30, 2021	$	385	$	210	$	203	$	17	$	815

















Balance as of April 1, 2020	$	255	$	48	$	123	$	19	$	445

Charge-offs	(18)		—		(2)		(3)		(23)
Recoveries	1		—		4		1		6
Provision for loan losses	81		9		19		1		110
Balance as of June 30, 2020	$	319	$	57	$	144	$	18	$	538


Reserve for remaining unfunded commitments:
Balance as of April 1, 2021	$	62	$	11	$	8	$	—	$	81

Provision for remaining unfunded commitments	(5)		(2)		1		—		(6)
Balance as of June 30, 2021	$	57	$	9	$	9	$	—	$	75





















Balance as of April 1, 2020	$	27	$	6	$	6	$	—	$	39

Provision for remaining unfunded commitments	9		—		2		—		11
Balance as of June 30, 2020	$	36	$	6	$	8	$	—	$	50




Allowance for loan and lease losses:
Balance as of January 1, 2021	$	453	$	242	$	242	$	26	$	963
Charge-offs	(16)		(3)		(4)		(6)		(29)
Recoveries	11		3		14		3		31

Provision for loan and lease losses	(63)		(32)		(49)		(6)		(150)
Balance as of June 30, 2021	$	385	$	210	$	203	$	17	$	815

Balance as of January 1, 2020, as adjusted (b)	$	142	$	29	$	121	$	15	$	307

Charge-offs	(25)		(1)		(4)		(6)		(36)
Recoveries	2		1		7		2		12
Provision for loan losses	200		28		20		7		255
Balance as of June 30, 2020	$	319	$	57	$	144	$	18	$	538

Reserve for remaining unfunded commitments:
Balance as of January 1, 2021	$	65	$	10	$	10	$	—	$	85

Provision for remaining unfunded commitments	(8)		(1)		(1)		—		(10)
Balance as of June 30, 2021	$	57	$	9	$	9	$	—	$	75

Balance as of January 1, 2020, as adjusted (b)	$	21	$	3	$	6	$	—	$	30

Provision for remaining unfunded commitments	15		3		2		—		20
Balance as of June 30, 2020	$	36	$	6	$	8	$	—	$	50

(a) C&I loans as of June 30, 2021 include $3.8 billion in PPP loans which due to the government guarantee and forgiveness provisions are considered to have no credit risk and therefore have no allowance for loan and lease losses.

(b) Balance, as adjusted, reflects the adoption of ASU 2016-13 (CECL) effective January 1, 2020.

The decrease in the ACL as of June 30, 2021 as compared to December 31, 2020 reflects an improvement in the macroeconomic outlook, positive grade migration, and lower loan balances.

In developing credit loss estimates for its loan and lease portfolios, FHN selected Moody’s baseline forecast as the primary source for its macroeconomic inputs, which included assumptions that were generally in line with Blue Chip Economic Indicators, including unemployment rates for 2021 and 2022 and GDP growth rates for the same periods, as well as assumptions around further business disruption related to COVID-19 and an unchanged target Fed funds range until mid 2023.

As there can be no certainty that actual economic performance will precisely follow any specific macroeconomic forecast, FHN also evaluated other macroeconomic forecasts provided by Moody’s and adjusted the modeled outputs through a qualitative adjustment to account for uncertainties inherent in the macroeconomic forecast process.

During the year ended December 31, 2020 and the six months ended June 30, 2021, FHN also considered stressed loan portfolios or industries that are most exposed to the effects of the COVID-19 pandemic and added qualitative adjustments, where needed, to account for the risks not captured in modeled results. Management also made qualitative adjustments to reflect estimated recoveries based on a review of prior charge off and recovery levels, for default risk associated with large balances with individual borrowers, for estimated loss amounts not reflected in historical factors due to specific portfolio risk, and for instances where limited data for acquired loans is considered to affect modeled results.